Britain facing its first lost decade since 1860s, says Mark Carney

Britain is facing its “first lost decade since the 1860s”, the Governor of the Bank of England said as he warned about the tensions from globalisation.

Mark Carney said on Monday that the openness of the world economy increases the “isolation and detachment” of those who are left by behind by globalisation.

His speech at Liverpool John Moores University comes in the wake of Donald Trump’s electoral victory in the US, the Brexit vote and rising populism on the left and right in Europe.

He said: "The combination of open markets and technology means that returns in a globalised world amplify the rewards of the superstar and the lucky. Now may be the time of the famous or fortunate, but what of the frustrated and frightened?

“From the rising spectre of global terrorism to intensifying geopolitical tensions and financial crises, for too long, for too many people, the world seems to be getting riskier.”

President-elect Trump ran his campaign on protectionist policies and to slap a 45% tariff on Chinese imports to the US. Carney did not name Trump but said “turning our backs on open markets would be a tragedy”, but it was a “possibility”.

“It can only be averted by confronting the underlying reasons for this risk upfront."

Carney said that living standards across the world have been improving since the 1960s but British workers were experiencing a “first lost decade since the 1860s” for earnings.

He said to confront the sense of disillusionment “economists must clearly acknowledge the challenges we face, including the realities of uneven gains from trade and technology”, grow the economy through monetary policy, fiscal policy and structural reforms and lastly, move towards “more inclusive growth where everyone has a stake in globalisation”.

He also defended the central bank's low interest rates, which have been criticised by politicians including Prime Minister Theresa May. After the Brexit vote, the BoE lowered interest rates to 0.25% from 0.5% and added to its quantitative easing programme to soften the effects of the referendum result.

"Has monetary policy robbed savers to pay borrowers? Has the MPC (Monetary Policy Committee) been Robin Hood in reverse? In a word, no.

“Monetary policy has been keeping the patient alive, creating the possibility of a lasting cure through fiscal and structural operations. It has averted depression and helped advanced economies live to fight another day, so that measures to restore vitality can be taken.”