Looking directly into a camera at a recent Tory leadership debate, a candidate pledged to “look again” at the central bank’s mandate because “some of the inflation has been caused by increases in the money supply.”

That candidate was Liz Truss, the current foreign secretary of the United Kingdom, and one of the final two candidates in the run-off to succeed Boris Johnson.^{1Inside Team Truss: slow off the mark but catching up fast in race for No 10 https://www.theguardian.com/politics/2022/jul/22/inside-team-truss-slow-off-the-mark-but-catching-up-fast-in-race-for-no-10}

After months of similar lines from Pierre Poilievre, I found it interesting to hear a refrain on that particular melody out of the U.K. Coming from Liz Truss no less. The most experienced Cabinet Minister in the race to replace Boris Johnson, a former Liberal Democrat, and the only candidate left in the race to have voted to Remain in the European Union. It’s not like we were hearing from the fringes of the Tory Party—though, it’s worth noting that Truss is positioning herself firmly on the Party’s right-wing in this leadership contest.

Central bankers are an interesting target for conservatives. It’s a fight that looks awkward from both an ideological and a narrative perspective.

Let’s start with this. The alarmism over the independence of central banks gets a little precious. The Bank is a creation of Parliament. Its roles and responsibilities have been amended many times by the Act of Parliament, and operational independence for the Bank wasn’t clarified in legislation until 1967.

In the United Kingdom, which has had parliamentary elections for centuries, the independence of the central bank was not codified until 1998. People have literally been Backstreet Boys fans longer than the Bank of England has been operationally independent. 

Now, just because it’s not an existential threat to the survival of democracy doesn’t mean that compromising the institutional independence of the central bank is good policy. Tories are supposed to favour things like smaller government, stable investment climates, and monetary policy that isn’t subject to political whims. 

When Labour introduced central bank independence to the United Kingdom in 1998, it followed decades of politically influenced monetary policy that bedevilled both major political parties and turned the pound into a political hot potato. Granting operational independence to the Bank of England is viewed as one of the great economic successes of the last quarter century in the U.K.

So, if central bank independence does a bunch of things that Tories generally like, why are Tories at odds with central bankers on both sides of the pond?

The answer, I think, starts with the 2008 financial crisis. 

Conservatism used to be a narrative about success. Class envy was something for the Left. Upward mobility, more education, entrepreneurship, and, ultimately, success were core narratives for both Margaret Thatcher and Ronald Reagan. It was the nation’s job to provide you with the opportunity, and you could be as much of a success as your talent, tenaciousness, and timing would allow for.

I think the 2008 financial crisis shattered conservative faith in the impartiality of markets.

Perhaps it’s because the consequences of doing so weren’t well communicated. Or maybe it’s more fundamental and Tories just instinctively believe fairness isn’t served until the guilty are punished. But, I know more than my fair share of conservatives who believe that we should have let major investment banks fail in 2008. I know still more that would have been willing to bail them out if a few people had gone to jail. Not a lot, mind you. But I think they wanted to see a few Hermes ties and Zegna suits confiscated by the Department of Corrections. 

There isn’t a ton of objective data to measure our dislike of the banking class since 2008. Recent polls by Maru Blue trying to determine our respect level for various professions found that about 53.8 percent^{2Canada’s most respected occupations 2022 https://www.marugroup.net/public-opinion-polls/canada/canadas-most-respected-occupations-2022} of us respect bankers in Canada. That’s worse than lawyers and private long-term care home operators, but better than car salesmen and members of parliament. In the U.K, the number dips only slightly to 50.6 percent.^{3Britain’s Most Respected Occupations 2021 https://static1.squarespace.com/static/5a17333eb0786935ac112523/t/60d49e1816b95c78390102cd/1624546842180/British+MR+Occupations+Release.pdf}

One of the more interesting studies was done by the Cato Institute in 2017.^{4Wall Street vs. The Regulators: Public Attitudes on Banks, Financial Regulation, Consumer Finance, and the Federal Reserve https://www.cato.org/survey-reports/wall-street-vs-regulators-public-attitudes-banks-financial-regulation-consumer} It showed that 49 percent of Americans believe there’s “widespread” corruption on Wall Street. When asked about “Too Big To Fail” financial institutions, the study found that 2016 Clinton voters (41 percent) were twice as likely as Trump voters (20 percent) to believe some banks were too important to the financial system to fail. These numbers are American, so not instructive of Canadian or British opinion, but interesting nonetheless.

I’ve long believed the 2008 financial crisis was the transformative political event of the twenty-first century to this point (though both the COVID-19 pandemic and the Iraq War have good claims). My reasoning, however, is that while both the Left and Right viewed the response to the recession in largely negative terms, the Left took it as a systemic failure of capitalism. The profit motive was the original sin, mortgage-backed securities were just sparks to flame. That view largely helped spawn things like the Occupy movement and Corbynism

The Right took the recession as a betrayal of capitalism. Properly functioning markets, in the mind of conservatives and libertarians, would have destroyed those bad actors. A well-functioning justice system would have ensured prison time for the most nefarious traders, but the system would be intact and trusted.

None of that happened.  In fact, our most powerful people went to lengths to make sure it didn’t. 

Years later, those same banking CEOs are getting exorbitant compensation packages, or jetting off to Davos to talk about Net Zero and “just transitions”. 

And, Pierre Poilievre and Liz Truss have them square in their sights. Fifteen years too late. 

Russia’s invasion of Ukraine has driven home what many have observed for over a decade: the structure of the international order is changing. The rise of new powers and the ongoing decline of American power require the realignment and reassessment of international and national security strategies for states and institutions alike. Indeed, given the rapid evolution of threats, the evolving world order promises to be both complex and unstable.

For decades, however, Canada has allowed itself to become seemingly lazy on the global stage. By being so closely associated geographically, economically, politically, and culturally with the United States as the lone global superpower after the Cold War, Canada allowed its international strategy to become more focused on domestic political consumption than on substantive global engagement. This decline, despite warnings from observers and experts, has been largely ignored by Canadians, who have traditionally shown little interest in Canadian foreign policy, even at times of global crisis. 

Canada has put itself in a position where it does not have an international strategy through which to navigate this changed, more uncertain world. There is no clear definition of Canada’s national interests, meaning Canada has no discernable goals to pursue globally. Canada has not been able to consistently present or use effective tactics to pursue its interests or goals, and its preferences for what it wants to influence internationally remain ambiguous at best. Further, Canada has no vision or plan to protect its national defence in the face of emerging and evolving threats, making the country vulnerable domestically and globally.

Beyond not having an international strategy, Canada’s actions and behaviours on the global stage in recent years have sent an important, decidedly unhelpful, message to the global community—that Canada is more interested in a foreign policy focused on public relations, photo opportunities, and soundbites than substance. Whether it is the ongoing disinterest in achieving NATO spending targets,^{1Military expenditure (% of GDP) – Canada https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locations=CA} empty rhetoric from the prime minister or foreign affairs minister, a futile campaign for a UN Security Council seat, or largely ignoring core strategic interests like Canada’s Arctic,^{2Canada must do more to protect its sovereignty in the Arctic https://thehub.ca/2022-03-01/canada-must-do-more-to-protect-its-sovereignty-in-the-arctic/} Canada is widely seen by other states as adrift on the world stage with no plan for getting on track to be a serious contributor to the rules-based order.

The prospect of a bipolar international structure, with two superpowers dominating international politics, is not something unfamiliar to Canada. Throughout the Cold War years, Canada defined, developed, and executed an international strategy and foreign policy that saw Canada forge an independent path in the world while enjoying the protection of its deep relationship with the United States in the West’s conflict with the Soviet Union. 

Canada’s conscious effort to make international strategy evolved into what became known as “middlepowermanship,”^{3Middle Power Diplomacy in International Relations https://link.springer.com/chapter/10.1057/9781137381767_2?noAccess=true} which involved leveraging its political, diplomatic, and economic capabilities while overcoming its lack of military power to pursue unique global opportunities. And Canada’s historical foreign policy proved highly successful. One of the country’s best-known and most effective tactics was multilateralism, which allowed a middle power like Canada to enhance its relative power position by working with other states and institutional arrangements to pursue national interests, such as through the United Nations and NATO.

We are witnessing a return to a bipolar international structure, one dominated by the United States and China.^{4‘An increasingly intense rivalry’: Foreign policy expert Aaron Friedberg on why decoupling from China is a costly but necessary decision https://thehub.ca/2022-06-21/an-increasingly-intense-rivalry-foreign-policy-expert-aaron-friedberg-on-why-decoupling-from-china-is-a-costly-but-necessary-decision/} Canada must therefore take its international strategy more seriously and embark on a process to develop a clear, coherent, and deliberate path in today’s world. Canada has an opportunity to project values consistent with its domestic priorities in a world in desperate need of greater rights, freedom, and democracy while fortifying its sovereignty and national security. 

The world is not waiting for Canada, and the costs of inaction and continued unseriousness will be profound. Canada is adrift and time is running out if it hopes to find its footing in this evolving world order.