Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Friday May 13, 2022
Pierre Poilievre’s inflation disinformation
For every serious, stubborn and complicated problem, there’s an ambitious politician peddling a bogus plan to fix it. And if you need any proof, just listen to Pierre Poilievre’s simplistic explanation for runaway inflation, and then his troubling proposal for saving the economy. The narrative being spun by this federal Conservative leadership hopeful is that the Bank of Canada’s leadership is “financially illiterate” and its incompetence punished the country with the worst inflation in three decades. As prime minister, he would sort the bank out, pronto. And to make sure that happens, he announced at a leadership debate Wednesday that if he forms the government, he would fire Bank of Canada governor Tiff Macklem.
This is a dangerous idea based on a tissue of misinformation but likely to be popular in these angry times, when so many people get their information from Twitter and are ready to believe Poilievre’s claim that Canada’s out-of-touch “elites” have betrayed ordinary Canadians. And, presumably, who could be more elite than the people running the Bank of Canada? Poilievre claims the country’s rapidly rising consumer prices are the result of the central bank purchasing hundreds of billions of federal government bonds during the pandemic. That, in Poilievre’s parallel universe, is why Canadians are now spending two-plus dollars a litre to fill up their cars, eating macaroni instead of steak for dinner and agonizing over whether they can make next month’s mortgage payment.
The trouble with Poilievre’s assessment is that the Bank of Canada and most professional economists reject it hands down. In fact, former Bank of Canada governor David Dodge said in a nationwide CTV public affairs program on Sunday that Poilievre’s criticisms of the central bank are “bull**** to be blunt.” It’s unusual to hear a person of Dodge’s stature use this kind of language in this kind of forum. But in this case, the shoe fits.
Go back two years, to when the COVID-19 pandemic was shaking Canada and the world to their core. Widespread lockdowns, entire economic sectors paralyzed, supply chains ruptured, economies sunk in recession: It was an existential economic crisis on top of the worst global health crisis in a century and there were well-founded fears of a global depression. And into this breach stepped this country’s federal government and its central bank, action mirrored by other countries around the world. The timely intervention by Canada’s central bank and Ottawa kept the country afloat economically, averting nationwide panic that people would lose their homes, businesses and livelihoods.
Reasonable people have asked if the government and central bank went too far in their interventions. Such questions deserve fair, informed answers. In addition, a case can be made that the Bank of Canada last year mistakenly dismissed the rising inflation rate as a temporary phenomenon and, consequently, waited too long to start raising interest rates to put the brakes on it. But none of that should make Canadians forget that, overall, they owe a vote of thanks to the central bank for how it shepherded them through the pandemic. Nor should they overlook the fact that most of the world, not just their part of it, is wrestling with an inflation giant today. Just as we seemed to be escaping the pandemic, a COVID-19 surge hammered China’s economy — the second biggest in the world. That continued to disrupt supply chains even as Russia’s unprovoked invasion of Ukraine is causing havoc with global oil and food prices — and driving up the cost of living.
Not that this matters to Poilievre. He has compounded his misdiagnosis of our inflationary ills by prescribing the wrong medicine for them. His plans for a new audit of the central bank, even though it is already audited, and to replace its governor would amount to serious overreach by a federal government. Just like our courts, the Bank of Canada must be independent of politicians and seen as independent. Sometimes the central bank must make unpopular calls as it tries to control inflation and maintain the dollar’s purchasing power. Politicians might be more worried about being re-elected than by the central bank’s priorities and mandates. But after a government appoints a Bank of Canada governor every seven years and sets monetary policy every five years, it should keep clear of the bank’s daily operations.
Were Poilievre to get his way, he’d undermine the independence and credibility of the central bank, thereby shaking the confidence of investors looking at Canada as a place to put their money. Whatever Poilievre’s selling, Canadians shouldn’t buy it. (Hamilton Spectator Editorial)