THE POLITE ECONOMIC ARSONIST
Morneau played role in creating anger toward BOC, says
The Supreme Court's quarrel was ... not with offenders being kept in jail for good; rather, it was the elimination of any chance at parole — any consideration of rehabilitation ... one of the principles of sentencing — that resulted in the law being declared unconstitutional.
If Canada is currently a house on fire, then former finance minister Bill Morneau is one of the arsonists who lit the spark. Perhaps this was accidental — the economic equivalent of a cigarette butt flicked thoughtlessly in the direction of millennials. Or maybe it was meant to be a controlled burn, with an insurance payout for generations who more reliably turn out to the polls. Who could've known young people would be so flammable?
The generation that invented the slogan “good vibes only” is now simply pissed and, to the horror of the political establishment, their red-hot anger threatens to singe, if not incinerate, the Bank of Canada's status quo.
This might not be such an issue if politicians simply continued their long-held tradition of ignoring young people. But someone broke from the ranks. Conservative leadership candidate Pierre Poilievre made an art of channelling millennial rage, going so far as to say he'd fire current BOC governor Tiff Macklem. Cue moral panic.
On Wednesday, in Morneau's keynote for the CD Howe Institute's annual directors' dinner, he made it pretty clear what he thinks of Poilievre's promise. “Canada is a country with political institutions that are, in many cases, the envy of the world. Yet there are politicians — who absolutely do know better — who are not only taking those institutions for granted, they're willing to actively undermine them if it gives them the slightest political advantage,” he said, according to his prepared remarks.
Except it's rich to complain about scorched earth when, less than two years ago, Morneau was dousing the place in lighter fluid.
Canadians' — and particularly younger Canadians' — issues with the bank can basically be attributed to three things: the housing crisis, inflation and questions about its independence. As finance minister, Morneau made all three of these worse.
Housing affordability was already an issue when Morneau took office, but his policies exacerbated the problem while making it easier for millennials to take on more debt.
He implemented misguided demand-side measures, which economists at the time warned would raise prices and reverse any benefits of increased supply. These included upping the amount first-time homebuyers could borrow from their RRSPS and allowing the Canadian Housing and Mortgage Corporation to become part owners in their homes. He studied the impact of foreign investment on Canada's real estate market, but chose to do nothing about it.
Meanwhile, Morneau failed to introduce any meaningful solution to Canada's supply problem while simultaneously aiming to increase immigration to 450,000 newcomers a year by 2021.
When the pandemic struck, Morneau held a news conference with then-bank governor Stephen Poloz, which undermined the central bank's claim to independence and created the impression that politicians and the bank worked together.
The actions Poloz took, namely quantitative easing, rewarded asset owners with lottery-like gains while allowing renters and young workers to fall evermore behind. They also exacerbated the wealth gap and, fatefully, contributed to the current inflation spiral.
While it can be argued the bank initially made the right call, the big question is why didn't they taper quantitative easing and raise interest rates sooner, when inflation first reared its head? Maybe they really thought it was transitory, but neither did they seem overly concerned about inflation exceeding their two per cent target.
Morneau signalled openness to adjusting the inflation mandate higher than two per cent back in 2018, a time when there was much open discussion about expanding the bank's mandate. Since then, the bank has taken what looks like small steps toward a dual mandate that also includes employment and climate targets. All of this distracts and competes with its most important responsibility: controlling inflation.
He also ushered in a new era of big government spending and federal deficits that ran higher than expected, even before COVID-19. While, to her credit, Chrystia Freeland recently reined some of this in, there continues to be an ingrained Liberal sensibility that almost all problems, including housing affordability and inflation, can be combated with more spending. Too often, it only makes the problem worse.
Morneau even had the gall to tell millennials concerned about precarious, low-paying gig work to just get used to it. “Most of the really smart people find jobs,” he said in response to a 2019 question about youth job prospects, “even when there's high youth unemployment. The reality is, it's 13 per cent. That means 87 per cent are employed.”
Now he has the audacity to lecture about the potential harm of “angry voices” and the need “to heal divisions, bring people together, restore faith in our institutions, and rebuild public trust.” Yes, how dare young people who were told to be OK with crappy jobs, saddled with debt to afford what used to be a middle-class lifestyle, chosen as the losers of monetary policy and financially repressed as others amassed fortunes be angry? Why don't they have more faith in the institutions that failed them over and over again?
Morneau lamented that, when he was finance minister, “So much time and energy was spent on finding ways to redistribute Canada's wealth that there was little attention given to the importance of increasing our collective prosperity.”
He's right; just not in the way he thinks. The Liberals did focus too much on income and gender when the real chasms that threaten Canada's collective prosperity and stability are gaping generational and property ownership gaps. Addressing the former sounds great on the campaign trail, but the latter risks the ire of those on the winning side of the divide.
Canadians didn't just wake up one day incensed about central banking and Poilievre didn't plant anti-bank sentiment in their heads. The blaze of anger we see today is a result of years of playing with fire and it's going to take a lot more than admonishments to “play nice” to put it out.