Too Big to Fail

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ã¯â»â¿michael e. porter, bishop william lawrenceuniversity professor, harvard business school, united states: well, good morning, ladies and gentlemen,and welcome to this panel on government assistance and where we go from here. and i see peopleare still coming in, but the time is short, so let us begin. i think the theme of this panel, i think,is the reflection of the extraordinary period that we have been through and, in some sense,are still involved in, in which government has intervened in the private sector. it intervenedin the economy in really extraordinary ways, certainly from recent historical perspective.government has put massive amounts of capital

into the private sector. it's establishedownership stakes in many companies and it's been involved in 'intervention', in a varietyof ways that are really a break in a long term trend. we've had a long term trend towardsless government direct involvement in the economy, but that trend has been broken, oftenwith discomfort on the part of governments that felt that they were really required orcompelled to take this action. the question we face today, as the economiccrisis is certainly not over but it's abating and there's a return to more normalcy, whateverthat means ã¢â‚¬â€œ the question is where do we go from here. what assistance shouldgovernment be providing going forward? should we go back to the previous model, this justbeing a temporary introduction or break in

that model, or is there some new role of governmentassistance that we should be pursuing, going forward? in order to discuss this question we havea distinguished panel. you all know who most of them are but, very briefly, we have: montekahluwalia, who's the deputy chairman of the planning commission of india; dominic barton,the world managing director of mckinsey & company; john evans, the general secretaryof the trade union advisory committee to the oecd ã¢â‚¬â€œ a trade union leader, distinguishedtrade union leader; david cameron, the leader of the conservative party in the uk; andreikostin, the chairman and ceo of vtb bank in russia and a distinguished banker; peter sands,the group ceo of standard chartered bank;

and last, but certainly not least, jean-claudetrichet, the president of the european central bank. in attacking this topic with such a largeand distinguished panel, we have divided the topic into really three broad areas, and wewould propose to proceed through those three areas as follows. first, the focus will be on the financialsector. that's the area where perhaps the most government assistance and interventionhas taken place. what next? what should be governments' role in the financial sector?should the involvement be wound down? in what way? how? where do we go from here?

second, the corporate sector. government hasownership stakes now in many companies and, again, what is the path forward? how shouldwe rethink or restructure those stakes? and then finally and, in some ways, most broadly,the whole issue of economic and job growth. we're in a relatively fragile recovery. growthis perceived to be slow in many parts of the world. we've lost millions and millions ofjobs around the world. what should government be doing to assist in jump starting economicgrowth and job creation, going forward? let's start with the financial sector andlet's start with mr kostin. in terms of government involvement in the financial sector, wheredo we go from here? andrei l. kostin, chairman and chief executiveofficer, vtb bank, russian federation:

thank you. i think the crisis showed unprecedentedinvolvement of the government in the financial sector and also unprecedented level of cooperationbetween the financial banking community and the government. president reagan once saidthat the most terrible words in english are, 'i'm from the government and i'm here to help,'but i think during the crisis that's the question which i think most of the financial institutionswere glad to hear, and most of the governments made, i think, quite brave steps. they spenta huge amount of taxpayers' money to support the financial sector. and again, i would liketo underline that there was a very high level of cooperation between the financial sectorand the governments. unfortunately, in my opinion, this spiritof cooperation was lost over the last few

months, probably, and we definitely see agrowing concern among the banking community that the government is not quite correctlyunderstanding this huge financial sector; they're not quite correctly addressing thisissue and they are, probably, there's extremely harsh criticism on bankers, their activity,their position. though generally of course, banking community understands the necessityof changing the system, changing the regulatory rules, not necessarily by more regulationsbut rather better regulations, and more probably efforts to have the regulations on an internationallevel to control the activity of global, international institutions. i think if we take russia for example, i haveto say the associations are a bit different,

because we still enjoy a very good understandingbetween the government and the financial sector of what steps should be taken in order toreach economic growth. i think there's public opinion is quite reasonably good to russianbankers. now what's going to happen now, after thegovernment spent a lot of money and sometimes even went directly involved in financial institutions,which was unthinkable in the united states, for example ã¢â‚¬â€œ that the american governmentwould buy direct stakes in leading american banks? i think, in the mid term and long termrun, the role of the government/financial sector, of the direct involvement, will bediminishing, because i don't think that, as a strategy, either in the united states orin europe or in russia, that the government

should keep the controlling or even the bigstakes in leading financial institutions. you see in america the banks are trying toreturn whatever money they've got from the government ã¢â‚¬â€œ of course, if the marketpermits. i'm quite sure that the british government, sooner or later, will think over how to privatizewhatever assets they acquired over the crisis. in russia, that's the same. i think there'sno political or strategic decision that the government should necessarily keep the higherstake or higher role in the russian banking sector. where the government will concentrateits effort definitely is trying to have a bigger say in controlling, in actually monitoring,the financial institutions and financial sector. if we remember before the crisis, there wasa trend that the largest bank was claiming

that the self regulatory system is the best,that the large institutions can supervise themselves, that the regulations can be organizedon a different basis. i think that's the end of this trend. i think now we're coming backto the stricter control of the government and the creation of some kind of internationalbodies or international efforts to have the global regulation of the financial sector. porter: peter sands? peter sands, group chief executive, standardchartered bank, united kingdom; co-chair of the world economic forum annual meeting 2010: i think the relationship between banks andgovernments and, by extension, society has

changed irreversibly, so none of us shouldbe kidding ourselves that it's going to go back to the way it was before the crisis,which is not to say it's necessarily going to be the way it is right now, but it is definitelygoing to be different from what it was before the crisis. there's a set of issues whichare around undoing or extricating or exiting the emergency measures put in place in thecrisis, as andrei was talking about ã¢â‚¬â€œ equity injections, liquidity provision andall that sort of stuff. but i want to focus more on the broader issue of the relationshipof banks to governments and society, and that includes banks which took no help whatsoever,because i think that has fundamentally changed. i think there are two aspects to this. oneis a sort of more technocratic regulatory

relationship, the relationship with centralbanks, the supervisory relationship. i think we are in the process of working out how tocraft that new relationship. the discussions aren't necessarily easy ã¢â‚¬â€œ some of themare very technical ã¢â‚¬â€œ but there is an acceptance within the industry and there isa common language and understanding of objectives between regulators, central banks and bankers.we need better regulations. we need more capital than we had before the crisis. we need betterliquidity regulation. we need to address the too big to fail problem. so there's a commonset of understanding and, i think, increasingly a very constructive dialogue, so i can seethe way forward as to how we craft a better relationship there.

the more challenging strand of how banks andbanking and bankers craft a new relationship with governments and society is on the politicalside, and there, i think, it's much more challenging to see how the path unfolds and how we getto a better place. i think banks have not helped themselves at all. as an industry,we've managed to be simultaneously tone deaf, shooting ourselves in the foot, insensitive.you can think of lots of metaphors here. i also think some politicians haven't been helpfulã¢â‚¬â€œ sort of broad scale demonisation of an industry that actually is vital to theresumption of economic growth is not necessarily terribly helpful in working out how to constructa better relationship. in short, what i think is, on the technicalregulatory side there are many tough debates

to be had, many tough decisions, but i cansee it happening. on the exit from the emergency measures, again some difficult issues, buti can see it being manageable. i think the primary challenge for both bankers and politiciansis to address that broader relationship issue, which comes down to values, comes down tothe whole fundamental social purpose of banks and that, i think, we haven't done well. absolutelythe banks have not played their part properly and that's the one we need to grapple with. if i could just add one other complication:the trouble is we can't just craft individual solutions for individual countries. the solutionswe work in terms of crafting this relationship have to work both at the level of an individualcountry and at the international level, because,

like it or no, we've got a globalized worldand a globalized financial system. porter: mr trichet, you're a central banker.what's your perspective on this discussion? jean-claude trichet, president, european centralbank, germany: first of all, i would echo what has just beensaid. on the amplitude of the public involvement in the recent period, it's currently, i haveto say, underestimated in my opinion that we were very close to a depression, a fullfledged depression, had not, as you just said, dear friend, the central banks on the onehand and then governments, on the other hand, stepped in to avoid what would have been acatastrophic development. the central bank did things on both side of the channel, onboth sides of the atlantic, everywhere in

the world that were unthinkable before thiscrisis erupted. and the governments put on the table a level of taxpayer risk which wasnecessary to avoid the depression, but represented on both sides of the atlantic, when all computationis made ã¢â‚¬â€œ recapitalization option, the option of our guaranteeing the loans ofthe banks, the impaired assets options and so forth ã¢â‚¬â€œ i arrive to 25% of the gdpon both sides of the atlantic. it's surprising that finally it appears that it is approximatelythe same amount, a gigantic amount which, very fortunately of course because we aresucceeding, will not be transformed in spending or losses, but gives an order of magnitudeof what was necessary to avoid a collapse of the system.

that being said, where do we stand now interms of public authority involvement? first of all, i have to say that, and i echo againwhat has just been said, we have a global problem. we could see that a single eventin the us could have immediateã¢â‚¬â¦ it was a question of half days, a dramatic influenceof the changes of the decision making process all over the world. we have to find out globalsolution; that's absolutely clear. we are fortunate, if i may, in this difficult period,because we have a consensus at the level of the world ã¢â‚¬â€œ a consensus on principles.for instance, that market economy remains the best way to produce wealth ã¢â‚¬â€œ thereis a consensus on that. there is a consensus on the fact that global finance appears tobe fragile to an extent that was under assessed

before, and that we have to make the systemmuch more resilient. we have a consensus on the methodology. we have a consensus on theenlargement of global governments to the g20 to have around the table both at the emergingworld and the industrialized world. and we are working, i have to say very activelynow, to try to make global finance much more resilient, which means, as has been said again,better regulation, not necessarily much more regulation but better regulation, becausethere is one thing which is absolutely clear: the public authority will not be forgivenif they don't care for the system to be much more resilient, much more resilient. thismeans that we have to improve everything, in my opinion, not scapegoating every partand parcel of the system. and again, i would

echo what has been said: the scapegoatingexercise is a bad exercise because, when you scapegoat one part and parcel ã¢â‚¬â€œ banksor rating agencies or accounting rules or whatever ã¢â‚¬â€œ then you forget the other.we have to improve everything, including of course the risk management of banks and behaviourof banks, but not exclusively banks: everything. let me only conclude on that. we are workingvery actively. a lot of ideas are examined. the g20 methodology is accepted. the financialstability board does a good job. the basel committee is working extremely actively, andall over working groups that we have at a global level with the emerging world. we haveto maintain this level playing field. we have to be absolutely sure that we will find outsolutions at the global level. if the solutions

are only local, regional, continental, national,it's a recipe for catastrophe. of course, i elaborate no more, because we have anotherside of the coin at the global level, which is the surveillance of macro policies withinthe g20, but it's another story. porter: david? david cameron, leader of the conservativeparty, united kingdom: thank you. i just wondered ã¢â‚¬â€œ there'sa danger where all going to be agreeing with each other, and that won't make for much ofa debate, but i wanted to strongly agree with what both peter and jean claude have justsaid. firstly, i think it's right that we must base our response on hard headed, practicalself interest and not politics of envy, not

scapegoating. i think that's incredibly importantand that's particularly important, as peter said, for politicians to understand. i just wanted to draw out what i think aretwo lessons: one on the point about regulation that jean claude was making and one on thepoint about relationships that peter was talking about. on regulation, i think that the ukexperience i think shows that it's not so much an issue of the quantity of regulation;it's the quality. but as well as the quality, it's also the authority of the regulator andthe clarity of the regulatory structure, and that's why our view is that we need to changethe regulatory system to end the so called tripartite of having three different playersin it, and invest much more power and authority

in the central bank. we think the centralbank has that ã¢â‚¬â€œ is the best place to put the natural authority and discretion thatyou need in good regulation, rather than believing that you can write a perfect set of rules.if you look at the uk experience, where there was such a problem of excessive leverage,i think greater centralization of the bank of england would have helped on that. on the issue of the relationship between politiciansand banks, society and banks, i think peter is right: it does need to change quite fundamentally,because of what has happened. the way i think about it is quite simple, which is the banksnow know that the taxpayers will not allow them, rightly, to go under, because the riskto the economy of a depression, rather than

a recession, is there. i think in return,the taxpayer through the government is quite entitled to say to the banks, 'well that meansthis relationship needs to change in some other ways,' and that's why i think two ofthe things that president obama said we particularly welcome. one, that there are things at thevery riskiest end, the large scale proprietary trading for instance, that shouldn't reallybe backed by retail deposits. and the second thing, perhaps controversiallyfor a conservative politician, is, as we look at how we create what jean claude said, amore robust system or more resilient system for the future, the idea of some sort of insurancelevy, both to pay for the mistakes of the past but to protect and enhance our systemfor the future, if that can be agreed internationally,

we think that is something that is very worthwhile.and that's a reflection ã¢â‚¬â€œ i hope not a knee jerk reaction ã¢â‚¬â€œ it's a reflectionof a changed relationship, given all that's happened, given the relationships and howit needs to work in the future. porter: mr evans? john g. evans, general secretary, trade unionadvisory committee to the oecd, france; global agenda council on employment & social protection: just maybe a contextual point before we leavethe banking sector: i think it would be wrong if anyone in this room were to underestimate,firstly, what monsieur trichet just said, how close we were to a total meltdown, 18months ago, of the financial system, which

would have sparked a major recession. andit was essentially the governments, the coordination, which actually put the patient on to lifesupport when it was about to actually have a fatal heart attack. now i think the patientis still on that life support system and i think it would be also wrong to underestimatethe degree of anger which, certainly in the organizations i represent, you feel ã¢â‚¬â€œwhen you go to meetings with groups of workers, people who've lost their jobs, their homes,their pensions ã¢â‚¬â€œ at that situation and what went wrong. so again, perhaps unfortunately for this panel,i'm just agreeing with what's been said. the idea that governments now can walk away havingspent the trillions, and say, 'okay, boys.

get on with it as it was,' is just unthinkable.the accountability, how the system works in the future and to ensure that that does nothappen again and we have a financial system, which returns to the job of supporting thereal economy and not the real economy just supporting a speculative bubble, seems tobe unthinkable that governments and public policy could move away from that responsibility. porter: what are the key elements of thatnew responsibility? evans: i think one thing, the other messagei hear, is that in the discussions around the new system, and we watch very closely,obviously, the discussions in the financial stability board and many of the areas we'rein, my message would be open that process

up. the people i represent say, 'look, theseare the people who brought you the crisis.' jean claude may have helped solve the crisis,but it's seen as being bankers, financiers who actually were responsible in the firstplace, who are now designing the same system which is actually supposed to prevent thefuture crisis. i think you have to have a stakeholder approach of engaging all the interestedparties about where the balance between regulation is and where the balance between liberalizationis. where the balance between ownership is, break up the banking sector as well into feasibleunits and, beyond that, i think you have to have a structure which is credible also tothe public and not just to the financial sector. now, there are different ways you do thatin different countries, and i certainly believe

you need to coordinate that to avoid regulatoryarbitrage internationally, but i think that has to be some of the agenda rolling out inthe future, on the financial sector. porter: mr ahluwalia? montek s. ahluwalia, deputy chairman, planningcommission, india: well, i'm not a banker but i'm coming at itfrom a government, sort of, perspective. in one respect, we've been fortunate in india,because the direct government assistance to bail out banks was not an issue. banks werevery conservatively run and were completely stable, so we don't have the problem of howdo we handle all the special assistance that's been given.

the larger issue of what's happening to theregulatory structure is clearly something very relevant to us. i mean, mr trichet pointedout that a whole new regulatory structure is being worked out in the financial stabilityboard. we participate in it. in fact, the expansion of what used to be the financialstability forum into a financial stability board, which includes all the g20 countries,is an important democratization of the way in which banking regulations are going tobe done, so we are participating in that. i think the real issue for us is going tobe questions that will be raised and are raised at home. you know, in the light of the factthat the global financial system ã¢â‚¬â€œ rather the financial system in industrializedcountries ã¢â‚¬â€œ is now seen to have been

engaged in too much of risk taking, too muchof a free for all, too much of a market knows best sort of ideology, which is now changing.what does this imply from our point of view? i think our view is that we've been fairlyconservative. we were nearly near the frontiers of this kind of financial innovation, andour strategy then was that we should gradually move to what is the consensus on good financing.now that consensus certainly changed in the sense there would be less of the innovativefree for all activity, but we're so far internal to the frontier that we will have to keepon moving in the same direction. you will getã¢â‚¬â¦ we have to persuade our population,public, etc, that even as the industrialized countries appear to be shrinking, we may wellbe expanding the scope for liberalization

in the financial system, and that's actuallywhat we've been doing. we've been saying that. we've been introducing new instruments andgiving a clear signal that financial liberalization in india is necessary. it's going to continue,but it will now be targeted to reach the end result of whatever emerges out of the fsbas a regulatory structure that makes sense. all these issues of too big to fail, how muchinnovation, leverage caps, all of this, will get built into our own structure, but we werefortunate that we were nowhere near a position where we would be directly affected, so weescaped from the financial system with a financial system that was whole and didn't really requirevery much government assistance, other than short term liquidity support in the firstsix months.

porter: so this is not an excuse to back offof liberalization? ahluwalia: definitely not, in my view. porter: mr kostin, in russia as well, in easterneurope, in other emerging countries, is this going to be an excuse to stop progress towardsliberalization? kostin: not at all, although i have to saythat the russian financial system, just like in india probably, very differs very muchfrom the western, and so if mr sarkozy here said that the banks should give loans to thereal sector rather than playing in the stock market that's exactly what russian banks weredoing. that's exactly when the threat for us came from, because actually when the realeconomy started actually not to perform too

well, then we had the problem of non performingloans. but i mean, i would say that yes, we have a little bit different situation and,for us, the financial sector was maybe not as severe as we saw it in the west. though we also understand that we are alreadypart of international community, and we are very much dependent on the international capitalmarket, international debt markets, so for us there's no way back. and that's important,because we're not talking about regulations now. i think it's important not to say, listen,in 1930s there were good legislations adopted in the united states. let's come back to thatlegislation and then we'll have another 50, 60, 80 years of comfortable life. i thinkwe should really build up a new system of

this, and the concern of the banking communityis if agreed too much limits on this. if agreed too much supervision, the industry itselfwill not be developing, will not be producing enough funding for the real economy. therewill be no economic growth without the proper organization of financial sector, so not tooverkill ã¢â‚¬â€œ that i think is a very big concern among the banking community. porter: well, we're going to make a transitionsoon here, but maybe perhaps a final comment on the banking sector and the government involvementin that sector. sands: yes, i think by now everybody in davoshas probably had their full of talking about banking, but i'll just make one closing commentbuilding on what andrei kostin said. at the

heart of much of the debates around the futureof the banking system and the regulatory frameworks and so on, is the trade off between how safedo we want the banking system to be ã¢â‚¬â€œ so minimizing the risk of another crisis ã¢â‚¬â€œversus how efficient and effective we want it to be in supporting the real economy, generatingjobs and so on. there are many things we can do that pursue both objectives. we all wantboth objectives, but there are also some trade offs between those two objectives, and weneed to tease those out and understand those very carefully, and that is something thati think the basel committee and the financial stability board is working on and is veryengaged in. but i also think, to your comments, it isn'tsomething that should be just resolved or

thought about by technocrats, bankers, regulatorsand so on, because the stakes for society as a whole are very big. if we get it wrongone way, we run the risk of having another crisis. if we get it wrong the other way,we run the risk of starving the real economy of enough credit and capital, and then nothaving the kind of recovery, the kind of job creation, that the world needs, so it is avery high stakes game. porter: well, that's a great segue, peter.so this discussion about the financial sector and regulation and banking is a mature discussion,at this point. we've been talking about this a lot for the last 12 months, especially forthe last six months, but then of course there's the real economy. there's the corporate sector.there are the businesses that have to create

the jobs that are going to replace all themillions of millions of jobs that were lost, and there's a great concern about how quicklythat process restarts and how many jobs are created. there are grave concerns that jobcreation will be too slow, and it will be years and years and years before we recover. so you're starting to hear new discussionabout what government needs to do to stimulate economic growth, what government needs todo to create jobs. we hear all kinds of schemes floating around. in our country, the wholegreen jobs movement is a very hot thing. green jobs are going to save us. there are manyother discussions around the world. government of course still has some ownership stakesthat it picked up in the economy in a variety

of industries for emergency reasons, likein our auto industry. dominic barton, could you lead us into this discussion? where dowe go from here? what should be the role of government going forward in trying to stimulateand enhance economic growth, and improve job creation? dominic barton, worldwide managing director,mckinsey & company, united kingdom; global agenda council on the role of business: a couple of things i'd say at the beginningare that there's no doubt that government has increased its role in the economy ã¢â‚¬â€œparticularly i'd say in industrialized economies, and some countries by up to 10 percentagepoints of gdp. interestingly, i'd say in many

of the emerging markets it's going the otherway; you're seeing less involvement. i don't think, as we've heard in the conversationshere, that that's going to switch back. it's moving that way, but certainly the governmentsare more involved. i think there's a worry from the corporatesector that you can have ã¢â‚¬â€œ there's good government and bad government or, touse a terrible analogy, there's good cholesterol and bad cholesterol, in terms of how you moveit through. i think the view of government picking winners, or the government tryingto decide where jobs should be created and how they move, i think gets people concerned.what i call sound-bite policy analysis ã¢â‚¬â€œ the pressure that governments are under tomake decisions quickly in what are really

complicated long term issues ã¢â‚¬â€œ i thinkworries people. so you mentioned the green growth side. when you actually look at iton the us side of things that seems like a great opportunity. when you actually lookat potential job creation, it's relatively small. it's less than a percent of what couldbe there in terms of the other picture. when you actually look at those jobs, many of thosejobs, by the way, in solar, may be created in china, not in the us. so you need to geta more granular look. with that said, if i look to the good governmentinvolvement, if we will, that involves both the private sector and the public sector workingtogether to figure out what these problems are. we need more long term policy work andcooperation together to move it forward. just

to give you a couple of examples, again fromthe emerging markets: if you look at what china did with their ndrc, which again ismore of a long term vehicle in terms of thinking about where the economy is going, which involvesprivate sector people, they realized that, if you want to create jobs and you have astimulation programme, perhaps one of the things you have to deal with is the healthcaresystem, which is broken and not there. you're not going to get consumers to save less unlessyou have a better healthcare system. being able to parse that and dig it down is quiteimportant in coming up with those solutions. the singaporeans, with their economic strategycommittee, again you've got a mixture of government, private sector, academics ã¢â‚¬â€œ they'reagain thinking long term, more through cycle

views to work on the opportunities and issuesthat i think where there could be real opportunity. so i hope we can move to more of that typeof a model, a little more long term perspective, looking at the fundamentals and trying toall contribute because with whatever 34 million jobs that have been lost in the last 18 monthsin the world, it's in business interest to help figure that out, but it's going to takebusiness and government working together to work on some of those issues and incentives. porter: well, strategic thinking is a greatidea, dominic, and both of you and i agree on that. perhaps we could turn to david cameron.what should government be doing to restart economic growth, to make sure those jobs comeback? dominic says we need to work public

private sectors together, be thoughtful, bestrategic, take the long term perspective, but of course there's a lot of pressure todo something. cameron: i think the first thing is we'vegot to make sure we learn the right lessons from the crisis. one of those wasn't the freeenterprise system as a whole that failed. it was a financial bubble and imbalances thatcaused the problem, and so we mustn't go back to some sort of failed corporatist model ofpicking winners. i think that would be a big mistake. i think another lesson to learn is that notevery country is in the same situation. when it comes to stimulating growth, the situationmany countries now face, the uk perhaps in

particular, is there is not government moneyto do this. the british government faces a 13% budget deficit. the greatest threat inmy view to the british economy is not from taking on that deficit; the greatest threatis actually putting off the action that needs to be taken. so not every country's in thesame situation. i think that is important. the challenge for policymakers, if you like,is how do we rebalance the economy. we've been too dependent on financial services andhousing booms and government money. in the uk case, that was 70% of our growth. how dowe rebalance the economy without a failed strategy of sort of picking winners? and thesecond big question for policymakers is: how do we get growth when there isn't any moneyaround, when actually we should be in the

phase of deficit reduction rather than deficitspending? now one thing that i think policymakers shouldbe grabbing hold of and putting back to the top of the agenda is something that, sadly,is far too low down the agenda, which is the doha trade round. i mean, if we want somethingthat would get growth going, that would benefit both developing countries and developed countries,it's there right in front of us, and it's a pity that we can't seem to get that moving.a lot of the deal is there, is ready to be done. i think that is hugely important. while i'm sure dominic is right about thescale of green tech jobs, it's not an area that is not about government picking winners;it's about governments understanding how future

energy markets are going to work. it's aboutdecentralization. some of it's about deregulation, as well as putting in place some of the infrastructure.i think that could make a difference, but the big challenge is trying to do this ina new way, rather than trying to return some sort of failed 1970s corporatist model. evans: well, i think one message i draw onis precisely this point that employment has to come centre stage. i think the real riskof a jobless recovery and a degree of complacency setting in, now that growth is picking upslightly that the pressure can come off, i think that's a key danger for tackling thejobs crisis over the next six months. i think governments have got a short term crisis todeal with: how do try to get more employment

growth out of the growth that's taking place;how to re orientate some of the stimulus packages, which relatively little has been spent onjob creation, training, skills development, ideas which can produce a better long termsituation in the short term. refocus that. i would say also, on the green jobs debate,we're just at the beginning, not the end. we have to tackle climate change. you haveto link agendas on jobs in the short term. but i think there is a longer term lesson.if i could just comment on one point that david cameron just made, if you look at what'shappened over the last 20 years on labour markets, the industrialized countries haveseen this massive rise in inequality and growth of poverty in some areas, at the same timeas a great deal of wealth at the top of scale.

i don't think it's going to be a questionof the politics of envy in the future. i think we have to design a growth model which actuallymanages to distribute growth better. i think the other challenge in the more medium termis, in this crisis, how do we strengthen institutions which can show, as in some economies, they'rerather good at getting distribution of income fairer. also, there's a certain amount ofevidence to show that the fairer societies tend to work better economically over thelonger term. i think you have to reproduce that globally; i think you have to produceit nationally; and i think that issue about how you deal with it is crucial. the last point: the international labour organization,in a tripartite way through employers, trade

unions and governments, last summer negotiatedglobal jobs pact, which actually tried to get agreement on some of the measures whichneed to be taken. so i'd say a stakeholder approach, also at the national level, bringingthose constituents together, seeing how you can get joint action in the future, seemsto be crucial if we're going to get out of this crisis and not return to some of theproblems of the past. porter: could you give us some hints? whatare some of the steps, the models, that you were referring to? you don't come out andã¢â‚¬â¦ evans: well, in the short term, as i say,there are schemes which can keep people in work. i certainly think some of the intelligentwork sharing ideas have been positive; people

have been able to be re skilled and trained;they haven't fallen into long term unemployment. the issue now is how does that translate andcan resources be put in to try and actually move into job creation in the short term. one key issue is confidence. as has been said,an issue is how we have resources for that. i think that has to be addressed. i just camefrom a jobs panel earlier this morning where we put a question to the audience: if youhad to choose between reducing deficits in 2010 and creating jobs, what would be thechoice? three quarters of the audience said 'creating jobs'. now, i'd say that's a statisticallyrelevant measurement of the view of davos that i'll hope you'll convey to bond marketsin the immediate future. but i think we also

have to look at new measures of taxation,transaction taxes as well ã¢â‚¬â€œ trying to pull in more resources from sectors whichhave to also be responsible for this crisis ã¢â‚¬â€œ i think also seeing how we can targetinvestment in the medium term to be more effective. longer term, i think again we have to strengthenthe sort of institutions. i would say collective bargaining but also labour market interventionswhich are successful in actually redistributing. i think that's part of the model of the last20 years which has gone wrong. it's not returning to an old corporatist system, but it's onewhich i would say, in addition to rethink, redesign, rebuild, puts redistribution upthere as perhaps an issue for the world economic forum.

porter: mr trichet? trichet: first of all, i would pick up whatmy neighbour just said to draw the attention to the fact that, if we want to create jobsas soon as possible, we need confidence. we need confidence in the household constituency,confidence in the entrepreneur constituencies and also in the market constituency, of course.and to get confidence, you have to be credible in having a path permitting you to be backto be normal and to a sustainable position, as regards public finance. so, i would reallyrecommend ã¢â‚¬â€œ of course it depends on a country to country basis ã¢â‚¬â€œ but beingable as soon as possible to demonstrate that you have a credible path towards sustainableposition is essential, in my opinion, for

confidence today and for jobs today. so idon't seeã¢â‚¬â¦ in the question which was asked, i see a slight contradiction, becauseit's a little bit more complex than that. again, confidence is of the essence, and itis what the central banks are trying to do: to be anchor of stability and confidence. now, on the longer term, i would say thatwe have so many challenges being sure that the system is much more resilient. let's makethe working assumption that we do that. then we have also science and technology whichare moving at a speed which is absolutely incredible and probably for dozens and dozensof years. we have the success of india, success of china, the success of the emerging world,of latin america, which calls for incredible

changes at the level of the planet. and then,in the industrialized world, the problem is to be sufficiently flexible to take advantageof those enormous successes, because we have to run a scientific success, a technologicalsuccess, a success in development, in what we called before the third world, which isnow the emerging world, and which is taking a dominant position. this of course callsfor being flexible if we want to have all the benefits of this new world, and the jobsthat we need, so i would call for structural reforms and appropriate flexibility. ahluwalia: well, actually i think those arevery wise words from mr trichet. i think a phrase like 'we must protect jobs', it's understandablethat in a crisis that would come up, and there

would be a great demand for ideas, but whati fear is that the supply of bad ideas will greatly exceed the supply of good ideas, soa lot of things can be done under the guise of protecting jobs, which will actually underminethe long term objectives that we all have in mind. and certainly in india, we're keepingthat very much in mind. let me just comment on how we see it. now obviously our situation is a bit different,in the sense that we were happily growing at 9% for four years. in the two years thatthe crisis has affected us, that growth rate has gone to an average of, say, 7%. that'sa big drop, but it's still a pretty good growth rate. certainly the demand in india is, 'what'shappening to all the jobs that you promised

would be created?' of course our answer isthat the solution lies in getting back to 9%, and so government policy is really focusingon how do we get ourselves back to a 9% growth. now the challenge there is pretty obviousin the sense that we know that, in the industrialized world, there is a lot of global rebalancingof demand that has to take place. hopefully, the g20 summits will bring about some greaterconsensus on how that's to be done. but you know, even if that transition is managed verywell, most people would think that the new normal for the world is not going to be likethe old normal, so can a country like india grow at 9% if the industrialized countriesat best will grow 1% less or 1.5% less than they were doing in the previous five years.

now we recognize that the world has changedand that, therefore, export growth and therefore demand from the export side is going to beless than it was earlier, and so the issue arises. we don't have any doubt that on thesupply side we have the capacity to grow at 9% so, for us, the challenge is, 'where'sthe demand going to come from?' it's not going to come from exports to the same extent. ourinternal thinking is that that demand should come from enhanced domestic investment, andthat investment should be in infrastructure, because that is the biggest supply constraintaffecting india in the medium term. now how do we do that? i don't think we envisagedoing it by a huge increase in public investment; i don't think the fiscal situation would actuallystand that. so the strategy is to increase

investment in infrastructure and to rely onpublic private partnerships. use public money where private money wouldn't come in ã¢â‚¬â€œrural infrastructure, all kinds of things that are important for the rural economy ã¢â‚¬â€œbut to use the available public money to leverage private investment through appropriate structuringof projects and arrangements, and we are doing that in a vast range of sectors in the economy,from telecom to roads, shipping, i mean ports, airports, railway movement, etc. the strategiesare different but, in each case, the effort is to put in place a framework that will bringin private money. now we're doing this in a background whereprivate investment in india has done very well. we obviously have a stake in the globaleconomy stabilizing as quickly as possible.

i think one new issue that this does raisein connection with the financing of such investment: is there a case for more innovative, publiclysupported financing systems, or do you just leave it to the normal financing system toprovide the finance providing the projects out there? this is something that we're reallylooking at, because the truth of the matter is there are many areas where government regulation,differential treatment of regulatory standards, hidden subsidies, etc, manage to push financein a more attractive way in certain areas. in our case, we have a financial system whichis still developing, so there would be more of a case for doing something. we don't havea firm conclusion on this, but that's an area we are trying to explore. otherwise, essentially,jobs are going to come when growth recovers

and we think that we can get back to 9% ifwe can manage these particular challenges properly. porter: we've talked about confidence. we'vetalked about a path to a sustainable growth, rebalancing of demand and need to establishmore domestic demand in investment in the emerging markets, make perhaps new financialtools. peter, how would youã¢â‚¬â¦? sands: the point that i'd like to emphasizeis trade and avoiding protectionism. the challenge is that, for very understandable reasons,discussions about job protection, dealing with unemployment, in many countries quicklytranslate into how can we protect jobs from the threat of either being migrated overseasor from exports from other countries. one

area in which both businesses and governmentsare endlessly creative is finding new ways of being protectionist, new and more obscureand less visible ways ã¢â‚¬â€œ be it through straight sort of trade protection or betweenfinancial regulations, even environmental regulations, currency policy and so on. ithink it would be a tragedy for the world if we do see that. i think there are a lotof pressures for the world. i think the general direction of the world, despite some nobleefforts in the other direction, is to be more protectionist at the moment. and so i wouldecho david's comments about the importance of trying to progress the doha round. trade policy is one of these areas where,if you're not pushing the bicycle forward,

if you're not riding the bicycle forward,you're falling off; you're going backwards. the world has a lot at stake in making surethat we don't quietly end up in a more fragmented protectionist system. cameron: i mean, i'd very much agree withthat, as peter said. i think one of the successes in this very difficult recession is that,although there's been protectionist rhetoric and there have been some protectionist moves,there hasn't been a wholesale, you know, but i agree with you: you've got to keep movingforward. i think it's one of the biggest opportunities in a world where we need to rebalance, wherethe countries particularly in the west, we need to trade more; we need to export more.we need this new growth model, which needs

to be a model, in our case, more based onsaving and investment and export, rather than housing and finance and government, and thisis one of the key ways in which we could do it. i just wanted to echo something jean claudesaid on this issue of confidence. i think it is wrong to say that there's somehow achoice for some countries between an early deficit reduction and job creation. for somecountries, there simply isn't a choice. actually, if we don't get on and make some early stepstowards deficit reduction, we've seen in the case of greece where this can lead and thepain that it can cause. i think there's a great danger, particularly as the crisis phaseof the difficulty passes, that whereas political

leaders were saying, 'we mustn't put off whatneeds to be done. we must take this action,' as the crisis point fades, politicians startsaying, 'well, why don't we wait and see? let's just put these decisions off.' and it'sa very dangerous thing to do. as many economists have been saying, the debt and deficit crisiscould actually replace the leverage crisis that we've seen. i was very interested in what montek was sayingabout private finance. we have huge experience of this in the uk ã¢â‚¬â€œ some great successes,but there is always a danger that what should be about sharing risk between public and privatesector just becomes a way of government keeping its liabilities off the balance sheet. we'dlove to take part in your private finance

initiatives. i'm sure there are all sortsof opportunities for the uk in this, but there are also risks to be avoided about buildingup liabilities for future generations, when there isn't a real transfer of risk involved. porter: quick rejoinder? very quick. ahluwalia: i'm very aware of both the uk experience,and actually we benefited from it, because we've been in touch with partnership uk intrying to find out what has worked in the uk and where not. i think this whole issueof the balance of risks and the appearance of transparency is very important. i mean,in india, one man's public private partnership can become another man's crony capitalism.we officially say that the role of the nature

of public private partnership is putting privatemoney into public projects, not public money into private projects. and that danger's there,and we handle that, first of all, by a very robust competitive system. i mean, every public project, at least forthe central government, is guided by a concession agreement, which is a very detailed documentlaying out all the risks, etc. we don't negotiate this with an individual investor. we havethe concession agreement and invite bids, so they bid either on the basis of a revenueshare which is positive or, where the project is not going to sustain itself by earned revenues,they can ask for a capital subsidy up to a certain maximum, which is pre announced, andwhoever wants the lowest capital subsidy gets

the project. so the system is transparent;the concession agreement is known; the standards that are expected are laid down; and there'sa lot of discussion before bids are invited so anyone who has an idea of how to improvethat concession agreement, to rebalance risks, can do so. and then the projects are actuallyawarded on a competitive basis. now the thing is it's only two or three yearsold. we've had a lot of very good responses. ideally i'd like to be able to say this hasgone on for 10 years and here are the projects and they've worked successfully, and i knowsome of the difficult ã¢â‚¬â€œ i mean, the channel tunnel comes to mind. you can runinto humongous big problems but, so far, we seem to be finding the private sector responsein many areas, and it's quite encouraging,

but i think we need to do more. certainlyit's a work in progress, and we keep consulting to find out whether we can do it better. porter: mr kostin? kostin: from russia, i think confidence isextremely important, but whether it's enough for economic growth ã¢â‚¬â€œ china, whichshows the quickest possible growth definitely has the confidence, but also spending questionhuge amount of public money on developing specific industries. i think what the russiangovernment is trying to do now is to focus not on building the bridges, which shouldbe very important, because there are very few bridges in russia, probably, but concentratingon innovative, high tech areas. recently,

the nanotechnology fund was set; a venturecapital public government fund was set. really, we think that, to provide economic growthand to create more jobs ã¢â‚¬â€œ definitely there shouldn't be any growth without newjobs ã¢â‚¬â€œ i think we should focus on these innovative new technologies, rather than probablycreating some additional demand to buy cars or keep inefficient the prices like the governmentwas doing during the crisis to protect jobs. porter: dominic? barton: i just wanted to build on the innovationpoint because i think, while i fully agree obviously that we don't need protectionismand driving the doha round forward i think is critical, it also is so important to lookwhere are we going to get the growth for these

jobs to occur, and what is the innovationpolicy that we're going to have. i think that's another area where you can actually get cooperation.again, it's not again about picking the winners in it, but ensuring that the conditions arein place. again, to use some examples, if you look athealthcare, which is not a very popular word to be talking about in the us, if you lookat it from a growth opportunity, and where technology can play a role, there's a massiveopportunity. it's a very under penetrated area and i think a lot of jobs and value addedand productivity could be created from that. i think being able to pinpoint some of theseareas where we could help create the conditions to generate more jobs and growth, and thereare a number of them ã¢â‚¬â€œ healthcare,

education, agri food, let alone what's happeningin the emerging markets. porter: yes, that really brings to fore apoint that i think we can lose at a time like this, and that is there are a lot of humanneeds in the world ã¢â‚¬â€œ huge numbers of human needs ã¢â‚¬â€œ in healthcare and educationand so many areas of life ã¢â‚¬â€œ housing, improving conditions, environmental impact.and if we can find a way to restore enough confidence that we can start focusing on those,if you will, growth opportunities, rather than thinking that there's this fixed poolof demand that we have to fight over who's going to get it, i think we'll be much betteroff. mr evans? evans: just a comment on perhaps trying torephrase the protectionist question, because

the organizations i represent, we've got membersin exporting sectors, importing sectors, people who feel threatened, so it doesn't actuallyhelp. we internalize that discussion. i think two points: one is that so far i'd agree thatthere is not this protectionist response, which would get into really killing growthat the moment. whether that stays that way, if there is not a backlash, i think is a keyissue we should all be concerned about. the solution of that depends upon our successon the job creation agenda and the confidence agenda and, actually, i'd say the engagingpeople in the discussion agenda, which is crucial. there's the more medium term issue, whichhas come up in the g20, which perhaps is a

more useful way to look at trade and capitalflows. it's how do you try and remove some of the wider imbalances, not just the financialmarket imbalance, but the wider imbalances, trade and demand and the points you've justmade ã¢â‚¬â€œ poverty in the world, needs in the world, supply ã¢â‚¬â€œ which actuallygets away to the imbalances of unsustainable trade deficits, which we've seen, and unsustainablesurpluses on the other. my message on that: that will not just be done on trade policy.you need to embed the trade policy in a set of other policies, including employment, someof the standards and norms of poverty reduction in the international labour organization toactually restore, i think, a more balanced global system.

last point: the g20 ministers have said they'regoing to look at different indicators now on that process, and the imf's been giventhe job, sort of heads of government. i think it would be a fundamental mistake not to haveemployment as a key indicator, with a review also of the quality of employment in thatprocess. i think that's something which can be done immediately. it can help to get amore balanced view on actually what's happening in the world, not go back just to a view we'vejust got to look at deficits. porter: well, i want to very quickly now openit up to the audience for questions so, if you could be thinking of a short focused questionfor our panel about these two big topics, please be thinking of those right now, andlet's give mr trichet the last word in the

formal part of this session. trichet: no, i only wanted to say that it'sextremely important that we don't forget the other side of the coin of global governance,namely the mutual assessment process of the g20, the framework for a strong, sustainableand balanced growth, which has been decided. it has to be run by the imf; it should goto the g20 for the peer assessment; and, i would say, the peer pressure in order to reducethe level of imbalances are at the heart of the problem that we have to cope with. wehad a financial sector that was extraordinarily fragile, but we had also this accumulationof imbalances and there, i have to say, it's a formidable challenge for the members ofthe g20, because they have to accept that

their own domestic policies could be changedfor the sake of the stability and prosperity of the global economy, which is now the onlypertinent entity at the global level. again, it's a challenge for all countries and certainlyfor the western democracies also. porter: well, we have about 15 minutes inour session left, so who'd like to ask the first question? let me emphasize the word'question'. yes, sir. please identify your affiliation, just so we'll know where you'recoming from. robert l. forbes, president, forbeslife, usa: hi, i'm bob forbes with forbes. one thingthat we have not talked about here yet is something that does stimulate jobs and economies,and that is tax reduction. does anybody on

the panel want to address that? cameron: yes, i'm happy to. obviously we havethe real issue, which i can't go on about enough in the uk, of having this huge deficitthat we simply have to deal with, not for its own sake but for the sake of confidence,for the sake of jobs, for the sake of the economy, otherwise our interest rates willbe going up. but we do think that, as we need to trade out of this recession, we shouldbe trying to use tax as a signal to help encourage people to get out there and create jobs andcreate new businesses. so for instance, saying that any business that sets up shouldn't haveto pay national insurance on the first 10 employees, for instance, something like thatto try and stimulate the creation of new businesses

and small businesses that will provide someof the growth and wealth, i think that is possible. i also think in the western economies ourtax systems have become phenomenally complicated, and i think there is a case, particularlyin corporate taxation, for fewer reliefs and exemptions and disregards and tapers and allthe rest of it, and flatter simpler rates of corporation tax. i think there's somethingelse that we can look at as well, which is, while everybody knows we've got this difficultand potentially quite painful readjustment as we try to get back to some normal budgetbalances, i think we should try to send a very clear signal that we want our countriesto be successful, entrepreneurial, enterprising

places where we want companies maybe thathave left and gone to relocate elsewhere to come back. and i think one of the clearestsignals we can send is on long term targets for corporate tax rates to say this is howwe see the future and be in no doubt that this is going to be a very, very businessfriendly country, as we need to be, if we're going to get out of what's been a terribleyear and a half. porter: any other thoughts? dominic? kostin: may i ask about new tax on bankers? porter: oh, sorry. cameron: what?

kostin: may i ask you about new tax on thebankers? cameron: yes. well, the government has setout a bonus tax, which they've put in for one year only, and i think that's going tohappen; that will take place. we haven't opposed that, but i don't think it's a long term answerto the problem. i think actually what president obama was talking about, the idea of, as isaid earlier, some sort of levy that could be agreed internationally in order to tryand ensure against future problems, such as the ones we've had, i think that is more longtem, more practical, more thought through. that, as i said at the beginning, we needto be hard headed, practical, acting in strong national interest, rather than knee jerk politicsof envy stuff, which may make us feel good

for five minutes but it's not going to solvethe problem for five years. porter: another question? the next question?yes, sir, please identify yourself. davide serra, founding and managing partner,algebris investments/tci, united kingdom: i'm davide serra from algebris investments,a fund management company. porter: in what country? serra: uk. i have a question today in termsof i see a strong imbalance today. the us is printing money through the treasury. thesame are doing the japanese. out of a g7 country, europe is the only country that right nowhas not a treasury and, as a result, it's very hard to compensate the global imbalancesthrough currencies which, at the end of the

day, create jobs or blocks of jobs. presidentsarkozy said that this is going to be a key item of the agenda when france takes overthe presidency next year for g8, and i think g20. can you comment on what you think arethe imbalances created by today currencies that do not trade in the same way? centralbank, they don't have the same freedom at a time where jobs are at risk in the variousareas, and this has an impact, both on the g20 emerging and most importantly japan, euroarea and the dollar area. thank you. porter: mr trichet, you're the central banker. trichet: i want to be sure that i heard thatthe central bank had not the same freedom. did you say that?

serra: yes, because of a separate treasury. trichet: i mean i'm sorry to say that it seemsto me that the federal reserve is independent, and i don't doubt that for one second. onthe currencies, i would only say that, as you knew, ben bernanke and tim geithner aresaying a strong dollar is in the interests of the united states, a strong dollar vis-ãƒâ -visthe other major floating currencies. i say myself, on my part, i fully agree: a strongdollar is in the interests of the united states. i would also say that it corresponds to theoverall superiority interest of the global economy as a whole, and certainly of the interestof europe. i echo what they say. i would also say that, as major floating currencies, wehave the sentiment that a number of other

currencies that are not floating could themselveshave a progressive and orderly and timely appreciation. that's the way i see the runningof the present situation. in the very long run, we could imagine other solutions of coursebut, at the present moment, we are running a set of free floating major currencies, andthere you have the terms of reference that we agree upon. porter: another question? yes, sir. participant: while every country has its ownproblem and is thinking of its own solution, how do you see the doha round will succeed?if it would not, what would be the challenges? thank you.

porter: peter, you brought it up. sands: i think it's a good point. i wish iwas more confident that it would succeed than i am confident in my knowledge that it's veryimportant that it succeeds. i mean, i think it is very important that we continue to makeprogress on trade, but i'm not expecting that doha is suddenly going to become easy. buti think even the process of trying to make it happen is helpful, because you tend toget small victories on the way and you also stop sliding backwards. but i think the realitiesof the positions of the different governments, the political pressures they're under, meanthat we're not going to see an early and quick resolution to doha.

can i, just building on the earlier questionand the role of currency, i do think there's an interplay between the trade and protectionismissues, and the currency issue. i think, ultimately over time, what we have seen is a shift ineconomic power and wealth from the west, broadly speaking, to the east ã¢â‚¬â€œ asia, middleeast and so on ã¢â‚¬â€œ broadly speaking. and that's a good thing. it's a good thingbecause it's a reflection of the fact that asia has got wealthier. i think that willultimately translate through to currency movement; asian currencies will ultimately become morevaluable versus western currencies. it won't be an immediate neat, smooth, unidirectionalpath, but actually the less movement we have on that, the more pressure we're going tohave on the protectionist issues and the more

difficult it will be to resolve things likedoha. trichet: first of all, to say the future isnot written; it depends on us that doha would be a success or not and that we will achievewhat we want. we all agree, and i would say not only on my own personal behalf but onbehalf of all central banks, that we have an immense stake in the success of the doharound ã¢â‚¬â€œ immense not only for the global prosperity, also for maintaining appropriateprice stability because, of course, protectionism would be the worst enemy in this respect.again, it depends on us, and we have all to work to convince our own people it seems tome, and i think what you said was very right, to be, to have the most lucid possible publicopinion to understand that there is a superior

interest in solving that problem. porter: it's very hard to keep forcing yourselfat this moment to think that there's a positive solution here, that everybody can benefit.this is a moment where it's very easy to start to think about how can i avoid losing, andthat's a very dangerous approach indeed. another question? david w. mullins, qvt financial, usa: david mullins, qvt financial. i think regulatoryfailure was absolutely at the centre of the problems that we've had and i would like yourassessment of the realistic prospects for improvement in regulatory structure and practice.and to put it in perspective, i'd like to

remind everyone that we in the us have sixseparate federal regulatory agencies. i will not name them all here, and i'm not even includingthe smaller ones that regulate ã¢â‚¬â€œ porter: and you were part of it, david. mullins: yes, i'm part of it, thanks. andmore than that, the administration looked at the regulatory problem and, last year,came up with their solution, which was to propose a new regulatory agency in the usto regulate consumer financial products. now, it is true they did propose merging ots intoocc to keep the total number at half a dozen for regulatory agencies. i would just furthermention that there are strong provisions in the congress currently to strip the federalreserve of regulatory authority. so, given

that outlook, what's your view realisticallyof the potential for progress here, given the sort of critical role that i think regulatoryfailure played in this crisis? thank you. porter: anybody want to take that? mr evans? evans: i think the regulators are all a bittimid on responding. trichet: no. porter: not this one. good. evans: there's an awful lot of blame to goaround on this crisis, so i don't think anybody should be modest about accepting blame, buti do think that some of the criticism of regulators, which has come from the financial sector,it sounds a little bit like you have a massive

fire; the fire brigade comes in and then youblame them for flooding your house. really what has been said ã¢â‚¬â€œ we're so closedown to meltdown, regulatory failure was a part of it ã¢â‚¬â€œ is in the cultural contextwhere, three years ago, public bodies, opinion makers, many, and i would exclude monsieurtrichet from this, were saying, 'look, we've entered a new world. we can all make 25 30%rates of return against 5% average world growth, because we're so intelligent. we're such goodinvestors. light regulation is the solution.' that culture brought us to the edge of theabyss. i think certainly you need some regulatorychanges, some structural changes, some supervision changes. you need to deal with the problemsof regulatory arbitrage, and i really do agree

with some of those who've been arguing herethis week that you need to bring this together internationally, and i think governments doneed to give up sovereignty in it, but you need a culture change as well, about how wego about this process in the future if we learn the lessons of the past. porter: so let's conclude this way. the topicis: what should the future role of government be in assisting the rebuilding of economiesand the financial system? could i ask each panellist to give one sentence of your answerto that question? who'd like to start? david? cameron: learn the lessons of regulatory failurein finance, and i think they are being learned, and recognize that, particularly in the west,we need a new economic model based on saving,

investment, a broader economy and export,rather than just housing, finance and government. porter: wow, he did it in one sentence. excellent.dominic? barton: i would say focus on the long termhealth metrics, which are things like tax, less regulation, education and how the infrastructureworks. porter: peter? sands: i think we all need a little humility.we all, businesses and governments, got a lot wrong and, as we work out what to do inthe future, we should condition our recommendations knowing that we don't know all the answers. porter: montek?

ahluwalia: i would say that the main lessonis to recognize that, whatever the rules were when you started, if something goes badlywrong, the government will be blamed, so you better be watchful about the economy. keepyour eye on the longer term growth prospects, which depend on individual countries ã¢â‚¬â€œwhat the drivers of growth are ã¢â‚¬â€œ and certainly as far as the financial sector'sconcerned, its health is very important, and you need to look at what is a global consensusof what constitutes a good financial sector, and keep moving towards it. porter: andrei? kostin: i think the role of the governmentwill be increasing in particular areas of

regulatory work and others, but i would liketo underline that, whatever decisions are undertaken, the efficient model will be onlythis when they will be based on the agreed principle with the business with conventionalcommunity. otherwise, we might be engaged in the game when one side is setting the rules;the other is trying to find loopholes, which normally the private business is quite successfulin this. evans: in the short term, it would be to givethe same political attention which governments gave a year ago to resolving the banking crisisto the employment crisis. in the more medium term, i think it's opening out decision makingand accountability in a much broader stakeholder model of trying to get better forms of governance.

porter: and last but not least, jean claude. trichet: well, not being complacent in anyrespect, which means that we have to work tirelessly for having a system which wouldbe at the global level much more resilient, be sure that we are really having a governanceas has been decided at the global level to run the global economy, which is now the pertinententity. and be sure that the information, the quality of information of our own people,the lucidity of public opinion enlightened by this quality of information, is such thatgovernments can really play the game of global governance. porter: well, thanks to our panel for a verythoughtful and rational discussion. i only

hope what really happens is so rational. thankyou.