Gabor Steingart, the chief editor of Germany’s leading financial and business newspaper Handelsblatt, shared his views at Maastricht University last Tuesday on the state of the world’s economy and the effect of the financial crisis on our society.
Steingart’s thought-provoking ideas and statements gave way to a lively open discussion with the large audience of students.
From the very first minute, Steingart caught the attention of the audience by rejecting the classical theories in economics. “For years I learned the wrong stuff,” he said.
In Steingart’s view, the classical economic theories professed by Adam Smith, Karl Marx or John Maynard Keynes do not provide any help in understanding the current economic situation because he believes that they are no longer applicable.
“I hope you do better than me. I should have gone to more parties and traveled around”
Going further, he surprised more than one listener when he described his studies as being a waste of time.
Steingart explained his position on the theories of Smith and Marx by saying that from his perspective, there is no invisible hand leading markets to efficiency, but only “the iron fist of the governments” and that “we are not helping the poor, but supporting the fat cats of Wall Street”.
In a slightly sarcastic tone, Steingart said that governments have also abandoned the Keynesian economic model: “No one is saving in good times. This is the reason why we do not have good times anymore. Liquidity is the king and printing money is all that seems to matter nowadays.”
According to Steingart, this explains what is happening in countries like the United States, Spain and Greece where governments try to kill the ’viral’ crisis by continuously throwing money over it.
“Maybe the classics weren’t wrong but the heroes of our times are”
Steingart believes there are still questions that do not have clear answers: “Why is the financial crisis still in the headlines and why it is not over? Why are we so unhappy as a society?”
Over time there have always been so-called “enemies” who have tried to undermine the system, the stability of the economy, and who have threatened the well-being of our societies. Steingart argued that “the enemies are not the communists, trade unions or the lazy people,” as believed in the past, but “the rich people and powerful institutions who cheated the system and the banking communities who broke their promises.”
What we need, he claimed, are new Smiths and Keyneses who will revolutionize the economic thinking. “Evolution is on the way,” Steingart said with a glimpse of hope.
Following up on his criticism on the academic theoretical approach, Steingarts advised students to seek beyond the theory and not be afraid of making errors, “because progress always involves errors.”
Steingart concluded his lecture on an optimistic note with a quote from Oscar Wilde: “Everything will be good in the end. And if it’s not good, it’s not the end.”
A series of questions dealing with different aspects of the current financial and economic crisis emerged during the ensuing debate.
When asked why the crisis seems to be concentrated in Europe, Steingart answered that the financial crisis has different faces around the world. The situation looks more fearful in Europe because the financial market is currently testing the idea of Europe, the idea of a common euro and its stability mechanism. The beginning of the crisis was easily predictable, from Steingart’s perspective, simply by looking at the misleading balance sheets delivered by American banks over the past 20 years.
What was less predictable, in his view, is the connection between the subprime market in the US and “such an economically irrelevant country like Greece”.
The huge amount of fear surrounding the situation in Greece is very surprising from Steingart’s perspective and is “more related to psychology than economics,” especially considering the fact that Greece’s debt adds up to only 4 percent of the European total debt.
“We have to learn how to share for a better world”
Steingart believes that politics cannot control worldwide economics because “markets have globalised and there is no set of rules and regulations that works everywhere.”
From his perspective, the world is not flat as Thomas Friedman wrote, but a “rocky territory,” and emerging countries cannot be blamed for the current crisis.
As Steingart sees it, the crisis was initiated by a coalition of bankers and politicians who thought that living on consumption and credits is much easier than through hard work and started lending money to people who could not afford to pay it back.
In China, on the other hand, the wealth comes from “real production with real people and real work,” he pointed out.
Steingart argued however that Europe should not fear China’s rise to the status of new world power. His advice to European governments is to open a debate to find out each party’s interest and moral values. “Asian countries need to be taught about environmental issues, child labour and work force,” he said.
Photo: Studium Generale
Steingart pleaded for progress, innovation, new ways of thinking, less fear and more action to help the world become a more stable and secure place. “What matters the most is to learn how to share views, political power, business opportunities.”
At the end of the lecture, which turned out to be shorter than usual, some in the audience felt that questions had not been fully answered and that true facts had been avoided. Other commented that Steingart had shown his independent journalistic approach and given them pertinent food for thought.
By Cristina Rujan
Cristina Rujan is the Secretary of SCOPE | Economics, the student organisation who organized the lecture in collaboration with Studium Generale.