Simon Evenett is Academic Director at the St. Gallen MBA and Professor of International Trade and Economic Development.
You say that it is important to understand the global financial crisis. But in the five years since Lehman, nothing has changed. The big banks are still dangerous to the society. What went wrong?
Plenty has changed since the financial crisis, but not all for the better. Only now are the banks being forced to hold much more capital, pay fines for past acts, and retrench. Many CEOs and policymakers played for time hoping, as in other crises, that this would soon past. As the crisis dragged on, so debts have built up and the adjustments are ultimately harder. Procrastination has a price. In the meantime, trillions of dollars in potential output has been lost and millions have had their careers disrupted.
After sharp criticism from the United States to the German large current account surplus, the EU also blames Germany’s export obsession in the euro area. What is going on in the EMU?
Germany has refused to adjust its policies and deserves to be criticised. German leaders think only deficit countries must adjust and become like Germany. If every country followed Germany's policies it would be a recipe for deflation and a worldwide slump. Only when the Earth starts trading with the Moon can every country run a trade surplus.
Are financial markets efficient and promote our prosperity? Or in other words: Do people have rational expectations?
Financial markets are by necessity forward-looking and expectations driven. What makes a financial market is that investors have different expectations--in which case some investors are going to be right and some wrong. While the market may punish those that make bad forecasts this doesn't mean that forecasting gets better over time, leaving plenty of room for bubbles and inefficiencies.
Thank you very much.
Simon Evenett is Professor of International Trade and Economic Development. His research focuses on the factors determining the intensity of competition in emerging markets, on the effects competition law and policy on firms behaviours and on the analysis of existing and proposed agreements at the World Trade Organization.
Professor of the week, in: Financial Times, Nov 6, 2013: Simon Evenett, St. Gallen.