Cambridge Conversations: A worldwide economic web: interdependence & recovery in a post-COVID world
Hello. I'm delighted to welcome you to this our fifth. Cambridge, conversations. Bringing you cambridge, ideas, on all things related, to covid, 19.. The previous focus has been on medical research, and public health, but today we focus, on social, and economic, issues. I'm stephen tupe and i have the honor to serve as vice chancellor, of the university, of cambridge. I'll moderate, today's, digital discussion. During the session, your microphones. And cameras will be turned off but you can see and hear our speakers. After our conversation, there will be around 20 minutes where our speakers, will respond. To your questions. You can submit, a question, at any point by clicking on the q and a box. At the bottom of the page. And typing, in your question. We're expecting, there to be far more than we can actually, answer but we'll do our best to get through as many as possible. The event is being recorded. And you'll, will be able to see it on our youtube, channel, next week. I must say that i'm not sure there's ever an easy time to be vice chancellor, of a university. But, pandemic. Certainly, adds, some challenges. You'll note that i'm trying to develop, the british, mastery, of understatement. As we in the uk emerge from lockdown, those challenges. For us at cambridge and indeed for the whole world, are simply, not, going away. The consequences. Of the virus, and the periods of quarantine. In most nations, have likely, brought, lasting, changes, for our society. And for our economy. Indeed these last few months, have seen. Profoundly. How interconnected. We all are. How quickly, we discovered, not only the speed at which a virus, can travel. But how dependent, we are on supply, chain. Chains, that weave their way around the globe. In january. Cambridge, itself, began to feel the impact, of covet 19. When chinese, tourists. Stopped, visiting. By the end of march, much of the world was in some form of lockdown. Flights were grounded. Oil prices, plummeted. Live performances. Stopped, and restaurants, and bars closed their doors. School children stayed home and access, to many services. Was halted, or at best. Circumscribed. The arts and entertainment. Industries, have been decimated, and i must say i found that loss to be truly difficult, and, we all hope for better days soon. While some governments, have found ways to support, people, unable to work, and to bail out some industries. In countries, where central, support is unavailable. Or difficult to access. Inability, to work has met the threat of starvation. For many. Decisions, made in the hope of saving, lives, have led to slowdowns. In some industries, with others, simply grinding, to a halt. In yet other industries, staff have proven their ability, to work from home, efficiently. Leaving office buildings, empty. And with them the coffee shops and cafes. For whom office workers, are essential, customers. Almost, in the blink of an eye, our economy. And our lives, have been. Upended. Cambridge, today is a very different, place, to cambridge, of december, 2019. Although the townspeople. And even a few tourists, can be found buying ice creams, and browsing, in a few bookshops, in general. Shops remain, quiet. And many businesses. May have closed for good. Cambridge, is but one relatively. Small town and yet it's representative.
Of Towns, villages, and cities. All around the world. So what next. Well it seems impossible. That we can go back to the way we were before. But where to from here. We have with us two of the world's, preeminent. And most sought after commentators. Professor, diane, coyle is the inaugural, bennett professor, of public policy. And co-directs, the bennett, institute, of public policy. With professor, michael, kenney. Her research, covers the fields of public policy, economics. Technology. Productivity. And inequality. Diane is a fellow of the office for national statistics, in the uk. And an expert advisor, to the national, infrastructure. Commission. Dr mohamed, el-erian. Is co-chair, of the campaign, for the university, and colleges, of cambridge. And president-elect. Of queen's, college. He's chief economic, advisor. To allianz. And was formerly, deputy, director, of the international, monetary, fund. Managing, director, at solomon, smith barney city corp. Ceo. Pimco, and chief executive, officer, and president, of the harvard, management, company. He also served, as chair, of president, obama's. Global, development. Council. So diane, and muhammad. Thank you for joining us it's great to have you. All around the world, unemployment. Has increased. Businesses. Are suffering, bankruptcies. Are on the rise. We've discovered, our societies, are, interconnected. Interdependent. And it feels, like the global, economy. Could be in meltdown, and yet. Stock, prices which initially, plummeted. Uh have seen gains, in the markets, over the last while. Hard to make sense of all of this. Diana. Diane how do you see it all, fitting together. Well this is no ordinary, recession. We've seen, in many economies, gdp. The main measure of output, decline, by a fifth or a quarter in the space of a month. There's great uncertainty, about what kind of recovery, there will be. It's going to depend, on. People's behavior. How confident, the consumers, feel about going out to the shops as you were describing. How um. How many businesses, going to carry on investing, and employing people. What happens when the furlough schemes start to get unwound, so all of that's incredibly, uncertain. I think as you're saying in your introduction, it does reveal. How connected, we all are in in many ways, one is through the supply chains that you mentioned. Only as strong as their weakest, link. One is the fact that we have such a service-based, economy, so, people. Companies, generally rise and fall together. And people hang together that way. And, we've seen in the response, to the social response to the pandemic, as well that the areas that are coping best, are those where the social connections. Are strong. So. Pandemics, exposing. Some. Strengths of the economy but also some very great inequalities. That maybe we can come back to later. And then again as you say there are there's this great um divergence, between, what's happening in the real economy, and the uncertainties, about that. And what's happening with stock prices. And mohammed's, a much greater expert, on on monetary policies than i am but it's clear, that. The extremely. Um loose monetary, policy, is one of the things that's sustaining those stock prices. And that within that there are there are winners and losers. So uh the american congress subcommittee, is about to hear from. The uh ceos of all the big tech companies, about. Their mark their market power. Their company those companies have been doing pretty well out of out of the pandemic, so far. You've just referred to the u.s mohammed, you're based there uh, what's the perspective. From the u.s, and, how do you think, see things evolving. I think the us, is running a second natural, environment, and we didn't do really well. On the first platform. Um the first one were, different states, reopening. With different adherents. To, the guidelines, the federal guidelines. Some reopened, faster. Some were in line some were slower, and we've clearly, seen that that was a mistake. Now we're seeing a second. Natural experiment, which is, a few states that are doing well. This time around new york, connecticut. New jersey trying to isolate, them themselves, from the west. Of the country. And we're seeing all sorts of quarantine. Requirements. Sand in the wheel, measures. My own feeling. Is that. We are yet again. Gonna have to. Find a way to, restart, in a healthy, manner. And we're starting to realize. That. Until, we get. Changes, in behaviors. We will not be able to have the sort of economic, recovery, we're looking for. As to why. Are the markets, booming. While the economy.
And The global economy is not doing well as diane, pointed out. It is not because. The market. Is badly informed, or irrational. It is because the market, believes. That it has stumbled, into a win-win. Hypothesis. The first win. Is, the traditional, one which is markets are long-term. Markets, look through the valley. And there is a vaccine, at the end of all this. And capitalism. Is, inherently, robust. So economies, will come back. But the second reason why, markets have been so solid. Has to do with what diane mentioned, central banks. Central, banks, have conditioned. Markets, over the last few years to believe. That they will be bailed out. That. Central banks cannot afford. Unfavorable. Market volatility. Because that could undermine the real economy. And central bank's actions have been consistent. With that conditioning. So the marketplace. Feels. And i think over optimistically. But it does feel it's in a win-win. And then you get the negative reasons, what's called tina, and fomo. The tina as everybody knows in the uk. There is no alternative, are you really going to put your money, in either. Low yielding, or negative yielding bonds. And the fomo, which is the fear of missing out if every, dip has been bought, do you really want to miss out. And we've had this massive, conditioning, of markets. That in my view has taken valuations. To excessive, levels. But i would have told you the same thing a month ago, and i've been proven. Wrong. Thanks muhammad. Diane, you talked, briefly, or mentioned. Questions around inequality. And it's interesting, that the markets. In. The points that muhammad's, made. Really aren't, pricing, in those, kinds of, if i may say social and political, worries, very very strongly. Where do you think inequality. Can be, effectively, addressed, in this circumstance. Or what what issues do we need to be attending, to, if the markets, aren't going to do it. I think the pandemic, is a kind of x-ray, of society. It's showing, and it's exacerbating. And highlighting. Many inequalities. You know whether it's the gender inequality. Of. Women more likely to work, in. Sectors of the economy, where there'd be more layoffs and more furloughs. Picking up more unpaid work in the home with child care and homeschooling. Or whether it's income inequalities. Or inequalities, between types of jobs the good jobs and the bad jobs. Or. Inequalities, between outcomes for different people of different ethnicities. And so, we're seeing, um. Quite extreme. Attentions. In this regard. So many people i mean mohammed, mentioned the robustness, of capitalism, i think many people now are questioning. Is that robustness. Being tested. To its limit. And i think there will be, responses, to the inequalities. In in many countries, and you know, obviously this is generalizing. And i know much more about the uk. Uh here we have a debate about leveling, up. Should, places, that have be, been over many years. Much. Lower income, seen much less investment. Than the big cities. Should they get special treatment now additional, investment, or. More funding for their schools and so on, so that's one way of thinking about it. Um, the tech giants themselves. In most, of, economies, now most jurisdictions. Now. Anti-trust. Authorities. Are starting to take much more serious, um, action, against. The big digital companies, because. If the share price of. Amazon is going to be able to rise 40, in six months during the pandemic. Of course it's a great service, but it does have market, power and that market power is paying off, so i think that will be another way that we tackle that. But i think there's going to be a broader debate about. Precarious, jobs should we really, have labor market legislation. That allows that to continue. Especially, if it's the case that people in those precarious, jobs. Will go out to work even if they feel ill and will. Hinder efforts to bring the pandemic, under control. So, i think there's a lot of questioning, about what kind of economy do we want to see, when we do get a recovery, there's the slogan, buildback, better. Um, so, i would say in the end capitalism, will prove robust enough but i think it will, be changed, by this really quite. Radical, experience, that we're going through. Muhammad, i i want to, broaden, out the conversation. To, the non-western. World if i may, you've talked about the shock to globalization. That's taken place, with economic, lockdowns. Clearly had a terrible effect on the economy, here at the uk, europe the us, etc, but. What about developing. Economies. How do you see. The developing, world the global, south navigating. This period. And and how do we respond. As a global, society. When these economies, may be deeply. Threatened. Phase one. Of covet 19, was of course, centered on china, korea.
Um Japan, phase two was europe and the us. And during these two phases. The typical, developing, country. Felt only the indirect, effects, of covet 19 not the direct effects and that was important. Not because, it wasn't hard it was very hard. The typical, developing, country, felt. Because of what was happening in the neighborhood, in the global neighborhood. Lower export demand. Lower commodity, prices. Lower tourism, receipts. Lower remittances. Lower in foreign direct investment, so everything. Turning, against, you from from a tailwind. To your economy. To a massive headwind. But it wasn't, as bad, as people. Were worried about, because as you point out and as an african friend, said to me because of our healthcare, system. If we get hit by covet, 19, in a big way. Our choice. Will be between. Dying of starvation. Or dying of infection. Unfortunately. We are now, in the third phase. And that has hit. Certain, developing, countries. Relatively, hard. It's particularly, the case in latin america. It is less so in africa. So, now you have countries, having to deal with both the direct, and the indirect. Effects, and what they're learning, is a few things. They don't have the financial, resilience. Of the advanced world. Of china. Secondly. They don't have. The. Ability, to to implement, relief measures. That are focused. Because they don't have the systems, in place to target, the most vulnerable. Segments of the population. And third. It is not, what, game theorists will call a one round game, it is a multi-round. Game, and a lot of them have used too much of their ammunition. Initially. So the bottom line, is they, will not be able to get through it, without, broader, burden sharing. Without, there being help from the international, community. And help from private creditors. And i think that what we're going to have to see is some sort of solidarity. Effort coming together. To help these countries, navigate. What is still. A very very difficult. Road ahead for them. Can we just pursue that for a moment muhammad. You talk about the need for solidarity. Uh and you also mentioned that. Many countries, or some, key countries, in in the global, south may have already, in a sense shot the bolt on their policy. Opportunities. To address the crisis. What about at the international. Level though i mean there's been such an attack on some major international. Institutions. Uh including, institutions. Of the.
Global Economy. You were uh previously, associated, with the imf, there's been a lot of doubt about the role of these institutions, especially, from uh the united, states. In recent times, do you think that there's resilience. In, global, economic, institutions. That will help us get through this crisis. Or have we too shot the bolt there. So undoubtedly. Some of these institutions. The imf, in particular, has responded, in a big way. To give you an example. As of three weeks ago, they were. Looking, at requests, for emergency, assistance, from over 100, countries, of which 60s. Had been processed. That is an incredible, number and they got the money out. Um, quickly. But on the whole. Um, stephen. The amount, of, global. Coordination. And collaboration. Has been. Inadequate. Compared to the challenge facing us this is a shared. Challenge, this is one that required, shared responsibility. And we have not had it, each country, has gone its own way, and it has made the problem, bigger. I also want to pick up if i may on something diane, said. The inequality. Aspect, is really important. Um there will be. Long, term, negative, consequences. For both the supply, and demand, responsiveness, of the global economy. And what we are seeing, at risk. Is not just. A worsening. Of an inequality, of income, and wealth. But a worsening of inequality, of opportunity. Those with fewer opportunities, to begin with are losing them even more, and if i come back, to the us, i'll give you one, startling. Statistics, that comes locally, here from california. The la school district. Has lost touch with 20. Of their students. They have no idea what has happened to 20, of their students. Since march. And that is of great concern, especially, that we that they are going to be online, again. In september, so you may have, unfortunately. The most vulnerable. Segments of our populations, both. Domestically. And globally. Having to face the biggest. Relative and absolute challenges. Diane. Do you see. Uh. Any, obvious. Policy, responses. Around, this type of inequality. That that both you and and, muhammad, have now highlighted. Is as key as a key issue. Coming out of the covet 19 crisis, what, what would you be advocating, or what should government be looking. At, right now to try and address these issues. The, um potential, what economists, call scarring, of young people's, lifetime, prospects, through missing out on education, would be top of any economist, list. And many policy makers. Not necessarily, in the us but in many countries. Uh share that priority, so there's a lot of focus. On the inequality, of access to online schooling. And the well-being. Of children who are not not in school. So that's a really important aspect, of it. Another, is actually, sustaining, the small businesses. It's the big businesses that get a lot of newspaper headlines, because, um. You know we pay attention to the really big companies, and, the amounts of money involved are large and they employ large numbers of people. But more people many, more people are employed, by, micro business, businesses, or self-employed. And they need to get a lot of attention to they need to be, supported. Through the downturn, so that they don't close their doors because if they close their doors, then the unemployment, problem. And the inequality, problem, is going to be much worse. You know milton friedman, was famously. Not averse to income inequality, he said it was a natural part of a, healthy capitalist system and there are many good reasons for it, but even he in his famous essay about inequality. Said, that if the social, fabric gets stretched too thin it will tear. And this kind of inequality, is not sustainable. So the policy reaction. At this moment is is fundamentally, important. Thank you. Uh just to switch, gears a little bit um. Here in the united kingdom there's been an interesting, internal, debate, uh within, uh bank of england, policy, makers, the economists. On whether or not. We're likely to experience, a, the so-called, v-shaped. Recovery, or a u-shaped, recovery, or something, that's longer. Uh in coming, um. I'm curious mohammed. Where do you position, yourself, in, in the prediction, game i i know it's a tough one but do you think we're we're looking at a v or a u or or something, a, w, something different. So it is really tough because. The um. Parameters. Have become very.
It's Very difficult to predict, how. Covet 19 will evolve. Add to that, that no one quite knows what the behavioral. Changes are going to be, how willing will people be to re-engage. In the economy. As they have before will they be more risk averse. And also. We will see a process of de-globalization. But we don't know how fast and how orderly that process will be. So all this is to say that, it's, it's, not unusual, that there is such debate, because, the world has become. Not just, uncertain, but unusually, uncertain. Having said that. When i look when i put all this together. And if i have to come up with a baseline. I would say, and i know diane, also likes that characterization. It looks like. A square, root sign. We came down very quickly. In the second quarter. We will come up and we have come up. And then now we're going to level off. And we're going to level off until. The people. Who, are uncertain. About, engaging. In the economy. We engage, fully. And that will require. Some combination, of vaccine. And community, immunity. So i i'm more, like diane i know diane is in the square root sign. Camp, than in the v cap. Diane, anything you want to add on the square root. Uh. No, and, it's always difficult to predict economic, outcomes, we had the experience of the financial, crisis. And. It was hard enough to, uh predict what was going on then and actually gathering the statistics, at the moment is a challenge in itself so there's there's great uncertainty. Even about where we are never mind where we're going to, um but if i had to pick one single, symbol, that would be mine. Great uh before we go to questions, from uh, people online, just uh one final, opportunity, perhaps, to shift to a, an optimistic. Note if at all possible. Uh, huge, challenges, here clearly, many people potentially. Suffering, but. Do you see, coming out of the adversity, that we all face here any particular. Opportunities. Economic. Social, political. That we really. Must, take up. Uh, diane i'll start with you. There's, clearly an opportunity, to invest, in, greener technologies. If governments are going to be spending lots of money. They can use that to direct the economy, towards a, cleaner. Path, that the technologies, used in transportation. And electricity, generation, and so on, so there's a lot of debate in the economics, community, about exactly how does that happen. How much investment, is needed who's going to do that, so then i think would be one good thing that comes out of it, the other one i would pick is a kind of evaluation. Of, what we care about. And um, we've, obviously, talked about share prices, and gdp, growth, i think many people. Realize, that it's, health, and, clean air and green space and good schooling that count in life, and those are the things that we should focus on. Thank you mohammed. So i agree with what danger, said and i have a. I have a piece of paper that i keep on my desk.
That Has the silver lining. Of this crisis. And there's eight items of it i'm gonna share four. One is we're seeing significant. Leap frogging, in medical, innovations. Inventions, and innovation. And that, will help a lot of people. Um. Two we're seeing. The type of collaboration. Among scientists. That i find incredibly, encouraging. And we're also seeing it among, companies, in certain, industries. With a sense of greater social responsibility. You'd want that to continue. Third. There's greater awareness of what a tail risk is. Seven months ago good luck trying to explain to someone a tail risk because. A low probability, event a very low probability, event even if it was impactful. People felt it was such low probability. Um, that they didn't really, think about it much, and certainly they didn't want to ensure, against, it. Now. With this pandemic. The tail risk has played out and we have an opportunity. To repeat the behavior you see, in areas that are subject to flood what's the first thing that happens after a community, is flooded. Those who can look to buy flood insurance. And this is important because we have other tail risks facing the economy, facing the global economy we have some that are not even there whereas climate change. So hopefully, this awareness. And sensitivity. To terrorists, will allow us to move on climate change. And finally. It's something you mentioned, earlier stephen. Is that we are now. Faced, with what it's like, not to have. Global. Policy, coordination. When we face a global problem. And the hope is that we can come out with, with energy to reform. A, multilateral. System. That, that is tired, and that needs. Updating. Thank you. Really interesting, responses. Um. You won't be surprised, to learn that uh, online, questions. Uh huh, um, quite a number of them have focused, on this question of green, recovery. And addressing. Climate, change, so i think we better, tease that out a little more. Diane maybe i'll start with you by asking. What does a green, recovery. Actually, mean in this context, what are the component. Parts. That we should be thinking about societally. To actually. Make sure that we are addressing, climate change.
And That. Green, investment. Is. Is at the forefront. Greening the economy, will require system, change the transportation. System. The electricity, grid and generation, system. Um people's, houses, how they are heated, and insulated. So it's a very big. Change very a, very large amount of investment, in these systems, that need that's needed. And so the opportunity. Is that because, of the scale of what we're facing at the moment, and the likely scale of government, investment, and government. Energy to coordinate. Change. That, this might now go ahead and, happen. There are some who say that. We can't afford it and we just got to concentrate, on getting people back to work no matter what. Um but i think that will that will not be the case that actually. Many governments, are determined, to grasp this opportunity. Um but it's you know it's a complex, array, of. New technologies. And old technologies, being implemented. In um, very wide ranging sectors of the economy. And, um. There's a lot of, you know very. Clever technical stuff going on looking at. Graphene, the use of. Car electric vehicles to become. A battery system if they're hooked up together, and so on, so it's going to take innovation. Uh investment, in research. Investment, in infrastructure. And behavior, change as well, that's a lot of coordination. It needs a very determined, government to bring that about. But if we can't do it now, then i think we're a bit doomed, on climate, change, and the costs and damages that will cause will be immense. So. Um i'm quite optimistic, about it but also. Uh, you're quite alert to the importance, of grasping this opportunity. Muhammad. Obviously, in the united states this is this remains, uh perhaps, a more controversial. Set of questions, than it does in other parts of the world so you've got a federal government that is not moving in this direction and yet, some state governments, including where you're sitting in california. That have really driven, hard, on. Trying to promote, a, a greener, economy, etc. Is this, shock, enough, to really, change, the political, dynamic, in the united states to allow, for, a, more, concerted. Focus, on green recovery. We could have a whole. Five hours, on the political, dynamics, of the. Country. You can't wear a mask without, making a political, statement i find that very strange. Um, but when we go out wearing our masks. Some people accuse us of making a political state, so that shows you how polarized. This country has become. What diane diane used a phrase. That is really important, determine. Government. Um, because. Any government today, especially in the advanced world, has, five.
Policy, Priorities. Five. One of them is exactly what we're talking about now. Which is, systemic, change. Changing, how we do things. But go earlier, we also talked about relief. Helping people. Who've, been, hard hit and there's a lot of suffering. And pain out there, two, there's a whole bucket of. Living, covert. We know well we need to live with, it and we need ensure we can live with covert. In a healthy. And economically, productive, way. Third bucket. Is to counter. Long-term. Insecurity. And, and what we talked about, which is the inequality. Of opportunity. And fourth, is. Is. To, deal with what are going to be. Downward, pressure on productivity, so when you look at a government, they're looking at five. Buckets. And. The problem. And we have to recognize, this. Is the urgent, and important. May crowd out other buckets. And in fact you may also get the urgent and not important, crowding, out, the other buckets. So i worry, that unless there's a much broader societal. Engagement. That involves, households. That involves, the private, sector. Companies. That we may have this opportunity. But we may end up not exploiting, it. And i think it's really important that this be a partnership. Because determined, government, will end up. Having, to deal with so many priorities, that there's a real risk that this one does not get the attention, it, should. It's very interesting, that a number of, people. Online, have actually made exactly, that comment worried, that, the. Urgency. Of the situation. Will uh drive economic, responses, that are in fact, not. Sensible, in the longer term and that don't take advantage, of the opportunities. For example. Uh that a greener, approach might take. One specific, question though from tony uh who's a graduate of trinity in france. Often, the economic, discussion, is shaped around the idea of getting, back to a pre-covet. Situation. Or to. Recover. Where, where we were. Tony's, asking, is that the right way to think about this at all, or should we really, take this opportunity, to think hard about whether, different, economic. Approaches, and structures, are needed, i mean people talk about the circular, economy, etc etc. Diane, how would you respond, to that challenge. It's a it's a question that's close to my heart into the work that we're doing in the bennett institute. To think about. How would you define. And then measure. Progress in a much broader sense than we have to date. Which does include. The careful care for the natural environment, understanding. What services, we take from nature, to, sustain, the economy. And the extent to which we have, run those down. And need to reinvest, in them. But also the importance, of social connection. And. People's. Ability, to, access. Networks, that give them, um. Support during times like pandemic.
Or Access to good jobs and information about good good jobs, that social capital. The, investment, in, opportunity. The education, and the human capital as we call it and they're not very romantic, economics, jargon. And so all of these are part of what we would think of as building, back. Better. To, pick up that slogan, again, i think there are many people, who, don't want to go, back to back to normal back to the way we were, there's been some polling here that shows that about a third. Of respondents. Wanted the government to make very big changes. In the way the economy, operates, and i think it's exactly these kinds of issues. And actually although. The urgent might crowd out the long term. There's evidence that my colleagues in the bennett institute, have, have found that, investing, in infrastructure, and particularly, green infrastructure. Can actually. Have a bigger effect, on, the economy, a bigger multiplier, effect. Than many other kinds of government spending, and so the short term the long term are aligned, if you're investing. In that kind of technology. Thanks diana, mohammad, anything you'd want to add on that point in terms of. The, possibility. Of actually, engaging, in a, in a a more profound. Think about the future of the, economy. We have, in recent history. An example, of a mistake, we don't want to repeat. And that is what happened in the aftermath, of the global financial, crisis. And i think of it, in terms, of winning the war and losing the peace. Back then, just like now, we were fighting. The, risk, of. A global depression. And. The adverse, consequences. Of all that for society, and they're multi-faceted. We won, the war. Against, the global depression. But we lost the peace. We failed to establish. Inclusive. Growth. That was consistent. With, our planet. And consistent. With our human obligations. This time around. We have to make sure. That, we don't repeat that mistake. And a lot of what we've been talking about. Deals not just with, winning the war but also establishing, the peace and i want to emphasize. What diane just said about infrastructure. Um the right. Type of. Infrastructure. Investment, is incredibly, powerful. Because it acts both on the supply, side and the demand, side. And economists, will tell you that that's the best source of measures if you can do something that helps you in the short term. On demand. But also. Increases. Your productive, capacity. In a sustainable. Manner. You should do that. And and for me it it it is it's rather sad that we haven't seen enough emphasis, so far. On on the sorts, of. Infrastructure, investment that diane just mentioned. You're really resonating, with a number of questions, that that have been uh put to us uh. So let me extend, that. The worry. That, as we try to build back, a will do it too quickly we won't take the opportunity. That's presenting, that that, muhammad, and uh, diane have just described. And here's a more specific, worry. That, the whole, uh, focus, around, what's been called the gig economy. Could actually be exacerbated. As conventional, unemployment. Increases. People are just looking for opportunities. Companies, see. The chance, of, getting relatively. Inexpensive. Uh labor, back into, uh some form of productivity. Uh, are we actually at risk that things. Will get worse, that inequality. Will be exacerbated.
And That we will fail to take. These opportunities. Diane. There's a real dissonance, isn't there between the way we've been standing on our doorsteps, and applauding, key workers, and the government's put up billboards, to them. And the fact that many of them you know in social care, they're on. Um. Short-term, contracts, they're on minimum, wage they're often. Immigrant workers. And um. You know this this sense that, the key workers, those who've had to carry on going out to work are some of the worst paid in our society. There's a real dissonance, about that. So i think the danger. Is there. Um, but i'm not sure, that. A lot of people. Will buy that and i see companies, dividing, into two, kinds actually. Um, the cost-cutting, kind who will try to take advantage, of people's desperation. And. More reflective, companies. Who. Understand. That. Your productivity. As a company, is higher, long-term. If you, treat workers, well. And if you pay them well you know this is not a new lesson henry ford, discovered, it when he doubled. Assembly line wages, back in the day. Um, but i see. Many companies. Acting on that now. I just wonder if we'll, see this divergence. And, that there'll be sheep and goats out there in the corporate world. I wonder what mohammed thinks. Yeah muhammad, what's your sense do you think uh that there will be enough, impetus, to to drive in in, a healthier, direction, here. I think absent. Um. Some sort of competitive, action. Or it can be bottom-up, driven. We risk ending up in a worse world yes i mean i hate saying that. Because we entered. With a lack of social, and economic. Resilience. And. We are now being hit even hard if you think of it coming in into this, we were hollowing, out. The middle, of distributions. Middles of distributions. Are very powerful because they anchor distribution, the middle class. The mid-sized, company. And we were already, hollowing that out, going. Coming, into this crisis, and now we risk. A massive increase in concentration. And in, power, among, a handful of people. So so i do worry i don't think it's inevitable. I think that that, it's the trend unless you do something about it. Um. And i also worry, that, whether, you are a good company. Or whether. As defined. By. Diane, which i agree with or whether alternatively. Um, you're not. The pressure to, resize. That's the phrase you're gonna hear, resize. Is gonna be enormous. So so i do think it's a challenge. Um but but it's also an opportunity, the great thing about challenges. Is they increase awareness. And anybody, telling you that when you when you want permanent, change you have to first, better inform. You want to inform. Influence. Rather than impose. Um and and people are getting informed because they're asking these questions we weren't asking these questions enough going into. Um. The crisis, i think. The amazing, work that diane and her colleagues have done at the bennett institute in terms of, let's measure things differently. And we all know that when you measure things differently, you get different outcomes. I wonder if there's a generation, shift going on as well, because. Younger people. Do seem to be certainly much more aware of the environmental. Issues. But i think if you look at you know the example of the big tech companies, and, employee. Concern, about. Social aspects, of, of those companies. Perhaps. Young the younger generation. Will help, a lot here. Let's, let's. Draw this out into, tax, policy, if i may because we've had a couple of questions, john from maudlin.
Has Asked for example, about. Whether or not. The crisis. Opens, up possibility. For increasing, tax on those who may have prospered, or at least done less badly. During the crisis. What's, what's your sense, of. How tax policy, will play out or should play out, in the course of the next couple of years. Diane do you want to start on that. It's hard to see governments. Facing the kind of. Deficits, and debt that they will over the next few years without thinking about tax increases. The question, i guess is going to be, what to increase. And uh who bears that that burden. Um, i remember a conversation. Before. The. Election. Here right after the financial, crisis. When it was with somebody in the city, they were absolutely, certain. That, they would see, their personal tax increase, after they um after the election. The result turned out differently, than people expected. And that didn't happen. It would be. Astonishing. In many ways if. Higher paid people, did not face higher income tax, to some degree. As we, see government start to repair their finances. But i think there'll be a broader re-evaluation. Of what we what we tax. And, um. Shifting more towards. Environmental, taxes, thinking more about taxes on property. There's been a total, failure, to. Address, the global tax challenges, on multinationals. And i think that. Is not going to be a very promising avenue for raising test revenues in the future. Muhammad. During a, u.s election, campaign. No one's going to want to talk much about, taxes. I suspect, but, what do you think is, is likely, to be the, evolving, course of this debate. So what should happen, is exactly what diane said. This is a golden, opportunity. To, reform, the tax system. And also. Um. Be able to tax. More efficiently. And i i can speak to the u.s tax system. And i think that there is really. Broad agreement, that the us, tax system, has three problems with it. It's anti-growth. It's anti-sustainability. And it doesn't distribute, enough. And, we here and i can give you you know. Um. The way we tax carried interest. Is a perfect example. Of of the anomalies, that are there so so we have that opportunity. Um i think. The elections. Actually, are offering. A bit of a t junction in tax policy, in the us. Um. If you look at what vice president, biden, has already. Stated. Including this week. It will be higher taxes on those who can afford it, it will be more regulation. And that in contrast. To what, um, president trump. Is suggesting, so so yes, it looks like we are coming to a t junction in the u.s on the tax side. The problem, and then, and and steven you know is better than i. Is. What what is like what should happen is very different most likely to happen, and and once we get the election, then we've got to see. As diane said in the, and we've got to see actually what's going to happen. In the in parliaments. Around the world. A related. Question, uh, is, coming from a couple of people including david. Who asks, about whether the opportunity. Is now ripe. To be considering. A universal, basic, income. As, as a means of addressing. Some of the inequalities. And and, lack, of, support, structure. That's been revealed, in the covet, crisis, in various parts of the world. Uh diane, do you think that this is, the moment for universal, basic income. I'm not a fan of universal, basic income. By all means make the benefit system, fairer and simpler. But it's it's an individual, solution, to societal, challenges. It doesn't give you, opportunity. Um to, access, a good public transport, system or access, a good school system. And, it individualizes. The problem, if you've got your ubi. Which by the way, would be. Very expensive, if it's a livable level of income for everybody in society. Um. Then if you fail it's your fault. And, so, i see it as a kind of version of what many of my colleagues would call would call neoliberalism. That that that very individualistic. Approach to policy. So i'm not a fan. Um. Having said that we obviously, need to make sure that people, don't.
Get Thrown out of their houses, and have enough money that they can buy food during, this, deep recession that we're facing. Thank you um. We're, starting to run out of time and i want to cover one, uh additional, range of questions, uh that a few people have asked about and that it goes back to. The very brief, comments, that were made about international. Institutions. Uh. Muhammad, you mentioned the lack of global, policy, coordination. We've also had real challenges, within the european, context. To get to, a, shared. Approach. Do you think that we need, new institutions. Or simply, reform. To existing, institutions. And what would that reform. Look like i'll start with you muhammad, and then diane if you have any thoughts especially on the european. System i think that would be helpful. Muhammad. So, first just on the european system i think what what we've seen happen, in europe is really important. And that's going to be. An important. In my view transformational. Step. For. The european, union and for eurozone. Um in terms of institutions. Here is what the situation, is now. The core, of the system. Is dominated, by institutions. That are tired. Are viewed, as, not credible. Not representative. Enough. So what we have seen happen. Is. Small. Little pipes. Being built. Including, alternative, institutions. So. China, spearheaded. The creation, of a new. Investment, bank that actually does what the world bank and the asian development, bank. They both do that. We are seeing, um, the bri. Initiative, from china. That tries, to replace. Multilateralism. With a certain amount of regionalism, so. The system, is fragmenting. I think that. The solution, to that. Is strengthen, your existing, institutions. And it's about political, will. This is this is not an engineering, problem. We know what needs to be done to make these institutions. More representative. More effective. Um but this is about political, will and here, since i started with europe, with with a compliment. If i may i'm going to start we end up with europe with a complaint, the. The basic, problem has been europe. Europe hasn't been willing. To give up. A system, that reflects, the realities, of yesterday. As opposed to the realities of today and tomorrow. And, because of that. Certain, developing, countries are increasingly, opting out of the system. And and that's bad news, for the global economy as a, whole. I'm afraid that we're running out of time so i'm not going to be able to get to diane, on that question, uh, but, look i can only say that i had every expectation. That this was going to be a great conversation. And it was thank you so much to diane to muhammad, for, really being, so generous. With, their thinking. I'm grateful to all of you for your interest, obviously, in cambridge's, engagement, in this global, crisis. Uh, we're delighted, and honored that we've, been able to make, contributions. And i want to thank you. Uh for your contributions. Intellectually. And also to our, recovery, research, fund, at cambridge, and to the student support. Fund, uh it's been wonderful, to see the alumni, step up, i encourage you to stay tuned to these uh cambridge conversations. Our next, event will take place, during the course of the alumni, festival. Uh so join me on the 17th, of september, for a cambridge, conversation. Focusing, on privacy. And human rights. Effects, of the kovit-19. Crisis. Uh. Meanwhile. Stay well, and we look forward to welcoming, you back, thank you.