13-14 September 2018 

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10 Years after the failure of Lehman Brothers: What have we learned?

OECD Conference Centre (Room CC4)

Day 1 brought together the NAEC Group of Ambassadors of Member and Key Partner countries, Chairs of OECD Committees, and OECD Directors to assess the extent to which OECD analysis and policy thinking has changed since 2008 and discuss the need for a new economic paradigm as well as the elements of a “new narrative of growth” that puts people at the centre of economic policy. The new techniques, methods and approaches needed to underpin this narrative were considered. Day 1 closed by looking at how the OECD working with others can tighten the links between science and analysis on the one hand and policy and action on the other to better address global challenges through the development of systems approaches.

 Opening Remarks by Angel Gurria, Secretary-General of the OECD

The economy before the crisis was characterised by the Great Moderation in a policy context dominated by a drive to deregulate markets and in particular the financial market, and reduce state interventions. The 2008 crisis and its aftermath triggered a re‑consideration of the policy framework that can help promote inclusive, sustainable and balanced growth.  At the same time, there were also a number of trends the crisis reinforced, including rising inequality and declining productivity growth. Meanwhile, technological change, notably digitalisation, and organisational innovation and reform are combining to radically alter many aspects of daily life, from employment to services. This contributes to changes in other spheres, notably social changes. The challenges confronting the global economy demand a better understanding of how the economy works. They also require an updating of analytical frameworks so as to put people at the centre of policy making, in line with the 21 for 21 Agenda of the OECD Secretary‑General. 

The OECD’s reflections on these changes have benefitted from the analytical and strategic proposals of eminent and innovative thinkers like Nobel laureate Angus Deaton, Mariana Mazzucato, Robert Skidelsky, Roberto Unger, Nora Lustig and Dennis Snower amongst others, presented in the accompanying draft synthesis report on a new narrative of growth. These reflections are presented to nurture the development of such a new narrative, and to benefit from the feedback of Chairs of Committees and Ambassadors.

Moderator: Professor Diane Coyle,  University of Cambridge
Keynote speech by Secretary-General Angel Gurria

• Remarks by Eric Beinhocker, Executive Director, Institute for New Economic Thinking (INET) Oxford
• Discussion and comments by Chairs and Ambassadors

Previous major crises, from the Great Depression to the stagflation of the 1970s, profoundly changed both macroeconomics and macroeconomic policy. This session will discuss the extent to which OECD analysis and policy thinking has changed in the 10 years since the global financial crisis. The discussion will be based on a survey of Directorates and Committees. The results provide perspectives for a range of policy areas (including trade, monetary and fiscal policy) and challenges (e.g. inequality and environment). The answers reflect the views of the Chairs and Directors regarding the OECD policy and practice. This survey will also be complemented by details of OECD work which will help inform Members on the changes in the policy thinking, perspectives and methods of work, since the financial crisis. Committee Chairs will be invited to share work that they have advanced in their policy domain, that could be identified as being consistent with NAEC (i.e. more innovative approaches to understand and explain complex phenomena).

Moderator: Gabriela Ramos, Special Counsellor to the OECD Secretary-General, Chief of Staff and G20 Sherpa

• Remarks by Michael Jacobs, Director, Commission on Economic Justice, Institute for Public Policy Research (IPPR), Laurie Laybourn-Langton, Senior Research Fellow (IPPR) and Laurie Macfarlane, openDemocracy
• Remarks by Martine Durand, Chief Statistician and Director of Statistics and Data, OECD
• Selected Responses from Committee Chairs and Directors

A new growth narrative needs to be underpinned by new techniques, methods and approaches. The foundations for the NAEC Innovation Lab are currently being laid and will benefit from discussion in the NAEC Group and feedback from Committees and delegates from Member countries. This is an initiative launched by the Chief of Staff and the Chief Economist to galvanise the emerging practice in many directorates and committees to rely on the most advanced research techniques to analyse complex issues and develop policy recommendations. The Lab aims to promote experimentation within the OECD on innovative techniques and approaches such as agent-based modelling (ABM), machine learning, big data applications, network analysis and behavioural economics. The Lab will also provide a space for cross-Directorate collaboration and exchange.

Moderator: Laurence Boone, Chief Economist, OECD

• Presentation of the Lab proposal by William Hynes, Head of the NAEC Unit and Sebastian Barnes, Head of Division, Economics Department
• Remarks by Alan Kirman, Chief Advisor to the NAEC Innovation Lab
• Remarks by Matheus Grasselli, Professor and Chair, Department of Mathematics and Statistics, McMaster University
• Discussion and comments by Chairs and Ambassadors

The OECD and the International Institute for Applied Systems Analysis (IIASA) have signed a Memorandum of Understanding to strengthen co-operation between the two organisations so as “to tighten the links between science and analysis on the one hand with policy and action on the other to better address global challenges through the development of systems approaches.” The Secretary-General has also established the OECD-IIASA Task Force on Systems Thinking, Anticipation and Resilience to explore how complexity science could transform the way we understand the economy and its interaction with other complex systems such as the environment and society and its resilience. Several Ambassadors expressed support for this strategic partnership during a presentation by the Director General of IIASA, the Chairman of the Task Force and the OECD Chief of Staff in advance of the first Task Force meeting in January 2018. NAEC is also helping to co-ordinate resilience activities within the OECD and strengthen inter‑governmental approaches to resilience. This aims to build safeguards, buffers and resilience to physical, economic, social and environmental shocks. The OECD-IIASA work programme will be presented and Committees and Ambassadors invited to contribute.

Moderator: Martin Lees, Chairman of the OECD-IIASA Task Force

• Remarks by Luis Delgado Sancho, Director for Growth & Innovation of the Joint Research Centre of the European Commission
• Remarks by Dr Igor Linkov, US Army Corps of Engineers and Carnegie Mellon University
• Discussion and comments by Chairs and Ambassadors

Session 5: NAEC Next Steps

Moderator: Gabriela Ramos, OECD Chief of Staff and Sherpa, and Committee Chairs

Discussion and comments by Committee Chairs and Ambassadors

Day 2 brought together some of the leading actors in the crisis to debate what caused the crisis; its economic, social and political impacts; and how the financial system has changed, or should change. The state of economics after the crisis was also discussed. While economic growth has recovered, there remain vulnerabilities and risks, and therefore, economists and policy makers need to improve the way we understand the functioning and purpose of the economy.

 
9:30-10:00

Opening by Angel Gurria, Secretary General of the OECD

The 2008 crisis was caused by a failure to run and to regulate competently the global economy and the firms that dominate it. This allowed huge imbalances to build up, and, when they reached a tipping point where they could no longer sustain their own weight, failure was sudden and brutal. The crisis revealed how some of the very strengths that had allowed the economy to expand, such as interconnectedness in its many guises, could be just as potent in provoking or aggravating its downfall. In this panel, key players in the crisis will draw lessons from what was happening in the financial system and how their instituions reacted.

Chair: John Kay, Financial Times

Keynote address: Jean-Claude Trichet, Former President of the European Central Bank

Panelists:

• Irena Sodin, Ambassador to the OECD, Permanent Representative of Slovenia
  
• Remarks by John Llewellyn, Former Chief Global Economist, Lehman Brothers
• Greg Medcraft, Director of OECD Directorate for Financial and Enterprise Affairs
  

The crisis showed that banks and financial market are not simply intermediaries between economic agents like companies and investors, and that they have an impact on the real economy in their own right. This prompts questions about whether finance and investment can be used to drive job creation and income growth and act as a conduit for the global diffusion of innovation, expertise and the funding all these depend on. This panel will also discuss whether regulators and other actors have applied the lessons of the last crisis and whether the system is now more resilient.

Chair: John Kay, Financial Times

Keynote Address: Willem Buiter, Special Economic Adviser, Citi

Panelists:

• Steve Keen, Professor of Economics and author of Can we Avoid Another Financial Crisis? (Presentation)
  
• Mathilde Mesnard, Deputy Director, Directorate for Financial and Enterprise Affairs
• Erdem Basci, Ambassador, Permanent Delegation of Turkey to the OECD (Presentation)

Keynote speech:
“Lessons from 2008 for beyond 2018”

Yanis Varoufakis, Economist and former Greek Minister of Finance

Introduction by Sony Kapoor, Managing Director, Re-Define

The financial crisis showed that the benefits of economic growth do not trickle down automatically. The long period of expansion before 2008 was characterised by growing inequalities of income, wealth and opportunities. Our economic systems, with all their strengths and advantages, have been producing and perpetuating social disparity for decades, and inequality has widened since the crisis. This has fuelled the perception that those who caused the crisis were saved by govenments at the expense of those who suffered. Disscussion will centre on the causes of popular miscontent and what can be done to mend the damage to the social fabric and to encourage constructive political debate.

Chair: Gabriela Ramos, Chief of Staff and Sherpa

Panelists:

• Michael Jacobs, Director, Commission on Economic Justice, Institute for Public Policy Research (IPPR)
• Robert Skidelsky, Professor of Political Economy, University of Warwick
• Erika Widegren, Chief Executive, Re-imagine-Europa

The dominant school of economic thought prior to the crisis essentially saw the economy as a machine that could be modelled and understood using general equilibrium models and representative agents behaving rationally to maximise value. This machine almost always operated at its optimal speed, producing outputs in an almost totally predictable, linear way, under the close control of its policy operators, unless it was hit by external shocks. Did the crisis discredit the analyses based on this view and the policy advice it generated?

Chair: Martine Durand, Chief Statistician and Director of Statistics and Data, OECD

Keynote speech by Maurice Obstfeld, Chief Economist of the IMF

Panelists:

• Eric Beinhocker, Executive Director of the Institute for New Economic Thinking (INET), Oxford
• Maeve Cohen, Director, Rethinking Economics
• Remarks by William White, Economist, former Chair of the Economic Development Review Committee (EDRC)