3 assertions regarding the financial crisis
Bern, 28.01.2009
Address by President Hans-Rudolf Merz
WEF Annual Meeting, Opening Address
Davos, 28 January 2009
The President stresses the importance of the WEF Annual Meeting and makes three assertions in relation to the financial crisis:
- There needs to be an open debate on values. Growth must be built on quality, sustainability and values.
- A new philosophy needs to be adopted in respect of financial market supervision and regulation. Global players need global rules. Supervisory authorities will increasingly have to cooperate across borders.
- The economic downturn should be seen as an opportunity for innovation. The downturn should be seen as an opportunity to develop new environmentally-sustainable products.
Professor Schwab, Excellencies, Ladies and Gentlemen
Switzerland is one of the most open countries in the world. Here, people and ideas have long found the freedom to be heard and to develop. It is in that spirit that Professor Schwab created the World Economic Forum, as an outstanding platform for the exchange of ideas. The Forum is needed now more than ever. I would like to thank Professor Schwab and the organisers for arranging this year’s Annual Meeting and for its choice of theme.
On behalf of the Swiss government, I would like to take this opportunity to welcome you all to Davos. We are extremely proud that, alongside leading figures from the business world, so many political dignitaries are also doing us the honour of visiting our country. I hope that you will be comfortable in these wonderful surroundings.
Switzerland is also one of the world’s leading financial centres, so the theme of this year’s Annual Meeting, `Shaping the post-crisis agenda’, is particularly appropriate. I would like to make three assertions to launch the debate:
I
Firstly: There needs to be a debate on values.
In large sections of the global economy, but particularly in the financial centres, the pursuit of growth has led to a sidelining, or even a denial, of values. Billions of dollars in assets and thousands upon thousands of jobs have been destroyed as a result. Traditional and proven rules have been sacrificed in the pursuit of profit.
No-one would seriously argue that growth is not needed to achieve progress and prosperity, and to manage population growth. The financial crisis and the economic downturn have made it dramatically clear that growth cannot be an exclusively quantitative phenomenon. Growth should be built on quality, sustainability and solid values. The notion of `more of the same’ must be replaced by `more of something better’.
Branches of industry and businesses make positive contributions to growth and prosperity when both production and commercialisation adhere to a strong set of values. Values are not tangible terms. Values are a set of shared convictions. That is something we should remind ourselves of by reflecting on the past, so we can focus on the future.
You are familiar with the famous examples. A renowned American industrialist once wrote:
“Take the industrial idea; what is it? The true industrial idea is not to make money. The industrial idea is to express a serviceable idea, to duplicate a useful idea, by as many thousands as there are people who need it.”
Another example is the private banking sector, which evolved around 1800 (eighteen hundred) in Geneva, and elsewhere, in an environment that at the time was entirely unregulated by the State. Its typical rules were: know your customer, be prudent when lending, closely monitor dossiers, have respect for money and risk. The solidity of the banking system is based on such principles. Today, these values have been somewhat lost. It is time they were rediscovered.
In many countries, and for many professions, there are rules of professional conduct which serve to foster the development of a set of values. Some things are done, or simply not done, as the case may be.
II
My second assertion is that regardless of how the financial crisis evolves, a new philosophy needs to be adopted in respect of supervision and regulation in the financial sector. Globalisation is extremely advanced; consequently, global rules need to be developed for the supervision and regulation of global players. Cross-border cooperation must become the norm. But all that is easier said than done. Tendencies to regionalism and isolated solutions undermine such efforts. In a globalised economy, regional crises have global consequences. That is something we have (to learn) to deal with.
A further challenge is finding a responsible balance between the market and the State. Market failure must not result in State failure, and laissez-faire must not result in State monopoly.
III
My third and last assertion is that we should see the economic downturn as an opportunity for innovation. The Swiss writer, Max Frisch, rightly said that,
“A crisis is a productive state. One just has to remove the (bitter) aftertaste of disaster.”
The crisis provides a chance to better unite ecology and economy through innovation. In the post-war period, these two considerations have generally not got along very well. They have not spoken the same language. Over the years, however, their mutual understanding has greatly improved. As part of this ongoing dialogue, the often spectacular results deriving from scientific research must be incorporated to a greater extent in product innovation. For example, the pioneering work on alternative sources of energy and power generation should lead to new greener products. The market for such products will grow, just as it did a century ago for the (internal) combustion engine and the uptake of current distribution.
Given the array of eminent delegates from industry, government and civil society assembled here, this Annual Meeting heralds to be one of the most important by far. I have no doubt that with regard to the themes I have outlined, it will also serve as a powerful catalyst in the search for sound solutions. (c) Federal Department of Finance FDF