I am in Paris at the moment, attending a conference on innovative finance in development, put together by the World Bank, AFD (the French development agency), and the Gates Foundation. It is an interesting event. As well as panels and workshops, there is a competition for promising financial innovations. The World Bank has a very good pamphlet, Innovative Finance for Development Solutions, if you want some background reading.
The competition's 20 finalists include all manner of ingenious schemes designed by small NGOs, not-so-small development agencies, and everything in between. "Mobile Authentication for Indo-Nepal Remittance" (by Ekgaon Technologies and Nirdhan Utthan Bank), for instance; "Natural Catastrophe Protection for the Rural Poor" (Caribbean Risk Managers and Development Bank of Jamaica); "Proving the Value of Mobile Money for Microfinance" (by the Grameen Foundation); and so on.
I moderated a panel on the first morning. (I expect there will be video later. I'll put the link in this post when I have it.) The issue that interested me most was the tension between all this pro-poor, pro-development financial ingenuity and the now-prevailing orthodoxy that financial innovation is essentially a scam perpetrated by Wall Street and its offshoots on everybody else. In the US context even Paul Volcker, as respected and mainstream an eminence as one could wish, says he sees little evidence that financial innovation has brought social gain.
The Economist just hosted an interesting debate on this between Joe Stiglitz and Ross Levine. Nearly 60% of readers casting votes agreed with Stiglitz in opposing the motion, "This house believes that financial innovation boosts economic growth." I'm with the minority in thinking that Levine made the better case. As I mentioned the other day, Bob Litan has done a good even-handed essay about the pros and cons of specific financial innovations, instrument by instrument. Bob Shiller as always is a font of wisdom on this subject: in The Subprime Solution and The New Financial Order he makes a persuasive case that we need new kinds of financial innovation-but in any event, more of it not less.
Pressed for time, my panel did little more than raise the subject and acknowledge the dangers. Browse through some of the schemes discussed in the Bank's pamphlet, or the competition finalists on the conference website, and see if your suspicion of financial innovation is not tempered a little.
This was the first time I'd been to Paris for several years, so indulge me in some cultural observations. The city seems to have been invaded by very large scooters-scooters which are to ordinary scooters as Hummers are to ordinary SUVs. They are more akin to small cars. In fact, some have two wheels at the front so that they can stand unsupported. I like them. They are somewhat manly. I want one of these hefty three-wheelers for driving round Washington.
Happily some things never change. I will say this for the French. This is a country that dares to soft-boil an egg. My breakfast this morning was the best I have had since I last visited Paris. Grapefruit, eggs, pain chocolat (half), and café au lait. Simple things, slightly reminiscent of the equivalent US and UK products, but raised to the highest standard of deliciousness. I could move to Paris for the breakfasts alone.
On a terminological note, I see that in France one is not a moderator but an animateur. Tout à fait.
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