“What the bank got wrong was the only thing that should matter to a central bank: controlling inflation,” says Philip Cross.
Chrystia Freeland is defending the Bank of Canada following Pierre Poilievre’s criticism of the institution, something that will only reinforce the sense among many Canadians that the Bank of Canada and the Liberal government are working together far too closely.
Here’s what Freeland said.
“It is clear to us all that we are living through a period of global volatility. We have COVID. We have the Russian invasion of Ukraine. We have China’s zero-COVID policy.
In this environment, responsible political leadership means reinforcing for Canadians, and for the world, our government’s very clear commitment to the independence of the Bank of Canada and our confidence in the Bank of Canada.”
Of course, Freeland and the Liberal government have an interest in defending the Bank of Canada.
The Bank of Canada has enabled the massive deficits and inflationary policies of the Liberal government, and to admit that criticism of the Bank is on target would be to admit that Liberal policies have done severe damage to our economy.
However, while Freeland may be backing up the Bank of Canada, a former Chief Economic Analyst for Statistics Canada is calling them out.
In a Financial Post column, Philip Cross slammed the Bank of Canada’s failures.
Here are some excerpts:
“Headlines say inflation is the highest in three decades, but the 6.9 per cent rate in January 1991 was actually a one-month spike due to the introduction of the GST. In reality, inflation in Canada is undergoing its sharpest and most prolonged resurgence since 1983, almost 40 years ago.
Bank of Canada Governor Tiff Macklem lamely defends his institution, saying “we got more things right than we got wrong.” Nonsense. What the bank got wrong was the only thing that should matter to a central bank: controlling inflation.”
Cross adds criticism of the former Bank of Canada head – Stephen Poloz – as well:
“Not controlling inflation coming out of the pandemic is not the Bank of Canada’s only recent failure. Under Poloz, the Bank for years failed to engineer its hoped-for transition from debt-fuelled household and government spending to more sustainable gains in exports and investment. But both exports and investment required the business community’s cooperation, and that was not forthcoming after the 2015 election of Justin Trudeau and his anti-growth agenda.”
Cross also notes the connection between the Bank of Canada and ongoing budget deficits:
“The Bank of Canada cannot be blamed for Trudeau’s poor economic policy, but it can be faulted for keeping interest rates low and encouraging a string of fiscal deficits in a forlorn attempt to goose growth. For years the Bank for International Settlements, the research clearinghouse for central banks, has warned governments that, at best, easy money policies would only buy them time to adopt policies that boost long-term potential by encouraging business investment, lowering barriers to inter-provincial trade, and cutting regulatory red tape. But rather than raise potential growth in these ways, governments relied on low interest rates to sustain growth for more than a decade.”
And in closing, Cross points out that it’s reasonable for Canadians to seek accountability from the central bank:
“Central bank independence means Canadians forego democratic control of the Bank of Canada in return for its unwavering commitment to low inflation and fiscal stability. When these goals are not achieved it is only reasonable to demand some degree of accountability. The surge of inflation reflects an institution’s failures over a prolonged period, not an isolated mistake by one individual.”
Accountability requires debate
Cross makes many important points in his column, the most important being the fact that the failures of the Bank of Canada should lead to more accountability.
So, whether people agree or not with Pierre Poilievre calling for the Bank of Canada governor to be fired, it is clear that officials in the Bank of Canada should not be above criticism or accountability for their performance.
Accountability requires debate, and democracy means disagreement.
Many in the political establishment fail to understand this, as they lose their minds over criticism of the Bank of Canada, and act as if accountability is somehow ‘dangerous.’
What’s truly dangerous is entrusting Canada’s future to people who would have no problem firing any of us from our jobs, but who believe certain top officials should be insulated from the accountability the rest of us face in our own lives.