Real wage increases have been on average 3 per cent a year on average, compared with 0 per cent a year in the 1980s. Of course, one can discuss how much regulatory frameworks and institutional conditions surrounding wage negotiations have meant for this development in relation to the general conditions and the increased understanding of the inflation target and of the importance of low, stable inflation. My belief is that they improve the conditions for succeeding in monetary policy’s objective of maintaining price stability. Budget consolidation Following the change of government in October 1994, I returned to the Ministry of Finance after a couple of years as adviser at the International Monetary Fund in Washington to become UnderSecretary of State to Göran Persson. There was basically one task on the agenda; to eliminate the very large budget deficit. The deficit in public sector finances amounted to around 11 per cent of GDP in 1993. After a majority of the Swedish population had expressed their support for Sweden joining the European Union at a referendum held in autumn 1994, this became an additional task, as well as financing Sweden's membership of the EU, which cost in the order of SEK 20 billion a year. The timing for dealing with the deficit was ideal from both a political and an economic viewpoint.
Still, given the rationale and the features of central banking policies, as Ben Bernanke (2015) states: “By comparison to the influence of (these) long-term factors, the effects of monetary policy on inequality are almost certainly modest and transient”. These long-term factors influencing inequality relate to globalization, technological progress, demographic trends, and institutional changes in the labor market. How should we tackle the chronic problem of uneven income distribution, which seems a symptom of many fundamental weaknesses of the system? How to return the greatness of the opportunities that modern society should bring? Should the way forward be stronger regulation, more active redistributive role of the state or as Prof. Zingales claims through harnessing the power of competition? As economists, we all know that market based system inherently brings some inequality, but its disruptive power is unthinkable when boundaries are crossed. At the current juncture, when global growth slowdown is on the horizon pro–growth and pro–equality policies seems inevitable. I am sure that distinguished speakers and panelists will reflect on the array of available policies, including improving access to markets and levelling the playing field, increasing financial inclusion, investing in human capital, regulatory and institutional reforms, that strengthen the rule of law and promote competitive and fair business environments. We, as policymakers, cannot only have the role of “innocent bystanders”, scrutinizing and stocktaking, but putting in place reforms that promote strong and inclusive growth that by its nature reduces inequality.