Professor David Miles discusses today’s economic challenges and the importance of economics for future business leaders.
Professor David Miles is a Professor of Financial Economics at Imperial College Business School. His experience includes working as a Monetary Policy Committee member at the Bank of England and serving as Chief UK Economist for both Morgan Stanley and Merrill Lynch in London.
In this interview, Professor David Miles explains his view of the top economic issues facing business today, and the far-reaching benefits of specialising in economics for students aspiring to become future business leaders.
Economics modules feature in the core components of many of our MSc programmes. In particular, MSc Economics & Strategy for Business features rigorous core modules in both micro and macro economics, as well as the economics of digitalisation, energy economics and the strategic and economic tools required for decision making in the context of innovation.
In your opinion, what is the biggest global economic challenge facing business leaders today?
I think that the biggest challenge facing many developed countries is weak growth combined with governments that have severe limitations on their ability to increase spending. Despite expansionary monetary policy, growth is pretty weak throughout most of the Eurozone. Interest rates are around zero, and despite that unemployment around Europe is approximately 10% – in some countries considerably higher. Here in the UK, unemployment is pretty low but the growth of the economy is still subdued. At the same time, most developed economies, including the UK, are running fiscal deficits. So it’s a difficult position where interest rates can’t really be cut any further and the scope of governments to boost demand by spending more is limited. On top of that, we have a collection of difficult political issues, particularly in Europe, many of them connected to the future of the European community, and that is particularly acute here in the UK after the vote for Brexit.
Given the challenging economic climate, how can studying economics and strategy boost students’ potential to become successful business leaders?
A solid understanding of the overall economic issues faced by countries and how businesses can devise and implement strategies in response to them is highly valuable for any future business leader. If you’re running a business it gives you some idea of what to expect in terms of taxes and the scope of governments to assist the part of the economy that your company is in. There are many difficult political issues affecting the future of Europe. There is a degree of scepticism surrounding the idea of ever-closer union, which has been the ideology of the European community until very recently, and now that faces major obstacles. This has an impact on trade, flow of investment between companies, the ability of each government to raise tax revenue, and so on. All these things are very interesting for people entering the world of business. After all, one of the prime determinants of how easy or difficult a business environment it is, is whether or not incomes are rising and confidence is high, and those things will be very affected by economic issues.
How do the strategy and economics modules offered at the Business School develop student understanding of these issues?
We teach a range of economics and strategy modules across the MSc programmes at the Business School. MSc Economics & Strategy for Business features a unique blend of teaching in the areas of strategy and both micro and macro economics, which provides students with the tools to understand the position of a company within its economic environment and consider strategies to thrive within that environment.
Micro and macroeconomics are the two broad branches of economics. Microeconomics considers individual markets, how the decisions made by one company may affect others and how that might play out over time. We particularly look at the strategies companies might follow given competitive pressures between individual firms and the ways in which prices are determined in markets. That’s relevant for students, whichever line of business you end up going into.
Macroeconomics includes issues such as interest rates, government spending and taxation, fiscal deficits and the impact of movements in exchange rates. For example, the implications of Brexit on trade and what that might do to the UK and their trading partners in the European Union. Macroeconomics is concerned with the overall environment that drives GDP and government tax policy, which have a big impact on the environment businesses work in.
What do you think is the key advantage of studying economics and strategy at Imperial College Business School?
Nearly all of us teaching economics and strategy, and indeed many other modules, have a good deal of experience in the business world. I have spent quite a lot of my life working in financial institutions in the city, both at the Bank of England and also with American investment banks. The level of industry expertise the faculty have results in a great deal of interaction between the teaching staff and businesses, both here in the UK and internationally, and we bring that real world experience to the way we teach economics and strategy at the Business School. Our teaching is very much focussed on how economic situations affect the environment in which businesses operate and I think that’s particularly important in a world in which the overall uncertainty surrounding the economic environment is considerably higher than we might have thought a few years ago. That is partly due to the lingering effects of the financial crisis of 2008, partly it’s the rise of populism and a degree of scepticism concerning ever closer union between countries, which may have implications on trade and movement of people between countries.
How would you describe the Business School community?
The Businesses School community is a collection of extremely smart people, and that covers both the students and the staff. My colleagues are a very diverse group. For example, we have many economists who studied in the US, economists from India and most European countries. In fact, as a British person I am in a rather small minority. We are a particularly international faculty, so we bring a very global outlook to the way we teach economics and strategy, and the strength of economics at Imperial has been growing at an extraordinary rate. We are now ranked as one of the strongest departments in Europe.