It also begs the question of what is preventing the diffusion of processes and technologies used in one firm to other firms operating in a similar region or sector. Are there barriers to technological diffusion, legal or competitive, which are stymieing productivity trickle-down? Are first-mover advantages and economies of scale simply larger for frontier firms these days, entrenching their advantages? Could more be done by frontier companies to promulgate their practices to companies lower down the supply-chain? I do not know the answers. But finding them strikes me as key for unlocking the growth and productivity potential of the long tail of companies and hence of UK PLC. Conclusion  The UK, perhaps more than any other country in the European Union, is an agglomeration of quite different micro-economies – micro-economies of high and low incomes, high and low skills, high and low investment, high and low productivities, Red and Blue Car regions. Closing these gaps would not only boost the size of the aggregate economic pie, but would lead to a more equitable distribution of its slices. 15  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  15  As much as anywhere in the UK, the North-East exemplifies some of those challenges. Incomes and productivities are towards the bottom of the UK league table and unemployment rates towards the top. In many ways it could be seen as a Red Car region. With these differences so large, it would be easy to view the UK glass, economically and socially, as half-empty.
Raising living standards could be achieved by simply keeping the printing presses running. Countries that have done so have found this tends to end, not in triumph, but disaster. Monetary policy is also unable to influence the distribution of outcomes across the economy over medium-term horizons. The reason is that central banks cannot set different interest rates for different sectors or regions, for different households or companies, or for borrowers and lenders. 15  Monetary  policymakers are, at least in normal times, one club golfers. None of this is to suggest that monetary policy is entirely unimportant in its impact on the size of the economic pie, and its distribution, over shorter-run horizons. As our two-car economy example illustrated, it is perfectly possible for monetary policy to influence both aggregate income, and its distribution, in the shorter run. That being the case, it is worth assessing the evidence on that over recent years. (a) Aggregate Impact  Starting with the impact of monetary policy on aggregate activity, since the dawn of the global financial crisis monetary policy has been loosened significantly in a large number of countries around the world, using a combination of lower official interest rates and, in some cases, asset purchases or QE. These measures have aimed to cushion the impact of the financial crisis on the economy and on jobs. 14 15  Not all economists agree on this, for example see Aghion and Howitt (1998).