Any financial system can be unstable

Hanoi Moi, 9 November 2012

1. Could you tell us the reason why you agree to become a keynote speaker for the 4th ASEAN “Bridges" event series?

I am pleased to be a speaker at the 4th ASEAN "Bridges" series of events facilitated by the International Peace Foundation and locally organized by the Ministry of Education and Training in Vietnam. In our global economy it is imperative that economists like me learn as much as possible about the forms of government and economic systems in all major nations of the world in order to better share information that will benefit them and the rest of the world.

2. Being a famous expert in economics, why you chose to speak about "Leadership, democracy and local government" and what is the significance of this topic for the for the 4th ASEAN “Bridges” event series?

As an economic theorist, I have devoted much of my professional life to trying to understand what are the essential foundations of a strong prosperous society. The words in this title summarize some of the key elements that I believe to be essential.

The success of any society depends on the qualities of the leaders to whom it entrusts itself, both local community leaders and national leaders. I will discuss how economic theory can help us to better understand what makes a successful leader. Democracy denotes any system in which leaders can get greater responsibility when they earn the trust and approval of more people in the society. One of the most important paths to greater responsibility that a political leader can have is from a position local leadership to a greater position of national responsibility. The relationship between government at the local level and the national government has vital importance in any society. I will argue that successful societies depend on positive interactions between local and
national politics, which can increase the national supply of local and national leaders who have good reputations for spending public funds responsibly to provide public services for the people.

3. What is the message you want to send to the Vietnamese students through this speech?

I hope to inspire the Vietnamese students to continue their study of social science, and to better understand all the different forms of government that exist in the world. The systems differ, but they all have common elements that we must all try to understand. As an academic, I believe strongly in the importance of education and support the free exchange of ideas that we will experience in Vietnam.

4. Since you received Nobel Laureate for Economics in 2007, the world economy has suffered many tremendous shocks, what do you think about the trend of the world economy in general and Southeast Asia in particular in the upcoming years?

This has been a time of financial turmoil throughout the world. Advances in economic analysis since 1929 have enabled the world to avoid the worst forms of economic depression that were experienced in the 1930s. But we have much more to learn. In particular, we need to learn much more about the basic regulatory rules that are needed for a strong financial system. The institutions of finance that channel people's savings to investment opportunities may be different in different parts of the world, but there are common problems that they all must solve. Any system can become unstable when people lose trust in those who invest for them. America, Europe, and
Asia each need different kinds of reforms to achieve greater stability and prosperity.
But the essential elements of a successful system are the same everywhere, and we can all achieve greater prosperity with greater understanding.