Mark Carney - Canada’s Economic Saviour?

With less than a month to go until the conclusion of the Canadian Liberal Party’s leadership election, Mark Carney is riding high. Having only formally entered the political arena in January, the former central banker’s technocratic, economy-first pitch has propelled him to pole position in the race for party leader and prime minister. Betting website Kalshi currently puts him at 96% likelihood of being the next prime minister. 

Carney’s sober, details-oriented platform comes amid a surge in populist, anti-incumbent sentiment in the country. The cost of living and housing has soared under the Trudeau administration, while immigration has risen to record levels of around 480,000 per year. The household income required to buy a home in Canada ($170,000) is almost 2.5 times higher than the national median ($70,000). The country faces an unemployment rate of 6.7%, well above the OECD average of 4.9%, and a growing budget deficit. Once the face of an open and progressive future, Trudeau has come to be seen by many as performatively ‘woke’ and out of touch. 

But Carney’s entry into the race has upended what looked like a certain victory for the conservative opposition led by rightwing firebrand Pierre Polievre in the coming federal elections. A February poll by Leger has estimated Liberal support at 30%, the highest level since May 2023. Leaning on his career in finance, his policy platform is squarely economic: ease living costs, balance the budget, create jobs and grow real wages. 

Carney’s credentials are salient and persuasive in a time of economic crisis. A PhD economist who studied at Harvard and Oxford, Carney spent 13 years in the investment banking division of Goldman Sachs before being appointed to lead Canada’s central bank in 2008. He served in the role until 2013, when he moved across the Atlantic to London to lead the Bank of England. He left public service in 2020 and has since served as the head of impact investing at Brookfield Asset Management - a Canadian multinational investment group. 

His tenures as governor of both Canada and the UK central banks were from an inflationary perspective broadly successful. Canadian annual CPI inflation averaged 1.94% over between February 2008 and 2013, just below the bank’s 2% target.

In the UK, annual CPI inflation averaged around 1.7% over his tenure from July 2013 to March 2020 - also below the bank’s 2% target. Inflation spiked soon after his departure from the role, as pandemic-induced shutdowns disrupted global supply chains and energy prices soared in the wake of Russia’s invasion of Ukraine. 

Carney has also touted his credentials as a crisis manager - citing his experience leading the Bank of Canada through the 2008 financial crisis. His aggressive monetary stimulus policies are credited with bringing the economy through the global financial crisis and into recovery faster than G7 peers, with output and employment recovering to pre-GFC levels by mid-2009. 

Source: World Bank

Carney also led the UK economy through the uncertainty of the 2016 Brexit referendum, pledging to pump up £250bn into the UK economy to shore up the financial system in the immediate aftermath of the vote. 

Despite his glittering CV, Carney's biggest challenge will be to differentiate himself from Trudeau on both policy and style. He was appointed an official advisor by Trudeau in September last year, and previously served as an unofficial economic advisor to the outgoing prime minister at the start of the Covid-19 pandemic.  

His long-time support for a carbon tax that Canadian consumers pay on gasoline and other fuels in exchange for carbon rebate cheques has become one of the main lines of attack for the opposition, with Conservative leader Pierre Poliviere attempting to brand him as “Carbon Tax Carney”. 

Carney has sought to distance himself from the controversial consumer tax and said that its burden will be shifted toward big business, which pay a tax on industrial emissions. But it is likely that cost increases will be passed on to households either in the form of higher prices or lower corporate profits, regardless of where the tax is levied. And with the prospect of imminent tariffs on exports to the US that account for 72% Canada’s overall trade, the tax risks placing further pressure on Canadian businesses to curtail Canadian investments and move their operations south of the border. The Canadian Energy Centre, a think tank, estimates that the tax in its current form imposes a between 3.6% - 5.5% increase in production costs for the manufacturing sector in Canada’s Atlantic provinces. 

Source: Canadian Energy Centre

Carney’s fiscal policy approach, under which the federal government would run a budget deficit to invest in infrastructure but balance its operational spending within three years, is also largely inherited from Trudeau, who in his first budget pledged C$60bn (US$42bn) on infrastructure spending. Annual spending on infrastructure more than doubled under Trudeau between 2016 and 2024, with the budget deficit also creeping up despite his pledges to balance the books.

Source: Office of the Parliamentary Budget Officer, Canada Department of Finance

And while Carney has criticised the failure of the Trudeau administration to deal with Canada’s economic problems, he maintains much of its liberal worldview. In a recent interview with UK podcast The Rest is Politics, he said that Canada under his leadership would continue to “celebrate and recognise diversity” and be “an example to the Western world that you can balance social progress with economic strength”. He has criticised Canada’s high immigration levels in largely economic terms, remarking in November that Canada’s immigration policy suffered from “failures of execution” and had seen “much higher levels of foreign workers, students and new Canadians coming in than we could absorb”. 

Politics is fundamentally a different game to monetary economics, and Carney is a newbie. If he leads the Liberal Party into the upcoming federal elections, Canada will face a stark choice between mild-mannered technocracy and chest-thumping populism. The question for Carney is whether he has the personality and political experience to rebrand the Liberals and sell his expertise and pragmatism in an era of rage and anti-incumbency.

To learn more about why Canada’s voters are so unhappy with Trudeau, watch our video here.