Economists first: Canada elects its own Mario Draghi

On April 28, voters elected Mark Carney, who had been chosen as the leader of the Liberal Party only a few weeks before the elections, as the new Prime Minister of Canada.

Carney, the former governor of the Bank of Canada and of the Bank of England was voted in by a majority of Canadians who viewed him as the best candidate to stand up to US President Donald Trump, in an election that was capsized by a trade war with Washington and annexation threats.

The official has been coined by some media as the Canadian version of Mario Draghi, who served as the Prime Minister of Italy from 2021 to 2022, based largely on their similar professional background, vision and international standing earned due to their experiences in leading in times of crises.

 

Economists first

Before taking office in 2021, Draghi was the Governor of the Bank of Italy for five years, during which he weathered the storm of the 2008 global recession. Following this, he was appointed as President of the European Central Bank (ECB) for almost a decade, where he led the Eurozone through the “sovereign debt” crisis.

The Eurozone crisis was a multi-year debt and financial crisis across the European Union that resulted primarily from many countries facing high public debts, threatening the stability of the bloc and the euro. In 2012, in a statement that would be picked up by international media coverage as having fastened the progress of solving the crisis, Draghi said that the ECB would “do whatever it takes” to keep the currency from failing.

Similarly, Carney held the position of Governor of the Bank of Canada during the 2008 financial crisis. Many steady but innovative strategies he implemented during this time earned him international recognition for navigating an extremely challenging time for his country.

Just like the majority of the world, Canada was not spared from the damage caused by the global recession. Yet, the negative impact it felt was somewhat minimal in contrast to other countries’ economies. This was reflected in the Canadian economy outperforming the G7 states at the time and Ottawa was the first to have its gross domestic product and employment return to pre-recession levels.

The Canadian leader went on to become the first non-Britain to lead the Bank of England since its establishment in 1694, where he oversaw existential changes brought about by Brexit.

A few months before the referendum of June 2016, Carney called Brexit the “biggest domestic risk to financial stability.” Although many Brexiteers viewed him as being pro-EU, in this role, Bank of England governors are intended to remain out of politics, which would play in Carney’s favour in the long term.

 

Antidotes for domestic storms?

Another common element that may have contributed to equating Carney with a “Canadianized” Mario Draghi was that both leaders were chosen in the hopes that they could be effective and steady antidotes to brace domestic and international storms.

Draghi took office amid one of the most challenging periods of our time: the global Covid-19 pandemic. At the time, Italian President Sergio Mattarella tasked him with forming a government that would seek to address the socio-economic and health consequences engendered by the pandemic and the EU relief fund. Much of what contributed to his selection was his significant expertise as a problem-solver, which he acquired in his past financial roles.

In many ways, this is also applicable to Carney and the perilous situation Canada finds itself in today. Last month’s elections were held in a highly unique context for Ottawa, where for many voters the deciding questions regarded which candidate they believed would best stand up to Trump and steer the country through these uncertain economic times.

For many weeks before the elections, that answer seemed to lie in the Conservative Party leader, Pierre Poilievre, having held a remarkable 27-point lead in opinion polls at some points ahead of the Liberals.

However, closer to the voting date, the more Trump upped its annexation threats and economic war musings, the more Carney, a political rookie but esteemed economist and strategist, gained popularity.

In a public opinion poll organized by Ipsos, a multinational market research and consulting firm, participants were required to answer questions based on which political leader they saw as the best fit. 42% of respondents said Carney would best stand up to Trump and manage during tough economic times.

Although simple, the Canadian leader’s campaign slogan “Canada Strong,” which vowed to brave Trump and build a stronger country, rallied voters across the political spectrum as they stood unified in the perceived need to truly defend their homeland. This does not necessarily imply that voters endorsed the values of the Liberal Party, but rather that they placed their faith in Carney for who he is and the unusual non-political experience he has.

 

Finding the right tactic

While it is too early to tell if Carney will be the right antidote to carry the country through the challenging times ahead, it will undoubtedly be interesting to see what strategy he will adopt to deal with the Trump storm.

Will the ex-banker take a firm stance in the hopes that he can change the US president’s mind – an endeavour that almost no one has succeeded in accomplishing– or will he lean into his economist roots and adopt a business tenure?

If Carney opted for the latter strategy in search of a compromise and prove willing to negotiate with the US President, who is first and foremost a businessman himself, the new Canadian Prime Minister could leverage his analytical skills and rely on data-driven arguments to compel Trump to see favourable outcomes for both countries.