jan f qvigstad : managing wealth – the norwegian experience speech by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at a seminar hosted by fedea ( fundacion de estudios de economia aplicada ), madrid, 23 march 2011. * * * the seminar was hosted with the assistance of mr torgeir larsen, norway ’ s ambassador to spain. it is difficult to overstate the effects of the financial crisis that started in september 2008. as a financial crisis, it has been one of the most severe on record. the crisis in the real economy was even worse. for the first time since the second world war, total world output has fallen from one year to the next. the crisis hit all countries and was surprisingly synchronised. this shows the interconnectedness of modern finance. big banks have important parts of their operations in other countries, often on other continents. some spanish banks provide good examples. though the crisis hit us quite similarly, we have emerged from it in very different ways. the crisis was difficult to foresee, but was it possible – ex ante – to point out the countries that would end up in trouble after a crisis? norway has escaped this crisis more lightly than many countries. luck explains a lot, but not everything. we had our own very serious crisis 20 years ago. one central instrument we put in place after that crisis was a fiscal rule. this rule is closely related to our sovereign wealth fund, the government pension fund. many explanations are offered for the fall of the roman empire. likewise, there are numerous causes behind the financial crisis. greed, especially in the financial sector, stupidity, low lending standards and low interest rates have all been highlighted, and these arguments are not without merit. still, two very important and striking features preceding the crisis were the growing imbalances in world trade and capital adequacy ratios in the banking system. the crisis was preceded by a build - up of global imbalances. large and growing deficits in the us were driven by high consumption and a large appetite for debt among us households. in the us, domestic spending had outpaced domestic production for a long period. private debt increased in the us, but also in europe, matched by high saving in asia – primarily in china. federal reserve governor ben bernanke called the imbalances a global savings glut. this glut

##bc convenor, representatives of banks having predominant share in sme financing in the state, sidbi, director of industries of the state government etc., are also members. mse associations need to use this forum not only for removing bottlenecks in the smooth flow of credit to the sector and for reviewing the accessibility of bank finance to more and more mses, but also highlight gaps if any in the attitude and skills at the bank branch level. i would urge upon the industry associations / chambers to take up region - specific issues relating to mses with the concerned regional director of reserve bank of india and the slbc convener banks. such issues that cannot be resolved at regional office level could be brought to the notice of central office of rbi. they could also spread awareness of the bis central bankers ’ speeches government schemes and code of bank ’ s commitment to mses among their members. lastly, the success stories of micro and small enterprises may be widely disseminated as it would inspire others to strive for excellence and thus contribute towards achieving greater heights in building a strong and prosperous india. the new entrepreneurs could also take a cue from the mistakes of their experienced counterparts and ensure not to repeat the same. a piece of advice 13. while i have sought to highlight the expectations from various stakeholders in supporting the growth of msmes, it is important to remember that individual msmes, themselves, have to constantly seek to transform themselves, in line with changing environmental factors, to ensure that they end up among the success stories instead of the failures. i have, in the past also, drawn from the famed management thinker peter f. drucker ’ s writings to highlight four typical mistakes that entrepreneurs need to avoid as they develop their businesses. these are, particularly relevant for msmes during the growth phase. these include the need to be open to potential new / unintended markets or applications for products developed by companies ; the need to focus on cash flows instead of focusing only on profits as these are the lifeline that keeps the company going ; creating a management team as the business develops ; and lastly, the need to constantly ask the question that what the business needs at this stage and whether one is concentrating on the right things. conclusion 14. let me conclude by restating the fact that msmes will continue to play a very important and vital role in our economy where the twin problems of unemployment and poverty constitute a major developmental challenge. in fact, if india were to have a growth rate