Andrew Haldane: Ideas and institutions - a growth story

Speech by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of England, to The Guild Society, University of Oxford, Oxford, 23 May 2018.
Central bank speech  | 
27 June 2018

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. 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, 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 growth may even have contributed to the incidence of global conflicts and wars having fallen to their lowest levels, perhaps in human history.

That makes growth a gift, one necessary (if not necessarily sufficient) to deliver secular improvements in living standards. And it is what makes a good understanding of the determinants and drivers of growth so crucial for societal progress. By understanding the forces driving growth, past, present and future, we can begin to devise and implement economic policies that support improvements in society.

I thought I understood the story of economic growth, its drivers and determinants. But recently I have changed my mind. I have a new story of growth. I think this story carries important implications for understanding the future challenges of technology and for devising the future policies and institutions necessary to meet them. That might require, among other things, a repurposing of successful institutions like this one, turning them from universities into multiversities.

The Story of Growth

The story of economic growth often begins with a chart like this one (Chart 1). This plots the path of global economic growth, measured by Gross Domestic Product (GDP) per head, over the past 1000 years. And what a story it tells. It is a tale of two halves – or, more accurately, a tale of three-quarters and a quarter.

For the first three-quarters of the past 1000 years, the global economy stood still in growth terms. GDP growth per head of population averaged less than 0.1% per year. Just try and imagine those rates of growth. They meant it took more than a millennium for living standards to double.