Bank Governor Urges Stronger Private Financial Regulation

August 22, 2012

News

In a historic address to the CAW convention, Bank of Canada Governor Mark Carney spoke of international efforts to tighten controls over private sector banking to stabilize financial markets and prevent another global recession.

“The financial crisis and ensuing global recession demonstrated the fundamental interconnectedness of the global economy,” Carney said. “When built on bedrock, interconnections of trade and investment create jobs and prosperity… When built on sand, as was the case for too much of financial activity pre-Lehman, the global economy can transmit instability, uncertainty and unemployment.”

Carney acknowledged that workers, globally, bore the brunt of the financial crisis. He emphasized the relative stability of Canada’s post-crisis labour market, but noted there are lingering challenges.

“The participation rate has not fully recovered and the percentage of involuntary part-time workers has risen about 5 percentage points,” said Carney, adding that wage growth is expected to remain moderate. In response to a floor question, Carney later acknowledged that the broad level of underutilization in the labour market was around 11 percent of the labour force.

Carney said that shifts in the global supply and demand for labour have contributed to rising income inequality in Canada. He noted that the share of income going to the top 1 per cent in Canada is now the third-highest among OECD nations.

“Labour’s share of national income is now at its lowest level in half a century across most advanced economies, including Canada,” Carney said.

Carney also discussed the decline of Canadian export performance since 2000. He acknowledged that the sustained high level of the Canadian dollar has contributed to Canada’s falling share of global exports, but also highlighted underlying structural issues (such as Canada’s small market share in faster-growing emerging economies).

During an open question period, CAW Local 222 President and Chair of the CAW-General Motors Master Bargaining Committee Chris Buckley offered his first-hand experience when dealing with corporations who have closed up factories and moved new investment overseas, many specifically invoking the dollar’s high value.

“The dollar makes us look more expensive than we are.”

Carney’s speech marked the first time a Bank of Canada Governor has addressed a union convention. Carney also heads the international Financial Stability Board, an international board that promotes the implementation of effective regulatory, supervisory, and other financial sector policies.

 

 

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