Britain has now experienced 41 successive quarters of positive economic growth. And unemployment in this country is lower than in any other G7 country. This greater stability is no accident. It is the product of a commitment to price stability as reflected in an institutional design encompassing a clear inflation target and a transparent and accountable process for reaching decisions on interest rates embodied in the Monetary Policy Committee. At the beginning of my lecture I referred to the frescoes of Good and Bad Government by Lorenzetti. If today you go to the Palazzo Pubblico in Siena to see these wonderful paintings in the Sala della Pace, which I translate as the Room of Stability, you will see the results of allowing daylight to fall on the walls. Yes, greater transparency - more daylight - has damaged the paintings. But if you look carefully, you will see that whereas daylight has caused no harm to the paintings of Good Government, it has indeed damaged Bad Government on the opposite wall. Even today, Lorenzetti’s frescoes tell us about the benefits of transparency and the importance of careful institutional design. Five years ago I delivered, again in this room, a lecture on the inflation target five years on. I argued that the new requirement on the Governor to write an open letter to the Chancellor whenever inflation deviated from target by more than one percentage point would provide ample opportunity for the Bank to restore the lost art of letter-writing. No letter has so far been required.
To illustrate the quality change and the new product bias, imagine that we go shopping in Harrods both today and in 1910. Suppose that we are given £ to spend - the same amount in both years. In 1910 you could have bought a vacuum cleaner, a record player, an iron, a camera, and a telephone. The vacuum cleaner would have spread as much dust as it removed, the record player would have been hand-cranked and the iron would need to be filled with coal. The camera would have been bulky and awkward to set up, and the telephone would have been largely silent because so few people owned one. Today you can buy a similar bundle of goods for the same total outlay, but all would be of vastly superior quality. So for durable goods it is not clear that the cost of living has increased at all. But if we buy food, however, the results are very different. Unlike appliances, many of the food items in 1910 are unchanged today - McVitie’s digestive biscuits, Quaker oats, Rose’s Lime Juice, Bournville cocoa, Frank Cooper’s Oxford marmalade, Marmite, Heinz baked beans and Colman’s mustard are only some of the familiar items for which precise comparisons over the years are possible. In 1910 you could have fed yourself on 10p a day by eating Marmite on Hovis toast for breakfast; eggs, bacon and toast for lunch; Heinz beans on toast for dinner; with a pint of milk to drink.