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

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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.

Contribution to FT’s annual UK economic survey

Phil was one of almost 100 economists and analysts asked to submit their answers to three questions about the outlook for the UK economy in 2022. The questions and (edited) answers were:

1. Will the UK economy outpace or lag behind other developed economies in 2022 and why? “Lag behind. In 2022 (as in 2020) economic performance will be driven by the response to the next evolutions of the coronavirus pandemic and by the endogenous state of the economy. At the turn of the year, the reaction function appears damaged with politicians contradicting scientists and politicians with the ruling party disagreeing with others, quite fundamentally. .”

2.To what extent will the Bank of England be in control of inflation by the end of 2022? ” In control. Inflation will peak in the spring following the restoration of the VAT rate for the hospitality sector and another big rise in the energy price cap.”

3.  To what extent will the UK look like a high wage, high productivity economy at the end of 2022 — and will people feel better or worse off than they do now? ” People will feel worse off, certainly by the middle of the year as inflation continues to rise, energy prices rise, and incomes flatline amid little evidence of pay rises responding to higher prices. The second half may see an improvement and the data for living standards may be better year-on-year in Dec 2022 but it is unclear whether consumers will actually register that. .”

The full responses are here.

Natural experiments in economics: a blog for the Lindau Nobel Foundation

Three professors who have spent their careers carrying out experiments in real life is the mark of the supremacy of the so-called “credibility revolution” in economics were awarded the Sveriges Riksbank Prize in Economic Sciences in November 2021.

David Card, a professor at the University of California, Berkeley, shared the prize with Massachusetts Institute of Technology professor Joshua Angrist and Stanford University professor Guido Imbens. Half of the prize was awarded to Card and the other half jointly to Angrist and Imbens.

For three decades they led the charge away from a focus on economic theory towards showing what conclusions about cause and effect can be drawn from natural experiments — real-life situations where chance events or policy decisions create similar conditions to those of a clinical trial.

In a blog for the Lindau Nobel Laureate Foundation, which in normal years gathers together around 30-40 Nobel Laureates in Lindau to meet the next generation of leading scientists, I pulled together all the many tributes that poured in from fellow experts and collaborators in the field who believed that the joint award as highly deserved. The article is here.

Writing and editing at the virtual IMF/ World Bank annual meetings

Phil helped organise the coverage by the magazine GlobalMarkets of the annual meetings of the IMF and World Bank that were held in October 2021. First the second time the annual meetings had to be held virtually because of the coronavirus. This means that the newsroom existed only on Microsoft Teams with editors and journalists reporting from various locations. We built on our experience of 2020 to interact with the organised events through virtual platforms. The newspaper was published as a PDF rather than printed and distributed manually.

He wrote two features analysing key issues that came up at the meetings of the finance ministers and central bankers of the 187 member countries. The first look at the future that surrounded accusations that IMF chief Kristalina Georgieva had put pressure on staff to alter data on China when she was CEO at the World Bank. The feature was converted into a news story as the issue was resolved in Georgieva’s favour on the eve of the start of the meetings. The story is here.

The other looked at the agenda that experts believe that World Bank president David Malpass should pursue to ensure that the multilateral lender remains relevant in the post-Covid era. At its heart is the need for a massive replenishment of the finances of the International Development Association, its arm that gives grants and makes loans to the poorest countries. The story is here.

Auctions and why they matter: a write up for Lindau Nobel Foundation

US academic Robert B. Wilson and his long-time collaborator and friend – and now neighbour – Paul R. Milgrom, won the Sveriges Riksbank Prize in Economic Sciences this year for their work on auction theory and how to improve them in action.

In the official announcement, the members of the Prize Committee said the pair’s insights had led to the design of new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies. Their discoveries have benefited sellers, buyers and taxpayers around the world, they said.

In a blog for the Lindau Nobel Laureate Foundation, which in normal years gathers together around 30-40 Nobel Laureates in Lindau to meet the next generation of leading scientists, I pulled together all the many tributes that poured in from fellow experts and collaborators in the field who believed that the joint award as highly deserved. The article is here.

Opinion pieces in The Independent

Phil has been commissioned to write a weekly column on economics and related issues for The Independent news website.

The first column on 6 January looked at how Boris Johnson’s focus on getting Brexit done means that he is ignoring Britain’s parlous record on productivity – which is the real key to future long-term economic growth.

The second column on 13 January dismissed Domald Trump’s “greatest ever” trade deal with China and argued that the US president has declared war on the multilateral trade system by refusing to allow judges to be appointed to the World Trade Organization’s appeals court, so leaving the world vulnerable to ongoing tit-for-tat trade wars.

Leading reporting of IMF/World Bank meetings

Phil helped drive the coverage by the magazine GlobalMarkets of the annual meetings of the IMF and World bank that were held in October 2018 in Bali Indonesia. GlobalMarkets is the new name for the magazine Emerging Markets that has covered the meetings of all the multilateral banks for a quarter of a century.

He wrote a number of features analysing key issues that came up at the meetings of the finance ministers and central bankers of the 187 member countries. Three of the features looking at the outlook for the two institutions: the first examined the new strategy of World Bank President Jim Yong Kim regarding fragile states (here); the second looked at the role that the IMF should play in revitalising multilateralism here. and the challenge of closing the iinfrastructure gap here.

He also wrote a number of news stories including: a warning by Professor Barry Eichengreen on the impact on the from a trade war; concern among leading experts that the IMF is losing relevance; an interview with World Bank CEO Kristalina Georgieva; criticism of the Bank’s Human Capital Index; and concerns over a rollback on regulation.

He was also heavily engaged in news planning, copy sub-editing and headline writing.

Experience covering academic and policy conferences

We have developed a specialism in covering mjor conferences of academic and policy experts, covering the main issues and producing plan English reports.

Phil was hired by the organisers of the The 6th Lindau Meeting on Economic Sciences in Germany that featured presentations and debates involving several recipients of the Nobel prize in economics. He wrote a number of pieces a day that captured the essence of some of the presentatioons and debates. One looked at how economists would design a good pension syste, based on what Peter Diamond called ‘a paternalistic need’ to use policy measures to encourage people to save more during their working lives. Another focused on what that path looks loike topwards a Nobel prize, based on the recollections of Oliver Hart, Bengt Holmstöm, and Jean Tirole. His final blog was looking ahead to the state of economics in 2020, the next meeting, featuring the thoughts of Peter Altmaier, Chris Pissarides and Deleza Hays.

Phil helped produce a highly commended article based on on innovative conference looking at consumer finance and behavioural ecojnomics. The first summit by the Think Forward Initiative held in Brussels looked at how Mainstream models in economics and finance restrict the factors relevant for financial decisions to emotionless logic, perfect information, and impeccable mathematics. The article covered debates over the ability of consumers to process information correctly, the potential gains for the aplication of behavioural economics, and the state of financial literacy. The article was published on the VoxEU portal.

Phil has played a key role in the coverage of the annual meetings of the International Monetary Fund and World Bank for Global Markets newspaper. At the last meetings he held interviews with the President, Vice President and Chief Economist of the World Bank and helped produce daily newspaper editions. He also wrote features on the outlook for the World Bank and IMF.