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Press, Journal Article
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Speech Pretoria, South Africa | 30.08.2016
Dr Andreas Dombret Member of the Executive Board of the Deutsche Bundesbank
From dream to reality
-
How finance serves
the economy, and how not
Speech delivered at the South African Institute for International Affairs, University of Pretoria
·
1 Introduction
·
2
Old temptations … and relapse into old patterns?
·
3 The dream of finance-led growth
·
4 …and the reality
·
5 The task: Finance for the future
·
6 Conclusion
1 Introduction
Ladies and gentlemen
Dreams can be built -
at least, if you believe the movie Inception. In that motion picture’s
scenario, a technology has been developed that allows one to enter another person’s dream. In
that dream, then, thoughts can be planted - or incepted. For this, the intruder needs to construct a
dream scenario inside the target person’s dream.
By incepting an idea in a person’s mind, his actions in the real world can be manipulated.
Unfortunately, politics sometimes shows surprising parallels to the world of cinema - in politics,
colourfully painted dreams are often used to sway voters.
But all too often, political dreams are built on a limited understanding of reality. That’s why
they are bound to crumble. That’s why
swayed voters wake up to a nightmare version of reality.
Such a dream world is the political strategy of finance-led growth, a dominant political ideology
since the 1980s. The dream goes as follows: growth of financial markets fuels investment; and
in this way, it leads to an increase in wealth and well-being for all people.
Many people, among them the majority of experts, believed this to be true - explicitly or
implicitly. However sophisticated the construct of the dream, it did not pass the test of reality. It
crashed hard when the financial crisis erupted in 2007.
Nine years later, one might think that we would have sorted out what went wrong. And so we
have, to an extent: we have learned that markets cannot regulate themselves; they do not work
without
rules. That’s why we devised far
-reaching reforms.