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Governor's 'dynamite' warning on wages and globalisation

Since becoming Governor of the Bank of England, Mark Carney has delivered his fair share of important speeches.

There was the one he gave the morning after the EU referendum, in which he reassured markets that the Bank would keep the financial system afloat.

There was his intervention on climate change, in which he took Threadneedle Street into uncharted waters, arguing that it too had a responsibility when it came to the environment.

But by some yardsticks, the speech the Governor has delivered in Liverpool may go down as one of his most significant.

:: Bank governor in globalisation warning

It will do so not just for the spirited defence it includes against those notorious attacks from the Prime Minister, who used her party conference speech to attack the Bank's low interest rates and quantitative easing schemes.

This speech is important because Mr Carney has effectively admitted that globalisation is not working - and insisted the Government needed to do more, urgently, to try to resolve the problem.

:: He admitted that we are now facing the first lost decade for wages since the Victorian era

:: He admitted that free trade and innovation were not raising all economic boats

:: He launched an attack on multinational companies which aren't paying their fair share of tax

:: He warned that this was one of the most uncertain periods for businesses and households in decades

Such comments might sound extraordinary enough coming from any economist.

Coming from the Bank of England governor, they are dynamite.

And they stand as a further reminder of the disjointed, destabilised world we live in at the moment.

The political mainstream is reeling from a sequence of extraordinary electoral surprises - from the EU referendum, to Donald Trump, to yesterday's Italian referendum, which has forced Matteo Renzi out of office - and is trying to work out why.

Mr Carney's speech provided at least some of the potential answers.

Among them is an extraordinary chart which shows long-term (10-year) real income growth going all the way back to 1850.

What it shows is that the recent drop in real wages (essentially, your salary minus inflation) represents, in Mr Carney's words, "the first lost decade since the 1860s".

He also nods to the rise in inter-generational inequality, pointing out that "a typical millennial earned £8,000 less during their twenties than their predecessors".

"Why," he asks, "doesn't it feel like the good old days?

"Because anxiety about the future has increased, because productivity hasn't recovered, and, as a consequence of the latter, because real wages are below where they were a decade ago - something that no-one alive today has experienced before."

Most striking, though, are the solutions the Governor suggests.

He argues that it is up to the Government to do more to cushion those who lose out from globalisation.

He argues that monetary policy - what the Bank does with interest rates - has been leant on for too long, and the Treasury now needs to do more, whether that's spending more to improve productivity, or changing tax policy, or indeed introducing so-called structural reforms to transform the economy.

He lays into the big, rootless corporations that have been able to avoid paying taxes, urging governments to clamp down on them more.

He also raises an interesting idea: why aren't there free trade rules for small businesses, allowing them to flourish and benefit from globalisation, rather than passing all of the windfall to the mega corporations?

Only a few years ago, such notions - mass redistribution of wealth, scepticism about the benefits of free trade, etc - would have been regarded as left of the Labour party.

Now (Frankfurt: 11N.F - news) we heard them coming from the heart of Britain's financial establishment.

How times have changed.