PF Live: ‘Biggest challenges are more political than economic’

27 Jun 23

The coming years will be defined more by politics than the economy, despite inflation and the cost-of-living crisis dominating the agenda right now, Public Finance Live heard.

Caroline Atkinson speaking at Public Finance Live 2023. Image © Rafael Bastos

Caroline Atkinson, whose CV includes stints as head of global policy at Google, deputy national security adviser for the Obama administration and director of external relations at the International Monetary Fund, told delegates that we are living through “a time of such uncertainty and change”.

She pointed to five “major events” from the past decade that have been largely unforeseen and had huge effects on the world: the Brexit vote, the election of Donald Trump, the Covid-19 pandemic, Russia’s invasion of Ukraine and the surge in inflation.

These began with what she called the “first wake-up call” that people in developed countries are feeling disaffected with globalisation, and all of which either exposed or contributed to the distrust people have in their leaders and the political system.

She said inflation in particular engenders a feeling of instability in people, and said major central banks, including the Bank of England, missed that it was coming – and that it was going to be here for so long.

Now, with Trump leading polls in the US, Ukraine having divided the world (albeit having united Europe) and the G20 being “not quite dysfunctional, but not able to work the way that it could”, the international order feels further under threat, Atkinson said.

That threat is felt through politics, she said, in the form of the threat to peace – there is an ongoing war in Europe and aggressive posturing between two global powers in the form of the US and China – as well as migration, the risk of a future pandemic, technology and artificial intelligence.

She sounded a note of optimism, at least, on the economy, saying that the “biggest challenges ahead are more rooted in the political than they are in economics”.

In the US, GDP reached its 2019 (i.e. pre-pandemic) level some time ago, and so other countries such as the UK can do so as well, Atkinson said.

“On the economy I really think it’s going to get better,” she explained.

“As it gets better, people will feel better.”

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