Mark Carney, the governor of the Bank of England, recently gave a speech entitled the Spectre of Monetarism. It was one of the most important speeches delivered by a central banker in years, as Mr Carney attempted to grapple with the what is becoming the number one issue of this age, how globalisation and technology is creating wealth, but which is not trickling down into higher wages for all people. Here are the highlights. He also proposed an idea that might have entrepreneurs celebrating across the land.
“The deepening of the symbiotic relationship between global markets and technological progress has lifted more than a billion people out of poverty while a series of technological advances have fundamentally enriched our lives,” said Mr Carney.
This chart sums it up pretty well:
But something has gone wrong in recent years in the developed world. Take the UK and real wages, that is wages minus inflation.
And we have also seen rising inequality.
Mart Carney put it thus: “Many citizens in advanced economies are facing heightened uncertainty, lamenting a loss of control and losing trust in the system. To them, measures of aggregate progress bear little relation to their own experience. Rather than a new golden era, globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities. . .
“In Anglo-Saxon countries, the income share of the top 1% has risen notably since 1980. Today, in the US, the richest 1% of households receive 20% of all income.”
But that is income. Look at wealth and inequality looks much worse:
“The proportion of the wealth held by the richest 1% of Americans increased from 25% in 1990 to 40% in 2012. Globally, the share of wealth held by the richest 1% in the world rose from one-third in 2000 to one-half in 2010.”
And he said that there are three priorities for economists and policy makers to focus on:
“First, economists must clearly acknowledge the challenges we face, including the realities of uneven gains from trade and technology.
“Second, we must grow our economy by rebalancing the mix of monetary policy, fiscal policy and structural reforms.
“Third, we need to move towards more inclusive growth where everyone has a stake in globalisation. “
He said: “To address the deeper causes of weak growth, higher inequality and rising insecurity requires a globalisation that works for all. For the societies of free-trading, networked countries to prosper, they must first re-distribute some of the gains from trade and technology, and then re-skill and reconnect all of their citizens. By doing so, they can put individuals back in control.”
He also talked about tax avoidance, referred to the BEPS initiative, “which will allow all countries to work together to implement measures against tax Base Erosion and Profit Shifting.”
He also referred to the idea of a kind of minimum corporate tax across the G20 – “that is why the G20 might at least consider, as Larry Summers has suggested, a minimum tax on reported earnings to be paid somewhere.”
But he also focused on opportunity, and at the point combined both the issue of technology and entrepreneurism, saying: “In an age where anyone can produce anything anywhere through 3-D printing, where anyone can broadcast their performance globally or sell to China whatever the size of their business, there is an opportunity for mass employment through mass creativity. Technology platforms such as Taskrabbit, Alibaba, Etsy, and Sama can help give smaller-scale producers and service providers a direct stake in global markets. Smaller scale firms can by-pass big corporates and engage in a form of artisanal globalisation; a revolution that could bring cottage industry full circle.”
And he made a suggestion that might be music to the ears of entrepreneurs: “Why doesn’t the G20 pursue global free trade for small and medium-sized enterprises (SMEs)?” He continued: “Global free trade for SMEs, connected via such platforms, holds out the prospect of a more inclusive form of global commerce with the individual at its centre.”