Daily Archives: January 28, 2010

Briefly, during the takeover bid for Cadbury by Kraft, I thought the UK might proclaim a “strategic chocolate” doctrine. Fortunately, that did not happen. Less fortunately, if history is any guide, the takeover of Cadbury is quite likely to be a flop. If so, the winners will be the shareholders of Cadbury, the advisers for both sides and those who arranged the loans. The right question, then, is not about chocolate. It is about the market in corporate control itself.

For high priests of Anglo-American capitalism, this question is heresy. They would insist that shareholders own the business and have a right to dispose of their property as they see fit. They would add that an active market in corporate control is an essential element in “shareholder value maximisation”, on which an efficient market economy rests. Yet, after financial markets have gone so spectacularly awry, the question whether companies should be left to the markets is being raised. Read more

Martin Wolf is writing for the FT’s Davos blog. Here is a copy of his second entry.

Another weird day has passed. But all days at Davos are weird. One never knows what is going on, except for the fact that, wherever one is, one would be far better off somewhere else.

The highlight of yesterday evening was the opening address of President Nicolas Sarkozy of France. The speech is so classically French as to be a caricature of itself: bombastic, high-flown and verbose, it addresses a vast range of contemporary challenges, around the grand theme of moralising and containing capitalism. Yet, I have to admit, there is much in it with which I find myself in agreement.

“Purely financial capitalism is a distortion, and we have seen the risks it involves for the world economy. But anti-capitalism is a dead end that is even worse.” Read more

From the FT:
Volcker has the measure of the banks – John Gapper
Why we should expect low growth amid debt – Carmen Reinhart and Kenneth Rogoff
An early warning system for asset bubbles – Charles Roxburgh and Susan Lund
How to make the difference between a bleak future and a bright one – Bill Gates in Davos

From elsewhere:
‘Obama sounded like a good old-fashioned mercantilist’- Economist’s View
Global financial regulatory reform falls apart – Felix Salmon
Dialing back the deflation watch – Free Exchange
A proposal for genuine financial reform – Marshall Auerback via the New America Foundation
Off with their heads – Simon Johnson via Project Syndicate
The Fed’s best man – Alan Blinder via the New York Times

By Roger E.A. Farmer

For the past nine months I have been presenting some new ideas at academic conferences where economists have been grappling with the current financial crisis. Boston, Montreal, Amsterdam, London, Cleveland, Sydney, Atlanta … Only the venues change.  The participants and the papers are always the same. Read more