Anthony Venables, Professor of Economics at the University of Oxford, took part last June in the presentation of UB Economics, a platform which centralizes and coordinates research in economics undertaken at the Faculty of Economics and Business of the UB and intends to increase its internationalisation. Professor Venables, an expert in urban economics, was former advisor to the UK Treasury and the World Bank.
How is the crisis changing the world economic map?
When we think about the impact of recession on the overall map of the world economy, I guess the main change we’re seeing is the rise of Asia, in particular the rise of China. And obviously that relative rise is going to be increased considerably by the recession. China continues to grow at 8-11 % while the West stagnates. So, that’s going to mean that change in balance happens sooner than it otherwise would. Of course we don’t know how long the recessions will last —a lot of people are now arguing that if we get away with the last decade we’ll have done rather well. It could be longer than that, though— but with China growing 10 % that’s a big rebalancing. That was going to happen anyway, but it will take place a bit sooner, because of the recession.
What role do cities play in getting out of the crisis?
I think cities are important in ending the recession for two sorts of reasons. First, the new ideas of innovation, the new technologies —be it in electronics or in green technologies— will come out of cities. So they are going to be really important in that sense. Secondly, a lot of cities are very short of infrastructure; they need major capital investments, so if governments were to be proactive and try and use some fiscal policy to get out of the recession, then spending in cities, I think, would be rather a good idea, but of course governments might not feel able to do that. They might choose to go on an austerity route, instead.
How can the role of cities as economic motors be promoted?
Unfortunately there’s no simple answer to that question. And there cannot be a simple answer. If there was a simple answer, then every region would be like Silicon Valley. However, I guess we do know the things that stop regions from performing well: you do need skills, quite a lot of economic flexibility, good governance that is quite decentralised, city mayors who are active… If you don’t have those things, it’s more difficult. But there really is no magic solution. If we knew it, as I said, everywhere would be like Silicon Valley, but that’s evidently not so.
Can research in economics help get out of the crisis? What role should universities play?
Universities have got two core roles and they should go on playing those to the best of their ability. One core role is to train students to the very highest level and the other is to undertake research of the highest quality.
I think economists have three absolutely key roles to play in getting out of this crisis. One role is advocacy. Although we didn’t foresee it all in advanced, we do understand what’s happening; we do know that some actions being taken by governments are sensible and other actions being taken are less sensible. So, economists need to get up and say that and engage with the media and the government and politicians and play probably a more active role in advocacy than we actually do.
On the long run, research agenda. There’s a really important work to be done in integrating monetary theory and macroeconomics. Modern macroeconomics addresses some questions very well, but ignores other issues, so there needs to be a real research agenda for really bright young researchers in making modern macroeconomics closer to monetary economics, financial economics and really making progress there.
The third thing is about learning how to regulate the financial system when the danger signs begin to emerge; spotting those and preventing this from happening again. In this case, this is not about getting out of this recession but about preventing the next one.
These are all areas in which economics is absolutely central, so people should be going into economics, because it is a basic and essential discipline. Now, storms arise and anticipated things happen, but we will learn from those in just the same way as we learnt from the experiences in the 1930s. However, it will take a group of well-trained and bright, young economists to do that.