From 2007 to 2010, a financial and economic crisis gripped the United States, Europe and the world. 7 million Americans lost their jobs, 10 million were pushed below the poverty line, thousands of families lost their homes, and many lost their savings. Somewhat lower numbers were reported from Europe, although the structural mechanisms behind the crisis were seemingly similar, eventually affecting not only the West, but the whole world. It is foreseen that the effects of the crisis will last for years, and it is still uncertain if a full recovery will be possible.

Given that a variety of highly speculative practices put into place by the banking and finance sector during the "neoliberal“ decades between the early 1990s and 2007 allegedly played a role in triggering the crisis, the request for more down-to-earth and sustainable ways of dealing with money and finance has surfaced to international attention. Particularly in Europe, social banks were among the most successful financial institutions during the crisis years, with annual growth rates of up to 30%, factually doubling their assets between 2007-10. This unprecedented success was supposedly due to the fact that many European savers shifted their assets from mainstream banks to social banks, driven by the hope that the latter would handle their money in less abstract and egoistic, and more realistic and community oriented ways. In recent years, social banks have forged influential global networks such as the Global Alliance of Banking on Values and the International Association of Investors in the Social Economy, which pursue the ambitious strategy of reaching out to 1 billion people by 2020.

Given that, not least as a result of the crisis, increasing numbers of people are improving their financial literacy and are taking a growingly critical stance towards the mainstream international banking and finance sector as we knew it before the crisis, the seminar poses the questions of whether (and how) social banking and social finance may concretely contribute to improving the current financial system, and how they might help to restore confidence in capitalism by providing “best practice” examples in selected fields.

The seminar will try to provide some answers to these questions by examining the pros and cons of contemporary social finance and by outlining perspectives of structural complimentarity and cooperation between speculative and sustainable finance.

Audio Synopsis:

In his seminar, Professor Roland Benedikter argues that too little has been done to reform the banking and financial sectors in the wake of the recent crisis, then presents social banking and social finance as an alternative system. First, he argues that the widespread bank bailouts of the past few years have "saved the wrong system" and points out that many of the largest US banks, for example, have actually grown since the crisis despite calls by the Obama administration for these banks to downsize or break in to smaller pieces. He acknowledges that new measures initiated by both the Obama administration (establishing a consumer protection bureau; imposing limits on fees by financial intermediaries) and by European countries (banning high-risk transactions in Germany; reducing public liability for private bank bailouts) are steps in the right direction. He adds his own suggestions, including increased regulation, better international agreements on regulating capital flows, a fee on high-risk speculative transactions, and a preventative tax on banks to protect against future crises. Many of these reforms, however, have faced enormous opposition from the major players in the banking and finance sectors in Britain, the United States, and China.  Progress seems to have stalled, with popular figures like Niall Ferguson, who once led calls for dramatic reform, now insisting that the system is too resistant to change, and that simpler goals such as a new hippocratic oath for the financial sector will suffice.

Benedikter then presents social banking and social finance as an answer to the seemingly intractable problems of the traditional system.  He first describes the industry in terms of what it is not. Traditional banks, he argues, made three major mistakes leading up to the crisis: irresponsibility (loans that were too high, too much derivative investment); lack of transparency; and unsustainability (by participating in speculation and contributing to market bubbles). The current economy, he explains, is based on a tripolar system: a "real" economy of manufacturing and tangible goods; and two "side economies" of real estate and financial derivatives, which have steadily drawn capital away from the real economy since 1989. A breakdown of this unsustainable system was predicted by multiple think tanks before 2007, based partly on the frantic growth of the derivatives market (from  $100 trillion to $516 trillion annually between 2001 and 2006 - for perspective, Benedikter cites the annual world GDP figure of approximately $50 trillion).

Social banks, on the other hand, invest 100% of their capital toward responsible, transparent, and sustainable ventures such as green technology and social initiatives. Banks emphasize knowing their customers, which requires them to operate on a smaller scale than traditional banks, and conversely customers know where their money is invested and can even participate in making investment decisions. These decisions  are meant to take the potential social as well as financial return on an investment into account. Benedikter describes this as a "Triple Bottom Line" approach, emphasizing profit, people, and the planet.

A discussion period following the presentation addressed questions including:  What are the mechanisms available to enforcing the triple bottom line approach in social banking and social finance? Are social banks guided by a common charter? What are the details of the proposed high-risk transaction fee? Why have some US social banks been successful while others have struggled?

Born in Tunis in 1957, Laurent Cohen-Tanugi is a Paris-based international lawyer, policy adviser and public intellectual.

A member of the Paris and New York Bars, his practice focuses on cross-border mergers and acquisitions, international arbitration, competition law, and policy advisory work. In the fall of 2007, he was appointed by the French government to lead a task force on the future of the European Union's Lisbon Strategy, ahead of the French Presidency of the EU ("Beyond Lisbon: A European Strategy For Globalisation", Peter Lang, 2008, www.euroworld2015.eu).

He was previously a partner of Skadden, Arps, Slate, Meagher & Flom LLP (2005-2007), Senior Vice President and General Counsel of Sanofi-Synthélabo, a European pharmaceutical group (2004), and a partner of Cleary, Gottlieb, Steen & Hamilton (1991-2003). In recent years, he was involved in substantial cross-border mergers such as Vivendi Universal, Sanofi-Aventis and Alcatel-Lucent.

Mr Cohen-Tanugi is an alumnus of the Ecole Normale Supérieure and holds an agrégation in French literature from the University of Paris and a degree from the Institute of Political Studies of Paris.  He graduated from the University of Paris Law School in 1981 and received an LL.M. degree from the Harvard Law School in 1982. 

He is the author of numerous influential books, including Le Droit sans l'Etat (PUF, 1985), a comparative essay on the French and American legal and political traditions, prefaced by Professor Stanley Hoffmann of Harvard University; La Métamorphose de la Démocratie (Odile Jacob, 1989), on the changes affecting the French and European democratic cultures since the late sixties; L'Europe en danger (Fayard, 1992), anticipating the current crisis of political Europe; Le Choix de l'Europe (Fayard, 1995), on the future of European unification, and Le Nouvel ordre numérique (Odile Jacob, 1999), a multi-disciplinary analysis of the communications and information technology revolution. 

His latest English-language works include An Alliance At Risk, The United States And Europe After September 11 (Johns Hopkins University Press, September 2003), exploring the present state and future prospects of transatlantic relations, and The End of Europe? (Foreign Affairs, November/December 2005, Volume 84., No. 6), an analysis of the state of the EU following the French and Dutch rejections of the EU constitutional treaty, and most recently, The Shape of the World to Come, on the geopolitics of globalization (Columbia University Press, 2008), which will also be published in China.

Laurent Cohen-Tanugi is a regular columnist in French newspapers Les Echos and Le Monde, and lectures on a variety of subjects internationally. A director of Notre Europe, a think-tank founded by former EC Commission President Jacques Delors, he is actively involved in European policy-making. He is also a member of the French Academy of Technologies and a director of several think-tanks, including the Fondation pour l'innovation politique. A frequent consultant to the French government, he sat on the Commission on Judicial Reform set up by President Chirac in 1997, and on the Commission on the Intangible Economy set up by the French government in 2006. He is also a member of the Policy Advisory Council of the French-American Foundation.

Mr. Cohen-Tanugi taught a seminar in European affairs at the Ecole Normale Supérieure in Paris from 2005 to 2008 and will be teaching a course on Transatlantic Merger and Acquisitions at the Harvard Law School in the spring of 2009. Laurent Cohen-Tanugi is the advisor to the Polish government in preparation for his upcoming presidency of the EU in 2011.

Ambassador Sheinwald discusses how he envisages international relations will form in the near and far future. He places particular emphasis on the growing importance of the US-China relationship. At the same time, Ambassador Sheinwald explores the EU as a key global power and its necessary cooperation with the US.

Synopsis

Ambassador Sheinwald clearly feels that the international stage is moving. In fact, for him, the change in the international order is accelerating due to the global financial crisis. In this sense, Ambassador Sheinwald explains that the UK has long supported expanding decision-making international institutions such as the UN Security Council. However, the UK still sees the value in intimate, power-focused bodies such as the G8. Ambassador Sheinwald discusses the fact that there is increasingly a sense that a ‘G2’ is developing between the US and China. To Ambassador Sheinwald, this model would not literally work as he argues China needs, at this stage in its development, a multilateral setting to grow into the active and cooperative power we would all like to see it become. At the same time, Ambassador Sheinwald believes that the partnership between the US and China is important in paving a solution to the current economic state and shaping the future global economy. In fact, the UK and the EU welcome this new cooperation between the two powers. Ambassador Sheinwald feels the US and the EU can harness China’s shared global interest on issues such as climate change, in which the EU has played a front role, to develop at stable global relationship. Moreover, he believes that if the US and EU can cooperate to form low carbon economies, it could incentivize China and India to act similarly. However, Ambassador Sheinwald stresses that for non-economic issues the US and China’s relationship is still important but slow moving, and he expresses the belief that it will take decades for any real ‘G2’ to emerge.

In the meantime, Ambassador Sheinwald argues that while the US looks round the world for support on key issues, it will find that the EU shares the most values and has the capacity to promote them. He cites the enormous investments between the two in comparison to the US and China to show the scale of the US and the EU’s relationship. Ambassador Sheinwald argues that financially the US and EU need regulatory cooperation, using a scientific basis, to set global standards. He stresses as well that the EU is a major global power on its own. It is increasingly seen as an honest, multilateral broker and plays a crucial in global economic recovery. Moreover, it has strong interest in fighting world terrorism. In comparison to other partners, the US can find similar values, intelligence, and capacity in the EU. In addition, the US can see more stability in Europe’s own backyard than perhaps 20 years ago. Looking to the future, Ambassador Sheinwald hopes that the Lisbon Treaty would help the EU organize itself further. Further stressing the importance of the US-EU partnership, Ambassador Sheinwald explains “nothing is more likely to be as dependable a foundation.”

In taking the time to answer questions, Ambassador Sheinwald discusses a number of issues. One partiuclar area of focus much emphasized was Europe's role in the conflict in Afghanistan. In addition, he addresses the issue of Britain and the US's relationship with China. Moreover, he also explains that he hopes that as developed countries deal with increasing security threats, their resolve in keeping their borders open will remain strong. Finally, Ambassador Sheinwald stresses the need to employ methods of sustainable, intelligent, and low carbon growth.

About the Speaker

Nigel Sheinwald joined the British Diplomatic Service in 1976 and has served in Washington (twice), Brussels (twice) and Moscow and in a wide range of policy jobs in London. 

He took up his position as British Ambassador to the United States in October 2007.  In that role he leads the Embassy in Washington and nine Consulates-General around the United States.   He had an earlier posting to Washington in 1983-87 as First Secretary (Political) in the Embassy. 

Before becoming Ambassador in Washington, Sir Nigel served as Foreign Policy and Defence Adviser to the Prime Minister from 2003-2007.

Sir Nigel was the UK Ambassador and Permanent Representative to the European Union in Brussels from 2000-2003.  Before that he was Europe Director in the FCO (1998-2000).  He had an earlier posting in the UK Representation in 1993-95 as Head of its Political and Institutional Section.  He began his career in EU work as Deputy Head of the FCO's European Union Department in 1989-92. 

Sir Nigel's first foreign posting was in Moscow in 1978-79.  He was also Head of the Foreign Office's Anglo-Soviet Section in 1981-83.

Sir Nigel has had a wide variety of other appointments in the FCO in London.  From 1995-98, he was the FCO Press Secretary and Head of News Department.  He was Deputy Head of the Foreign Office's Policy Planning Staff in 1987-1989, responsible for transatlantic relations and other issues.  He also worked in London on the Japan Desk (1976-77) and on Zimbabwe (1979-81), including the Lancaster House Conference.

Sir Nigel was born in 1953 and educated at Harrow County Grammar School and Balliol College, Oxford.  He is married with three sons.

This event is jointly sponsored by the Office for International Visitors at the Bechtel International Center, the Forum on Contemporary Europe, and the British Consulate General in San Francisco.

The rise of China and India represents both challenges and opportunities for Europe. Rising powers like China and India are challenging the European Union. They will be in a position to shape and influence global agendas and decisions to a greater extent than at present. For both, Europe will remain an indispensable partner since it is a vital source of trade, advanced technology and foreign direct investment. China and India do pose challenges for Europe, but they also provide opportunities since their growth contributes to greater growth worldwide, which means more exports, especially to a swelling consumerist middle class, which will make more demands of European goods, technology, and services.

Rajendra K Jain is Professor of European Studies and Chairperson, Centre for European Studies, School of International Studies, Jawaharlal Nehru University, New Delhi. He is Secretary-General, Indian Association for European Union Studies. He has been Visiting Professor at Leipzig and Tuebingen University and at the Maison des Sciences de l’Homme, Paris. He is the author/editor of over two dozen books and has published 70 articles/chapters in books. He has most recently published India and the European Union: Building a Strategic Partnership (2007) (editor).