Change Maker: Maverick economist Andy Haldane

04 October 2019

  • Andy Haldane is tipped by some as a future Governor of the Bank of England
  • Warwick graduate has been labelled a maverick due to his radical ideas
  • The Chief Economist is driven by memories of mass unemployment in 1980s
  • Now taking the Bank on the road to see the economy in action

Echoing around the labyrinthine corridors of the Bank of England, its rich 325-year history hits you at every turn.

The many turrets, arches, columns, staircases, ancient-looking paintings, amazing marble floors, mosaic carpets, chandeliers and antique clocks give it the awe-inspiring feel of the first day of school at Hogwarts. Up a lift, around several corners and corridors is the office of the Chief Economist.

Andy Haldane shakes hands and ushers me into his capacious office, with oak-panelling surrounding an oak desk that might make an appearance on antiques roadshow one day.

Among the reserved splendour of Threadneedle Street’s historic walls the 51-year-old has brought modern and radical ideas in his speeches, policies and approach to shaping data. Described by The Economist as a “maverick” and tipped by some as the next Governor of the Bank of England, Andy has called for trade unions to be given a greater role in companies, demanded a reassessment of ‘civil society’ - ie the contribution of volunteer groups, charities and grassroots movements to the economy - and used epidemiology to explain the financial crash.

Having grown up in West Yorkshire in the 1980s when unemployment soared above 11 per cent and three million people shuffled in and out of job centres, not only has Mr Haldane’s route to the Bank’s Monetary Policy Committee been unconventional but it has given him a unique perspective in the heart of the world's financial capital.

“Growing up the 1980s with three million unemployed, that is why I studied economics,” he says. “Because I could see the real implications of the economy going wrong, for my friends, for my local community. This was a monumental fail for the economy and for policy in a way that was having real consequences for a lot of people, and not just for those not in work, but for their families as well – it was destroying the soul of communities.

"I asked myself ‘how do I make sense of this fail, how can it come to pass? What can be done to stop it happening?’

“Those are the questions I asked myself when I was 13 or 14 and those are the same questions I ask myself today, it is why I get up in the morning and have come here for the last 30 years. How can the economy do a better job for society? My career has been about that.”

Rising star: Andy Haldane collects his honorary degree from the University of Warwick

After gaining two As and a B at A level at his local comprehensive Andy became the first in his family to go to university, doing his bachelors at Sheffield before studying an MSc Economics at Warwick. In the 1990s the Bank recruited almost exclusively from Oxbridge - indeed no governor has come from any other university - but just as Mr Haldane graduated it decided to expand and needed to diversify its economists.

“Suddenly I was in the game,” says Andy, whose father was a professional trumpet player. “When I came there were still a lot of classicists around the Bank, but as policy became more rigorous that meant recruitment changed. Warwick really gave me the tools of the trade, to properly understand, analyse and frame policy - it was a coming of age as a professional economist.”

Plucked from the masses, he has taken the Bank to them. Since 2017 Mr Haldane has been on the road with the Bank, touring the country in a series of town hall meetings to find out what is going on in the economy on the ground.

Andy, who has been awarded an honorary doctorate by the University of Warwick, says: “As well as the very nerdy and yet essential sifting through data and running our models, just as important are the conversations we have around the country with people, companies, charities and communities - they are the economy in action.

“Effective policymaking, ultimately, is about people’s lives, so when I add a subjective overlay to all these models, data and policy frameworks, that is shaped by what I have heard in towns and cities up and down the country.”

Aids and its link to the financial crisis 

It also helps re-establish the Bank’s reputation after the financial crash. Andy was part of the Bank’s financial stability department during the crisis in 2008 and became its Executive Director the following year, turning to epidemiology – the study of how diseases spread – to explain it.

“People had thought that bigger banks were better, because they had their risks better spread around the world and so could run with lower levels of insurance capital or liquidity,” he says. “But it turned out that was completely wrong at every level, because those same banks, when they go wrong, spread their disease more widely and rapidly than their smaller brethren.

“So you need them to have greater insurance, rather than less, and more capital - that debate has gone through 180 degrees either side of the crisis. It was the same debate epidemiologists had when tackling Aids in the 1970s.

“It shouldn’t have taken a crisis to have learnt the lessons of the 1970s Aids epidemic, but at least we have now and the financial system is a safer place.”

The crisis, he adds, also showed economists have to be more humble and open to learning from other disciplines to understand an economy.

“We are building a more plural approach,” says Andy, who has also brought in a vast array of speakers to the Bank from West Indian fast bowler Michael Holding to transvestite potter Grayson Perry to give their perspective on the world.

“We can borrow from behavioural science, the listening tour for example brings anthropology and sociology to the world of policy. I have drawn extensively on epidemiology, network theory and systems theory to help make sense of the crisis.

“We did not have tools to make sense of what was going on, I should have been working with epidemiologists in the run-up to the crisis to develop models of contagion and network dynamics that could begin to make sense of what was happening. I used those models to craft a regulatory response in the form of higher capital, higher liquidity and so-called ring-fencing, resolution plans and more.”

The crisis proved a great opportunity for Andy and he explains that he has taken advantage of several throughout his career to learn, develop new theories and prosper at the Bank.

The collapse of the Exchange Rate Mechanism in 1992, which saw interest rates rise five per cent in one day, allowed Mr Haldane to help reset monetary policy around inflation targeting, which has stayed intact for 25 years.

It also lead to the Bank gaining its independence with Mr Haldane writing an influential paper with Mervyn King, Governor from 2003 to 2013, laying out the grounds for its removal from Government control. Once established Mr Haldane gave the very first briefing to the newly elected Monetary Policy Committee in 1998 – although it wasn’t a total success.

“I pressed the button to start the PowerPoint, which was very new then, but this high-pitched ear-screeching noise came out and the kit fell on the floor,” says Andy. “I looked up and Eddie (George) looked at me with a look of ‘this is the end of your career’.”

It wasn’t. His 2012 ‘Dog and Frisbee’ speech, which drew heavily on behavioural science to argue piling on more banking regulation was adding complexity to complexity, drew widespread praise and prompted Forbes to declare him a “rising star” in central banking.

Mr Haldane has now turned his attention to productivity, a puzzle for the UK over the last decade, and with unemployment falling to less than four per cent but real wages still below pre-crisis levels, it needs to be solved quickly.

“Polarisation and inequality have become more acute,” says Andy, who is Chair of the Government’s Industrial Strategy Council. “We need an infrastructure both physical and digital that spreads ideas to all corners of the UK. Plus, in Germany it has institutes whose job is not just to be a crucible of innovation, but to spread that to SMEs - we don’t have that here. We have the catapult centres, but they are not of a scale and reach of the German Fraunhofers.

“We need these to ensure all parts of the country and business can harvest the fruits of the fourth industrial revolution. This really matters because it will translate into higher pay for people - where productivity leads pay follows.”

As somebody who has grown up around the pain of acute inequality you get the feeling this is a fight Mr Haldane truly believes in and will use every tool from every discipline to win.

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