by Michael Harvey | Oct 21, 2009 | Cooperation and coherence, Economics and development, Europe and Central Asia, North America
– With Czech ratification of the Lisbon Treaty now looking increasingly likely, attention shifts to the implications for the EU’s global influence. Benita Ferrero-Waldner, the current External Relations commissioner, offers some thoughts on the future EU foreign policy setup here. Hugo Brady, meanwhile, identifies some of the qualities needed in a new President of the European Council – “the job appears”, he suggests, “to require its holder to be a walking paradox: charismatic but modest, highly effective but non-intimidating, a consensus builder but also a decision-maker”. Pascal Lamy, he argues, might just fit the bill.
– In the London Review of Books, David Bromwich explores President Obama’s tendency toward the conciliatory gesture and major pronouncement, assessing the consequences for delivering meaningful outcomes. “[H]is pattern has been the grand exordium delivered at centre stage”, Bromwich argues, “followed by months of silence”. Writing in the WSJ, meanwhile, Bret Stephens offers a critical perspective on the President’s commitment to human rights.
– Elsewhere, Dani Rodrik rails against those raising the spectre of protectionism, suggesting that “the world economy remains as open as it was before the crisis struck” and that the “international trade regime has passed its greatest test since the Great Depression with flying colours”. The Economist, meanwhile, provides an analysis of the falling dollar, while Jean Pisani-Ferry and Adam Posen assess the limitations of the Euro as an alternate global currency.
– Finally, behind the scenes of the financial crisis, and based on in-depth interviews throughout, Todd Purdum chronicles Hank Paulson’s time in office. Reuters has an extract from Andrew Ross Sorkin’s new book offering another take on the former US Treasury Secretary’s actions during the crisis. Daniel Yergin, meanwhile, examines the importance of finding a narrative for the crisis – crucial, he suggests, not only in understanding what happened but also offering a “framework for organising thinking for the future”.
by Michael Harvey | Sep 15, 2009 | Economics and development, Europe and Central Asia, Global system, North America, UK
– With the anniversary of Lehman Brother’s demise, the FT recalls the events of that fateful weekend last September. The NYT has reflections of three former Lehman employees, while a Guardian roundtable asks what lessons, if any, we’ve learned from the bank’s fall. Niall Ferguson, meanwhile, rails against those who argue “if only Lehman had been saved”. He suggests:
Like the executed British admiral in Voltaire’s famous phrase, Lehman had to die pour encourager les autres – to convince the other banks that they needed injections of public capital, and to convince the legislature to approve them.
– Sticking with matters financial and economic, Der Spiegel has an interview with the head of the IMF, Dominique Strauss-Kahn, on the Fund’s actions during the crisis and the potential for a new role for the institution going forward. Former MPC member, David Blanchflower, meanwhile, offers a telling insight into the inner workings of the Bank of England’s decision-making as financial meltdown ensued.
– Elsewhere, the WSJ reports on President Sarkozy’s call to broaden indicators of economic performance and social progress beyond traditional GDP, following the findings of the Stiglitz Commission. Richard Layard, expert on the economics of happiness, offers his take here, arguing that “[w]e desparately need a social norm in which the good of others figures more prominently in our personal goals”.
– Wolfgang Münchau, meanwhile, assesses the implications of an Irish “No” vote in the upcoming referendum on the Lisbon Treaty. “There is an intrinsic problem for the Yes campaign in Ireland”, he suggests, “which is that the core of the treaty was negotiated seven years ago. This is a pre-crisis treaty for a post-crisis world… If we had to reinvent the treaty from scratch, we would probably produce a very different text”.
– Finally, last week saw the German Marshall Fund of the US publish its Transatlantic Trends survey for 2009. Unsurprisingly, a majority of Europeans (77%) support Barack Obama’s foreign policy compared to the 2008 finding for George W. Bush (19%); though the “Obama bounce” was less keenly felt in Central and Eastern Europe than Western Europe. A multitude of other interesting stats – on attitudes to Russia, Afghanistan, Iran, the economic crisis, and climate change – can be found here (pdf).
by Andrew Pickering | Jun 30, 2009 | Economics and development, UK
The financial crisis has led to a lot of talk about the failure of ethics in the banking sector. Greed overtook wisdom, we’re told. No doubt this is the case. Yet whilst bankers are to blame, it’s hopelessly naïve to suppose that a ‘return’ to some golden age of ethical business will solve all our problems.
There is a parallel with the expenses claims of British parliamentarians. Caught with their hands in the till, some cried out that the system was to blame for letting them get away with it. For all the cheek of that response, there is a lesson in it.
Individuals must take responsibility for their sins. But if we’re serious about making sure that these things cannot occur again, it really isn’t enough to call for more ethics in business. In fact, I’m beginning to suspect that this is a way to avoid having to enact any real change. As the crisis seems to be settling down, the British Chancellor of the Exchequer Alistair Darling has shied away from significant reform of the regulatory system and chose instead to blame bosses for being irresponsible. ‘Don’t worry,’ we seem to be being told, ‘we’ll just ask bankers not to be greedy any more.’ Forgive me, but I had hoped for something more robust.
It must be conceded that in sharp contrast to the plans of the British government, Barack Obama’s planned reforms are substantive and bold. But on a global level, concerns are growing that the opportunity for broader reform that this crisis provides is being missed as optimism returns alongside talk of ‘green shoots of recovery’. The Bank for International Settlements (BIS), often described as the central bankers’ central bank, published its annual report on Monday. According to the FT, the BIS:
said it was vital that thought be given to the ongoing structure of the financial system while the patient was still on life support. Efforts so far, it concluded, had been a “messy mixture of urgent treatment designed to stem the decline, combined with an emerging agenda for comprehensive reform to set the foundations for sustainable growth”.
It highlighted two main risks: first, that not enough will be done to ensure a durable recovery from crisis; and second, that the emergency action to stabilise the financial system will undermine efforts to build a safer system.
The G8, too, is jumping on board the ‘return to ethics’ bandwagon. MBA graduates have set up their own code of ethics, taking inspiration from the medical profession’s Hippocratic Oath. This is welcome. We do need to create a public environment in which ethics and responsibility are more emphasised (and more respected), but to expect a firm whose raison d’etre is the pursuit of profit to apply the brakes is painfully naïve. Business (and politics) should be conducted on more ethical grounds. This year’s Reith Lectures, given by Michael Sandel, address this point well. But in the meantime (between now and hell freezing over), we need rules that acknowledge people’s tendency to ignore ethics, especially in the heat of the moment. The great theorists of capitalism itself, such as Adam Smith, knew well that the system wasn’t moral. But neither is capitalism immoral – it’s simply amoral. If we want a moral system, we have to bring in the morality ourselves. But to expect bankers to do so on their own is to invite a conflict of interest. We do not expect the players at Wimbledon to make line calls on their own shots and, similarly, we should not expect the financial sector to judge the morality or wisdom of its own practices.
This is an important moment, but it’s not a moment of a new ethical kingdom, or of a new form of capitalism. Instead, we need to return to an older scepticism about the role of private interests in our society and the degree to which the doctrine of self-regulation is a realistic solution.
by David Steven | Apr 20, 2009 | Economics and development
Like most of you, I spend most of my days weeping at the fate of rich. But I don’t think I’d realised how bad things were, until I came across Gabriel Sherman’s definitive account.
You should probably get your senior executive assistant to read you the whole thing, but if you’re been forced to cull the hired help, the key themes are: (i) Make sure we, the rich, are paid more than anyone else, even if we go bust. (ii) Don’t expect us to foot the bill from the bailout – tax the sheeple instead. (iii) Money isn’t enough – we demand deference and respect.
Here are some of the quotes that made me tear up:
Citigroup exec: “No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?”
Bankrupt Wall Street exec: “I think [Obama] doesn’t have an appreciation for how hard it is to build these companies, the blood, sweat, and tears that goes into them. It’s just that he has no passion for it.”
Bear Stearns senior managing director: “Honestly, you can pick on Wall Street all you want, I don’t think it’s fair. It’s fair to say you ran your companies into the ground, your risk management is flawed-that is perfectly legitimate. You can lay criticism on GM or others. But I don’t think it’s fair to say Wall Street is paid too much.”
Wall Street exec: “Why are [we] being punished for making a lot of money?”
Hedge fund guy: “The government wants me to be a slave!”
Another hedge fund guy: “JPMorgan and all these guys should go on strike—see what happens to the country without Wall Street.”
I’d also highly recommend reading the Economist’s typically incisive analysis. The stakes are high, it warns. Raise taxes on the rich and you’re on a slippery slope towards fascism, genocide and global conflict:
Barack Obama has suggested raising the tax rates on high earners and closing loopholes such as the carried-interest privilege enjoyed by private-equity managers. Such tax changes may suit the public mood. The danger is that popular anger, once released, can fasten on targets beyond the rich; immigrants, say, or foreigners generally. The 1930s Depression led to fascism in Germany and the second world war. Even if such apocalypses are avoided, the anti-rich backlash can [still] go too far.
So, repeat after me, “They came first for the rich, and I didn’t speak up because I wasn’t rich. Then they came for the Jews…”
by Alex Evans | Feb 4, 2009 | East Asia and Pacific, Economics and development, Latin America and the Caribbean, South Asia
As David just noted, this morning’s Lex column in the FT is relatively upbeat about the dangers of protectionism, arguing that “the disaggregation of global supply chains, the source of the huge efficiencies that companies pass on to consumers, will not be easily undone.”
Whether or not that’s right (and like Willem Buiter, Martin Wolf is also a good deal more downcast than the Lex team), it’s interesting to compare today’s Lex column with what they had to say about capital flows to emerging markets just a couple of days ago. Here’s the bit that made me sit up:
Take Brazil and India, the globe’s ninth and 12th biggest economies, according to the International Monetary Fund’s latest estimates. While the developed world is expected to shrink by 2 per cent this year, the IMF reckons Brazil will grow by 2 per cent, and India by 5 per cent. Why? One answer is that they have stable banks, relatively closed economies, and large internal markets. This has insulated them from much of the global turmoil.
The contrast with East Asia is stark. Singapore’s economy shrank at an annualised 17 per cent rate at the end of last year, South Korea by some 20 per cent. Yet this is not for lack of capital. Asian economies, after all, are global creditors. Their economies have shrunk instead because they are heavily oriented towards collapsing international trade. Meanwhile, their local markets are undeveloped and weak. Asia’s challenge is how to best deploy its accumulated surpluses to boost domestic demand.
(more…)
