Bank of England Governor Andrew Bailey stated that populism is increasing the difficulty of addressing global economic challenges and is not the solution to weak growth and issues of living standards. The Bank of England on Friday released the text of a speech Bailey delivered earlier this week to the Bellagio Group, which is composed of central bank officials and economists. In his speech, Bailey defended the global system and its multilateral institutions, pointing out that moderate, weak growth makes it harder for people to recognize the benefits of internationalism. "In what is called the rise of populism, the whole task has become more difficult," Bailey said in his speech text. He stated that the mistake populists make is to treat domestic production and wealth distribution as being in "opposition" to openness, when in fact they are "complementary"; and to blame "external forces" rather than "shared challenges." Bailey did not name any specific countries or individuals, but his criticism appeared to be directed at protectionist and nationalist policies, such as the tariff measures implemented by US President Donald Trump and his threats towards the Federal Reserve; it was also directed at the UK Reform Party led by Nigel Farage, which currently leads in the polls. In many developed economies, populists have either already gained power or are advancing. Bailey said populists also encourage distrust in institutions by making them appear "distant, unresponsive, and serving powerful, uncontrollable interests." He said that supporters of the global system need to "push back," and do so "more by action, not just words." But Bailey also acknowledged that while trade and openness do support growth and reduce global poverty, "it can have, and has had, distributional consequences," eroding social capital and domestic cohesion. He indicated that the situation may worsen before it improves: countries face multiple challenges, including greater pressure from aging populations, demands for defense spending, climate shocks, and artificial intelligence. "These headwinds to growth are a powerful force that will complicate the operation of the international system," he said. The rules-based international system "relies on domestic support and a mandate." Bailey stated that multilateral institutions such as the United Nations, the International Monetary Fund, and the Financial Stability Board (FSB) of the Bank for International Settlements, which he leads, must "step up" and ensure their "own internal governance is in order," because a world without these institutions would be "very difficult to keep stable."
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