Session at Bretton Woods Conference
Friday, April 8, 2011
The Emerging Economic and Political Order: What Lies Ahead?
Anatole Kaletsky, Associate Editor of The Times, introduced the panelists and moderated the ensuing discussion.
Jean-Paul Fitoussi - Professor of Economics, Institut d'Etudes Politiques de Paris
Jean-Paul Fitoussi argued that excessive inequality contributed to the financial crisis and that it undermined democracy. He suggested that economic policy-making take into consideration not only effects on output but also effects on democracy.
Harold James - Professor of History, Princeton University
Harold James suggested that China has played a stabilizing role for the world economy since the financial crisis, as Kindleberger found that Britain had done in the 19th Century. On the other hand, he drew upon the finding of early twentieth century British commentator E.H. Carr to the effect that liberal democracy has been associated with economic prosperity, to conclude that China has also played a destabilizing role.
Kenneth Rogoff - Professor of Economics, Harvard University
Kenneth Rogoff contended that advances in economics staved off a second Great Depression, worried about excessive debt in old age pensions and some European nations, and concluded that economics may not be a science but is a discipline and that rational expectations models bring discipline.
George Soros - Chairman, Soros Fund Management and the Open Society Foundations
George Soros contrasted the views of financial regulation of Alan Greenspan (markets have become so complex that regulation is likely to do harm) and Barney Frank (markets can cause so much harm that we cannot afford not to regulate). He found that European policies on sovereign debt to date are not workable and that they protect the banks but threaten a two speed Europe. He noted the emergence of two competing currency systems, one based on the Washington Consensus and the other China’s two tier system.
The Q&A and discussion was moderated by Anatole Kaletsky
In the discussion, Rogoff observed that the university tenure process discourages interdisciplinary research. Fitoussi recommended looking beyond GDP for measures of welfare. James suggested that conventional economics has worked fine where simple models suffice in monetary and fiscal policy, but are lacking when it comes to financial regulation in and after a crisis. He noted that the three causes of the financial crisis still hang over us: the U.S. mortgage market, international imbalances associated with cheap credit, and too big to fail financial institutions.