Ideas and Institutions – A Growth Story Speech given by  Andrew G Haldane Chief Economist Bank of England  The Guild Society University of Oxford 23 May 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Shiv Chowla and David Ronicle for their help in preparing the text. I would like to thank Will Abel, Sandra Batten, Sarah Kinson and Patrick Schneider for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Economic growth has been among the greatest gifts given to us, as individuals and societies. It may no longer be fashionable to say so. Measures of economic growth, like Gross Domestic Product (GDP), can be highly imperfect metrics of how well individuals and societies are faring, their subjective sense of well-being. 1  And growth in income and output is not, of course, an end in itself. Nonetheless, it is now pretty well-established that growth is a vital ingredient, indeed pre-requisite, for meeting many of the broader societal objectives many would view as important to our longer-term health, 2  wealth and happiness. While not an end in itself, economic growth appears to be a vitally important means of achieving those societal ends. Economic growth is the main reason why global levels of poverty and rates of infant mortality have fallen spectacularly over recent centuries. It is why longevity and educational standards have risen secularly over the same period.
And even though they may have wanted to counteract inflation, they did not have the independence to do so. Furthermore, spiking oil prices were responded to with pay hikes, creating a vicious cycle of rising wages and prices – a typical wage-price spiral. This is why inflation was not brought under control until central banks had been granted independence and explicitly tasked with safeguarding price stability. In Europe, the German central bank led the battle against inflation, and it can be said that other countries tried to bask in the warmth of German credibility by pegging their exchange rates to the Deutschmark. In the Nordic countries, price stability was not ensured before a consensus was reached in the labour market with the so-called Nordic model. So is this where we are today? The lengths to which the world’s largest central banks have gone in quantitative easing over the past decade is cause for concern. They have truly taken on the task of financing government spending by printing money. It will require a Herculean effort to climb out of this slippery slope. The outlook is for many countries’ financing costs to rise significantly thereafter. By the same token, the labour shortages that have developed in the West could create wage pressures and push inflation higher. Honoured guests: It is vitally important that we Icelanders draw accurate conclusions from our own monetary history in the wake of the 1973 oil shock.