© Photothek/Getty

Be the first to know about every new Coronavirus story

Edited excerpts from the book proposals of the three finalists for the 2020 Bracken Bower Prize, backed by the Financial Times and McKinsey.

New Money

How central bank digital currencies could transform the economy — and why you might not want them to

By Stephen Boyle 

Facebook was coming for their money. On June 18 2019, the social media group launched a digital currency called Libra that aimed to do nothing less than “reinvent money and transform the global economy”. With 2.7bn people already using one of the group’s apps across its Facebook, Instagram and WhatsApp brands, financial analysts believed it could realise up to $19bn additional revenue by 2021, in part because it would allow those users to send money to each other easily without ever leaving Facebook’s ecosystem.

What took insiders by surprise when the announcement came was that, while spearheaded by Facebook, it was from the newly minted Libra Association, a consortium of 28 organisations including major brands like Visa, PayPal, Uber and Spotify. Hidden behind the technocratic language of an “efficient medium of exchange for billions of people around the world” that would “grow into a global financial infrastructure” was a promise, or, depending on your point of view, a threat: what we have done for social media, music, and taxis we are going to do to money. 

The difference from those industries that had already been “disrupted”? This time they were going after the state, and the state was not going to throw open the doors to its vaults without a fight.

The official response was abrupt, and coming from the reserved and academic halls of central banks and abacus-obsessed finance ministries, unusually forthright. The Bank of England’s globally respected Canadian governor Mark Carney (dubbed the George Clooney of finance by his fellow central bankers — they don’t get out much) described it as having a “very wide range of issues” to resolve. France’s finance minister, Bruno Le Maire, put it most starkly when he said “the monetary sovereignty of the state is in jeopardy”. Digital currency had hit the mainstream, and the state was mounting a fightback.

This is the story of the response the Libra announcement sparked, and how it breathed life into a radical idea that has the potential to upend the relationship between individuals and money, tear up the banking system as we know it, and unleash a world of innovation. This is the story of central bank digital currencies.

*****************************************************

To understand why the announcement was treated with such consternation, we need to take a step back and think about what money really is.

In the economy at the moment there are three different types of money — cash, bank deposits, and central bank reserves — and they all have different qualities and features. The idea behind a central bank digital currency is an alluringly simple one: to create a fourth type of money. It would be electronic state money that could be held directly with the central bank. While intuitively this may feel similar to a commercial bank deposit at the moment, this seemingly simple change has the potential to radically reshape the economy. If individuals and businesses could hold money directly with the central bank, there would instantly be a system with the advantages of state money, like cash, and the advantages of easy transactability, like bank deposits.

Better still, it would come without their downsides. You would no longer need to physically carry around cash. And you’d no longer be carrying the risk of lending money to a bank, like you do when you deposit money into a bank account.

One of the functions of a currency is to make it easy for people to trade with each other, and there are real opportunities to improve cross-border trade. Gathering all of the money in the economy in one place could create an ecosystem effect where multiple providers all invest in new propositions. With the right controls and incentives, this could allow everything from “smart contracts” that execute themselves — like your electricity meter reading itself and paying your bill for you — through to apps that help manage your money better, to academic insights that predict GDP ahead of time. With so many advantages it is easy to imagine people abandoning commercial banks in droves unless the central bank limits the amount you can place in your account.

But risks abound. Now the state would have a single log or ledger of every transaction that you, and everyone else in the economy had made. How would you feel about the state being able to check that you had paid your taxes and weren’t skimping on VAT? Had paid a subscription to Pornhub premium last month? Had paid £30 at regular increments along with dozens of other people to someone who seemingly didn’t have a job, with a little herb emoji in the payment details? You might delight in no longer giving money to your bank for a paltry return, or no return at all. But what if you came to buy a house as a first-time buyer, and your bank no longer had any deposits? Perhaps your rate of interest would be higher and your payments would be more expensive. Perhaps they wouldn’t be able to finance it at all, leaving you stuck with your landlord that refuses to fix the boiler. Banks might not be popular, but without an alternative we might just find we miss them after all. 

*****************************************************

The state fightback against Libra worked. Cowed by the fierce criticism, many of the early backers started to run from the nascent currency. But the fear it sparked was real, and the response is still filtering through the system. It is likely to have a profound and long-lasting catalytic effect.

The worry stemmed from how realistic it was that consumers, fed up with traditional banks, unenamoured with the state, and often less concerned with privacy than policymakers are, might have chosen to abandon state currencies and bank deposits in droves. To keep the state’s monopoly on money intact, plans for digital currencies have accelerated and are the talk of the global financial system. The Bank of England issued a consultation paper in early 2020. The Bank for International Settlements has an active working group in place, and Sweden and China are both exploring their own differing implementations. Not since we moved away from the gold standard to fiat currencies has there been such a radical moment for money.

Stephen Boyle leads the data design team at Lloyds Banking Group

Waiting on Medicines

Our reliance on medications to shape our future

By Rola Kaakeh

Dr Patel, a critical care physician, was paged to attend an urgent meeting in the emergency room of a large academic medical centre. The hospital just received news that they will no longer be able to obtain critical medications that are part of the intubation kits. Without a definitive resolution date to this shortage, the hospital called together the different individuals needed to manage this crisis. 

Dr Patel walks into the room with 10 professionals, including pharmacists, nurses, physicians, informatics representatives, purchasers, and hospital administrators, all working to minimise disruptions to patient care. She mentions that she uses the medications (rocuronium or succinylcholine) in rapid sequence intubation for her patients. She prefers rocuronium, based on her experience and clinical data, but will occasionally use alternatives. She is asked to make the necessary but difficult decisions to best allocate the remaining quantity on hand. Who will get the medication? How will they manage the adverse events of not having the medication? This new shortage is added to the growing number of shortages that Dr Patel and her team have been experiencing for months — including an existing normal saline shortage, vital in most hospitalised patients. Troubled, she asks, “How can we be short of normal saline, and it’s just sterile saltwater? Why are we still having these issues?”

Almost daily, we read headline after headline regarding medications — from issues such as the drug shortages crisis, the opioid epidemic, to numerous other problems related to lack of, or overdosing of, medications. Our reliance on medications has and will shape our future — either positively or negatively. While access to healthcare has been a priority topic for decades, understanding the challenges and opportunities to access medications has now taken centre stage. 

Medications consume a significant amount of healthcare expenditures in both developed and developing markets. Total US prescription spending alone is comparable to the full economies of some developed countries. There are tens of thousands of prescription drug products approved for marketing. However, as a society, we are struggling to provide equitable access to all medications needed globally. The World Health Organization has estimated that 2bn people globally still lack access to essential medicines. With hundreds of medications already in short supply for years, crises (like pandemics) have further exposed the limitations of our vulnerable and global pharmaceutical supply chains. We have yet to develop an international consensus, used by everyone, to address the critical issue of equitable access to medications.

Global economies, devastated by recessions caused by Covid-19, are waiting on a vaccine to accelerate their path towards recovery. Every day, millions of people worldwide anxiously await the news of the approval and delivery of a Covid-19 vaccine. The speed at which the potential vaccine clinical trials have been conducted, reviewed, and approved is unmatched in history. It’s unlike anything we’ve seen before.

But on the brink of this new vaccine, will our vulnerable pharmaceutical supply chain be able to withstand the massive demand that awaits? Everyone in the world that fits the criteria for a vaccine will need access to it. We’ll need billions of doses before we start seeing a glimpse of getting back to “normal”. Two billion doses, at least, within months of approval. These numbers do not consider the demand for any other medications that will play a role in treating and preventing Covid-19. The reality that we are not immune to any future pandemic has pushed us to re-evaluate our processes to design future systems that will enable access rather than leave us in a scarcity situation.

Stakeholders from across industries have invested time, money, and expertise to develop the vaccine, but will these efforts continue once we create a vaccine? What about the other health conditions that burden our societies? We must not neglect the chronic, long-term diseases that are the leading case of mortality worldwide. At the minimum, we must ensure access to essential medications that are not just pandemic related. Our supply chain must be suited to meet both current and future medication needs to address chronic and acute conditions impacting our societies.

The World Economic Forum projects that Covid-19 will cost the world trillions of dollars, significantly more than the pricetag of prevention measures. But to design prevention measures, we must understand where we’ve been, where we are, and what we need to account for as we design our future systems. Will we ever ensure access to medications for all those who need them? How have we leveraged diverse stakeholders, clinical knowledge, innovation, and technology to create clinically appropriate interventions that meet individual needs, to address these pressing issues? Multidimensional solutions are required to tackle these multi-faceted questions.

An organisation’s ability to tackle today’s pressing issues, such as access to medications, is considered a pre-requisite to be competitive, prosperous, and agile in the future state of healthcare and public health. Tackling access to medications will require building capabilities in new topics, building resilient supply chains, increased diverse engagement and communication with various stakeholders — with a focused strategy and a receptive organisation to execute. 

Waiting on Medicines provides insights into the current landscape of access to medications and what the future holds. As a pharmacy leader, I will summarise the various approaches taken by communities, healthcare systems, and national and international economies and organisations to improve rational drug use and access to medications. I will explore how to design a future to improve access to medications. In the end, I will lead readers to better understand and more efficiently connect with the diverse stakeholders, resources, and processes needed to increase access to medications and drive improved health outcomes. Equitable access to safe, effective, high-quality, and affordable medications for all will be in our future — because our future depends on it.

Rola Kaakeh is chief executive of Salus Vitae Group and adjunct faculty at the Northwestern University Feinberg School of Medicine

Money Trees

Making the Business Case for Nature

By Siddarth Shrikanth

India’s natural ecosystems were on the brink. Decades of corporate greed and state mismanagement had fuelled an unsustainable cycle of extraction, with entire forests felled for timber and cleared for farmland. Many of the country’s mind-bogglingly diverse animals and plants faced the threat of extinction.

It was 1855, a year that few in the modern environmental movement remember: the year that the first “empire forest” was established in British India. In the following years, vast tracts of forests would be set aside across the country to slow the pace of destruction — and to ensure the sustainability of the colonial enterprises that depended on forest products. By the end of the 19th century, more than 10 per cent of the world’s land area would be set aside as “protected areas”. 

The East India Company, arguably one of history’s most rapacious corporations, can hardly be considered an exemplar of corporate responsibility. And the empire forest model had a number of grave flaws, including the forcible displacement of indigenous people who had been stewards of these forests for centuries. 

But the fact remained that the company recognised its dependence on ecosystem services and acted decisively to protect them. Even as it exemplified capitalism red in tooth and claw, its administrators clearly saw a financial rationale to conserving nature.

In the following years, however, conservationists took a different path. Appealing to higher ideals, they argued in favour of the many scientific, moral, cultural, and spiritual reasons to protect nature. The result was the birth of a modern environmental movement that achieved remarkable tactical gains while simultaneously imbuing people across the world with a sense of wonder in nature. 

But the pace of progress has remained far too slow to save our planet from the relentless pressures of capitalism. The WWF found in 2018 that animal populations had declined 60 per cent in just over 40 years, even as an area of forest the size of the UK was lost every year.

The fact that money matters remains as true as it was nearly two centuries ago, and conservationists have been far too shy about putting a price on the natural world. 

The time has come to proudly make the business case for nature. Faced with an escalating climate crisis, shareholder pressure and the threat of regulation, major companies have made a series of bold pledges to invest in nature. Carbon markets are maturing and recognising the central role that nature will play in meeting climate goals. Measuring progress on conservation outcomes is becoming easier with new valuation frameworks and technologies. Innovative business models are proving that our ecosystems can be worth more alive than dead.

But far more remains to be done on each of these fronts to turn nature into an investable, scalable asset class, rather than relegate it to a shrinking patchwork of protected areas at the fringes of the modern economy. Those who seek to defend the natural world must make the case that money really can grow on trees — or risk losing what remains of our precious natural world.

*****************************************************

Why does this matter? As climate change has risen up the agenda, the world has seen encouraging progress in some areas including renewable energy and zero-emissions transportation. But cutting emissions dramatically will simply not be enough: nearly every pathway to net-zero emissions by 2050 involves deploying negative carbon solutions at an unprecedented scale. 

But for all the hype surrounding carbon capture, natural carbon sinks remain our best bet. In the US, for instance, they could absorb a fifth of annual emissions and bring myriad other benefits. It is no wonder then that natural climate solutions — including forest restoration, soil carbon sequestration, regenerative agriculture and ocean protection — have become a key area of focus for businesses and governments as they seek to slow the pace of the climate crisis. Spurred on by investor pressure and undeterred by the Covid-19 crisis, many now believe we have reached a tipping point in financing such investments in natural capital. 

The coming tsunami of capital presents a once-in-a-generation opportunity for conservationists to demonstrate once and for all that our planet is worth more alive than dead. But doing so will require them to abandon old taboos and partner with the capitalists they rightly fear. Equally, corporations and governments must do more than throw money at the problem: they will need to collaborate on creating robust carbon markets, new valuation frameworks, technology-enabled transparency tools, and business models to make this vision a reality.

Siddarth Shrikanth is a joint MBA/MPP candidate at the Stanford Graduate School of Business and the Harvard Kennedy School, where he focuses on economic and policy solutions to the climate crisis

Get alerts on Business books when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article