A recent article by Gillian Tett in the Financial Times profiles the contrarian views of a UK fiscal policymaker regarding innovation, technology and growth. Contrary to the conventional wisdom, that is, as captured by McKinsey and others that promote unfettered innovation as the ultimate solution to the challenges facing worldwide economic expansion.
Andrew Haldane, chief economist for the Bank of England, sees things differently. In a speech entitled "Growing Fast and Slow," Haldane examines the past 250+ years and concludes that innovation is only part of the reason for the rapid growth the globe has experienced in that time. There are additional factors that are critical: rising levels of human capital (educated people), social capital (trust), and a shift in cultural attitudes towards the future (from a focus on short-term gains to planning for the long term).
Further, while innovation can enable greater growth, Haldane worries about the current direction that digital technologies are taking us. He warns that the digital revolution is increasing income inequality, and may be reducing our time horizons--making us less capable of the patience required to make the investments needed to achieve sustainable long-term growth.
Fast thought could make for slow growth."
Haldane ends his speech with a warning about the cross-winds associated with increasing innovation on the one hand and decreasing social development on the other. If we are not careful, global growth could end up "suspended between the mundane and the miraculous."
We appreciate an analysis that accounts for human capital, social capital, and considers the merits of a long-term perspective. What do you think about Mr. Haldane's observations?
-- Clara Shen