WHO made these remarks in a recent speech? “Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes.” Or: “Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith.” Or this: “Market fundamentalism…contributed directly to the financial crisis and the associated erosion of social capital.” Was it François Hollande? Ed Miliband? Thomas Piketty?

No, all these leftish-sounding quotes came from Mark Carney, the governor of the Bank of England, at a conference* on inclusive capitalism on May 27th. Nor did Mr Carney’s apparent heresy stop there. He also remarked that banks operated “in a privileged heads-I-win-tails-you-lose bubble” and observed that “there was widespread rigging of benchmarks for personal gain.” And he implicitly backed Michael Lewis’s criticisms of high-frequency trading (in his book “Flash Boys”), stating that equity markets blatantly favoured “the technologically empowered over the retail investor”.

In some respects Mr Carney is repeating the iconoclasm of his predecessor, Sir Mervyn King, who was also sceptical about some of the finance sector’s practices. Given that central banks act as prudential regulators, their governors should have a detached attitude towards the finance industry. They should definitely not act as cheerleaders for the banks.

Back in 2008, central bankers realised that the finance sector bore a significant proportion of the blame for the economic crisis. But despite that, they felt they had no choice but to bail out the banks, in order to avoid an even greater economic calamity. As Mr Carney’s tone shows, they are not that happy about it.

A similar sense of frustration helps explain some of Mr Carney’s other remarks. Central banks have played their part in redistributing wealth, most obviously through lower interest rates which penalise savers and reward borrowers. In addition, quantitative easing (the creation of money to buy assets) pushed up asset prices and thus benefits the rich more than the poor. By so doing, it may have contributed to a recent rise in inequality, which Mr Piketty has highlighted (see Free exchange, page 74) and Mr Carney laments.

But Mr Carney’s defence is that the central banks had no choice. Without monetary stimulus, the recession would have been deeper. Many more young people would have been unemployed, something that would have affected their earning power for the rest of their lives. By itself, that would have exacerbated inequality.

In the longer run, Mr Carney’s argument is that regulatory reforms—planned or already put in place—will serve to balance free-market capitalism with the needs of society. “A sense of self must be accompanied by a sense of the systemic”, was his pithy phrase. First, the authorities have attempted to eliminate the problem of banks that are “too big to fail” by introducing resolution plans that impose losses on the private sector. However, work on dealing with cross-border institutions needs to be completed later this year.

Pay has also been reformed, with bankers receiving bonuses in the form of deferred compensation which can be withdrawn if profits turned out to be illusory, or if evidence of misconduct emerges. Here, Mr Carney might also have mentioned the requirement for banks to hold more capital. In the long run, by reducing the return on equity of the banking system, these rules seem likely to reduce bonuses; they have also caused banks to cast a more sceptical eye on some of their operations, as shown by Barclays’ retreat from some areas of investment banking.

His other points, alas, display a degree of woolly optimism. He hopes that the boards and senior management of banks will promote “a culture of ethical business” throughout their organisations, while individual employees “must recognise that their actions do not merely affect their personal rewards, but also the legitimacy of the system in which they operate.” Good luck with that.

Though financiers may choke on their champagne at Mr Carney’s remarks, he is surely right to say that “financial capitalism is not an end in itself, but a means to promote investment, innovation, growth and prosperity.” Where it does not, regulators like Mr Carney should be more willing to step in than they have been in the past; not after a crash has occurred, but while the boom is in full swing.

Economist.com/blogs/buttonwood

* http://www.bankofengland.co.uk//publications/Pages/speeches/2014/731.aspx