Andy Haldane says technological progress could be hindered by greater short-termism, while use of ‘intelligent robots’ could trigger a further ‘hollowing out’ in employment
High debt, rising inequality and an ageing population means low global growth could be here to stay, according to the Bank of England’s chief economist.
Andy Haldane said technological progress could be hindered by greater short-termism and lower investment, while greater use of “intelligent robots” could trigger a further “hollowing out” in employment.
“Since the financial crisis, global growth has under-performed.In the decade prior to it, advanced economy growth averaged 3pc per year. In the period since, it has averaged just 1pc,” Mr Haldane said in a speech on Tuesday .
“The economic jury is still out on whether recent rates of growth are a temporary post-crisis dip or a longer-lasting valley in our economic fortunes. Pessimists point to high levels of debt and inequality, worsening demographics and stagnating levels of educational attainment. Optimists appeal to a new industrial revolution in digital technology.”
Mr Haldane said changes in society meant people were increasingly valuing short-term gains over long-term investment, while the popularity of social media platforms such as Twitter offered “further evidence of shortening attention spans”.
He said the past 250 years had been characterised by “three distinct innovation phases”: the industrial revolution, mass industrialisation and the IT revolution, which had helped to raise pay and living standards across the global economy.
But while new advances in technology could hail “the fourth industrial revolution”, Mr Haldane warned that robots could soon replace workers en-masse.
“Intelligent robots could substitute for lower-skilled tasks. If the capacity of the machine brain approached, or surpassed, the human brain, higher-skilled jobs could also be at risk. Where this leaves trends in employment, inequality and social capital is unclear. But, most likely, this would be far from blissful ignorance,” he said.
“A second secular headwind, closely related to rising inequality, concerns human capital,” he added. “Inequality may retard growth because it damps investment in education, in particular by poorer households. Studies show parental income is crucial in determining children’s educational performance. If inequality is generational and self-perpetuating, so too will be its impact on growth.”
“In sum, if history and empirical evidence is any guide, this cocktail of sociological factors, individually and in combination, could restrain growth. They could jeopardise the promise of the fourth industrial revolution. Pessimists’ concerns would be warranted.”
Economists including Larry Summers have warned that technology could leave a generation of people frozen out of the workforce . Mr Summers has also revived the concept of “secular stagnation” – or the idea that policymakers will find it harder to find ways to improve productivity and raise living standards in the future.
Mark Carney, the Governor of the Bank of England, described himself as “positive” on technology and its potential contribution to growth.
Eric Schmidt, the chairman of Google, has also dismissed suggestions that innovation threatened a generation of workers . He said advances in technology will create a tidal wave of new jobs and opportunities.
This article was written by Szu Ping Chan from The Daily Telegraph and was legally licensed through the NewsCred publisher network.