Does the spectre of monetarism haunt our economies? i  These are serious charges, based on real anxieties. They merit sober, objective assessment. This evening I want to discuss the role of monetary policy in this time of great disruption. But first I will focus on the underlying causes and consequences of weak real income growth and inequality across the advanced world. That’s because any doctor knows that the importance of diagnosing the underlying causes of the patient’s symptoms before administering the cure. Monetary policy has been keeping the patient alive, creating the possibility of a lasting cure through fiscal and structural operations. It has averted depression and helped advanced economies live to fight another day, so that measures to restore vitality can be taken. II. The Great Disruption During the last quarter century there have been a series of profound disruptions to the way we work, trade, consume and live. The fall of the Berlin Wall and the reforms initiated by Deng Xiaoping led to the integration of a third of humankind into the global labour force. Those workers are increasingly linked by global supply chains that have spread from goods to services. In parallel, an explosion of technological innovations has brought access, at the click of a virtual button, to the sum of human knowledge to three-anda-half billion people (Chart 1).
Consumers get lower prices and new product varieties, and, over time, benefit from the spur to innovate and higher productivity. Some workers, however, lose their jobs and the dignity of work, or see their “factor prices” – in plain English, wages – equalised downwards. Such dynamics have been recognised by trade theory for over 75 years. xvi  And they are felt by those at  either end of the great convergence. Survey evidence shows that 70% of Chinese workers believe that trade creates jobs and increases wages, equivocal. xvii  US households think the opposite, and UK public opinion is  xviii  People’s attitudes towards trade shocks are being hardened by the effects of accelerating technological innovation. As my colleague Andy Haldane has explained, up to 15 million of the current jobs in Britain could be automated over time. xix  The fundamental challenge is that, alongside its great benefits, every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge. This was true of the eclipse of agriculture and cottage industry by the industrial revolution, the displacement of manufacturing by the service economy, and now the hollowing out of many of those middle-class services jobs through machine learning and global sourcing. The combination of open markets and technology means that returns in a globalised world amplifies the rewards of the superstar and the lucky. Now may be the time of the famous or fortunate, but what of the frustrated and frightened?