What happens when an economist becomes prime minister?

0:01NPR

0:11The 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, Anis Heydari.

0:53Welcome, Anis. Thanks for having me back for the view from north of the 49th parallel. Yes. Both financial and political watchers here are saying, hey, can this guy switch from high-profile economist? Plus, it's kind of a pivotal time for both economics and government in North America. Just a smidge. We're fighting a little bit. 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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2:53Visit usbank.com today to learn more. Member FDIC. Copyright 2025 U.S. Bank. This message comes from NPR sponsor Adobe. Introducing the all-new Adobe Acrobat Studio, now with AI-powered PDF spaces. Need to turn 100 pages of market research into five insights with a click? Templates for a sales proposal that'll close that deal? Or an AI specialist to tailor the tone of your market report? You can do all that with the all-new Adobe Acrobat Studio. Learn more at adobe.com slash do that with Acrobat. Elections in Canada run a little differently than they do in the U.S., but one thing is often similar.

3:37Many political leaders have business and finance experience before hopping on a ballot. Yeah, but what many political leaders don't have is experience running a central bank, like 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.

4:18President Trump's unjustified tariffs come with threats to our sovereignty that have one goal behind him, to weaken Canada. to break us so that America can own us. That doesn't sound like a central bank has measured words about interest rates and inflation. Like, that sounds like a political speech. Yeah, it was a lot. And we've said this is all happening as Canada is facing major economic tensions with the United States. 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.

4:59You 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 advisor for the party before all of that happened. So traditionally in British-style systems, whoever leads the incumbent party usually gets to be the prime minister until the next election. And that is what's happening right now. Carney announced what Canadians would call a snap election for April 28th. So none of these long build-up two-year campaigns up north?

5:37Well, 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. 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. 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.

6:25Carney's response at a press conference late last month reverberated across North America. The old relationship we had with the United States, based on deepening integration of our economies and tight security and military cooperations, is over. Well, it also seems to be over as diplomatic hedging of words. That is pretty direct. Yeah, it was blunt. The day after that press conference, President Trump and Prime Minister Carney actually had their very first conversation as leaders over the phone. Carney called the call cordial and constructive and said that more negotiations could come after the election.

7:00But 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? Why are we doing this? I should point out, if you remove energy from that trade calculation, let's say the U.S. didn't import the 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.

7:40You might remember it. Yeah, I remember the major economic collapse due to subprime mortgages, among other things in the U.S. 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. Mark Carney cut interest rates quickly. And so in conjunction with stimulus spending from our federal government, Canada made it through the 2008 crisis. But Carney didn't stick around in Canada. From 2013 to 2020, he became the governor of the Bank of England. Yeah, you know, there was that whole Brexit thing in that period, too. This guy really knows how to choose easy jobs during periods of economic confusion.

8:22He 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 caught, one day cold. Carney, you're not replying to his text. Oh, he's leaving the House of Commons on red, at least. according to Labour MP Pat McFadden, who is upset that Carney is putting out what McFadden characterizes as mixed messages about where interest rates would go.

9:07Carney, though, stood firm. So we don't want business decisions taken today, personal decisions taken today, boring decisions for investment or for housing or for whatever, for consumption, that are based on expectations of interest rates that are unlikely to transpire. You can hear the difference, right? That is when he is sounding like a central banker. 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.

9:45Rob Gillesault 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 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. I mean, that's, of course, theoretical.

10:21Hasn't happened yet. We don't know that any of that's going to happen either. Of course, Mark Ghani 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 minister of Italy a decade later. But he resigned after a year and a half. There was a political crisis there over economic stimulus coming out of the pandemic. 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.

10:58Not over here in the U.S., though. No, no. You got nothing to do. We're just twiddling our thumbs, waiting for the Canadian elections. I'll be sure to send you a postcard. This episode was produced by Angel Carrelles with engineering by Robert Rodriguez. It was fact-checked by Sierra Juarez. Cake and Cannon edits the show and The Indicator is a production of NPR.