 Okay, good evening everybody, I hope you can hear me okay. I'd like to welcome everybody to tonight's lecture, the Royal Philosophical Society, Adam Smith lecture. I'm extremely pleased to welcome tonight's speaker, Professor Sir Anton Muscatelli who's going to give us a lecture this evening. Anton is a Principal and Vice Chancellor of Glasgow University where our live audience is at the moment. Anton is an economist, an academic, but also he's particularly his research interests are in monetary economics in fiscal policy in international economics and macroeconomics. And Anton chairs and is a member of many committees and I'd be giving you a whole whole lecture if I told you what they were. He's also involved in advising the Scottish government on different aspects including our relationship with Europe and how to try to protect that. Anton was knighted in 2017 for his services to education and economics. And apparently in his hobbies are listed cookery and football, amongst other things, being in Glasgow, though, I'm not going to ask him what football team he supports. He's also been part of an advisory group in 2020, which was advising the Scottish government on economic recovery. And that's what Anton is going to talk to us about tonight. The title of his lecture, very appropriate given that it's the Adam Smith lecture is the health and wealth of nations pitfalls and opportunities in the economic recovery from the pandemic. I'll just remind you that we have a small live audience here in the in the James McCoon Smith building and we also have a large audience joining us virtually after when we get to the end of Anton's lecture. If you have a virtual audience, please, as usual, enter your questions into the Q&A on the Zoom platform. Don't enter them into the chat, but into the Q&A. I will ask your questions to Anton as many as we have time for, but we will also take some live questions from the audience in the lecture theatre. That has to be done by the members of the audience who wish to ask a question using the microphone, but the audience at home won't hear that too well. Anton will repeat the question for the benefit of the audience at home. Anton has to stay in the sphere of this lectern. And if he goes outside it, I would like to say. So I'll hand over to Anton now for the health and wealth of nations. Thank you. Thank you very much for that very kind introduction and I hope everybody can hear me at the back. Thank you. So good evening and I'm really grateful to the Royal Philosophical Society of Glasgow for this invitation to deliver this Adam Smith lecture and thank you very much for inviting me in this wonderful lecture theatre. It's the first time I've been able to lecture in the James McCoon Smith building so it's a real privilege to be here. I'm an economist and someone who is I myself an alumnus of the University of Glasgow. Of course Adam Smith's name and legacy is usually significant to me. And indeed, as Pat has said, and you've spotted the title of this lecture is a tribute to one of Glasgow's most famous alumni and professors. Like most lectures, let me start by setting out what I intend to cover. And in fact, I think I should perhaps start by saying what this lecture is not. I think my clicker works. Let me carry on it's not what I'm not going to do tonight is it's not a lecture on health or how the trade offs. Thank you. How the trade offs between health and economic objectives have been handled by different governments or in countries in the pandemic. That's a really interesting issue of course, and a matter which will continue to be hotly debated. Once the pandemic comes to an end and indeed public inquiries are held on how governments handle the crisis. Instead what I want to do is I want to take the COVID shock as a starting point and I want to look forward. And I of course will highlight some cross country evidence on the economic impact to the pandemic. One important caveat I think needs to be kept in mind when you look at cross country evidence which is that there are many factors which differ between countries, not least their geography, their international linkages, whether they were transport hubs, which can explain differences it's not just all about government behaviors and what governments did so, and how they handle the public health emergencies, it's a bit more complicated as you can imagine. It also goes to say without, it goes without saying public health is not my area of expertise, although as an economist, I have to say I don't think I've ever read as many papers for public health or virology as in the last year. But looking at the membership and indeed the Council of the Royal Philosophics Society you have many members with expertise in the life sciences so I'm sure my fellow academics in the room will be better placed than me to address those issues. Instead what I'm going to do is I'm going to talk a bit about macroeconomics and about economic policy choices, and particularly to illustrate the legacy of the pandemic in economic terms and how it conditions the choices that we now face as a society. The name of the pandemic is put on our economies and our societies is really considerable, and it's shockwaves will be felt well after this year or need the next few years. The first key message from the lecture is that the pandemic has imposed really major fiscal shock costs on society, and the cost is pretty much akin to that of a significant war. I don't want to use military analogies but that's the kind of shock you will have seen. Now again, I want to stress that I'm going to focus my attention on economic costs, but of course the pandemic has been much bigger than that it's imposed an immeasurable cost in terms of health, the loss of life, long term health consequences for many millions of people across the globe has been tragic. Even the economic costs alone I by no means wish to minimize the devastating wider costs to human society caused by the pandemic we're all acutely aware of the major losses felt by families across the world, and the significant burden faced by pandemic on our health care systems which are impacting many people who have health problems beyond beyond COVID. By approaching this topic from an economic standpoint I'm going to focus specifically on the major fiscal implications from COVID-19. And as I say the reason for doing that is because it's I think it's important to understand how these conditions are future choices, particularly because we're now in the middle of an even bigger global climate change and existential crisis in confronting climate change. And as was emphasized by most climate experts during COP26 in the city. It's really what we do now between now in 2030 that will be crucial to the planet survival, but more on that later I'll mention it again at the end. While the costs incurred as a result of pandemic mean that we're starting this period of investment into hopefully saving the planet in a weaker fiscal position that there are some potential civil linings on the horizon. First I think the pandemic has created a sense that collective action is necessary and potentially possible to tackle major global challenges. Secondly you'll have heard the mantra build back better in many government documents whether they originate in countries like the UK or in Scotland or indeed elsewhere in Europe. President Biden's build back better framework and so on. Secondly, I think the pandemic has in many industrialized countries led to a reduction in the carbon footprint of economic activity. I'm just talking about that before the lecture and largely through its impact on travel and movement of people. And this again may be seen as a platform in which we can build rather than returning to pre pandemic norms. The second theme of this lecture is that in addition to the fiscal costs of dealing with a COVID pandemic there's a handful of really important economic variables or forces which will influence the election of policy, and hence the challenges will make us a society and I'm going to touch on these tonight. One is the is around inflation and cost of living pressures much in the news these days. The other is perhaps not always in the news but I think it's particularly important which is around economic inequality and how the pandemic will play into debates about addressing this major issue in society. And finally, I want to talk productivity growth because I think it's one of the key variables in as we go forward. And I'm going to just briefly touch on how long the pandemic will last because that again conditions are choices and drives an important variable and economic uncertainty. From the outside, I should say that none of us have got a magic crystal ball, and none of us can know how long this pandemic will last. No virologist of public health expert can tell you that the complete certainty and certainly an economist like myself can't do that. What I do want to emphasize is that as I say this ongoing short run uncertainty does matter, because it conditions economic behavior, and it touches I think on the major issues which I will cover in the rest of the lecture. And I think impacts on how quickly investment recovers and the economy therefore recovers. In turn, as I will tell you later this one packs impacts on productivity growth, and indeed, the public investments we can then make going forward and how we will fund them. I, some of you may have seen if you if you are the readers of the times. And I did an opening a piece on this theme of uncertainty just in the Christmas period. And as I see it as I said in that phases of the covert crisis from an economic perspective. First we had that initial lockdown phase of course where pretty much we had the most severe economic impact. Most activity ceased in many countries. Second we have the intermediate phase of living with the virus and the emerging variants of the virus, and third we will hopefully have an exit and recovery phase. And I believe we're still very much firmly in that second phase of the pandemic a kind of economic limbo, whereby we cannot enter the third phase and recover economies until we firmly distinct extinguish the uncertainty that as the pandemic rumbles on. We'll also have to continue to invest massively. And this is a point I've made repeatedly in domestic testing and surveillance and new therapeutics. Crucially, we will have to try to develop second and third generation vaccines against covert which provides cover against the broader range of possible variants. Or sorbeco viruses might confer some degree, perhaps even some degree of sterilizing immunity because otherwise we simply don't know whether we will get out of all this of this phase. And that will take time in serious investment I think one of the risks actually, although I am commenting here on health policy. One of the risks is that people will say well we no longer need this testing infrastructure we no longer need the surveillance that to me is a real risk because uncertainty can then continue. Indeed, I think we should have learned the lesson by now that there is less of a trade off between health objectives and sustaining economic activity than some commentators suggested back in 2020 when there was big debates about lockdowns. I know you've had some lectures about this in the society and you know individual behavior and persistent caution and business pessimism can significantly reduce economic activity even if they're in the absence of a government to create lockdown you don't need. And it's about how people behave. Now, where does this leave governments trying to manage the second phase of the pandemic. Well in the health sphere as I say that needs to be this real plan to invest in a long term strategy in the next generation of therapeutics and vaccines. This is a global plan for vaccination of course here at Glasgow University we have many experts at this area and I am our C Center for virus research. We play a big role in the lighthouse lab in this space. Additionally, I think we need to learn how to deal with temporary disruptions, if more variants like Omicron and touch wood, not more lethal than Omicron. We need to be able to recognize and which can't be covered by vaccine protection. There needs to be therefore more flexible support for individual sectors, finance ministries and the major industrialized countries by the UK Treasury will generally wish to avoid generalized job protection schemes like the furlough scheme job retention scheme because they as we'll show I'll show you in a moment they have absolutely massive costs. If you have a job loss is in disruption you're probably going to have to develop more targeted and flexible interventions for highly exposed sectors. And third given that the shadow that continued long term economic uncertainty will cast on business investment decisions government will need to communicate clearly and I'm going to emphasize this, there needs to be clear communication around what will be done to manage the economy beyond this Omicron wave. And I'm going to show you a graph later that shows you just how badly business investment in the UK has been affected by uncertainty, actually starting with the Brexit referendum so I'll come back to that. I wanted to show you this graph because although it is about health and not economics, and where we are focused on economics here on our domestic policies. This really highlights the importance of what many people have been calling for, particularly in the health sphere around global vaccination. The OCD's chief economist Lawrence Boone recently estimated that the G 20 had spent $10 trillion $10 trillion, supporting their own economies through coven 19 when actually $50 billion would have ensured a global vaccination program, which is an absolutely staggering figure. And if you see on this graph, it basically this figure it shows you a map of using IMF, WHO data on vaccine supplies, and this is about secured supply so supplies on paper contracts for two doses around the world and you'll see there's some batches of which are not covered most of them, of course, in Africa and low income countries. But this figure pales into significance when you actually look at what might actually happen in practice so this figure shows you as opposed to supplies on paper, what delays may actually happen. What it shows you is as effectively many of these paper contracts are actually already at risk, and many of the countries highlighted in red or yellow probably will not receive vaccine supplies adequate vaccine supplies well into 2022, which is really a disaster in terms of managing the pandemic at a global level. In terms of the economy, what this graph shows is just how significant the economic impact of code has been. It's been the biggest drop in GDP in UK and many other countries, really, in modern times really more since modern industrial times. And although we've now recovered and what these graphs those dotted lines show is that we've these some of these these are forecasts, and we've now moved of course into 2022 and you'll have heard in the news. We've now recovered in some countries are pre pandemic level of GDP number of countries have passed that bit now. But actually, even though we might then resume growth, what's happening is that we've permanently lost where we might have been had a not been a pandemic. So actually we are met permanently poor as a result of this, we can match the growth rate, possibly that we were expecting private pandemic, but you're not going to quite recover the level that you wouldn't be not have been a pandemic. The experience of the pandemic has varied as I said, by country. In most cases as I said it's been very significant this graph shows you what's happened to GDP and employment, the red and the green bars and the blue graphs blue lines are bars are what's been happening to hours work. This graph is a third reasonably well during the pandemic, Denmark and Sweden or that end on the left hand side. As you look at it. Now, as I said, you've got to be very careful to say that this is going to do all the policies. For instance, Denmark avoided, if I just take one of the examples of the countries on the left. They avoided a full third wave by implementing very restrictive measures of the outset, they had a very high vaccination percentage. They use vaccine passports very effectively, and then reopen the economy very quickly afterwards. Now, without it worked in other countries, you can't tell the reality because, you know, every country difference by geography by initial conditions. So you've got to be very, very careful. Those countries that experienced the bigger shocks faced had to then implement really serious furlough type schemes to protect jobs. They had to cut taxes to make sure that businesses stayed in operation. And that fiscal effort has been absolutely huge. This graph comes as sort of shows as a percentage of GDP. The fiscal effort has been across a number of countries with a being the total for the advanced economies. These are, this is a graph for the advanced economies I could have shown you a graph for the low and middle income economies, which should have shown actually a smaller fiscal effort simply because they kind of, they couldn't afford to put in place quite the same fiscal effort. What you'll see is that some of them had less of a fiscal effort they see countries like Denmark and Sweden that had less of an impact so they had to do less. And you'll see some countries, large countries, most of them, although there's a couple of smaller countries there too, Singapore and New Zealand are towards the right of the graph. And they actually implemented some pretty radical spending plans and tax cutting plans. It's the dark bars that are real spending the light blue bars which look quite big in some cases are actually more like loan guarantees so this is government's helping businesses to say well we'll guarantee some of the loans that you've taken out. If you can't afford them will come in and help you. Not all of them have been exercised in fact some of these big light blue bars won't probably cost those countries as much as they look some of them look absolutely normal. So for many countries, you know if you take the USA, the UK, the effort was around 15% of GDP. And this is spending, as I said, along the lines of what you would see in a world war, if you look at World War two UK public deficit deficit spending I think peaked around 25% of GDP. Yeah, it's a sort of thing you would probably only spend a dot those sorts of times. And I'm not showing you a graph on indebtedness. But if you were to look at the UK's net debt to GDP. What this shock has done is has pushed us net net debt to GDP back to what it was in the early 60s when we were still repaying the effects of the Second World War. In other countries, the eurozone is now looking at how it manages fiscal policy. Some of you will know that the eurozone has something called a stability and growth pact, where they have they tend to have they try to encourage countries to have a limit to their debt to GDP ceiling, not all of them have method at around 60%. That's now seen as impossible. Most of the countries involved in the eurozone have debt to GDP levels above that. I think Germany, which started at a very low level probably is one of the ones that's still within the limit but the others are well above that limit. And it does condition future choices for fiscal policy as I said, starting with a much higher level than debt and this means that we need to think much more actively about how we pay for that infrastructure investment that we need to make for net zero health and we need to pay that probably more through current taxes as opposed to borrowing and through future taxes and mortgage in the future. Had it not been for COVID had it not been for the great financial crisis back in 2007 eight and had we'd had lower levels of debt, we might have had easier choices but I think there is no free lunch I think for us in the future. And we'll have to make substantial investments, simply to survive the climate change challenge. And we must, we must have a debate about how we're going to pay for this because we can simply say well, it will be paid for in the future. We need to develop and this is one of my key messages today. We need to develop a fair progressive tax system. And I'm going to come back to that later. I want to talk a bit about monetary policy because during the COVID crisis, as happened during the great financial crisis. Many major economies and their central banks, particularly have used monetary policy as well as fiscal policy to support the fiscal policies to pursue so called quantitative easing or QE for short. Now this is a very busy chart. All I want you to get from this is that just to see just how active it shows you the sort of size of spike shoes just how active central banks have been in supporting our economies since the COVID crisis, even bigger spikes than we saw back in 2007-9. So, compared to even the great financial crisis, this has been a period when central banks have stepped in to help governments fund their deficits. Now what is QE? I could give you a whole lecture about QE and I won't. Basically it involves central banks buying assets, mostly government debt, but in some cases high quality private debt to keep the cost of borrowing low. It helps the costs of funding government as well as protecting consumers and businesses and very high and volatile interest rates. What it does, and that's what that red line on that graph shows you, is expands the money supply as the balance sheet of the central bank expands. So the total stock of QE in the US, Eurozone, Japan and the UK, which is what this graph is capturing, is risen sharply relative to the size of our economies, the size of the central bank's balance sheet. So QE is money creation of a sort, but it is temporary and it's not quite like printing money in the style of the hyperinflations that we saw during interwar Germany or Zimbabwe or Venezuela or other examples you might have read about economies in crisis. Providing that the bank retains control of what happens when the government debt matures and they don't just keep on doing this, if they manage as a matures it says to government, back to you, it's now you have to fund this. And the issue is how you unwind QE how you do unwind this approach and that's what's happening now at central banks are worrying about how to return to full activity as the economies return to full activity, how to control inflation. And that neatly takes us to inflation because the danger is as you is that as activity recovers, we see prices rising. And we are seeing inflation at unprecedented levels, particularly in the UK US and the Eurozone as we've seen from this graph. Last week the Office for National Statistics reported the UK's consumer price index rose to 5.4% and that's the one with called CPI as opposed to CPI H and there's a slight difference as many indices that you can measure this by. The last time inflation was this high in the UK was in March 1992, when it was 7.1% and the rate continues to be well above the bank and it's 2% target. And all of us at all, well, many of us are as economists are asking is whether is this this inflation temporary is a transitory or is it persistent. And central banks have all hinted just how difficult the choices are that they have to make now so at the end of last year calendar year. And how the chair of the US Federal Service says that they have to taper the QE that they've been doing they need to rise raise interest rates. The Bank of England is also said things in this direction, Hugh Pill, it's new chief economist said that, and I'm quoting now, the conditions now existed for him to vote for higher interest rates. And perhaps only the European Central Banks Chief, Christine Lagarde has stuck to struck a more dovish note, saying it's unlikely that the ECB will increase interest rates in 2022, despite the fact that their inflation is above their their target. So the question is, how significant is the shock, and what are its causes. Just to see from this graph just in historical perspective the blip I showed you in the previous one actually is much much smaller than what we experienced back in the 70s and 80s when we had the big oil price shocks and inflation was surging all across the country, particularly in some economies like like our own. But as I said, compared to the current inflation increase to what happened in 2000s. This is one of the biggest shocks in the since the Bank of England became independent from government and indeed the independent European Central Bank was set up as well. The inflation search wasn't unexpected and a number of economists had said this would happen. And the causes of the shock is are multiple. First, there have been major supply chain bottlenecks. The initial lockdown in 2020 cause the slowdown in production in key areas T input areas one obvious example which is much cited as microchip and electronic components. Actually, production was ceased across many factories and as a result, there was a knock on effect on the cost of this key input, the consumer goods such as as they mobile phones as computers motor vehicles. There are still big lags as you know in in if you order a car now if you order a computer in one particular model, or mobile phone you can always get it immediately. Second, or generally, global supply and transport chains were already strained prior to pandemic most businesses over the years developed a highly efficient production model which rely on just in time, ordering of inputs relying on last minute purchases, triggered by demand signals. And we saw the impact in fact of this early on in the pandemic when we can get PPE, because you get a surge of demand unexpectedly and supply chain can cope. And as consumer demand recovered during 2021. There wasn't just PPE or lateral photos, there was everything that was affected. And this graph shows you just how significant this is this is for the eurozone. And it shows you that comparing what's happening now at the end of 2021 rather compared to what normally happened in terms of shortages in different sectors in the eurozone between 2015 and 2019. So, mostly, you will see in a survey of companies you'd see about 10% of them reporting shortages. Now we're seeing, you know, is like motor vehicle manufacturer 80% of the companies experience shortages, and even in food and beverage which is much whether supply chains are much shorter, you know, 20% are experiencing shortages of this type. Another factor is around labor markets, labor markets are tight and a number of economies not everywhere but in a number of economies, and that puts pressure on wage costs jobs were of course protected as I said by government schemes for low type schemes job protection schemes. But we also had some interesting other effects in the US and UK and some other countries. There was a reduction in participation job market participation through early retirement number of people decided to retire. And that was one of the figures. So you saw people in economies that rely on temporary migration, particularly in Europe, not just the UK actually relies on a lot of temporary migration in key sectors like food transport construction hospitality. Even the northern European economies experienced this and of course that stopped in the pandemic creating shortages as well. And there were sort of three, three areas where there was a big impact and then of course energy prices again, due to the fact that Europe started off this winter with very low supply shock supply storage of gas. We've seen big spikes in energy prices due to particular conditions like that. Overall inflation pressures are proving much stronger, much more persistent than expected a few months ago. Now, I think most economists and put myself on that is probably expected that you would you'll see fading of these inflation shocks in 2023 providing, however, that key bottlenecks sees and capacity expands, but there are caveats that prediction won't be long. If, for instance, there's more supply disruptions because there's more on the current type variants causing shutdown across the world and this is one of the problems that the shutdowns are not harmonized across the world there. They're hitting different parts of the supply chain at different points. And of course then you have of course other geopolitical crisis like the crisis in Ukraine and the model with at the moment, which also adds to the threat and it is like energy prices. So if you look at monetary policy respond. For central banks the key question is this actually it's not what's happening to actual inflation. For central banks the key question is to do with inflation expectations because if consumers and businesses. believe that inflation will continue at similarly high levels, as they did in the 70s and 80s so that they think oh gosh, the spike will continue. They will then try to incorporate it into their way they said their prices or into wage claims and inflation will then become more persistent. One difference between the 70s and 80s and now is that actually labor markets are more flexible. In most part of the private sector and many advanced economies actually trade unions have less wage bargaining power than they had. And as much for companies there's much more international competition as a result of globalization. So if you think of a wage price spiral rising prices might simply be absorbed temporarily by both profits and wages, falling in real terms, meaning that it would rise by less than inflation and then the shock disappears and then they catch up over time. The way to look at it is that if there's a cake maybe that's a wrong analogy these days you shouldn't talk about cakes, but if you think of a cake. The shock is basically taking away one slice of the cake and as everybody's fighting over that cake and setting prices and wages. That can actually cause the inflation, but if there isn't a fight that emerges over the cake and it passes then eventually a bit of the slices missing gets put back as prices subside in energy and prices and elsewhere. That depends on COVID shocks supply disruptions being temporary and not recurring. And if both of these happen in the future, then that's problematic for central banks. So I think the key to gauging as to whether inflation means transitory will be seen in future labor market and expectations data. And that's what central banks are looking for at the moment and they'll look at how these evolve between now and mid 2022. If inflation takes root because wage and prices wages and prices continue to rise as a spiral, then you will see interest rates rising because interest rates now are unnaturally low, given the levels of inflation that we have. Central banks would have very little alternative and the danger is, of course, is that you're then back in some of the scenarios that we saw last saw in the 70s or early 80s. The inflation is high. You don't have to raise interest rates to try and get the inflation down. And that of course depresses output increases potentially creates recessions actually try and manage inflation, which is, which is problematic. An issue of inflation and it's an equal effects on society I think takes a very neatly into the issue of how we ensure that the recovery from COVID doesn't increase inequalities in society and I'm going to talk about inequality and again I want to stress and talking about economic inequality so inequality in areas like income and wealth. There are many other inequalities that you can measure and there's inequalities in the health domain which are more qualified to talk about this from some fantastic research that's being done at the moment, including in my own university including understanding the impact of long COVID. And these are just as important of course. And of course I can't give you a lecture on economic inequality in a few minutes. In 2014 I was asked to. This is the Adam Smith lecture back in 2014 I was asked to give the David Hume Institute presidential lecture. And what I did there is I was highlighting back in 2014 just how even before COVID in the shadow of the great financial crisis we were dealing with really severe issues and inequality which needed to be addressed One of my key conclusions then is that we really needed to overhaul the tax and benefit system to create more fairness in society. And I think it's arguably that many of those things that I was talking about then in 2014 and that David Hume lecture actually have been the proximate cause for other crises and economics and politics. I argued back in 2017 when I give a talk about Brexit, which I think is still on YouTube within the Butte Hall that really I think what happened to start meeting real wages and inequality was probably one of the drivers of the Brexit book back in 2016. And I think it's important to know that when you look at measures of income inequality there's some real lessons to learn here. Not all of this happened in the in the 2000s. A lot of this actually predates the great financial crisis. If you look at inequality where things began to turn and become we started getting increasing inequality was actually in the mid 1980s. After a period between 1945, the post war period in the mid 80s when actually inequality economic inequality was generally decreasing in most countries. But there is another important point is not confined to a few industrialized countries. If you look at OECD data, you see that actually inequality rose between 1985 and 2008, not just in countries like the USA and the UK where we talk a lot about it, but also in many other countries. And although inequality is less marked in some countries like Scandinavia, which have more progressive taxation system. Actually, they've only moderated and not reversed the trend, even in these countries will see an increase in inequality. So as a result of this, there's a lot of this trend, I think there's been quite a few radical proposals. Many of you may have read Thomas Piketty's book capital in 21st century and he was looking at again a broad broad historical sweep of an equal increasing inequality again, marking the same trends that things changed around 1980 after a period of greater of lesser inequality both income and wealth. However, as I argued in my David Hume lecture, there are many forces of play here. In my opinion, it's not Piketty it was arguing mainly that is to do with the taxation of capital and the fact that we're not able to tax capital but I think there are more. It's a much more complicated story than simply return on capital story. So let me make a few points. First, I don't think this is just a story about the super rich or the top 1% or a needed top point 1%. Actually, a Swedish economist Daniel Waldenstrom paper in 2021 revised Piketty's data and actually he was emphasizing that there'd been a shift to the situation where private health wealth was mainly held by the wealthy to a situation where it's mainly owned actually by the middle class. So actually two interesting graphs here the one on the one on the right, as you look at it, is showing you that if you look at the top 1% yes there's a bit of a problem in the US I mean there's clearly some science that in the US, the top 1% are getting better. If you look at many European countries, it's more of a story it's less of a story of the top 1%, things have not been getting better this is an uptick there too. But actually what's been happening what's been driving inequality in many European countries, including UK is to do with middle class wealth actually as much as it is to do with the top, the top 1%. So what's been happening with things like housing is to do with things like savings. And, and this would explain, you know, what the different dynamics is in Europe compared to the US. And they also question you know the, I think this data is particularly interesting because I think it questions also Piketty's idea that this, you know it's all to do with one or two variables. And I said that in 2014 I'm going to reiterate it now that I think it's about understanding all the variables here. It's not just about taxation it's also about trying to get some of the fundamentals in terms of economic structures that are going to improve the incomes and wealth of the poor arts and society. And that takes me to a further point. Instead of just focusing on the symptoms of inequality, we, as I say we have to understand its fundamental causes, and we have to act on these. And there's a really interesting book, and quite a big literature that's been built on this, written by Harvard economist Claudia Goldin and Lawrence cats in the 1980s. We argued that one of the biggest drivers and greater inequality in the US after the mid 80s was actually the slowing down of the mass upskilling of the US population. They're saying that you know mass universal free universal secondary education in the US had delivered greater equality and that could be seen in other countries to. But of course then it halted and of course access to tertiary education is pretty expensive in the US it's not free, it's not generally free, and they were argue this was one of the biggest drivers to all of inequality. And their stories essentially that as technology progresses in society. Technological process is what they call skills biased in other words what it does is it increases the returns to those who have higher skills. So actually if you make education expensive if you don't provide free public education. Then what you want to do is actually you're going to bias returns either bias things towards the incomes of the richest part of society. And this is one of the biggest drivers they argued that skills bias technological change is something which has been driving inequality. Then of course other effects is not just about the golden and cats effect. And the other thing that that is that certainly 21st century technologies is showing is that certain models of growth of businesses are highly scalable. It's much easier in the 21st century for a small number of corporations to grab a much bigger share of the total market, the Google's the Amazon's etc. And this trend is particularly insidious because of what it means is that these large companies can shift profits around the world. So we've seen some of that being discussed at OECD level and in fact countries are beginning to act, you might say too slowly. They should have acted many years ago on trying to stop this transfer of profits, so that capital profits can be taxed as well as laboring. There are other explanations cited rising inequalities, and that relates to economic globalization. In recent years economists like Jean Grossman and Hanon helpman have highlighted that although trade benefits and economy as a whole, and Adam Smith but of course emphasize this very point in those wealth of nations. There are also heterogeneous effects that are major distributional effects. These are bad. Some of you may have seen Branko Milano which is famous book, recent book rather capitalism alone. And he's got this famous graph which looks like the tusk of an elephant, which is basically showing you that actually globalization has lifted millions billions possibly out of poverty in the developing world and low income. And that's for that has been actually the incomes have been squeezed for the lower skilled workers in countries in many advanced industrialized countries. And this is probably driven greater protectionism and populism in countries like. What needs to be understood I think this to summarize this point around inequality what needs to be understood is, there is no silver bullet to address growing inequality. It's a problem which has multiple causes and needs multiple cures. Certainly progressive taxation can help as part of any solution countries moving towards more progressive systems can help. Above all, as in climate change we're not going to address these issues with individual national level we need greater collaboration, as we've seen recently with the minimum tax agreement signed between number of OECD countries. And when it comes to global bias technological change, we need to invest in education, public education, as widely as possible. This is something which clearly does benefit those with lower skills, who have went to the labor market with lower skills, particularly technological process continues. So more can and should be done by targeting spending on public goods which benefit building social capital. For example, targeting investment in early years education, increasing childcare support to those who cannot afford to pay for it, tackling health inequalities in early years. Fully integrating the, this is something that infuriates me, fully integrating the benefit social security payments and taxation system. We keep thinking the national insurance and other taxes should be handled separately in many countries and actually national insurance is a tax unemployment. We need to integrate those systems to make sure that you're handling the whole spectrum of progressivity across income levels. Well, you need to also incentivize wealth redistribution through perhaps a greater inheritance tax breaks for donations to charity to try and spread wealth, as I say it's not simply a top 1% issue. Many of these interventions don't fall foul of the usual criticism against higher taxes that are about this incident, this is this incentivizing entrepreneurship and risk taking and overall economic growth it's about trying to create public goods that really do matter. So, and I, I say, I think we do need collective action. So, as I've just explained, we had inequality before the pandemic. But I think the pandemic has made some of these things worse and there have been a number of studies on the economic inequality effects of the pandemic. And let me just briefly summarize I'm not going to go through this in detail because I'm running out of time. I don't want to give time for questions but there's a really good study which Richard Blondell and colleagues at UCL and the Institute for fiscal studies have done with an off field foundation back in 2020 and they looked at a number of effects of, of inequality and what they were saying of the pandemic and the sort of things they were talking about is how it's had a really severe effect both around gender lines, ethnicity lines, and indeed on different socio economic groups that are serious about this we need to make a number of interventions and the kind of things that Richard and his colleagues have highlighted in terms are actually similar to those little things I was talking about a moment ago, and which were present even before the pandemic so you need to reduce the cost of employing people using the tax system, you need to raise public service expenditure and public sector employment. You need to increase funding of retraining programs, and welfare reforms have to lessen the conditionality element, boosting out of work benefits and introducing more social insurance into the welfare system. And this has to be paid for actually through taxation. Very briefly, I want to, before moving to conclude I want to turn to the major issue of productivity growth, and why it's absolutely critical that we address this. What do we mean by productivity productivity is the amount that an economy can produce with a given number of inputs, labor, physical capital, raw materials, other inputs and productivity really matches hugely in the context of post COVID recovery because what this graph shows you for the UK is that things have really not been good since 2008. It's a very differential crisis. Instead of keeping on that trend line that is the line going upwards, we have a big gap shown by the yellow and the blue bars and some small red bars there. And it's a really big issue because actually had the economy continued to grow along that line. The UK economy would have been about 300 billion larger today, which basically means around 11 and a half thousand pounds for each household in the UK. And when you're dealing with issues of inequality, you can see that you have a much bigger cake to deal with that. Now, again, understanding all the economics of productivity will require a whole series of lectures, not just a bit of one. But we, there's some interesting things happening here in the sphere in the UK, UK eyes invested in the productivity Institute to get to the bottom of some of the factors here. I'm pleased that University of Glasgow is involved in this. In fact, I'm pleased to have been asked to be part of the TPI's productivity commission to think about these issues and look at what policies could be adopted. A lot of the drivers of productivity is to do with the yellow bars, which is the bits that we can measure it's called so called multi factor productivity growth is not to do with the blue bits to do with less investment and we'll come back to that in a moment. So it has to do with the things that are missing and it can involve things like improvements in business processes, technological improvements, not permeating the whole of business lack of management quality. It can also be, you know, to do with the quality of capital and machinery. I won't show this graph in detail. The UK is the worst performer since it's not just, it's not just the UK problem, as I said, but the UK is one of the worst sort of patients in this particular productivity malaise. And one of the things I did want to emphasize is that actually what's happened since the Brexit referendum is relevant here because what you see is a great financial crisis really did impact on this graph shows UK business investment indexed to the beginning of the sample but essentially it shows that the great financial crisis hit quite hard and then recovered, but actually, not just the pandemic has had an effect before the pandemic after the Brexit referendum it's essentially flatline. So it's been one of the things that's consolidated the problem. So productivity is the key source of economic growth and competitiveness because it's to do with efficiency of production is to do with a given set of inputs, how much are you able to produce. Now I know there's issues here like the climate change by the way, but, and there's a huge literature I could spend a whole hour talking about how you can actually see increasing productivity and maintain economic growth, this energy intensity and carbon intensities. So actually matters because as we're trying to make more substantial investments and decarbonizing the economy, we're addressing the increased investments in health or social care, and indeed addressing an equality. If you don't have productivity growth you're going to have to do it through pure redistribution. Some people are going to have to be worse off, net worse off in level terms, and that's a more difficult sell to democratic societies. So this is one of the reasons why in terms of achieving a just transition and transition to net zero, we do need to drive productivity. And I was asked to write a report for Scottish government back in 2019 to look at how you could, you know, suddenly innovation policy could be tweaked and changed to try and drive more into that year those yellow bars that multi factor productivity growth. I'll go into the details of that at the moment, but there are a number of things that could be done, you know, including funding more postgraduate study again looking at public funding for that to try and address some of the inequality of access to private courses and because that improves that it's the kind of golden and and cats effect it's to do with trying to address skills, biased technological change and spreading the benefits of that technological change more widely. But it's also to do and let me mention one thing in the connection to innovation. One of the big things that I do say in that report and I would emphasize today. We need to really understand the importance of general purpose of platform technologies. One of the drivers of low productivity case to do with lower levels of digital adoption. And certain companies do extremely well of course they are right up at the leading edge, but many do not adopt even what are now very common digital technologies. So when we look at the next stage of general purpose technologies things like additional intelligence or quantum technologies. Are we going to ensure that we actually are the leading edge. Are we going to ensure that we can take advantage of these. It is general purpose technologies whether it's electricity, or many other inventions through the last two or three centuries that have made a difference in driving productivity growth. I want to finish on one point around climate policy uncertainty because I have mentioned uncertainty before and all this uncertainty matters and I said, and this has been one of my themes tonight. We're trying to get out of the problems of the COVID pandemic if we're trying to give the economy a clear steer we need to have consistent policies. We need to have a reduction in uncertainty and some of that is about fiscal monetary policy management. Some of that is around giving a very clear direction of travel. And that is one of the key messages that also matters for climate change because it's not all about public money it's not all about the fiscal purse. Which I think is really interesting it comes from an OECD study. And it's basically saying it's an analysis of, and this is giving the example of a median carbon intensive firm and a high level, high carbon intensive firm and it's saying what difference would it make if governments had a very clear path for carbon reduction. What investments do these companies have to make in order to survive and thrive. And as you can see, I mean, basically, it could lead to an increase in investment of between seven and 9%, depending on the type of firm, if governments get a very clear line of direction and could find a way of reducing that uncertainty in terms of direction of travel. So let me conclude. The world faces an existential challenge in the 21st century, one which objectively is much more serious than COVID, as we address climate change. And in the cost of the pandemic hot on the heels of the great financial crisis of 2007 eight means that most of the world's economies are now starting this period of required investment in a much weaker fiscal position. And this will require to make some of us to make some really difficult choices on how that transition to met zero is funded. One key point of this lecture I think is to hopefully illustrate to you that the various economic challenges we face all require a sophisticated coordinate and a cohesive policy response. It's not about simple solutions. And in fact, I want to end by quoting Adam Smith and he has some nice quotes in wealth in book four of his wealth of nations. He's suspicious of merchants and manufacturers for what he calls their interested interested sophistry which is all about their self interest, but he also says beware speculative physicians as he calls them will present you a very simple and complex problems like I can't resist this, leaving the EU will solve our problems. But you can think of other examples. But to end on a hopefully optimistic note, you know, tackling the pandemic in our recovery with the uncertainty changes created I think should think and reflect on the lessons learned. As an economist, I really do believe very strongly that strong institutions matter for both growth and prosperity. So I mentioned productivity. One of the things that makes a difference across country in terms of productivity is actually institutions, and it's to do, as you might expect in some cases with some very basic things like the rule of law, applying to all like the balance of property rights, the ability about to balance the ability of individuals to prosper in society through their enterprise with a high degree of mutual insurance fairness and social cohesion. Now Adam Smith was a political economist and he would have said that the pandemic should encourages. You should also encourage us to ensure about how the different institutions in our society are cohesive, fair, and resilient because that is part of the picture. There are no simple solutions to many of these problems. And there are, beware any economist that tells you that pulling one lever will solve all your problems. And on that note, I'm going to stop. Thank you pattern. Hopefully, we can have a conversation. Thank you very much. Indeed, Anton, we'll have some questions. Okay. Okay, I think we'll now begin now with the questions. I'll ask one or two of the online questions first, and then we'll take some live and then we'll come back to the online questions so. So the first online questions is, is it possible to separate out the effects of Brexit from the effects of the virus epidemic. The question was, is it possible to separate the effects of the coronavirus pandemic from the effects of Brexit. That's a very good question. And I think it's difficult to do that in the data the moment because the covert effects warms most of the Brexit effect. The main effect of Brexit which we have noticed as I mentioned was to probably think like temporary migration flow of people to flow of people to in particularly those labor markets that have been impacted by COVID. But there have been one or two quite interesting studies. There was a counterfactual study which was done by the Center for European Reform, I think, which effectively says well what if we hadn't had COVID. Could we calculate how much our trade with the rest of the EU would have been impacted and they came to the conclusion that our trade with Europe is probably would have fallen by 15% of COVID and not happen. You know some of this counterfactual analysis simply by looking at the models for exports and imports. So we do know that Brexit has had an effect on trade. We have not felt that fully and we won't feel that fully until we're out of the COVID crisis. We're already feeling some of the other effects like the fact that we can't find drivers for HEVs, vehicles, etc, etc. So, yeah, you can disentangle it but I accept it's much more difficult because the COVID effects warms everything. Okay, thank you. A question, how difficult do you think it would be or will be to persuade governments to invest more in a global fund, which invests in being better prepared for future pandemics. Well, yes, I suppose I'm starting pessimistic when you see those graphs of the WHO can only be pessimistic. And when you see those figures, you know, 50 billion, which is nothing compared to what's actually been spent could have avoided this. And yet we didn't do it. So what's the tell us that we can do it next time round. Look, I think all we can do is to show the evidence. I think the fact that organizations like the IMF, which is all about fiscal prudence actually used to be about fiscal prudence in the 70s and 80s are actually working together with the WHO and saying, It's in your interest to do this. It's in your, you know, you would want to do it anyway because of what bonds humanity has. But this is actually in your interest to do it. And that's hopefully might be enough to make people think about more collaborative approaches to the next generation of vaccines or of therapeutics or whatever. A question about the built environment and the need to revamp it in order to ensure that there's fresh air inside buildings and that might require huge investment. And the question is our economists modeling and planning for that. Some economists are absolutely I it's not an area of expertise that I have at all. I can't even begin to give you an answer to how much it would cost to completely re engineer all our built environments. I have some idea about what it would take in a university like ours. Look, I think it depends how this virus evolves. You know, if, if we end up developing second and third generation vaccines that actually do suppress the virus. I suspect that problem fade if, if COVID actually has a long tail, then absolutely I think that that would be a serious issue and the adaptation cost will be quite tremendously severe I would have thought in some areas but yeah it depends how this virus evolves but not an expertise I'm afraid. And I guess that we are conflict was preparing buildings to be more energetically efficient, which anyway, I now asked the audience here if anybody would like to ask a question. Can I just take my mask off and ask a question, as I will make my voice heard. The question is, why, when you look to the inflation chart and the other global effects, you never in your whole lecture mentioned China, India, and even Africa. And also, once you could explain, or I'm not an economist, but you said in one of your courses, this equation was able to send to the nations. There were, there were two questions that you want to repeat. Yes, very happy. So it's basically, it's why did I in my lecture touch on some of the non advanced industrialized countries, like India, China and Africa when I talked about inflation. And the second question is really, you know, actually for those who bought property, like the gentleman who asked the question and 70s actually, they've ended up with a massive asset actually inflation didn't impact on that. So let me address both. The first apologies I wanted to give you a bit of a cross country picture and partly because I would imagine most people might be interested in what's happening here in terms of our policy choices. I was looking at comparable countries but yes I could have. I mean, in fact, if you look at the slides that the slides are available online afterwards. So what you can do is you can go into those databases and you'll see actually some of the pictures. What's happening around inflation is it's very valuable around the emerging economies, low and middle income economies, some, particularly South America, Latin America, Argentina, Venezuela are having very high inflation. Turkey is having quite high inflation. That's partly to do with policies is not just to do with the supply shop. I think India is somewhere in between but it's probably suffering from some of the dislocations around transport of goods so it's very, very possible. And of course, one of the issues is that when you're looking at economies like Turkey, like emerging economies like Turkey or Latin America, they all have different institutional arrangements for central banks that which makes it more complicated to compare. Right. Yes, absolutely. A lot of people can make a lot of money. You've actually made my point for me. Inflation is like a tax, but it does redistribute across the economy. So those people who are able to buy property and ensure themselves against higher prices do rather well out of inflation. If you move out of cash, if you have a labor income which is not fixed, you can do rather well. Those who were able to buy into properties in the 70s are doing very well, which is one of the trends towards inequality that I mentioned post 1980. Unfortunately, not everybody is in the same boat if you have a fixed income and very low bargaining power, then actually cost of living is going to put a lot of pressure. Inflation to the IMF this week, put pressure on the UK to say, look, you should target any aid in terms of energy prices and inflation towards those or lowest incomes because they, you know, they're not able to insure themselves against that. People think inflation is painless, but it isn't painless. We know just how much of an impact it had. But you're absolutely right. It did actually benefit some people who were able to protect themselves by buying property, making up some choices, investment choices, but it is very random. And it is, it does redistribute income and wealth as well, which is why in the 1990s, many governments said, look, this is not a policy that governments should drive because they don't have short term political horizon. And we should give create central independent central banks, because this is a ball about taking a long term perspective and trying to keep prices stable, because inflation does redistribute. And sometimes in a random way and sometimes actually creates more inequality. So it's a very dangerous. It's a very dangerous economic variable. And inflation is also about China. And I think one of the things everyone became aware of is with more sensitivity to the interconnectedness of all our economies. And I wonder if you could say whether you think this, they, there might be an opportunity that makes us become more resilient because I've heard reference but I don't know where the data comes from, that there's been more and whether this might be something that could. And also if you looked at your graphs of the European zones all the supply chain problems there I think a lot of that view dug down might become to do with the disruption from China. So, so you're absolutely right. It is to do with, and as I said it was to do with supply chains and a lot of it is to do, not just Chinese the whole of globalization across a whole range of countries in terms of low cost manufacturing being off short, and therefore having very, very sort of 10 years supply lines and you're absolutely right that many manufacturers in those sectors I showed, and are we thinking about on shorting again or at least having much shorter supply lines to avoid answer. And that would certainly have helped. I mean, now, there are two. We, again, since no, you know, we've got to look to the future we're not just looking at COVID. Climate change is a really interesting debate going on at the moment because the World Trade Organization is looking. There are actually two types of effect on the one hand, keeping you know having very long supply lines can be actually quite expensive in terms of carbon usage because you're going to move things one side the other, and back again. But actually, if trade also drives efficiency which means you use less raw materials, which means that's good for climate change so you don't want to return to a very inefficient model having all your production happening in one place so there's some interesting questions there. Again, it's more complicated than we sometimes think. On shorting, yes, absolutely would have helped us during COVID. Will it help us necessarily during in terms of tackling tight climate change or do we actually do want quite a high efficient level of production with less waste. And of course there's also some things there like carbon leakage and things that we need to be aware and trade, but it's your point is really valid in terms of COVID and we need to look at how we need to look at trade and the heterogeneous effects it creates the related linkages, and we need to look at how we want to arrange it going forward because the next challenge is not COVID the next challenge and I say is suddenly climate change and who knows what else. Yeah, I'll take another of the online questions we've got quite a lot so I'm going to try to summarize them. There's a question about whether or not you'd favor moving taxation from earnings and spending towards unerred and hoarded wealth. That's a really interesting question, and it's one actually economists did look at and there was a famous report around taxation back in the 70s called the need report which was looking at the possibility of using things like wealth taxes and I think the problem with that is that wealth is mobile a bit like capital and therefore, unless the whole world moved to that you would have a situation in which people would simply move their wealth around some wealth can be moved but a lot of wealth can easily be moved. I suppose the question is more, do you want to strike more of a balance in this direction and, and of course, you know, you could do that and we do do that to some extent in take housing taxes in the UK. They're not actually as progressive as they might be. They're not based on the value of your house they're based on very rough bandings. What I would say is be very careful though that when you go into these debates. It's not often that it's not just about the very wealthy. First of all, they are often outside any jurisdiction because I say, unless you can get a policy around this across the world, people will just move their wealth around. But in order to get a large enough base you are going to hit a large proportion of population. And the last thing you want to do also is to send to this incentivize savings that was one of the arguments when this was debated in the 70s and wealth taxes. Well, you don't want to stop people from saying I want people to encourage people just to consume wealth because actually that's a bad policy as you're going into a world in which you're trying to manage climate change over consumptions the last thing we need. So, I wouldn't favor all that but I would favor some, some, you know, selective taxation, all things like housing wealth or other wealth which, you know, at the margin you could probably do to try and encourage some level of redistribution. So, again, balance is my answer to the question. And still with taxation there's a question about whether we should change tax so that bad activities that are damaging the climate are taxed most heavily. So that's an easy one I think the answer is yes to that and suddenly, I think increasingly governments have to look at that. And again, to, it's not easy politically. I mean you're seeing the debate at the moment, not only in the UK but the many countries around. Oh well, could we not cut taxes and fuels please because prices are going up and people are being living standards are being squeezed. It's also about you know you have to take into consideration, do people really have choices around some of this and what do you do which again means you could probably do it by taxing bads. So ensuring that you use the welfare system to compensate those who can't afford to consume this bad. It's a really complicated question again but generally yes the answer is you want to go there you want to tax carbon more intensively. But it's easier to do so once you're starting to put in place solutions to to carbon usage as well around public transport systems, you know low carbon transport systems, etc. There's also a question in connection with Denmark, and how Denmark managed to have such a relatively low economic impact. Can you say anything about how I realized that I made a mistake by mentioning Denmark was I needed to then sort up about everything about all I know about actually Denmark's quite interesting because there's an interesting comparison with Sweden because geographically of course they're very close but they also have very different approaches to managing the pandemic where Sweden had a more liberal approach during the first wave and Denmark actually had a stricter approach and actually Denmark initially fared better than Sweden. I think all I can say about Denmark is that they did avoid one of the major ways. And it happened to coincide with a period when vaccines were available so they very quickly vaccinated heavily they use vaccine passports very heavily. However, I'd be very careful in trying to compare things too carefully because it may have to do you know it's a small population, it may have to do with how much you know that that particular wave the third wave they avoid it was seated in the country and whether you know, they were able to climb down very quickly. You know, as I say, it's not going to be easy for anybody to do a retrospective analysis of all this and what could have happened because no two countries were the same in terms of that but I think that's basically what they did they were very very strong, but also they released economic activity. One other thing actually let me give you the example of Germany, because again Germany did rather better than us in terms of economic shadow. We shut down in this country we shut down pretty much everything including construction and manufacturing Germany then they said no that has to continue. It's interesting to me because again, it showed you how there was quite a different approach in different countries and, and, of course, you know, you can't identify it as a simple cause and effect from one or two measures it was the cumulative effect, but the they did all approach it rather differently and as a result with outcomes but I wouldn't were very different I can't you know I can't say they did one magical thing that except as I say, rapid restrictions, comprehensive restrictions, but also a quick release on the end. There's also a couple of questions in relation to the intersection between Scottish independence and economic recovery. That's obviously politically quite sensitive but do you want to say anything about that. I'm very happy to talk about it in neutral terms and I mean I've always done in these instances given my institutional position I've never sort of taken a public position any of this but I'm very happy to talk about the issues that play. And actually there's some really interesting. And there's an interesting set of publications which is partially edited by one of our professors here Glasgow Graham Roy and social sciences. It's a publication called economic observatory. And it's written in late in late versus language. It's actually funded by the SRC as we have communicating economics, economics research. It's a very good series it's all about independence I would encourage you to look at that. And the two trade the trade offs the main trade offs here and whether you believe that actually a major radical change in our economic arrangements, which would need to happen if the Scotland did become independent and join rejoin the EU it wouldn't imply actually reengineering all the economic arrangements. Most of our economic links at the moment I was in the UK with the trade barriers that would appear if we did become independent and rejoin the EU, you would need to be like Ireland you need to be much more connected with EU in terms of trade linkages and economic linkages. And there's some people who would say that's a great thing and that will give us because we'll hitch our wagon to a more rapidly growing Europe. Those who are against it are saying well hold on a second if you're part of a larger country, they're able to share risks more effectively. And actually the UK will make a success of being outside the EU. Those are two of the issues that I play but I really would encourage you to have a look at the economic observatory so actually it's online freely available great publication I tells you what the issues are whatever side of the way to your own. Another question partly related to the climate change issue do you think the pandemic is an example of an ecological catastrophic limit to economic growth is putting the brakes on actually in planetary terms, a good thing. That's a really difficult question I. So I'm, I mean as you'll have done that I'm holding the part of those economists who think there is a path to net zero, which involves being able to do this in a just way and in a way that doesn't effectively require society to completely change what it does because I suspect that will be the cell. There will be of course be to be an impact on our carbon usage but most of it was a really interesting lecture given of the University of Glasgow recently by Chris Stark of the Climate Change Commission showing that actually the kind of investments we're talking about in order to transition and zero around 4% of GDP per year. And most of our countries is actually do it is do and that will drive with the technologies that we already know about could drive us towards net zero without effectively saying stop growth that the problem with stopping growth dead is and then we're not necessarily solving the climate catastrophe because as you're aware even the current levels of CO2 emissions and I will not solve the climate problem and therefore how do you fund those technological changes that are going to drive down emissions. And secondly the redistributive consequences are so stark that I suspect you will simply not get consensus either our democratic societies or even in autocratic societies when you get consensus on trying to do something about climate change so I suppose I'm, I'm, I'm in the tribe of economists who thinks that actually trying to channel the technologies and productivity growth to help the transition is the right answer. And because I think stopping everything dead doesn't actually get you there but I know there's people with the views of this. The audience. The online audience, because we're running out of time I'm sorry you might be able to catch Anton at the end. There's a question then about the questioner is asking that as an exporter of machines. He knows that the periods of return on investment in the UK and the United States are about 18 months, but in Germany, maybe three years. In five, why is that, why is it take, why is it return expected to be so much faster in the UK. That's a good question. And I suspect the questioner is asking really about the way in which companies are managed in with multiple patient capital baps in Germany and Japan and the US and UK and, and that's to do with the, probably with the ownership of these companies. And it's a fair, it's a fair point and maybe to do it's probably to do that. It's probably something which has helped countries that have more patients capital take a long view on investment so yeah I would sympathize with that I suspect that that's what, that's what's driving the data he's citing. We're running out of time I'm just going to ask you. As a question you mentioned three economic phases to the pandemic. And the third one was an exit phase as opposed to the live with it phase. Do you think there really will be an actual distinct exit phase. Good question. I think it depends entirely on how the pandemic and doesn't mean vaccines end up being effective against further variants. The variants continue to be like all the crown which is that they have, you know, less lethal to a vaccinated population then I suspect there will be gradually an exit. And there will be attention given to other things, not least because and again this is not my area of specialty but I know from talking to many of our medical experts that there are many other health issues which have been essentially supplanted by the pandemic and these will come to the before I mean people will will ask for a rebalancing of different harms and we're having that debate at the moment, certainly in Scotland in the health zone. So, so I think there will be an exit phase, however, you know, also tell me we've been lucky so far because actually many respects. Despite that, you know, it's been such a terrible devastating disease. You know, we could have had a variant that was much more lethal and just as transmissible as some of the reasons so actually, you know, and nobody can tell us whether a variant like that will emerge in which case, and that phase three is a long, long, long way away. Let's hope not I'm going to touch with I'm saying I'll just ask one final question of my own. This is about intergenerational justice in this pandemic. A lot of economic impact and loss of opportunities has been faced by the younger generation, rather than the older generation. And in terms of these lost economic and so many other opportunities, how can the economy help young people in particular. That's a really good question. I wasn't able to spend as much time actually on that study by Richard Blundell and colleagues at UCL and my face I would encourage you to have a look at it if you have a moment it's written in quite non technical language is online. And as you say, but I mean, it's there's the, there are many losses that we're only beginning to measure, you know, learning loss in schools, which is not impacting equally on all children. We have less rental support who tend to come from order price so she can improve so it's going to embed those inequalities going forward. Given everything I was telling you about skill, you know skills bias technological change and all that. That's going to become even more acute in the future with those generations. The only way you deal with it is through in terms of intergenerational fairness is to invest in things like education. And I'm afraid that's going to have to be paid by those parts of society which are tend to be the older generations with higher incomes and higher wealth and I think that's one of those things that has Richard and his colleagues emphasize can help to level the playing field. Okay, we run out of time and apologize for questions that Anton has not been able to answer either from the audience here for the audience online we just don't have enough time. I should have said at the beginning that I'm my name's Pat monahan I'm the president of the society, and I just slipped off the screen a little bit to put on my presidential chain of office slipped into something not comfortable I might say. But I now have the pleasure of thanking Anton for a very interesting lecture he took us through a lot of ground about economic policies nationally internationally, how it intersects with the climate crisis that we also face. And that was all very interesting and thank you very much indeed. And Tron for doing that for us. And what I'd like to do now is to present you with the society's Adam Smith medal. You do get to keep it so that brings with not that strapped economically back off you. That brings this evening session to an end. I just like to say that the next lecture which is on the 9th February which was to be given by Helena Kennedy, unfortunately due to meetings of parliamentarians can't quite think what they've got on their mind at the moment, but anyway, she's not able to come to Glasgow, then. And so instead, we have an alternative lecture from the director of Scottish opera, and he's going to talk to us about an enduring art opera in Scotland. So I hope as many people as possible will be able to join us for that so thank you very much. And good night.