Andrew Haldane: The UK's productivity problem - hub no spokes

Text of the Academy of Social Sciences Annual Lecture by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of England, London, 28 June 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

I am delighted to be giving this year's Annual Lecture of the Academy of Social Sciences and honoured to be a Fellow of the Academy. I thought I would use the occasion to discuss an issue of pressing public policy concern, an issue that affects the living standards of each and every one of us and has, as best we can tell, since the dawn of time: productivity.

It is a terrible word, as it leaves most people dazed and confused. Few are those who can define it and fewer still those who can measure it. Yet it has entered the popular lexicon and with good reason: the one thing we do know is that productivity is crucial to our pay and living standards over the longer run. Productivity is what pays for pay rises. And productivity is what puts the life into living standards.

History, distant and recent, makes this only too clear. It is no coincidence that productivity, pay and living standards have moved in lock-step over the past millennium - flat-lining for the first three-quarters before sky-rocketing in the final quarter - as each new industrial revolution has dawned (Chart 1). Pay and living standards have increased over fifteen-fold since 1750. Productivity explains why.