With his vow to fire Bank of Canada Governor Tiff Macklem if he becomes prime minister, Conservative Party leadership candidate Pierre Poilievre has crossed the Rubicon. There is no turning back for him now. His frontal attack on the central bank chief’s independence is no longer just a gratuitous political talking point: It is a policy statement that speaks to his recklessness.
Until Wednesday’s leadership debate, Mr. Poilievre’s criticisms of the Bank of Canada could have been dismissed as populist boilerplate. He has alternately accused the central bank of “printing money,” “acting as an ATM” for a big-spending Liberal government and, quite ludicrously, of being “financially illiterate.” His fans ate it up; almost everyone else rolled their eyes.
During Wednesday’s debate in Edmonton, however, Mr. Poilievre explicitly put Mr. Macklem on notice that his seven-year term, which is not slated to end until 2027, would be cut short by Mr. Poilievre if he becomes prime minister before then. Such political meddling in the central bank’s affairs typically makes financial markets queasy. It does not inspire confidence in investors.
Besides, the governor of the Bank of Canada is chosen by the government of the day on the advice of the central bank’s board of directors. Once appointed, he or she cannot be removed without cause. The Bank of Canada Act stipulates that the governor serves “during good behaviour.” Mr. Poilievre would need to change the law to fire Mr. Macklem.
Conservative prime minister John Diefenbaker famously tried and failed to do that 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. Canadians generally sided with Mr. 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 quashing inflation, which he blamed for the country’s 11-per-cent unemployment rate at the time. But Mr. Chrétien never explicitly vowed to fire Mr. Crow if the Liberals won that year’s federal election. Mr. Crow’s mandate was set to expire 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 Mr. Chrétien’s government.
Mr. Poilievre’s critique of monetary policy under Mr. Macklem is that it has been too loose, and that the central bank’s government bond-buying exercise during the COVID-19 pandemic has sent inflation upward by injecting too much liquidity into the economy. This is a legitimate critique as far as it goes. But it is misleading to suggest the Bank of Canada is mainly responsible for higher inflation or that it acted in the Liberal government’s interests.
If Mr. Macklem is guilty of anything, it is of underestimating the risks of inflation becoming entrenched, rising too high above the central bank’s 2-per-cent target for too long. Many central banks around the world have made the same mistake and, like Canada’s, are scrambling to reverse course now. That is not because they are “financially illiterate”; it’s because, for all their technical expertise, they’re human and fallible.
Mr. Poilievre’s critique of Mr. Macklem suggests 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 claims to be fighting for far more than the drop in purchasing power they have experienced this year as a result of inflationary pressures. It would also create an entirely new set of problems (see: recession) that could potentially wreak enormous economic damage on average Canadians.
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 determinations. Yes, they can make mistakes, but their decisions are not determined by political calculations, or certainly not to the extent Mr. Poilievre’s are.
“If you’re an investor looking at coming to Canada and you hear that kind of a statement coming from a member of the House of Commons, you think you’re in a third-world country,” said Tory leadership rival Jean Charest of Mr. Poilievre’s vow.
Wednesday’s debate may or may not have been a turning point in a leadership campaign that appears to be going all Mr. Poilievre’s way. His support of the truckers who illegally blockaded downtown Ottawa streets in February and his cryptocurrency fanaticism had made him a populist sensation. But his promise to fire Mr. Macklem raises even more serious questions about his judgment.
Sooner or later, Conservatives need to take notice. The stakes couldn’t be higher.
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Konrad Yakabuski