Has capitalism failed the world? | Head to Head

what are banks for who's to blame for the economic crash is capitalism itself in crisis mistakes made in Wall Street and the City of London are paid for by people all over the world as inequality Rises so does anger and those who were supposed to regulate the banks stand accused of being asleep at the wheel Lord Adair Turner is one of the world's most influential financial policymakers he was at the helm of the UK's Financial Services Authority in the wake of the 2008 banking crash my name is Mihaly Hudson and I've come here to go head-to-head with Adair Turner in front of an audience and to challenge him on whether capitalism has a future and what to do about those banks ladies and gentlemen please welcome Lord Adair Turner the former regulators we've attacked for being too close to the industry but more recently he's become much more critical of bankers and the global financial system we have been through the worst financial crisis in living memory some say in a hundred years the big question that people are still asking almost five years on is who started it who's to blame what happened in 2008 wasn't just the product of the misbehavior of individual bankers or over exotic derivatives developed in the three or four or ten years before the crisis I think it had deeper roots I think really 30 or 40 years ago we began to develop an idea that finance was just a market like any other market and market like the market for shops or the market for car manufacturers and that the same propositions about the benefits of free markets which work pretty well in the market for restaurants or car manufactures work in finance and they don't and as a result we simply didn't pay attention to a set of trends which would be going on for many years which had seen the financial system in rich developed countries just get bigger and bigger relative to the size of our economies you can see that measured in things like what's called the overall level of leverage the level of debt relative to people's income I've really spent the last four years slowly waking up to what a deep crisis we're in and how does it go you said many years well I would say it was from the 1970s onwards some of the deregulation deregulation the periods of regulation alms training and then it just becomes more and more intense it becomes more intense in the 1990s with the takeoff of the derivatives markets with the deregulation of the role of the investment banks in the u.s. these things don't happen by accident we all know how banks got out of control you mentioned some of the toxic assets and the things they cooked up you were until very recently chairman of the Financial Services Authority the FSA Britain's top financial regulator he was abolished the end of March why did the FSA not see any of these flaws that we now all identify why was it allowing banks to get away with all this behavior the most fundamental mistake is to allow banks to do too much business on a light level of capita is that because you guys were asleep at the wheel is the question a lot of people were asleep at the wheel it happened over a long period of tapas if eclis the regulators well the regulators and the central banks I mean the regulators and the central banks together were responsible for the development of the capital regime for the banking system and if you look at those regimes then there just wasn't enough capital in the banking system and it is quite startling to look at back at it how did anybody ever think that it was a sensible thing for a mortgage bank to lend a hundred pounds of mortgages on the basis of 99.5 of borrowed debt and only 0.5% 1/2 as some would say of of equity but that's what they were doing and it was it was a crazy thing that we allowing them to do and some say that they were the reason for that is because regulators split basically into two types of people there were people working in regulatory agencies who were either in or of the banks and wanted to go and work for banks or there were those who were basically intimidated by the banks who were outgunned intellectually and financially outgunned by the big bang but I think that we had small regulatory intelligence as a part of it but you also have to understand that some very apparently fine economists people who worked in central banks in regulators 10 years ago were telling a story about the benefits of the capital regime and somehow along the line they convinced themselves that this over leveraged banking system was essential for the economy let me bring in an Pettifer he's a director of the think tank prime economic she's a fellow of the New Economics foundation in London rather prescient Li in 2006 she wrote a book called the coming first world debt crisis and you're listening to a dare here talking about the fail intellectual failures and the regulatory failures how big do you think they were I think they were massive but I wanted to say that we ought not just to blame the regulator's we need to blame to other groups who I think deeply responsible often escape scrutiny the one is the economics profession and I think it's appropriate that we should discuss that here at the Oxford Union who cheered on this liberalisation and this deregulation all the way through and who became hired guns effectively in and in making the case and the second is the politicians the fact is that ultimately it's politicians that sighing the rule book and that enforces the rule book let me bring in John Moulton who's sitting to your left you are a venture capitalist founder of the British private equity firm better capital I think it's worth hundreds of millions of pounds when you hear people say it was regulation that was the problem the lack of regulation and we need more regulation what's your response to that before the crash the regulation was ineffective and very obviously so and was writing in 2006 I was even routing about it in 2005 it was obvious that there was too much leverage it was obvious that there was too much interconnection it was obvious we had too big to fail it was obvious that we had what we're of a paid bankers with inappropriate motives in what they were to do things to get bonuses the the the control of the accounting was out of control it was all blasted of this nobody wanted to hear it the politicians didn't want to hear it because they were enjoying the growth driven by the credit boom we need simple hard rules we don't need thousands of pages and thousands of bright people it's all wasted talent wasted no I I happen to agree with John and uh it's as if we've got you know a car without shock absorbers driving along a motorway without crash barriers and because of that we've crowded a whole load of people into the driving cab to look over the drivers shoulder if we'd actually design the fundamental rules in a better system we probably wouldn't need as many regulators as we have but can I pick up and point as well the point about a credit and what was obvious what you end up with is a belief that the economy will only deliver income and jobs particularly for lower income people if you are providing huge amounts of credit credit to lower-income households is almost making up for the fact that they haven't got good enough jobs to start with give them credit because we can't give them good income jobs so there's a very deep point about the way that we ended up believing that there were only way we could have full employment economies with with this continual growth in the amount of debt relative to to our national income costas lapavitsas is also with us he's a professor of economics at the university of london author of the book crisis in the eurozone a greek economist what do you take what you're listening to regulation we've had plenty it's incorrect to think that there has been no regulation the last 30 years there's been stacks of regulation dreams of it all of it however has been market conforming regulation he has been he has been conducive to financialization it's been regulation designed by banks for banks and and he hasn't worked so regulation alone is not the answer although I fully agree that we need better regulation that we've had before we need to think of the structure underlying transformations that need to come about and simply raising the amount of capital will not tackle that you mentioned the thinking that was led to some of these intellectual mistakes we've talked about the role of regulators but it wasn't as you say it wasn't limited to this group does the role of government there international institutions like the International Monetary Fund which was hailing all this by world innovation it was there are the credit ratings agencies it was giving triple-a ratings some of these toxic assets but none of these guys I mean put punishment to one side and justice in terms of actually getting rid of them from the scene they're all still hanging around the scene these economists who got it wrong the IMF the ratings agencies how can you move forward when you've got all the people who helped cause the crash still in influential global positions when you get mistakes made sometimes there are people who've made mistakes and who have the technical skills of economists who are you know capable of seeing what's gone wrong and I don't think you can simply say we've got to completely get rid of the entire set of people who've been involved in that process it's very very important that we we learn from those mistakes and we understand what a deep set of mistakes is were made and along with the Great Depression of early 1990 1930s this is the biggest setback other than global Wars it's the biggest peacetime setback to growth of prosperity that's occurred you yourself are not just a former regulator you're also former banker you started off with a career in banking yep I think you were vice president for Merrill Lynch you're awash from 2000 to 2006 here's what I'm wondering when you were working at Merrill Lynch and in a kind of in the top layers of that institution did you and your foot did you say to your fellow bankers then yep what you're saying now in books like you know I did a crisis where you're talking about I mean the role I did in Merrill Lynch was focused on the mergers and acquisitions very much generally about the general quait to make about you ladies it's a very legitimate point you know I was involved in debates and there were lots of things I got wrong I certainly made intellectual mistakes I did not until the last four years really go back to the basics of what a banks do this amazing way that banks it's sometimes described in the economics profession or in economics textbooks that banks take savings and work out where to put it they don't they simultaneously create new credit and new money and that is a fundamental insight of what the banking system does which largely got sort of ignored and forgotten by the economics profession in the years running up to the crisis just on the specific issue of banks they're so huge they're so global they're so powerful and we talked about kind of the lobbying power I used someone who says it's time to break them up it's time to break these big banks up because there's a debate here in the UK in the United States about what division there should be between the different parts of the banking sector there's the retail banking sector does the high street bank there's what's called the casino banking center the investment banking center well as you know in the UK we have this plan to ring-fence them internally and I think that will be a very useful step forward it will give to the authorities if banks get into trouble much more degrees of freedom to say well let's keep the retail banking going and let the investment bank if necessary fail so I'm a supporter of those proposals I don't imagine enough I know that there's any magic about small banks so let's just remember the last big banking crisis of the early 1930s in the US was a banking crisis of lots and lots of small banks lots and lots of small banks can go and in the UK we had problems with Northern Rock with Bradford & Bingley these were relatively small banks I don't know we should I can eyes small banks I think the most fundamental things are much higher levels of of capital much higher levels of liquidity to me that's more important than the size of the banks themselves John Milton do you think we should break up the big banks absolutely the ring fence won't do ring fences it's an extraordinary process we're going through in the UK it takes longer to actually ring fence the banks than it took us to fight World War two so there's not exactly a great rush about this process it's not happening and it may very well not happen at all in any reasonable way would it protect yes it would at least the simple banks would be simple they'd be manageable which is something else we haven't talked about because as our banks too big to fail still too big to fail is a subsidy the banks people people should realize it's a social subsidy the banks banks make the profits they keep them in good times and then the losses are basically passed on to society but I think breaking up banks only goes that far what we need to consider is actually the systemic failure of banks in terms of what they do in a capitalist economy banks are supposed not only to pass savings on which and I agree they also create credit banks are also supposed to manage risk to collect information and to assess information they are there they're the nervous center of the capitalist economy now that is manifestly failed it's very and therefore what I would say is we need to consider the failure of private banking and we need to think seriously about public banking I don't think that just breaking them up is sufficient and the reason for that is that banks not only create credit effectively out of thin air they also price it ie they determine the rate of interest and it's the rate of interest that is rarely exploitative if you if you're a subprime ER and you borrow three hundred thousand pounds to have $1.00 to have a roof over your head and they charge you seven eight ten fifteen percent you'll never going to be able to repay that except by extracting all of your wealth really from you and we have lost I mean throughout history throughout Christianity throughout Islam there have been strong prohibitions against usury and high rates of interest we've forgotten that if you listen to our guests here one of them is saying ring-fence break them up one of them is talking about the ownership structure and the private ownership one of them is talking about the capital controls and interest I mean you are much more radical than you were when you were about you don't seem to be radical enough well I mean I think that the bit where I've got much more radical I think is I have become convinced by the arguments that many have been put forward which is slightly different in this category that an ideal banking system would probably have leverage ratios of our banks of more like five to one and fifty to one we're talking about banks as institutions we're talking about the system cost as I mentioned capitalism itself if I bring the debate back to individuals Durai Banks consists of bankers yeah some of us are a little upset that five years after the crash not a single leading banker on either side of the Atlantic has been put behind bars are you upset about that well you can only put them behind bars if they broke the rules that were in place then and you know as the charity ethnicity I was in charge of an enforcement organization with lots of lawyers and we looked carefully about whether there had been events which broke the existing rulebook and broadly speaking we didn't find them what about a little LIBOR rate really oh well with with LIBOR we did bring fines against a bit but to go back to the first fundamental thinkers and this is really important in many sectors of the economy we accept that some firms will go bankrupt indeed that is an essential part of the creative destruction process that leads innovation and growth forwards the fundamental problem we have is that banking is different when banks go bankrupt they don't just that it isn't that Enterprise fails they can bring down I'm asking what are they too big to fail nobody dies in jail that's why I think what we ought to be doing is not trying to jail them but simply saying when you become a director of a bank your terms of employment your terms of being a director should force you to have a different trade-off between risk and return learn is appropriate in another sector of the economy I think we should say if you're a director of a bank and it fails then you will be automatically banned from being in the financial services again I think we should say that bankers including the non-executive directors should put all of their fees into an ask row account and should lose that if it fails but that's not criminal that's not saying they're bad people it's simply saying we want them to strike the balance but you don't risk any bankers are only different you don't think any bankers about people just well I think I'm sure some bank has bad people but most of them most of them made trade-offs between risk and return which might have been perfectly legitimate if it had been in some of the sectors of the economy but we're not right in the shaking it's just it's awful to watch I we're we have people in the replacement organizations for the FSA we've got people there who are directors at senior levels in fail banks we are still using the same people we're using them in the Bank of England we're using them in the in the regulator's we have had very little - let me let alone putting them in trigger well let me we haven't even changed on that note we haven't changed enough of the people we've got bankers paying massive bonuses which we haven't even got into we've got a regulatory system which we're still questioning banks too big to fail what's going to stop another crash do you think we're gonna get another crash in the next few years I don't think we could have another crash in the next few years because we may come on to this later I think we're in that period where our big problems now are getting the economy going you're not worried about another banking crash not I'm very worried about it in 10 or 15 years because I think as memories fade as people believe that this time it's different as people believe we're all cleverer than the previous generation and that there's some new you know X Y Z squared financial innovation that everybody believes has got rid of risks we'll make the same mistakes again I mean I am concerned that we have not been radical enough in our reform some would say that the financial financialized capitalism that you referred to cost us and some of our guests referred to is deeply unstable and deeply destabilizing because of the massive and huge levels of inequality that it generates is that a fair criticism I'm not in a gala Terry and I'm not a socialist but I am worried about the the sheer extent of the inequality that's now going I think finance is part of that story it's undoubtedly true unless you means some very good academic research that shows that as the financial system has got bigger relative to the economy it has played a major role in that expansion of inequality did it nd the quality play a role in the crash well I think inequality played a role in the crash in a way that I made a reference to earlier I think in the US the you had an expansion of inequality and you had a political culture in which you couldn't possibly say that the answer to that was to redistribute income to the losers the bottom quarter of American society but on the other hand you needed a political response and a political response was let the meet credit it was it was it was a subprime boom Adair says he's not a socialist Costas I believe you are a socialist let me ask you this how complicated are they it's complicated how complicated do you think this massive explosion in income inequality both nationally and globally has been when you look at the income distribution the top 1% in the United States and in this country has taken is creamed off all the increase in productivity during the last 30 years now how through finance you see finance has been a vital lever in this people enormous incomes wages presumably in the financial system wage is what wage is how can anybody earn wages of millions and millions of pounds a year this is actually creaming off the surplus now that can certainly be restrained that can certainly be controlled how how would you restrain it impose controls on what bankers get paid for a start the government is good of course I mean what is this notion of bonuses people should get paid for doing a job would you support or oppose a government which tried to tax bonuses as a way of dealing with a bang because bonus take which we had for a brief period in this country I think you can only do that as a temporary thing because as I say you'll find also I think like that there are so many ways around it and I think there is there is an illogic to ending up saying you're going to have a tax on bankers bonuses not other people's bonuses you know should basically be aiming to make sure that your entire banking system is only doing things which are value out and rather than rent extraction again we're back at the complexity of regulation I think it should be very straightforward there will be no government guarantees there will be no tax payer back subsidies there will be no bailouts unless bankers meet these conditions and turns we went through like autumn 2008 I think we were right at that time to bail out the banks I think if we had not bailed out the banks in autumn 2008 we will now have 20% unemployment not you know greed but the terms as an put the terms well I think we should ideally not have put money in we should we should have nationalized them and white out the equity holders we've we've talked in this half and we'll bring this half to a close we took this half a lot about finance and the role played by finance and in destabilizing capitalism itself here's my question put the crash to one side and look at the bigger picture how can anyone defend an economic model a system in which the richest 300 people control more wealth than 300 million or 3 billion people on this planet well I would defend liberal capitalism the market economy as despite all its false having done a better job than the alternatives like the least worst city like democracy it is the least worst system I think it's very important then to manage capitalism to make sure that it doesn't go to excess and I think we developed a belief before the crisis that we could go to the extreme of just believing that it was completely in a self-adjusting that it would always produce perfect results that's not true we can have a better capitalism than we've got but it invert it requires self-confident staged intervening and regulating in an appropriate fashion while also not getting in the way of the bits of the entrepreneurial process which are valuable and I think we've got it quite wrong and I think the core of the way we got it wrong was in our wrong attitude to the financial system well okay on that note I'm going to bring part one to a close in part two we're going to be talking about the response to the crisis D debate over austerity versus stimulus the eurozone crisis and we're going to be bringing in our audience join us after the point you're watching head-to-head on al-jazeera we're talking about the financial crisis the causes the consequences we're joined here in the Oxford Union by Lord Adair Turner former head of Britain's Financial Regulator the financial services authority author of the book economics after the crisis Adair we've been talking about the financial aspect the banking part of it and the crash that was one of the big failures you called it an intellectual ideological failure in part one but wasn't the other big failure not the crash itself but our response to the crash we've seen governments really struggling to get to grips with how to respond to unemployment the lack of growth the debt crisis haven't we we really didn't realize in spring 2009 as we got beyond the immediate stage of the crisis we didn't realize how difficult it is to get economies going again when you first allowed debt in the private sector to get to too high a level we all failed people in the official community failed back in 2009 to realize how difficult it then becomes to stimulate the economy you cut the interest rate to zero nothing much happens you try what's called quantitative easing which is the central bank buying the government debt to try and bring down long-term interest rates as well as short-term interest rates but nothing much happens then either has austerity failed I think we have been too certain that short-term austerity can produce a benefit I think it's not true that short-term austerity produces a confidence effect I think the difficulty is that when the debt levels the public debt levels go up in the crisis you feel what I've got to get that under control at some time but I then think if you try to get it under control quickly by cutting your public expenditure or increasing taxes in the short term you can enter a cycle where the very process of trying to get your debt levels down meaning you never get your debt levels down now I've argued that in the face of that we may need to consider some really radical policy options such as what's called helicopter money which is running increased public expenditure or tax cuts and paying for it not with money that the government borrows but with a central bank created money so I think we have to be we need a very balanced approach which has a point of view of how long how we get public debt burdens under control over the medium-term but is more cautious about short-term cuts and fiscal austerity than most countries have been so far John Moulton has austerity failed in the way Adair Tennessee state does in the short term first of all austerity has been incredibly mild the previous government in the UK increased public expenditure by about 62 percent in real terms we've taken about 3% out so the austerity is very slight it has occurred I actually think it was probably inadequate because right the way across Europe we've got more and more public sector spending relative to the size of the economy just absolute nonsense no chef Dave and what do you absolute nonsense wise are absolutely not developed among since the real crisis as Lord Turner has spelled out very carefully was a private financial debt crisis that the private finance sector dumped huge sentiment among Humana bed the the Britain is one of the most indebted nations in the world and it's private debt it's Republic and there is an ideological refusal to address the private financial crisis instead there's an opportunity taken and really viciously opportunity taken to attack the public sector and that is what's up John I will come back to you castas John Moulton says austerity here in the UK has been mild you're a Greek economist we all know about austerity in Greece what has happened in Greece as a result of austerity economics or say austerity is B in Greece has been phenomenal and it's basically what happened in the UK times hundreds because the state is about the idea generally when the problem is that one and the problem is private that because austerity basically doesn't achieve what it sets out to to achieve it's it's a fallacy it's a logical fallacy and a policy fallacy to deal with that you need growth or you need to write it off or state it doesn't doesn't cure that and what it creates is unemployment and more problems there's two things about austerity one is absolutely austerity hurts the economy and causes the pain that you're talking about in Greece no argument Greece sure defaulted absolutely would have been much less painful or being able to inflate its currency which it couldn't what you do need to do which is not quite the same austerity is cutting the size of the public sector to enable a larger private sector to cut you just don't even look at the bloody data and the data shows that large public sectors lead to low growth data shows that private investment has collapsed under the burden of debt they've dumped on it by banking system group in that case we need public investment and that's precisely why the economy cannot recover because we've cut public investments as well as private I think the answer is that you can have a different balance of problems in different economies if you look around the eurozone economies I think it is a reasonable case that in the case of Greece part of the problems were created by public debt and what happened in Ireland and Spain was absolutely clearly an explosion of private credit particularly in the housing and commercial real estate sectors which then blew up and then tip the economy into recession and then the public debt started going up with them but the basic cause was the private sector in Ireland and Spain Costas and John have both mentioned Greece and whether Greece should have defaulted Kostas a supporter of Greece exiting the euro do you think it's time for a orderly dismember of the eurozone Greece will not pay back the full amount of this public debt I mean this is just a fantasy that we're all pretending you can either default and stay in the eurozone or default and leave the eurozone my belief now is that for the eurozone to survive it will have to go really quite a long way down a route of federalization of centralization and I think you've got to have a Euro bonds a category of Euro bonds and I think in particular the most crucial thing we've got to break this terrible link we have at the moment between bank solvency and state solvency and what that means is when a bank gets into trouble in Spain if you think you've got to rescue it in order not to have a worse knock-on effect to the economy you've got to do that with central eurozone resources because if you try and do it with Spanish state resources you'll simply make the Spanish state in a worth solving position this is this is this is what's called the banking Union there is a commitment to have it but I think they are going to have to go and in the long way down that line to make this workable and in the late 1990s you were one of the big supporters of the euro project of British membership are you wrong and I tell you what what is hasn't made me really think about this I failed to see that the the big problem would be the way that a single currency area people said well you have a single currency area the great thing is you'll get capital flows across this single currency area capital flow will flow to the low productivity areas and they'll build up businesses in Spain etc well we've got huge capital flows but unfortunately they didn't turn into you know increases in productivity in low productivity areas they went into commercial real estate and housing very briefly let me ask each of our panelists here do you think the euro will survive should it survive John euro will survive I suspect parts of it will not survive that'll be the best answer for some of the countries it's the United States of Europe or no euro no I don't think it can survive because it's a deeply flawed and very undemocratic currency it is one on which states and lost the power to manage their fine and and they have had to transfer that power to something called the troika none of whom are elected and who are dictating policy ok Kostas I think the urines current form is unsustainable and I think the idea of a federal state or euro bonds or a banking union basically is pie in the sky I don't think it's going to happen because this is a this is a collection of states national states I think the main problem of the year is actually Germany it's not none of these other issues the problem is Germany which is which has been keeping wages low and creating a competitive advantage for itself and this is actually appearing more and more relative to France now and relative to Italy it crashed it has crashed the periphery and it's now crashing France in Italy and that is when the problems are going to emerge in full earnest well we've talked about banking the crash finance regulation inequality tax rates austerity stimulus the eurozone time for you to come in with your views on any of those subjects raise your hands make your points please keep them as brief as possible let's go to the lady here in the front room good evening I'm one of those terrible academic economists so that caused all the trouble in the first place um one of the things there are students want to hear in the first year one one teaches economics is why on earth in a crisis we are not doing the policies that that textbooks suggest we should be doing you know there needs to be only public spending help so when we're in a recession and you know there are issues about how that public spending is generated of course and about the terms on which new debt is contracted and on the rest of it however that's what they expect why didn't we do the classic things well in a sense we did back at the London conference g20 conference in a a preliminary response which at the time did require involve a fiscal stimulus and frankly that was a success gentlemen here in the second row behind you yes hi many of you might know me as the H boss whistleblower I've been there and I've done it and I've got the t-shirt and I want to say a couple of things about the power it wasn't that there was just something rotten in the state of Denmark everything from the politicians the regulatory system the accountants the non-executive directors the whole system we can't talk about that for a long time let's talk about the future we need to find as you said Adair a new monetary system a new way of finding our way between austerity and growth don't you think that a system in which about 25 executive directors of the big four banks are in control of the creation in the direction of 80 to 85 percent of our money supply through the issuance of debt is a bad way to run an economy and a banking system don't you think full reserve banking is a much much better way to go well spawn to the arm this is an incredibly interesting debate I just want to make sure everybody understands what full reserve banking is it's an environment where for every deposit that you make as a member of the public at a bank there is a matching either no tourcoing in the vault or a reserve at the central bank it's full reserve banking I'm not quite in that camp and what's very interesting about the debates on full reserve banking is that it was supported by some people some mid 20th century economists who in every other sector of the economy were the most extreme free-market people of all so I'm in a slightly intermediate position which is not 100 percent reserve banks but I certainly believe in much more liquid banks and much more heavily cap we've had those banks but there you are in the very radical camp that we've had a we've had it we've had a fair few potshots taken at the bank Stein is anyone here in the audience who wants to come in and say actually they're not all bad there are many supporters who think back isn't getting a bad rap who want to come in and know nobody brave gentlemen here in the second row isn't there a danger that if we go too far in criticizing financial services but actually we do down a sector in which the UK is in fact very strong I think the difficulty the UK economy has is that because before the crisis the scale of finance in addition to those useful value-add activities was also doing a whole load of unnecessary activities the UK economy had in part ended up earning its way in the world by selling some services that the rest of the world didn't need which weren't good for them and they rumbled us after 2008 which is one of the reasons why the worst thing that's happened on the UK current account a situation over the last four years is the fall in our financial services exports country by country yep do you think governments and societies should be looking again say across the West for a start at the size of the financial sector I think we ought to look at the size of the financial so I don't think you can have a point of view it has to be size X not size Y but I do think there was a dangerous belief before the crisis where people looked at the rise in size of the the increasing size the financial sector as a percent of national income and they actually asserted that that was definitionally good and that was an intellectual mistake okay gentlemen they're on the second row in the glasses yes my name is Eric de chartres and I'm a CEO of a company called home strings which facilitates the transfer of remittances from the west through the emerging markets one of the concerns that I have with respect to reform regulatory reform is the fact that much of those discussions or inward looking and not looking at what the ripple effect or the unintended consequences are of those national national focus reforms specifically on the emerging markets the question here is if you focus on stringent regular regulation aren't you affecting the impact that these transfers are having on the emerging markets which in some cases account for 20% of their GDP well I think what you've Illustrated is this incredibly important thing about financial deepening i providing new financial services some financial deepening is good and some is completely unnecessary and your business of remittances which is often very important when you have emigres communities sending back money doing that in an efficient fashion and cost-efficient fashion is important the difficulty is it often gets hijacked by the people want to turn up in an emerging market and say well what you want immediately is a corporate bond market in a derivatives market in a futures market well actually what they want is step one which is a good basic banking industry serving you know small businesses I said the gentlemen here at the front my question is much focus seems to be on structural change with gel which then shapes the behavior of actors rather than going directly at the heart of it why don't we try to shape the actors themselves the bankers I mean regulators they the people how do we change their I think human beings are human beings they're a mixture of good and bad and selfish and altruistic and it was a magnet a particularly greedy they share that view if you know I don't I think there's something about sitting in front of a screen all day rather than being involved in some economic process that involves you seeing your customer face to face or dealing with some physical product which unless you are very careful can produce a sort of moral distance from the consequences of your actions your actions just become an extension of computer games by other means and I think that is that is a sort of ethical danger in banking which is very important that the management of banks you know guard against but I think that was illustrated in the LIBOR case if you just end up sitting in a dealing room thinking all that matters is that I make money at the end of the day well why shouldn't I cheat a bit you know because the real customers the real end product is is so distant that you've lost sight of it gentlemen they're second in with the beard I teach development in environmental economics I think in the context of the financial crisis discussion something very big and very vital is being missed at this moment the biggest crisis Humanity is facing is the ecological crisis climate change and global warming it's of a hugely important dimension than the financial crisis and if we keep that in mind then we need to relook at the way you are talking about the the benefits of capitalism capitalism is inherently unstable on economic system and even those who want to reform it by saying stimulus that will actually damage the environment so we will actually move out of the economic crisis get land into the quadric neurological crisis I have been for the last four years both chairman of the UK's climate change Committee and of the FSA and I see this as you know two different tasks one is stability of a system let's not have self-inflicted wounds of unemployment but you're quite right the bigger challenge long-term is I think climate change and we will not solve that with an entirely free financial system you need a vision of the state as to what we're going to do but then you have to use the financial system as well and you know capitalism is a very powerful mechanism at the detailed level for driving efficiency driving productivity but it needs to do it within an overall framework of policy which is clearly set by the government do you think capitalism yes or no you know shortener is environmentally destructive as the questioner is asking you share the climate change committee not inherently know it can be managed to be less environmentally destructive and again I make the point I make earlier you want environmental destruction go to what Soviet Union did a good answer they managed to overdo I guess I'm not right okay okay yeah let's go to the running out of time the gentle to your right I think if anybody wants to know what went wrong in banking they oughta read the south's review of Barclays which was issued recently it actually states that the the 60 best paid employees the bonus pool for them exceeded the amount of money paid to dividend to shareholders my question is where would the shareholders how do they allow this are these people fit to own banks and if not should the state take them over well it's a very good question the answer is I think I don't think this problem is tractable I mean I you know this issue of our shareholders really active enough in enforcing their ownership of large public companies no they're not too many operates simply on the basis of if I'm happy I'll sell the shares and move elsewhere they're very wary of really enforcing their point of view but I'm not sure that's attractable problem I wanted to ask we're looking at our financial system these days which has become so internationalized and it's so extraordinarily large and complex we can't even model it most of the time we don't even know what it's doing to what extent would you say that we now have an unguardable financial system well one of my answers to that is that we should not oppose the idea that when we do have large global banks we should insist that in each of their major countries countries of operation they have subsidiaries which are separately capitalized separately liquid and separately regulated so that although they are sharing skills and approaches and brand which and there may be some value in that if they get into trouble you can say the fact that you know one of them is in trouble at a global level the Mexicans can say we've got a bank which we can make sure is okay so and this is very important point because you get an ideological opposition to what's called fragmentation of the global financial system I think that's a scare tactics we shouldn't be worried about strong national subsidiaries my name is Chris first and Davis occupy London Stock Exchange and London economics working group I know nothing about economics I'm a doctor I'm glad you haven't totally caught the disease of neoliberalism but clearly you're still touched by it but I hope you're coming out of it and you may have some hope of things being better my point is about practical answers I put in with my colleagues a petition to number 10 Downing Street to build public sector housing for rent only and my point really is why can we not invest in that way for public sector spending which in the long term will be a wonderful asset why can't we invest in a public setting the way that we've say propped up the banks with public money well I think the UK has a shortage of supply which has been absolutely not solved by the easy supply of credit I mean broadly speaking the supply of credit into the UK housing system simply drove up the price of the housing stock that had existed unlike in Ireland and Spain it didn't produce a housing boom at the answers I don't know enough about that specification I'm certainly not against it in any ideological so let me ask very quickly since he mentioned he was from occupy the Occupy movement so across the globe as a fan as someone who's involved in finance financial regulatory all that unfold were you quietly quite admiring of what they were doing your budget I chose an absolutely legitimate expression of anger positive CERN about it well I think it was on the whole positive I think when people you know do things which are of that form but in a non-violent form we should we should pay attention to final question from the audience here from this lady here I'm Lyn Billings from Oxford Brookes University and a lord Turner describes a model of capitalism that he would like to see but one that actually seems to rely on people actually behaving ethically people having a moral imperative people not being greedy can we be confident that actually there are people in place in power who are going to behave in that way well you see I responded I don't think you're going to change human nature right so human nature has a certain balance of selfishness and altruism which is sort of you know it's a given but I think you can we can do better at structuring the rules of the game right so that it makes it more likely that they're altruistic elements come to the fore not they're selfish but I'm I'm I'm wary of anything that imagines that we're going to make the world better people one has to design social systems that work well with people with all the mix of you know nice and nasty that they are I think that's a perfect note on which to end the program we've run out of time there Lord Adair Turner thank you very much for sparing time to come here and talk to us all and give us some insights we've got a real problem in the world today and I think we've debated some of them tonight thank you all for coming and contributing here in the Oxford Union and thank you all for watching at home head-to-head we'll be back here in the Oxford Union on al-jazeera next week goodnight you

Channel: Al Jazeera English

Views: 242,035

Keywords: al jazeera english, head to head al jazeera, head to head, al jazeera, Has capitalism failed the world?, impact of capitalism, the famous Oxford Union, Mehdi Hasan challenges, Lord Adair Turner, UK's Financial Services Authority, capitalism in the world, the debate of capitalism, capitalism debate, Policy Research Macroeconomics, SOAS university of london, New Economics Foundation, mehdi hasan, mehdi hasan debate, mehdi hasan head to head

Id: iOEUd54NN4Q

Length: 47min 30sec (2850 seconds)

Published: Sat Jun 29 2013

Reddit Comments

[u/circleandsquare]

Capitalism is the best way of fostering economic growth and development, but let's not pretend like this is some magical system exempt from critical analysis. We need to correct for negative externalities and bad economic outcomes from unbridled capitalism.

[u/MichaelWLloyd]

Capitalism is not at fault here, your argument is misguided. Human nature is what you are pointing at; and I'm afraid we do not have an alternative to fix that.

yet?

[u/skydivingdutch]

When the headline is a question the answer is always no.

[u/MarcoVincenzo]

How could it, we haven't had capitalism for over a century.

[u/[deleted]]

There is no such thing as a perfect system, but I would gladly choose corrupt, biased capitalism where at least we have a chance over total war, genocidal fascism or oppressive, overworking communism

Edit: ok you're smarter than me I get it

[u/[deleted]]

Capitalism is the best of worst hand we have. And there is not a great hand.

[u/[deleted]]

But fair is not really a legitimate metric, fair is a word used by a politician in their rhetoric.