But credibility starts with the strength of the institutional framework of the central bank and its independence from pressure to compromise price stability. Economic outcomes will be worse where that framework is vulnerable to political challenge. The rate of growth in real economies will be higher, more stable and more durable where central bank independence is beyond challenge. Thank you for allowing me to share these thoughts with you today.
2  BIS Review 35/2006  Globalisation involves both challenges and opportunities The increasing competition from, for instance, China, India and eastern Europe means that there is increasing pressure on the early industrialised nations to transform their trade and industry structure. This structural transformation will affect people, places and regions in different ways. However, history shows that free trade and increased economic integration lead to increased economic welfare for the world as a whole. The international division of labour that follows in the wake of globalisation leads to lower production costs and productivity gains, which in turn means that labour and investment in the industrialised nations can be moved to other sectors with more refined products and services. In that sectors and companies that are not internationally competitive are knocked out, scope is created for new employment in areas where different countries and regions have comparative advantages. However, for an individual country or region to benefit in this process, the “creative destruction” entailed in the structural transformation must lead to new jobs with a higher value added factor being created at the same rate as the old ones disappear. Effects on the labour market China’s and India’s integration into the world economy is sometimes described in the debate as a supply shock in the global labour market, which will result in rapidly-falling wages in the western world.