COVER

THE INFLATION FIGHTER

JOHN CROW’S RESOLVE IS UNSHAKEN

ANN WALMSLEY May 7 1990
COVER

THE INFLATION FIGHTER

JOHN CROW’S RESOLVE IS UNSHAKEN

ANN WALMSLEY May 7 1990

THE INFLATION FIGHTER

COVER

JOHN CROW’S RESOLVE IS UNSHAKEN

Shortly after dawn on a working day last week, Bank of Canada governor John Crow—in grey jogging shorts and a white T-shirt—embarked on his usual, briskly paced 20-minute run near the banks of Ottawa’s Rideau Canal. As he rounded the end of the driveway in front of his modest greystone house in the upscale neighborhood known as Ottawa South, he acted like thousands of other Canadians beginning their morning routines. But the brusque, patrician, 53-year-old Crow is not just any Canadian: he is the high priest of Canadian monetary policy whose decisions affect every citizen. For the roughly three years he has been governor, Crow has been the subject of pointed criticism because of what he describes as an unwavering fight against inflation. That campaign has driven interest rates to sky-high levels. In fact, Crow’s determined stance recently earned him the nickname “Johnny Clobber” on Bay Street, a reference to Big Bobby Clobber, the heavy-handed hockey player created by the satirical comedy troupe The Royal Canadian Air Farce.

Battle: Crow’s battle has become a lonely one. Still, he has managed to absorb the attacks, and he continuously repeats his message that inflation is an ever-present threat to the Canadian economy and that high interest rates are the only effective defence. Currently, only a handful of chartered bank presidents, economists and right-leaning editorialists—as well as Finance Minister Michael Wilson— supports him. Exporters say that the dollar, driven up by foreign investors attracted by the high interest available, is pricing Canadian products out of international markets. Canadian homeowners are seeking relief from mortgage rates that have reached 14.25 per cent for a five-year term, the highest levels since the 1982 recession. Even the Commons finance committee has demanded that Crow defend his policies in televised hearings early this month. Through it all, the governor’s resolve only seems to become more unshakable. Said Gail Cook-Bennett, a former Bank of Canada director: “This is not a job for somebody

who wants to win a popularity contest.”

Yet, it is his growing reputation for predictability that has become one of the most valuable weapons in Crow’s arsenal. It is a quality admired by both foreign and domestic inves-

tors. As a result, Crow has used his anti-inflation policies to help strengthen international confidence in the dollar, even though interest rates are putting pressure on Canadian businesses and consumers. While previous bank governors gave more weight to issues of unemployment and economic growth, Crow’s focus is more on inflation and the dollar’s performance in international currency markets. Said Michael McCracken, president of the Ottawa-based economic consulting firm Informetrica Ltd.: “If Crow has a hero, it would be Karl-Otto Pöhl at West Germany’s central bank, the Bundesbank, who, against great criticism, is fighting inflation hard.” Unlike his predecessors—Graham Towers, James Coyne, Louis Rasminsky and Gerald Bouey—Crow is not Canadian-born and -educated. Before joining the Bank of Canada, he spent 12 years at the International Monetary Fund (IMF) in Washington. There, he dealt with many developing countries whose economic stability was undermined because of runaway inflation. During his tenure at the IMF, he often met with officials from the Bank of Canada in his capacity as head of the agency’s North American division. Impressed by his powerful analytical abilities, they invited him to join the bank’s research department in 1973, and he rose rapidly through the bank’s hierarchy to become senior deputy governor 11 years later.

Succeed: Crow meets as many as 10 times a year in Basel, Switzerland, with his counterparts from major industrial countries. Following a Federal Reserve Board initiative, he now makes public the minutes of the bank’s eight yearly board of directors meetings. He has also established the most ambitious public speaking agenda of any Canadian bank governor in an attempt to educate Canadians about his policies, delivering g twice as many speeches per year as his predecessor, Gerald Bouey. According to Cook-Bennett, who was involved in selecting Crow to succeed Bouey, his fluency in French—which he studied at grammar [public] school in Britain—was an asset, because the bank wanted a governor who could speak to all Canadians.

Crow can be surly and impatient with oppo-

nents. A meeting with John Fryer, for one, president of the 297,000-member National Union of Provincial Government Employees, became so heated that Fryer invited him to settle the matter outside the room. Crow reflected later that it was “the one time I lost my temper in public.”

Crow’s toughness and determination may have been forged during a childhood that required a large degree of self-reliance. He was bom in 1937, the only child of a janitor in Bethnal Green, an impoverished section of East London.

He endured periods of separation from his family during the Second World War, when he was evacuated to Wales to escape the Blitz. He attended grammar schools where he impressed teachers with his raw intelligence and facility with languages. Determined to make the most of every situation, he learned Russian during his two-year compulsory military service in Britain, where he was part of the National Service’s Russian unit, and became qualified as a translator.

He then went to Oxford, earning a BA in philosophy and political economy in 1961. In addition to French and Russian, Crow also speaks Spanish, which he perfected during his years with the IMF.

Gold: According to former and current co-workers,

Crow is a brilliant technocrat, incisive analyst and tough administrator. But he also thrives on the camaraderie of the bank, sometimes refereeing soccer matches between departments vying for a goldsprayed running shoe known as The Golden Boot. Bank insiders say that they appreciate his sense of humor.

Crow now presides over a workforce of 2,100 that supplies him every few minutes with key data on international economic trends. After arriving at the bank in a chauffered blue limousine at about 8:30 a.m., he begins his day with coffee and a few cookies— usually a different assortment every day, which, associates say, he tries to avoid eating. His office on the fourth floor in the original 1937, five-storey grey granite, downtown Ottawa Bank of Canada building is now surrounded by gleaming office towers. Like Rasminsky and Bouey before him, he consults widely, and he is willing to entertain other views about the interpretation of

data and strategy. In return, Crow expects loyalty and collegiality in the tradition of the 55-year-old bank. Senior bank officials describe the atmosphere under Crow as one of good morale.

Outside the office, Crow spends most of his time with his family, as well as attending the opera and ballet with his wife, Ruth, a FinnishAmerican economics writer he met in Washington and who now works as a freelance writer for the federal government. They have

two university-age children, Rebecca and Jonathan. Although those close to him say that he is more drawn to athletics than the arts, he enjoys Bach and Beethoven and no longer plays cricket, which he pursued avidly when he was

younger. He also lives modestly, occupying the same lVk-storey house overlooking the Rideau Canal that he bought for $64,000 when he first came to Ottawa in 1973. Many Canadians would also be comfortable with his main forms of relaxation: tending a large vegetable garden, preserving marmalade and making an Italian stew called chiamotta from a well-used New York Times recipe. And when colleagues ask Crow how he spent his vacation, he usually explains that he was busy with house repair projects, or perhaps a trip to England to see his family.

Earns: Despite the respect he gamers from colleagues and the international banking community, his domestic position has been undermined recently as a result of political controversy over his salary. In March, opposition critics discovered that the bank’s board of directors increased his pay by at least 35 per cent since 1987. He now earns a salary in a range of between $162,000 and $243,000, compared with Federal Reserve Board chairman Alan Greenspan, who makes $112,000, up from $103,000 in 1987. Bank statistics also show that the average salary for its employees has increased by 17.66 per cent since 1987, compared with 12.98 for the average Canadian worker. Critics have pointed to the fact that Gerald Bouey chose to take no increases at all for five years.

Crow’s monetary policies have likely upset Finance Minister Michael Wilson’s projections for a $34-billion budget deficit in 1990-1991, by making borrowing costs higher than the minister predicted. But insiders claim that the two men share similar economic convictions and are, in fact, good friends. By all accounts, their private weekly meetings at the finance minister’s office are cordial.

Indeed, Crow’s, Wilson’s and the government’s future are tied together in the same inflation-fighting package. For now, it is the governor who is leading the charge— and taking most of the heat. And unless he changes tack soon, he will assume an even larger role in the Uves of Canadians, as they struggle to survive the ravages of skyrocketing interest rates.

ANN WALMSLEY