Rundheersing Bheenick: Escaping the fate of the Dodo
Address by Mr Rundheersing Bheenick, Governor of the Bank of Mauritius, on the occasion
of the Commemoration Dinner for the 40th Anniversary of the Bank of Mauritius, Bank of
Mauritius, 24 August 2007.
* * *
A very warm welcome to you Mr President and Lady Jugnauth, to you Mr Prime Minister and
Mrs Veena Ramgoolam, our Deputy Prime Ministers and their spouses, members of the
Board and to all our guests this evening, who honour us with your presence, at this special
Commemoration Dinner. And let me wish to all of my colleagues in the Bank of Mauritius
here today, Happy Birthday! Happy 40th Birthday! and especially those benefiting from the
pension fund: many...many...Happy Returns of the Day!!
I have to admit to you now, that, faced with the formidable history of the achievements of my
predecessors, many of whom we welcome here tonight, I am feeling rather modest. A most
unusual state to be in as Governor! Some would say, I suspect, a most unusual feeling for
this particular Governor, often taxed - in the past, and wrongly, as I would say - with a
certain arrogance and an "effortless sense of superiority"!
At the inception of the Bank in 1967, I had just completed my time at Oxford, broke, as is the
fate of all students, and wondering what I would do with my life. Yet it was at this moment
that Robin Harrison, the Warden of my college, Merton, Oxford introduced me to his old
friend Professor James Meade1 who came down from that other place, Cambridge, for an
excellent lunch. Over lunch, Meade steered me towards demography and the runaway
population explosion that he had identified as the biggest threat to Mauritius, which was then
a world leader in the fertility stakes! Meade was pleased to see me to exchange views on the
prospects for Mauritius. For it was he who with his team had planted that vital signpost in the
early story of the economic and financial outlook for our country in 1961, with the seminal
Report on the Economic and Social Structure of Mauritius.
The then Prime Minister, Sir Seewoosagur Ramgoolam2, sent me a letter through Sir
Dayendranath Burenchobay3, the then Permanent Secretary at the Prime Minister's office -
actually transmitted through no less a person than Raymond Chasle, then running the
newlyopened Mauritius High Commission in London, inviting me to return to Mauritius, and
detailing a list of openings in the economics field. The list included the Economic Planning
Unit, The Development Bank of Mauritius, The Bank of Mauritius and the University. Since
February this year, I can say, I have been associated with all the institutions on that list, in
one capacity or another!
We have come a long way!
1
Economic and Social Structure of
James Edward Meade, 1907-1995, economist, author of "The Mauritius"
(Methuen & Co, London, 1961) and "The Economic and Social Structure of Mauritius: Report to the Governor
of Mauritius" (Publisher: London, Cass, Date: 1968.), chaired the Economic Survey Mission to Mauritius,
1960-1961. He prophesied in the early 1960's that Mauritius's development prospects were poor - that
Mauritius was a strong candidate for failure, with its heavy economic dependence on one crop (sugar),
vulnerability to terms of trade shocks, rapid population growth, and potential for ethnic tensions. History - or,
rather, Mauritius - proved Meade's dire prognostication famously wrong.
2
Sir Seewoosagur Ramgoolam, known as the Father of the Nation, LRCP, MRCS (18 September 1900-15
December 1985) was the Prime Minister of Mauritius from 1961 until 1982. As decolonisation swept the third
world, he led his country to independence from the United Kingdom in 1968. He was Governor-General of
Mauritius from 28 December 1983 until his death in December 1985.
3
Sir Dayendranath Burrenchobay, (24 March 1919-29 March 1999), served as Governor-General of
Mauritius from April 26, 1979 to December 28, 1983.
BIS Review 99/2007
In truth, reflecting on the story of the forty years of banking, as we are doing now, makes me
full of wonder and admiration for what has been achieved. I remain therefore heavily
conscious of the responsibility we inherit for sustaining the course.
Meade was to become a Nobel laureate in 1977, but this year 2007, is also significant, as it
is the 100th anniversary of his birth. His work in economics as an adviser to us in Mauritius
and to other countries is perhaps not as widely celebrated as that of Keynes4, with whom he
collaborated, but it is more significant for us today through his contribution to the linkage
between development theory and monetary practice.
In his invaluable report of 1961 to which I referred earlier, he produced about 100 detailed
recommendations but just gave us one option for averting the fate of the Dodo5 itself; invest
and industrialise! The question was, should it focus on import substitution or on exports. The
great and somewhat fruitless debate was engaged, the answer being not either but of course
both. But Meade gave us the shock we needed to get us going. He continued to be a wise
counsellor on policy and planning in developing countries.
In his Banquet speech on receiving the Nobel prize he had this to say about economists:
"The well-balanced economist ...(has)... his warm heart on the Left, his practical
work-a-day hand on the Right, and his clear and thoughtful head in the Centre."
A sage prescription for the profession. The history of the Central Bank here in Mauritius has,
I believe, admirably reflected that balance.
Our saving grace, in the face of all the challenges which he outlined in such stark and
ominous terms, has been the foundation of a secure financial system, firmly laid at
Independence, and the period leading up to it, respect for law and order and a productive
relationship with the colonial powers that was to ease open the gateways to the future and,
not the least, at the heart of the economy, the banking sector.
William Kogan, a distinguished economic journalist has referred to Meade's approach as
"a model of globalization that doesn't leave anyone behind."
He adds, Meade's
"was a pragmatic approach to management of economic stability, embracing
globalization, but taking responsibility for handling its social and economic
consequences."
Meade would be in the league now with those macro-economists who today are concerned
for the "losers" from Globalization such as Joseph Stiglitz6, and Lawrence Summers7. Meade
also had some sharp things to say about our need for technical transition. He referred to the:
4
John Maynard Keynes, (1883-1946).Noted principally for his 1936 publication "The General Theory of
Employment, Interest and Money."
5
The Dodo (Raphus cucullatus) was a flightless bird that lived in Mauritius. The dodo has been extinct since
the mid-to-late 17th century. It is commonly used as the archetype of an extinct species because its extinction
occurred during recorded human history, and was directly attributable to human activity. The phrase "as dead
as the dodo" means undoubtedly and unquestionably dead.
6
Joseph E. Stiglitz, (1943-), 2001-winner Nobel Prize in economics, cabinet member of the Clinton
Administration, served as Senior Vice President and Chief Economist of the World Bank, author of
"Globalization and its Discontents".
7
Lawrence Henry ("Larry") Summers, (1954- ), American economist and academic. He is the 1993 recipient
of the John Bates Clark Medal for his work in macroeconomics, was Secretary of the Treasury for the last year
and a half of the Clinton Administration, and served as the 27th President of Harvard University from 2001 to
2006.
BIS Review 99/2007
"startling ignorance (in Mauritius) of modern ideas about education and its true
purpose"
and he encouraged a greater attention to technical inefficiency then rampant in the public
sector with its lack of Organisation and Methods study to link inputs to outputs. We now
begin to see in Mauritius forty years later a more problem-oriented approach to education
and continuing professional development as core principles for human capacity-building. In
the new Medium Term Expenditure Framework of my friend the Deputy Prime Minister and
Minister of Finance and Economic Development we now also have a target date for
establishing results-based budgets for the whole of the public sector. Change does not
always come fast; we must be patient. Some reforms can take a generation to flower, as they
have to press against the embedded climate of inertia inherent in our traditional culture and
values.
In 1961, when Meade was reviewing our gloomy prospects, we not only had no Central Bank
and no Stock Exchange but we also had to confront a kind of unholy alliance somewhat
opposed to such ideas of regulation and standardisation. Surely, some might have mused,
Independence would mean just the opposite: a free operation of the market, de-regulation
and an escape from colonial-style central control.
In the early days the old Chamber of Brokers convened, informally in a little room, for quietly
facilitating the buying and selling of private shares in local family companies. Rather different
today; but did reforms come about in a seamless way, an inescapable progression in our
unfolding destiny? Indeed no; and many here can offer evidence of the immense efforts
expended in achieving the difficult transition from the third to the first world - or at least the
doors of the first world, for we are certainly not there yet. Reform requires first inspiration,
then perspiration, with determination and courage aplenty to overcome the innumerable
setbacks and the disappointments on the way!
James Meade's seminal report was a shock from which we have mercifully recovered, more
than once! But I suspect it was always intended to be a wake-up call, not a requiem. In his
summary section, he declared:
"Continuous and self-sustaining improvement in production and in the real standards
of living can be achieved in Mauritius only if over the next five years or so there is a
relentless effort to introduce all those economic reforms which are essential to set
this process of economic growth to work. "
If there is a secret to the continual forward impulsion of the country it is set in the foundations
of the state itself and the capacity of its leaders and the sturdy fortitude of people of our
country to want something better for their country and for their children. We have now so
much we owe to the aspirations of our parents and the strength of our family life!
In one of the formative policy documents which set the scene for Independence, Sessional
Paper No.9 of 19668, we find the following context for our work:
"Ministers of Finance have their ears to the political ground; A Central Bank should
concern itself with the economic facts of life and above all should be "in" and "of" the
financial and business community."
Tellingly, this paper refers to the Central Bank as the "Government's Bank" and the "Bankers'
Bank". That was a key formula for the times, defining the role of the new Bank-to-be in
providing advice to Government and to business on domestic monetary and economic
matters.
I am the sixth Governor of the Bank of Mauritius. It is a great honour to follow the lead of
those five men before me.
The life of a Governor in this part of the world for those who are statistically-oriented is about
8 years, but with a large deviation, from the shortest 2 years to the longest 14 years. Sir John
Shaw Rennie9, Governor of Mauritius, at the inauguration of the Bank, and addressing its
Governor, remarked that his wife had drawn his attention to a dictionary definition of
governor:
"an automatic attachment to an engine for controlling the speed, usually by
regulating the supply of working fluid."
Happily not a phrase appearing on my job description!
The first Governor Mr Aunauth Beejadhur10, having just opened the shop for business on 14
August 1967, responding to the immediate challenges on his desk, had this to say at the
official opening three weeks later:
"We intend to proceed cautiously...The Bank would not have seen the light of day if
it were not for the imagination, the sagacity and drive of the Premier and Minister of
Finance. He has untiringly brought one more financial institution into being and
continues to watch over its fortunes, with undiminished interest... "
But the first Governor was a man in a hurry. For he proceeded in short shrift to take over the
Exchange Control Department on Friday 1st September, and on Monday 4th September, to
issue bank notes, in the name of the new Bank, sent under close security by our good friends
at De La Rue. I salute the presence of the CEO of De La Rue, Mr Quinn, at our
commemoration dinner tonight.
The actual origins of the idea of the Bank were disclosed in the Second reading of the Bank
of Mauritius Bill, no. 33 of 1966, on the 5th July that year, when the Premier mentioned that
he had been thinking of a central bank since the 1940's, citing the then leader of the
Opposition, Jules Koenig, in support of his claim. If we are commemorating the birth of the
Bank in 1967, we should I suppose cherish the thought that the first twinkle in the eye of the
father of the nation, the creative urge, was some twenty years earlier. Some gestation! Our
debt to our founding fathers is truly immense.
At its birth the Bank inherited a fixed link with the pound, at Rs 13.40!, Now there is some
nostalgia for you! I have been reminded of one of the early tests for the Bank, by a good
friend11, a scrupulous analyst and commentator on financial affairs of state, with his store of
memories from a vantage point very close to the centre. The courage of the Bank was
immediately tested in its capacity for taking an independent line in September 1967, when
the pound sterling was devalued.
After some consultation with expert opinion and in concert with the then internal adviser
seconded from the Bank of England, who was also the Managing Director of the Bank of
Mauritius, Mr. Donald George Herbert Cook12, it is reported, the consensus was that the
rupee should follow the pound sterling. The Bank presented documentation to the Premier
and Minister of Finance to devalue the rupee in line with the pound sterling. Un moment
critique! To say there was hesitation by the Premier, is to lightly paraphrase my informant's
account! I understand an official communiqué some days later, presented the remarkable
paradox to the faithful people, in language worthy of Sir Seewoosagur Ramgoolam:
"The rupee is not being devalued; the Government has decided to maintain its
relationship with the pound!".
With a heavy reliance on sterling trade, this was one way to resolve the dilemma and
preserve the independence of the Bank, even if it stretched the meaning of the English used
to its very limits.
Tonight, however, is not the time or the occasion for me to try to trace the blow-by-blow
history of the crises met and resolved by my predecessors and their gallant teams. In the
course of this year we are to prepare a series of events and publications which will more
thoroughly explore that history, the dilemmas, the decisions and the people involved. It is a
fascinating story, which culminates with us tonight being able to commemorate forty sturdy
years of this Bank in its fearless service of the country.
But I cannot let the opportunity go without making some mention of the pathway we have
travelled, some passing reflections on the bases of policy development and a few of the
principal "dramatis personae".
So I am glad to say that we have with us tonight a wondrous clutch of previous Governors,
Board members, leading lights from the commercial banking sector, the chambers of
commerce and government, and distinguished actors from the wider world of economics and
finance, many of whom together have contributed to the undoubted success of the venture
embarked upon 40 years ago, plus others here who will continue to guide our future.
I am especially pleased that we are honoured by the company of two of our former
Governors of the Bank:
• Sir Indurduth Ramphul, appointed Governor - in 1982 and who continued until
1996, and
• appointed Governor in 1996 who continued until
Mr Mitrajeet Dhaneshwar Maraye,
1998.
In a different capacity, I was instrumental in ensuring a smooth transition between the two of
them. I very much regret that my immediate predecessor
•
Mr Rameswurlall Basant Roi, appointed Governor in 1998 and serving until 2006,
was not able to be present with us tonight.
I am very pleased that, marking the history of the Bank, we have with us tonight the son of
our first Governor Mr. Beejadhur, and the young nephew of the second Governor Mr
Bunwaree13, who is also here in his capacity as a former Minister of Finance. May I say I am
delighted that Lady Ringadoo the widow of our first Minister of Finance on Independence14 is
with us tonight. The other former Ministers of Finance who are sadly unable to be present
here tonight are Mr Paul Berenger15, Mr Vishnu Lutchmeernaraidoo16 and Mr Pravind
Jugnauth17 who have sent their good wishes for this historic occasion.
Finally, I want to say, how glad I was to know that Mr Leo Quinn CEO of De La Rue plc has
been able to make the long journey from the UK, to represent our banknote and security
printers, as we were amongst their first colonial clients.
I wanted also to refer to certain milestones along the pathway we have travelled together,
which have helped to consolidate the role of the Central Bank, as an indispensable institution
of governance in a modern democratic state. In talking with people, however, about the
history of the Bank, it is evident that there are many quite different perspectives, making a
kaleidoscope of impressions of the journey made in the passage of time.
Some see the story in terms of the issue of new currency; the banknotes and the coins with
the images of monarchs and presidents and the great and the good. Some consider the
milestones are the laws which have prescribed the duties and powers of the Bank, one
account even citing the legendary UK Bills of Exchange Act of 1882, the model on which
subsequent legislation for Mauritius was built, followed by the Banking Ordinances of colonial
times and then the Banking and Companies Acts of the Parliament of Mauritius. Others see
the story in terms of the changing structure of the Bank to respond to the need for
implementing those laws and providing the operational mechanisms increasingly adapted to
the needs of modern banking. They cite for example the coming of Departments for
Research and for Information Technology, which strengthen our back-office capacities and
with the Administration Department itself, serve the needs of the continually-developing
frontline Departmental functions of the Bank; the Departments concerned with Financial
markets, with Accounting and Budgeting, with Banking and Currency and with the
Supervision of financial institutions.
Other people, when you ask them about the significant events in the life of the Bank, will talk
of appointments, disappointments, personal careers, departures, marriages, deaths, fires,
even a strike; these are the sagas of the internal and personal life of the people here who
make the Bank a working living organism at the service of the State and the people.
Beyond the internal workings of the Bank itself there are other perspectives too, those of the
wider Banking and commercial community in Mauritius, our investors and creditors, the
global banking community, the Governments who have accorded us our role and last but not
least the citizens of this country on whose trust we depend.
In mapping the history of the Bank over the coming months we shall try to bring together
these strands in the real life story of this complex Institution, warts and all.
At the silver anniversary of 25 years of the Central Bank in 1992, the then Prime Minister,
now President18, had this to say about the place of the Bank in Mauritian society; the Bank is,
he said,
"a centre of moral authority, an authority capable of expressing constructive
criticisms in moments of exaggerated optimism or exaggerated pessimism. To
succeed in this mission the Bank required from the outset public friendship and
support and public confidence"
Indeed, as we well know, trust and confidence are the primordial qualities for a central bank:
"Who steals my purse steals trash; 'tis something, nothing...
but he that filches from me my good name,
Robs me of that which not enriches him,
And makes me poor indeed"
As in Shakespeare's Othello with this delineation of the political values in the 16th century
Venetian court, so in Banking today name, trust and reputation are all.
The reputation of any Bank takes years to build and can be lost in moments. That good
name of this Bank, and of banking in Mauritius in general for that matter, has been bought by
the diligent toil of so many here in Banking past and present.
Over the next year as we set down the history of the Bank of Mauritius, chapter by chapter,
we shall be also capturing something of the social dimension to show the character of the
changing times and the pattern of working of our dedicated staff. In opening this chapter
recently I have been reminded of some of the social elements of those early days and I hope
that many of you here will help in the coming months to paint in these aspects of the picture
with anecdotes from times past.
For example, we have been reminded by the longest-serving members of staff, of the initial
days when there was not one building for the Bank of Mauritius as now; the staff were
scattered in as many as five different locations. In 1967 there were no computers, no electric
accounting machines, no electric calculators nor even electric typewriters. All was largely
done by hand, mostly in pen and ink.
Many of the junior staff were recruited straight from school but had to sit for an exam
including a précis and questions to be answered on the scope and content of the 1966
Banking Ordinance, before they would be taken on. Hours of work were generally 9-4 but on
Thursdays and Saturdays they were 9-12. Long gone are those days of Saturday banking.
Trousers for women were banned; no married women were recruited to any Bank in
Mauritius and when a girl on the staff announced her marriage, she was forced to resign.
This rule was only revoked in 1974 after continued protests, and by a special edict from the
Prime Minister's Office; but women who came back had either to repay the compensation
they had received on their early departure, or lose seniority.
That was a different world that we must document before the passage of time buries these
secrets of the past from our collective memory.
If I refrain from elaborating on the history now, let me make two points about monetary policy
and investment. Economists are commonly expected to have a position on macroeconomic
matters derived from theory covering monetary policy and practice as a basis for shaping
advice on decision-making. These theoretical principles may derive from the 18th century
classical economics of the Free Market, the neo-classical developments of the late 19th
century Alfred Marshall19, from John Maynard Keynes' postulates for promoting
fullemployment in the post-Depression era, the post-Keynes developments by Nicholas Kaldor20
and his colleagues, to respond to the challenges of wage inflation, from the modernist
positions of Milton Friedman21 to control money supply, and from even the post-modernist
evidence-based approaches of Jeffrey Sachs22. It was Sachs, one of today's "big shots" in
macro-economics, who at a stroke put the brakes on hyperinflation in Bolivia in the 1980's.
Each of these iconic scholars represents schools of thought which to the outsider have
something of the appearance of coteries or clubs of isolated sects.
Now on such matters of economics schools, clubs and theories I tend to keep an open mind,
without going to the extreme position of my friend Marx... Groucho23 of course! He once
famously declared:
"Any club that would have me as a member... I would not want to join!"
You see monetary theory has been growing wildly for years and I guess is just about
approaching its infancy, that is as an evidence-based arena of positive economics.
On an occasion such as this, I am sure you would not want me to further explore the
intricacies of this very complex subject. Yet as we celebrate all those medals gained in the
Jeux des
Iles24, although as a central banker I have to say unhappily rather more in bronze
than gold, as we enjoy the opening of the new Season of the Premier League, and as we
come fresh from the third meeting of the Monetary Policy Committee, I cannot resist offering
a sporting metaphor, as a vehicle for my take on Monetary Theory and its application to
national economic policy.
In doing this I would like borrow from the "Maradona theory of interest rates" as enunciated
by an elder in the metier, our colleague from the Bank of England, Governor Mervyn King, in
his Mais lecture in 2005. It is a football metaphor, that beautiful game for gentlemen
commonly played by ruffians!
The Maradona Theory of interest rates is, I believe, a really innovative and apt contribution to
the bulging portfolio of macroeconomic theory. The Maradona theory is named after the
famed Argentinian footballer Diego Maradona - and was there a greater ruffian than he in
the annals of that beautiful game? If I may be allowed to elaborate just a little, this theory
encompasses, iteratively both a classical free-market approach to theory and a
postmodernist line. The field-work setting is the World Cup in Mexico in 1986 when, you may well
recall, the Argentinians swept a strong England team out of the world competition when
Maradona notoriously scored two remarkable goals.
The first goal aptly illustrates the Adam Smith25 principles of the free unregulated market and
the operation of the "invisible hand", or as the great Diego subsequently called it, "the hand
of God".
The second goal, Mervyn King declares, admirably illustrates the power of expectations in
the modern theory of interest rates.
As with the Manchester United Portuguese star, Ronaldo of the modern game, when his legs
are crisscrossing to deceive the tackler, the ball itself continues rolling straight on with its
initial forward propulsion. The five defenders, confronting the Argentinian star in 1986, fell in
turn to one side or the other expecting a corresponding feint. Maradona ran some 60 yards
from inside his own half, beating the whole defence and then the goal keeper, keeping in
virtually a straight line. This, King declares, illustrates the misguided power of expectations:
the conflict between appearance and reality.
Monetary policy, says King, works in a similar way: market interest rates react to what the
Central Bank is expected to do. Thus, no simple rule must be applied if the object is inflation
targeting and the stability of the markets. The precise rule that Central Banks follow is less
important than their ability to condition expectations. But once the cat was out of the bag,
neither classical nor post-modernist theory could help even Maradona to score again in the
match.
So monetary policy must be embedded in a continuous process of learning; or what Jeffrey
"the process of clinical
Sachs refers to as economics", an evidence-based iterative process
of the continuing testing of fresh hypotheses.
In the short run monetary policy, wisely attuned, does affect output and employment and so
has the potential to be an effective stabilisation tool. Inflation targeting requires two elements,
a medium-term target and a short-term response to economic shocks. King calls this
"a framework of constrained discretion".
Together with the Minister of Finance, the members of the Monetary Policy Committee, and
the research staff at the Bank, we are now getting these elements more firmly in place.
The second big point I want to make, if I may crave your further indulgence, is on the
urgency of the promotion of savings in line with the new economic framework of the
Government. Without wishing to upset the apple-cart with my commercial banking
colleagues, we must extract ourselves from what have been referred to as the
"disasters of a culture of wild speculation and debt delinquency"
that are eroding economies of the world. Whilst the Polonius26 financial policy
"never a borrower nor a lender be"
was never good news for banking, we must be concerned when these days it seems easier
to spend on credit than to save; I'm told you can even borrow money from one credit card
company to pay off a loan from another!
In the past weeks there has been a spectre hanging over the banking world emerging from
the sub-prime market in housing loans in the US and ricocheting off most other components
of the complex market in credit. For every loan there has to be a clear reciprocal relationship
between debtors and creditors.
Here in Mauritius we can see in microcosm the problems of the failure of this relationship
emerging in the sale-by-levy traumas and the new processes of regulation and family support
that have been so rapidly put in place by the Government to help the poor debtors subjected
to such foreclosures. Ultimately there are of course no free lunches and no free loans;
people must be persuaded that in the end, if you borrow, you have to pay it back and the
sooner the cheaper. It is certainly a concern if we are to drift on the Moody's scale of reliable
debtors.
One of our tasks ahead is no less than to change the culture and the forms of access to
services. Just as the Government and even our Civil Service are trying to become more and
more people-oriented, so this Central Bank needs to achieve that transition from being The
Bank of Mauritius to being the Bank for Mauritians; the Bank of the People. We must make
the sound financial choices for every family, the easy choices. We must also re-orient our
communications accordingly. If we want to penetrate a new market, we must adopt a
marketing strategy to compete with the other goods and services ordinary people buy. We
will need a new language for getting the message across. As has been said in a recent IMF
seminar on finding this new market, the people out there have a different set of priorities in
terms of the trends and the shape of the economy and their options for saving or spending:
"They don't care about the shape of the Phillips curve, but they do want to know if
their mortgage payments are going up".
We may even have to start giving away pens rather than chaining them up at the counter.
We must also beware of viewing the world of banking just as a bunch of accountants and
economists, of whom George Bernard Shaw said:
"they know the price of everything but the value of nothing!"
For in Mauritius, in these forty years that we celebrate today, we have come to treasure not
just the Treasury Bills, but also the non-traded assets of these islands. Trust, probity,
friendship, truth and beauty. Let us cherish these values above all in the years ahead; the
natural and human assets of our homeland.
So what is the agenda for the next forty years. Who can say? It is tough to make predictions,
especially about the future! Much experience in forecasting suggests that its principal
function is better to illuminate the known unknowns.
As we establish more elaborate computer-based models for our planning we should perhaps
test-run them through the 1967 data when we opened for business and see how far they
would reveal the shape of things now. Something for our research team to use as the litmus
test for any new mathematical modelling kit!
In recent years, the world of finance has encountered what Taleb from the US, a professor of
the science of uncertainty, denotes as the "Black Swans" of economic life, the unexpected
eruptions which sharply deviate from the smooth transitions of the Gaussian bell-shaped
curve. We must be ready for the unexpected and nurture a capacity for resilience to
withstand the future shocks and crises.
IBM forty years ago was predicting little future for the PC, entrenched as they were in
mainframe systems; when "Big Blue" failed, Bill Gates was the beneficiary. In the US they used to
consider the profession of accounting straight, if rather boring, and company accounts a fair
presentation of the financial state of affairs. That is all being swept aside in the light of
unexpected events, with the new tighter company regulatory systems; adieu Arthur Anderson
and the rest.
That is the Black Swan bad news; but a fairer wind blows: now Goldman Sachs is telling us
that socially-responsible compa