Contribution to FT’s annual UK economic survey

Phil was one of more than 90 economists and analysts asked to submit their answers to three questions about the outlook for the UK economy in 2024. The questions and (edited) answers were:

(1) Will voters feel better or worse about their living standards in the run-up to the election? 

(A) Whether compared to the eve of the general election in 2015, 2017, or 2019 voters will feel worse off about their living standards thanks to the impact of Brexit and the cost of living crisis delivered by spikes in prices of energy food and other essentials far outstripping wage rises over a prolonged period. Voters’ longer memories than just of the snapshot of prices and wages the month before polling day.

(2) Will the Bank of England win its fight against inflation in 2024?

(A) No. the economy will probably post growth well below 1 per cent and the trend of 2.5 per cent. Growth of, say, 05 per cent will feel like stagnation. The cuts in public spending implied by the budget, the lagged impact of the previous hikes in interest rates, and the parlous levels of productivity growth will prevent growth from gaining momentum, instead keeping in its stagnation trough.

(3) Which single policy change after the next election would do most to boost the UK’s long-term growth?

(A) Set out a plan for public investments and day-to-day spending needed to deliver high-quality public services by the end of the first term.

Covering the IMF Annual Meetings in Marrakesh

Phil joined the team from GlobalMarkets newspaper to help edit the coverage of the annual meetings of the International Monetary Fund and World Bank. They were held in Marrakech, Morocco, and were the first meetings to be held on the African continent for exactly 50 years.

The meetings were overshadowed first by the terrible earthquake that hit near Marrakech a month before the meetings and then the conflict between Hamas and Israel that began on the day before the meetings got underway. And of course, there was the ever-present backdrop of the ongoing Russian invasion of Ukraine. Despite the geopolitical turmoil, the two institutions were able to make some meaningful steps towards reform.

Phil helped edit the four daily papers that were printed live in Marrakech, and distributed to the meeting venues and the hotels where delegates were staying. He also wrote two features looking ahead to the challenges facing the IMF and the World Bank.

Contribution to FT’s annual UK economic survey

Phil was one of more than 100 economists and analysts asked to submit their answers to three questions about the outlook for the UK economy in 2023. The questions and (edited) answers were:

(1) Will the UK economy outpace or lag behind other developed economies in 2023 and how will it feel for households?

(A) The British economy will likely lag most of its developed peers in 2023 and will fall into recession. One reason is a continued fall in real household income. Real wage growth in 2022 fell at the fastest rate for some 50 years and, thanks to high inflation and Brexit, will continue to cause severe pain for households next year.

(2) How tough will the Bank of England need to be in 2023 to curb inflation?

(A): The Bank has already been tough and needs to stop raising Bank rate when it gets to 4 per cent — if not before. The danger is now more that it will tighten policy more than is needed and depress economic growth even further than is needed to hit the 2 per cent target than it fails to counter inflationary pressures that are receding.

(3) Will the government need to announce further tax raises in 2023 to maintain sound public finances?

(A) No. It has already enacted steep taxes and heralded cuts in spending that risk a repeat of the damaging austerity programme of 2010. These will depress growth and affect the poorest households the most. The government is probably prevented from allowing borrowing to rise to cater for greater public spending (as it did during Covid-19) because of the echoes of the disastrous economic programme of Liz Truss that undermined the confidence of the financial markets in the current administration.

(4) Will we see green shoots of recovery starting by the end of 2023?

(A): Hardly. The fiscal tightening will exert a large drag on the economy through 2024. Growth may return towards the end of the year but this will etiolated strands of grass rather than a lush meadow.

(5) What is the best historical comparison for the downturn the UK faces in the year ahead?

(A): The 2009-10 recession and anaemic recovery probably give the best road map. The downturn has not been as severe but the recovery will be as lacklustre. This time, rather than from financial sector failures, it will be the after-effects of a hard Brexit that will hang over the economy for years. A likely housing market correction or crash will not help either.

(6) Is there anything else you would like to tell us?

(A): The British economy will likely lag most of its developed peers in 2023 and will fall into recession. One reason is a continued fall in real household income. Real wage growth in 2022 fell at the fastest rate for some 50 years and, thanks to high inflation and Brexit, will continue to cause severe pain for households next year.

The full responses are here

Marketing for good: write-up of all day event at UChicago

Phil was asked to attend an all-day conference for the James M. Kilt Center for Marketing at Chicago university’s Booth School of Business on the whole idea of marketing for good.

The inaugural Booth Marketing Summit in London, co-sponsored with the Rustandy Center for Social Sector Innovation, brought together several faculty members and a select group of alumni. By sharing knowledge, research, and lived experiences, the participants were able to highlight a set of actionable insights that centred on three key learnings on how to approach efforts aimed at marketing for good.

Be Strategic, Consistent, and Authentic: the event heard from experts at Microsoft and HMG Global as well as Professor Abigail Sussman on how successful ESG-focused marketing must be aligned with a company’s corporate mission and consistently portray authenticity. When there is a proper roadmap, businesses can do good business—and do business for good.

Use Purpose to Strengthen Competitive Differentiation: senior executives from UPS and the Kraft Heinz company used highly pertinent examples that showed how companies that invest in their local community and devise tools aimed at helping to make a better society stand the best chance of engaging consumers and partners along that journey, which winds up being a good thing for business in the long run.

Understand What Your Purpose Means to All Stakeholders: marketing executives from Haleon Healthcare, Maersk Drilling and Microsoft explained how marketing for good has a great deal of potential to bring benefits to society as well as generate profits for an organisation.

Overall, although there is no prescription for how a company can accomplish these broad-reaching goals, industry leaders and academic researchers at the inaugural Booth Marketing Summit in London provided some evidence of ideas that work and underscored the importance of learning from what doesn’t.

The article is here.

Improving How to Deal With Financial Crises: a write up for the Lindau Nobel Foundation

In November 2022, the three United States-based economists share the 2022 Sveriges Riksbank Prize in Economic Sciences receive the award for demonstrating the importance of preventing widespread bank collapses, particularly during financial crises.

Ben Bernanke, a former professor at Harvard University and now at the Brookings Institution, shares the prize equally with Chicago Booth professor Douglas Diamond and Philip Dybvig, professor at Washington University in St. Louis, for decades of work that laid the foundations of research into why nations have banks, how to make them less vulnerable in crises, and how bank collapses exacerbate financial crises.

In an article for the Lindau Nobel Foundation, I looked at how the Laureates’ contribution to the economics profession’s understanding of the role of banks in financial crises came through two discrete routes.

Bernanke analysed the Great Depression of the 1930s, the worst economic crises in modern history. In his classic 1983 paper in the American Economic Review, “Nonmonetary Effects of the Financial Crises in the Propagation of the Great Depression”, Bernanke explained why a mild recession in the United States in late 1929 turned into the Great Depression of the 1930s.

He showed that bank runs were a decisive factor in the crises becoming so deep and prolonged. When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly. Economic’s ability to channel savings to productive investments was thus severely diminished.

In the same year, Diamond and Dybvig published their seminal piece in the Journal of Political Economy, “Bank Runs, Deposit Insurance, and Liquidity”, that led to the development of the theoretical Diamond-Dybvig model which explains how banks create liquidity for savers while borrowers can access long-term financing.

Diamond and Dybvig also presented a solution to the problem of bank vulnerability in the form of deposit insurance from the government. When depositors know that the state has guaranteed their money, they no longer need to rush to the bank as soon as rumours start about a bank run. This stops a bank run before it starts.

Bernanke’s scholarship in Great Depression economics was seen as key to his handling of the 2008/09 global financial crisis when he was the chairman of the US Federal Reserve board. When the Covid-19 pandemic hit in 2020, the Laureates’ insights played an important role in supporting the significant measures policymakers took to ensure that the impact on financial markets did not develop into a new depression.

Bernanke’s scholarship in Great Depression economics was seen as key to his handling of the 2008/09 global financial crisis when he was the chairman of the US Federal Reserve board. When the Covid-19 pandemic hit in 2020, the Laureates’ insights played an important role in supporting the significant measures policymakers took to ensure that the impact on financial markets did not develop into a new depression.

the committee was clear that timeliness of the issues surrounding bank collapses was not a relevant factor in making their decision on the award. “It’s true that it is very timely. That, of course, is nothing that we are unhappy with, but it was not the reason for giving the prizes,” Professor John Hassler, a member of the prize committee, said.

Covering the first in-person IMF in three years

Phil joined the team from GlobalMarkets newspaper to help edit the coverage of the annual meetings of the International Monetary Fund and World Bank. These were the first in-person meetings since 2019, as the outbreak of the Covid-19 pandemic forced them to be held virtually.

There was a strong feeling among organisers, visiting delegates and media and NGOs that the opportunity to meet and interact made the in-person meetings vastly superior to the virtual ones. That was especially important in October 2022 because of the confluence of a set of major crises including the food shortage, the fuel price surge, the wider inflationary spike, the debt problems facing many low- and middle-income countries and the war in Ukraine.

Phil helped edit the three daily papers that were printed live in Washington, DC, and distributed to the meeting venues and the hotels where delegates were staying. He also wrote two features looking ahead to the challenges facing the IMF and the World Bank.

Feature on an organic vineyard in Belgium

Chicago Booth’s magazine commissioned Phil to look at an organic vineyard launched by three MBA graduates from the business school. He spoke to the founders: Michel Schoonbroodt, Didier Jacques, and Philippe De Prins about their decision to embark on the project after each had enjoyed a successful careers in finance over the previous decades.

They told him about the five years of hard work, the ups and downs in the journey, and how their experience and knowledge acquired at Chicago Booth helped them achieve success.

The first harvest at the organic vineyard yielded 6,000 bottles of still and sparkling white wine in 2020. One of those wines, called Les Rémouleurs, or “knife grinders,” is on the wine list at La Canne en Ville, a Brussels restaurant with a Michelin star. The vineyard will host the Family Day of the Booth Alumni Association on September 11, 2021.

Asked what advice he has for recent Booth graduates, Schoonbroodt says: “Don’t be afraid of doing something new. It’s only difficult the first time: the second time will be easier, and the third time easier again.” The article is here.

Covering EBRD annual meetings for Global Markets

Phil contributed analysis pieces to the coverage of the annual meetings of the European Bank for Reconstruction and Development in May by Global Markets magazine. The meetings were held in May 2022 as the military attacks by Russia on Ukraine were well into their third month.

One piece looked at the likely negative impact that the conflict would have not only on Russia and Ukraine but on the EBRD’s central and eastern European (CEE) region. A partner piece examines the impact on inflation and interest rates in the region.

A key element of that is the likely disruption to regional and global oil markets which this piece looked at. While oil price rises will cause problems for many CEE countries, Russia and Ukraine’s place in global food markets will cause major problems and misery for countries on the North African fringe of operations. This piece looks at that.

The EBRD is one of many international financial institutions to have offered to increase funding for projects in Ukraine: this piece looked at who has given what, and how much the likely final bill will be.

Finally, there may be some glimmer of hope from the unity that the conflict seems to have inspired within the European Union and NATO. This piece looks at how this might bring together the EBRD’s shareholders and recipient countries 31 years after its foundation in the wake of the collapse of the Soviet Union.

Digitalisation and emerging markets for OMFIF magazine

Phil was invited to research an article for a magazine published by the Digital Monetary Institute at the thinktank OMFIF that is looking at the future of capital markets in 2022. It focused on how digital finance offers hope of internationalising emerging markets.

It looked at how international financial institutions are examining the potential of the ongoing revolution in digital money to enable emerging markets and developing countries to participate more in both local currency and international capital markets.

Phil spoke with experts at the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, and the Bank of International Settlements.

The article looks at the ways in which digital finance has changed the ways that policymakers in emerging and developing are adapting to allow the creation of digital money channels in their economies and the benefits they bring in terms of financial access and inclusion. It also looks at how international financial institutions can work with EMDCs to make the step up from personal finance towards using digitalisation to improve the way they issue debt on the capital markets. It looks at both opportunities and threats in a wide-ranging discussion.

The long-form article can be found here.

Working with the CORE project on economics education; RES article

Phil has been working with the team behind the CORE Project, which promotes economics teaching motivated by addressing pressing real-world problems using the best economic
research. CORE had produced three textbooks, available free online to students, that show a new way of teaching and learning economics, using the best research to address the world’s most pressing problems.

The project’s websites highlights the 380 institutions across the world are using CORE in teaching 115,000 students each year. Phil has written profiles of several dozen institutions across the world. These include universities in the developing world such as the American University of Afghanistan, emerging market universities including the University of Cape Town, and longstanding advanced economy colleges such as the University of Oxford and Duke University in the US.

More recently, a new centre in the Department of Economics at University College London is being set up to develop novel research and education initiatives, focusing on the causes and consequences of wealth concentration. One aim of the James M. and Cathleen D. Stone Centre on Wealth Concentration, Inequality and the Economy is to support the CORE Project.

The centre’s co-director is Wendy Carlin, Professor of Economics at UCL and Director of
CORE. In an article for the January 2022 edition of the Royal Economic Society newsletter, she told Phil that the centre will have a very active visitor programme on the education and the research side, and every research activity is going to have an education component.

Co-director and also Professor at Economics at UCL, Imran Rasul, said that UCL can become a hub for new thinking about the deep underlying features of the economic system that drive
inequalities of different types, and for analysing what might be done about them.

The Centre will have resources to fund PhD students and post-doc positions, provide grants
for data and research projects, and finance visits to the other five Stone Centres in the US and France.