Reporting the Global Financial Crisis

The economist, author and erstwhile government advisor, Leo Goodstadt, spoke to the JMSC about the reporting of the global financial crisis on Friday, May 27, 2011.

Leo Goodstadt at HKU

Goodstadt opened his talk by saying how nice it was to return to HKU, particularly to talk to people who want to be journalists.

His ties with both the university and journalism are strong. In the 1960s, he was a Lecturer in Economics at HKU and, in 2001, the university awarded him an Honorary University Fellowship.

During his distinguished career, Goodstadt has also worked as a financial journalist, holding a post as Deputy Editor of the Far Eastern Economic Review, serving as the Hong Kong Correspondent for The Times of London and hosting a public affairs programme on local broadcaster ATV.

However, he is best known in Hong Kong for his role as Head of the Central Policy Unit, a government think tank – a job he did from 1989 to 1997.

During the talk, Goodstadt compared the situations in financial institutions in the West and in China and looked at differences in both the reporting and understanding of the facts and issues involved.

He discussed the difficulties journalists face when they are up against editors keen to publish ‘fashionable financial journalism’. The examples he used of this were of the reluctance of editors to take any view other than that state intervention is bad and that tight regulation cripples markets.

He also talked about the popular view that China is the model of the future and will rescue the world, a claim consistently denied by those in authority in China, who see the weaknesses in their system.

“Editors are usually wrong!” he said. “This is a problem for us when we write stories.”

Goodstadt also debunked the claim, central to what he refers to as the Anglo-American style of regulation, that markets always know best. It was precisely the unwillingness of regulators in the U.K. and U.S. to intervene, despite clear and acknowledged evidence of a brewing crisis, that led to the global economic turmoil of 2008-9.

Despite their reputation for business-friendly, laissez-faire policies, Hong Kong regulators didn’t make the same mistake. Ironically, Goodstadt noted, it was the Hong Kong government’s US$15 billion market intervention in 1998, in the wake of the Asian Financial Crisis, that now serves as a model of a successful economic bailout – and one that was heavily criticised at the time by Anglo-American regulators.

The Hong Kong Advantage

He concluded the talk by discussing the oft-cited perception that Hong Kong is on the wane as a financial centre, about to be replaced by mainland China. Goodstadt pointed out that for years Hong Kong has raised more money on shares than anywhere else in the world, is the world’s seventh largest stockmarket and the second largest in Asia. He stated that the financial crisis had minimal impact on Hong Kong and that, since 1978, Hong Kong has continued to be the single biggest source of foreign investment in China. Hardly a city on the decline!

Goodstadt’s explanation for Hong Kong’s continued success was that the city has better, tighter supervision than elsewhere and that, far from strangling the economy, this encourages a competitive and creative financial services industry.

“When it comes to financial services, Hong Kong is tops,” he said. “I look at history and if there’s a problem for China in the international world, where do they look? Hong Kong.”

Goodstadt quoted the Chinese Premier, Wen Jiaobao, speaking about Hong Kong in 2009: “The status of an international financial centre is established not by a government decision but through market competition.”

After a Q&A the session in which students quizzed him on his ideas, Goodstadt signed copies of his latest book: Reluctant Regulators: How the West Created and China Survived the Global Financial Crisis.

Leo Goodstadt signing books