Mark Carney: The Impossible Man, an Impossible Task
Someone once told me a story about unstoppable forces and immovable objects
We haven’t done too many written pieces so far in The Hatchet. But below, we’ve got an in-depth look at the options Mark Carney has in front of him now that he’s got the job of remaking Canada’s economic and political landscape. It’s behind a paywall, so we hope you’ll support us.
But even for non-paying subscribers, we’ll have a podcast episode later this week. And we’re continuing our reporting on Brookfield, so look out for more episodes on that company in upcoming weeks.
Mark Carney is a political unicorn. A true one-of one.
By winning the latest federal election, he has done something unprecedented — not just in Canada, but anywhere in the world. Never before has a central banker, with no experience in elected office, won a mandate from voters.
Mario Draghi, who had been the head of the European Central Bank, served as Italy’s prime minister briefly during the pandemic, but he never even held a seat in that country’s parliament. Manmohan Singh led the Reserve Bank of India in the 1980s. But he was then elected to the Lok Sabha and became famous as a reformist finance minister many years before he became the PM.
This isn’t the only way in which Carney is unique. As we were reminded many times over the last six months, he’s the only foreigner to ever lead the Bank of England. And, as far I can surmise, he’s also the only person ever to be in charge of two central banks.
This kind of singular achievement can’t be brushed aside. Carney is clearly a man bristling with talent and intellect.
Almost everyone who has encountered him professionally comes away impressed. Adam Tooze, the economic historian and public intellectual par excellence, said that Carney is one of the most formidable people he’s ever met.
“He will be tough for the Americans to deal with. He will make mincemeat out of the second-raters in the Trump team,” he said on his podcast earlier this year. “It’ll be a bloodbath if they actually confront each other, because he doesn’t take prisoners.”
Carney’s career has been defined by some of the greatest economic crises of our era. Going back to his time at Goldman Sachs, he was part of the Toronto-based team that took over the global investment bank’s book in the immediate aftermath of the September 11th attacks.
It was his time at the Bank of Canada that brought him to global prominence. Because Canada came out of the 2008 crisis relatively unscathed, it’s hard to recall that some Canadian banks (especially CIBC) actually had significant exposure to the toxic mortgage-backed securities that were at the root of the crisis. And while it was our more prudent banking regulations that minimized the worst of the damage, Carney played a crucial role captaining the central bank in stormy monetary seas.
He did it again in the United Kingdom. Before the Brexit vote, he was a truth-teller, warning Britons that leaving the European Union would damage the country’s economy. And after the vote, he was the loyal bureaucrat, trying to minimize that economic damage as much as he could.
But his successes on the world stage came as a central banker, a role that is far different from leading a country.
To be the head of the Bank of Canada, or the Bank of England, or even the Federal Reserve is fundamentally a reactive role. Your job is to shape an institutional response to economic conditions within a constrained mandate.
Central bankers are at the mercy of events and only have a limited number of tools at their disposal. And while that toolkit has expanded significantly over the last two decades, they possess fewer powers and responsibilities than a head of government.
But the truth is that the challenges facing Carney as Canada’s 24th prime minister are far more significant than any he has faced before. They will require him to be proactive, instead of simply reactive. And he will need every ounce of intellect, guts and luck that he can muster to meet them head on.
A Fork in the Road
Mark Carney was elected prime minister because a plurality of Canadians felt that he was the best person to take on Donald Trump.
And Canadians might have been right. Ever since Carney was sworn-in, Trump’s tone towards Canada has softened. He seems to genuinely like our new PM. During their tête-à-tête in the Oval Office, Trump was touching Carney’s leg so often that it started to feel more like a first date than a diplomatic visit.
Has Trump been attacking Canada because he has some kind of personal grudge against Justin Trudeau? Increasingly, that seems to be a likely explanation. Trump couldn’t help but attack Trudeau and “that terrible person” Chrystia Freeland during his meeting with Carney. But his rapport with the former banker may also stem from his perpetual desire to gain the respect of the Davos elite that he simultaneously loves to poke in the eye. (Or maybe he remembers that Brookfield did his son-in-law a solid a few years back?)
Whatever the reason, Canadians were making an educated bet that Carney might be the best man to reset our relationship with the American president.
However, according to Carney himself, negotiating with Trump is only one aspect of what his government must do. His ambitions are aimed much higher.
“Our old relationship with the United States, a relationship based on steadily increasing integration, is over,” Carney said during his victory speech last week. “The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that, well, not perfect, has helped deliver prosperity for a country for decades, is over.”
In essence, Carney is making it clear that he believes it’s necessary to radically alter the shape and orientation of Canada’s economy. And by doing so, he is tapping into a deep historical debate that goes all the way back to Confederation.
The political war between economic nationalists and continentalists has been one of the defining conflicts of Canadian history, though it has largely been dormant since the signing of NAFTA.
Wilfred Laurier lost an election after proposing a free trade agreement with the United States. FDR’s famed “arsenal of democracy” was built, in part, by Mackenzie King and C.D. Howe, who helped foster the numerous cross-border industries that supplied the war effort.
In the 1960s, Lester Pearson’s government was riven with divisions over how to handle the American question. Pearson eventually chose the American path, signing the Auto Pact. Pierre Trudeau had his “third option,” where he sought to diversify trade away from the UK and the US.
But Mulroney and Chrétien seemed to put the question fully to rest by embracing the politics of continental free trade.
There’s been a durable consensus on free trade with the United States among Canadian political parties ever since.
Even during the first Trump term, there wasn’t much talk about changing the nature of Canada’s economy. The task in front of Justin Trudeau and Chrystia Freeland was clear — renegotiate NAFTA in a way that largely maintained the status quo. And by this metric, they were astonishingly successful.
But this time, anyone with eyes and ears can tell that things are different.