Once is not custom: the NDP leader Jagmeet Singh found himself in the same camp as Pierre Poilievre by criticizing the action of the Bank of Canada and its governor, Tiff Macklem. Not for the same reasons, however. Strange bedfellows, the Anglos would say all the same.
Jagmeet Singh denies questioning the independence of the Bank of Canada and he has not threatened to fire Mr. Macklem if he comes to power, as Pierre Poilievre did during the Party leadership race curator of Canada.
Being tactical, these attacks are above all directed against the Trudeau government. But the economic arguments they put forward are not conspicuous by their rigour. In the case of the Conservative leader, it is downright humbug and further proof that ridicule does not kill.
To free us from the grip of the Bank of Canada, Pierre Poilievre suggested that citizens convert their Canadian dollars into bitcoins. It’s a great libertarian utopia: no more need for the state and central bank to ensure the value of money; the private sector, through countless overheating computers, will take care of it.
In a letter published in The Press, former Conservative minister Michael Fortier writes, not without a certain irony, that Pierre Poilievre, with his enthusiasm for cryptocurrency, had brought Canada closer to the Central African Republic and El Salvador, two countries that have adopted it as their currency. He suggests that the new Conservative leader learn a lesson from the very briefly Prime Minister of the United Kingdom, Liz Truss. She plunged her country into an economic crisis by placing dogma before pragmatism.
It is true that the hundreds of billions that the Trudeau government paid in direct aid to the population and businesses during the pandemic may have contributed to the inflationary surge. But without these draconian measures, Canada would have experienced a deep economic crisis. And this massive aid is not the only factor involved. Disruptions in supply chains, the invasion of Ukraine and inflation from elsewhere, notably the United States, also played a role. And let’s be clear: it was not the Bank of Canada that told the Trudeau government what to do.
In a letter he sent to Prime Minister Justin Trudeau last week, Jagmeet Singh said raising rates, “this unique solution to inflation, […] makes life difficult for most people”, workers and “people on fixed incomes, such as seniors and people with disabilities”.
Due to the economic slowdown, or even the weak recession, that the Bank of Canada is planning, workers could find themselves unemployed. But we must all the same remember that the Canadian economy was practically at full employment and that there are still labor shortages. It is possible that this context will mitigate job losses, especially if the economic downturn is short-lived.
When the NDP leader tries to move us by talking about people on fixed incomes, he is derailed, at least economically. These people are precisely the most affected by inflation, which erodes their meager purchasing power.
As for this “one size fits all” that he deplores, it is that there are not fifty-six ways to curb inflation. It is necessary to restrain the demand and the growth of the money supply. Acting on interest rates is one way; the other is the austerity of a government that cuts its spending. That is certainly not what the NDP leader has in mind. And there is this other solution which is not one: the control of prices and wages. In an open economy like Canada’s, this is impractical. And long before free trade, Trudeau senior had already tried it with dubious results.
If it is not forbidden to criticize the central bank, let it nevertheless assume its responsibilities in complete independence. Monetary policy is the subject of an agreement renewable every five years with the federal government. It sets the inflation target at 2% within a range of 1% to 3%, which has not changed for 30 years. Under the Bank of Canada Act, its independence is limited: in the event of a difference of opinion, the Minister of Finance can always give instructions.
We cannot say that the Bank of Canada overdid it. At least not yet. The six consecutive increases have started to bring down inflation: this is encouraging. If, as we hope, the Bank makes a final increase in December, the game will have been won without too much damage. Everyone has their own job, and the cows will be well looked after.