Top 15 Minouche Shafik Quotes

There are many ways in which co-operation on macro-prudential policies could be deepened further. Options which could warrant further investigation range from formalising the exchange of information, to frameworks for reciprocity for tools beyond the countercyclical capital buffer, to common stress test scenarios and risk assessment that are used across the world.

The growth of market-based finance and asset management is creating new sources of funding, adding welcome diversity to the financial system, particularly for emerging markets. And in some ways these flows are less risky – for example the average maturity of international securities issued by emerging markets is 10 years, reducing rollover risk and exposure to a sudden flight of capital.

Reciprocity also helps address the old problem of asymmetric adjustment of global imbalances. Suppose a deficit country wishes to contain the supply of credit and build resilience in its financial system by raising the buffer. If a surplus country whose banks are lending to the deficit country reciprocates, its banks should be incentivised to lend less to the deficit economy, and more to their domestic economy. That should increase domestic demand in the surplus country, and hence demand for deficit country exports, reducing the overall level of imbalances.

The most obvious way to take international considerations into account is by treating risks emanating from abroad as an important input when setting domestic macroprudential policy.

The benefits of open capital markets are clear. They facilitate the flow of finance to where it would be most productive and help ensure global resources are allocated most efficiently. They allow savers and investors to diversify portfolios beyond national borders, and they provide a greater range of funding sources to fast growing economies and businesses

So, the economy of the future is our choice. We face a classic intertemporal investment problem – incur some investment costs now with high returns later or opt for inaction or not enough action but incur very high costs and risks later. Even if you do not take into account future generations (which makes these arguments much, much stronger), it seems to me the choice is clear. Climate change and biodiversity loss are here, and we are already suffering the consequences. Unlike the Pharaohs, we can overcome this climate change by choosing a different kind of economy for the future.

Africa is responsible for only 1% of emissions but will be the hardest hit by climate change. That cannot be right. At the same time, many African countries are rich in sunshine, wind, rivers and forests. With support, they could leapfrog the dirty energy systems of the past and, if we create a better carbon market, provide a huge source of income for countries rich in carbon sinks.

We know we are in difficult economic times with war, recession, and inflation. Where will the money for this investment come from? In tough times, we need to use our limited resources most efficiently. Given the history of climate change, we need an appropriate balance between responsibility and resources.

I can also paint a different picture of the economy of the future. One in which we make the needed investments and created cities in which we can move, breathe, and thrive. One in which the food we eat regenerates the earth rather than depletes it. Where our economies continue to grow and especially in poor countries, living standards continue to rise, where this growth is greener, more stable and where human well-being is enhanced through co-existence with nature.

What could the economy of the future look like? We have a choice. It could be one based on familiar technologies, markets and institutions. We could continue with polluted air and water where our children suffer from respiratory diseases; where our economies are struck by frequent shocks caused by unpredictable weather events which cause catastrophic losses; where people have to move across borders as their livelihoods are destroyed by rising sea levels or persistent droughts and rising temperatures; and one where the natural world continues to diminish.

But before doing that, let me start with a story from the past. Over 3000 years ago a different kind of climate change caused by volcanic eruptions and changing weather patterns resulted in persistent droughts that caused famines and political unrest in ancient Egypt. The pharaohs of the Ptolemaic dynasty such as Cleopatra went to great lengths to adapt – transferring grain from productive regions to drought plagued areas, opening up grain stores, crossbreeding cattle to develop more heat resistant animals, and providing tax relief. These foresighted efforts managed to prolong the Egyptian empire for a half century longer but ultimately one of the greatest empires the world has ever known collapsed because of the effects of climate change. The difference between then and now is that we are the cause of today’s climate change, and we have the means to stop it by changing our economy.

I am honoured to speak today in the country of my birth, a country that has been a cradle of human civilization for millennia, on a topic that will determine the future of human civilization and whether it lasts for more millennia. I am an economist who has worked on development and environment issues for several decades and I wanted to speak to you about the economy of the future.

Today, the critical questions we ask include, “What are you going to do with the training you’ve acquired?” and “How are you going to use the research you’ve conducted for the betterment of society?” Look behind me at the inscription on Low Library which says we want to be an institution that is “cherished by generation after generation for the advancement of the public good.

Universities and institutions of higher education have existed for millennia, stretching back to the schools of the ancients in places like China, Egypt, Greece, and India. There is something special, even magical, about the tradition of students and scholars coming together to create these unique environments of learning.

Like you, I am new to this campus, having started as Columbia’s 20th president in July. And I say as someone who has experienced change once or twice in my life, beginnings are exciting, and hard, and everything in between. They introduce us to new people and ideas, challenge us to adapt to new situations, and open our eyes to new ways of thinking about the world and our place within it.