Bitcoin, Brexit, electricity rates, COVID and climate change: can we handle it all?
Now that the COVID-19 pandemic is starting to ease up, old and new challenges are rearing their heads in the political and economic agenda. Climate change has come back into the public sphere with a bang, and the geopolitical landscape is still tense due to Brexit and other international disputes. At the same time, we are going deeper into an unprecedented energy conflict while cryptocurrencies and other new economies are switching up the rules of the game.
These topics were the focal point of the ”la Caixa” Foundation fellows’ virtual meet-up in October, in which 12 experts from the sector came together to discuss these challenges and suggest some solutions, while also giving us some recommendation to keep up to date.
From left to right, top to bottom: Francisco Hernández Fernández, Agustín Sánchez-Arcilla Rosanas, Laura Cordero Herrera, Gerard Martín Escofet, Jose Miguel Pulido Villverde, Christoph Semken, Samir Kadiri Díaz, Juan Llavador Peralt, Roy William Cobby Avaria, Alberto Gimeno Sanz, Antonio Barroso Villaescusa and Emilia Jordi, Diana Molina and Ainhoa Martín from the ”la Caixa” Fellowship programme.
Climate change, in the eye of the storm
José Miguel Pulido, the head of the ”la Caixa” Foundation fellows association, opened the session by putting forth the topics for discussion: Are these challenges the result of citizens’ decisions, or have they been orchestrated by governments or other organisations? Has the pandemic taught us anything that we could use to respond to the huge global crisis of climate change?
The debate started out with the economic effects of climate change, since all of the fellows agreed that this was the greatest challenge that the global financial systems were facing. And yes, we can learn from the response to pandemic. “At the beginning we were following the patterns from previous crises: central banks reacted to protect the financial system. But then there was a diverse range of actions taken in different countries. People questioned what had been taboo topics in economic management,” said Roy Cobby, a PhD student at King’s College London and the Data & Policy editor at Cambridge University Press. One of the responses he wanted to highlight was the US intervention in vaccine production, where they forced competing corporations to work together. As well as the global restrictions on movement.
However, climate change has additional challenges, said Antonio Barroso, Manager Director at the consultancy firm Teneo: “the main problem is the intertemporal inconsistency between the short-term costs of adopting measures against climate change and their long-term benefits.” The solution for pushing through decision-making in governments and other international organisations involves “lining up incentives to take measures against climate change and bringing in democratic principles so that the necessary decisions get made,” said Alberto Gimeno, an MBA student at the London Business School.
Growing concerns among the general public regarding climate change is an immense help for greener policies, said Juan Llavador, a PhD student at the University of Stockholm: “there is a paradigm change underway, and voters are asking for these policies.” In fact, the scope of the economic and social challenges is so great that they require joint responses: “a stable political claim with many people asking for it and accepting the costs involved”, in the words of Christoph Semken, a PhD student at the Pompeu Fabra University.
It may seem like mission impossible, but Roy Cobby referred back to other moments in history where there was a rapid global response: “after the Second World War, the countries in the Marshall Plan underwent huge transformations in their economies in a very short time. This transformation was much more dramatic than the changes we need to make to have a more sustainable way of life.”
From energy policies to active policies and new economies
The energy crisis in Europe was another one of the main topics, since it is thought that it will get worse in coming years, and that it will spread out across the planet. Samir Kadir, an economist at Hydro-Québec, was very clear in stating: “energy is going to get much more expensive, unless we develop cost-competitive storage methods. Until then, the energy wars will continue, and Europe isn’t ready. Neither energy independence nor regulatory bodies have a route map for this kind of situation.” On that last point, Francisco Hernández, currently studying a Master in International Law at the Graduate Institute in Geneva, added that ”the problem is that the decisions are made with old legal regulations, which don't make sense anymore because the situation has changed.”
Once again, countries with more flexible system might get there quicker. “EU tax and monetary policy run at different speeds, which is why the post-COVID recovery period is happening much later than in the USA and will be much weaker. The problem of inflation caused by the supply chains are related to the poor recovery from the previous crisis,” said Roy Cobby.
Focussing on Spain, Antonio Barroso believes that the situation here is even more critical: “we are seeing the first tensions in the labour force with an unemployment rate of 16%. There are countries that are ready to take on this challenge with active policies on the job market. However, all international organisations are saying that Spain is not good with policies to train people and tackle unemployment.”
The response may come from the explosion of new economies, mainly thanks to technology, even though they may not be sustainable solutions. Laura Cordero, an independent consultant on inclusive finance, mentioned that “the technology on which cryptocurrencies are based is very revolutionary in the long term. Its flexibility and traceability are applicable to many sectors. However, the amount of energy this technology burns up is a challenge. Furthermore, many governments are sceptical about Bitcoin and other cryptocurrencies. They shift a lot of money, and we still don't know if they can be regulated and turned into a real alternative.” Along these same lines, Francisco Hernández mentions a central bank response to Bitcoin, known as CBDC. “CBCD is a very promising instrument in political, legal and economic terms since it involves turning the physical euro into a digital format”, he said.
The general public, the crucial piece for taking on many of these challenges
During the conversation, people - as individuals and as a collective - came up time and time again as crucial players in the coming changes. For these changes to be brought through with criteria, we need education on economics and participative processes that take them into consideration. There are multiple examples of this, such as the Swedish Innovation Agency, which includes citizens in its decision-making process for the use of EU funding in the energy transformation. In other countries, the unions that are on many company boards take part in the decarbonisation plans and in other dialogues on active policies and other strategies for change.
However, it is important that new regulations and consumer supply does not worsen socio-economic inequality any further. That’s why, according to Alberto Gimeno, consumers must be given real decision-making capabilities. For example, “if we force everyone to have an electric car, people who can only afford a second-hand car will be much worse-off.”
Active citizen participation starts with well-informed people. That’s why the fellows in this meet-up made some suggestions for sources to get a better understanding of the topics covered in this debate and economics in general.
To get started
Roy Cobby on Twitter - He talks about topics regarding economics and development on his Twitter account.
Explained - A short documentary series on Netflix from the US production company Vox, which provides short introductions to complicated topics such as cryptocurrencies or the securities market. Some similar videos are available on their YouTube channel.
Wendover Productions - A YouTube channel that analyses a wide range of topics on economics, geography and politics in under 20 minutes.
French Elections – Fellow Antonio Barroso recommends following the political and economic debates to take place this year and next year in France, since they are normally a good overview of the disagreements and the political changes to be tackled in public policy.
Nada es gratis - An economics blog in Spanish with regular contributions from various ”la Caixa” Foundation fellows, which brings economic research to the general public.
Trade Talk Podcasts - Podcast in English about trade commercial and political economics explained in a simple way for all audiences.
Chartbooke - Newsletter from the historian Adam Tooze with articles, statistical data, links, recommendations and much more on economics.
Jon Sindreu - His articles for the Wall Street Journal, in English, cover financial markets and the international transport industry.
A deeper look
The Black Swan - An essay on black swan theory regarding the impact and consequences of improbable and unpredictable by Taleb Nassim.
The Climate Crisis and the Global Green New Deal - A book by Noam Chomsky and Robert Pollin about the Green New Deal, a set of proposals to help tackle global warming and the financial crisis, in which they calculate the small cost that fairer policies would have.
Bank for International Settlements - It has a range of information regarding cryptocurrencies.
WTO - The website of the World Trade Organisation publishes news in English on various topics in the sector.
OCDE - The Organisation for Economic Co-operation and Development website has data and analysis on economic and social policy in various sectors.
UNCTAD - The United Nations Conference on Trade and Development and their annual reports are a good source that often provide a broad range of perspectives on the sector.
Establert el 1988 per l’OMS, el Dia Mundial de la Sida va ser el primer dia dedicat a la salut arreu del món. Avui, amb els investigadors i becaris de la Fundació ”la Caixa” Elisa López, d’ISGlobal, i Ifeanyi Jude Ezeonwumelu, d’IrsiCaixa. Tots dos centres, impulsats per la Fundació ”la Caixa”.
In 2021, when the limits between the possible and the ethical are being questioned on a regular basis, the focus was on people and their interactions with their environment, and how we collectively take on present-day challenges. Faced with these shifting terrains, which are both hugely interesting and decisive for our future, we set up a conversation with three ”la Caixa” Foundation fellows.