Looking at these multiple sources of capital, in turn, provides an account of the Industrial Revolution whose genesis differs significantly from the Neo-Classical one. 25 Take human capital accumulation. One measure of that is literacy and numeracy in the population at large. Chart 7 plots the level of adult literacy in a selection of Western Europe countries from the late 15th century. At that time, less than 10% of the population were literate. Measured levels of human capital were miserably low, consistent with subsistence living standards. But in the following three  22  Douglas Allchin describes preternatural phenomena as being “suspended between the mundane and the miraculous”. 23  For example, Romer (1986), Aghion and Howitt (1998) and Acemoglu (2009). 24  Sachs (2014). Sachs also discusses environmental capital. Also see Solow (1956), Becker (1965), Rebelo (1991), Putnam (2000), Romer (1986). 25  For example, Acemoglu and Robinson (2013), Clark (2009). BIS central bankers’ speeches  5  centuries, a transformation took place. Literacy rates in the adult population shot up to around 50% in Western Europe, in some countries higher. In other words, human capital accumulated at real pace prior to the Industrial Revolution. This skills-deepening provided one foundation on which other sources of growth-enriching capital were built – for example intellectual capital, the generation of ideas and innovation. On this interpretation, sociological transformation supported, perhaps preceded, technological transformation. Innovation was an earthly creation, not manna from heaven. Since the Industrial Revolution, levels of educational attainment have continued to rise.
Household debt has increased at a faster pace than income in the last ten years. Norges Bank’s calculations indicate that the sharp rise in house prices in recent years may explain a large share of debt growth. Higher house prices have a fairly long-lasting effect on household debt growth. As a result, credit growth will remain high for a fairly long period even though the rise in house prices is expected to slow. Given the assumptions underlying our projections, it is likely that debt will continue to grow at a faster pace than disposable income through the entire projection period. As a result of high credit growth, the household debt burden has increased over the past year. The debt burden is currently record high. Due to unusually low interest rates, the interest burden is, nevertheless, relatively low. A normalisation of interest rates will increase households’ net interest expenses, but according to the projections the interest burden will not be higher than it was at the end of the 1990s. If there are expectations of persistently low interest rates, there is a risk that the debt burden may increase more than assumed in the projections. Net interest expenses will then also be higher than assumed. In addition, households will be vulnerable if unexpected disturbances result in higher than expected interest rates. Challenges ahead Oil gives us an economic base that is not available to many other countries.