Workshop entitled ‘Financial Crime and Fragility under Financial Globalisation’, Organised by IDEAs at India Habitat Centre, New Delhi, India,19 - 20th December, 2005.

International Development Economics Associates (IDEAs) hosted a two day workshop on the theme of ‘Financial Crime and Fragility under Financial Globalisation’. The workshop was meant for about 40 participants. The 2 day workshop was held as part of series of intensive workshops on topical themes organized by Ideas towards promoting dissemination and application of critical analysis of existing economic policy frameworks and development of heterodox tools of economic analysis appropriate for meeting the challenges of a more sustainable, participatory and equitable development process.

Financial globalisation, and the wave of financial sector reform that it has generated, seeks to homogenise financial structure across the globe. The justification for this process of internationalising versions of the so-called Anglo-Saxon financial system is that it is efficient, rule-based, transparent and less prone to failure. What is more, the suggestion is that if countries approximate this ideal structure, a minimal degree of prudential regulation (in the form of capital adequacy norms, accounting standards, disclosure requirements, etc.) would be adequate to ensure healthy financial markets. In practice, however, evidence of successful and unsuccessful attempts by agents to circumvent regulation is routinely reported. In fact, a substantial part of what is termed “financial innovation” (as in the area of derivatives trading) is merely an attempt to evade regulatory scrutiny and control. Further, instances of conflicts of interest, insider trading, accounting frauds and market manipulation are an abiding features of the system, threatening in some cases the viability of institutions too large to rescue. The workshop was hence geared towards examining whether financial crimes of varying intensity are the rule rather than the exception and whether, institutionally speaking, the currently dominant “ideal” financial structure and the regulatory forbearance it incorporates is inherently fragile and prone to systemic failure in which case various proposals for drawing contours of an alternative were to be discussed and debated upon.

The workshop was meant for intensive discussions around a specialized theme with experts from representative groups. It consisted of four sessions arranged thematically and divided over a period of two days. In keeping with IDEAS vision of bringing together academicians, policy analysts, students and activists to work on a feasible and long term development strategy for the south,  participants were drawn from varied locations and included academicians, activists, researchers and students, most of them working around issues relating to growth and development policy analysis and intervention. The resource persons included well known specialists working in diverse areas such as global economic inequality as in the case of Prof. James Galbraith to those dealing with the political economy of law and crime such as Prof.William Black, to noted heterodox macroeconomists like Prof.Prabhat Patnaik, Prof. Amiya Bagchi and Prof. C P Chandrasekhar. Other members of this eclectic mix included Dr. Costas Lapavitsas from the School of African and Oriental Studies, Kannan Srinivasan( researcher and ex senior editor from the leading Indian daily The Indian Express), Prof. Jayati Ghosh (Professor of Economics, Centre for Economic Studies and Planning, JNU and executive secretary, IDEAS), Prof Nirmal Chandra (Professor of Economics, Indian Institute of Management, Kolkata) Prabir Purkayastha (engineer and a science activist in the power, telecom and software sectors),  financial activist cum lawyer Arun Agarwal and Girish Sant, an activist based at Prayaas, an NGO working on power sector reforms.  The various presentations made, followed by interactive discussions, were as follows:

  • ‘Global Inequality and Global Finance’ by James. K. Galbraith (Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government, University of Texas, Austin. He also directs the University of Texas Inequality Project, an informal research group based at the LBJ School.) 
  • When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic Stagnation and Collapse’ by William Black (Executive Director, Institute for Fraud Prevention, University of Texas, Austin.)
  • ‘On Some Implications of Financial Liberalisation’ by Prof. Prabhat Patnaik
    (Professor of Economics, Centre for Economic Studies and Planning, JNU)
  • ‘Financial Liberalisation and Financial Fraud: Revisiting the 1990s’ by Prof. C.P.Chandrashekhar (Professor of Economics, Centre for Economic Studies and Planning, JNU)
  • ‘Economic and Non economic Factors in the Credit Allocation Process of Turkish Banks’ by Costas Lapavitsas (Department of Economics School of Oriental and African Studies, University of London )
  • ‘Vulnerability of Power Sector from Financial Globalisation’ by Girish Sant(activist, Prayaas, a Pune based NGO, working extensively on privatization of and malpractices in the power sector)
  • ‘Neoliberal Imperialism, Corporate Feudalism and the Contemporary Origins of Dirty Money’ by Prof. Amiya Bagchi (Director, Institute of Development Studies, Kolkata)
  • ‘Economic Growth, financial globalisation and low CPI (Corruption Perception Index)’  by  Arun K Agrawal ( financial analyst, Lawyer and activist working on various cases of corporate financial frauds in India.)
  • ‘Money Laundering and Capital Flight’ by Kannan Srinivasan (Monash Asia Institute, Monash University, Melbourne Australia.)

This was followed by a panel discussion where the issues raised, the systemic problems identified which leave the global economy increasingly vulnerable to financial fragility and endemic frauds, as well as alternative regulatory policy frameworks were discussed and debated upon. Their was a wide ranging and lively discussion on various aspects including several questions from the floor. The participants generally agreed that it was a fruitful learning exercise and was a step forward towards pooling of expertise and information from divergent groups.

Programme

Registration: 9.30 am, 19th December, 

Workshop Timing:10 am to 5.30 pm

Time
Speaker
Title
Moderator
Day 1: 19th December
Session I Morning
10 to 11.30 am
James Galbraith
‘Modern Economic Predation: War, Corporate Fraud, Labor Market Reform’
Jayati Ghosh
P Patnaik
To be given later
11.30 to 12. pm
Tea Break
12 pm to 1 pm
Bill Black
‘When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic Stagnation and Collapse’
Sushil Khanna
1 to 2 pm
Lunch Break
Session II Afternoon
2 pm to 3.30 pm
C P Chandrasekhar
‘Financial Liberalisation and Crime: Revisiting the 1992 Stock Scam’
 Sunanda Sen
Costas Lapavitsas
‘Economic and Non economic Factors in the Credit Allocation Process of Turkish Banks’
3.30 pm to 4 pm
Tea Break
4 pm to 5.30 pm
Amiya Bagchi
‘Neoliberal Imperialism, Corporate Feudalism and the Contemporary Origins of Dirty Money’
Prasenjit Bose
Kannan Srinivasan
‘Money Laundering and Capital Flight’
Day 2: 20th December
Session I Morning
10 to 11.30 am
Arun K Agrawal
‘Economic Growth, financial globalisation and low CPI (Corruption Perception Index)’
Prabir Purokayasthya
Kavaljit Singh
 ‘Financial Liberalization, Offshore Financial Centres and Financial Crime’
11.30 to 12. pm
Tea Break
12 pm to 1 pm
Dipankar Mukherji
To be given later
Sukumar Muralidharan
1 to 2 pm
Lunch Break
Session II Afternoon
2 pm to 3.30 pm
Girish Sant
‘Vulnerability of Power Sector from Financial Globalisation’
Ajit Singh’s paper to be presented by Partha Pratim Pal
‘Shareholder Value Maximisation, Stock Market and New Technology: Should the US Corporate Model be the Universal Standard?’
3.30 pm to 4 pm
Tea Break
4 pm to 5.30 pm
Panel Discussion
Chalapati Rao
Bill Black
Nirmal Chandra
Jayati Ghosh
Sunanda Sen
Prabir Purokayasthya
Sushil Khanna
‘Financial Crime and Fragility under Financial Globalisation’