The governor of the Bank of England has called on global institutions such as central banks to fight back against populist forces by getting “our houses in order”.
In a speech given to a group of economists and central bankers, Andrew Bailey said that multilateral institutions, which were under attack from the likes of President Trump and copycat parties in Europe, “should not pretend that all has been perfect” and reform in the face of declining public trust.
In unusually pointed political remarks about the state of the world economy, Bailey said “the rise of so-called populism” was a headwind for global stability, as its proponents pitted free trade against domestic workers and had a “tendency to attribute unfavourable conditions to outside forces rather than to point to shared challenges”.
The governor, who is also head of the global Financial Stability Board, which is based in Basel, Switzerland, said multilateral institutions must respond to the claims that they did not act in the interest of public good and “be prepared to make changes where they are called for, as was done in the past. But we must be clear and agreed that a world without effective institutions is unlikely to be stable.”
The US administration withdrew this month from 66 international organisations, half of which are associated with the United Nations. Bailey and ten other central bank leaders signed a letter this week affirming their support for Jerome Powell, chairman of the US Federal Reserve, who is subject to a criminal investigation by the US Department of Justice.
The governor has had strained ties with Nigel Farage, leader of Reform UK, and Richard Tice, the party’s deputy leader, who met Bailey in September over criticism about the Bank’s bond-buying policy. Farage will attend the World Economic Forum in Davos next week.
In the speech, the governor acknowledged that the benefits of free trade had not been evenly spread and “there has been an undermining of social capital — so called — and domestic cohesion”.
He said that governments and regulators needed to ensure that “the next major contribution to global productivity growth … likely to be AI and robotics” developed in a “way that is sensitive to managing the consequences and particularly invest in developing skills”.