“Today’s great debate is where next for growth. The sunny uplands of innovation-led growth, as after the Industrial Revolution? Or the foggy lowlands of stagnant growth, as before it? Which of the secular forces – innovation versus stagnation – will dominate? And if growth is going back to the future, on which side of the Industrial Revolution will it land?
Andrew G. Haldane is the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England. In 2014 he was named by Time Magazine as amongst the world’s 100 most influential people. On 17 February 2015 he gave a speech at the University of East Anglia in Norwich titled Growing Fast and Slow, which has been quite noticed around the World.
The speech was about economic growth and why it has slowed down since the recent Great Recession. In the decade before the Great Recession, advanced economy growth averaged 3% per year. In the period since, it has averaged just 1%. The world has grown fast, then slow.
Haldane observes that for most of history living standards were relatively fixed. The average person in Biblical times or even much earlier did not live that differently than the average person in the 18th century. Then around the year 1800 something changed, and ever since the standard of living has been rapidly increasing.
For those who are interested in understanding more of the long term trends, I can recommend Bradford DeLongs working paper Productivity, Growth, Convergence and Welfare in the VERY long run from 1988, who Haldane quotes in his speech, where he includes the graph below.
The recently slowing economic growth has led to fears of secular stagnation, a lengthy period of sub-par growth. The same concerns were voiced at the time of the Great Depression in the 1930s. The economic jury is still out on whether recent rates of growth are a temporary post-crisis dip or a longer-lasting change in our economic fortunes.
Pessimists point to high levels of national debt in most advanced economies and the increasing levels of inequality, worsening demographics and stagnating levels of educational ambitions. Optimists appeal to a new industrial revolution in digital technology. Given its importance to living standards, this debate is one of the key issues of our time. Click on the link below to read Mr Haldane´s speech.