NORWICH, England (Reuters) - Economic growth from the next industrial revolution, driven by new technology, may be blunted by problems such as growing inequality, lack of investment and increased short-termism, the Bank of England’s chief economist said on Tuesday.
In a speech, Andy Haldane weighed up arguments for and against secular stagnation — the theory that developed economies will not return to pre-crisis levels of growth because of slowing technological progress and a chronic shortfall in demand.
On the one hand, Haldane said rising adoption of digital technologies offered strong grounds for expecting that rapid economic growth would resume after the damage done by the global financial crisis.
And the last few hundred years have shown how huge shifts in innovation — the industrial revolution, mass production, and the digital era — have been the driving forces behind economic growth and prosperity.
But Haldane said declining levels of research among companies, falling public investment and growing inequality could stymie the prospect of further technological innovation.
“They could jeopardise the promise of the fourth industrial revolution. Pessimists’ concerns would be warranted,” Haldane said in the speech to the University of East Anglia in Norwich, eastern England.
He said inequality in the United States might have stunted past U.S. economic growth to the tune of almost 1 percentage point each year.
“In an era of low growth, that is a strikingly strong headwind from lower levels of social capital.”
Haldane said the abundance of information available on the Internet — perhaps symbolised by Twitter — could also be shortening people’s attention spans, creating a trend towards greater short-termism that reduced the desire to invest and the ability to innovate.
“We have fear about secular stagnation at the same time as cheer about secular innovation. The technological tailwinds to growth are strong, but so too are the sociological headwinds,” he said. “Future growth risks becoming suspended between the mundane and the miraculous.”
Writing by William Schomberg and David Milliken; Editing by Kevin Liffey and Alison Williams