Nobel Prize winner and Harvard Business School professor Robert Merton; Paul Collier, director for the Center for the Study of African Economies at the University of Oxford, and Juan Enríquez Cabot, an expert in the impact of biotechnology on the quality of life, expressed their points of view in a seminar moderated by Foreign Policy magazine editor Moisés Naim.
Merton emphasized the idea that the financial crisis may be decoded and understood following clear patterns. Step by step he reviewed how risk built up without recognition and talked about the challenges and recommendations for financial regulatory reform. He finally proposed to pursue financial innovation for a future beyond the crisis.
“It is bad, but it is not out of control,” assured Merton, who explained that even though financial models are limited, they work. “The situation is not something that we do not understand, we have a cause,” added Merton.
“A structuring process is essential,” he insisted. Regulation, oversight, rules and incentives have to be applied. “Some will be dysfunctional, but we need to do that,” he explained.
Enríquez Cabot described the process that led the United States to the crisis and insisted on the need for austerity. He considered that the key to managing the crisis is to keep an eye in the long term, particularly promoting education, science, technology and mathematics. “Treat education as a varsity sport,” advised the CEO of Biotechonomy.
“The future is not on oil or mining, it is in the minds of the youth,” he said. Latin America needs to focus on excellence in education with an international perspective, because technology could generate immense wealth. The relevant small enterprises are the future Googles and Intels. “There are extraordinary opportunities. Mutual gain is possible,” underscored Enríquez Cabot.
Paul Collier pointed out the three pillars that governments have to ensure to maintain social order and avoid the high costs of social crisis and disturbance: jobs, which give dignity and structure as well as income; improved quality and efficiency of basic services, such as health and social housing; and food, through improved domestic supply and agricultural research.
Collier’s work focuses on the bottom billion of people living in extreme poverty as a useful testing ground for what happens in other societies. He analyzed the case of Haiti and signaled that crises give governments a unique opportunity to be realistic and focus on strategic priorities.
As Latin America is squeezed in the middle of the global crisis, Collier suggested, governments should seize the opportunity by cutting low-value spending and increasing priority investment. His advice regarding multilateral financial organizations was to expand their role to provide what the private sector is not available to give at this time.
- Christina MacCulloch