British economists to the Queen: Sorry, m'lady for that financial crisis!
O Britain! Only in the U.K. could an 83-year-old billionaire living on the public dole -- Queen Elizabeth II -- demand answers from Her Majesty's Economists (HME), and have them dutifully oblige Her Majesty's request. The Royal Request: Why didn't you predict the financial crisis? Their response: We f%^$ed up.
And therein lies the cleverness of what it takes to survive under a monarchy: failing to put a single person in charge and therefore making it difficult to sever just one economist's head from his neck. According to The Observer, the Queen made her request to a group of leading economists during a visit to the London School of Economics. Of the origins of the financial crisis, she asked: "Why did nobody notice it?"
A number of leading economists met to discuss the queen's question, included Nick MacPherson, a permanent secretary at Britain's Treasury, and Goldman Sachs (GS) chief economist Jim O'Neill. Their response, delivered in a letter to the Queen: "In summary, your majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole."
While this response might be good for protecting HMEs' positions, it does nothing to answer her question (although it cribs from remarks Alan Greenspan made last year). It just raises a new one: Why did the bright people fail to imagine the financial crisis? And the simple answer is that these bright people had far more to gain financially from keeping the bubble expanding then predicting its bursting and the resultant catastrophic damage to the global economy.
Of course, if the Queen was truly concerned about the financial crisis, she would do the proper thing for Britain and eliminate the monarchy -- turning her assets over to the British population to whom she owes her Queendom.
In the meantime, if she truly wants economists who provide objective predictions of the economy, she will need to find some who don't depend on financial engineering for their bonuses. Otherwise, they will loyally continue to act as mouthpieces for those who butter their bread.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.