mervyn king : how international cooperation can raise britain ’ s economic performance opening remarks by mr mervyn king, governor of the bank of england, at the panel on eu / us cooperation at the advancing enterprise conference, london, 26 january 2004. * * * chancellor, ladies and gentlemen, in this session we shall examine how international cooperation can raise britain ’ s economic performance. before introducing our speakers this afternoon, i would like to present a few facts about productivity in this country, and then pose three questions. you might ask why a central bank governor is chairing a panel on enterprise. well, some believe in prudence for a purpose ; we believe in stability as a spring - board, a springboard for enterprise. since the start of the railway age in the 1830s, output per person has increased ten - fold in britain ; it has increased twenty - fold in the united states. that is because over that period output per person rose on average by 1 ½ % a year in the uk and by 2 % in the us. the result is that the level of output per person is now around 25 % lower in britain than the us. in part this reflects shorter working hours, but it also reflects a lower level of productivity. from around 1980, however, the productivity gap between britain and united states started to close, and for the following 15 years or so labour productivity actually rose significantly faster in the uk than the us, at an annual rate of 2. 1 % compared with 1. 4 %. but since 1995, the gap has started to widen again as ict investment has boosted productivity growth in the united states. the empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. within manufacturing, the rate at which the productivity gap between britain and the us closed during the 1980s and early 1990s was greater in the more open than the less open sectors. against that background, let me suggest three areas for questions : first, why is the gap in the level of productivity between the us and the uk so persistent? and what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? what are the respective roles of business and government in removing them? second, can the uk benefit as much as the us from the it revolution? is it a question of the speed with which business adapts? or is it the need to fund our

institutions, these eu level regulations should be applied to all lenders providing housing loans. such regulations may not be needed right now. but they could be useful next time when the lending cycle starts to rise again. third, the eu legislation should explicitly allow the use of the so - called positive neutral countercyclical capital buffer requirement. national macroprudential authorities should be able to set that buffer requirement at a positive level during normal times. in times of unexpected and sudden crises, the buffer could be flexibly released, if needed, to support bank lending and economic recovery. 2 / 3 bis - central bankers'speeches dear friends, in addition to steven cecchetti's keynote starting in a minute, i believe you are eagerly awaiting the other two keynote speeches of this conference : alex jung's presentation on machine learning and michael platzer's on ai - generated synthetic data. before those, let me tell you about my forgotten history in computer programming. in high school – that is, only few years ago – i was an avid member of our school's automated data programming club. there we, for example, practised programming languages basic and fortran after school. unfortunately, the school did not have any computers! so, we wrote our basic and fortran codes only on paper. not surprisingly, the local football club's training matches, taking place at the same time, began to feel more attractive. so, the world lost one potential coder in me. i'll let you judge whether monetary policy was ultimately a winner or loser in that outcome. even more seriously, the potential threats and opportunities of artificial intelligence and machine learning are very hotly debated at the moment. i think we may assume that in the field of financial services, the developments in ai and machine learning can bring substantial benefits, for example in risk management, loan underwriting and customer behaviour analysis. the developments may also help the work of supervisors. that said, we should be aware of the potential dangers of the misuse of such powerful tools. above all, we should improve our understanding of these fascinating technological developments, also in order to make better policy choices. in that, the forthcoming keynote speeches will be most helpful. with these words, let me wish you a stimulating and productive conference! 3 / 3 bis - central bankers'speeches