Online Dialogue "The global scene in times of uncertainty: economy, society and technology".

Summary:

On 31 May, the Rafael del Pino Foundation organised the dialogue "The global scenario in times of uncertainty: economy, society and technology", with the participation of Roberto Rigobón, Society of Sloan Fellows Professor of Business Administration and Professor of Applied Economics at MIT Business School.

When the Covid-19 crisis broke out in 2019, we were coming from a period of great success, with high economic growth, low inflation and unemployment and interest rates rising very slowly. Covid-19 was a public health problem. Most countries reacted well, using management to reduce global contagion, giving subsidies to companies in Europe and to citizens who were confined. They also used every incentive to develop the vaccines in record time and their distribution was not through the markets, but was given first to health workers, food servers, educators, and then to others. It was an extraordinary example of public management.

This process had economic costs, which we are paying now. Public debt increased. We also have inflation problems, because some countries gave too much support, although this is preferable to giving too little support because then people die. There were also political and social costs because the management of the crisis had political and social costs because people's rights had to be limited. The damage we would have had with Covid-19 would have been extraordinary. Eight hundred million people would have had to die, so we got it right. It was a health shock, not an oil shock, a financial crisis or a political problem.

The situation is now very complicated because we have high inflation and we are on the verge of a recession. In developed countries, inflation is above 4% and we can no longer blame it on supply disruption, but on excess monetary support. And it does not seem to be coming down much. To get to 2% inflation, central banks would have to raise interest rates further, which would cause a recession. So they are being prudent. They are acting in the right way. What is being done incorrectly is fiscal policy.

In order to bring inflation down, the central bank would have to trigger a recession, which is very costly for the world. That is why they are being cautious. What is needed are reforms that come from the fiscal side. What is important here is innovation. For example, making labour markets more flexible. That is what is missing, someone who is dedicated to thinking about the problems of each country, because each country's problems are different from the others. The central bank is not going to solve these problems because it has to fix inflation. The mistake we are making is to trust that the central bank is going to fix everything, when what we need to do is to solve the problem of polarisation in the countries, to solve the problems of internal competitiveness, such as improving the education or health system. That is what will solve the problems of recession and inflation. Central banks do not have the space to do this quickly because they are immediately questioned. If inflation does not come down, that is very costly for the poorest in society, for those who earn less, for the unemployed. We are not doing our job on that part.

I wouldn't be too worried about England playing the fool. The English are experts at getting out. They love to get in and get out. What I would do is use this to rethink the rules and norms in the EU. The fact that Britain has left means that some member is rethinking the cost of the union and this should be looked at.

In the Greek bankruptcy it was very interesting how the EU reacted, with a financial reform and a single regulation, which is very good for a monetary union because it makes it more robust than having different regulations. It was not thought that the crisis would discipline the Greeks, but that the reform had to be done because if someone does not have discipline, it is going to be transmitted throughout the financial system and that financial system is not totally robust. In Brexit it is worth judging the internal rules, asking what is being done that is perceived to be very costly and see how we can solve it. If there wasn't that, people wouldn't be against it. What can be improved?

The Ukraine case I would use for another topic. It is very frustrating that this is happening. It is very clear that it is better for Europe to act as a bloc than separately. Europe accounts for 30% of the world's GDP and therefore it is important for it to act as a bloc. In the past it was clear for Europe that it was better to be together than separate. But, over time, this view has been lost and people are beginning to think that it is better to be separate. This is what has been discussed over the last decade in Europe. Ukraine should show Europe why it is worth being together. There is a difference between autonomy and isolation, they are not the same thing. Local governments have to be autonomous because local needs are different, but that is not isolation. There are local problems that require local solutions, but there are global problems that require common solutions, such as the environment, immigration, energy independence, defence. We need to see what we can change so that the second Putin does not come and do the same thing.

We have a couple of short-term economic problems, but we will get through it. The biggest challenges and risks we have are to our success as a species. Life expectancy has doubled in the last ninety years. We have to change social security, because the scheme we have is for a life expectancy of 40 years. This success has a cost in our social network, in our health system. In the past, people died very young. Today they don't. The cost of the health system has changed, but the system has not. The cost of financing has to adapt to that. These are difficult discussions within a society. These are the big challenges because, if not, we are going to have a high degree of social dissatisfaction. How many people over 65 are still useful? To think that people over 70 are completely useless is a total mistake. Nobody is thinking about these issues in Spain. Young people can find a way to use these human resources in a better way. Older people can give good lessons about life, how much success depends on that process, why they feel fulfilled. That mentoring is not happening. In the world of the future we are going to need more of that because we are going to need to be more flexible as workers.

Europe has to rethink its role in the world. When there is a bad president, the US throws him out. In order not to have to deal with refugees, the US leaves them at home. Europeans think the problem is solved by absorbing them. The problem is solved with both tools. Someone has to have that empathy with the people. Europe has to have that conversation. Does Europe want to continue to support those values or not? It's something that has to be solved collectively. We can't keep extending the retirement age, we have to rethink it starting from scratch to redesign the system. The challenge is to make those decisions in a very polarised political situation.

Artificial intelligence is another of the big shocks that are coming. We are a very fragile species, but we have the intelligence, which allows us to complement our physical weaknesses with technologies. We use technology to complement what we do, so we become more efficient, we have better standards of living. We have used technology correctly because we have found how to complement it. But in every transition it was difficult because there were people who had to reinvent themselves. We did it through several things. First through the education system, making it evolve with the needs and the opportunities that were there to complement the existing technologies.

Artificial intelligence is affecting another aspect of our lives, which is the cognitive part. Computer science is based on the assumption that if something can be explained, it can be encoded. Now it's if I repeat it, I can code it. Artificial intelligence has made it so that repeated actions can be encoded. The question is what are we going to do when AI replaces repetitive tasks. There are several things that can be done. One is to stop the technological process. Another is to compete with computers. The last is to be complementary to them. This is the one to choose. There are aspects of human beings that are irreplaceable, such as human contact. Those aspects of presence, of hope, of thinking that something can happen when the probability is zero. The computer has no hope. Nor creativity. Art, music, is not repeating something, it is not combining something; it is something very special that human beings do and it is complementary to technology. We have to change our work projects to change them in those aspects that are complementary to technology.

Transference happens when someone inspires someone else to do this transference. There is going to be a need to relearn, so life has to be reorganised. Re-education should be formalised in the middle of working life. There should be times when you can enjoy your life, think about what you want to do with the rest of your life, what is your role in your community.

People know that they are upset with the current situation. If we don't start having these discussions, we are going to have a social revolution that will force us to change. The education of people in their fifties was designed thirty years ago with what was needed then. Some have been able to reinvent themselves in their jobs, which is where they learned the 90% of what they use. But that system requires you to be lucky enough to have a job and someone willing to train you, a mentoring system. This is going to be very expensive, because if people have to pay for it, it's going to increase inequality. This has to be a solidarity system.

The impact of the environment is more than CO₂. We measure everything too late, be it biodiversity, women's inclusion. I'm trying to see how you can measure the SDGs before the problems occur. What is being done so far is that companies are measuring themselves and then sharing the information. This is happening because there are people who think this is very important. This is an extraordinary opportunity. But what cannot happen is that this is used to lie more, to manipulate to make themselves look better. Regulators are focused on measuring things that don't reflect the real problem. What is important is to understand the context in which the event occurred. Just because there are women in the company does not mean that the treatment they receive is right. This obsession with the outcome is a mistake. What needs to be measured is the intention, the context in which events occur. The problem with oil companies is not that they produce CO₂The problem is that we can't live without the petrol they produce. So we have no choice but to buy what they sell. This attitude that says we have to get rid of the oil companies means we have to live without aeroplanes. The regulators are looking at this in a short-sighted way. Oil has huge costs, but it brings huge benefits to global societies. To think that we are going to deal with CO₂ like arms trafficking, it's not the same, because we have to understand the benefits of that CO₂. We have to translate this into statistics that are meaningful to the problem we are dealing with.

We are working on the margins of what we have done in the past. We have to rethink the issue, but that requires a lot of courage, effort and collaboration. What it does not require is stubbornness, ideology.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of their authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.

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