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| Mark Carney: we must tackle isolation and detachment caused by globalisation | Mark Carney: we must tackle isolation and detachment caused by globalisation |
| (35 minutes later) | |
| The governor of the Bank of England has issued a rallying cry to policymakers across advanced economies to tackle the causes of a growing sense of “isolation and detachment” among people who feel left behind by globalisation. | The governor of the Bank of England has issued a rallying cry to policymakers across advanced economies to tackle the causes of a growing sense of “isolation and detachment” among people who feel left behind by globalisation. |
| Mark Carney used his first big speech since Donald Trump swept to power in the US to warn that open markets are under threat and that politicians must do more to share out the gains of global trade and the rise of technology. | |
| Carney reiterated the Bank’s stance that monetary policy could not be held accountable for rising inequality. He gave no new hints on the direction of interest rates in the UK and said rate setters would continue to trade off the opposing forces of rising prices and uncertainty stemming from the Brexit vote. | |
| The main focus of his last speech in an eventful year was inequality and he described current times as “the first lost decade since the 1860s”. | |
| Carney noted the rise in living standards around the world in recent decades and said technological progress had lifted more than a billion people out of poverty. But he recognised those advances had not been felt equally. | Carney noted the rise in living standards around the world in recent decades and said technological progress had lifted more than a billion people out of poverty. But he recognised those advances had not been felt equally. |
| “Despite such immense progress many citizens in advanced economies are facing heightened uncertainty, lamenting a loss of control and losing trust in the system. To them, measures of aggregate progress bear little relation to their own experience. Rather than a new golden era, globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities,” he said. | “Despite such immense progress many citizens in advanced economies are facing heightened uncertainty, lamenting a loss of control and losing trust in the system. To them, measures of aggregate progress bear little relation to their own experience. Rather than a new golden era, globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities,” he said. |
| That climate had combined with the aftermath of a financial crisis that exposed how banks had been working in a “heads-I-win-tails-you-lose bubble”, he said. | That climate had combined with the aftermath of a financial crisis that exposed how banks had been working in a “heads-I-win-tails-you-lose bubble”, he said. |
| “As a consequence of all of these developments, public support for open markets is under threat. Turning our backs on open markets would be a tragedy, but it is a possibility. It can only be averted by confronting the underlying reasons for this risk upfront.” | “As a consequence of all of these developments, public support for open markets is under threat. Turning our backs on open markets would be a tragedy, but it is a possibility. It can only be averted by confronting the underlying reasons for this risk upfront.” |
| Carney set out three priorities to tackle the way innovation had fostered “isolation and detachment” for a substantial proportion of people. | |
| “First, economists must clearly acknowledge the challenges we face, including the realities of uneven gains from trade and technology. | |
| “Second, we must grow our economy by rebalancing the mix of monetary policy, fiscal policy and structural reforms. | “Second, we must grow our economy by rebalancing the mix of monetary policy, fiscal policy and structural reforms. |
| “Third, we need to move towards more inclusive growth where everyone has a stake in globalisation.” | “Third, we need to move towards more inclusive growth where everyone has a stake in globalisation.” |
| Most potential solutions to the sense of disenchantment lay “outside the Bank’s remit”, Carney said. | |
| Defending the Bank, he said: “Monetary policy has been keeping the patient alive, creating the possibility of a lasting cure through fiscal and structural operations. It has averted depression and helped advanced economies live to fight another day, so that measures to restore vitality can be taken.” | |
| “In the end, monetary policy isn’t a spectre but a friendly ghost.” | “In the end, monetary policy isn’t a spectre but a friendly ghost.” |