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Populism is making it harder to manage the global economy against a backdrop of slow growth and growing fiscal pressures, Andrew Bailey has warned.
In an unusually forthright intervention, the Bank of England governor said populist leaders had a tendency to blame domestic economic problems on outside forces, viewing the health of their national economy as being “in opposition to international openness rather than complementary”.
Populists also tended to encourage a decline in trust in institutions so they became “viewed as distant, unresponsive and acting for the benefit of powerful and uncontrollable interests”, Bailey said.
“The rise of so-called populism makes the whole task harder . . . for those of us who are institutionalised, the answer is that we have to challenge back, in deeds more than just words,” he told an annual gathering of senior central bankers and officials.
Bailey’s comments, delivered on Tuesday, were published by the BoE at the close of a week when central bankers rallied to support Jay Powell, US Federal Reserve chair, against pressure from the Trump administration.
Bailey was among 11 central bank governors who declared they stood “in full solidarity” with Powell in a statement issued after US authorities opened a criminal investigation into him over a $2.5bn renovation of the Fed’s headquarters in Washington.
Publication of Bailey’s speech also came days after Robert Jenrick and Nadhim Zahawi, former Conservative immigration minister and Tory chancellor respectively, defected to Nigel Farage’s Reform UK.
Farage, whose populist party is leading national opinion polls, has hinted in the past that he would sack Bailey were he to lead a future government.
In practice, Bailey’s term as BoE governor is likely to come to an end before the next general election, which must be held by summer 2029. But a Reform government would be free to make other appointments to the Monetary Policy Committee that sets interest rates, regardless of whether it sought to change the central bank’s remit.
Bailey said on Tuesday that, against the backdrop of rising populism, policymakers needed to “assert and demonstrate continually” the benefits of trade, which was often “more directly blameable” when particular groups of people in the domestic economy were losing ground.
It was easier to liberalise trade in periods when strong economic growth made it possible to compensate losers, he added.
At present, weak productivity growth, ageing populations, rising defence spending and climate-related shocks all served as headwinds to growth and made it harder to win public backing for free trade, Bailey noted.
Industrial policy — increasingly in favour with governments around the world — could help deal with these challenges, but it could also exacerbate imbalances in the global economy, he added.