Mark Thirlwell will start as the AICD’s chief economist in February next year. He has nearly 30 years' experience as an economist, focusing on international political economy at the Bank of England, JPMorgan, the Export Finance and Investment Corporation, the Lowy Institute and currently Austrade. Mark spoke to The Boardroom Report about what fired his interest in economics, how governance is crucial to understanding the diverging paths of Australia and Argentina, and the big trends shaping the world economy.
Boardroom Report (BR): What made you want to become an economist?
Mark Thirlwell (MT): I grew up in a steel town in the north-east of England, a place called Consett. One of the formative parts of my childhood was watching what had been basically a one industry town adapt to that industry being shut down. In 1980 they closed the Consett Steel Works, which had been the single dominant employer in the region and in the town. As a consequence Consett had one of the highest unemployment rates in Europe. I saw how political and economic shocks can really change the environment you're in.
Then another part of my childhood was growing up in the Middle East. My father was building infrastructure in Saudi Arabia and in Kuwait. That was the opposite end of the economic spectrum. These were economies that had just had this huge windfall in terms of oil revenue.
They were trying to figure out how do you do really rapid development and growth.
I had these two very different views of the world as a kid. That got me thinking, "What's happening here. How do I understand this stuff?"
BR: Your work has had a strong focus on the intersection of geopolitics and economics. How did you become interested in that?
MT: I remember reading at university a book called The Rise and Fall of the Great Powers by Paul Kennedy. He tried to pull together economics, military history, grand strategy politics, and he wrote this huge, sweeping narrative from the rise of the Hapsburgs through to the rise of the United States and the British Empire sandwiched in between. And I was really taken by it.
I was fascinated by this idea of pulling together history and economics and politics and telling these big stories about how the world works. That's always been a part of what's interested me.
BR: What excites you about taking on the role of chief economist at the AICD?
MT: One thing is the breadth of the membership. I will get a chance to engage with more than 43,000 directors across from the public sector, the private sector, listed companies, private companies, not-for-profits. That's a really interesting group of people to get to know and to talk to, and to learn from.
Also, the AICD’s vision of strengthening society through world-class governance. If you think about the big-picture stuff, what drives economic success, what drives the way the economies work, as well as standard factors like demographics and investment rates, one key factor is technology and the other factor that is really critical is institutions and governance.
If you compare Australia and Argentina, for example, back at the turn of the last century, both Southern hemisphere economies, both very resource-rich, with the potential to grow dramatically, but then you've got very divergent paths. You can't explain all of that just by saying, “it's the fundamentals”, I think you also have to explain it by comparing the quality of governance and institutions. Governance has always been right at the core of what’s important for economies and in the current era we are – again – rediscovering that importance.
BR: How do you see your new role in terms of the analysis you will provide AICD members on the economy and economic issues?
MT: If you think about the range of issues you grapple with as an economist, there's what I would call the bread and butter stuff. So, what's the cyclical story around the economy, very traditional market economics. What's the RBA doing with interest rates? What's the to and fro between what's happening in the labour market at the moment versus what's happening in the housing market? How's that going to influence the interest rate decision and the short-term growth outlook?
That's obviously a useful and important part of what you look at, but it’s only one part of the story. If you think about the overall environment that you're operating in, nowadays the key lesson is you've also got to spend time thinking about the big forces that are going to shape the economy beyond those short-term cyclical stories.
We've gone through a period back to at least the financial crisis of a challenging and rapidly evolving external environment. If you look at indications of policy uncertainty out there, they're really high at the moment. To take one example, a lot of what’s happened in both the global economy and here in Australia in recent years was shaped by the rise of China. Now that China has passed through that first part of its rise, it's time to grapple with: ‘What next after the initial rise of China?’ story now. One aspect of that is the balancing story between the United States and China, which obviously matters a lot for us.
A second example is that there’s a huge technology innovation story out there which is influencing everything from the way global supply chains work to the future of work itself. How do those things change both the economy, things like wage growth and distribution, potential profit expectations, and the role of competition and government policy?
Technological change and globalization are reshaping the way politics works. And as politics changes, that changes the governance framework within which we all have to operate, and we're seeing that on a whole range of different issues pushing in on us from new changes about the way the people think about regulation, changes to how people think about, "What is the responsibility of a company?" Right from that narrow definition of shareholder welfare through to these bigger debates about, "Well, what's your corporate responsibility, and how is that changing in this changing world?"
You can see these big forces out there, and I see my role as seeking to help directors in understanding these key issues by trying to pull them together as part of a coherent framework.
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