Minouche Shafik seemed destined for the top job at the Bank of England when she arrived in 2014, but becoming the first female governor was not to be.
She only spent two years inside the Bank’s imposing offices on Threadneedle Street before quitting as deputy governor to head the London School of Economics.
Rumours swirled that she had fallen out with her boss, Mark Carney, newly arrived himself and armed with plans to shake up the 300 year-old central bank. Now, sitting in her top-floor office with panoramic views across London near Waterloo Bridge, she smiles and responds with the diplomacy for which she is known. “Oh, come on: the LSE job offer was too good to miss.”
If she were in Threadneedle Street now, how would Shafik be voting? The interest-rate-setting committee meets next month and investors expect a rise to 0.5%.
With inflation at a 30-year high of 5.4% and heading above 6%, she believes the Bank’s credibility is at stake.
“I have heard the argument that somehow central banks have lost their mojo, but I don’t buy it,” she says. “They know how to bring inflation down.” However, she adds: “There is a question over the bank’s willingness to act – and over how rate rises are communicated, because there is an impact on businesses and households. Confidence in the institution is important, though, which is why interest rates should begin rising back towards more normal levels. It’s why I am not worried about going back to the inflation of the 1970s.”
Family Married with two college-age children and three adult stepchildren.
Education Too many schools and colleges to mention.
Pay Basic salary of £348,000 plus pension and accommodation allowance.
Last holiday Venice.
Best advice she’s been given “From my dad, that everything can be taken away but your education.”
Biggest career mistake “Nothing that could be published.”
Word she overuses “A toss-up between ‘community’ and ‘evidence’.”
How she relaxes Reading, walking and yoga.
Embracing academia has provided a platform for the recently ennobled economist to air her views in a forthcoming book, What We Owe Each Other. Shafik has joined the campaign against a winner-takes-all business culture that offers the spoils of capitalism only to those that rise to the top, putting her in the company of some of the world’s most prominent political thinkers.
While she has come a long way from her Egyptian birthplace, her questioning of privilege has remained consistent. “The idea that you are successful because you are smart and hardworking is pernicious and wrong, because it means everyone who is unsuccessful is stupid and lazy,” she says. Referring to her friend Michael Sandel, the Harvard philosopher, she says the next phase of history should be characterised by a shared endeavour, ending the extreme individualism of the last 40 years.
“The discussion we need to be having asks: what do we owe each other and what are our expectations of each other?” she says. People who think they have climbed the greasy pole on their own misunderstand how much luck had a part to play and how society, directly or indirectly, also helped them rise.
In the mid-1960s, her businessman father fell foul of President Nasser’s programme of land reform and nationalisations, losing his homes and property. The family, shattered by the loss of an idyllic lifestyle, moved from Alexandria to Savannah, Georgia, where a friend of her father’s from his days studying at Imperial College helped him find a job as a scientific researcher. Shafik went to local schools, nine or even 10, she says, often changing institution to satisfy the authority’s need to balance the racial mix.
When she was 15, the family returned to Egypt, where she would compare herself with girls destined for arranged marriages and very different economic circumstances.
It wasn’t long before the US lured her back, with a place at the University of Massachusetts Amherst to study economics. After an MSc at the LSE, she secured a doctorate from St Antony’s College, Oxford.
From there she joined the World Bank in Washington, married economist Mohamed El-Erian, who worked across the road at the IMF, before going on, at 36, to become the bank’s youngest ever vice-president. By the age of 40 she had remarried, had twins and become stepmother to her partner Raffael’s three children. She told Kirsty Young on the BBC’s Desert Island Discs that she stayed at the World Bank because, as a parent of five, she needed a job she could do with her eyes closed.
Her former employer attracts stiff criticism for its handling of the pandemic, in particular its refusal to campaign for a wider distribution of vaccines. “The response to Covid has probably been the biggest ever failure of the international system that I have seen in my career,” Shafik says. “It is a textbook crisis that should have been handled globally. And the fact we are dealing with ever-new variants only goes to show what a failure it has been.” Famed for her calm manner, this is the most heated she becomes in the interview, though she is also disparaging about the attitude of the UK government to planning. “We have a long-term strategy for the LSE which we call ‘LSE 2030’. I was recently talking to someone in government about it and they said, ‘Here we think 2030 is half past eight’.”
From the World Bank she came to London, in part for her partner to pursue his career as a scientist, turning algae into food, and to join the Department for International Development, which was flush with money following the UK’s commitment to spend 0.7% of GDP on aid. She rose to be its permanent secretary before heading back to Washington to join the IMF as deputy director. An apartment in London Bridge became her home after a switch back to the UK, and the Bank of England, in 2014.
Shafik says World Bank officials also need to change the way they tackle the climate crisis, with an overhaul of funding for poor countries. Big carbon emitters and those countries with huge amounts of locked-up carbon should be targeted with more support than the criteria allow at the moment. “It won’t only help them, it will benefit all of us,” she says.
Technology and the changing role of women are now the two driving forces of change, she says. “Technology because it has changed jobs and lots of people haven’t benefited. They have been left behind. They don’t have the skills and they are not in the right place, with the result that their prospects are poor. And the way our whole social contract was predicated on women looking after the young and the old for free – now there are more women going to university than men, globally, not just in the UK, and they are employed, and the cost of them not working is really high, so you want them to work. Yet we haven’t found a way to adjust – a way to look after the young and old without women providing free labour.” And Covid made things worse, heaping more care responsibilities on those already on the frontline.
Making no apology for her technocratic outlook, she says the government needs to plan for a post-Brexit, post-Covid world. Echoing those fearful that the UK has spent a decade avoiding tough questions about how to grow the economy while lowering carbon emissions, she says detailed policy proposals are the only way to convince the public that cooperation can triumph over individualism.
“I am not just a person who wants to raise taxes and share out more. I want everyone to pay their fair share of taxes and invest more in each other.”