Gala Diaz Langou, Executive Director at the Center for the Implementation of Public Policies for Equity and Growth (CIPPEC) delivered this keynote address at the OTT Conference 2023, at Chatham House, London, UK.
How much do you think £20 will be worth in May 2024?
I know it’s an awkward question.
It may be the first time that many people in different countries are asking themselves questions like these more and more frequently, given the global economic situation and growing inflation rates.
But to be honest, in my home country, Argentina, we’ve been asking ourselves questions like these several times over the past 40 years. We’ve had ramping inflation with governments of all political colours.
So, let me ask you again. How much do you think these £20 will be worth in one year?
I don’t want us to focus on the answer. I’d like you to stay focused on the question and, with the exercise, you surely did.
Many of you probably projected a future scenario to think about the value that those £20 could have. This is a very useful idea and we inadvertently do it more and more often to make daily decisions.
It’s also a very common practice in finance: it’s called future value. Its main function is to help us estimate the impact of the decisions we can make today.
But, of course, we’re not in the most fertile context to do these exercises.
The global context
Over the past 40 years, most of the countries have experienced a decrease in interpersonal trust.
We are facing a context of mistrust, polarisation and uncertainty, where economic uncertainty is just one aspect of the many uncertainties we face.
Those of us from the Global South might be a bit more used to this uncertainty and may have become a bit more resilient to it.
And we know that in contexts like these projecting scenarios is not easy. Because uncertainty, instead of inviting us to think about the future, almost always leads us to stillness.
Why? Are we afraid of making mistakes in projections? Or could it be that it’s difficult for us to assume high costs today for the supposed benefits of the future that we do not even know that we will be able to reap?
More often than not, we end up giving up and inadvertently validating the self-fulfilling prophecy that uncertainty leads to immobility.
However, when they pressure us, we come up with alternatives so as not to lose the value of those 20 pounds: fixed term investments, funds, or some even buy goods such as bottles of oil.
We can even rationally choose between these options by calculating their associated risks and returns.
This common sense that we have, individually or corporately, this ability to project into the future even in uncertainty, goes missing in action when we deal with public issues.
But the problem is the same; although the costs of not thinking about the future are probably much higher. But these are not individual costs, they are collective costs and this might explain some things.
What I want to share with you today is that there is a relevant role for think tanks in projecting future scenarios in the public sphere.
This is a crucial exercise in evaluating the expected returns and the risks associated with the decisions we could make today. If we don’t make this projection, we can fall into inaction or improvisation, with catastrophic effects on the majority of the population.
The Argentinian context
I am the executive director of CIPPEC, one of Latin America’s leading think tanks, and the main one in Argentina. From this role, and all the past ones I’ve taken over the past 17 years at CIPPEC, I’ve learnt that, in contexts of extremely high uncertainty, it’s not only possible to carry out this type of analysis, but that forward thinking becomes much more important.
In Argentina we are now facing a major crisis; it has economic, political and even institutional effects. But, amid this crisis, there’s a huge achievement that’s not getting enough attention: in December 2023, Argentina will turn for the first time in its history of 40 years of uninterrupted democracy.
However, this major achievement co-exists with structural and historic debts. The country hasn’t grown in the past 13 years, almost half of the population lives in poverty, even more so if we focus on children.
And this situation is a bit of a paradox because Argentina has everything the world needs right now: energy – the second worldwide reserve of natural gas; food – the leading exporter of flour and soybean oil and the second largest exporter of maize; knowledge – Argentina’s a world leading software developer and exporter; and key minerals – Argentina is the fourth producer and third world lithium reservation.
But, due to our recurrent situation of macroeconomic instability and low rule of law, added to this year’s political uncertainty, we are not able to seize this opportunity.
At CIPPEC we believe that the only way to overcome the now long succession of crisis-after-crisis is to project the future, even amid this uncertainty. Because, by doing so, we might be able to generate the long-term agreements that will enable us to provide more certainties in the future.
Democracy 40
Based on this strong belief, two years ago, we began to project scenarios for the next 40 years of democracy. We named the project, Democracy 40.
First, we backcast the next 40 years: We analysed the trends that we know are going to affect us – the few certainties we have.
For example, the climate crisis – we no longer have any choice; the impact of digitisation on every single aspect of our lives and on labour markets; the fact that most of our countries are ageing; the shifting of global power; or the growing concentration of income in fewer hands.
Considering these and other trends, we projected scenarios for Argentina in 2063 – for the next 40 years. Some of these scenarios were positive and some were negative.
What we sought was to understand what could be done – especially by the next administration, which will start in December this year – to move towards the most positive scenarios.
To get closer to a better future, we undoubtedly need to face our more structural problems.
When we thought about the next 40 years of democracy in Argentina and identified these paths, we focused on pinpointing the first steps in each one of these paths.
We identified 10 concrete recommendations, which are feasible from the technical, the political and the fiscal points of view.
We did this so these actions would be more concrete and more prone to getting the consensus needed for their implementation. In short, these small actions could help reinstitute trust, just because they’re feasible and they might show results.
The role of all think tanks
Just as we did with Democracy 40, think tanks have a crucial role in leading this prospective thinking and, especially, in proposing actions – concrete policies that can serve as the building blocks for reinstating trust and, therefore, reducing uncertainty. But in order for this to work forcibly these exercises need to have three main characteristics, as follows:
1. Forward thinking
When we’re facing a crisis, we tend to focus on the present situation, but we have a responsibility to augment the time frame considered in analysing how to overcome it.
Different techniques might be used: forecasting, backcasting and, surely, other projections. But what we always need to bear in mind is that we need to compare the scenario of what we’re thinking about proposing to do with its costs and benefits to the projection of the status quo.
The status quo is costly and this sometimes gets hidden: we tend to think that a policy is too expensive because it needs an investment that’s larger than zero, but we don’t consider the cost of not doing it.
There are concrete tools, such as the input–output matrix, which are useful in simulating the future impacts, both of the proposal and of the status quo.
2. Applied research
The main pillars of any think tank should be based on applied research. And let me highlight the ‘applied’ part of it: This isn’t only about identifying what works and why or the causal mechanisms within a specific set of public problems, but mostly what may be done in the near future, given the present restrictions in solving these problems. And I’m not only referring to fiscal constraints.
We had a larger perspective, obviously including the restrictive fiscal space, but which also considered the political economy and the technical capacities needed to implement the policies.
Analysing this required an important effort in uncertainty, but it’s incredibly valuable – at least to present scenarios.
3.Other actors
These are processes that need to involve other actors. The main type of actors are all the relevant political forces who might be crucial in deciding a policy’s format and be involved in its implementation.
But it’s also necessary to go beyond political leadership. Most of the problems we’re facing need commitments from other actors: the private sector, unions, the media, and social movements.
We need to include all of these leaderships with two main characteristics:
- Territorial perspective, involving those who have territorial knowledge, especially in discussing policies that require territorial adaptation.
- Intergenerational representatives – we mostly discuss structural problems that need long-term solutions.
During the implementation period for these solutions, there might be a renewal in many of those leaderships, and those younger, new leaders, need to already be part of the solution if we want the course that has been set to be maintained. With all of these actors, the solutions need to be constructed.
Making solutions work: What needs to be done?
But, in order for all these solutions to work, we need to continue working for more and better democracies. We need to ensure that all who assume governmental responsibilities respect, with conviction, the rules of democracy.
This is not an overstatement; we’re all seeing what’s happening in many countries where outsiders, not too committed to democracy, have won elections.
We are now, globally, facing an inflection point.
By now, we must know that progress is much more likely and sustainable in democratic contexts. Let’s not jeopardise the democracies that have been so costly to build in many of our countries.
It’s time we accept that, even in uncertain times, it is possible to project the future. And think tanks play a crucial role in this task.
But it’s not only possible to project our future, it’s necessary. Only then will we be able to act to get out of the pessimistic predictions that seem inevitable and move towards optimistic scenarios.
Let’s stop using it as an excuse that mistrust and a lack of certainty are not letting us act.
Keynote address at OTT conference in London, 11 May 2023 – Chatham House