BOC leader hoping for revival in global unity
Tiff Macklem, who took over as Bank of Canada governor in the first week of June, still hasn't fully decorated his office.
The camera on Macklem's computer caught a bit of his wooden desk during our interview last week, but the walls behind him were white and bare.
The Bank of Canada sent non-essential staff home when governments initiated strict social distancing in March, and hasn't decided when to call them back. So, why hang art when there is no one around to see it but your chief of staff?
Still, Macklem's office can't be completely barren because he offered to show me a picture from the meeting of G7 finance ministers and central bank governors in Washington, D.C. on Oct. 10, 2008, when the world's most important economic leaders realized the global financial system was on the verge of coming undone.
“I still have a picture, I'll go get it afterwards,” said Macklem, who was the Finance Department's top international official at the time. “I keep this picture of the beginning of the meeting. I'm in the picture and I look terrible. I was pretty stressed. I keep that in my office as a little reminder of that feeling in the pit of your stomach.”
Macklem's boss, the late Jim Flaherty; Mark Carney, the Bank of Canada governor; and their counterparts from the United States, Japan, Germany, the United Kingdom, France and Italy would declare that no other big bank would be allowed to fail as Lehman Brothers Holdings Inc. had a few weeks earlier.
That doesn't sound like much anymore, considering the world's major economies have spent hundreds of billions of dollars to keep their economies afloat during the pandemic. But back then, the G7 promise was considered an extraordinary intervention, especially after it was endorsed by the larger G20 soon after. “It was effectively suspending capitalism,” said Macklem. “It wasn't a decision that anyone would take lightly and it wasn't a decision that anyone could have imagined taking even a few weeks earlier.”
This moment in our conversation stood out because it demonstrated the biggest difference between the global crisis that we continue to endure and the last one 12 years ago.
It's unlikely that veterans of the COVID-19 crisis will be holding onto memories from the international meetings they attended in 2020 as markers of important turning points. To be sure, images of global leaders talking over video link make for poor art, but the main reason is that the G7 and the G20 were nonentities in a year that saw the biggest global calamity since the Second World War. Those institutions exist for moments like these. It was embarrassing.
So much was said a decade ago about how the financial crisis had finally galvanized the world's powers into taking global governance seriously, and yet they failed their next test. When leaders said at their summit in Pittsburgh in September 2009 that the G20 would thenceforth be the “premier forum for our international co-operation,” it occurred to no one that their response in the face of something as severe as the global spread of a deadly virus would be to barely talk to one another.
“The level of international co-operation this time has been considerably less than last time,” said Macklem. “That's unfortunate. I am hopeful that going forward that begins to change.”
It could. The U.K.'S Prime Minister Boris Johnson will host the G7 in 2021 and Italy will chair the G20. Both will be upgrades over this year's hosts, which were a cruel joke at the expense of those who care about international cohesion. The U.S. inherited the presidency of the G7 after President Donald Trump's White House had spent three years upending a global order that the other members of the group cherished, while Saudi Arabia was called on to manage the G20, even as it continued to wage a controversial war with Yemen
and destabilized the global oil industry with an ill-timed push to gain market share.
Neither the U.S. nor Saudi Arabia had the credibility to lead global institutions, and it showed. Leaders and ministers met, but nothing much came of it. The G20 couldn't even agree on a plan to help the world's poorest countries, as final discussions on a debt-reduction plan were pushed to early 2021.
Macklem's hopes for a revival in international co-operation rest with the G7, the collective of postwar economic powers that assembled in the 1970s to manage volatility in global exchange rates.
That will disappoint fans of the G20, who see the G7's continued presence as an attempt to block China and other big emerging markets from the centre of global decision making, but Canada's central bank governor seemed to have low expectations for a consensus-oriented group that includes the U.S. and China.
“The G7 is not the world and that's why you will need the G20,” Macklem said. Still, “the G7 is going to remain very important,” he said. “It's a group of mature, market-based democracies that have worked together for a long time. We're all facing very similar global forces,” he said, listing the shift to a digital economy based on services, climate change, and pressure to overhaul antiquated payment systems.
That's more back to the future than the new world order that some of us anticipated a decade ago. But it might be one in which Canada can make a bigger mark, if only because it's more comfortable playing on smaller ice surfaces.
Macklem appears keen to try. “We can be effective at the international table when we lead at home, when we bring good ideas to the table, and when we work with other like-minded countries,” Macklem said.
“I've seen it when it works.”
The level of international co-operation this time has been considerably less than last time.