As David Dodge steps down today from his post as Governor of the Bank of Canada, he does so with top marks from the people who closely scrutinized his decisions and words.
“If one is to judge him by the bottom line and that is what happened to inflation over the tenure of Mr. Dodge then we would have to give him an A plus,” said Carlos Leitao, chief economist at Laurentian Bank. “Certainly inflation remained close within the targeted range despite all the shocks the economy went through.”
In his final press conference as BOC Governor, Dodge said perhaps the world conspires to dump a load of new challenges on a newly minted governor, but he certainly had his share since his appointment to the position in February 2001. There was the Asian economic crisis, the 9/11 terror attacks, SARS, the high-tech bust, a deep depreciation in the Canadian dollar to just below 62 cents U.S. in 2002 and a subsequent 70% appreciation in the loonie over the last six years, trade imbalances sparked by the rapid rise of emerging economies such as China and India and now the U.S. real-estate collapse spurred by the sub-prime lending debacle.
But an old high school chum of Dodge says that multiple challenges and having several plates spinning in the air is the sort of thing Dodge thrives on.
“Even going back to when we were at school he always had a billion things on the go,” said Terry Scandrett, a friend who attended Ridley College, a residential private school in St. Catharines, Ontario with Dodge. “It didn’t seem to disrupt him or bother him. I can remember in Grade 13, he and another guy – who was just as bright as David – the two of them were working on the school magazine, two or three days before Grade 13 exams started. Most people were buried away in their books studying for months before that.”
But despite their work on extracurricular activities, Scandrett recalls Dodge was among the top students to win acceptance to Queens University, while the other young man came first at Ridley in marks and was among the top students admitted to Western.
“Those guys really knew how to buckle down and compartmentalize things,” Scandrett said. “I remember being in classes with him and it didn’t matter what the subject was, he was very good at it.”
Dodge received a bachelor’s degree (Honours) in Economics from Queen’s University and served as Assistant Professor of Economics there. He also met his wife and fellow economics student Christiane Schweiger at Queen’s. He won a scholarship to Princeton where he obtained a doctorate in economics, but eventually he was drawn out of academics and into the public service where he joined the federal finance department in the 1970s. He became director of research at the Anti-Inflation Board in 1976.
“I remember thinking here’s a really smart guy on the wrong side of other issues and why isn’t he on my side?” recalled David Laidler, a retired professor of economics at the University of Western Ontario and the first academic advisor to the Bank of Canada in 1998. Laidler remembers he had trouble reconciling the bright young economist he met with the patently interventionist mandate of PM Pierre Trudeau’s wage and price controlling Anti-Inflation Board.
“The 1970s were a really rough time in economic policy and politicians were looking for quick fixes and public servants got sucked into that,” said Laidler. “If you’re a public servant you have to accept the direction of the government.”
But Laidler said Dodge really got an opportunity to shine as he rose through the ranks of the public service and eventually managed to convince government leaders to bring spending under control. The cuts to spending and public service jobs that would eventually result were unpopular at the time but stood the country in good stead, Laidler said.
“Government was always putting off tough decisions until the year after next, until the year after next finally came. We’re going into a bad time now, but at least we’re going into it from a good position,” said Laidler.
Laidler said Dodge has always struck him as a person with tremendous energy.
“He’s intellectually restless and imaginative, and – and this is rare for people like that – and nevertheless he has a good sense of the long run objectives and somehow he’s able to keep his mind focused on that,” Laidler said. “People who are focused on the long run are usually really, really boring and he’s not really boring at all. He has a good sense of what’s politically achievable, but he’s not deeply committed one way or the other.”
Sal Guatieri, a senior economist with BMO, said he would rank Dodge among the top global central bankers.
“He successfully kept inflation close to target and at the same time promoted strong job growth and the lowest unemployment in a generation,” Guatieri said. “He did a remarkable job keeping interest rates fairly low in anticipation of the headwinds confronting our economy right now, and I think he made tremendous strides in improving the Bank of Canada’s communications strategy toward greater transparency.”
Leitao said Dodge was also remarkable for talking about issues not directly under the bank’s sphere of influence but which affected the bank’s decisions.
“Talking about productivity, education and all those things, I guess what was refreshing was to hear from him: ‘Listen at Bank of Canada we have one mission, to make sure we control inflation; however there are all these other issues that are of great, great importance to our society that need to be addressed,” Leitao said. “Those are important issues that in my view go beyond ideological or partisan views and that need to be discussed.”
In a convocation address to engineering graduates at Queens in 2002, Dodge noted that innovation and technological change as an engine of economic growth had, until only recently, been overlooked by the field of economics.
“Indirectly it does affect the bank’s decision-making because it affects the economy,” Leitao explained. “It’s also something he made clear that he talks about these things not just because they are interesting intellectually but those issues do have an impact on or have the potential to impact on the economic rate of growth and that is the main determinant on inflation in the country.”
Being transparent and outspoken was a real change Dodge brought to the role of Governor of the Bank of Canada, but it came as no surprise to Scandrett who says Dodge has always been a straight forward and “down to earth guy” who is never afraid to say what he thinks.
“I remember reading in the paper about his conversations with (then-federal Finance Minister Paul) Martin and how they apparently got quite heated,” said Scandrett. “He had a lot to do with relatively unpopular things which weren’t necessarily very popular at the time, but in retrospect were critical with Canada turning its fiscal game around.”
Yet Scandrett said for all of his friend’s outspoken ways, he doesn’t talk shop when they get together, preferring to simply catch up.
When asked if Dodge has mentioned to him what he’ll do next, Scandrett said all Dodge has told him is that he hasn’t decided yet.