Problems at the British Steel plant in the town have put at risk the jobs of 5,000 workers and a further 20,000 in its supply chain.1 Hopefully, a new buyer can be found and jobs in the town and beyond can be assured. This is the latest chapter in what has been a long and sometimes painful story for the UK steel industry recently. It has been a recurrent theme of my visits around the UK, including in Redcar and Port Talbot. The loss of signature industries can leave lasting social and economic scars – jobs lost, families disrupted, communities decimated. It is a pattern we see repeated across many industries in many advanced economies. It has been a key cause of the disaffection and disconnection felt by many and a potent polarising force in our politics, policies and societies. This polarisation is also a potent force shaping the fortunes of our economies, as I will go on to discuss. The travails of the steel industry lead me neatly to the issue I want to discuss today – jobs and pay. In the UK recently, this has been a good news/bad news story. The good news has been the new jobs created – the best jobs recovery in the UK since at least the Second World War. The bad news has been the subdued performance of pay over much of that period – the weakest pay performance the UK has experienced since at least the Boer War.
In a speech two weeks ago, British Prime Minister Gordon Brown proposed a new role for the IMF: “…its role should be to prevent crises and not simply manage or resolve them as in the past. And in a wider role the IMF, working with the global financial stability forum, should be at the heart of what we need – an early warning system involving regulators and supervisors in all countries for financial turbulence affecting the global economy.” 4  3  Financial Times January 26, 2008. 4  Speech at the Chamber of Commence in Delhi, 21 January 2008. BIS Review 14/2008  3  Obviously, there are pipelines that are not on our present maps. Also, our knowledge of what flows through the known ones is scarce. But would it help us if we knew? Would we be able to predict a looming crisis and thus prevent it? I do not have the answer to this, but I think it is fair to raise the question. We must expect turmoil in financial markets to occur from time to time. There will always be stupidity and greed, fear and euphoria (and some scoundrels). Accidents will happen. Authorities should strive to establish regulatory frameworks that give the right incentives for prudent behaviour. It is important to avoid overregulation that severely restricts markets and stifles innovation. We must of course make sure that obvious shortcomings in existing regulations are corrected.