Who has contributed best to the "public conversation" during these turbulent times? Prospect names the top 25 brains of the financial crisisby Jonathan Ford / December 16, 2009 / Leave a comment
A worthy winner: Simon Johnson, Professor at MIT, Peterson Institute fellow and former IMF chief economist
The financial crisis has destroyed both wealth and received wisdom. The idea that prices are always right and markets self-correct is fatally challenged. Even Alan Greenspan admits that the “whole intellectual edifice” of the efficient market hypothesis collapsed in the summer of 2008. The financial establishment is in a state of deep confusion. As the FT’s Gillian Tett put it in September’s Prospect: it is like “a priest who has lost faith in the Bible, but still has to go to church.” But this is not a bad thing, for it has opened up new ways of thinking about markets, institutions and the all-important cause of financial reform.
Unfamiliar voices have come to prominence, aided by a new wave of financial bloggers eager to push fresh ideas. But who has made the most impact? Prospect assembled a panel of experts to draw up a list of leading “public intellectuals” of the financial crisis in 2009 and then decide on the most important. Our criteria were simple. Anyone who had made an impact on policy with their ideas, or who had changed the “public conversation” was a candidate.
The panel sifted hundreds of names, with an unavoidable bias towards Britain and the US, but felt the most important contributions had been in financial reform—those trying to work out what to do next. The crisis has laid a staggering financial burden on the world, with some $14 trillion propping up US and EU banks. We cannot afford another one. Moreover, we urgently need a new regulatory philosophy. Are liquid markets always good? Is complexity in financial services harmful? Can finance firms stop “herding,” creating wild booms and busts?
The role of the banks themselves is also being rethought. They have mushroomed in size without doing a better job—Royal Bank of Scotland’s balance sheet grew 20-fold in the decade from 1998. Some banks have become too big to fail and hence dangerous. Should we return to the strict division between commercial and investment banking, as proposed by Paul Volcker and Mervyn King? And how can we now rein in this super-sized financial system with its powerful lobby? Many of the surviving megabanks have pressured governments for a return to the status quo ante. They want their old economy back, with the implicit warning that if they don’t…