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Sunday, October 12, 2008

Financial crisis - the merits of holding meetings and Galbraith's take

This weekend sees another series of meetings of political and financial leaders in efforts to stem the banking crisis. Clearly, there are risks in holding such meetings. Failure to produce a plan of action, which is actually followed by action, might lead to a worse result than having no meeting at all. But then, it is always good to talk and communication is key in these times. And indeed, it looks as if the UK is leading the way on capital injections for banks; it is trying to persuade other countries to follow.

Apparently we are all reading JK Galbraith's history of the 1929 stock market crash. Anyone remotely involved with the current turmoil should have read it years ago. Still, it does merit regular return. Galbraith looked not only at the Crash but at the aftermath. In one section, he writes in praise of the 'no-business meeting'. President Hoover organised a series of meetings with business leaders, after which positive statements about their sectors were made. Hoover was not, Galbraith dryly maintained, merely organising reassurance.
[President Hoover] was also conducting one of the oldest, most important - and, unhappily, one of the least understood - rites in American life. This is the rite of the meeting which is called not to do business but to do no business...there is the meeting which is called not because there is business to be done, but because it is necessary to create the impression that business is being done. Such meetings are more than a substitute for action. They are widely regarded as action.
While there is probably an element of this in the meetings taking place at the moment, really these meetings are essential to get the global financial system working properly again.

Nevertheless, when the attention turns to the wider economy we can probably expect some Hoover-style meetings too...

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