Building a more inclusive economy
At the helm of the Bank of Canada, Tiff Macklem is helping shape Canada’s economic policy
By Debora Van Brenk, BA’86, MA’87
Tiff Macklem (Photo by the Bank of Canada)
You may have learned somewhere that the study of economics is about deciphering production and consumption, supply and demand, profits and markets, exports, imports, scarcity, spending, numbers and trends, and more numbers.
But Canada’s top banker says those definitions fall far short.
“Ultimately, economics is about understanding people,” says Tiff Macklem, governor of the Bank of Canada, which is charged with setting monetary policy to keep Canadian inflation low and stable, and fostering a healthy financial system.
Understanding not just people’s buying behaviour, but also the intangibles: what they need and want; and how their perceptions, experiences and communities shape them.
It’s a perspective shaped in large measure at Western, where Macklem earned his master’s degree in economics in 1984 and his PhD in 1989.
The insights he developed at Western and honed since then have proven invaluable in his career as banker, advisor, policy-maker and educator.
And since Macklem’s appointment to the top post at the Bank of Canada in May 2020, understanding the human condition has proven to be an essential tool – almost as significant as computer-guided economic modelling – in navigating the nation’s economic recovery from a global pandemic.
‘We can solve these problems’
Macklem grew up in the Westmount neighbourhood of Montreal, a city that did not only aspire to be world-class; it had a long track record of international clout.
Aglow with pride in its new Metro subway and the success of Expo 67, Montreal was Canada’s commercial and financial heartbeat.
It was the headquarters of life insurance companies, banks, breweries and distilleries and, not coincidentally, the venerable Birks jewelry company where Macklem’s father was an executive.
In the 1970s, Montreal was also home to growing Quebec nationalism, political uncertainty and economic unrest. Consumer prices were skyrocketing even as jobless numbers increased.
“My impression as a teenager was that everybody was angry, there were a lot of strikes, and everybody felt ripped off from inflation and unemployment. It was just a very turbulent time.”
As young Macklem read his newspapers, it seemed to him that the country’s woes were an incomprehensible, and probably unavoidable, feature of the landscape.
But soon after he started university – he went to Queen’s planning to major in geography – he discovered economics.
“What I learned in my undergrad was these things didn’t just arrive from outer space; they were created by us … and we can solve these problems.”
He came to Western, which he calls Canada’s powerhouse in economic studies, intending to learn how.
Family and almost family
Macklem was impressed and intimidated by his classmates’ focus and intensity.
Professors David Laidlaw and Michael Parkin – macro-economists whose research had already made a mark on global monetary policy – were an enduring inspiration and influence.
“There were the very senior faculty members who’ve been real leaders in their field and in monetary economics. And then there are all these young faculty members who were bringing in new ways of looking at things and new types of models.
“We were soaking up new ideas…I discovered after a while, yeah, I was actually not bad at this stuff.”
For a long time, economics had focused on the demand side: consumption, investment and exports. But Western researchers added nuance to the other side of the equation: supply, productivity and labour-market participation.
Although more difficult to measure – “productivity is sort of an amorphous concept,” he notes – it’s the supply side that determines long-run prosperity in the commodities-intensive Canadian economy.
Macklem joined the Bank of Canada for a year after graduating with his master’s. He then returned to Western to begin his doctorate a year later.
Partway through the doctorate degree, he married and moved to a Western-owned mature-student apartment. “This was our first place together, our own place. So while sometimes (studies) were a burden on my personal life, it was a special time.”
Then there was the connection among fellow economics scholars: “The wonderful thing about doing your PhD is you’re immersed in this almost family. You speak this unique language among yourselves and you’re thinking about the same stuff, and you have vibrant debates,” he recalls.
But it also made them seek solutions outside the department.
“You really have to reach beyond your field and your relatively narrow slice of deep expertise, and draw in other experts from other domains, because these problems are so cross-disciplinary.”
After earning his PhD, Macklem rejoined the Bank of Canada and took on increasingly senior roles there.
He became one of the go-to economists charged with working out the central bank’s new inflation targets (Canada was only the second country, after New Zealand, to announce inflationary targets), and he helped guide the economy through the worldwide recession of the late 2000s.
He then served with the federal Department of Finance for four years before becoming senior deputy governor and chief operating officer of the Bank of Canada.
In 2014, Macklem left civil service to become dean of the Rotman School of Management at the University of Toronto.
Appointed governor of the Bank of Canada in May 2020, Macklem still hadn’t met most of his staff in person a year later.
“There’s so much ingenuity out there. People are figuring out how to work in ways that I never imagined and that does give you some optimism for the future.”
The global pandemic has led to some pondering about the human element and the experiences of people in Canada – with or without a pandemic.
“There are so many elements of this crisis that are so unique. They’re not like anything we’ve experienced previously in our careers. That forces you to really go back to your fundamental training and use everything you’ve got. But it also forces you to go out and get diverse perspectives … to get input from a broader range of people coming at it with different lenses.”
And for an economist, it also meant identifying gaps in the human equation and examining who has been left out of the recovery.
“Some Canadians are feeling [this] much more acutely than others, because the impact of this has been so uneven across different parts of society. So you can’t just look at everything at the macro level, you’ve got to understand the perceptions and experiences of different parts of the economy, different people in the economy.”
This, he says, is the sharpest and most unequal economic cycle of our times.
During a recent address to students at Atlantic Canada universities, Macklem noted the importance of building a diverse workforce and more equitable workplaces.
“A more inclusive economy is a bigger economy, a more prosperous economy with more room to grow without creating inflationary pressures,” he told the students.
As the pandemic wound down to something manageable, Macklem found an unexpected benefit of all the virtual connections necessitated by COVID: renewed connections to fellow economics alumni from Western. A ‘let’s reconnect’ email that started with a few names has now evolved into a comprehensive list of almost the whole class, he says.
“We’ve been having fun reminiscing over email. I have so many happy memories of Western.”