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Issue 3 The Political Economy of Financial Markets October 2015 PEFM in Focus All the world’s a stage... Inside this issue: The past year 2014/15 has seen migrant crisis where Europe, as shenanigans at Volkswagen has All the world’s a stage... 1 no shortage of dramas, much ever, struggles to achieve shifted the spotlight of ethics The PEFM vision 1 of Greek origin and character, consensus on strategy. In the misdemeanours from Anglo- People at PEFM 2 in the political economy of background, the great China Saxon finance to German financial markets. At the deflation is now playing, with manufacturing, no doubt Ethics and finance 3 forefront of the stage was the dyspeptic local symptoms of tempting some schadenfreude An interview with 4 agonizing resistance and then spectacular stock market among the lately unloved David Vines capitulation of the Syriza-led crashes, and the effects of the bankers of London and New PEFM Seminar Series 6 government in Athens to the slowdown filtering out into York. There is still much terms of the austerity camp led collapsing commodity prices material for PEFM to digest! Highlights of other PEFM 7 by Berlin, with the IMF and pressure to delay—yet David Vines and Adam Bennett events stepping aside—unwilling to again—tighter monetary PEFM events in 2014-15 8 commit without the debt policies in the fast growing reduction that it should have economies of the USA and UK. insisted on at the outset in Are these the last men standing 2010. The travails of the for the global economy? Eurozone have, for the Meanwhile, the stunning moment, been eclipsed by the revelations of vehicle emissions The PEFM vision The goal of the Political frameworks and of financial different academic disciplines, programme - not only among Economy of Financial Markets supervision. The programme is and from official and private academic institutions but at the programme (PEFM) is to devoting special attention to market institutions, so that IMF, the European Commission, improve the institutional design two things. The first is the role their complementary research the European Stability of policy frameworks affecting of macroeconomic frameworks efforts and discussions can help Mechanism, H M Treasury, the financial markets, in order to in setting the stage for develop and promulgate new Bank of England, Chatham help foster sustainable and sustainable financial flows. The policy insights. This response House, and the Financial Times. crisis-free growth. The second is the change in ethical capacity should help address Our aim is that, over time, we programme focuses on the framework which appears to new and potentially can build PEFM into a go-to interaction between official be necessary if the financial destabilising market tendencies place in Oxford for policy- policies and financial market system is to again play a as these emerge. related work on the financial behaviour. It explores how constructive role within the Other programmes in Oxford system. Our experience in incentives affecting the economy. have been very receptive to co- Oxford might indeed serve as a financial sector can be The goal of PEFM is not to organising events with PEFM. catalyst - and perhaps a first coordinated to foster more compile a cookbook of static And there has been a healthy node - for a wider network of stable growth in the real policy recipes. In a world of appetite for the output of the this kind in the UK. economy in the future. adaptive and interactive The scope of the 'official financial markets, that would Political Economy of Financial Markets policies' reviewed under the not be realistic. Rather, the aim European Studies Centre | St Antony’s College programme goes well beyond is to bring together a University of Oxford | OX2 6JF the design of regulatory community of experts from Tel: +44 (0)1865 274537 | E-mail: [email protected] Website: http://www.sant.ox.ac.uk/research-centres/political-economy-financial-markets People at PEFM In 2015, Nathalie Gold and Nick Morris joined PEFM as Associates. They both will be working on the Ethics and Finance project. Natalie Gold Natalie is a Senior Research Fellow at Kings College London. Her research is on behavioural decision making and moral psychology. She has worked on topics including the framing of decisions, moral judgements and decisions, cooperation and coordination, and self-control. Natalie studied philosophy, politics, and economics at Balliol, and although her ultimate goal was always philosophy she followed this with an MPhil and a DPhil in Economics, specialising in experimental economics. She held postdoctoral fellowships at the University of Konstanz and at Duke University, and then became a Lecturer in Mind, Reason, and Decision in the Philosophy Department at the University of Edinburgh. At Edinburgh, Natalie ran the AHRC funded project ‘Framing Effects in Ethical Dilemmas’ and since 2011 she has led a project at Kings, ‘Self-Control and the Person: An Interdisciplinary Account’ funded by the European Research Council. Nick Morris Nick is an economist with 35 years of wide-ranging experience. He was a co-founder and then Chief Executive of London Economics, for a period of 14 years, and, prior to that, was Deputy Director of the Institute for Fiscal Studies. Nick studied Engineering and Economics at Balliol, emerging with an M.Phil in Economics, and recently obtained a PhD in Law from the University of New South Wales. He has been a visiting Professor of City University, a Governor of the charity ‘Research into Ageing’, and a Fellow of Melbourne University; he is currently a Guest Professor at the China Executive Leadership Academy in Shanghai. In the 1980’s Nick was involved in the privatisation of utilities, and the establishment of utility regulation in the United Kingdom. In the 1990’s he worked on the establishment of new markets and regulatory regimes, both in Europe and in developing countries and emerging-market economies. During the last 12 years he has worked extensively in Australia, South East Asia and China advising governments, regulators and companies. C. Maxwell Watson: 1946-2014 Max Watson, the inaugural Director and creator of the programme on the Political Economy of Financial Markets (PEFM), succumbed to cancer in December 2014. He started his professional life at the Bank of England and was one of a series of young bank officials to be seconded to the IMF (1979-81) as personal assistant to the Managing Director, then Jacques de Larosière. Max returned to the Bank of England, but came back to the IMF in 1984 as Chief of the International Capital Markets Division. Over the next few years, he helped devise debt-reduction plans for more than a dozen highly-indebted Latin American countries. This work was essential for the success of the 1989 Brady Plan, through which the Latin American crisis was eventually resolved. Max had a similarly distinguished post-Fund career. At the European Commission in Brussels, he served as Economic Adviser to the Director General for Economic and Financial Affairs, Klaus Regling. He was later was asked by the Minister of Finance of Ireland to prepare a detailed independent report into the origins of Ireland's 2009 banking crisis, and in 2010 was appointed to Ireland’s Central Bank Commission, the governing body of the central bank. At Oxford, he spearheaded the political economy work of South East European Studies at Oxford (SEESOX) at St Antony’s College, where he became a Visiting Fellow, and then in 2012 launched PEFM. In his extra-mural life Max was an avid sailor, owned a vintage Rolls Royce (and took part in a 700 mile Rolls Royce rally through Rajasthan, India), and also keen bird-watcher. Max was an inveterate traveller and multilingual, having studied languages at Cambridge, but also picked up languages (e.g., Japanese) as his career took him from country to country. He will be greatly missed by many around the world. PEFM is now organized under the following management team : David Vines, Acting Director; Adam Bennett, Deputy Director; Julie Adams, Programme Administrator TEL. 01865 274537 | EMAIL: [email protected] Page 2 PEFM in Focus Ethics and finance Restoring trust in the financial system Two years ago, the Archbishop of integrity. That character trait cannot be others), experiments on ways of improving Canterbury, Justin Welby, called for the successfully pursued as an end in itself, or the behaviour of the financial-system financial system to return to “a broad effectively feigned, by the kind of selfish workforce (to be carried out by our sense of promoting the wellbeing” of individuals which economists seem to philosopher colleague Natalie Gold who is those whom it serves (Welby, 2013). He imagine inhabit this planet. It can only at Kings College, London), and analysis of argued for what he called a “change in emerge in the presence of a genuine the legal system (including acknowledging culture”, and then said: concern for the interests of others – an the fact that good laws can help promote idea discussed in some detail in Integrity in good behaviour and not just prevent bad “[This] means that companies the Public and Private Domains, edited by behaviour). It will also include some should be communities of common Alan Montefiore and David Vines and philosophical analysis about the interest which serve the common published by Routledge in 1999. underpinning of trust, and some history of good. For that to happen there In Firm Commitment: Why the economic thought, about why it was that needs to be a store of value in them: Corporation is Failing us and how to Restore economists came to suppose that the a sense of what is right that is Trust in It, published by OUP in 8679, Colin world contains only selfish people.
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