Mark Carney is one of a small handful of Canadian prime ministers to have been educated abroad. He received a bachelor’s degree in economics from Harvard and a master’s and doctorate degree in economics from Oxford.
He leveraged those credentials to undertake a truly remarkable career. After working first at the elite investment banking firm Goldman Sachs, Carney went on to become Bank of Canada governor at 42, Bank of England governor at 48, and prime minister at 59.
Few can claim such an impressive résumé. So pundits were quick to guffaw when Conservative Leader Pierre Poilievre challenged Carney’s professional track record.
At a recent Canadian Club event in Toronto, Poilievre had said, “Mr. Carney has been wrong about every major economic issue of the last decade. The gap between Mr. Carney’s boasting and his results is perhaps unprecedented.”
Separately, on a podcast, Poilievre had said, “There’s one thing that’s worse than being uneducated and it’s being badly educated. And Mr. Carney is very badly educated on economics.”
As a matter of political strategy, such statements do not seem like a winning line of attack.
But that does not mean Poilievre’s substantive point should be dismissed out of turn.
For years now, Poilievre has been raising concerns about the impact of central bank policies and government spending on inflation.
Poilievre’s key charge is that central bank and fiscal policies — particularly during the financial crisis and pandemic — exacerbated inflation, and by extension, the cost of living.
There is merit to these claims, and Carney has played pivotal roles in these periods: he was governor at the Bank of Canada during the financial crisis, governor at the Bank of England at the very outset of the pandemic, and delivered as prime minister a first budget that ran a nearly $80-billion deficit.
During both the financial crisis and pandemic, central banks in the U.S., Canada and England slashed interest rates to zero and engaged in a practice known as quantitative easing.
Broadly, quantitative easing, or QE, is where central banks print new money to purchase government bonds. This can have the effect of stabilizing financial markets and keeping borrowing costs low, but can also trigger price inflation.
Poilievre has argued QE and government programs pumped too much money into the economy. The effect was to drive up the cost of living for ordinary citizens, as it left more dollars chasing the same amount of things.
This is correct. Inflation disproportionately harms lower and middle-income households, as poorer households spend a higher share of their income on essentials like food, rent and fuel.
Where we would take a more nuanced view is on causation — and the counterfactual. Most mainstream economists attribute inflation to a combination of factors, not just monetary or fiscal policy. In the case of the pandemic, for example, supply chain disruptions, the Ukraine war, and a global surge in demand for consumer goods also drove up prices.
Also, there is a real question about what central banks and governments should have done differently. Central banks implemented QE because their traditional tools for providing assistance (namely, cutting interest rates) were already tapped out.
But it is fair to argue that central banks overdid it in their responses: that the scale of their bond purchases were too large; that they should have foreseen the impact of their programs on inflation; that they were too slow to wind the programs down once their effects became apparent.
For instance, many analysts argue the Bank of Canada left interest rates too low for too long after the financial crisis, and that this contributed to high household debt and surging housing prices. Carney was at the helm then.
Now, with Carney at the helm of government, one can ask: is the government exercising the right level of spending restraint? If last year’s $80-billion deficit was not enough to get the government to materially overhaul spending, what will?
Given his track record, Carney does seem to have a bias toward loose money — that is, easing financial conditions. It is fair game for the Conservative opposition to criticize this.
In short, just because Carney is smart and credentialed does not mean his decisions are above scrutiny. Smart people can and do make unsound decisions too.
I agree that deep expertise doesn’t mean someone is above good faith criticism. But I also think it’s a category error to put Poilievre’s criticism in that bucket.
His criticism is reflexive, rooted in a philosophical aversion to any government spending at all, an opinion that he formed at 17 and never updated to include any appreciable nuance or evidence. His critique isn’t fair comment, it’s just another attack like all the other attacks and zingers and insults that he keeps in his repertoire to try to undermine his opponents.
If you asked Carney for his reasoning abouf policy trade-offs, he’d have thoughtful answers. If you asked Poilievre, he’s have glib derision. Treating his comments as critique informed by any such analysis as in this article is a mistake, and gives him far too much credit.
Well said. I agree with you 100%.