Mark Carney’s exit: A shock, but maybe it was inevitable

If the explanation had come from a public figure with more of the usual dents and scratches in his image, there would have been eye rolling in the National Press Theatre this morning over Mark Carney’s stated reason for making his surprise leap from Ottawa to London.

As he explained it to the gathered media, Carney assessed the situation he now oversees as governor of the Bank of Canada and saw “unity and cohesion.” By contrast, he foresees “real challenges” facing the next governor of the Bank of England. So he opted for the tougher job.

That sketch of his own decision-making process—Where am I most needed?— wasn’t drawing much skepticism today. “He’s interested in the public good,” summed up Bessma Momani, an expert on monetary policy at Waterloo, Ont.’s Centre for International Governance Innovation.  In fact, just about everybody who has worked with him comes away much the same sense, which is obviously a tribute to the man.

Still, that’s far from the only quality Carney projects.

“Anyone who knows him knows he’s an ambitious man and brilliant,” Momani added. Louis Gagnon, a finance professor at Queen’s University, said Carney probably realized that the biggest moment he’s ever likely to face as Bank of Canada governor has already come and gone—the financial crisis of 2008, followed by the 2009 recession—and so he needed to look elsewhere for his next chance to shine.

Like most other close watchers of Carney’s career, Momani and Gagnon both said they were shocked by today’s news. That Carney was a candidate for the Bank of England job was reported months ago. But last August, in an interview with BBC’s Hardtalk, he appeared to take himself out of the running, saying he looked forward to working with the Bank of England’s next governor.  Interviewer Zeinab Badawi followed up by asking him, “Is that a ‘No’ or a ‘Never’?” To which Carney replied, “It’s both.”

Actually, neither. What changed between August and November? At this morning’s press conference, Carney said the courtship has been and on-and-off affair, and the intensity of interest from the British recruiters increased only over the past two weeks.

Interestingly, that timing suggests the discussions heated up after Carney’s Nov. 7 interview with CBC’s Power and Politics, in which he finally, decisively put to rest speculation that he might be contemplating a bid for the Liberal party’s leadership. The rather generic way he described his future to CBC’s Evan Solomon now seems telling.  “I have no intention of seeking political office,” Carney said, later adding: “I’m going to be a central banker for some time, God willing.” Accurate enough—he didn’t specify at which central bank.

Momani regards London as Carney’s natural habitat. As the world’s most important financial centre, it’s the natural focal point for the sort of banking reforms Carney wants to spearhead. He knows the City from his days there as a Goldman Sachs banker. His wife is English. They both went to Oxford. As well, there’s less resistance in London than in, say, New York City to Carney’s prefered style of regulatory oversight. “He’s willing to stand up to private interests,” Momani observed, “even though he comes from the private sector.”

Gagnon said his own surprise at Carney’s move is certain to be broadly shared among academics, bankers and bureaucrats who follow this sort of thing. He said there’s “no question about it” that Carney’s BBC interview last summer was widely interpreted in those circles as a clear signal that the Canadian central banker wasn’t considering a move to London.

But Gagnon said Carney might have come to see that Canada has become too placid, after he, along with Finance Minister Jim Flaherty, managed the 2008 credit meltdown and the deep global slump that followed. “He steered the ship through the biggest storm that we could ever possibly have imagined,” Gagnon said, “and now he’s looking for the next big thing to do, the next challenge.”

Indeed, Carney’s choice of words today left little doubt he views the playing field he’s striding onto expansively. “This is a critical time,” he said, “for the British, European and global economies.” But he sounded almost wistful about leaving the compact Canadian scene on which he has been such a powerful presence since being appointed the country’s top central banker in 2008. “I’ll miss the camaraderie and the clear sense of purpose,” he said.

He won’t be making the transition from Canada to Britain until next June. That leaves the Bank of Canada’s search committee plenty of time to come up with a recommendation for Flaherty on Carney’s successor. It’s unlikely to be such a charismatic figure. There just isn’t one waiting in the wings.

Yet we needn’t assume the next bank governor will be a dry monetary-policy technocrat. A likely leading contender, for example, is Tiff Macklem, Carney’s senior deputy governor since 2010. Macklem, then a top finance department bureaucrat, was a credited as a smooth behind-the-scenes player in the orchestrating of the Toronto G20 summit in 2010. Despite the street protests many will remember, the actual summit sessions went off remarkably well from the Canadian government’s point of view, and Macklem garnered considerable credit.

There can be no doubt, though, that Carney will leave a huge gap in the federal political and policy scene. His confidence and poise simply were not rivaled during his years in the federal public service. Political and public attention to his pronouncements on everything from “Dutch disease” to auto industry productivity went well beyond the norm for a central banker.

In the end, apparently seeing no obvious upward path in politics beckoning here at home, it might have been inevitable that he wouldn’t stick around to grow stale.