Draghi and Diversity

wasn't a science at all, just dismal. Maybe that's why historically you haven't seen so many women going into economics. Last year, less than twenty percent of economics undergraduates in the UK were women. The numbers for the US are similar, and they shrink as you proceed through academia. Only four percent of full economics professors in the US are women, and that is an all time high. But if you look outside the universities, women economists are starting to punch

well above their weight. If you look around, several of the world's biggest banks now have female chief economists. We also have female chief economists at the International Monetary Fund, the World Bank, the Rich Country's Club, the o E c D, and the European Bank of reconstruction and development.

We decided to celebrate the rising tide of women in economics this week at Bloomberg with a special invent in London, talking about everything that matters in the global economy with two women at the very top of the economics game, Janet Henry, the global Chief Economist for HSBC, and Claire Lombardelli, who is the Chief Economic Advisor to the Treasury and also runs the entire Economic service for the UK Government.

We're going to play you most of that conversation in this week's podcast, but first I thought we should check in on events in CenTra, which is the royal, fancy hilltop resort that the European Central Bank brings everyone to every year to think about monetary policy and the global economy.

And this one is special because not only is it the twenty year anniversary of the Euro, the single European currency, but it's going to be the last forum presided over by Mario Druggy, President of the European Central Bank, who'll be leaving office at the end of October. Paul Gordon runs our central Bank coverage in Europe out of our Frankfurt office and he's been at the center conference this week. Paul, thanks for joining me. I know there's lots going on,

but what's what's the mood like at center. I know that you're an old hand at these things. Yes, I mean you have to remember it's an academic retreat and there's some quite interesting research papers and themes to deal with. But what everyone really wants to talk about is what is the ECB going to be doing in the near future.

And Mario Dragging gave people plenty to talk about in his opening remarks on the first day of the conference, saying that if the economic outlook, particularly inflation, does not improve, additional mulus will be needed. Now that's quite a low bar, and he didn't say the economy has to deteriorate. He just has to say it doesn't improve, and that've got

people thinking about what he's going to do. Dragging himself said everything is on the table, interest rate cuts, specifically a resumption of quantity of easing, and any other measures that might be needed. But the Governing Council members and the officials who we managed to speak to inside the room clearly gave us the sense that they're expecting if anything happens, it's going to be an interest rate cut. That would be the first step, and it could come

quite soon. I'm reminding people that that's a cut from an already negative rate, which we had previously not We had sort of thought it couldn't go much lower. Yes, I mean the rate, the deposit rate, which is the key rate. There's minus zero point four percent. Now nobody thinks that's there's the lower bound what used to be called zero lower bound. But we've broken through that. Of course in Switzerland, for example, you're a minus zero point seven.

But there's probably not that much room to cut before banks start complaining so much about their squeezed profitability that they stopped lending to the real economy, to companies and households. Now, there is a fudge around that, and it's one that Mary Draggie has also mentioned. That is supposedly known as tearing. But what it is is effectively exempting banks from some of the charge on their deposits. That's a contentious point

within the Governing Council. Some people think it's not necessary, but it is generally accepted. It would allow the ECB to keep rates lower for longer, but again not necessarily much lower. It's possible we will lose some of our audience if we go further into the tearing analysis. But I think if we sort of stepped back and just

think about the sort of big picture on this. I mean, you've got married Druggie who at least is credited with saving the euro He got the European Central Bank to create instruments that didn't exist before, for responding to the sovereign debt crisis, and he's consistently had to drag other people on the Governing Council along when he's wanted to do more to help the Eurozone economy. Was this him

in his speech this this year? Was he trying once again to push the Governing Council in a way that they didn't necessarily want to go and maybe even lock in his successor because technically he's not in charge for very much longer. He might not be around for most of this loosening that he's talking about. Yes, he's definitely constrained as successor, whoever that may turn out to be.

That was already the case because the Governing Council has pledged to keep interest rates at current levels at least until the second half of next year. But he may well have locked his successor into lower rates for a longer time as well. It's entirely feasible that his successor is part of that decision, of course, that already sits on the Governing Council. That decision will be taken eventually by the European Union leaders sometime over the coming weeks,

possibly even over the coming months. But this is potentially something of a last hurrah. You're right for Mario dragging he will never raise in trust rates. He will be the first ECB president never to have raised interest rates and as president and that is something that no doubt is weighing on him well. Although funny enough, of course, the first thing he did when he came in as president was reverse the recent increase of his predecessor, Jean

clude Twitche. So I guess you never can completely lock your successor into anything. I wonder if it will be the last Trump tweet he gets, because very soon after the speech, we had a couple of tweets from the American President talking about the markets responding to unfair comments by Mario Dragi and that this was part of a continual policy of other countries talking down their currencies making them more competitive. Against US producers. Did that come as

a how do people respond to that? That tweet? CenTra, It's circulated quite quickly within the room. It is certainly raised some eyebrows here at the ECB. There was no initial official reactions that at all, although we did speak to the former chief economist Peter Prett on TV who said that this is the kind of thing, this is misguided. I forget his exact words, but he was saying, this is not what this was about. This is not about

lowering the euro, weakening the euro. This is the TV doing what it has to do for its own economy, and that's perfectly reasonable. Well, if nothing else, President Trump is getting global exchange rate policy back into the headlines. I guess as economists we should be pleased. Paul Gordon, thank you very much for joining us. Enjoys intro. Thank you.

Had a similar event for International Women's Day in New York, thinking about the rising tide of women in economics, but also just talking about what matters in the global economy with senior women economists, and it's one of the most kind of fun conversations I've had this year. So I'm looking looking forward to this one. If I think back then, I think Christine Legarde, the head the International muchI Fund, had just described the situation in the global economy as precarious.

We were talking about the so called pivot or you turn, depending on how you look at it, by the US Central Bank and thinking about what that might mean in terms of not having further rate rises. Things have moved on a long way since March. We've had a complete change in expectations around FED policy. We've had today big shift or a signal of a big shift in European central bank policy. Janet, would you say the risks of a recession have materially increased in the last few months

or have we just talked ourselves into a much gloomier place. Um, It's it's certainly been dramatic. I mean last September, I think the markets were pricing in three more FED increases and now their book to basically pricing in three break cuts by early twenties. So the move has been very, very swift. But we are now in this world and I think it's probably best summed up by Buduacure from BCB Board thinks yesterday or the day before, he made the comment on the yield curve, and it's clearly the

financial markets see something that we don't. You don't ignore a signal like that, but nor do you blindly follow it. And that's why, you know, I think the message from the ECB today was, Yeah, let's talk about the instruments. Let's persuade everyone. We've got a whole raft of measures we can deliver if necessary, but we we will be

ready to act if we need to. But there is this disconnect between what's in the data um and the actual available in the markets, and what's in the actual data at the moment, which is still consistent with the general slowdown compared with two thousands and seventeen and then two thousand and eighteen, but is not quite in recessionary territory yet, Employments still growing even in the ural area. Wage growkers that are ten year high, hay rolls are still rowing in the US. So yeah, the risk is

that it becomes self fulfilling. We've seen brief periods of in versus Yokov over the last six months or so, and let's always triggered this this conversation. I like the way John Author's put it actually in a in a column this week, said we shouldn't be trying to sort of explain this way. You know, the bond markets might be may be behaving as if they're bracing themselves with something terrible to happen, because traders are indeed scared that

something terrible is going to happen. And if you look at some of those kind of leading indicators that people talk about in the US, I think it's you know, trucking or the Empire State Manufacturing Survey. I mean, I don't know what's your what's your favorite leading indicator of recession and which way is it pointing? Well, I think what we've got at the moment is a very clear industrial recession. You know, we've had it really in different parts of the words. It's the middle of two thousand

and eighteen. You know, it was led by Europe and led by Germany. You had all sorts of factors in the industrial sector related to the autosector, in particular change in vehicle licensing. You know, Italy was in recession and the second half of last year Germany avoided recession by the narrowest of margins. Then it looked like things were stabilizing to some degree. But the z W which is a survey of financial analysts came out this morning. It

was shockingly bad. The Empire Survey New York State, not really representative of the Holy United States, but at these kind of levels. But remember, in most economies, particularly someone like the United States, the economy is consumer spending. So you can have a disconnect between this extreme weakness in the industrial sector, which is pretty much in recession from

services for a while. But the more that industry remains in a recession, if that starts to impact the labor market, then if construction gets hit by the labor market, that impacts on consumer spending, and then the slowdown and consumer spending actually starts to follow. So yeah, industry, there is no question, there's very little side of turnaround. But for now, the consumer side is okay. And I think, as you say, when where market are scared, they're scared that you know,

the rest of the economy will follow. We know that your investment is not going to pick up in a world where we've got these trade tensions persistently influencing on the outlook for the global economy in a negative way. Now, Claire, you're very kind to come along today because it is a week when the Minetary Policy Committee for the UK is meeting and in our great kind of British colonial phrase, that means you're in perda, so you can't talk about

the sort of short run issues around monetary policy. But if you look at the UK, even independent of Brexit, I was struck by one of our UK Economy is saying that the case for for holding policy and just generally the case for concern around the economy has increased independent of what's going on Brexit and the last few months. I mean that that the material risk of the UK

economy have gone up in the last few months. You think that's right, Well, I think it's I mean, it's very hard to distinguish or to separate hour what's going on in the UK economy from Brexit, but I mean I do think the impact of these global uh the global movements that we've seen on the UK or also having a having an effect, and you can't separate that. I mean, we are an open and small economy, we are very exposed to that, so to an extent that

is an additional risk. That is definitely the case that the concern globally will translate into one in the UK and Stan it said. I mean again, consumption PA is an important well in the UK as it doesn't in the US, and that has continued to hold up reasonably well. But the recent data that we saw we were actually the data and Q one was was strong. But when you look at that, a lot of that was around inventories and lot of things we might think to be

short terms. So I think again, in the same way as in the global position for the UK, the position is quite subdued. And when you're thinking about it, I mean looking at it an economists, but also when you have to be you know, thinking about the fiscal outlook for the UK, what the planning framework is going to be for the next few years. A year or so, we might have said we still had quite a long

way to run in this economic cycle. Do we do we conclude from the last year that actually there's a good chance that this is that we've got less time than we thought, or is this just more feels more like a sort of temporary slowdown. We shouldn't change our fundamental view of the recovery. I mean, if you look at the actually the fiscal numbers, you wouldn't necessarily I mean the large change that as people know our forecasting has done sort of quite an independent body, the Office

of BUDGECT responsibility. And actually the large change they made on the fiscal forecast was towards the end that was last year, in the budget last year, and actually they recognized that sort of systematically um our fiscal reouslys have been coming in higher than they previously thought, and so that was the point at which they made a large adjustment. So in a sense quite separate from these trends that

we're talking about. Only part that was basically just looking at the backward data and what had actually happened and seeing that the forecast that they've been running toward them were not actually in line with with the outturns of what we or um So then I feel they've moved to a more central post, which is actually particular fiscal side, the position to continue to be recently strong. Have you, I mean, have you changed your view of the of the cycle or where we might be in it as

on the basis of the last few months. Uh no, no, we haven't. We know from that that we're absolutely brilliant at forecasting, so well we are. But actually in July, this US expansion becomes the longest in the post war period. It goes just over ten years, which was the previous longest throughout the nineteen nineties. And you know, we had always expected a slowdown in growth, and we've longed for as long as we've been forecasting, we've had interest rate

cuts in our profile. It's just that, yeah, in the course of the last couple of months, we've become the hawks in the room because suddenly everyone's forecasting a rate

cut in July. So I think it's just the balance of risks has materially shifted, and it's already impacting on sentiment and on some of the Now some of the industrial indicators, it looks like maybe the auto sector isn't even worth shape, the tech sector, the semiconductor still looks a bit weak, and as I say, any evidence of any investment pick up is more likely to continue to be constrained. So it's more about, no, we haven't changed our central profile, but the risks around it a have

certainly become much more skew to the downside. You know, we've seen obviously populism dominating a lot of the political debate in the US, across Europe and clearly in the UK. Um. I sometimes wonder whether there could there will be risks in if we have a similar response to the next crisis, which is fundamentally driven by quantitive easing, as well as maybe some fiscal polar see does that then so the seeds for another populous backlash because people do associate, rightly

or wrongly. People think the printing of money to push up asset prices is helping people who own assets, which is wealthy people, at the expense of, or at least expense of increasing inequality. Do you think central banks should be wary of that sort of the political impact of those kind of tools. I think the difficulty with central banks in the last down swing was clearly that they

were overburdened. You know, we could sometimes be forgiven for thinking that the only thing that causes growth is monetary policy, cutting interest rates and buying assets, which arguably there's rise and asset prices contributed to income and equality. Were wealth inequality not so much income inequality. So I think, you know,

we need to think about what actually generates breath. And I think this is again part of the message that we were getting from Mario Dragging in his in his central speech, it was yes, we've We've got this a of instruments we can deliver. We can do more quantitative easing, we can cut interest rates more negative. But we still need to see the political integration. We still need to see a fiscal union. We still need to see a

banking union and a capital markets union. And perhaps if governments didn't overburden central banks to the same degree, then we could get something that's more supportive for for growth longer term. But I think central banks will protect UM as much as their independence and their political neutrality as they possibly can. You should see who the next banking

and governor is. Who whether you have strongly Defenser, I mean, Claire, you're in a really interesting position because we were sort of used to, you know, out of Bloomberg, sort of market economists with no offense to Janet Henry, who is at the top of this tree. But you know, we have a lot of people who were talking about how

macro relates to markets UM. But the economists who worked for you are actually shaping the way policymakers think about economics and the sort of models they have in their heads when they're thinking about policy. There's a lot of criticism since the crisis of the models that people used being faulty and leading us a straight How much do you think we've fixed that right on on the ground level. How much are you working to kind of broaden people's minds.

I mean, look, it's very fashionable I think these days to blame economists for all sorts of things, and some of the criticisms of the economics professional are fair, and an awful lot of them, I think are are misplaced, and it's important sort of distinguished between the two. I mean, there are things we can and should do better. I mean one of the things you sort of alluded to there, I think is around the diversity of the profession. And it's certainly the case that we are not a profession

that's as diverse as we should be. You know, if you if you look at economists and you think about what people think of when they think of economists, they don't generally turn to the of a representative group across society. I mean, it is important that we have a more diverse bunch of people doing this this discipline party because it has quite a big impact on people that I mean, economics has a disproportionate impact and economists have a disproportionate

impact on on outcomes for people. And there's quite a lot of evidence that we all know that diversity correlates to performance. I mean, we just saw that in the in the charts that you, um you showed. I mean, one of the things you've got to think about if you're trying to address this. And I know this is sort of badged as a sort of rising tide of women in economics, though we need to be clear economics

is not very diverse on any other factors either. You area terrible outcomes in terms of the number of black and Asian I think, minority of people in their profession. You know, we also a very terrible if you look at the sort of socioeconomic background, you look at where we're all based. I mean most economists work in London, live in London, the Southeast, or in some other globalized city. You know, it's not surprising then that people load the charge at us that we're a bit out of touch

with what's going on. And put it's particularly important I think for the government Economic Service because the work that we do, like you say, some of it is you know, sort of macroeconomic issues. We've talked about today, some of it actually is doing things like looking at how individual health programs affect people on the ground in certain regions and things like So, actually it's really really important. I mean, one of the worrying things. You've got to look at

those what is the pipeline. So it's very good that there's been lots of high profile appointments of senior women to high profile economics jobs, you know, chief economists here there and all over. But actually when you look at who is studying economics, those numbers are not moving at all. About a third of economic students undergrads are women. I mean actually over the last ten years, that's not increased. Infact,

it's actually going down slightly at the moment. And that suggests actually quite a worrying trend in terms of the pipeline of where this is going. You know, if you look at that, then throughout the academic spectrum you again have it progressing up. I mean, it's interesting when you look at why so some people would argue that what it's about maths women don't study at or math puts

them off whatever, and somehow that's a barrier. I mean, leaving aside the slightly offensive suggestion that women can't can't do that, or choose not to. It's quite interesting if you control for that. If you look at the people who study A level maths, fewer women that study A level must then go on to do economics. They're farm will like you to go on to do medicine, for example,

than than their male counterparts. Um, it's interesting if you look at the proportion of subjects that women study, Economics has the third lowest proportion of women who are more women as a proportion studying maths, but are more women as a study as a proportion study in physics, but still economics comes out really badly, and you have to sort of think, well, what what do we need to do about that? I mean, personally, I think we have

an image problem as economists. I think we talk in a language that is really exclusive, that enables people to sort of switch off and be bored. You know, we use terminology that you know, we think we're being precise and accurate, and that is of course really really important. It's also very hard to get your message across if you do that. We don't tend to focus on the things and talk about the thing these people care about. If you look at the top universities in the UK.

If you look at the top journals in the economics and what people are publishing on, it's not necessarily those issues that are the really exciting things we work on. Climate change, income distribution, health outcomes, development, those are the things that really affect people's lives. If you actually look at what a lot of climes are studying, it's not necessarily that what economists are talking about, it's not necessarily that.

So I think there's quite a lot we need to do to make us make it more diverse, and to go out and sort of make clear to people that actually there is a place for them and econo it's even when you look at us as a profession now you may not see people that look like you, but actually there is a place people. You have to go

out and drag people in. One of the things we're doing in the government for the first time in September, and it's you know, it's it's new, it's different as we're taking apprentices apprentices in economics for the first time, so people will be coming without any economics training before and studying and working at the same time. It's very interesting. We're taking seventy five people in September. We've advertised this in a completely different way than ever before. So it's

all been done on social media. We don't awful lot about checking the language we're using. We've got a completely different cohort of people coming. Nearly half the people coming and women over a third are you know, not white. It's quite different to what we've seen before. I mean,

it's a bit of an experiment. We'll see. But I do think it's incumbent on all of us in the profession to try and reach out a bit and try and change this perception that somehow economics is about talking about, you know, with all due respect, money and stock markets and all of that. I mean, it is about that, but it's also about talking about the things that really affect people in your health, outcomes, welfare, regional bounces, all

that sort of stuff. Well, and it's interesting, I mean it's because we do we have been saying how wonderful that the Global Economists, which is BC as a woman, and several other international major banks currently have a female chief economist, and the International Monetary Fund, World Bank, all of these things. But I mean, now globate we think that that's a bad thing. Because it's further emphasizing that we've now got these role models who were all talking

about the sort of the high pollution. Where you don't have the role models is actually a university that's whereas the worst instance with it. I mean, actually of my global economics team at h b C were about a third women, and in London we're half and half. But in public sector that now a lot more women economists, but in academia it's less than ten percent. Now, I was fortunate my undergraduate we had a very impressive female economist.

And yeah, if you don't see people that look and sound like you and speak a language that you speak, why would you want to be interested by that? And I was I was looking at the numbers in the US. The it's four percent of full economics professors in the American universities are women, and that's actually an all time high.

And there's quite a lot of concern because of the way the pipeline has changed with people fewer PhDs, that that's going to be an all time high for quite a long time, because it's going to go down from from here. But I also I like Clar's point about

measuring things, measuring the things that people care about. I was very struck when I was working on the Inclusive Growth Commission with cities that they often had they just didn't have data for even measuring whether they were producing the right kind of jobs in their region or their city that they wanted to or that they thought they were, And you wouldn't. You didn't guess a lot of the relevant data in the form that they could use at the time that they could use it. So I guess

that comes down to it as well. It does seem to me that in a way that gender inequality is an easier is an easier thing to address than the social diversity, because the social diversity, you're also dealing with the consequences of a very uneven education system in every country, and we can often I feel like the diversity agenda, when it's only focused on women, means that you're desperately competing to get a small number of women who have all had this fantastic who who may in fact be

very privileged and have had a very similar social background and the people they're joining, and they may not be offering the diversity. So how I mean, you talked about the apprenticeships, but how else can we address it. No, I mean, I agree it's a real challenge. But I think some of this that is actually about talking to

people in a language they understand. You know, when I go to schools and you actually talk about economics and what you do, people are more excited about the content of the subject than pretty much any other subject, right because people are understandably passionate about the big issues that face society and wanting to change them. And actually, that's

what economists do. We just need to explain that's what we do, rather than always talk in a way that makes it sound like we're doing something that's from a different planet. So I think there's an element of that. There's an element of um thinking about the sort of the way in which we advertise jobs and we recruit, and there's quite a lot of frankly bias, unconscious, some unconscious in that. You know, we've moved away in the

civil service. We used to used to be very focused on going and having an interview with some you know, very articulate, highly educated person. Now some people feel more comfortable in that environment than others. You know, a lot of people who are twenty one do not feel confident going into a room where they're asked to sort of debate like some kind of Oxford debating club with someone who's you know, four or five years older than them. And actually things like that are barriers that we just

it wasn't intentional. We just hadn't really thought about it that way. And it's only when we looked at it and some people came and said, have you thought about what this feels like if you're twenty one and applying and you don't know anyone who's applied. You know, you might not have in your family or extended network, you might not know many people in these sorts of jobs. So a lot of things like that, but also you've just got to go out there and sort of actively

try and pull people in. I mean, you know, who knows where we'll get to with our apprenticeship scheme. But that's been one way. Like I said, we've done it all through Snapchat. I mean, I have done it. I don't really understand snaptat, you know what it is, But we're not everybody here could teach perhaps, but you know,

we've had other other people. We basically sort of outsourced it to a set of people who understand how to do this better than than than we did, and it's had some good results, but it's a small step and I think it's incumbent on us in the profession, Frank you to go out and do that, because the only

way we're going to get any better at this. And I think unless we do, there is a legitimacy that we are missing out on, really, because how can we really justify going around and having this big influence on people, public policy and all of that when actually not representative at all. So I do think you have to do quite practical things like that, think about, actually, you know, what is the offer you're making and how does it

sound to the people you're trying to convince. Well, I can say the good news is since the results of the Conservative Leadership second round of have come through that, however undiverse economics is, it's still a great deal more diverse than the remaining five candidates, only one of whom was state at school educated, four of whom went to Oxford, and I think two actually we're at the same college and indeed both at Eton, so we won't be looking

for diversity. And if you probably you don't want to be leader of the Conservative Party. But I wouldn't recommend it from diversity. UM, thank you very much for both of you. I think we have managed to cover up quite a lot of ground in thought provoking way, and I look forward to having more conversations like this. But thank you to everybody for coming, Thanks for listening to Stephanomics. We'll be back next week with more on the ground

insight into the global economy. In the meantime, you can find us on the Bloomberg Terminal website at or wherever you get your podcast. We'd love it if you took the time to rate and review our show so it can reach more listeners. And for more news and analysis from Bloomberg Economics, follow at Economics on Twitter. Is that simple.

You can also find me on at my Stephanomics. This episode was produced by Magnus Hendrickson with assistance from David BC, Mike Simpson and Agatha Cantrill and the Women in Economics. Event would not have happened without Matt Winkler, Sasha Grap and Tammy Dyke. Our executive producer is Scott Laman special thanks to Janet Henry, Claire Lombardelli and Paul Gordon. Francesco Levy is the head of Bloomberg Podcasts,