 Well, let me thank all of you for being here tonight. I mean, the first words that I feel like saying are actually words of awareness. Not too far away from here and not too long ago, this country experienced a terrible tragedy where many, many lives were lost. As a sign of mourning and participation, I suggest we dedicate this conference to the memory of those who lost their lives and propose that to their families, we make a donation as ECB and as the participants will decide and this donation will complement a donation made by the Bank of Portugal. Also tomorrow's dinner will take place in the hotel rather than in the scheduled avenue and now I would suggest we have a minute of silence. Thank you. Well, in just preparing these few words for tonight, I came to memory last year at the same time and suddenly there's a big difference. Last time when we met for this conference, the people of the UK had just decided to leave the EU. You remember I used the word, it's a moment of sadness. Growth was still weak and political uncertainty high. The ones who had always been against the European project and against the euro, they were always a minority of the European Union citizens and were more vocal than ever, cherishing the outcome of the British referendum and the election later of any leader that promised to be exceptional and anti-European. Then the silent majority of Europe was given a new voice. The outlook for the economic recovery improved and the vocal cries for the demise of the European Union and the euro had became just barely heard whispers. Certainly the problems haven't vanished but the outlook for the recovery is clearly better. We're now facing robust growth across countries and sectors and monetary policy has played its role in placing our economy on this favorable footing. So now it's precisely the time to reflect on how we can capitalize on better cyclical conditions to raise the structural outlook. The great financial crisis has attracted a heavy toll on our economies. It's acted as a sizable downward shock to output. And in its aftermath, we observed lower productivity growth than is desirable, especially in the context of aging societies. But now that recoveries start to firm up, the key issue is how to make this growth sustainable and less reliant on monetary stimulus. For that, we need policies that will launch a virtuous circle between investment output and productivity. And this is why the topic of this year's conference on investment and growth in advanced economies is a relevant one. To address these issues, we're gaining our best to attract excellent speakers. That over the next two days will be engaged in what I hope to be a frank, open and informal debate, which undoubtedly will also help us meet in today's economic and central bank policy challenges. This evening's dinner is Bember-Nanke. He doesn't need an introduction. But for me, it's actually my first public opportunity to pay him a tribute for his intellectual leadership. Which is meant by these words, what we mean is that he led this country with the force of his ideas, his culture and his intelligence, he led this country out of the financial crisis. Being the leading authority on the causes of the Great Depression and on the foundations of inflation targeting certainly helped him. But he also complimented his intellectual leadership with the courage and executive responsibility that are always an indispensable quality for a policymaker at all times, but especially in the times that Ben had to live through. And on a more personal basis to have him as a colleague meant a lot to me. I'll say no more. We are delighted and we are honored that you are here with us tonight. And we are obviously eager to listen to you. Thank you. Thank you, thank you very much. I'd like to thank Mario and the European Central Bank for inviting me to be here at Cintra, my first time in Cintra, a beautiful place. I'm a civilian now, but it's still terrific to see so many friends and colleagues from central banking. Now the theme of the conference, investment and growth in advanced economies has a feeling of transition about it, which I suspect was intended. With policy interest rates at close to zero in most advanced economies and inflation still very low, there's much more work to be done before full recovery from the global financial crisis can be claimed. Still with cyclical expansions apparently entrenched, financial conditions looking stable, and the major central banks at least contemplating an exit from extraordinary policies, it's natural that the focus is beginning to shift to the longer-term challenges of growth, investment and structural change. In my remarks this evening, I'll discuss some of these longer-term challenges from the perspective of my own country, the United States. My talk is entitled When Growth Is Not Enough and is strongly influenced by recent political developments, which have cast a bright light on some disturbing economic and social trends in the United States. Unfortunately, policy makers in recent decades have been slow to address or even to recognize these trends, an error of omission that has helped to fuel a voter backlash. If the populist surge we are seeing today has an upside, it is to refocus attention on both the moral necessity and practical benefits of helping people cope with the economic disruptions that accompany growth. Of course, Europe also faces the problems of managing change as it pursues an agenda of reform. In the last portion of my remarks, I'll offer a few thoughts on the implications of the US experience for Europe. Regarding the United States, let me start with the positive. The nation's cyclical recovery is entering its ninth year this month and appears to have room to run. Although the Great Recession was exceptionally deep and the recovery was slower than we would have liked, real GDP is now up about 12.5% from its pre-crisis peak, and real disposable income is up more than 13%. Importantly, the Federal Reserve is close to meeting its congressionally mandated goals of price stability and maximum employment. Since the trough and employment in early 2010, more than 16 million new net jobs have been created, comparable to a civilian labor force of about 160 million, bringing the unemployment rate down from 10% to well below 5%. Indeed, the latest reading on unemployment, 4.3%, is the lowest since 2001. Inflation is below but relatively close to the Fed's 2% target. The Federal Open Market Committee has expressed confidence that recent softness in inflation is transitory and that wage and price inflation will continue to strengthen. On this, of course, the data will be dispositive. As is often the case in the United States, the household sector is a major driver of the expansion. Real wages and labor income have lagged the improvement in labor market conditions, but appear to be moving in the right direction. Households have very substantially deleveraged since the crisis, and household wealth, reflecting the recoveries and house prices and equity values, exceeds the pre-crisis peak by about 20% in real terms. Consumer sentiment has rebounded to pre-crisis levels with high proportions of respondents expressing confidence in their own financial prospects. Beyond the cyclical recovery, optimists can also point to some strong, long-term fundamentals for the American economy. It remains, of course, a highly integrated continental economy with a large domestic market and free internal movement of goods, capital, and labor. The federal government provides a national fiscal policy including substantial risk sharing across geographic regions and mostly unified regulation including of the financial sector. Despite recent controversies and talk of border walls, immigrants are generally well-assimilated and their presence contributes to an overall demographic outlook in the United States that is somewhat better than most other advanced economies. The country remains a technological leader with high-tech clusters like Silicon Valley and a large share of the world's leading research universities within its borders. The markets for capital and labor are generally flexible and the financial system looks healthy. Energy production has soared as a result of the application of new technologies. These are substantial advantages. And yet, and yet, despite the sustained cyclical upswing and the economy's fundamental strengths, Americans seem exceptionally dissatisfied with the economy and indeed have been for some time. For example, those who tell pollsters that the country is quote on the wrong track consistently outnumber those who believe that America is moving quote in the right direction by about two to one. And of course, last November, Americans elected as president, a candidate with a dystopian view of the economy who claimed that the true U.S. unemployment rate was 42%. Inaccurately described the United States as the most highly taxed nation in the world and promised to restore a lost American greatness. Nor it should be noted that the anger come exclusively from the right as a left-wing populace made a serious bid for his party's nomination as well. So why, despite the undoubted positives, are Americans so dissatisfied? The reasons are complex and not entirely economic. Without trying to be comprehensive, I'll highlight here four worrying trends that help to explain the sour mood. First, stagnant earnings for the median worker. Since 1979, real output per capita in the United States has expanded by a cumulative 80%. And yet during that time, median weekly earnings of full-time workers have grown by only 7% in real terms. Moreover, what gains have occurred are attributable to higher wages and working hours for women. For male workers, real median weekly earnings have actually declined since 1979. In short, despite economic growth, the middle class is struggling to maintain its standard of living. Second, declining economic and social mobility. One of the pillars of America's self-image is the ideal of the American dream, that anyone can rise to the top based on determination and hard work. However, upward economic mobility in the United States appears to decline notably over the post-war period. For example, in a paper aptly entitled The Fading American Dream, Raj Chetty and co-author has studied one metric of upward mobility, which is the probability that a child would grow up to earn more than his or her parents. Using census data, they found that 90% of Americans born in the 1940s would go on to earn more as adults than their parents did. But only about 50% of those born in the 1980s would do so. Other research finds that the United States now has one of the lowest rates of intergenerational mobility among advanced economies, measured, for example, by the correlation between the earnings of parents and their children. For a supposedly classless society, the US is doing a good job of rigidifying its class structure through means that include residential and educational segregation, social networking, and assortive mating. Stacked and median wages and declining mobility are, of course, related to the overall trend toward increased income and wealth inequality, which is already more pronounced in the United States than in most other advanced economies. In particular, high inequality tends to impede economic mobility by increasing the relative educational and social advantages of those in the upper percentiles. My former Princeton colleague, Alan Kruger, has dubbed the close cross-country relationship between inequality and lack of social mobility the great Gatsby curve. I think, though, that the frustrations of stagnant earnings and limited upward mobility are more salient to Americans than inequality per se. Americans tend to be more tolerant of inequality than citizens of other countries, putting greater stress on equality of opportunity rather than equality of outcome. The third adverse trend is the increasing social dysfunction associated with economically distressed areas and demographic groups. For example, other former Princeton colleagues of mine, Ann Case and Angus Deaton, have done important work on morbidity and mortality among white working class Americans, precisely people with only a high school degree. They find that midlife mortality rates among white working class Americans have sharply worsened, relative both to other U.S. demographic groups and to working class Europeans. Case and Deaton refer to the excess mortality among the white working class as, quote, deaths of despair because of the associated declines and indicators of economic and social well-being and the important role played by factors like opioid addiction, alcoholism and suicide. Indeed, in 2015, more Americans died of drug overdoses, about 60% of which involve opioids, than died from auto accidents and firearms related accidents and crimes combined. Because the white working class was pivotal in the recent election, its problems have received much attention recently. However, the problem of social dysfunction among the economically distressed populations is much broader. For example, among the most worrying economic trends is the decline in labor force participation, particularly among prime age 25 to 54 aged men, which has occurred across demographic groups. In 1960, about 97% of American prime aged men were in the labor force. Today only about 88% are. Studies find that many of the men who are not working in the formal sector are substantially idle. They are not involved in caring for children or the elderly, for example. Participation rates of prime age men are lower in the United States and in many European countries, despite the weakness of recent labor markets in much of Europe. One possible explanation for the transatlantic divergence is differences in criminal justice policies. America's high incarceration rate leaves many men, particularly African American men, with prison records, which hurts their employment opportunities for many years after release. The fourth and final factor I'll highlight, closely tied to the others, is political alienation and distrust of institutions, both public and private. In particular, Americans generally have little confidence in the ability of government, especially the federal government, to fairly represent their interests, let alone solve their problems. In a recent poll, only 20% of Americans said they trusted the government in Washington to do what is right, quote, just about always or most of the time. The failure to prevent the global financial crisis did not help the situation, of course, but these attitudes are longstanding going back at least to the 1970s. A recent book by the sociologist, Arlie Russell-Huckschilds, called Strangers in Their Own Land, recounts her experience living for several years in a politically conservative community in Louisiana. One of her most striking findings is the reluctance of Louisiana's to support federal efforts to protect the local environment, despite the substantial health risks they face as the result of pollution by oil refineries and other industries. This opposition appears to be partly a product of traditional values of self-reliance and independence, but also reflects deep-seated skepticism about the sincerity of government officials and their ability to achieve improvements at reasonable economic cost. Stagnant median wages, limited upward mobility, social dysfunction, and political alienation are a toxic mix indeed. How did it happen? The sources of these adverse trends are complex and interrelated, but at a 50,000-foot level, they appear to be the product of some broad global developments of the post-war era, together with the U.S. policy response, or lack thereof, to those developments. The immediate post-war era, say 1945 to 1970, was extraordinary, economically speaking. Following 15 years of depression and war, Americans were once again able to enjoy peace and prosperity. A substantial backlog of technological and commercial innovations was available to be exploited, and producers faced enormous pent-up demand for consumer goods and housing. The federal government provided extensive support for education through the GI Bill, for example, and undertook major infrastructure projects like the Interstate Highway System. Importantly, for a time, the U.S. economy had no effective competition, either from war-ravaged Europe and Japan, or from not-yet-emerging markets. There was plenty of economic change in what we would now call disruption, but strong catch-up growth, active economic policies, and America's monopoly position resulted in widely-shared economic gains. It's not really surprising that this period evokes nostalgia as a time of national greatness. However, as Robert J. Gordon has documented, the pace of technological and economic change in the middle of the past century was historically quite unusual and unlikely to be sustained. By 1970 or so, the backlog of commercial and technical opportunities available at the end of the war had been used up, and the conversion to a civilian, consumer-driven economy was complete. Outside of a brief productivity spurt associated with the IT revolution, the past 45 years or so have been historically more normal in terms of economic growth and productivity gains. Productivity growth has been particularly anemic, as you know, over the past decade. Equally important, American economic dominance faded as Europe and Japan recovered as what we now call emerging market economies accounted for increasingly larger shares of global output and trade. The emergence of China as a global trading power was particularly disruptive with adverse effects on the wages and employment opportunities of many Americans of moderate or lower skills. In contrast, high-skilled workers tended to be favored by global economic integration, particularly those whose talents were scalable to the size of the market. Of course, similar forces were playing out in Europe and elsewhere with effects that depended on the policy response. In the United States in the immediate post-war era, feelings of social solidarity and economic optimism had helped to generate political support for significant expansions in government spending on education, health, and infrastructure. However, the post-war globe faded as America divided over a variety of big issues in the 1960s and 1970s, including the Vietnam War and the Civil Rights Movement, and as economic growth began to slow. The Reagan Revolution heralded a more constrained approach to economic policy aimed primarily at fostering aggregate economic growth by empowering the private sector. Examples of such policies include tax cuts and tax reform under Reagan, a number of consequential trade agreements under Reagan's immediate successors, financial deregulation and welfare reform under Clinton, and more tax cuts and trade opening under the second President Bush. Missing from the mix, however, was a comprehensive set of policies aimed at helping individuals and localities adjust to the difficult combination of slower growth and rapid economic change. Why policy was not more proactive in this area is an interesting question. Perhaps the failures of Lyndon Johnson's Great Society and the inflationary monetary and fiscal policies of the 1960s and 1970s hurt the reputation of activist policies and help revive Americans' laissez-faire inclinations. Perhaps the stresses in the heartland were not sufficiently understood until it was too late. Perhaps the politics didn't align. Whatever the reason is clear and retrospect that a great deal more could have been done, for example, to expand job training and retraining opportunities, especially for the less educated, provide transition assistance for displaced workers, including support for internal migration, to mitigate residential and educational segregation and to increase the access of those left behind to employment and educational opportunities, to promote community redevelopment through grants, infrastructure, construction and other means, and to address serious social ills through addiction programs, criminal justice reform and the like. Greater efforts along these lines could not have reversed the adverse trends I described at the outset, and notably Europe, which was more active in these areas in the United States has not avoided populist anger, but they would have helped. They might also have muted the disaffection and alienation, which our political system is with which it is currently grappling. Which brings us to the present. Whatever one's views of Donald Trump, he deserves credit as a presidential candidate for recognizing and tapping into the deep frustrations of the American Forgotten Man, 21st century version. That frustration helped bring Trump to the White House. Whether the new president will follow through in terms of policy, however, is not yet clear. Trump's economic views which mirror the odd combinations of factions that make up his coalition are a somewhat unpredictable mixture of right-wing populism and traditional supply-side republicanism. The policies that his administration has actually proposed or endorsed so far lean toward the latter, including healthcare bills that would significantly reduce insurance coverage among lower income people, tax cuts for both individuals and corporations and a relaxation of financial environmental and other regulations. Policies that would more directly address the needs of people who elected Trump, such as community redevelopment, infrastructure spending, job training and addiction programs have recently received a good bit of rhetorical attention from the White House, but remains to be seen whether this attention will be translated into programs and budgets. Ironically, it may turn out to be that the most rhetorically populist president since Andrew Jackson will, in practice, not be populist enough. Well, I'm hardly the first to observe that Trump's election sends an important message which I've summarized this evening as sometimes growth is not enough. Healthy aggregate figures can disguise unhealthy underlying trends. Indeed, the dynamism of growing economies can involve the destruction of human and social capital as well as the creation of new markets, products and processes. Unaided, well-functioning markets can, of course, play a crucial role in facilitating economic adjustment and redeploying resources, but in a world of imperfect capital markets and public goods problems, there is no guarantee that investment in skills acquisition, immigration, or regional redevelopment will be optimal. Tax and transfer policies can also help support those who are displaced, but the limits on these policies include not only traditional concerns, like the disincentive effects of income-based transfers, but also conflicts with social norms. Notably, people can accept temporary help, but transfers that look like handouts are often viewed with extreme suspicion or resentment. Some active interventions seem a necessary part of a responsive policy mix. Providing effective help to people and communities that have been displaced by economic change is essential, but on the other hand, we should not understate how difficult it will be. Addressing problems like the declining primate participation rate or the opioid epidemic will require the careful and persistent application of evidence-based policies, which populist politicians with their impatience and distrust of experts may have little ability to carry through. Moreover, to be both effective and politically legitimate, such policies need to involve considerable local input and cooperation across different levels of government, as well as the cooperation of the public and private sectors. The credibility of economists has been damaged by our insufficient attention over the years to the problems of economic adjustment and by our proclivity towards top-down rather than bottom-up policies. Nevertheless, as a profession, we have expertise that can help make the policy response more effective, and I think we have a responsibility to contribute wherever we can. I've been speaking about the United States, but of course, Europe has shared some of the same problems, including populist reactions. The European Central Bank, as one of the most respected European-wide institutions, has been an outspoken proponent of pro-growth reforms. I think the ECB's efforts have generally been constructive and reforms have taken place and appear to have had some success, including here in Portugal. I'd like to conclude my remarks with a few comments about the European reform process in light of the American experience. First, I've made the case this evening for more intervention in labor markets by American policymakers, for example, through active workforce policies like the promotion of job training and apprenticeships. In Europe, however, the message has been that government should intervene less in labor markets. I'd emphasize that there's no real contradiction here. Rather, the contrast reflects differences in starting points. It's useful to divide labor market interventions into what I will call somewhat tendentiously forward-looking and backward-looking policies. Forward-looking policies, like job training and other types of workforce development, aim to help workers adjust to change and dowing them with skills and the training they need to take advantage of new opportunities. To invoke another theme of this conference, forward-looking policies generally involve investment, investment in human, social, or physical capital. Backward-looking policies, in contrast, aim to preserve the status quo and, in particular, to protect incumbent firms and workers. Examples are rules that excessively restrict employers' ability to fire workers or to set pay and hours to impose restrictive licensing or certification requirements or to create large fixed costs of hiring or market entry. Backward-looking policies inhibit productive growth and change, which is why they are ultimately not sustainable. Relative to the United States in reflecting differences in political traditions among other factors, post-war Europe has employed many more of both the forward-looking and the backward-looking types of labor market policies. Calls for reform in Europe today largely focus appropriately on the elimination of what I've called backward-looking policies. But the distinction between the two types of policies should be kept front of mind, including the recognition that a reduction in rules that protect incumbent workers, for example, may need to be balanced with an increase rather than a decrease in active policies to support necessary adjustments in the labor market. Second, the cyclical recovery in the United States is sufficiently far advanced that issues of longer-term growth and reform can be debated largely independently of short-term cyclical considerations. In Europe, labor market slack remains, interest rates are still at zero, and macroeconomic adjustment is incomplete, all of which implies that reform plans cannot ignore macroeconomic conditions. A small literature has argued that structural reforms can be counterproductive when interest rates are at the zero lower bound because of the disinflationary effects. Personally, I tend to agree with the finding that those ZOB effects are probably quantitatively modest. However, whether rates are zero or not, it does seem likely that policies that have the effect of releasing redundant labor resources could have adverse short-run effects of insufficient aggra demand exists to re-employ those resources in a reasonable time. It's consequently important for the content and sequencing of reforms to take into account the macroeconomic situation as been pointed out by the International Monetary Fund, among others. Likewise, reforms can complement but should not be viewed as a substitute for appropriate macroeconomic policies. In particular, labor market reform should not by themselves be expected to solve national competitiveness problems, at least not in the short term. Also needed are appropriate macroeconomic policies, especially fiscal policies, to help ensure aggra demand is adequate and to remedy the underlying source of trade imbalances. Finally, on both sides of the Atlantic, we have to grapple with some issues of political legitimacy. As I've noted in the United States, many voters have gone beyond this agreement about specific policy proposals to question both the federal government's motives and its capacity to improve their lives. Winning back that trust will require better policy process as well as better policies. In particular, in the United States, we need more two-way communication between the grassroots and the center to try to adapt policy initiatives to local conditions. America's federal system in which economic policy is made at the state and local level, or much of it, could be helpful in achieving that. In Europe, again, the starting point for policy is different. While the United States is already an integrated continental economy, Europe is still working towards that goal. Achieving uniformity across the eurozone in areas such as banking and capital market regulations inevitably requires decisions to be made at the center, even if after wide consultation. However, there may be less of a need for top-down uniformity in other areas such as in the regulation of labor markets or small businesses. Accommodation of national and subnational differences in rules and institutions that mostly affect local conditions could foster more responsive and more effective policies which could also be perceived as politically more legitimate. Well, let me sum up. Generally speaking, economic growth is a good thing, positively associated with many indicators of citizens' well-being. More rapid growth also improves fiscal balances, giving governments greater capacity and flexibility. But as recent political developments are brought home, growth is not always enough. Economic growth almost always involves significant change and the possibly rapid depreciation of some human and social capital. The resulting dislocations can be very difficult to address, likely requiring a mix of top-down, bottom-up, public and private interventions. But if the resources released by economic change are to be effectively redeployed, if the benefits of growth are to be widely shared, and if economic policies be widely perceived as both successful in its own terms and politically legitimate, then making those interventions effective should be a top priority for policymakers. Thank you very much. Thank you.