Lessons from 2008 for beyond 2018: Keynote this Friday 14th September at the OECD, Paris

Before 2008 we could all see that global trade imbalances were growing inexorably, creating a glut of savings in surplus countries that flowed into deficit countries, causing house price, stock exchange and debt bubbles whose bursting would never end well. What few could see, however, was that, behind the dominant narrative of unfettered competition and equilibrating market forces, a different reality was taking shape. Corporate power was succeeding in reducing price competition, usurping (and often replacing) market forces and controlling effective demand. Τhe Bretton Woods-era objective of full employment and falling inequality was, since the late 1970s, replaced by the aim of maintaining an unbalanced growth. This new corporatized, globalised technostructure extended its realm magnificently by appropriating the magic of financialisation (through, for example, turning car companies like General Motors into large speculative financial corporations, that also made some cars!), magnifying by a dizzying factor its power and, ultimately, replacing the aim of GDP growth with that of ‘financial resilience’: enduring paper asset inflation and permanent fiscal austerity for the majority.

These imbalances were essential after the 1971 collapse of the Bretton Woods system because, once the United States was in deficit to the rest of the world, but nonetheless issued the world’s main currency, the only alternative to imposing austerity upon itself (and shrinking like… Greece) was to boost its trade deficit (providing in the process China’s, Japan’s and, later, China’s factories with the necessary demand) and make non-American capitalists pay for the US trade deficit (by enticing their capital to Wall Street lured by marvellous financial returns). But for that to happen, Wall Street and the City had to be ‘unleashed’. This ‘unleashing’ required a political class willing to de-regulate and an economics profession keen to provide the academic ‘sermons’ that would steady the de-regulating politicians’ hand (and nerve). Once financiers were unshackled from all meaningful regulation, a glut of private, combustible quasi-money changed the nature of capitalism.

In Europe, the demise of the Bretton Woods system caused large fluctuations in exchange rates that undermined a European Union forged initially as a cartel of central European oligopolies that needed stable prices and thus fixed exchange rates. This gave the impetus to the creation of a common currency (the euro) in a manner guaranteeing that it could never absorb the shockwaves of the inevitable global financial crisis. The notion of a central bank without a state to back it up, and of nineteen governments without a central bank to bail them or the national banks out, could only proceed on the erroneous assumption that the miracle of financialisation would never burst. When it did burst, European democracy was seriously wounded while Europe’s fiscal and monetary policy responses destabilised the faltering global economy through vicious two-way dynamic effects.

In the end, following the 2008 financial collapse, two powers saved financialised capitalism from itself: The US government, and in particular the trillions of dollars that the Federal Reserve pumped into European private and central banks via its ‘swap lines’. And China, whose skilful economic management boosted domestic investment to unheard of levels, kept on its books worthless dollar assets that many others were shedding, and even went so far as to propose the elimination of trade imbalances via the adoption of a multilateral clearing union of the type that John Maynard Keynes had proposed at the Bretton Woods conference in 1944 (only to be denied by the Obama administration, who preferred to keep the dollar’s privilege intact at the expense of a seriously unstable capitalism).

Now, in 2018, we must face up to three uncomfortable facts: First, the neoliberal populist myth (that wholesale deregulation will make everyone’s dreams come true under the rule of democracy and… Montesquieu) has been discredited. Secondly, the pre-2008 global imbalances are rearing their ugly head as if the events of 2008 taught us nothing. And thirdly that, in the political climate that naturally flowed from the inane handling of an inevitable crisis, it is highly unlikely China and the US could, or would be willing to, combine forces to save capitalism again.

Finally, the keynote will end with a sketch of a New Bretton Woods that our times are calling for.

14 September – OECD NAEC and Partners for a New Economy (P4NE) Conference

Day 2 will bring together some of the leading actors in the crisis to debate what caused the crisis; its economic, social and political impacts; and how the financial system has changed, or should change. The state of economics after the crisis will also be discussed. While economic growth has recovered, there remain vulnerabilities and risks, and therefore, economists and policy makers need to improve the way we understand the functioning and purpose of the economy.
 9:30-10:00 Opening by Angel Gurria, Secretary General of the OECD
 Session 1: The Failure of Lehman Brothers and the causes of the financial crisis
 10:00-11:30 The 2008 crisis was caused by a failure to run and to regulate competently the global economy and the firms that dominate it. This allowed huge imbalances to build up, and, when they reached a tipping point where they could no longer sustain their own weight, failure was sudden and brutal. The crisis revealed how some of the very strengths that had allowed the economy to expand, such as interconnectedness in its many guises, could be just as potent in provoking or aggravating its downfall. In this panel, key players in the crisis will draw lessons from what was happening in the financial system and how their instituions reacted.

Chair: John Kay, Financial Times

Keynote address: Jean-Claude Trichet, Former President of the European Central Bank


  • Irena Sodin, Ambassador to the OECD, Permanent Representative of Slovenia
  • John Llewellyn, Former Chief Global Economist, Lehman Brothers
  • Greg Medcraft, Director of OECD Directorate for Financial and Enterprise Affairs
Session 2: The financial system 10 years on
 11:45-13:00 The crisis showed that banks and financial market are not simply intermediaries between economic agents like companies and investors, and that they have an impact on the real economy in their own right. This prompts questions about whether finance and investment can be used to drive job creation and income growth and act as a conduit for the global diffusion of innovation, expertise and the funding all these depend on. This panel will also discuss whether regulators and other actors have applied the lessons of the last crisis and whether the system is now more resilient.

Chair: John Kay, Financial Times

Keynote Address: Willem Buiter, Special Economic Adviser, Citi

  • Steve Keen, Professor of Economics and author of Can we Avoid Another Financial Crisis?
  • Mathilde Mesnard, Deputy Director, Directorate for Financial and Enterprise Affairs
  • Erdem Basci, Ambassador, Permanent Delegation of Turkey to the OECD
Keynote speech: “Lessons from 2008 for beyond 2018”
14:00-14:45 Yanis Varoufakis, Economist and former Greek Minister of Finance

Introduction by Sony Kapoor, Managing Director, Re-Define

Session 3 : The social and political fallout of the crisis
14:45-16:15 The financial crisis showed that the benefits of economic growth do not trickle down automatically. The long period of expansion before 2008 was characterised by growing inequalities of income, wealth and opportunities. Our economic systems, with all their strengths and advantages, have been producing and perpetuating social disparity for decades, and inequality has widened since the crisis. This has fuelled the perception that those who caused the crisis were saved by govenments at the expense of those who suffered. Disscussion will centre on the causes of popular miscontent and what can be done to mend the damage to the social fabric and to encourage constructive political debate.

Chair: Gabriela Ramos, Chief of Staff and Sherpa

  • Michael JacobsDirector, Commission on Economic Justice, Institute for Public Policy Research (IPPR)
  • Robert Skidelsky, Professor of Political Economy, University of Warwick
  • Erika Widegren, Chief Executive, Re-imagine-Europa
Session 4: Economics after the crisis
 16:30-18:00 The dominant school of economic thought prior to the crisis essentially saw the economy as a machine that could be modelled and understood using general equilibrium models and representative agents behaving rationally to maximise value. This machine almost always operated at its optimal speed, producing outputs in an almost totally predictable, linear way, under the close control of its policy operators, unless it was hit by external shocks. Did the crisis discredit the analyses based on this view and the policy advice it generated?

Chair: Martine Durand, Chief Statistician and Director of Statistics and Data, OECD

Keynote Speaker: Maurice Obstfeld, Chief Economist of the IMF

  • Eric Beinhocker, Executive Director of the Institute for New Economic Thinking (INET), Oxford
  • Maeve Cohen, Director, Rethinking Economics
  • William White, Economist, former Chair of the Economic Development Review Committee (EDRC)