I was in Madrid this week for a very interesting conference of the Campus of Excellence.
The Campus brings together Nobel prize winners in various disciplines and people who have been involved in politics to discuss the problems of the world with students from a number of Spanish universities.
I managed to attend three sessions, one on the world political situation, another on immigration, and a third on the world economy.
I spoke in the session on world politics along with Rosalia Arteaga, a former President of Ecuador, and Michel Rocard, a former Prime Minister of France.
Rosalia Arteaga was President of her country in 1997.
Michel Rocard is a member of the European Parliament since 1994, and was Prime Minister from 1988 to 1991 under President Mitterand. He also held various other ministerial offices including being Minister for Agriculture in the 1980s.
Rosalia Artega was concerned about the trend towards anti democratic populist politics in some Latin American countries.
Michel Rocard was disappointed at the progress in negotiations with Iran on the nuclear question. He favoured bringing Turkey into the EU.
In the session on immigration, it was claimed that 8 out of 10 immigrant movements in the world are from one country in the less developed country in the world to another similar country. Immigrants tended to be treated as objects or as part of a category rather than as human beings.
Policies to only admit skilled immigrants meant that richer countries were creaming off benefits from educational spending by much poorer countries than themselves. It was claimed, for example, that 90% of doctors educated in Ghana emigrate to better paid jobs in Britain, thereby subsidizing the British economy at the expense of the Ghana.
The European Commission had calculated that the EU will need 50 million immigrants between now and 2060 if it is maintain current levels of economic activity in face of the ageing of the native European population.
In the session on the world economy, it was pointed out that family owned businesses had been more prudent in their borrowing policies that had public companies where management had been able to gamble with shareholders funds.
The system of rewarding executives with stock options was strongly criticised by Nobel Prize winning economist, Robert Aumann. He said it encouraged them to be imprudent because they faced a situation where it was a case of
Heads I win, tails I do not lose”
It would be much better, he said, to reward them with actual shares, where they took the downside risk, as well as the upside possibility of gain.
I think he is right. The focus in reforming pay in the banking system should be not be on the amount people earn, but on how their earnings are calculated and on whether the incentives are for prudence or for recklessness.