 So welcome everybody to this panel retooling the economy, the future of monetary, fiscal and competition policy. Hopefully we're going to have a fascinating 30 minutes before we reduce the size of the audience here. My name is Geoff Cutmore. I'm very pleased to be with you and to be helping moderate and guide the conversation here. I'm from CMBC and do the regular squat box program every morning. Let me introduce you to our panellists. Alex Cobham is with us, Chief Executive of the Tax Justice Network here in the UK. Ray Newton Smith is the Chief Economist for the Confederation of British Industry, or the CBI as we tend to call it here in the UK. She's also a young global leader and Raghuram Rajan is the Catherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. Many will also know him as I think the Chief Economist at the IMF and previously the Governor of the Reserve Bank of India. And let me just apologize on behalf of the Minister of Finance for Ethiopia, who I understand is detained and unable to join this conversation. So we wish him well, but we will push on regardless. So thank you everybody for taking the time to join us on these very important questions about how we steer the world economy forward and how countries try to deal with the pandemic with a combination largely of monetary and fiscal policy. And Professor Rajan, I think it would be appropriate if I could come to you first off, given your background and your current role. What do you think of the efforts that have been undertaken so far in terms of monetary and fiscal policy? Have they been implemented as efficiently as they might have been? Or do you think mistakes have been made along the way? Well, it's too early to tell about mistakes. But what is clear is many countries have placed massive amounts of resources to work to try and preserve the capabilities of the economy. And I think it's important to recognize that much of the spending has gone towards trying to keep firms alive, to keep households together, to put food on the table. And this is necessary to make sure that the economy is able to survive the period of lockdowns and so on as we fight the virus. And, you know, unfortunately, we're seeing a recurrence of the virus across much of Europe. It's coming back in a significant way in the United States. It never actually got down to the levels it got in Europe. And so the fight is still going to be there for some time. Lot of hope that the vaccines as well as potential better testing, better treatments are on their way. But by most calculations, this is going to come perhaps by the middle of next year in full measure at the earliest. And so the challenge for many governments, for many central banks is how can we keep this level of support alive till then? Because it's extremely expensive. Many percentage points of GDP have already been spent. And to keep it at this level would require as much if not more. And so the challenge is really how do we target better while focusing on preserving the capacity of the economy, but also not standing in the way of necessary change. If the pandemic has made long-term shifts, we should allow those shifts to take place rather than freeze the economy in a status quo situation. So these are really the big challenges that policymakers have. So far, huge amount of effort, much less in emerging markets which don't have the capabilities or the buffers that industrial countries have, and significantly less in very poor countries. Just on a point of principle around the implementation of monetary policy and not to get too pointy-headed about it because it's a very short panel discussion, but it's the argument that as long as there is no evidence of inflation we can continue to push the boundaries of monetary policy with negative rates and purchasing of bonds or equities, is that the right argument in your opinion? Well, first I think that we've gone beyond that, right? Now we're willing to see inflation even go beyond our target for a little while. So we're willing to tolerate more inflation. Central banks have become even more accommodative. But the real question they have to ask themselves is what kinds of policies help and what kinds of policies hurt. As far as negative interest rates go, the jury is still out. In fact, Sweden came back pretty rapidly from negative interest rates and is not going there again, perhaps because they feel it wasn't that successful. On the broader issue, I mean where the central banks have particularly invested efforts, this time around which they did in the last time, is credit, especially to the private sector, especially to small and medium enterprises. And again, varying degrees of success there. And they will have to ask the question, how long is this going to be useful? And at what point does it stand in the way of change? Are we feeding too much debt into the system? Is it time to feed some equity into the system? Is it time to perhaps let some entities close so that their resources can be repurposed elsewhere? These are the questions after that first wave of support. And as the pandemic seems longer lasting, that central banks and the governments that are backing them with some of these credit guarantees will have to ask. Is there too much debt in the system? Well, there was too much debt in the system to begin with. Now the question is, if we have a pandemic, should we start, should we keep asking questions about debt? I mean, this is clearly what constrains many emerging markets. They fear that if they blow their fiscal deficits in a big way, they're going to have the markets turning against them, which may lead to, you know, a much worse situation. Remember banks hold a lot of government debt. If the government debt plunges because markets don't trust that it'll be repaid, that the debt is going to go into default, then you have a banking sector problem. So you have to be careful. But I would say the onus right now is on protecting the health of the economy to make sure it can come back rather than perhaps nickeling and diming at the margin. Rain, just to focus on the experience of the UK, but please feel free to broaden out to give an international perspective if you want to. We have a situation where we've seen the monetary authorities engage. We're not at negative rates yet, but the idea is being floated, as we know. In fiscal terms, the government has also been very supportive. Rishi Sunak has bent over backwards to try and keep people in work where possible and try and keep some pipeline of capital to businesses, small, medium-sized, and industries that have been particularly badly affected. Do you feel, though, that enough has been done in rethinking structural shifts in the economy as we go forward? We have this wonderful phrase from Boris Johnson about build it back better, but we're not quite sure what that actually means. Yes, and I think the jury's still out as to whether Boris Johnson was the first one to coin the build back better moniker. I think, look, building on what Professor Rajan said, I think the support we need in this next phase of the crisis is a lot more challenging and absolutely does have to be more targeted, but I think more broadly it is still a fiscal policy that has to do the heavy lifting, obviously across central banks. They are looking at more innovative tools, negative interest rates might be something the Bank of England considers, but I think we're very unlikely to see that on retail deposit rates. I think the heavy lifting still has to be from fiscal policy. Maybe I can just share a few reflections from my role at the CBI. We represent businesses from across sectors and regions and in the UK and really my role is to help shape economic policy across the board between the Bank of England, our wider ministries, and also the wider business community. I think what we've seen in terms of policy so far was absolutely about using the financial system to build a bridge to the other side of this crisis. Some of the gaps that we saw emerge right at the beginning which we had to fix was about how do you make loans to businesses that have maybe never, ever taken a loan before because I think different to how it was in the global financial crisis where the crisis started in the financial sector and then rippled to the real economy. Here you had a health crisis and the way we needed to address that really had an impact on businesses across all sizes. I think many advanced economies have really had to think about how do you get lending out to smaller businesses in the UK? There's five and a half million businesses that have fewer than 10 employees. Many of those maybe had never, ever taken out a business loan before so it was trying to find those mechanisms. Of course the other big piece was about supporting jobs and in the UK we didn't have a Curb-Weitzer scheme like we've seen in Germany and if I can take some positives around this I think you've seen people look globally, look at schemes in Germany and France and think how can we learn from those schemes and how can we implement something that's different but similar in our own countries. In the UK you've seen the job retention scheme that's been hugely effective, supported over nine million jobs but these schemes have been hugely expensive. As we move to the next phase of the crisis we do need to allow more adjustment in the economy. We need to see a more dynamic response and that makes the decisions I think from here on in more difficult. I think if I could highlight three things that are really on my mind where I think we need to learn some more lessons. One is about this broader issue of competition. We've used our financial system as it is to build a bridge to the other side. I do think at the moment and our traditional banks have been hugely important in delivering that but I think it's been harder for some of the fintech businesses, for some of the innovations we've seen in the banking sector to compete on the same terms as some of those larger banks when we've been using these lending schemes and how we make sure that we aren't unintentionally shutting the door on some of that competition. I think that's an issue in the UK and I think it's an issue in other advanced economies and there could be an unintended consequence. I think the second issue is absolutely thinking about how we focus on investment in some of the long-term issues we know we need to do. What are the no regrets action that we need to be investing in now where we're not seeing enough investment and of course that's about the transition to a low carbon economy and there's so much we could do in the UK it's about looking at energy efficiency in our homes and how we invest in that or more broadly how we invest in renewable energy and how we invest in the future of mobility and making that low carbon. That is something so many countries need to make the transition to. We need to get those investments going which is a combination of public and private finance and I think having that it's short-term action that drives that long-term transition where I think we do need to see more in this next phase of the crisis and I think the final bit that's sort of missing for me is also thinking about how we can learn better from across the different experiences around countries not just in handling the virus. I think there's been great sharing on medical expertise on how we treat the virus but thinking about testing systems, how they work in different countries, how that affects the R rate and other ways in which this virus is transmitting. I don't think there's enough of sharing of learning and shared understanding about those testing systems, about some of the trade-offs. I've never think it's sensible to say it's health versus the economy. It's really a matter of thinking about different choices on health across the board and I just don't think we have enough shared understanding and learning between health ministries, business and finance ministers and almost international trade and I think we need to bring together more of that thinking in the next stage of this crisis so that we can all truly learn to build back better. You've written passionately about the need for innovation and innovation as a way out of the woods ultimately and we hear talk from different vested interests about maybe the green economy could be a good way of moving forward or we need to embrace digitalization, for example, just focusing on innovation for a moment. Governments have a bit of a checkered background being heavily involved in innovation in inverted commas or helping technical businesses and industries move forward. Can I just ask you to be very specific for a moment about what you mean by innovation and how that is going to evolve and take us out of this given that we've all become Keynesians and want the government heavily involved in all sectors of the economy now to save us? So to my mind there's sort of two different elements. One is at the sort of smaller end and smaller businesses and how do we help them to innovate out of this crisis and it's something we're very much talking with the government at the moment so one of the challenges in the UK is there's lots of readily available technologies whether you're a smaller businesses and need to build out a better website to have a takeaway presence if you're a restaurant or whether it's just having a better system to manage your clients as you are a small and growing business. There's a lot of readily available technologies that smaller businesses don't really adopt and I think there is a real role particularly now as these businesses are incredibly credit constrained to have a proportion of grant funding to help them have a productivity voucher to really adapt to this new normal because we need to see that innovation happening at the smaller end and then at the much larger end I think it's absolutely about if you think about you know over the longer term we do need forms of carbon capture usage and storage that's where you're taking carbon out of the atmosphere and storing it and potentially using it that is hugely capitalally intensive technologies it's very high risk so that's where I think if you just leave the private sector alone to invest in that you're always going to under invest so I think there's a role for having you know across Europe you've got the European investment bank in the UK there's potential for an investment bank to help catalyze some of that investment you will also then you need to crowd in the private sector investment but I do think it's one of the areas where having public and private investment working together can really help to deliver some of those large-scale technologies and of course we need to see that happening not just in the UK but of course in other countries around the world. Alex let's talk about the opportunity here for you because we've discussed monetary and fiscal and where that's going and we've talked a little bit about competition policy and innovation and the opportunity for the private sector and business I think as far as your focus is concerned we have an opportunity in a crisis to implement some structural changes that would both be better for communities inequality and a more equitable distribution of the profits of economic activity. Do you think governments are going to take that opportunity now or do you think we're going to miss it again as we did back after the global financial crisis? I'd say we're on a slow road and that's continuing through from before the crisis learning more about the extent of corporate and individual tax abuses just how big the revenue losses are from each of them compared to the kind of public spending needs we have but in this crisis you know what we're saying this is a crisis of inequality the countries where the pandemic has hit hardest are the countries with the deepest inequalities that have done least to respond to that we know that people who have to go out and work because they don't have any kind of buffer are most exposed and that's people in lower income jobs in a country like the UK there's a very strong element of the effectively the embedded racism that's in our economy playing out in racial as well as gender impacts of that and we can see by and large that countries that are able to invest to protect particularly the poorest are the countries that can return to growth that can control the pandemic so we have countries of which Zambia is perhaps the the most worrying example where the ability of governments to access debt is in question and therefore there's a real role for the international institutions to come in and support their access to capital and make sure they can take the measures they need to take to limit the damage of the pandemic and in countries like the UK where it's really a you know there may be consensus among economists that the way to protect the economy is to protect public health but policymakers don't seem fully to have got on board with that and the extent to which they're willing to take measures to protect those on the lowest incomes seems clearly insufficient but on the tax side and I realize my role here is to be Rutger Bregman and say tax tax tax which you know is more or less what I think the answer will be we need to think about two stages there's a stage now where most businesses and most normal income earners are under great pressure and we shouldn't be thinking about additional tax measures for them at all but there are people and companies where we can be thinking about tax in particular those with the broader shoulders so we need to be looking as a number of countries beginning with Argentina are now doing at wealth taxes thinking about who has major assets that can be used to support the responses governments need to make and then looking at excess profits taxes although many businesses are struggling in lockdown a number of them Amazon being an obvious example are doing exceptionally well not because of anything they've done cleverly but simply because of the massive state intervention of lockdowns to protect public health that have created these excess profit opportunities the excess profits ought to be being taxed at levels of 75 percent or higher simply to put that money back into public funds this is not earned profit this is excess and should be treated as such but we need to do that in a way that aligns with the second stage the longer term building back better if you like which will involve bringing through and I think this is what you know as your question suggests there is a growing public appetite and a policymaker awareness of the opportunities to say how do we tax particularly multinational companies so that they're on a level playing field with small domestic businesses rather than effectively being subsidized because they can dodge most of the most of the taxes they should be paying and that means making sure we have an international tax system that allocates profits according to where the real economic activity is not where you can shift it through transfer pricing but where the sales take place and where the employment is that's what the OECD is very very slowly moving towards now I think we may see that process shift to the United Nations just because of the frustration with the OECD's failures and that will give it a more globally inclusive negotiating base so I think over the next two to three years we're expecting really to see some of that progress come through generating revenue revenues in a way that allows us to address the major inequalities that the pandemic has laid bare. Alex do we need though the big breakthrough in the United States I mean back in I think it was January of this year I sat on a panel with Treasury Secretary Mnuchin that broke out into a squabble over digital taxes and the threats to the UK Chancellor of tariffs on auto exports from the UK and from Europe if we have the audacity to impose unilaterally taxes on American digital companies I mean without a change in the political wins in the United States and some buy-in that broader issue of digital taxes on US businesses is not going anywhere is it? So I think everyone is kind of interested to see what happens in the elections but actually on this issue and this is probably in a minority of one the tax justice movement is somewhat aligned with the US Treasury at the moment in the following way the digital tax effort is really misplaced it is true that the digital companies you know Amazon and Facebook and Google and so on have been more extreme in the structures they put in place in order not to pay tax in the places they're actually making their profits but they're only outliers they're not categorically different pretty much all multinationals across the world have been moving in the same direction over recent decades on our analysis for US multinationals in the 1990s only about five five to ten percent of their global profits were being shifted into tax havens by the end of the financial crisis that's risen to 25 to 30 percent so this is a problem that's exploded and it's across every sector so what we need and in this sense we would agree with Mnuchin it's not a solution just to look at how you tax the digital companies we need to look at how we're taxing all multinationals and we need to say look here's your global profit if 10 percent of your employment and your sales is in the UK then 10 percent of your profit should be being declared there for tax purposes and we cut through all of the transfer pricing all of the intellectual property gains and I think that is where things are going we're stuck at the minute at the OECD because they've tried to kind of ride every horse and it hasn't worked so it's really the process has kind of fallen apart and that's why I think you see this shift now to take it to the United Nations unless the OECD can pull a rabbit out of the hat and honestly it's not really clear whether they have a better chance with a Biden administration that will need time to work out what its priorities are and how it wants to deal with multilateral processes or a Trump administration which for all its faults at least has finally thought about what it wants on digital I think you know we'll we'll see this develop in either case Professor Arjan just to bring that to you obviously we're a couple of weeks away from the US election here and in so many spheres of policy making there could be a meaningful change I think if we get a political shift as clearly you understand do you think that we should be preparing ourselves for a reset or a shift in the way that we see the United States engage on so many of these policies not least tax policy which Alex has talked about Well certainly if if there is a change in administration I expect we will certainly see a change in the way many of these issues are discussed globally as well as potentially some greater US leadership but you must remember also the US has interest it is not in the US's interest to see some of these large digital platforms which are in a sense US champions be taxed to high heaven elsewhere in the world so I would be surprised if they go to that extent of shifting 180 degrees on what the Trump administration has believed I do think I agree with Alex there is room for better taxation of multinationals that it is the fair thing to do and it is something which needs some kind of a global consensus because there's so many places where it can be hidden and the principle of taxation is always spread it as widely as you can so that everybody pays a lower amount rather than have it concentrated so that it distorts but I do hope the US engages much more in that global dialogue and there's plenty of scope for doing more I think the mood in the Biden administration will certainly if there is a Biden administration will certainly be on how do we spend more where it is relevant and that's that's a point that I want to emphasize we need to improve the quality of our spending also this is not an argument to say no don't spend but how do we spend we've talked about education for so long how do you spread education more beneficially to the segments of the population who aren't getting it how do we focus on early childhood education I mean those are issues which we've talked about for 40 years we need better solutions and so thinking about a revolution in spending even as we're thinking of raising funds I think is extremely important I would say there's probably much more scope for decentralizing one last point just to react to something that Ms Newton Smith said I do think this is an opportunity potentially to reset but I worry a lot about incorporating the terms of the reset in any kind of government help because it seems as if you know if you have if you want to go green getting the weakest firms that you're supporting to make significant green investments is one additional constraint over and above the fact that they're struggling to get back into business etc so one has to be careful that you know these kinds of arguments should be I think used more widely business as a whole should go more green which means more broader rules governing what what business does but government support has to balance this idea of we're trying to support the weak get back into the mainstream and putting a whole lot of additional requirements at this point some of which may be not applicable to a healthier firms in the industry might in fact hold back the recovery so I just a point of caution I agree with the sentiment but the broader point of caution let's not put too many sort of constraints on the support make sure it's targeted make sure the private sector pays make sure stockholders and bondholders pay but but don't require too much well we're going to wrap up the public set segment of the conversation at this point but if you have top link and you're a top link user then please stay with us because we will continue privately on top link for the next 15 minutes or so so thank you everybody if you've joined us on the public side of this conversation