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Three Perspectives On the Biggest Issues at Davos · Stephanomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you. This week, we're up a mountain
• 0:14
  Speaker 1: in Davos for the World Economic Forum, that famous and
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  Speaker 1: infamous gathering of the global great and good now celebrating
• 0:22
  Speaker 1: its fiftieth anniversary. That's fifty years of talking about the
• 0:26
  Speaker 1: world's problems in the middle of the Swiss Alps. Who
• 0:28
  Speaker 1: would have thought it. This year, climate change has dominated
• 0:32
  Speaker 1: the agenda and ten teenage environment activists were invited to come,
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  Speaker 1: including Greta Tunberg. There were also a hundred nineteen billionaires
• 0:42
  Speaker 1: and many many chief executives and bankers. But luckily, tackling
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  Speaker 1: global inequality has also been high on the agenda here,
• 0:50
  Speaker 1: so you can stop worrying about that as well. I'll
• 0:53
  Speaker 1: be talking about the potential physical and social impact of
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  Speaker 1: climate change with the director of the McKinsey Global Institute
• 0:59
  Speaker 1: later on, and I'll be asking the leader of one
• 1:02
  Speaker 1: of the world's biggest trade unions, Christie Hoffman, how she
• 1:06
  Speaker 1: would make the world a fairer place. But first I
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  Speaker 1: wanted to catch up with the Davos veteran attempted to
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  Speaker 1: say the Davos Institution, so Dr Jacob Frankel is a
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  Speaker 1: very distinguished economist and former colleague of mine at JP Morgan.
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  Speaker 1: He served as chairman of JP Morgan Chase International since
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  Speaker 1: two thousand and nine, and before that, among other things,
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  Speaker 1: was Governor of the Central Bank of Israel for nearly
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  Speaker 1: a decade. Jacob, love you to have you on Stephanomics.
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  Speaker 1: It's been fifty years they've been holding the World Economic Forum.
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  Speaker 1: You just told me this is your thirty three say.
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  Speaker 1: I'm struck how the economic debate here has broadened in
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  Speaker 1: the past few years. Most of the people I've spoken
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  Speaker 1: to here, and indeed the speaking to it for the podcast,
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  Speaker 1: and not focusing on just the narrow macro economic issues.
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  Speaker 1: They're talking about the environment, about populism, about social inclusion.
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  Speaker 1: Do you think the discussions were having here up a
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  Speaker 1: mountain have become more or less useful over the past
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  Speaker 1: few years. I think that the definition of useful has
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  Speaker 1: evolved so in a way they are all relevant given
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  Speaker 1: the interests of the time. For example, thirty years ago,
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  Speaker 1: there was no question about what does it take to
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  Speaker 1: do good economics. There was the so called Washington consensus.
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  Speaker 1: You knew you have to have budget responsibility, monetary policies
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  Speaker 1: that focuses to achieve price stability and the things of
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  Speaker 1: that type. And at the same time the issue was
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  Speaker 1: will government have the political will to execute what we
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  Speaker 1: all know needs to be done? The compass was clear.
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  Speaker 1: The great financial crisis of a little bit more than
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  Speaker 1: a decade ago marks the most important change because that crisis,
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  Speaker 1: in which still has the consequences seen today, That crisis
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  Speaker 1: shuttled the compass. The question was not anymore how do
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  Speaker 1: I execute what we all agree needs to be done,
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  Speaker 1: but rather what should be done? The narrative world experts
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  Speaker 1: have failed. We need to have a new theory. We
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  Speaker 1: need to throw all the textbooks away, in my judgment,
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  Speaker 1: a big overshooting, with the danger that you will throw
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  Speaker 1: away also a lot of good wisdom. It all started
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  Speaker 1: with the notion that somehow all the conventional modeltor my
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  Speaker 1: macroeconomic policies up analyzed. Fiscal policy could not be used
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  Speaker 1: because that was already too big. Structural policies could not
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  Speaker 1: be used because it takes more time to show fruits
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  Speaker 1: and we are in a crisis. Therefore, the theory when
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  Speaker 1: we need to show quick results. Hence, all the lights
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  Speaker 1: were put on the central banks and monetary policy. Before long,
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  Speaker 1: central banks became the only game in town and they
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  Speaker 1: needed to do the only things that could be done,
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  Speaker 1: namely lowering interest rates. The file was extinguished and the
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  Speaker 1: question was how do you go back to the old
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  Speaker 1: power time of growth and prosperity. However, what was coined
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  Speaker 1: as unconventional policies to be understood as a temporary departure
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  Speaker 1: has become almost a conventional policy because the consequences are
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  Speaker 1: still with us. Your expertise is monetary policy, your former
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  Speaker 1: central banker, and I'm struck that the Bank of England,
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  Speaker 1: the Federal Reserve and the European Central Bank are all
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  Speaker 1: now under or now undergoing a review of their tools
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  Speaker 1: and their targets everything they did with monetary policy. Um,
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  Speaker 1: what do you think where do you think they should
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  Speaker 1: end up? We should not expect a new textbook to
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  Speaker 1: be written in this context. That's not the issue. The
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  Speaker 1: main focus will be on various procedures, on various mechanisms,
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  Speaker 1: on various regulations. It will not be the new perspective
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  Speaker 1: of macro economics because those things are not done through
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  Speaker 1: a review within the central bank. Those are things that
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  Speaker 1: are generational things That's what I'm saying, don't throw the
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  Speaker 1: old textbooks away, but also recognize that being the only
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  Speaker 1: game in town for monetary policy is a very dubious
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  Speaker 1: compliment because it means that you are granted or taking
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  Speaker 1: upon yourself tasks that you are not equipped to deliver.
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  Speaker 1: You do not have the tools to deliver. The name
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  Speaker 1: of the game today is innovation, growth, technology, creativity. Where
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  Speaker 1: does this come from? It comes from everywhere but monetary policy.
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  Speaker 1: It is fiscal policy, it is tax system, it is
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  Speaker 1: structured policy policies that remove these totions, policies that realize
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  Speaker 1: the flexibility of the economy is the key for further growth.
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  Speaker 1: But if we do all of these re examination within
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  Speaker 1: the monetary policy domain, it leaves the impression that also
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  Speaker 1: the answer to the current challenges will come from the
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  Speaker 1: central bank. I all welcome to see reviews of monetary policy,
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  Speaker 1: but I warn't against the illusion that here we will
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  Speaker 1: see a new framework that will allow the only game
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  Speaker 1: in town to continue. But on that precise point, and
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  Speaker 1: where does inflation fit into that? I mean, do we
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  Speaker 1: have to be have an understanding of why all those
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  Speaker 1: inflation targets are being missed and where we're going to
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  Speaker 1: get inflation from, if not from the any game in town. Well,
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  Speaker 1: I my answer when people ask me where is the inflation?
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  Speaker 1: After all, you we were told that if you print,
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  Speaker 1: that's what happens. Well, the inflation found itself in another
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  Speaker 1: place in asset markets. You have kept interest rates so
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  Speaker 1: low that you have provided artificial stimulus to investors and
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  Speaker 1: others to invest in the financial markets because that's well
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  Speaker 1: the incentives go. And as you do that, you inflate
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  Speaker 1: asset prices. You have stock markets all over the world
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  Speaker 1: reaching new heights every day, and as a result, you
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  Speaker 1: have a greater disconnect between the real economy and the
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  Speaker 1: financial economy. At the end of the day, the mirror
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  Speaker 1: and the reality needs to be aligned. Let make a
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  Speaker 1: long story short and say macroeconomic policies have been pushed
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  Speaker 1: to be out of balance, excessive reliance on monetary policy.
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  Speaker 1: And I think that therefore, as we do the review
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  Speaker 1: of monetary procedures all over the world, it's time also
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  Speaker 1: to wake up other one under policy instruments. Okay, final question.
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  Speaker 1: We've talked about this. That you are soon retiring from
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  Speaker 1: JP Borgan, you're gonna have a bit more time to
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  Speaker 1: take grand thoughts. Um, you already have PhD. But I
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  Speaker 1: wonder if you were going to go and get another one,
• 8:33
  Speaker 1: go back to school, what would knowing everything and seeing
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  Speaker 1: the world as it is, what would you want to
• 8:38
  Speaker 1: go and study? Well? To begin with, I would ask
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  Speaker 1: myself what is the name of the game today? And
• 8:46
  Speaker 1: I will say those things were not even on the
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  Speaker 1: curriculum when I was stilled AI, Artificial intelligence, big data?
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  Speaker 1: Who knew all of the Internet, all of that kind
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  Speaker 1: of thing? So I think that, but in more general way,
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  Speaker 1: I think the future will not depend on how many
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  Speaker 1: degrees you have, but rather how many how much knowledge
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  Speaker 1: you have accumulated. And knowledge is not a set of information,
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  Speaker 1: but capability to operate in a changing environment, capability to
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  Speaker 1: know where to find the information that you need once
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  Speaker 1: you need it, but really capability to operate across section.
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  Speaker 1: Most of the curriculum of important universities has moved away
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  Speaker 1: from narrow discipline to interdisciplinary approach. And the reason why
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  Speaker 1: it is the case because there is greater understanding that
• 9:42
  Speaker 1: to be a good physician you need also to be
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  Speaker 1: a good psychologist. To be a good psychologists, you must
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  Speaker 1: understand how other systems work. Etcetera. And on the job
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  Speaker 1: training will become a very important thing. We spend a
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  Speaker 1: lot of resources on training and too few resources on retraining.
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  Speaker 1: Why do we need to retrain? Because the things that
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  Speaker 1: we are training for have changed, and hopefully we will
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  Speaker 1: move into even a more rapid change and if there result,
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  Speaker 1: the whole concept of education and training will need to
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  Speaker 1: be modified. Well, we're being very interdisciplinary on steconomics, is
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  Speaker 1: we You're the only economist I'm talking to, But Dr
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  Speaker 1: Jacob Franko, thank you very much, thank you. We talk
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  Speaker 1: a lot about the future of work here at Davos,
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  Speaker 1: and these days I think there is also a lot
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  Speaker 1: of talk about capitalism needing to deliver a better deal
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  Speaker 1: for people. Trade unions you might have thought would be
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  Speaker 1: useful things to have around when you're trying to navigate
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  Speaker 1: both of those things. But by and large, I would
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  Speaker 1: say that the trade union movement is not very well
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  Speaker 1: represented here at Davos. One exception is the Union Network
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  Speaker 1: International UNI, which represents twenty million people around the world.
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  Speaker 1: And I'm delighted to say that the UNEDS UNEDS General
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  Speaker 1: Secretary Christie Hoffman is here with me. Christie, thank you
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  Speaker 1: and welcome to Stephanomics. Thank you for having me pleasure.
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  Speaker 1: I guess I should start by asking you, you know,
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  Speaker 1: what kind of reception you get here at the World
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  Speaker 1: Economic Forum? I mean, they do talk a lot in
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  Speaker 1: these sessions about giving workers a better deal, But do
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  Speaker 1: they want to do a deal with the likes of you? Yeah? Well,
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  Speaker 1: actually there are ten of us here, and I think
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  Speaker 1: more or less that's that's been the same for for
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  Speaker 1: several years, just to you know, spice it up when
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  Speaker 1: there we'reds, you know, three thousand. But in any event, um,
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  Speaker 1: where some of the top you know, international leaders are
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  Speaker 1: here and so we're a feisting group. Um, how do
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  Speaker 1: they react? I think that you know, the question of um,
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  Speaker 1: that the hard question that a lot of the companies
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  Speaker 1: here have to face with us is that our demand
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  Speaker 1: is we want to, in particular UNI's voicing this this
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  Speaker 1: year and other as well, that we have to really
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  Speaker 1: re strengthen and restore the role that collective bargaining plays
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  Speaker 1: in our economy because without that we will never solve
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  Speaker 1: the issue of inequality. And we talk about inequality breaking
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  Speaker 1: down social cohesion and diminishing economic growth and all the
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  Speaker 1: problems of inequality, immorality, the number of working poor, um,
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  Speaker 1: the gross you know pay that goes to the CEOs
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  Speaker 1: these days, and all these things. But at the core
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  Speaker 1: of it is we have broken down an attack to
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  Speaker 1: collective bargaining for so many decades, and that's at the
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  Speaker 1: point where we need a conscious campaign to restore collective bargaining.
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  Speaker 1: And yeah, I mean, is that the message that companies
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  Speaker 1: really want to hear. No, I think they'd rather hear
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  Speaker 1: you know, you should give everybody a little more time off,
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  Speaker 1: or you should think about rescheduling or some like benefits
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  Speaker 1: they could sprinkle down to make life better for workers.
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  Speaker 1: And that's all good, but we need a power shift
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  Speaker 1: and if we don't have that, we're not gonna we're
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  Speaker 1: not going to solve the issues of inequality and we're
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  Speaker 1: not going to be at the bargaining table to navigate,
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  Speaker 1: as you pointed out, the new world of work, where
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  Speaker 1: it's critical that unions are able to workers through their representatives,
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  Speaker 1: are able to sit down and navigate how we're going
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  Speaker 1: to implement new technology, What are the skills required, how
• 13:23
  Speaker 1: are how old will this impact the workers? UM and
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  Speaker 1: climate change. We need to be able to negotiate just
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  Speaker 1: transitions so all the problems we've faced in every direction.
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  Speaker 1: We need to have a worker voice at the core.
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  Speaker 1: That's why there was a good line I heard earlier
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  Speaker 1: in a session from the chief executive PayPal who said
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  Speaker 1: that the multi stakeholder capitalism that people talk about couldn't
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  Speaker 1: just be about having two wolves and a sheep decide
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  Speaker 1: what to have for dinner, which I thought was But
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  Speaker 1: it is true that if you think about the nineteenth century,
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  Speaker 1: you know the real changes in working conditions and pay
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  Speaker 1: happen because they were forced on businesses by legislation and
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  Speaker 1: to some extent by by trade unions. I mean, do
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  Speaker 1: you think it will be any different this time. I
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  Speaker 1: think there's always room for voluntary movement in the right direction.
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  Speaker 1: We negotiate with companies all the time. We try to
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  Speaker 1: persuade good companies that they should negotiate agreements on the
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  Speaker 1: whole range of issues, and we're successful in that within limits.
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  Speaker 1: But we want governments also to step in. They're not
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  Speaker 1: Governments are not just there to protect the corporate elite.
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  Speaker 1: They need to step in and strengthen their collective bargaining institutions.
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  Speaker 1: But I guess one of the reasons why, I mean,
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  Speaker 1: there's been. The US famously has this legislation which does
• 14:35
  Speaker 1: make it very difficult to organize a union. M But
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  Speaker 1: one of the reasons why employers not always very welcoming
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  Speaker 1: is they unions have not been associated with helping change
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  Speaker 1: to happen. So is that is that a fair criticism
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  Speaker 1: that unions also have to be a bit more flexible.
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  Speaker 1: I think what you find if you look at unions
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  Speaker 1: all over the world is that unions where there is
• 14:59
  Speaker 1: a more equal balance of power tend to be way
• 15:02
  Speaker 1: more flexible. Um. And so when you look at our
• 15:04
  Speaker 1: Nordic unions, so from Sweden, North Norway, they are really welcoming,
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  Speaker 1: open arms with their employers towards how to make the
• 15:15
  Speaker 1: employer more efficient, how can we use technology to advantage
• 15:18
  Speaker 1: everyone because they know they're going to share in the
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  Speaker 1: gains um and they don't feel threatened by change. They
• 15:24
  Speaker 1: feel that they want to embrace change and embark upon
• 15:28
  Speaker 1: change in a way that makes their jobs more interesting,
• 15:32
  Speaker 1: their companies more competitive, shared prosperity, etcetera. So, and then
• 15:36
  Speaker 1: when you look at unions in the UK who are
• 15:39
  Speaker 1: a little more embattled, maybe they're not as flexible. Same
• 15:42
  Speaker 1: for the US, but a lot of that also depends
• 15:45
  Speaker 1: on whether you have work site you know, enterprise bargaining
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  Speaker 1: or you know work site by work site relationships or
• 15:52
  Speaker 1: a sectoral relationship where you have sectoral bargaining. So just
• 15:55
  Speaker 1: in one industry, right and that I mean, there was
• 15:59
  Speaker 1: a big study UM that came out this year from
• 16:02
  Speaker 1: the O E c D, which is not known as
• 16:04
  Speaker 1: being a radical institution, that said sectoral bargaining is really
• 16:08
  Speaker 1: healthy for economies. It's better for employers and better for workers. Now,
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  Speaker 1: they didn't say every form of bargaining is is the greatest,
• 16:16
  Speaker 1: but they did say that, but it's a real change
• 16:20
  Speaker 1: and they've really said, Look, you want stronger economies, better
• 16:24
  Speaker 1: ability to weather the ups and downs, better ability to
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  Speaker 1: implement new technology. I mean, I know, I started out
• 16:31
  Speaker 1: my working career in a factory and a very big machine.
• 16:35
  Speaker 1: And when they introduced numerically controlled machines that didn't require
• 16:39
  Speaker 1: me to turn the wheel all day, I could not
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  Speaker 1: have been happier. I was so happy that my job
• 16:44
  Speaker 1: was easier, safer, cleaner, UM and I had a union
• 16:49
  Speaker 1: so that it wasn't gonna Uh. You know, nobody felt
• 16:53
  Speaker 1: threatened by the implementation of new technology because we knew
• 16:57
  Speaker 1: our company needed to be productive and high tech if
• 17:02
  Speaker 1: they were going to succeed. And I think most workers
• 17:04
  Speaker 1: weren't their companies to succeed for sure. It's really that
• 17:08
  Speaker 1: they also have to think about, well, does this mean
• 17:11
  Speaker 1: I'm growing out on the street with no protection? And
• 17:14
  Speaker 1: I did hear it, actually hear it dens. I think
• 17:16
  Speaker 1: I had a Scandinavian unionist saying that that we're not
• 17:19
  Speaker 1: worried about new machines, were worried about old machines. They're
• 17:23
  Speaker 1: the biggest threat workers. What about the gig economy, because
• 17:26
  Speaker 1: it feels like, again when you look at the debate
• 17:29
  Speaker 1: around you know, what's an employee? You know, lots of
• 17:33
  Speaker 1: these gig companies, you know, Uber and others, famously they've
• 17:37
  Speaker 1: kind of not had to worry about workers right so
• 17:40
  Speaker 1: much because they say that all of these people working
• 17:42
  Speaker 1: for them are not employees. Um and there's a sort
• 17:45
  Speaker 1: of legal debate around that. Don't you haven't seen until recently,
• 17:50
  Speaker 1: you may correct me traditional unions really active in that
• 17:54
  Speaker 1: debate and or indeed kind of reaching out to the workers.
• 17:58
  Speaker 1: Is that kind of the next runt? Is that going
• 18:00
  Speaker 1: to be new unions that do that or the old ones. Uh,
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  Speaker 1: you know, I think it is maybe the next frontier.
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  Speaker 1: But I also know that a lot of members of
• 18:09
  Speaker 1: UNI are or or the Transport Workers, two different federations.
• 18:14
  Speaker 1: But I'm aware of a lot of unions reaching out
• 18:16
  Speaker 1: to Uber workers. And now some of it is a
• 18:19
  Speaker 1: question of making sure they're regulated in the same way
• 18:23
  Speaker 1: as taxi drivers. For example, so um like in Stockholm,
• 18:28
  Speaker 1: the uber drivers were not allowed to operate unless they
• 18:32
  Speaker 1: registered as a taxi company. Brussels they're not allowed to operate.
• 18:36
  Speaker 1: Geneva they're not allowed to operate. So many cities across
• 18:39
  Speaker 1: Europe are saying either you act like an employer, or
• 18:44
  Speaker 1: you act like a taxi company, or you're you're out,
• 18:47
  Speaker 1: and so this we're seeing this increasingly. But we're also
• 18:50
  Speaker 1: seeing unions talking to the drivers a lot. And then
• 18:53
  Speaker 1: in the US you have a big fight in California
• 18:56
  Speaker 1: about whether or not they're an employer, and I think
• 18:59
  Speaker 1: that that's going to play itself out. But increasingly Uber
• 19:04
  Speaker 1: is facing like all these different doors, none of which
• 19:07
  Speaker 1: are especially attractive, because to be an employer doesn't meet
• 19:11
  Speaker 1: with their business model to be a taxi company. That's
• 19:15
  Speaker 1: also kind of burdensome and then to just be free
• 19:17
  Speaker 1: to do what they want. More and more governments are
• 19:20
  Speaker 1: saying no so, and unions are talking to the drivers
• 19:23
  Speaker 1: and trying to especially in California. The unions are really
• 19:26
  Speaker 1: really involved in California, and I think that will be
• 19:29
  Speaker 1: a little bit of a test because that's by far
• 19:32
  Speaker 1: their biggest market. Climate change has been around as an
• 19:42
  Speaker 1: issue for years here at Devils, but it's all felt
• 19:45
  Speaker 1: a bit well, superficial. The movers and shakers coming here
• 19:49
  Speaker 1: have been urged to take a bust up the mountain,
• 19:51
  Speaker 1: not a limo. Instead of the usual freebees, we got
• 19:54
  Speaker 1: plastic free drinking bottles in a recycled bag. This year.
• 19:58
  Speaker 1: The streets up still full of cars and chauffeurs, and
• 20:01
  Speaker 1: a lot of those bottles still seems to have ended
• 20:04
  Speaker 1: up in the trash. But it does feel a bit different,
• 20:08
  Speaker 1: and not just because Greta Tunberg was here, not just
• 20:12
  Speaker 1: because we've had weeks of coverage of the fires blazing
• 20:15
  Speaker 1: in Australia. I think it's also because serious money is
• 20:19
  Speaker 1: now going into making the world zero carbon and business
• 20:23
  Speaker 1: leaders really are starting to think about what it means
• 20:26
  Speaker 1: for them. The McKinsey Global Institute has brought a report
• 20:30
  Speaker 1: here to Davos on what exactly climate change could mean,
• 20:34
  Speaker 1: not just for the planet, but for people and the
• 20:37
  Speaker 1: global economy. And I'm glad to say I have one
• 20:40
  Speaker 1: of the directors of the Institute who co authored the report,
• 20:43
  Speaker 1: Jonathan Wetzel, sitting down with me here. Jonathan, thanks very
• 20:47
  Speaker 1: much for being on Stephanomics. We have had a lot
• 20:50
  Speaker 1: of consciousness raising here over the years about the cost
• 20:53
  Speaker 1: of climate change. What's different about your report, Well, we're
• 20:58
  Speaker 1: looking at the physical climate risk. So what's different is
• 21:01
  Speaker 1: that this is we think the deepest and most comprehensive
• 21:05
  Speaker 1: assessment of both the hazard and it's social and economic impact.
• 21:11
  Speaker 1: There are a lot of reports out there which take
• 21:13
  Speaker 1: a look at a specific area, whether it's wildfire or
• 21:16
  Speaker 1: a heat wave or flooding uh in a specific geography.
• 21:20
  Speaker 1: What we have tried to do is step back and
• 21:22
  Speaker 1: take the global view while going deeply into nine different
• 21:26
  Speaker 1: cases of extreme climate today and then looking forward and
• 21:29
  Speaker 1: say how wild all this play out across the world.
• 21:32
  Speaker 1: So that's that's what we've tried to do here, and
• 21:33
  Speaker 1: we think that is a step forward for the conversation contribution.
• 21:38
  Speaker 1: We hope to decision makers. And when you talk about
• 21:40
  Speaker 1: the socio economic impact, what's an example, what's the kind
• 21:43
  Speaker 1: of thing we're talking about. I was very struck. For example,
• 21:45
  Speaker 1: you had the figure about the percentage of the world
• 21:47
  Speaker 1: population that could face a quite significant risk of a
• 21:50
  Speaker 1: of a change of weather that could actually make it unlivable. Well, yes,
• 21:55
  Speaker 1: so we're looking at impacts that are affecting our three
• 21:58
  Speaker 1: basic sources of capital, human capital, economic capital, and natural capital.
• 22:04
  Speaker 1: And we look at the hazards in terms of the droughts,
• 22:07
  Speaker 1: the heat waves, of floods and so forth, and how
• 22:09
  Speaker 1: those hazards effect those systems. So the intersection of that
• 22:13
  Speaker 1: is physical climate risk. But there will also be places
• 22:16
  Speaker 1: that maybe for some period of time, would benefit or
• 22:18
  Speaker 1: even find it easier to grow food for example. I
• 22:21
  Speaker 1: mean it's very differentially impact. Indeed, physical climate risk is spatial.
• 22:26
  Speaker 1: It happens in a place, and as a result those
• 22:29
  Speaker 1: those impacts in those places may differ. As you say,
• 22:32
  Speaker 1: agricultural yields in northern latitudes are likely to increase uh
• 22:37
  Speaker 1: and warmer weather for some parts of the world would
• 22:40
  Speaker 1: be a benefit, and cold weather kills lots of people.
• 22:43
  Speaker 1: But on the other hand, it's this is not a
• 22:45
  Speaker 1: report that tries to make a trade off. It says
• 22:48
  Speaker 1: we're trying again measure the full risk so that people
• 22:50
  Speaker 1: can decide what is the appropriate action. Just to play
• 22:54
  Speaker 1: devil's advocate, I mean, I wonder when you're very clear,
• 22:58
  Speaker 1: and a lot of other reports are also very clear
• 23:00
  Speaker 1: on the differential impact, and that it's often the poorest
• 23:03
  Speaker 1: countries that are going to suffer most, which of course
• 23:05
  Speaker 1: ought to be a call to arms. But if the
• 23:09
  Speaker 1: richer countries that have also been most reluctant to change
• 23:12
  Speaker 1: their behavior, if it's increasingly clear to them that they're
• 23:16
  Speaker 1: not going to pay the full price of failing to
• 23:19
  Speaker 1: do anything and may even benefit in the cases you
• 23:22
  Speaker 1: say of some Northern European countries, I mean, do you
• 23:24
  Speaker 1: just is there a little bit of you that worries
• 23:27
  Speaker 1: that actually more information in this debate could make the
• 23:30
  Speaker 1: political argument harder because you're saying to people you're probably
• 23:34
  Speaker 1: not going to suffer from this. We know that now
• 23:37
  Speaker 1: with a bit more certainty than we did a few
• 23:39
  Speaker 1: years ago, but we still want you to help pay
• 23:41
  Speaker 1: for it to avoid it. The reality is, I don't
• 23:44
  Speaker 1: think we can in there's ever more interconnected global world
• 23:48
  Speaker 1: somehow pretend that what happens somewhere doesn't affect us or
• 23:52
  Speaker 1: wherever we are. Whether it's the supply chain that gets interrupted,
• 23:55
  Speaker 1: it's migration, it's a financial wealth being dissipated because of
• 24:01
  Speaker 1: the unexpected systemic knock on effect, and tax revenues for
• 24:05
  Speaker 1: Florida being affected by the devaluation of coastal properties. Ultimately,
• 24:10
  Speaker 1: physical climate risk affects every geography and uh and because
• 24:15
  Speaker 1: it is so nonstationary, because it's changing all the time,
• 24:19
  Speaker 1: it challenges our assumptions those thresholds that we have basically
• 24:24
  Speaker 1: built our economies and our physical infrastructure, whether that is
• 24:28
  Speaker 1: the grid transformers and how much heat they can bear,
• 24:32
  Speaker 1: or is the sea walls and how high they are,
• 24:35
  Speaker 1: or it's our ability to stay outdoors. I mean, these
• 24:38
  Speaker 1: things are going to be changing and challenged globally, and
• 24:43
  Speaker 1: that's that's that's the reality of where we are. And
• 24:46
  Speaker 1: even in countries that the UK, where there's a commitment
• 24:49
  Speaker 1: for zero colbum by, I think even there people criticize
• 24:54
  Speaker 1: it for not being a near target. Um Even there,
• 24:57
  Speaker 1: people haven't thought about getting rid of all that aspied
• 25:01
  Speaker 1: boilers in the house and things like that, so people
• 25:03
  Speaker 1: are definitely underestimated. I think that we are just at
• 25:07
  Speaker 1: the beginning of incorporating this risk into our financial and
• 25:11
  Speaker 1: economic calculations. That and with without a measure, of course,
• 25:15
  Speaker 1: it can't be managed, and so we are attempting to
• 25:17
  Speaker 1: help provide some of those measures. So we can now
• 25:21
  Speaker 1: think that through. And as others in the financial community
• 25:24
  Speaker 1: have said, that should then factor into portfolio allocation for capital,
• 25:28
  Speaker 1: it should re be reflected in insurance premiums and reinsurance premiums,
• 25:33
  Speaker 1: and those decisions ultimately are going to be I think
• 25:35
  Speaker 1: the ones that affect decisions like what should my boiler
• 25:39
  Speaker 1: be and how should I what I what will my
• 25:42
  Speaker 1: city council invest in? Because it's simply put, will be
• 25:45
  Speaker 1: more expensive to invest in UH assets which are either
• 25:51
  Speaker 1: climate exposed are our climate risk inducing. I'm interested. I
• 25:57
  Speaker 1: said at the stop that I thought that there had
• 25:59
  Speaker 1: been a che a change is sort of maybe a
• 26:01
  Speaker 1: tipping point has been reached in terms of people taking it,
• 26:05
  Speaker 1: not just taking it seriously and talking about this, but
• 26:07
  Speaker 1: it actually as you suggest people. Mark Carney, the Government
• 26:11
  Speaker 1: of the Bank of England, for example, this week, was
• 26:12
  Speaker 1: talking in a session about reminding people that every British
• 26:16
  Speaker 1: financial institution was going to be stress tested now by
• 26:18
  Speaker 1: the Bank of England, not just for a financial crisis,
• 26:20
  Speaker 1: but for what it would look like in a zero
• 26:22
  Speaker 1: carbon world. Um a lot of investors, they had a
• 26:27
  Speaker 1: black rock talking about how environmental factors might have to
• 26:31
  Speaker 1: start sort of factoring into how they think about companies.
• 26:35
  Speaker 1: How has this report been received here? Do you sense
• 26:38
  Speaker 1: a change of mood? Well, I think it's first of all,
• 26:42
  Speaker 1: I mean, it is the topic. I think the entire
• 26:45
  Speaker 1: Dabo's experience too, so far from me, has been all
• 26:48
  Speaker 1: about climate and I think that so there's a recognition.
• 26:51
  Speaker 1: I think there's also a bit of a I don't
• 26:54
  Speaker 1: want to say that the good news is that people
• 26:56
  Speaker 1: seem to know what to think. They know what the
• 26:58
  Speaker 1: bad news is, and it's without again knowing what that
• 27:02
  Speaker 1: risk is. It's very hard to justify putting incremental capital
• 27:06
  Speaker 1: to work to do something about it. And so one
• 27:08
  Speaker 1: might have the best will in the world, but there
• 27:10
  Speaker 1: are all these priorities, and whether those are saving for
• 27:15
  Speaker 1: pensions for the orphans, or climate or something else. This
• 27:19
  Speaker 1: allows us to say, well, this is not a question
• 27:22
  Speaker 1: of choice, this is an underlying change that affects everything,
• 27:26
  Speaker 1: and so it gets factored in now across the financial community.
• 27:29
  Speaker 1: So the protection, I think has been to say, well, great,
• 27:32
  Speaker 1: now we have something that we could work with. We
• 27:34
  Speaker 1: actually have some data that we have a methodology that says, well,
• 27:38
  Speaker 1: this is how we think about physical climate risk, this
• 27:41
  Speaker 1: is what we can do about it. Jonathan Weistle, thank
• 27:43
  Speaker 1: you very much, my pleasure, Thanks for listening to Stephanomics.
• 27:53
  Speaker 1: We'll be back next week with the final episode of
• 27:56
  Speaker 1: our second season. Sad as Donald Trump would say, but
• 28:00
  Speaker 1: you can always get news and analysis from Bloomberg Economics
• 28:03
  Speaker 1: by following as Economics on Twitter. This episode was written
• 28:08
  Speaker 1: by me and produced by Magnus Hendrickson. Special thanks to
• 28:12
  Speaker 1: Dr Jacob Frankel, Christie Hoffman, Jonathan Witzel, Clive Tarling, and
• 28:17
  Speaker 1: Victoria Cochrane. Our executive producer is Scott Laman and Francesco
• 28:21
  Speaker 1: Levy is the head of Bloomberg Podcasts.