Farewell David Dodge

I’ll be sorry to see Governor David Dodge leave the Bank of Canada. To be sure, I’ll take a good deal of critical distance from his and the Bank’s view that we are operating “above capacity” when real wages for at least the bottom half of the work force are flat, and I think monetary policy as a whole should and could have somewhat lessened the scale and severity of the current manufacturing jobs crisis. Still, one would hardly expect a convergence of views between unions and a central banker on the desirable degree of labour market slack, and Dodge has no control of commodity prices or forces pushing down the US dollar.

To his credit, Dodge met at least annually with the union leadership during his term, and union economists have met annually with top Bank staff. We have no cause for complaint on lack of consultation. It would have been nicer to have had more agreement and less polite debate, but I think monetary policy has been modified to some modest degree by these consultations.

Moreover, somewhat at odds with his otherwise impeccably neo liberal/macro orthodoxy credentials, Dodge had a lively interest in broader public policy as a force for social and economic improvement. He weighed in regularly on the importance of “human capital” for productivity, and was something of a champion for child care and early learning investment, as well as serious attempts to promote “lifelong learning.” During his brief tenure as Deputy Minister of Health, my suspicion is that he developed a plan for safeguarding Medicare for the future which was largely jettisoned in negotiations with the provinces.
Dodge was acutely aware of the serious imbalances of global capitalism as currently configured, and pressed internationally for a more demestic demand driven Chinese and Asian economy. He was also not insensitive to the dramatic tilting of bargaining power away from labour towards capital.

I doubt Dodge was pushed out. But the Governor and Minister of Finance work very closely together, and I also doubt that Dodge thinks highly of Flaherty’s intensified political oversight of Department of Finance officials – who have frowned at GST cuts, and large increases in spending via transfers.

One comment

  • Louis Rasminksy was a central banker to be admired, the last one in Canada. His successors, Bouey, Crow, Theissen and Dodge were no where near his level. Crow was a serious problem. So was Bouey. They created destruction across the economy with high interest rates.The great recession of 1982 was driven by the G7 central banks, Volcker in particular. Much of the world has never recovered from the obscene debt levels that resulted from the doubling of dollar interest rates: the debt crisis is with us still. Crow managed to engineer a recession in Canada following 1989, for no good reason.
    Theissen let the dollar devalue once the Bank and the Finance Dept. (under Dodge) destroyed Canada’s welfare system, federal provincial finance arrangements, and wounded public medicare and public universities.
    The dollar devaluation — deflate and depreciate — was the price to be paid for the failed strategy of free trade. Overall the nineties were the second worst decade of the century.
    It seems Dodge decided there was more power as Bank Governor than Finance Deputy, and so got himself appointed to the job.
    Dodge was not a central banker and it showed. He talked too much about things that were none of his business, for instance musing about the idea of a common currency with the U.S.
    The currrent slow steady decline of the U.S. dollar boods ill for the world economy. The Bank of Canada should be working to create a climate of opinion for a reform of the world financial system. Instead they take the American line, blaming China.
    The only good thing I can find to say of Dodge is that his successor will likely be worse.

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