Where the Buck Stops: The Dollar, Democracy, and the Bank of Canada

Brenda L. Spotton is an assistant professor of economics at York
University.

The central thesis of this book is that, throughout most of its history,
the Bank of Canada has not acted in the Canadian public’s best
interests. The authors attribute this to the fact that the bank has not
been held accountable to the public for its actions, as well as to the
ability of foreign interests to move the value of our dollar.

Written for the general public, the book takes the reader through a
narrative history of the bank from its inception to the present. The
focus is largely on the governors of the bank: who they were, where they
came from, what they did. A general description of the political and
economic environment is provided, along with discussions of various
aspects of the bank’s operations. Part 1 covers the bank in its
infancy. Part 2 takes the reader through the tenures of the second and
third governors, James Coyne and Louis Rasminsky. Part 3 covers the
anti-inflation period of the bank’s history, from mid-1970 to the
present.

Babad and Mulroney rely for their information principally on the
biographies, memoirs, and memories of key figures in the bank’s
history. Their thesis could have been better supported. At a minimum,
they should have addressed the bank’s argument that an environment of
price stability is ultimately better for employment. Finally, their
recommendations are questionable. While it is true that the bank could
be made more accountable and more regionally representative, it does not
follow that such changes will turn bank attentions toward unemployment.
Although a fixed exchange rate would, by definition, reduce
exchange-rate volatility, it is wrong to believe that pegging the
Canadian dollar to the U.S. currency would free the bank to pursue
domestic goals. Such action would do precisely the opposite, forcing the
bank to concentrate more, not less, of its efforts on defending that
value.