“I don’t think someone with experience will say financial crises can be avoided. They can be minimized; you are working with risks, with vulnerabilities. The financial system invests in the future. Who knows what will happen? The financial system takes risks, sets up risk provisions. It is impossible for the financial system not to be in ‘offside position’ from time to time. But the important thing is for banks to have provisions.”
Isarescu on Thursday gave a presentation on “Governing and Economic Governance. A point of view” at the Central University Library (BCU), where he received the title Doctor Honoris Causa of the National School of Political and Administrative Studies (SNSPA).
In fact, Isarescu raised the issue of the need for public policies and institutions that can handle free markets, which not always bring good results for the society. If there is economic governance, independent from the government policy, the risk of slippages is much lower, and crises are no longer as violent.
“People are expecting someone to solve their problems, and that someone doesn’t exist. We have reached situations where governments say they no longer have the instruments, levers to solve certain situations. Then, we look to governance for solutions. There are overlaps between political governing and economic governance, but they don’t completely overlap. There is enough ‘specific difference’ to give substance to economic governance,” Isarescu said.
“If we confine ourselves to governing, we fuel the nostalgia that it was better in the past. Governance will ultimately prevail,” he added.
He also recalled that market forces and Adam Smith’s “invisible hand” – which have governed the world in the last decades do no work, considering that there are no ethical codes and principles.
“We have all been tempted to let the economy work out its problems on its own, to believe that markets, if allowed to function freely, will solve the problems, but it hasn’t happened. We can talk about an invisible hand in a puritan society, when people would go to church and had principles. They would put in the work, had no inclination towards speculations and easy gains, as bankers do these days. Those who say we should return to a Code of ethics in business if we want the invisible hand to work had a point.”
Recently, representatives of the Foreign Investors Council have brought up ethics in business as a pre-condition for encouraging innovation, entrepreneurship and foreign investments in the current competitive business environment.
Foreign investors believe it is important for the Government and the business world to take measures to combat corruption, especially when it comes to public procurement.
The “invisible hand” is an idea devised by 18th century Scottish economist Adam Smith, which suggests that individuals, seeking their own gain, promote the general interest of society more efficiently than if they set out to do that intentionally.
(English version by Daniela Stoican)