Last November on Guy Fawkes Day, The Queen visited the LSE. While she was there, she posed the question - Why had no one noticed the arrival of the credit crunch?
In response to this question, June 2009 saw a roundtable discussion - ‘The Global Financial Crisis - Why Didn't Anybody Notice' - take place at the British Academy. The event, chaired by Professor Peter Hennessey FBA, and attended by a diverse group which included leading economists, academics, journalists and politicians, expressly sought to address the Queen's poignant question. An ‘unofficial command paper' was then crafted and drafted as a response.
Last week, Professor Peter Hennessey along with LSE Professor Tim Besley wrote to The Queen on behalf of the June 2009 British Academy Forum attendees to attempt to answer her question. A downloadable PDF of the letter can be accessed from the British Academy website.
The letter advises that while there were many who did foresee the crisis, most were convinced "that the banks knew what they were doing" and that the "financial wizards had found new and clever ways of managing risks". It concludes by admitting to The Queen that there had indeed been a failure to "foresee the timing, extent and severity of the crisis and to head it off". Principally, the letter confirms, this was "a failure of the collective imagination of many bright people ... to understand the risks to the system as a whole".
Next steps will be a further forum hosted by the British Academy to ensure a ‘never again' scenario. Some thought is also being given to the development of a new, horizon-scanning capability to be shared amongst all key influencers in the UK and internationally.
Robin Jackson, Chief Executive and Secretary of the British Academy believes "the Academy forum was an opportunity to get an exceptional range of experts, participants and commentators in one room, sifting fact from fiction and shedding light on what had gone on". He hopes, he said, that "Her Majesty, and indeed others will find our letter informative".
