Economy

Senior Conservative MPs have turned on the Bank of England over its handling of inflation, in a rare outbreak of political criticism of the central bank in the way it is doing its core job.Boris Johnson’s party is feeling the political heat as the cost of living crisis intensifies and now some Tory MPs are blaming the BoE, which has been operationally independent for 25 years, for losing its grip on prices.Liam Fox, a former cabinet minister, told the Commons that the BoE had “consistently underestimated the threat” of rising inflation, which the BoE fears could top 10 per cent later this year.“The BoE persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at 5 per cent,” he said. Fox said the Commons Treasury select committee should launch an investigation into the central bank’s handling of inflation. His comments reflect growing anger on the Tory benches towards the BoE.One member of the government said that the BoE had “got it completely wrong at every single moment of this crisis” and it should have “obviously” tightened monetary policy sooner.The person added that BoE governor Andrew Bailey said inflation was going to be temporary while “every single fund manager in the City knew that wasn’t true”.Meanwhile, Robert Jenrick, a former Tory Treasury minister, told the FT: “The BoE missed the opportunity to gain control over inflation last year, arguing that it would be modest and transitory when it was clear to many of us that it would be high and longstanding.“We are now in danger of a entering a new inflationary era. Having acted too little, too late, there is a risk of overcompensation if it pursues significant further interest rate raises.”Direct criticism of the BoE in its core mission of inflation control from MPs in the governing party has been almost unheard of in the 25 years since the central bank was given independence to set interest rates. When inflation has been too high or too low, chancellors ranging from Alistair Darling to Rishi Sunak have been studious in accepting the BoE governor’s explanation of what happened and how to get inflation back to the 2 per cent target. In his most recent open letter to Bailey, the chancellor wrote that he agreed with the BoE’s assessment that high inflation was largely the result of global factors and the consequences of the coronavirus pandemic. But there is nervousness inside the BoE that as inflation heads towards double digits with a big leap expected in the April figures, published next week, the heat will be on the BoE as never before. The governor will be grilled by the Treasury committee of the House of Commons next Monday where further tensions between the BoE and MPs are likely to surface. Jagjit Chadha, director of the National Institute of Economic and Social Research, said: “It’s a little bit unfair to blame the BoE for the inflation problems we’re seeing, many of which are the consequence of the necessary stimulus that resulted from the coronavirus pandemic”. But Andy Haldane, BoE chief economist until last year, told LBC this week: “I wish we’d done a little bit more a little bit sooner, to tighten things up, so there wasn’t quite as much money chasing quite as many goods.” The BoE declined to comment. More

Black researchers made up about 1.5 percent of the Federal Reserve system’s 945-person staff of doctorate-level economists at the end of 2021, a number that highlights the central bank’s ongoing struggle to improve racial and ethnic diversity in its ranks.Data that the Fed on Thursday published publicly for the first time showed that 72 percent of the system’s Ph.D.-level economists are white, 17 percent are Asian, and 9.4 percent identify as Hispanic or Latino. A small share report identifying with two or more races.

The new diversity figures follow reporting by The New York Times last year, in which data provided by the Fed showed that just 1.3 percent of economists across its system identified as Black alone around the end of 2020. The 2021 data are roughly, but not exactly comparable, because the central bank made methodological improvements in collecting the figures this year.Economics is a heavily white and Asian profession — just under 5 percentof U.S. citizens or residents who earned doctorates in the field in the 2020 school year were Black — but the Fed tends to be even less racially diverse than the profession as a whole. The release underlined that America’s central bank is making slow progress when it comes to hiring and retaining a more racially varied staff of experts.Across the Fed’s 12-bank system and Board of Governors in Washington, 14 Ph.D.-level economists identify as Black alone. The board employs 429 economists, but no Black women and just one Black man.There appears to be some progress toward greater diversity at the entry level, however. When it comes to the Fed’s 393 research assistants, who usually have bachelor’s degrees and are often aiming to pursue doctoral degrees in economics down the road, the new data showed that 19 people, or about 5 percent of the assistants, were Black.That is a slight improvement from 3.7 percent the prior year, and it roughly reflects the share of economics graduates who identify as Black.The Fed’s more entry-level staff was also more diverse by gender: 42 percent of research assistants were women, compared to about 25 percent of its doctorate-level economists.Lawmakers and think tanks have for years pushed the Fed to increase diversity within its ranks, arguing that having a set of economists and researchers at the central bank who more closely reflect the public — the people the Fed ultimately serves — would lead to a wider range of viewpoints around the policy table and more rounded economic discussions.The Fed sets the nation’s monetary policy, raising or lowering the cost of borrowing money in order to slow down or speed up the economy. Its actions help to determine how strong the labor market is in any given moment, help to control inflation, and can influence financial stability.“The risk with underrepresentation, from a substantive standpoint, is that you are underrepresenting perspectives that are important for policymaking,” said Skanda Amarnath, executive director at Employ America, which pushes the Fed to focus more intently on the job market.That could mean that a range of ideas and experiences “don’t get fully understood, or captured, to the same degree,” he said.The Fed is about to see greater racial diversity at its highest ranks: Lisa D. Cook and Philip N. Jefferson, who are both Black, were confirmed as Fed governors just this week. Susan M. Collins will become the first Black woman ever to lead a regional Fed bank when she becomes president of the Boston Fed this summer, and Raphael Bostic, the first Black man to ever lead a regional bank, is currently president of the Atlanta Fed.The Fed’s leadership team has also become more gender diverse in recent years. Assuming Mr. Biden’s nominees are all confirmed, three of the central bank’s seven governors will be women. Once new presidents take office in Boston and Dallas this summer, five of its 12 regional bank leaders will be women.Fed officials have in recent years talked publicly about aiming for a broader array of views within their own workplaces.“The Atlanta Fed is committed to modeling economic inclusion, and that starts with our own organization,” Mr. Bostic from Atlanta said in a 2020 opinion piece, published after George Floyd, a Black man, died at the hands of the police in Minneapolis. “We embrace diversity and inclusion as essential to who we are.” More

The UK is heading for a trade clash with Brussels over plans to bring forward legislation to unilaterally scrap parts of the Brexit deal after talks over Northern Ireland’s trading rules ended in deadlock and recrimination.Liz Truss, UK foreign secretary, said on Thursday that Britain would have “no choice but to act”, but the EU warned that any move would force it to restrict Northern Ireland’s access to the single market for goods.British officials expect Boris Johnson to set out as early as next week plans for a bill to disapply parts of the so-called Northern Ireland protocol the prime minister signed just 18 months ago. Brussels has warned of trade reprisals in the event of Britain rewriting the protocol, raising fears in the UK Treasury that the country could face further economic damage in the midst of a cost of living crisis.After a difficult call with Truss, Maroš Šefčovič, European commission vice-president, said that unilateral UK action was now likely. It would “put a huge question mark over access of Northern Ireland to the single market. This is a very serious issue,” he told a joint assembly of UK and EU parliamentarians in Brussels. Under the terms of the protocol, which was agreed to ensure there was no trade border on the island of Ireland, goods produced in Northern Ireland can enter the EU without checks, which has helped the region’s economy outperform much of the rest of the UK. Johnson was warned when he negotiated the arrangements that they would create political problems in the region, as the protocol creates a trade border in the Irish Sea. Some British suppliers say they can no longer ship popular foodstuffs from Great Britain to Northern Ireland.Commission officials said they had no wish to impose border controls on the island of lreland but had to protect the single market, which allows goods to circulate freely within 27 countries once they have crossed the union’s external border, and Ireland’s place in it. “The last thing we want is for Northern Ireland to lose access to the single market,” one said.Washington has called on both sides to show “leadership” and resolve the issue by negotiation, while Johnson also faces the prospect of months of parliamentary rebellions on the issue.Truss is said by Tory MPs to be embarking on a “charm offensive” with leading UK political figures to explain Britain’s reasons for wanting to rip up parts of the protocol, which only came into effect last year. But resistance in the Commons and, especially, the House of Lords is expected to be fierce. “Some of us will want to underline the damage to Britain’s reputation from taking this step now, in the middle of the most serious conflict in Europe since 1945,” said Lord Peter Ricketts, former UK national security adviser.The UK government has received legal advice that it would be justified in overriding parts of the protocol in order to support the 1998 Good Friday Agreement that brought peace to the region. Truss told Šefčovič that fundamental changes were needed to the trading rules, which are opposed by Northern Ireland’s pro-UK unionist parties. She argued that unless checks on trade from Great Britain to Northern Ireland were greatly reduced, there was no prospect of the main unionist party, the Democratic Unionist party, rejoining the region’s power-sharing executive at Stormont. London believes that reforms to the agreement suggested by the EU in October do not go far enough. But EU member states have insisted they are not prepared to renegotiate an international treaty. “The EU simply expects that international agreement to be honoured and is willing to be extremely flexible in terms of how it is honoured to try to accommodate what are genuine concerns in Northern Ireland from business people and from the unionist community in particular,” Simon Coveney, Ireland’s minister of foreign affairs, told RTE radio on Thursday. Additional reporting by Jude Webber in Belfast More

Why has the union campaign spread so much further at the coffee chain than at the e-commerce giant?Roughly six weeks after successful union votes at two Buffalo-area Starbucks stores in December, workers had filed paperwork to hold union elections in at least 20 other Starbucks locations nationwide.By contrast, since the Amazon Labor Union’s victory last month in a vote at a huge warehouse on Staten Island, workers at just one other Amazon facility have filed for a union election — with an obscure union with a checkered past — before promptly withdrawing their petition.The difference may come as a surprise to those who believed that organizing at Amazon might follow the explosive pattern witnessed at Starbucks, where workers at more than 250 stores have filed for elections and the union has prevailed at a vast majority of the locations that have voted.Christian Smalls, the president of the independent Amazon Labor Union, told NPR shortly after the victory that his group had heard from workers in 50 other Amazon facilities, adding, “Just like the Starbucks movement, we want to spread like wildfire across the nation.”The two campaigns share some features — most notably, both are largely overseen by workers rather than professional organizers. And the Amazon Labor Union has made more headway at Amazon than most experts expected, and more than any established union.But unionizing workers at Amazon was always likely to be a longer, messier slog given the scale of its facilities and the nature of the workplace. “Amazon is so much harder a nut to crack,” John Logan, a labor studies professor at San Francisco State University, said by email. The union recently lost a vote at a smaller warehouse on Staten Island.To win, a union must get the backing of more than 50 percent of the workers who cast a vote. That means 15 or 20 pro-union workers can ensure victory in a typical Starbucks store — a level of support that can be summoned in hours or days. At Amazon warehouses, a union frequently would have to win hundreds or thousands of votes.Organizers for the Amazon Labor Union spent hundreds of hours talking with co-workers inside the warehouse during breaks, after work and on days off. They held cookouts at a bus stop outside the warehouse and communicated with hundreds of colleagues through WhatsApp groups.Brian Denning, who leads an Amazon organizing campaign sponsored by the Democratic Socialists of America chapter in Portland, Ore., said his group had received six or seven inquiries a week from Amazon workers and contractors after the Staten Island victory, versus one or two a week beforehand.But Mr. Denning, a former Amazon warehouse employee who tells workers that they are the ones who must lead a union campaign, said that many didn’t realize how much effort unionizing required, and that some became discouraged once he conferred with them.Understand the Unionization Efforts at AmazonBeating Amazon: A homegrown, low-budget push to unionize at a Staten Island warehouse led to a historic labor victory. (Workers at another nearby Amazon facility rejected joining a similar effort shortly after.)Retaliation: Weeks after the landmark win, Amazon fired several managers in Staten Island. Some see it as retaliation for their involvement in the unionization efforts.A New Playbook: The success of the Amazon union’s independent drive has organized labor asking whether it should take more of a back seat.Amazon’s Approach: The company has countered unionization efforts with mandatory “training” sessions that carry clear anti-union messages.“We get people saying how do we get an A.L.U. situation here? How do we do that like they did?” Mr. Denning said, adding: “I don’t want to scare them away. But I can’t lie to workers. This is what it is. It’s not for everyone.”At Starbucks, employees work together in a relatively small space, sometimes without a manager present to supervise them directly for hours at a time. This allows them to openly discuss concerns about pay and working conditions and the merits of a union.At Amazon, the warehouses are cavernous, and workers are often more isolated and more closely supervised, especially during an organizing campaign.“What they would do is strategically separate me from everyone in my department,” said Derrick Palmer, an Amazon employee on Staten Island who is one of the union’s vice presidents. “If they see me interacting with that person, they would move them to a different station.”Asked about the allegation, Amazon said it assigned employees to work stations and tasks based on operational needs.Both companies have accused the unions of their own unfair tactics, including intimidating workers and inciting hostile confrontations.Organizing drivers is an even greater challenge, partly because they are officially employed by contractors that Amazon hires, though labor organizers say they would like to pressure the company to address drivers’ concerns.Christy Cameron, a former driver at an Amazon facility near St. Louis, said the job’s setup largely kept drivers from interacting. At the beginning of each shift, a manager for the contractor briefs drivers, who then disperse to their trucks, help load them and get on the road.“It leaves very little time to talk with co-workers outside of a hello,” Ms. Cameron said in a text message, adding that Amazon’s training discouraged discussing working conditions with fellow drivers. “It was generally how they are highly against unionizing and don’t talk about pay and benefits with each other.”Amazon, with about a million U.S. workers, and Starbucks, with just under 250,000, offer similar pay. Amazon has said that its minimum hourly wage is $15 and that the average starting wage in warehouses is above $18. Starbucks has said that as of August its minimum hourly wage will be $15 and that the average will be nearly $17.Starbucks workers celebrated the results of a vote to unionize in Buffalo last year.Joshua Bessex/Associated PressDespite the similarity in pay, organizers say the dynamics of the companies’ work forces can be quite different.At the Staten Island warehouse where Amazon workers voted against unionizing, many employees work four-hour shifts and commute 30 to 60 minutes each way, suggesting they have limited alternatives.“People who go to that length for a four-hour job — it’s a particular group of people who are really struggling to make it,” said Gene Bruskin, a longtime labor organizer who advised the Amazon Labor Union in the two Staten Island elections, in an interview last month.As a result of all this, organizing at Amazon may involve incremental gains rather than high-profile election victories. In the Minneapolis area, a group of primarily Somali-speaking Amazon workers has staged protests and received concessions from the company, such as a review process for firings related to productivity targets. Chicago-area workers involved in the group Amazonians United received pay increases not long after a walkout in December.Ted Miin, an Amazon worker who is one of the group’s members, said the concessions had followed eight or nine months of organizing, versus the minimum of two years he estimates it would have taken to win a union election and negotiate a first contract.For workers who seek a contract, the processes for negotiating one at Starbucks and Amazon may differ. In most cases, bargaining for improvements in compensation and working conditions requires additional pressure on the employer.At Starbucks, that pressure is in some sense the union’s momentum from election victories. “The spread of the campaign gives the union the ability to win in bargaining,” Mr. Logan said. (Starbucks has nonetheless said it will withhold new pay and benefit increases from workers who have unionized, saying such provisions must be bargained.)At Amazon, by contrast, the pressure needed to win a contract will probably come through other means. Some are conventional, like continuing to organize warehouse employees, who could decide to strike if Amazon refuses to recognize them or bargain. The company is challenging the union victory on Staten Island.But the union is also enlisting political allies with an eye toward pressuring Amazon. Mr. Smalls, the union president, testified this month at a Senate hearing that was exploring whether the federal government should deny contracts to companies that violate labor laws.On Thursday, Senator Bob Casey, a Pennsylvania Democrat, introduced legislation seeking to prevent employers from deducting anti-union activity, like hiring consultants to dissuade workers from unionizing, as a business expense.While many of these efforts may be more symbolic than substantive, some appear to have gotten traction. After the Port Authority of New York and New Jersey announced last summer that it was awarding Amazon a 20-year lease at Newark Liberty International Airport to develop an air cargo hub, a coalition of community, labor and environmental groups mobilized against the project.The status of the lease, which was to become final by late last year, remains unclear. The Port Authority said that lease negotiations with Amazon were continuing and that it continued to seek community input. An Amazon spokeswoman said the company was confident the deal would close.A spokeswoman for Gov. Phil Murphy of New Jersey indicated that the company might have to negotiate with labor groups before the deal could go forward. “The governor encourages anyone doing business in our state to work collaboratively with labor partners in good faith,” the spokeswoman said.Karen Weise More

The UK economic recovery stalled in February and March as inflation surged to its highest level in 30 years, in the worst combination of surging prices and zero growth since the 1970s.The prospect of prolonged stagflation is at odds with Prime Minister Boris Johnson’s claims of a strong economic bounceback from the coronavirus pandemic in the latest figures.Gross domestic product declined 0.1 per cent between February and March, data published by the Office for National Statistics showed on Thursday, below the no change forecast by economists polled by Reuters.It follows zero growth in the previous month, a downward revision from an initial reading of 0.1 per cent expansion.This comes as consumer prices rose at an annual rate of 7 per cent in March, the fastest increase since 1992, according to data released last month.James Smith, research director at the Resolution Foundation think-tank, said: “The economy already appears to be losing momentum as the cost of living crisis intensifies and the risk of stagflation looms.”Over the first quarter as a whole, the UK economy expanded 0.8 per cent over the previous three months, boosted by stronger growth in January. However, that was below analysts’ expectations of 1 per cent and down from the 1.3 per cent increase in the previous quarter.Paul Dales, chief UK economist at consultancy Capital Economics, said some of March’s weaknesses in consumer-facing services, such as retail sales and the hospitality sector, might be because of the cost of living crisis forcing households to cut their spending on non-essential items. “This is particularly ominous when our forecasts imply that the surge in inflation will reduce households’ real incomes the most in the next six months,” he added.Chancellor Rishi Sunak boasted that UK quarterly growth was faster than in the US, Germany and Italy.However, the difference largely reflects the timing of Omicron coronavirus infections and the fact that British households were temporarily shielded from the surge in energy prices in the first quarter by Ofgem’s default tariff cap, which is reset only in April and October. In contrast, consumers in most other countries were hit almost immediately by higher prices.Even with these differences, the UK economy was 0.7 per cent above its level in the last quarter of 2019 before the pandemic, which was marginally stronger than the eurozone’s 0.4 per cent but below France and the US.Speaking at the start of a cabinet meeting in Stoke-on-Trent, Johnson said the economic data was encouraging. “The most extraordinary thing about the way the country came back from the pandemic was the strength of the employment position . . . that is the single most important thing we need to focus on: a strong jobs-led recovery,” he said. “I am encouraged by some of the growth figures I just saw this morning . . . jobs, jobs, jobs is the answer.”Speaking earlier on LBC, the prime minister said growth “will return very strongly in the next couple of years”.This contrasts with warnings from many economists of the growing risks of a recession, defined as two quarters of economic contraction.The Bank of England warned of a recession last week as inflation is set to rise to a 40-year high of about 10 per cent in the autumn, in the wake of ever-increasing energy costs. The central bank forecast that the economy would alternate between near stagnation and contraction over the next two years, with output barely changing by the first quarter of 2024.“It is clear the UK faces a serious fight to avoid recession this year,” said Ed Monk, associate director at investment management company Fidelity International.Samuel Tombs, economist at consultancy Pantheon Macroeconomics, said he expected GDP to contract 0.4 per cent in the second quarter as health spending declines and consumers tighten their belts.The pound, a bellwether of the UK’s relative macroeconomic performance, dropped 0.4 per cent on Thursday morning and continues to trade near pandemic-era lows against the dollar.Despite the weak economic outlook, markets expect the BoE to raise its main interest rate from 1 per cent to 2 per cent by the end of the year.ONS data showed that the UK’s trade deficit for goods and services widened to a record 5.3 per cent of nominal GDP in the first quarter — the largest gap since records began in 1955 — as imports rose 9.3 per cent, largely reflecting higher energy prices, while exports fell 4.9 per cent. The fall in exports was broad-based with contractions in machinery, cars and fuels, as well as financial and business services.The war in Ukraine also resulted in UK goods trade with Russia falling almost 70 per cent in March.Business investment fell 0.5 per cent in the first quarter and was 9.1 per cent below its pre-pandemic level, as well as being 8 per cent below that of the first quarter of 2016 before the Brexit referendum, reflecting high business uncertainty. This is despite the government’s super-deduction policy, a two-year tax break on investment that has been in place since April 2021.Investment matters for productivity growth, which ultimately drives wage growth and standards of living.Sandra Horsfield, economist at Investec, said: “Boosting productivity through higher investment will be a crucial ingredient in containing cost pressures for businesses in light of surging wage bills. So, a further shortfall in this regard is a concerning signal.”A 15.1 per cent drop in car sales contributed to March’s fall in output. However, activity slipped 0.2 per cent across the entire services sector and output fell at the same rate in manufacturing.The contraction in March’s GDP would have been sharper if it was not for an unusually strong 1.7 per cent growth in construction, which the ONS attributed to repair work after February storms. More

Fed Governor Christopher Waller pledged that the central bank won’t make the same mistakes on inflation as its 1970s predecessor.
“We know what happened for the Fed not taking the job seriously on inflation in the 1970s, and we ain’t gonna let that happen,” he said.

Christopher Waller, U.S. President Donald Trump’s nominee for governor of the Federal Reserve, speaks during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S, on Thursday, Feb. 13, 2020.
Andrew Harrer | Bloomberg | Getty Images

Federal Reserve Governor Christopher Waller pledged Tuesday that the rate-setting group wouldn’t make the same mistakes on inflation that it did in the 1970s.
Back then, he said during a panel chat with Minneapolis Fed President Neel Kashkari, the central bank talked tough on inflation but wilted every time tighter monetary policy caused an uptick in unemployment.

This time, Waller said he and and his colleagues will follow through on its intentions to raise interest rates until inflation comes down down to the Fed’s targeted level. The central bank has raised rates twice this year, including a half percentage point move last week.
“We know what happened for the Fed not taking the job seriously on inflation in the 1970s, and we ain’t gonna let that happen,” Waller said.

The remarks came with inflation running at its hottest pace in more than 40 years. Earlier in the day, President Joe Biden called inflation the economy’s biggest challenge now and noted fighting price increases “starts with the Federal Reserve.”
Though he noted the Fed’s political independence, Biden said, “The Fed should do its job, and it will do its job. I’m convinced of that in my mind.”
While Waller drew the comparison to the Fed of the 1970s and early ’80s, which eventually defeated inflation with a series of massive interest rate hikes when Chairman Paul Volcker took over, he said he doesn’t think the current policymakers need to be as aggressive.

“They had zero credibility, so Volcker just basically said, ‘I’ve got to just do this shock and awe,'” Waller said. “We don’t have that problem right now. This is not a shock-and-awe Volcker moment.”
The Volcker moves took the Fed’s benchmark interest rate to close to 20% and sent the economy into recession. Waller said he had a conversation with the former chair before his death, and Volcker said, “If I had known what was going to happen, I never would have done it.”
Waller said he thinks the economy can withstand the path of rate hikes this time that will be much gentler than the Volcker era.
“The labor market is strong. The economy is doing so well,” he said. “This is the time to hit it if you think there’s going to be any kind of negative reaction, because the economy can take it.”
Earlier in the day, Richmond Fed President Thomas Barkin also backed the goal of getting inflation under control, saying the likely path will get the fed funds rate to a range of 2% to 3% and “we can then determine whether inflation remains at a level that requires us to put the brakes on the economy or not.”

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This week we released the second instalment of our occasional on-screen spin-off known as Free Lunch on Film. Do watch and share my attempts to explore and test my belief in climate techno-optimism — the view that it is possible to decarbonise the global economy without a radical change in our lifestyles. (And give a thought to all my colleagues and contributors who made the film possible!)In this piece, I want to highlight some simple but powerful observations that play a big role in my thinking about this. Start with the wonderfully clarity-inducing Kaya identity, which simply sets out that total carbon emissions are equal to the multiplication of three or four relevant factors: carbon emissions per dollar of gross domestic product (which is, in turn, the product of carbon emitted per energy unit and energy consumed per dollar of gross domestic product), GDP per capita, and the number of people in the world. The website Our World in Data, from which I have taken the image below, has a good exploration of the actual numbers that go into it.

The Kaya identity shows that reducing emissions arithmetically requires either cutting the carbon intensity of GDP, making the average person poorer, or shrinking the population. In other words: green growth, “degrowth”, or a programme ranging from anti-natalism at best to eugenics at worst. So, taking as given that decarbonisation is necessary, which is it going to be?In practice, decarbonisation will not mean literally zero carbon emissions. The “net” in “net zero” allows for emissions, combined with activities that draw carbon out of the atmosphere in the same amount. Planting more trees can do some of that, and I got my hands dirty planting one in the making of the film. One of my interviewees, the economist Arvind Subramanian, who used to be chief economic adviser to India’s government, emphasised that “negative carbon” technologies will have to be part of the solution. He argued that compared with renewables, we are investing far too little in such technologies, which include carbon storage in underground or subsea reservoirs, and the capture of CO₂ or other greenhouse gases at the point of emissions or directly from the air.Now there is a lot of scepticism that negative carbon captures can amount to very much. But allowing for at least some carbon to be emitted on a “gross” basis, the Kaya identity tells us we may not need to cut carbon intensity, incomes or the population all the way down to zero — just almost all the way down to zero. Good thing too, because cutting either of the latter two literally to zero entails policies and outcomes that hardly bear thinking about and would, in any case. never be accepted.But I do not think population control and degrowth are useful policy strategies even for more modest emissions reduction goals. Reducing the global population by an amount that makes even a dent in the carbon problem would require unacceptable control over people’s lives. As for degrowth, I think it is misguided. First, because letting poor people enjoy economic growth is no danger to the green agenda. Why? Because they emit so little at the moment that they could even engage in “dirty” growth for some time before making much of a difference. I admit I had not realised just how astonishingly unequal carbon emissions are. Diana Ürge-Vorsatz, an environmental scientist and a working group vice-chair at the Intergovernmental Panel on Climate Change, pointed out that the 10 per cent highest-income individuals in the world are responsible for half of the carbon emissions. The reverse is also true: the poorest half of humanity produces only 10 per cent of all global emissions.Sensible degrowth advocates accept this, and suggest it is about rich-country residents (and presumably the rich in poor countries) reducing their consumption. But I find that unconvincing too. One thing is that it will not work unless the cut in material standards is draconian. In my interview with Branko Milanović earlier this year, he pointed out: “People don’t realise that the median income in western countries is at the 91st percentile of the global income, so even if you were to bring everybody in the rich countries to the median, which is actually for 50 per cent of people a loss of income, you would still not solve the problem.” And if you were to curtail the purchasing power of rich-country residents, Subramanian points out that through trade this would hurt poor countries too.Sometimes people speak of degrowth as simply meaning to reduce material consumption — the physical stuff we emit carbon to produce. This can be done by shifting consumption from physical goods to services or simply leisure (working less), and it can be done by systemic change that reduces our material needs. One example is to design houses that need less heating or cities where you do not need cars much. But then we have really moved to talking about cutting the carbon intensity of GDP or income or wealth, not GDP or income or wealth itself. That is to say, green growth.Is green growth realistic? To some extent it is already happening. A number of countries are already “decoupling” growth and emissions — the chart below shows how UK GDP and carbon emissions per capita have been moving in opposite directions. Decoupling is taking place even when accounting for the carbon embodied in production offshored to places such as China. The question is not whether it is possible but whether it can happen fast enough, go far enough, and be done by enough (or all) countries. To form an opinion on this, look at where carbon emissions come from. As the chart below shows, it is mostly from energy use, in particular from industry, buildings and transport. Then comes farming and land use, industrial processes and waste. In the film, we start by looking at transport, and visit Norway to look at the electric vehicle revolution there. The country has the world’s highest penetration of EVs; most new cars sold are electric. As the head of the EV users’ association, Christina Bu, told me, there is nothing natural about a cold country with long distances becoming an EV pioneer. So if Norway can do it — which it has done by taxing conventional cars and rewarding electrical ones — so can everyone else. Here is what everything hinges on. I think what is possible for transport is true for other energy use: you can electrify almost everything, and you can decarbonise that electricity generation. (The challenge here is aviation and to some degree shipping, but even there zero-carbon technology is advancing.) For the remaining sources of emissions, things such as alternative building materials (high-rises made of wood rather than steel and cement) or high-tech agriculture and reforestation are part of the solution. The point is this: the technology exists to decarbonise almost everything our material lifestyles depend on and decarbonisation is therefore compatible with maintaining those lifestyles. Two caveats are in order. The technology to take us to net zero could still deplete other resources (rare earths needed for batteries, for example) or cause other environmental problems. The techno-optimistic argument here is only about net zero carbon. And while it is technologically feasible to decarbonise our lifestyles, it will still be expensive. The International Energy Agency puts the needed annual investment at $4tn, nearly 5 per cent of current global GDP. We will not get there without a carbon tax, which will feel like it deprives us of economic wellbeing. And many carbon-intensive jobs will be lost.But while raising investment must reduce consumption today, it will increase consumption tomorrow (the relevant benchmark is the risk to living standards if global climate change is not reined in). Carbon tax revenues can be redistributed as dividends, benefiting those most in need. And if recent IMF research is right, the job churn is not as bad as it was during deindustrialisation.Above all, all of this is compatible with more and more people enjoying rich-country middle-class lifestyles. It will be difficult to get to net zero, but it will not be painful once there.Other readablesI’m a bit late to it, but my colleagues did a great Big Read on the growing global stagflation fears.The OECD explains how Finland conquered homelessness.I wrote a column arguing that moving ahead with deeper EU integration would inflict a defeat on Russian president Vladimir Putin.An international group of experts have published an excellent white paper on how the EU should place further “smart” sanctions on Russian energy exports.Numbers newsThe US released new inflation numbers yesterday. A tip: high inflation is baked into the year-on-year number because prices rose fast earlier in the year. Month-on-month inflation fell by three-quarters to 0.3 per cent, largely because energy goods prices went down. Service price inflation picked up strongly, however, reflecting the indirect effects of earlier jumps in goods and energy prices.

Video: ‘Net zero won’t change the way we live’ More

Philip N. Jefferson, a college administrator and academic economist, was confirmed to the Federal Reserve’s Board of Governors on Wednesday.Senators approved him for the job in an overwhelming bipartisan 91-7 vote. He is the third of President Biden’s nominees to secure a spot on the Fed’s seven-person board: Lisa D. Cook was confirmed as a governor on Tuesday, and Lael Brainard was confirmed as vice chair last month.Mr. Jefferson, who was most recently vice president for academic affairs at Davidson College, was born in Washington, D.C., and holds a Ph.D. in economics from the University of Virginia. He has been an economist at the Fed board, and has written about poverty and monetary policy’s effect on the labor market, among other topics.The White House has also renominated Jerome H. Powell as Fed chair, though Mr. Powell is still awaiting a final confirmation vote. Senators said that vote was expected as soon as Thursday.The administration’s nominee for the final open Fed job — the vice chair for supervision — has yet to have a committee hearing and vote. Mr. Biden’s initial nominee for the position, Sarah Bloom Raskin, withdrew from consideration after it became clear that she would not pass the Senate. Michael S. Barr was put up for the job more recently.If those picks are confirmed, Mr. Biden will have nominated or renominated five of the Fed’s seven governors. The Fed is independent of politics, so those appointments are the main way that the White House can shape the future of monetary policy, which is used to keep inflation stable and employment high.Governors at the Fed’s board in Washington hold constant votes on monetary policy and oversee the nation’s largest banks. They set interest rates to guide the economy alongside 12 regional reserve bank presidents, five of whom hold a vote on monetary policy at any given time.Mr. Jefferson and Ms. Cook are likely to support the Fed’s current project: reining in rapid inflation. Consumer prices climbed 8.3 percent in the year through April, data released Wednesday showed, an uncomfortably rapid pace of increase. Fed officials are raising rates at the fastest pace in decades as they try to tamp down price pressures and bring the situation under control.“The spike in inflation we are seeing today threatens to heighten expectations of future inflation,” Mr. Jefferson said during his confirmation hearing. “The Federal Reserve must remain attentive to this risk and ensure that inflation declines to levels consistent with its goals.” More