At this point, it is customary to wheel out the following, now rather over-used, Paul Krugman quote: “productivity isn’t everything, but in the long run it is almost everything.” Despite its over-use, this quote does have one important virtue, something not to be taken lightly in this post-fact, post-truth world: it is empirically verifiable and appears to be factually accurate. Let me illustrate that with a simple example. Since 1850 UK living standards, as measured by GDP per head, have risen roughly 20-fold, a huge gain. How much of that gain can be attributed to higher productivity? Well, if productivity had flat-lined over the period, UK living standards would only have only doubled. Or, put differently, in the absence of productivity growth, UK living standards would be an order of magnitude lower today, stuck at late-Victorian levels. A more refined way of reaching the same conclusion is to decompose growth into the contribution from inputs into the production process – labour and capital – and the contribution from improvements in the efficiency with which these inputs are used – so-called Total Factor Productivity (TFP). Chart 1 does that for the UK since the Industrial Revolution. This suggests movements in TFP have accounted for the lion’s share th  of both the growth and variation in living standards since at least the mid-18 century. Saying that productivity matters is not the same as saying we understand its determinants. The past few years have served to underscore just how partial economists’ understanding of productivity remains.

Niklaus Blattner: Global trends in financial market infrastructures and their significance for financial stability Introductory remarks by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 14 December 2006. *  *  *  Developments at banks and financial markets are subject to extensive daily media analysis and commentary. By contrast, financial market infrastructures, i.e. stock exchanges, payment and securities settlement systems, only rarely make the headlines. I have decided to shift the focus today and concentrate on financial market infrastructures. In particular, I wish to highlight some interesting global trends and assess how these trends impact on the stability of the financial system. Internationalisation of financial market infrastructures Traditionally, most financial market infrastructures have a strong national focus. This made sense as long as the financial markets also had a strong domestic focus. However, the deregulation and liberalisation of financial markets and the associated increase in cross-border financial flows resulted in a widening gap between financial markets and financial market infrastructures, with the latter remaining constrained within national bounds. More internationalisation of financial market infrastructures became inevitable in order to avoid a loss of competitiveness due to inefficiencies. This process of opening up market infrastructures still continues today. We can differentiate between different types of internationalisation. First, direct access to infrastructures that used to be reserved exclusively to domestic participants is now being granted more frequently to foreign participants as well.