Murdoch University Vice Chancellor Professor Richard Higgott has warned that without a reform of the market system the world economy is in danger of experiencing further and more frequent financial crises.
Professor Higgott discussed this topic at the prestigious Noordin Sopiee Lecture at the Universiti Sains Malaysia in Penang on July 9.
The Vice Chancellor’s lecture Why Can’t We Govern the International Economy? Lessons from the Recent Global Financial Crisis explored the causes of modern capitalism’s recurrent state of instability, pointing the finger firmly at a failure in oversight.
“Along with the Global Financial Crisis, the miss-selling of derivatives, the miss–selling of insurance products, recent IT failures, US banks rigging the municipal bond market and massive insider trading scandals in Japan, we have a wider systemic and potentially greater problem than one-off setbacks in global finance,” Professor Higgott said.
“Over the last 25 years the financial sector has come to dominate the real economy in an asymmetrical and increasingly questionable, indeed irresponsible, manner.
“This dysfunctional relationship is reflective of a crisis in the market system. The behaviour of the financial sector reflects a cultural shift in what passes as legitimate activity in the market place.”
Professor Higgott said that if the market system is not reformed there would be increasingly rapid iterations in the cycle of economic crisis.
“The solution to this problem is as easy to identify as it is difficult to achieve,” Professor Higgott said.
“We need to get the relationship between the market and the state right.
“The market, as an instrument of allocation and coordination, surpasses all other mechanisms devised by man. But it is no more than a mechanism or machine. And like all machines it requires steering, regulating and servicing every now and then if we are to get the best, as opposed to the worst, out of them.”
The Noordin Sopiee Lecture series is named in honour of Dr Mohammed Noordin Sopiee, a Malaysian scholar, intellectual and thinker whose views and advice on strategic and economic matters were keenly sought at home and abroad.