The Carney affair with the Liberal Party: It will all end in tears

Hypothetical questions around the wooing of the Governor of the Bank of Canada

by Stephen Gordon

(Chris Wattie/Reuters)

I — and presumably most people familiar with the recent history of monetary policy — read this article in Saturday’s Globe and Mail with mounting horror:

Mark Carney was cast as the perfect alternative to Justin Trudeau by a tight network of Liberals who pulled out all the stops last summer to attract the Bank of Canada governor into the Liberal leadership race.

Mr. Carney was responsive to the efforts, and his actions over the summer – taking phone calls, asking questions about the race, staying over at a senior Liberal MP’s house during a week-long family holiday in Nova Scotia – fueled speculation about his candidacy.

By September, Liberal officials were trying to put together a team of organizers and supporters, and mapping out Mr. Carney’s road to victory at next year’s Liberal convention.

This isn’t just a bombshell; it’s a bunker-buster. As Mark Carney noted in his most recent speech, modern monetary policy depends crucially on making sure that people understand what is going on:

[R]esearch and experience demonstrate that clear and open communications also enhance the effectiveness of monetary policy. In particular, successful monetary policy requires transparency around two aspects of the policy approach – what we are trying to achieve and how we go about achieving it.

This sort of transparency is almost impossible to achieve when monetary policy is set by politicians. This goes beyond the usual concern that since raising interest rates in never popular, monetary policy will always be too loose. There’s also the risk that even if the government does announce a shift to monetary tightening, people won’t believe that it will be carried out. And actually carrying out the monetary tightening doesn’t make the problem go away: an unexpected increase in interest rates is more disruptive than an expected increase.

It took 20 years and two recessions — both of which were more severe than the one we just had — before we were able to come up with a monetary policy framework that works well. The current practice in Canada is that the government provides the Bank of Canada an inflation target, and the Bank of Canada is free to exercise its discretion in how it meets its mandate. This is not full independence — the Minister of Finance has the legal authority to override the Bank in extreme circumstances — but it’s been enough so that when the Governor of the Bank of Canada speaks, people know that there are no unspoken partisan political considerations through which his message should be filtered. Explanations of how monetary policy is being conducted can be taken at face value, even if they are couched in cautious and nuanced language.

Or at least, that was the case before the Globe story broke. The second paragraph puts this hard-earned reputation for non-partisan professionalism into question. Unless Mark Carney can swiftly and convincingly demonstrate that he responded to those Liberals’ overtures with a quick and unequivocal refusal, we shouldn’t be surprised if non-Liberals start looking through his recent speeches through the corrosive, distorted lens of partisan politics. Was his speech to the Canadian Auto Workers simply a play for union support? Was his dismantlement of the Dutch Disease talking point simply a tactic to put the NDP off-balance? For me, these are rhetorical questions written with a sense of sickening dread; others will doubtlessly repeat them in earnest and with angry, partisan vigour.

But even in the best-case scenario in which Mark Carney’s conduct is blameless, we are still left with the prospect that not-insignificant elements in the Liberal Party of Canada were willing to risk one of the most crucial elements of our governance for partisan gain. If we are extremely lucky, this episode will be quickly forgotten. But if by taking a run at Mark Carney, these Liberals have initiated a never-ending cycle of speculation about the possible political ambitions of future Governors of the Bank of Canada, they will have weakened — perhaps fatally — the foundations of Canadian monetary policy.




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The Carney affair with the Liberal Party: It will all end in tears

  1. When I first heard about it I thought “what illiicit improper benefit could the governor provide a political party and vice versa?” This article hasn’t given me much despite the author’s hysterics.

    Can someone who is an expert in government affairs (not merely an economist) provide a better analysis of whether this is a wrongdoing, with reference to guidelines and precedence?

    • Much ado about nothing. Tempest in a teapot.

      Writer in need of ….several….valium.

    • It’s all about trying to influence monetary policy. If he can be influenced into running for the Liberals, that he can be influenced by other politicians and the Governor of the Bank of Canada should be totally non-partisan. But I agree, it’s a tempest in a teapot and the media can’t help itself, it has to smear everyone.

      • but if an MP is trying to talk with Mr. Carney to influence monetary policy for what they see as the benefit of Canada, what is the harm in that? I would expect and approve of that, and I would expect mr. Carney to listen to the MPs comments and give them the weight that he, as an expert, deems fit. And I’m having trouble coming up with a scenario where national monetary policy could be influenced for the partisan benefit of a political party, though I’m open to realistic suggestions.

        Most people aren’t talking about monetary policy, in fact most of the angries seem to be angry on the idea he spent time being wooed by the LPC to run. I am willing to accept this as a likely possibility. But civil servants probably should be able to consider running for office or be considered for office. Are there guidelines for this? what are they and were they breached (something I really would have liked to see some information on)? Hearing that he was constantly courted by a party to run for a while might kinda pique my interest and make me want to know more about it, it doesn’t evoke “mounting horror”

        • Yes, but you don’t have a fear of losing your Conservative Bona-Fides if it comes out that you admired a guy who may lean.. ewww.. Liberal.

      • Being influenced to take another job and being influenced to do other than what you think is the best in your current job are two entirely different things.

    • If you cannot see the obvious and endless corruption possibilities with those who control interest rates and the money supply, you’re hopeless.

      • And if you cannot see the obvious and endless corruption possibilities with those who control the information supply ( The Globe), You are hopeless. The Globe broke a story about someone who deied the rumours the Globe published. then the Globe attacks his professional reputation for what? For allowing a story to be broken about what his future plans may or may not be. Which part of this sequence is it that bothers you exactly?

        • Note the byline. One of the authors is Jane Taber – one notorious for using unnamed sources while in Ottawa, and legendary for the Saturday G&M column – Who’s Hot, Who’s Not, often containing kitten references to Laureen.

          Same fingerprints all over this story.

          • I agree with Gordon regarding the seriousness of the issue, but I also agree with you that the story authors, along with the Globe’s general reputation, makes me skeptical of the truthfulness of the story.

          • Well, in the UK press it was revealed that John Ivison plays tennis with Mr. Carney, and Paul Wells is a friend.

            Are they in a conflict-of-interest as reporters? I just yawned. The town is small enough that this is inevitable.

            Carney was obviously flattered for all of the attention, and appears to have basked in it. Not surprising to someone who was faceless and toiled behind the scenes for so long. It happens. I can even see it in some newly found “talking heads” – who need a reality check.

          • I lived in Ottawa for about 10 years and I knew not one of Ivison, Carney or Wells. Neither did anyone I know. So it’s not really the town, it’s the much smaller circle of people involved in the highler levels of government and journalism. It’s the same in Washington DC and in London UK.

            As government has become bigger and more entwined in all layers of society, government is becoming increasingly cozy with other levels of government, with the press, and with corporate CEOs. It’s a big social club. Journalists reporting on the government then get hired by the same government and then later get hired as lobbyists to lobby the same government.

            Some of it is corrupt, some of it isn’t, but in general it’s just not healthy.

            Carney was obviously flattered for all of the attention, and appears to
            have basked in it. Not surprising to someone who was faceless and toiled
            behind the scenes for so long. It happens. I can even see it in some
            newly found “talking heads” – who need a reality check.

            I do agree with that assessment of this situation.

          • I doubt that CBC’s Terry Milewski would have similar social circles, but you never know. Term limits for reporters would solve at least that part of the equation.

          • Omygod, Jane Taber. End of story.

        • Firstly, nobody controls the supply of information except perhaps the governments of communist countries. It’s actually funny for someone to suggest that the rag known as the Globe controls the supply of information.

          Secondly, I do agree with you about being skeptical of the Globe.

          • s_c_f, it’s perfectly OK to be sceptical of a news story but to call a mainstream paper a rag is an insult. Let’s try to stay away from that in this conversation or I’m going to have to moderate it more forcefully.

          • OK, I would like to call it an unreliable, dishonest, partisan, sensationalist and low-quality publication.

            It is the kind of publication that would do what “Why do I bother” is suggesting, the type of publication that has done such things before and will do such things again.

          • It is not hard to follow my comment. The Globe and Mail published an article a few weeks ago announcing that some Liberals might be trying to recruit Carney for the Leadership contest. Carney denied that he was going to run. Then today the Globe published this article that casts aspersions on Carney because it is not proper that there should be any slightest hint that he may be considering a partisan role. The point being that it was the Globe and Mail that started the public rumours, despite Carneys denial, and it is the Globe and Mail that is now blaming Carney for the existence of the rumours they started. Does that make it easier for you? Maybe you should re-read the article. The theme is that it is not proper for any hint of partisanship about the Governor of the BofC. They do not state he is partisan, they simply say that there should not even be a sniff of it, and that Carney is to blame.

          • OK, I agree with you.

        • Staying at Scott Brison’s house was hardly non political. These rumours have been going on for some months and now it has proven to be true.

          • What has been proven to be true? Absolutely nothing beyond the fact that the Governor of the bank of Canada spent his holidays with a friend who was also a Liberal. The article does not say that Carney is a Liberal, it says that it may possibly appear to some that he may be influenced by political and partisan considerations. it repeats rumours and innuendo, and says that appearances of partisanship should be scrupulously avoided. Why do you not read before you make such assertions.

          • He probably put RED jam on his morning crumpet too. My lord, we should run the guy out of the country…wait a minute…

  2. Puh-leese. Would there be such shock and outrage if we heard the Cons had been courting him? How come there was no similar outrage when we learned Fantino was running for them? (Well, maybe the difference is that Carney is good at his job…)

    • This goes a little far. Commenters have said Mr. Gordon is very pro Conservative but I’m not sure about that and don’t like leaping to conclusions. I would think it far more likely his reaction is genuine (maybe he honestly feels the governor should be nowhere near any politican of any stripe whatsoever) but unwarranted and maybe even a bit naive.

      a less likely but still possible reason for the shock and outrage is that it seems the author has been having some trouble adjusting his writing style for the non-academic audience, and maybe he thought “laying it on thick” was the right way to approach this piece of journalism.

  3. Does Carney want to run as a Conservative when he comes back to Canada? I’d love to see him as PM.

    • Carney has a home in Britain and a British wife. Why should he come back to Canada? Why would he?

    • He won’t have come back for you.

  4. If those political baboons would speak plain English and perhaps even truthfully, we may have some clue about what should be scaring us to death or not. As it is … who knows what they are actually saying and what is all actually means. If it difficult to second guess sophisticated, professional liars … except, you alway know that you are continually being deceived.

  5. And somehow Harper will be blamed for this..

    • Not that, surely? Harper would try to assassinate the character of someone who does not share his political views? Someone with better economic credentials, and enjoying more trust with the electorate than the Harper himself? Someone who may have been talking to LIEBERALS no less? Surely no-one would ever suggest such a thing. Canadians know that Harper is totally above reproach, and would never stoop so low.

    • Are you suggesting that Harper SHOULD be blamed for this? Because I’ve seen nobody at all ever even suggest Harper should be blamed for this but you. So I can only assume you want us to blame Harper for this.

      • Heavens forfend! Our Dear Leader would never try to shape the message or deceive Canadians. The sun shines from his every orifice, and I gratefully worship the hallowed ground upon which he treads.

  6. Carney’s term as the Bank of Canada Governor is up next year so of course he would be looking to see what he would do next. The fact that the harper party apparently did not try to entice Carney to join them says a whole lot more than the fact that the Liberal Party apparently did.

  7. I can’t get o worked up over this. It was pretty much public knowledge that he would be a contender to lead the liberals if he decided to put his hat in.
    Anyone with career aspirations beyond boc governor can’t be blamed for asking a few questions.

    Also, we haven’t felt all the effects our monetary policy are going to have yet. While its worked ok so far, it’s to early for me to say the system works.

    • And not even “asking a few questions” but “allowing himself to be asked a few questions, and not providing answers showing he was interested.”

  8. This article misses the point on many fronts – first, many Canadians would love to see Mark Carney run for political office in Canada as either Lib or Cons. Is Stephen Gordon suggesting that he’s “off limits” ? Maybe because he’s too smart and not partisan enough?

    And is the suggestion being made that Carney himself is not allowed to consider future prospects such as running for office? Curse him for thinking that he might consider a role in public governance and trying to make Canada a better place!

    Or the Liberals are evil for thinking that a smart, progressive and economically wise individual would make a good political leader? Curse us for having such high standards, Canada!

    I’m sure Carney has many private discussions, and he may even have friends… to assume that he can’t separate those discussions from his official role is giving him very little credit. It would be much easier to suggest that since he worked at Goldman Sachs he still acts in the interest of those past masters, yet that criticism has also been long-debunked.

    The points this column makes are cynical and simply don’t make sense.

    • They make perfect sense if you consider the origin.

  9. How do you measure the influence of Jim Flaherty on Mark Carney? He had him as a senior official in Finance for 2 years and then they have traveled the world together dozens of time to attend all these international financial and monetary policy meetings since 2008. That’s a lot more hours that all the liberals could have ever spent with Mark Carney. We have never had a Bank Governor and a Minister of Finance that have been so close and moreover we have never had a Governor who has been so outspoken on many non-monetary policy issues. So please put things in perspective, will you before coming to such drastic conclusions.

  10. We should not recruit successful leaders into government. We need more men of “no accomplishment” like Harper, McKay and Kenney. What did these guys ever do before they were elected? Nothing. And now look at how successful they are at running the country. People Like Paul Martin could not run the economy as a well as Harper. (Those 8 balanced budgets during Martin’s time was a Liberal trick).

  11. Trust has to begin somewhere. Take the Supreme Court of Canada. I believe most, if not all Canadians accept the rulings of the Supreme Court with the knowledge the decision was made with professionalism and without partisan politics. Judges are appointed by the government in power and it would seem each government in power tries to load the Supreme Court with folks they know will support their particular political leanings. However, even though these judges can be right, middle or left of the political spectrum, I firmly believe they make a decision on that basis, not on party politics. (ie) Conservative, Liberal, NDP, etc.) I take the same stance for the Governor of the Bank of Canada. I believe Mark Carney would make economic and financial decisions based on his expertise, not on party politics.

  12. Just to add to my other post, this article is another example of mainstream media hysteria. I trust readers will see through this facade. Stephen Gordon, go take a cold shower!

  13. I agree with Gordon that this is serious news.

    Corruption never ends with the Liberals.

    Unquestionably, Carney should have brushed off political overtures and he should have kept his future plans to himself.

  14. I smell a rat. The smell is at the Globe, not Carney`s vacation plans. The Globe`breaks the news` that in the greatest of secrecy, Carney may, or may not have been talking to Liberals about becoming a politician. Carney obviously and explicitly did everything he could to protect the impartiality of the office of Governor of the Bank of Canada. He denied publicly the implication, whcih incidentally torpedoed any such plans he may have actually had. A few weeks later, Canada loses a great central bank governor to the UK, and the same Globe that broke the story about his personal affairs starts to mailign him for even allowing the possibility of a career change to become news, liberally casting aspersions while they are at it. The original story was highly speculative, and denied by Carney. The whole sequence of events stinks, with the Globe starting the rumour, and now pumping it up into some pretty serious allegations of impropriety. I doubt very much that any such article would be published if Carney was discreetly speaking with Flaherty about running in the next election. Could this article be Act II in yet another character assassination?

  15. I really wish the twitter crowd who spent yesterday whipping this up into a fury would count to ten, take a break from their ongoing and apparently all consuming passtimes, go for a walk or something, and do something better with their tax payer funded sabbaticals.

    • Moderator Ealini:

      I had a comment here that was posted and has now been deleted. It had to do with the character and the background of the author of this blog – who is attacking the character and reputation of a public official, and a political party.

      Could you please explain why it is no longer available to view, nor relevant?

      • I am not going to tolerate any personal attacks on the author of this post, something you engage in fairly regularly. Your other comments are welcome. Erica

        • That’s quite an allegation on behalf of your colleague on this blogsite. Care to provide proof?

          • What’s the allegation, Dot? Gordon is simply expressing concern based on reporting made by the Globe and Mail. To say that a central bank governor should avoid perceptions of being cozy with politicians is not an allegation, and is, frankly, quite a mainstream opinion.

          • Wow! Talk about self serving. I just re-read the article, and in all honesty, I see it as a partisan attack on Carney in particular, and the Liberal party specifically, based on little or NO evidence. Since the original article was in the Globe, and the un-named sources are presumably not known to the author of this article, I wonder how so many far reaching implications and conclusions about Carneys motives, and even the goals and objectives of the ‘sources’ for the original article can be read from the original article. I think the entire article was shoddy journalism, and really quite suspect. If the best you can say is that it is mainstream opinion, well shame on you. ‘Everybody is saying it’ is a weak excuse for repeating rumours, and casting aspersions.

          • Most economists would agree that a central bank governor should avoid giving people any reason to believe that she/he is too cozy with a certain political party. Perceptions (whether they are correct or not) matter a whole lot in monetary policy, hence the author’s concern.

          • Polled Canadians on it, have you?

  16. Carney should not be “staying over” at the home of the Liberal Finance Critic. Period.

    • Carney is a public servant, and a good one. He can stay over at a friends place if he wants. It is not a public statement if he does, no matter how many reporters `discover` that he did so. The bar you are setting is ridiculously high, and our democracy is mature enough that such limits are well understood, and regulated.

    • What he does with his vacation time is his own business. The press shouldn’t even CONSIDER reporting on it. Considering his career, he’s going to have “interesting” friends from all parties, I’m sure. It’s a non-issue.

  17. This comment was deleted.

    • Can’t tell if serious, or satirizing the alarmist nature of the article…

  18. For those that want to pretend this isn`t a major issue – please explain why it is OK for a very Senior Public Servant to take favours from any political party in the manner of vacation home use… it was the Liberals, also, that handed Kevin Page one of the Queen`s Jubliee medals — he may or may not deserve it but this too cosy relationship between Senior Officials and the corrput Liberals just stinks to high heaven. Face it folks — if the Conservatives had of done either of these things, the MSM would be in open revolt and the unions would be rioting in the streets. Corrpution is way too common in leftie circles.

    • I’ve never spent a weekend with Scott Brison but from what I’ve seen of the fellow it doesn’t look all that amazing (seems like a swell guy, but y’know, maybe the single most drab homosexual in existance…). Trying to spin it as giving out valuable favours won’t fly.

  19. This is the dumbest thing I’ve ever heard… Accusing Mark Carney of playing Liberal politics? So dumb..

  20. It really doesn`t bother me that Carney and his family chose to spend a few vacation days at the home of Scott Brison and his husband. I don`t share the concern that there could be irreparable harm to the Canadian monetary policy because there was a conscious effort on the part of the LPC to recruit an intelligent but politically naive saviour.
    Hey, they have a history of doing that.

    I think the real story here is that there is a concerted effort on the part of senior Liberals to elect someone other that Justin Trudeau as their new leader. It shows real concern that the anointed one may be bad news.
    Senior Liberals are thinking this Junior Trudeau could be the end of The Liberal Party.
    I have been thinking the same thing for some time.
    Look for some disruptive fireworks in the Trudeau camp over the next few months.

  21. This article reads like the author is running around screaming “the sky is falling!” Big on alarmist language, short on any actual implications or evidence for that alarmist language.

  22. Meh, slow news weekend. Anybody with Carney’s career is bound to have powerful political friends. How he spends his vacation time is really none of our business. And frankly, the Liberals would be fools to not try to recruit him. As would the CPC and NDP. He’s obviously a very intelligent and highly professional leader.

    What I do find unsavory, however, is the fact that senior Liberals would plant this “story” (has Carney done anything but deny the rumor since day 1?) with a Liberal-friendly paper in a shameless effort to give their party economic street-cred by calling into question the credibility of one of Canada’s finest civil-servants.

    While I normally enjoy Gordon’s writing a lot, I can’t believe he’s actually calling the credibility of the BoC governor into question. Is Gordon actually suggesting that Carney may have been acting against Canada’s best interests to strengthen the Liberal’s electoral chances? In an effort to become PM in 2015? Has Carney ever indicated in any way, shape or form that he has political aspirations?

    Honest question: Does anybody who knows him actually think he’d think he’d throw away his entire career as one of the smartest non-partisan policy makers in Canada (the world?) to roll the dice on becoming PM of Canada by running for the 3rd place party in the country, who’s brand and electoral prospects have been in steady decline for the better part of a decade? It would frankly, be one of the stupidest career moves imaginable, and from someone I think we can all agree is decidedly NOT stupid.

    At the end of the day, this story is far more about how the Liberals and Liberal-friendly journalists at the G&M are willing to throw any institution and/or individual under the bus if they think it might give them a bump in the polls.

    Carney’s done a lot for Canada, and he deserves better than to be Liberal-media cannon fodder.

    • I don’t disagree with some of your points. Although i’m a liberal, the parties tendency to let powerful party officials run around doing whatever they want, bothers me. If this is what happened it’s been done without consulting the membership, and is likely to backfire. [if they had succeeded] It backfired badly with Ignatieff, and TM is a fool if he thinks the party membership will put up with similar behaviour again.

      Where i find your theorizing fanciful, ridiculous really, is why on earth liberal insiders would have leaked this to the media after the horse has bolted? It makes no sense. If anything this is more likely a tory planted story, planted to create friction with the LPC. If my theory is closer to the truth than yours that would make the CPC the institutional political vandals.

      In any case, you have some nerve complaining about throwing institutions under the bus; considering these Cons and their core supporters hold many of our institutions in utter contempt.

  23. It seems to me that it’s being blown up far out of proportion, and that the media are delighting in it. Anything to trash the Liberals.

  24. If you ask me, Tory fingerprints are all over this episode. They’re really threatened by Trudeau.

  25. This is very disturbing with some suggesting it is simply a tempest in a teapot. Well it is not. The Governor is suppose to be non partisan and making decision on monetary policy without the influence of politics. Carney appears to have breached that point and for the Liberals to try and corrupt the Governor of the Bank of Canada is disgusting.

    • Funny, you didn’t seem much “disgusted” when Harper chose to use the Governor as a prop in one of his – team players with sleeves rolled up – photo ops.

  26. Sorry, SG but i worry a little about your judgement [ political anyway...and i'm not calling you a Con shill] I must have missed your concerned post/article when Carney was allowing himself to get roped into those – we are all in this together – photo ops the CPC ran during the recession. If this is wrong, so was that. Or more rationally neither was wrong within its proper context.
    When you read all the article it is apparent that conspiracy theories cut both ways. If for instance MC was planning to take a run in ’18 this leak puts a crimp in that…now i wonder who has a proven track record in character assassination and salting the liberal political earth?
    However, most likely this is idle media speculation.

  27. Oh what have you done SG? If this story brings on a Wente column i will hold you personally responsible…

    …hold that thought..

    …thank goodness for paywalls…i knew there must be some silver lining to them, somewhere.

  28. This story would be frightening, if it wasn’t for the universally skeptical comments here and even at the Globe. Good to see we’re all still good at detecting BS!

  29. This comment was deleted.

    • Yeah, seems that some people have fallen for Harper’s fear mongering. The irony is just too much.

  30. Moderator Ealini:
    My comment was also deleted and I have no idea why. What guideline did I breech?

  31. What an overwrought peace filled with a silly amount of angst. I mean come on, get a grip already, we have enough doomsday stuff going around at the moment! LOL

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