BoC’s Wilkins emerges as an important voice on a range of topics, but productivity is her favourite
There are lots of ways to start a conversation with Carolyn Wilkins, the senior deputy governor at the Bank of Canada.
In the five years since she was elevated to the central bank’s Governing Council from its rank and file, Wilkins has delivered two dozen speeches, covering the following subjects: financial technology, monopoly power, debt, rethinking the way central banks do their jobs, crypto-assets, innovation and inclusive growth, the implications of slower economic growth, the disruptive effects of digital technology, China, labour markets, and the future of money.
Oh, and Viola Desmond, the Black entrepreneur who fought racial segregation in Nova Scotia in 1940s, who now adorns the $10 bill.
Not bad for a practitioner from a discipline that tends to produce specialists. It’s the kind of intellectual range that’s required of a modern central bank leader, a position that some think Wilkins could someday be asked to fill. Last month, Bloomberg included her on a shortlist of candidates to succeed Stephen Poloz, who entered the final year of his seven-year mandate on June 3.
It’s too early for such speculation, of course. Insiders might be able to make an a reasonable guess about who Prime Minister Justin Trudeau and Finance Minister Bill Morneau would choose, but polls suggest it might not be their decision to make.
However, we can’t help ourselves in this business. Let the parlour games begin.
“Well, as you know, the job isn’t open and so the question’s a bit premature,” Wilkins told me in an interview in Calgary last week, her first since the Bloomberg story. “I love my job. I work with the smartest and most dedicated people,” she added. “I’m really looking forward to continuing what I’m doing.”
Wilkins probably is the most prominent senior deputy governor the Bank of Canada has ever had.
There are only a handful of people who would know whether her influence on policy exceeds that of the men who previously occupied her position. But she is without question the first who would have an outside chance of being identified on the street as someone important. Poloz has given his No. 2 more opportunity to lead than any of his predecessors did theirs.
He hired a chief operating officer, relieving Wilkins of many of the administrative duties that traditionally were attached to her position. Poloz also has shared the spotlight, taking turns with Wilkins in writing and delivering the opening statement at the central bank’s quarterly press conferences.
And Wilkins is a feature on the economic conference circuit, as organizers at the International Monetary Fund and elsewhere regularly seek her out to appear on panels on financial technology and other issues.
Wilkins agreed that her speeches are “wide-ranging,” but she said they all relate to a central theme: productivity, the subject that she said most interests her as a policy maker.
“I just believe that you can’t have a healthy economy, you can’t have the labour market performance that you hope for, the financial stability that you hope for, unless you have vibrant firms who are investing and making productivity gains and are being competitive relative to our international peers,” Wilkins said.
By that definition, Canada’s economy needs to spend some time at the gym.
In a speech hosted by the Calgary Chamber of Commerce, Wilkins described the country’s recent economic performance as “relatively solid,” the kind of thing you say to a friend who finishes her or his first marathon without collapsing.
Later at a press conference, Wilkins reminded reporters that the benchmark rate is lower than inflation, meaning the real interest rate is negative, “which is pretty darn accommodative.” In April, the Bank of Canada lowered its estimate of how fast the economy can grow without stoking inflation, mostly because recent growth has been driven by immigration, not by companies becoming more innovative. The International Monetary Fund said “current levels of productivity growth are insufficient to sustain long-term growth.”
You might think the most frustrating thing about talking to central bankers is all the technocratic jargon. It’s not.
The most frustrating thing is their refusal to pronounce on anything that isn’t strictly related to their inflation target. They identify issues, and then they refuse to say what they would do to improve matters. The convention (mostly) keeps them out of trouble with the politicians, but it denies the rest of us the insights of neutral experts who have ready access to the best information.
Wilkins is no different. She wouldn’t say specifically what could be done to enhance productivity, as those decisions must be taken by elected officials. So we are left to guess based on the way she frames the issue. Wilkins said “there is a lot going for us,” citing Canada’s strength in artificial intelligence as an example, noting that the companies that are applying that technology are “benefiting from all the expertise that we have.”
But she cautioned against assuming that a relatively small group of fast-growing technology companies would make Canada’s economy more innovative on their own. “If you look at the past and studies that are done carefully to understand what is it that makes us different from some other countries, it really centres around diffusion and adoption of technology to a wider range of industries,” Wilkins said.
“We kind of think that productivity comes from the gazelles and the superstar firms that have big productivity gains, but, in fact, productivity for an economy as a whole is the product of many firms together just getting better at what they do.”
Canada spends about 1.5 per cent of gross domestic product on research and development, less than 17 of its peers in the 36-country Organization for Economic Cooperation and Development. A new survey sponsored by Salesforce, the San Francisco-based maker of customer-relations software, found that one in three Canadian companies say their use of digital technology was stagnant in the past three years.
All Wilkins can do about any of this is hint and nudge. In fact, she might eventually contribute to making it harder for Canada’s firms to adopt new technology by raising interest rates. So policy makers in Ottawa and the provinces might want to follow the lead of the woman who could be the next Bank of Canada governor and recognize that the economy is changing and old rules may no longer apply.
“What I find interesting today is that you can’t only look at the past, in terms of, you know, what’s been getting in our way of doing even better, you have to look at the new environment,” Wilkins said.