Strategic Challenges

Global Economic Performance, Policy and Management

The collapse of confidence in the world financial system will shape the research agenda for a long time.The full extent of the damage to the global economy remains unclear. Governments have been forced to intervene in the economy, overturning the economic orthodoxy of the last 30 years.

The boundaries of public and private are being redrawn as new economic regimes are created.The recession puts renewed pressure on understanding the causes of poverty and what policies reduce it.Through research centres and grants, ESRC funded social scientists have already been active in these areas, giving us the opportunity to build on and deepen what is already known.

Governance has proved inadequate in the face of the spiraling complexity of financial innovation. Social scientists will increasingly be expected to examine the causes and the resulting economic and social distress, and suggest remedies. Social science can help determine which parts of our system remain viable, design governance to avoid future collapses, and look for new ways to enhance economic performance in the context of scarce public funds. Analysis of the nature and performance of international institutions, in particular the international financial system, will be needed to help develop a new regulatory regime.

The challenges facing social science are:

• Calibrating the impact of greater governmental involvement in the economy and understanding how the boundary between public and private action may be redrawn
• Understanding individual investor and consumer behaviour within a highly volatile global economic context, not just on the basis of 'rational actor' models, but also behavioural understanding of markets: the shared understandings and expectations that emerge among participants in, say, valuing and trading complex financial instruments
• How policymakers can ensure that market governance mechanisms effectively address risks, for both individuals and businesses
• How to improve the capacity of and movements between the wide range of infrastructure networks, such as roads, rail, energy and electricity, requires social science input as well as technology
• The impacts of globalisation, both in the short run as demand falls and job losses escalate, and in the longer term if and when growth increases again (with parallel shifts in demand and supply if the economies of countries such as China and India continue their high levels of growth).

To address these challenges social science will use new international data resources and comparative methods. Increased investment will be required, including studentships geared to the economic opportunities and risks agenda. Interdisciplinary collaborations will seek to explain the coevolution of global economic performance, environmental sustainability, security, and human health and wellbeing, and the role of individual and collective behaviour in economic events.

Global economic instability cuts across almost all the other key challenges for social science set out here. Within there are questions on whether economic recovery will reinforce or impede environmental objectives. How the UK provides for a high skill economy with businesses competing in an ever more demanding global environment will intersect with the challenge. Links with the challenge are likely to emerge from understanding how risks to security from turmoil in the global economy may be turned into opportunities for developing harmony between peoples. Links to the and challenges will arise from the possible consequences of the economic downturn on health and demographic change.

There are also outstanding opportunities for the ESRC to work with other Research Councils and the Technology Strategy Board (TSB). For example, work with the Engineering and Physical Sciences Research Council (EPSRC) on securing resilience of the UK economy in addition to work with the Technology Strategy Board on securing high value from global markets and production chains.

Achievements 2005-2008

• Influencing economic policy, contributing to debate on financial markets, globalisation, productivity and the economic downturn
• Contributing to knowledge about alleviating world poverty through the ESRC/Department for International Development (DfID) initiative, an international scheme involving research organisations from both the UK and developing countries
• Advancing understanding of where and how the public and private sectors of the economy intersect, and providing evidence about how best to organise and deliver public services.

Priorities for 2009-2014

By 2014 the ESRC will have:

• Invested in major new research aimed at understanding of macro-economic performance and how markets, institutions and policies interact to sustain competitive advantage in the global economy
• Funded work on the impact of public policy interventions on individual and institutional responses to global crisis, for example in their saving and consumption
• Identified evidence on how to improve global governance of economic activities for the sake of enhanced wellbeing
• Funded substantial new research with DfID on reducing poverty among the poorest countries in the world
• Expanded its investment in the provision of international datasets, such as those available from the World Bank and International Monetary Fund
• Worked with the follow up to the Council for Science and Technology report on infrastructure to ensure that the economic and social implications of developing the UK's infrastructure are fully integrated with the technology
• Through the further funding of key longitudinal data resources developed a deep understanding of individual and household responses to the rapidly changing economic climate
• Promoted access to data resources within specific emerging economies
• Led an initiative to strengthen capacity in macro economics. This will include ring-fenced studentships and post-doctoral fellowships.