I would like to urge that, in searching for labor market solution, attention must also be paid to the problems of the wage structure, since at the going wage, price mechanism and its signaling function do not work efficiently enough to clear the labor market to eliminate this skill mismatch. Related issue is that of a long stall in labor productivity as well as overall productivity growth. Policy distortions and a lack of clear policy directions can discourage firms from accumulating physical capital and investing in innovation, and prevent workers from moving to higher value-added sector. For example, agricultural price subsidy measures, while serving their redistributive purposes, may inadvertently channel workers away from highly productive manufacturing to agricultural sector, thus contributing to lower overall productivity of the economy. At the same time, low public spending on R&D and insufficient protection of intellectual property rights may deter innovative entrepreneurship and hinder a transformation towards a knowledge-based economy. Good news is, the risk of a sustained growth slowdown could be reduced or even avoided, as success of some mature economies in Asia have shown in the past. This will depend crucially on the quality and the timeliness of public policies across a wide spectrum in tackling these long-term issues. To be sure the task is not going to be easy. Reorienting the country’s growth strategy to focus more on skills development, innovation, and productivity involves deliberate planning over relatively long stretch of time. Three principles are of the essence: visionary leadership, consistency, and continuity.
Jean-Pierre Roth: Switzerland as an industrial location and National Bank policy Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Europa Forum Lucerne, Lucerne, 27 October 2003. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  In a high-wage country such as Switzerland enterprises can only maintain their position in the face of international competition by a process of ongoing innovation. The resulting structural change in the direction of highly technological and increasingly productive economic sectors is also a prerequisite for strong economic growth. In an international comparison, however, Switzerland’s growth is poor. This weak perfomance in terms of growth highlights the need for action in economic policy. Monetary policy cannot, however, fulfil this role. The primary task of monetary policy is to ensure price stability. Price stability is an important locational advantage that Switzerland has to offer. Moreover, monetary policy can also contribute to stabilising the economy and warding off undesirable exchange rate shocks. It is, however, not in a position to bring about a sustained improvement in economic growth. The result of such an attempt would merely be economic overheating with the threat of a subsequent slide of the economy into recession. Lasting effects on economic growth may, by contrast, emanate from education policy, research policy, policy on foreigners and fiscal policy.