With his promise to fire Bank of Canada Governor Tiff Macklem if he becomes prime minister, Conservative Party leader candidate Pierre Poilievre has crossed the Rubicon. There is no turning back for him. His frontal attack on the independence of the central bank chief is no longer just a gratuitous political talking point: it is a policy statement that speaks to his recklessness.
Until Wednesday’s leadership debate, Poilievre’s criticism of the Bank of Canada could have been dismissed as a populist model. He has alternately accused the central bank of “printing money”, “acting like an ATM” for a liberal government that spends a lot and, rather ridiculously, of being “financially illiterate”. His fans ate it up; almost everyone else rolled their eyes.
However, during Wednesday’s debate in Edmonton, Poilievre explicitly warned Macklem that his seven-year term, which is not scheduled to end until 2027, would be shortened by Poilievre if he becomes prime minister before then. Such political meddling in central bank affairs generally unsettles financial markets. Does not inspire confidence in investors.
In addition, the Governor of the Bank of Canada is elected by the government of the day on the advice of the central bank’s board of directors. Once appointed, he cannot be removed without cause. The Bank of Canada Act stipule that the governor serves “during good behavior.” Mr. Poilievre would have to change the law to fire Mr. Macklem.
Conservative Prime Minister John Diefenbaker tried and failed in the early 1960s, after clashing with then Bank of Canada Governor James Coyne over the latter’s “tight” monetary policy. Mr. Coyne eventually resigned, but not before a vitriolic war of words between Mr. Diefenbaker and Mr. Coyne. The Canadians generally sided with Coyne. Politically, Mr. Diefenbaker never recovered.
Then, in 1993, Liberal opposition leader Jean Chrétien repeatedly criticized then Bank of Canada Governor John Crow’s high interest rate policy aimed at stifling inflation, which he blamed for the unemployment rate. 11 percent of the country at the time. But Chrétien never explicitly promised to fire Crow if the Liberals won the federal election that year. Mr. Crow’s term expired in 1994; the victorious Liberals did not reappoint him. But his successor as governor, Gordon Thiessen, continued the bank’s low-inflation policy, with the support of the Chrétien government.
Poilievre’s criticism of monetary policy under Macklem is that it has been too loose and that the central bank’s government bond-buying exercise during the COVID-19 pandemic has pushed up inflation by injecting too much liquidity into the economy. This is a legitimate criticism as far as it goes. But it is misleading to suggest that the Bank of Canada is primarily responsible for higher inflation or that it acted in the interests of the Liberal government.
If Macklem is guilty of anything, it is of underestimating the risks of inflation taking hold, running too high above the central bank’s 2% target for too long. Many central banks around the world have made the same mistake and, like Canada’s, are struggling to reverse course now. That’s not because they’re “financially illiterate”; it is because, for all their technical expertise, they are human and fallible.
Poilievre’s criticism of Macklem suggests that he would replace him with a governor who would raise interest rates even faster and higher than the central bank is currently doing. That would hurt the “working people” he says he fights for much more than the drop in purchasing power they have experienced this year as a result of inflationary pressures. It would also create a whole new set of problems (see: recession) that could potentially cause enormous economic damage to the average Canadian.
This is precisely why most elected politicians know better than to undermine the independence of the Bank of Canada. The people who run that institution are better qualified than Mr. Poilievre to make monetary policy decisions. Yes, they can make mistakes, but their decisions are not determined by political calculations, or certainly not to the extent that Mr. Poilievre’s are.
“If you’re an investor looking to come to Canada and you hear that kind of statement coming from a member of the House of Commons, you think you’re in a third world country,” said Jean Charest, a rival to the Conservative leadership. Mr. Poilievre’s vote.
Wednesday’s debate may or may not have been a turning point in a leadership campaign that appears to be in Poilievre’s way. His support for the truckers who illegally blocked the streets of downtown Ottawa in February and his fanaticism for cryptocurrencies had made him a populist sensation. But his promise to fire Mr. Macklem raises even more serious questions about his trial.
Sooner or later, conservatives must take note. The stakes could not be higher.
Keep your opinions sharp and informed. Receive the Opinion newsletter. sign up today.
Reference-www.theglobeandmail.com