What happens when an economist becomes prime minister?

Summary

Summary of “What Happens When an Economist Becomes Prime Minister?” – The Indicator from Planet Money

Release Date: April 9, 2025
Host: Darian Woods
Guest: Anees Heydari, Senior Business Reporter with the Canadian Broadcasting Corporation

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Introduction

In the April 9, 2025 episode of The Indicator from Planet Money, host Darian Woods explores the intriguing scenario of an economist transitioning into the role of a national leader. The discussion centers on Mark Carney, Canada's newly appointed Prime Minister, who brings a unique blend of central banking experience to political office. Senior business reporter Anees Heydari joins the conversation to delve into the implications of this unprecedented move.

Mark Carney's Background

Mark Carney is a distinguished figure in the global financial landscape, having served as the Governor of the Bank of Canada before taking the helm of the Bank of England. His extensive experience with two major G7 central banks sets him apart from typical political leaders. As Anees Heydari explains, “What many political leaders don't have is experience running a central bank like the Federal Reserve or the Bank of England” (02:08).

The Current Economic Situation

Canada finds itself at a critical juncture, grappling with strained trade relations and economic pressures from the United States. The tension has escalated with the introduction of tariffs on Canadian goods, particularly targeting steel, aluminum, and automobiles assembled in Canada. Mark Carney has been vocal about these challenges, stating, “President Trump's unjustified tariffs come with threats to our sovereignty that have one goal behind, to weaken Canada, to break us so that America can own us” (03:30). His direct and assertive stance marks a departure from the typically measured rhetoric of central bankers.

Carney's Actions and Statements as Prime Minister

Since assuming office, Carney has had to navigate a complex economic landscape. He has taken a firm stance against the U.S. tariffs, announcing, “We're going to fight these tariffs with countermeasures. We are going to protect our workers and we are going to build the strongest economy in the G7” (05:11). Carney’s approach underscores his commitment to safeguarding Canada’s economic interests, even as he faces the daunting task of balancing political leadership with his central banking principles.

Historical Context of Central Bankers in Political Roles

Carney is not the first central banker to transition into a political leadership role. The podcast references Mario Draghi, former Governor of the Bank of Italy and President of the European Central Bank, who also served briefly as Italy's Prime Minister. However, Draghi's tenure was fraught with political challenges, leading to his resignation after a year and a half amid disagreements over pandemic economic stimulus measures (09:36). This historical parallel raises questions about the sustainability and effectiveness of central bankers in political positions.

Expert Opinions and Analysis

Rob Gillesow, an economist at the University of Toronto, voices concerns about the potential erosion of trust in central banking independence. He remarks, “If people think the bank might give in to political actors, then when the bank says they're going to act to bring down inflation, people may not believe them” (09:03). Gillesow emphasizes that the credibility of monetary policy relies heavily on the perceived independence of central banks, a dynamic that could be threatened by Carney's dual role.

Political Context and Upcoming Election

Mark Carney's rise to Prime Minister comes at a tumultuous time for the Liberal Party in Canada. Following declining polls, former Prime Minister Justin Trudeau resigned, leading to Carney's appointment. He has since called for a snap election scheduled for April 28th, which deviates from the traditional extended campaign periods typical in Canada’s British-style parliamentary system (04:28). This expedited electoral process places Carney at the center of both political and economic uncertainty as he seeks to solidify his leadership amid ongoing trade disputes and economic challenges.

Conclusion

The episode culminates with an acknowledgment of the uncharted territory that Mark Carney now inhabits as Prime Minister. While his extensive experience in central banking provides him with a robust understanding of economic policy, the intersection of this expertise with political leadership presents both opportunities and risks. As the April 28th election approaches, the outcome remains uncertain, and the world watches to see if an economist-turned-leader can navigate the complexities of political governance without compromising the foundational principles of economic stability and central bank independence.

Produced by Angel Carreras, engineered by Robert Rodriguez, fact-checked by Sarah Juarez.

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Notable Quotes:

• Mark Carney (03:30): “President Trump's unjustified tariffs come with threats to our sovereignty that have one goal behind, to weaken Canada, to break us so that America can own us.”

• Mark Carney (05:11): “We're going to fight these tariffs with countermeasures. We are going to protect our workers and we are going to build the strongest economy in the G7.”

• Rob Gillesow (09:03): “If people think the bank might give in to political actors, then when the bank says they're going to act to bring down inflation, people may not believe them.”

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Timestamps Reference:

• [00:11] Introduction by Darian Woods
• [02:08] Anees Heydari on political leaders and central bank experience
• [03:30] Mark Carney’s statement on US tariffs
• [05:11] Mark Carney’s commitment to fighting tariffs
• [09:03] Rob Gillesow on trust in central banks
• [09:36] Anees Heydari on Mario Draghi’s political tenure

Transcript

[NPR Host]

Npr.

[Darian Woods]

The chair of the Federal Reserve is kind of supposed to be boring. Nobody wants a flamboyant Fed chair talking off the cuff and maybe spooking the market. And they're also supposed to be independent from political pressure. If you're running the central bank, it could be tempting to juice the market in bad times. Enter Mark Carney, who's merging those two worlds as Canada's new prime minister and one of the only world leaders who used to lead a G7 central bank. Not just one bank, but two of them. Here to tell us all about Mark Carney is senior business reporter with the Canadian Broadcasting Corporation. Anees Heydari Welcome Anise.

[Anees Heydari]

Thanks for having me back for the view from north of the 49th parallel. Yes, and political watchers here are saying, hey, can this guy switch from high profile economist?

[Darian Woods]

Plus, it's kind of a pivotal time for both economics and government in North America.

[Anees Heydari]

Just a smidge. We're fighting a little bit.

[Darian Woods]

You're the master of the understatement. Trade and political relations between the U.S. and Canada are at this all time low. This is the indicator. From Planet Money, I'm Darian Woods. Today on the show we are looking at what it means when a job like who is deciding a country's interest rate bleeds into who decides everything else.

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[Darian Woods]

Elections in Canada run a little differently than they do in the U.S. but one thing is often similar. Many political leaders have business and finance experience before hopping on a ballot.

[Anees Heydari]

Yeah, but what many political leaders don't have is experience running a central bank like a Federal Reserve or the bank of England or the bank of Canada. And Canada's latest prime minister has that experience. And it's been a little unusual. You see, central banks are supposed to make decisions outside of politics. But this is what Canada's Mark Carney is up to these days. Just this Monday, he warned Canadians that the U.S. is driving itself into a recession and it would hit Canada too. He didn't mince words as he nodded at the 51st state rhetoric.

[Mark Carney]

President Trump's unjustified tariffs come with threats to our sovereignty that have one goal behind, to weaken Canada, to break us so that America can own us.

[Darian Woods]

That doesn't sound like a central banker's measured words about interest rates and inflation like that sounds like a political speech.

[Anees Heydari]

Yeah, it was a lot. And we've said this is all happening as Canada is facing major economic tensions with the United States.

[Darian Woods]

But Mr. Carney has never held elected office before of any kind. He's running in his first election right now. In Canada. You can become the Prime Minister technically without winning an election.

[Anees Heydari]

You can blame the British for that one. We inherited this system from them. I'll give a little bit of background here. Our last prime minister, Justin Trudeau and his Liberal Party, they were polling is really unpopular. Trudeau resigned. Mark Carney took over. He'd been an economic adviser for the party before all of that happened.

[Darian Woods]

So traditionally in British style systems, whoever leads the incumbent party usually gets to be the Prime Minister until the next election.

[Anees Heydari]

And that is what's happening right now. Carney announced what Canadians would call a snap election for April 28th.

[Darian Woods]

So none of these long build up two year campaigns up north.

[Anees Heydari]

Well, I mean for us this still feels pretty long, but yeah, in the meantime, with the few weeks that we have for this election campaign, Mark Carney remains the Prime Minister. And so of course he's facing this big political and economic crisis for Canada. Donald Trump and his tariffs, which include hits to steel and aluminum. Then there's retaliatory tariffs.

[Mark Carney]

We're going to fight these tariffs with countermeasures. We are going to protect our workers and we are going to build the strongest economy in the G7.

[Darian Woods]

Of course, to do that, Canada is going to have to deal with all these tariffs and that is a big one. Slapping tariffs on cars assembled in Canada. Carney's response at a press conference late last month reverberated across North America.

[Mark Carney]

The old relationship we had with the United States based on deepening integration of our economies and tight security and military cooperations is over.

[Darian Woods]

Well, it also Seems to be over is diplomatic hedging of words. That is pretty direct.

[Anees Heydari]

Yeah, it was blunt.

[Darian Woods]

The day after that press conference, President Trump and Prime Minister Carney actually had their very first conversation as leaders over the phone.

[Anees Heydari]

Mm. Carney called the call cordial and constructive and said that more negotiations could come after the election.

[Darian Woods]

But then, of course, came what the President called Liberation Day. And he repeated claims about a trade deficit with Canada. And I say, why are we doing this?

[Anees Heydari]

Why are we doing this? I should point out, if you remove energy from that trade calculation, let's say the US didn't import crude oil from Alberta. The trade deficit basically goes away. Deficit or not, though, a trade war, as Carney warned this week, could drag Canada into a recession very quickly. But this is not the first, let's call it economic s show that Mark Carney has grappled with. Think back to 2008. There was a little bit of a financial crisis. You might remember it.

[Darian Woods]

Yeah, I remember the major economic collapse due to subprime mortgages, among other things, in the US that spread around the world. But, you know, Canada didn't get hit as hard. Mark Carney was governor of the bank of Canada at the time.

[Anees Heydari]

Mark Carney cut interest rates quickly. And so, in conjunction with stimulus spending from our federal government, Canada made it through the 2008 crisis.

[Darian Woods]

But Carney didn't stick around in Canada. From 2013 to 2020, he became the governor of the bank of England.

[Anees Heydari]

Yeah, you know, there was that whole Brexit thing in that period, too. This guy really knows how to choose easy during periods of economic confusion.

[Darian Woods]

He never lets a crisis go to waste. And, you know, at this time, the bank of England's decisions were critical. It was like walking this tightrope over crocodile infested waters. Politicians wanted certainty on Carney's plans for interest rates. Take a listen to this British Parliamentary committee in June of 2014. It strikes me that the bank's behaving a bit like a sort of unreliable boyfriend. One day hop, one day cold. Carney. You're not replying to his text?

[Anees Heydari]

Oh, he's le. He's leaving the House of Commons on read. At least according to Labor MP Pat McFadden, who is upset that Carney is putting out what McFadden characterizes as mixed messages about where interest rates would go. Carney, though, stood firm.

[Mark Carney]

So we don't want business decisions taken today, personal decisions taken today, foreign decisions for investment or for housing or for whatever, for consumption, that are based on expectations of interest rates that are unlikely to transpire.

[Darian Woods]

You can hear the difference. Right. Like that is when he is sounding like a central banker.

[Anees Heydari]

Yeah. He's got those central bank pants on right there. And with those pants on, he's saying central bank decisions shouldn't be politically driven even or especially when politicians push. Now fast forward to today and Mark Carney is leading Canada as the Prime Minister. Rob Gillesow is an economist at the University of Toronto. And Rob says it's not a good look. He believes it's a matter of public.

[Rob Gillesow]

Trust for the bank to be believed that they are going to contain inflation. People need to know that they're not susceptible to the politicians. And if people don't trust that. Right. If they think the bank might give in to political actors, then when the bank says they're going to act to bring down inflation, people may not believe them. Meaning that inflation expectations get locked in and that high inflation period gets worse and it's harder to get out of.

[Anees Heydari]

I mean, that's of course theoretical. Hasn't happened yet. We don't know that any of that's going to happen either.

[Darian Woods]

Of course, Mark Garney is not the first central banker to land in charge of a country. Mario Draghi was a governor of the bank of Italy back in 2005, President of the European Central Bank a few years later in 2012, and the Prime.

[Anees Heydari]

Minister of Italy a decade later.

[Darian Woods]

But he resigned after a year and a half. There was a political crisis there over economic stimulus coming out of the pandemic.

[Anees Heydari]

We don't even know yet if our ex central banker will become an ex prime minister. That election's at the end of the month. So, you know, busy times in Canadian newsrooms and certainly for me not over.

[Darian Woods]

Here in the US though.

[Anees Heydari]

No, no, you got nothing to do.

[Darian Woods]

We're just twiddling our thumbs waiting for the Canadian elections.

[Anees Heydari]

I'll be sure to send you a postcard.

[Darian Woods]

This episode was produced by Angel Carreras with engineering by Robert Rodriguez. It was fact checked by Sarah Juarez. Cake and Cannon edits the show and the indicator is a production of npr.

[NPR Host]

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