MICHAEL WILSON’S LEGACY.
A STEADY HAND WHO HELPED SHAPE THE BEDROCK OF CANADIAN ECONOMIC POLICY
Michael H. Wilson had no business in politics. His public speaking style could best be described as functional and effective, so long as the objective was to deliver a sober message in steady tones. He was mild-mannered, non-confrontational, steady, always gentlemanly, unpretentious, thoughtful. No audience ever roared and jumped or cheered wildly in the wake of a Michael Wilson speech.
Perhaps for that reason, he fit perfectly the role as Canada’s ambassador to the United States, distinguished and professional, the perfect Canadian. As a banker, he radiated bankerly qualities of honesty, integrity and understanding. And as the many obituaries since his death have noted in recent days, he became a quiet campaigner for mental health issues.
And he was usually cordial with the media. Not a trickster or a manipulator. Straight-up, friendly. Just last August, I asked him if he could compose a brief note to mark the retirement of Barry Critchley, the Financial Post’s veteran columnist. Wilson soon sent this in:
Critchley — the wild Aussie, still riding his crazy kangaroo.
Barry, I always have enjoyed our lively discussions on many issues, although I never won an argument with you. Your unique perspective over many years has gained you many readers and admirers.
Best of luck,
Michael Wilson
Though Wilson lacked the demagogic flair and the industrial strength blarney that seems to be a requirement for office holders, he held his own when, as a minister in the Mulroney cabinet between 1984 and 1992, he played a critical role on four key files that have shaped Canadian economic policy: roaring fiscal deficits, controlling inflation, introduction of a national goods and services tax (GST) and the negotiation of free trade deals with the United States (1988) and Mexico (1993).
Wilson did not conquer every issue. Much of the skill in being finance minister is the ability to cope with economic developments and shocks, handle the imperatives of the global financial markets and the limits of fiscal policy while juggling the vagaries of the political forces shaping government policy, from the whims of the prime minister on down.
Of the four major challenges and issues, Wilson certainly failed one. Under Mulroney, Canada’s fiscal situation worsened and Wilson’s public attempts as finance minister — delivered in his mild-mannered fashion — failed to galvanize the government or the population.
As $30-billion annual federal deficits continued up through 1990 and beyond, the national debt doubled from $207 billion in 1984 soared to $425 billion in 1993.
Could someone of greater charisma and force of personality have turned the federal fiscal fiasco around in 1989 and 1990 to avoid a catastrophe? Possibly. More likely is that such major policy shifts are only possible in the heat of a fullblown crisis, which is what happened a few years later when, under the Liberals, a currency meltdown forced the government to cut spending, raise taxes and download costs.
Wilson seems to have been more effective on the free-trade file. Derek Burney, a consultant and Mulroney’s chief of staff during the period, once said that when Wilson was with Burney during the 1988 U.S. free-trade battle “it was like having a solid right arm: he was thoroughly dependable and reliable and his judgment on issues was impeccable.”
The battle over the introduction of the GST, a ball Wilson carried as minister of finance, was an evolving political firestorm filled with compromises. What started as a nine-per-cent rate with broad coverage was cut back to seven per cent with many exemptions. But in the end it was an economic success, in the sense that it replaced a destructive tax on manufacturers with an economically superior — although unpopular — tax on consumption.
Opposition parties had a field day with the policies Wilson championed, running election campaigns in opposition to free trade, the GST and another policy initiative, inflation targeting.
Little acknowledged in Wilson’s obituaries was his role in introducing inflation reduction targets as a hallmark of Canadian monetary policy. Canada became the first major nation (following New Zealand) to establish inflation targets and price stability as national monetary objectives. John Crow, governor of the Bank of Canada during Wilson’s stint as minister of finance, said in an interview Monday that the impetus for Canada’s adoption came from Wilson and the finance department.
With inflation running at more than five per cent in 1989, the inflation reduction plan required higher interest rates. The bank rate hit 10 per cent in 1990 and 16 per cent in 1991, rates that caused the federal deficit to rise. Through it all, though, Wilson stuck with the inflation-reduction principle.
In a sense, Crow said Monday, during Wilson’s stint in finance, “monetary policy went against fiscal policy.” Despite the pressure inflation control and high interest rates imposed on fiscal policy, Crow says Wilson was “very supportive” of the objectives. “Michael never complained to me. For him, what we were doing was kind of right. In his fibre, he knew that. He was a very honourable person as well (although) people in finance didn’t necessarily share his world view.”
While constantly under review, Canada’s inflationcontrol regime, introduced by Wilson, remains a bedrock of Canadian economic policy, as do the other core elements of Wilson’s contribution to Canadian politics, from the GST to free trade.
Perhaps Wilson’s career is proof that you don’t have to be a hard-nosed, truth-warping, word-spinning political manipulator to succeed in politics.