ISET unpicks financial crisis

On December 10 the Policy and Management Consulting Group (PMCG) and International School of Economics at TSU (ISET) organized a round table discussion on the global financial crisis and its possible impact on Georgia, hosted by ISET.

The round table was chaired by Mr. Aleksi Aleksishvili, Founder of PMCG. Senior professors of economics from ISET and different universities including the University of Pennsylvania, University of Toulouse and Stockholm School of Economics, representatives of Georgian commercial banks, the NBG and different donor organizations participated in the discussions. Also among the guests was the Head of the Chancellery of the Government of Georgia, Kakha Bendukidze. This wasn’t the first round table arranged within this framework. On December 5, ISET and PMCG had held discussions on the GEL exchange rate, National Bank of Georgia (NBG) monetary policy and the refinancing rate.

The discussion was opened with a short humorous film in which two comedians spoke about international market purchases and the financial crisis in a way quite close to the current reality. The major facilitator of the subsequent discussion was ISET International Faculty Committee Member and Professor of Economics at the Hebrew University of Jerusalem Michael Beenstock. He discussed the financial architecture of the international market. Mr. Beenstock spoke about the negative sides of the banking business and regulation in general. He highlighted the lack of open information for customers, as the banks are oriented to give details only to their regulators. This information shortage also impacts the interbank market, since bank A doesn’t know what’s going on in B and might refuse to lend it money.

Mr. Beenstock also highlighted the success of such unregulated financial institutions as offshore banks. Their stability has been created by cautious operation as they have no opportunity of receive a bailout and as Michael Beenstock said, “they have no regulation game to play.”

After this Kakha Bendukidze made several remarks. “If men were angels, no Government would be necessary. If angels were to govern, not men, neither external nor internal controls on Government would be necessary…,” he said, quoting Alexander Hamilton, in response to Mr. Beenstock’s report. Bendukidze declared that regulations were devised for public benefit, if they fail this is due to low transparency.

Some time ago, ISET and PMCG announced the establishment of an internet forum entitled Public Policy Discussion Panel. Everyone interested in current economic situations can take part in discussions at the address www.pmcg.ge. In addition to the internet discussion, ISET and PMCG are planning to organize permanent round table discussions on specific economic issues in future as well.