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Rustat Conference on the Economic Crisis

On 9 May 2009, leading academics from the fields of economics, politics, business and history gathered at Jesus College, Cambridge to discuss the key issues of the Economic Crisis with invited participants from the worlds of politics, finance, industry, the public sector and the media.

The speakers led with brief points for discussion followed by a moderated round-table debate. In the morning Professor Peter Nolan spoke on economic nationalism and China, Professor Lord Eatwell on the future role of government, Professor Arnoud de Meyer on Europe. In the afternoon Will Hutton led on banking and financial services, Professor Geoff Harcourt on Keynes, Professor Martin Daunton on America, and Professor Ajit Singh on the world economy.

Opinions predictably polarised between gloomy and optimistic; the optimistic view gathering greater impetus by the end of the meeting. On the pessimistic side, there were fears of nationally-based centrifugal tendencies, predictions of low or negative economic growth in developed economies (as signalled by the IMF); a fall in foreign direct investment; social and political unrest, and an erosion of democracy. One Cassandra claimed that the entire edifice of global financial markets risked collapse. The G20 had failed to do its job; some thought there were still major governance issues at the IMF. Others were sceptical about the efficacy of Britain's massive fiscal stimulus as a way out of the crisis.

Nobody challenged the need for financial regulation of banking and financial services. The Basel II Accord, one speaker noted, had failed to warn of the consequences of excessive financial risk-taking. Until 2008 banks had performed only two stress tests: on the possible effects of the Y2K bug, and the potential for an avian flu pandemic. Banks had abdicated their traditional responsibilities for assessing creditworthiness. Banks had not been held to account, and autocratic CEOs had allowed reckless risk-taking.

The participants called for greater transparency on the part of hedge funds and for the exposure of off-shore tax evasion. Regulatory failures were legion, particularly by credit- rating agencies. There had been "trickery" on a grand scale. The world had witnessed "big- time" business mismanagement, catastrophic failure of judgment, excessive expansion of balance sheets and contraction of moral responsibility. One speaker said that profit had been privatised while risk had been socialised. Some participants criticised the Bank of England for ignoring asset price inflation, questioning whether policy should be determined by an unelected autocrat - the Governor of the Bank of England.

There was a lively debate on the role and status of China in the crisis. It was widely agreed that lack of regulation in the West was to blame for the crisis rather than the "China rising" theory. There were sharp disagreements between speakers over China's capacity to overtake the United States in the next two decades.

The optimists were convinced that the reduction of interest rates and the fiscal stimulus would ensure a short-lived albeit deep-ish downturn, with the world economy soon regaining a long-term upwards trajectory. One speaker noted that in recent years, the number of people living in absolute poverty had fallen below one billion for the first time since the end of the 19th century, thus decisively rejecting Malthus's predictions. Faced with the credit crunch and the loss of confidence in the financial system, nations of the world have for once acted in concert and the optimists saw it as a triumph for Keynesian economics that many of the world's richest nations had agreed to spend their way out of recession in concert.

The range of issues included the economic future of Europe (Germany in particular); Keynes's view that when speculation dominates enterprise, stock exchanges that behave like casinos; the role of the media in exacerbating the crisis; China and India as "rocks of stability"; the importance of climate change and energy supply.

The future role of government intervention loomed large in the round-table discussion, and hence the future of capitalism itself. All were aware of expanding unemployment, debt, and poverty. Against this background, and in the light of scandal of British MPs' expenses which broke in June, the Rustat Panel, led by the Master of Jesus College, Cambridge, concluded that the next meeting, scheduled for 13 October, will be on the Future of Democracy.

Participants and speakers included the following:

Professor Robert Mair, Master of Jesus College, Cambridge
Professor Peter Nolan, Judge Business School
Professor Lord Eatwell, President Queens' College, Cambridge
Professor Martin Daunton, Master, Trinity Hall, Cambridge
Professor Arnoud de Meyer, Director, Judge Business School
Sir Terry Leahy, CEO, Tesco
Lord Turnbull, former of Cabinet Secretary and head of the Civil Service
Dominic Casserley, Managing Partner UK, McKinsey & Co.
Simon Hayes, Chief UK Economist, Barclays Capital
Brandon Davies, Director, Gatehouse Capital
Sally Keeble MP, Member Treasury Select Committee
Robert Chote, Director of Institute for Fiscal Studies
Will Hutton, Executive Vice Chair, The Work Foundation
Professor Geoffrey Harcourt, Jesus College, Cambridge
Professor Ajit Singh, Queens' College, Cambridge
Sir Samuel Brittan, The Financial Times
Dr Shailaja Fennell, Jesus College, Cambridge
Patricia Hewitt MP and former cabinet minister
Raymond van der Putten, Senior Economist, BNP Paribas
Ken Warwick, Deputy Chief Economic Adviser, BERR
Christopher Saul, Senior Partner, Slaughter and May
David Strachan, Director Financial Stability, FSA
Professor Pier Luigi Porta, University of Milan Bicocca
Thomas Harding, European Counsel, Access Industries
Paul Everitt, CEO, Society of Motor Car Manufacturers
Sue Matthias, journalist, Guardian
John Harley, Head of Private Equity, Ernst & Young
John Naughton, Professor of Public Understanding of Technology, OU
James Hudleston, energy sector
Adrian Frost, Fund manager, Artemis
Dr James Dodd, Director, Anthem Corporate Finance
Joe Herbert, Professor of Neuroscience, Cambridge University
David Goodhart, Editor, Prospect
Professor Jean Seaton, University of Westminster
Doug Richard, technology entrepreneur
Professor Stephen Heath, Jesus College, Cambridge
Tomas Carruthers, CEO and Chairman, CAL
Martin Clarke, Partner, Permira
Dr Stoddard Martin, publisher
Jonathan Cornwell, Director, Media Symposia
Dr Tudor Jenkins, Wide Eyed Vision
Justin Marozzi, historian and Rustat rapporteur
Dr Kwasi Kwarteng MP, historian and author
John Wilkins, former editor, The Tablet
John Cornwell, Director, Rustat Conferences.