Lackluster global coordination, relatively weak international responses to the worldwide financial crisis, persistent problems of over-capacity, and the likely decimation of peasant agriculture in countries with huge populations to feed are all factors largely overlooked by most economists and policymakers. Giving these issues short shrift could ultimately lead us into a double dip recession, warned a diverse panel of experts who spoke on March 25 at Columbia University.
If there is one historical personage that all finance ministers – or treasury secretaries – need to know, he is Jacques Necker (1732-1804). He was the finance minister of France in the 1780s. He was credited with popularizing the phrase ‘public opinion’ (opinion publique). What was his central insight? He noticed that the attitude of the French public to the king of France determined whether or not they purchased the treasury bills issued from time to time by the king. It they had a favorable opinion of the king they bought his bills; if not, they did not buy his bills. In other words, the financial health of the kingdom and the power of the king depended on opinion publique.
Necker pointed out that the same was true of the finance minister. He was clear that the finance minister ‘stands in most need of the good opinion of the people.’ He pointed out that fiscal policies needed to be pursued with ‘frankness and publicity,’ and that the finance minister must ‘associate the nation’ with his plans, including the obstacles he had to surmount. Necker practiced what he preached, launching a systematic management of public opinion. In 1792, he declared:
That is the one of the main contentions of a new Crisis Response Policy Brief from the World Bank on Bank Governance. Jumping right to the conclusion:
Editor's Note: Clive Harris is Manager of the Public-Private Partnerships program at the World Bank Institute. This is the first in a series of posts on PPP Days 2010, taking place March 22nd and 23rd at the headquarters of the Asian Development Bank in Manila.
Editor's Note: John Nellis was a Senior Manager in the World Bank's Private Sector Development Department. He is now Principal of the consulting/research firm, International Analytics.
The World Bank's new chief economist for Financial and Private Sector Development, Asli Demirgüç-Kunt, has entered the blogosphere with the new All About Finance blog. In her first post, Asli considers whether the financial crisis ought to make us consider turning bureaucrats into bankers. She responds with a resounding "no"!
Editor's Note: Heinz P. Rudolph is a senior financial sector specialist in the Financial and Private Sector Development Vice Presidency of the World Bank Group.
This is the 12th in a series of policy briefs on the crisis—assessing the policy responses, shedding light on financial reforms currently under debate, and providing insights for emerging-market policy makers.