11 November 2015 6.30pm

The SBE Annual Dinner 2015

Speaker: Igazio Visco, Governor, Bank of Italy

Venue: Millennium Gloucester Hotel, 4-18 Harrington Gardens, London, SW7 4LH

Members and their guests sat down to the Society’s Annual Dinner this year in the unaccustomedly exotic surroundings of the Conservatory at the Millennium Gloucester Hotel, which some likened to an eighties rock venue while others were minded of the Palm House at Kew. They all looked forward to hearing the thoughts on a changing economy of our distinguished principal guest, Dr Ignazio Visco, Governor of the Bank of Italy.

But first our President, Sir Dave Ramsden, welcomed us all and called on us to join him in the loyal toast. Then our Chairman, Dame Kate Barker, after thanking Standard Life for their longstanding and generous support for the occasion, and MNI Connect for their support in organising the speaker, went on to propose a toast to the Society. She observed that the economy continued to disappoint, with recovery falling short of escape velocity and with concern growing at the possible unwelcome side-effects of the prolonged period of low interest rates. Nevertheless, the Society’s membership is rising, particularly our student membership. This owed much to the Society’s continuing programme of lively and interesting speakers, of masterclasses to help members keep up to date with new thinking, and the insights afforded at its in-depth Conferences and she thanked Ashurst Law for their generous hosting of many of these events.

These achievements reflected the efforts of many but she particularly wished to thank two members of Council who have stepped down this year after many years’ service: Charles Burton, who had given unfailing good advice and help to the Society, and Adam Chester, who had played a major part in setting up our new website. The work of James Lambert, our Treasurer, and of Sandra Curtis, our Secretary, and the support of our Vice-Presidents, two of whom, Dr Andrew Sentence and Sir Alan Budd, were hosting tables tonight, all deserve recognition. And we surely had to thank our Secretariat, Katie Abberton and Shirley Kimber, for all their efforts, not least in organising the Dinner tonight – a call greeted with warm applause.

Finally she announced that next year she would step down as our Chairman. She had been honoured to hold the office and was delighted that Kevin Daly, Managing Director, Economics, at Goldman Sachs, had agreed to take it up. She was confident that he would enjoy the same support that she had had from the President and Vice-Presidents, from Council and from the Society’s secretariat. With such support for the future she asked us to join her in a toast to the Society.

The Chairman then invited the President to present the Rybczynski Prize for 2015. He remarked on how the competition gave a wider platform for interesting work in business economics and thanked KPMG for their support of the Prize. Because our Dinner was so late in the year the winner had already been announced and given his award but Tim Harford’s essay on forecasting had been one of excellent short list, and Sir Dave reminded us of the other wide-ranging and well-written entries that had been listed. Nevertheless Tim’s review and assessment of the work of Philip Tetlock had deserved his Prize and the President presented him with a Certificate of his award.

After presenting the Prize our President proposed a toast to our guests and, in particular to our principal guest, Dr Ignazio Visco, Governor of the Bank of Italy who had so kindly accepted our invitation to address us this evening.

Dr Visco thanked the Society on behalf of all the guests, and in particular for inviting him to speak to us. He said he would like to talk to us about economic change, and both its short- and longer-term challenges. Indeed, he suggested that short-run developments cannot be assessed separately from the more profound changes we see in our economies. He scarcely needed to remind us how over the past two centuries technological change and the opening up of markets had produced wealth, work and better living standards for ever more of the world’s people, and these changes seem to have gathered still further momentum in the past fifty years. He did, though, enter two caveats: first, to remind economists that these changes had not proceeded in any simple linear process as may be inferred from some economic models – there had been a recession in every decade since the 1960s – and, second, the fruits of change had not been equally divided and the share in national income of the wealthiest had increased significantly.

These reservations cast light on two key challenges to continued advance. The first is the possibility of ‘secular stagnation’ reflecting a diminished level of investment in further technological advance, either as a result of the impact on expectations and relative prices of the prolonged under-utilisation of resources flowing from the effects of the financial crisis, or because the innovations that have driven the massive increases in productivity underlying rapid growth have run their course – though Dr Visco leaned more to the view that the current digital revolution is far from having worked all its effects and had anyway opened the way to other pioneering new technologies offering extraordinary gains in productivity.

The second challenge arises from the effects of the new technologies on the demand for labour and skills, where they tend to replace labour even in fields where human skills have appeared essential and rewarding and may so raise output per hour that that there are few opportunities of employment for many, regardless of their level of education and competence, while output accrues to those few who own the technologies. Such developments may feed into a cycle of stagnation by increasing supply potential while restricting the wide spread of incomes needed to create the demand for the new goods and services.

He believed that there could be no single response to such threats of stagnation – we cannot for example simply educate ourselves out of the problem, though education, particularly to encourage creativity and dynamism, would be one important response. Support for basic research and for social and economic infrastructure would be another. And, recognising that in this environment where not only growth is weak, but also demand and so employment and incomes, some stimulus for increasing investment that promises increasing returns over the medium- to long-term would be essential. He suggested that we should not fear the impact of new technologies but take advantage of the enormous cost reductions they allow by finding the new skills, the new ways of working to do so.

Dr Visco concluded, first by sharing his conviction that the progress of the European community to a full Union would contribute to such solutions, and second, by commending to us the virtue of being alert to the opportunities brought by change.

Our guest went on to answer a host of questions from members until our Chairman intervened to draw proceedings to a close, thanking Dr Visco for so generously giving of his time and for sharing with us his insights into a changing economy.