Pierre PoilievreFederal Conservative leader Pierre Poilievre claims he has the answers when it comes to inflation. But when you look at his policies, it’s clear—Poilievre’s got it all wrong. Working people can’t trust him to solve the very real problem of rising prices and stagnating wages.

Poilievre argues that the Bank of Canada caused inflation by printing money to fund government spending. As such, he says the way to fight inflation is to impose legal limits on government spending. But neither of these claims hold up.

First, recent price increases have been caused primarily by pandemic-related supply shortages. To make things even worse, corporations in critical sectors used supply chain issues as an excuse to increase their own profit margins. A report by the Centre for Future Work found that 15 sectors dramatically increased their profit margins in 2022, including oil and gas extraction and refining, financial institutions, motor vehicle dealers, food manufacturers and food retailers. In some of these sectors, a small number of businesses control most of the market, making it much less competitive and easier for companies to profiteer.

Second, while it’s true that the Bank of Canada increased the money supply during the pandemic, this increase helped people and small businesses, and allowed our economy to bounce back quickly. At the beginning of the pandemic, the Bank of Canada created money to buy debt from private banks in the form of bonds. Commercial banks were nervous they would lose money if no one bought their bonds at a reasonable price. The purchase of bonds by the Bank of Canada gave private banks confidence to keep lending money. Increasing the money supply also made it cheaper for the government to borrow money. This assisted small businesses and households in turn because the government was able to pay out temporary benefits like CERB with the money it borrowed.

Importantly, this increase in the money supply was only temporary. When the bonds the Bank of Canada bought mature, the amount that they borrowed gets paid back to them. Instead of reinvesting in new bonds, the Bank will use this income to reduce the extra debt they created during the pandemic. This is called quantitative tightening. Quantitative tightening is already happening. Two key measures of money supply (M1+ and M1++) show Canada’s money supply shrinking as of the last quarter of 2022.

Growth rates of Canada's money supply

In this context, Poilievre’s claims about inflation don’t hold up. While Poilievre is right that inflation is a problem, he’s wrong about the answers. The sharp increase in global oil prices, for example, is due to supply chain issues and profiteering. The amount of money our government spends has no effect on these prices. Moreover, temporarily increasing the money supply during the pandemic helped us avoid an increase in bankruptcies and longer-term economic destruction. If we had limited government spending during the pandemic, like Poilievre says we should have done, we would not have been able to fund programs like CERB that helped households and small businesses survive the crisis.

In fact, despite Poilievre’s claims, almost no one benefits from limiting the government’s ability to spend in response to emergencies. It’s just a bad idea that was popularized by libertarian conservative economists in the 1970s and 1980s—along with busting unions, cutting taxes, shrinking public ownership and investment in infrastructure and services and offshoring manufacturing to ‘low-cost’ countries.

The policies Poilievre wants would shift the power from consumers, small businesses and workers to big corporations. They would concentrate power in the hands of a privileged few. And they would limit the ability of governments to intervene positively in our economy. History shows us that the kinds of policies Poilievre is putting forward as a solution to inflation have only made our economic problems worse. Let’s not fall for it again.