October 9-10, 2009

Meeting the Challenge of the Crisis: Economic Freedom Network Asia Holds Annual Conference in Cambodia

Cambodian Deputy Prime Minister Keat Chhon

The Economic Freedom Network Asia (EFN Asia) held its annual conference in Siem Reap, Cambodia from 9-10 October 2009. This year’s theme was "Overcoming the Global Financial and Economic Crisis: The Rule of Law as the Key to Economic Crisis?" The conference attracted more than 130 participants from 18 countries.

Opening the conference Keat Chhon, deputy prime minister and minister for economy and finance, stressed the commitment of the Cambodian government to strength the rule of law in the context of building a liberal democracy and a market economy. Citing the work of Douglass North, he stressed that this process requires time. It needs to be embedded in a country’s culture. The institutional change necessitated by it should be calibrated carefully so as not to endanger social stability.

Lawrence White, professor from George Mason University, was the keynote speaker. Defining rule of law as non-discretionary government, he criticized the discretionary nature of central bank policies. He especially pointed out the inconsistencies in handling the bank crises as illustrated by the different responses to the problems at Bear Stearns and Lehman Brothers. In his view, banks that got into trouble should not have been saved at tax payers’ expense. He also argued for ways to reduce discretionary powers of central banks and governments.

Panel Discussion

This was followed by two panel discussions on the role of the rule of law both as causes and solutions to the crisis. A variety of topics was discussed: the role of political pressure to extend homeownership by easing access to loans; gutting standards of prudent lending; the dubious role of rating agencies whose business model depended on getting paid by those they were supposed to critically evaluate; ill-conceived regulations, especially in the Basle Accords; and even a demand for the de-nationalization of money. To great applause, Swaminathan Aiyar, research fellow of the Cato Institute’s Center for Global Liberty and Prosperity, warned against overexcitement. He stressed that boom-and-bust cycles were part of economic freedom. A system that tried to stifle them was doomed to fail. On the other hand, much as we might warn against erring on the side of overregulation, political freedom means that legislators who think they need to respond to a crisis with more rules get elected. Political and economic freedoms are sometimes in conflict. That is the price of a system that, overall, actually works well.

Open Space Technology

The conference then embarked on small-group discussions that were organized through Open Space Technology, where a marketplace of ideas is generated with people proposing topics for discussion and signing up for topics of their choice. Eventually 13 groups were formed around topics ranging from “Capture of Regulatory Bodies by Vested Interests” to “Islam and the Market Economy.” The groups displayed their results and participants ranked them by vote, with the top six being discussed in the plenary. This process allowed participants to set their own agenda, rather than having to submit to one set by the organizers. It also utilized the manifold talents among the group.

EFW launch with Michael Walker

The final part was the traditional launch of the annual Economic Freedom of the World (EFW) report. This was presented by Michael Walker, Fraser Institute president. He also combined this with a tribute to Rose Friedman who had died a few days before. An eminent economist, she had been one of the people who came up with the idea for the EFW report. She and her late husband, Milton Friedman, were life-long supporters of it.