ON LIBERTY

The Dahrendorf Questions

Edited by Timothy Garton Ash

Front cover photograph: Ralf Dahrendorf in Venice Leonardo Cendamo

Produced by the Medical Informatics Unit, NDCLS, University of Oxford

Contents
Preface ...............................................................................................................................................................5 Seminar to mark the 80th birthday of Ralf Dahrendorf ....................................7 Markus Baumanns ..................................................................................................................9 Jrgen Habermas ..................................................................................................................11 Fritz Stern ....................................................................................................................................14 Timothy Garton Ash..........................................................................................................19 Contributions from the oor ......................................................................................23 Colloquium to mark the 80th birthday of Ralf Dahrendorf .......................29 Liberty and the Current Crisis (Introduction: Martin Wolf) ..........30 Liberty, Poverty and Development (Introduction: Partha Dasgupta) ....................................................................................................................................53 Liberty and Diversity (Introduction: Gerhard Casper) ........................71 Contributors .............................................................................................................................................91 A select list of books by Ralf Dahrendorf .....................................................................93

Preface

This is the record of a colloquium held at St Antonys College, Oxford, to mark the 8oth birthday of Ralf Dahrendorf on 1 May 2009. Lord Dahrendorf was himself able to participate in the meeting, although he was already very ill. He died less than two months later. This publication has therefore become not just the record of a memorable intellectual event, but also a memorial to one of the foremost social and political thinkers of the second half of the twentieth century. The transcript has been lightly edited, but no attempt has been made to eliminate the freshness of speech. I am most grateful to Dominic Burbidge and Jonathan Parreo for their assistance in transcribing and editing the text for publication. We at St Antonys are greatly indebted to the Aurea Foundation in Toronto and the Zeit Stiftung Ebelin und Gerd Bucerius in Hamburg, who have generously supported both the original colloquium and the research programme for the study of freedom which prepared it. We are glad to be publishing this small volume jointly with the Zeit Foundation. Timothy Garton Ash Oxford, October 2009

Seminar to mark the 80th birthday of Ralf Dahrendorf

1st May 2009

Professor Timothy Garton Ash Lady Dahrendorf, Warden, distinguished guests, ladies and gentlemen. Welcome to this very special event to celebrate the eightieth birthday of our third Warden, Lord Dahrendorf, which falls on this very day, the first of May. I have to say, Ralf Dahrendorf made a rather interesting choice of birthday in 1929: to choose the first of May, of all days, to come into the world. This very special event is to celebrate his extraordinary life and work; a life that straddles academia and politics, Britain and Germany, Europe and America, intellectual life, journalistic life, high public office both national and European philanthropic activity; and academic administration as the head of two great academic institutions. His partial autobiography is entitled in German ber Grenzen, which for those of you who know German has a double meaning: crossing frontiers but also about frontiers. That says a lot about Ralf s work. A work which, by the way, is immense. We have on the table outside a select list of Ralf Dahrendorf s books, which has a mere 35 books on it so if you are just finishing your doctorate, you only have 34 to go. Some of them are in two separate editions, because Lord Dahrendorf first wrote the English book, and then, when he worked out what he really wanted to say, he wrote the German one, or vice versa.
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ON LIBERTY

This event is to celebrate that extraordinary life and work. It is also to discuss it; to discuss at least some of what we have called the Dahrendorf Questions about liberty. And to do that, we are really delighted to have with us two immensely distinguished speakers: Professor Jrgen Habermas and Professor Fritz Stern. Professor Stern has crossed the great physical distance of the Atlantic to be with us, and Professor Habermas has crossed the somewhat smaller physical distance of the Channel. Whether the psychological distance across the Channel is not rather longer, we shall see. Jrgen Habermas is, of course, one of the two most influential German social thinkers of the last fifty years the other being Ralf Dahrendorf. Both of them have an influence which is far beyond Germany; not only to Europe but to a much wider world. And so it is a very special and indeed unique occasion to have Jrgen Habermas with us to celebrate Ralf Dahrendorf s eightieth birthday. Fritz Stern is quite simply the Nestor of historians of modern Germany acknowledged as such, not only in Germany and in the rest of Europe, but in fact, across the world. It is a very great honour and pleasure to have you both with us here today; thank you so much for coming. I would like also to mention a number of other distinguished guests who are with us today, from as far afield as Italy, Germany, Stanford, California, and the LSE the London School of Economics. I would like particularly to welcome Sir Howard Davies, the Director of the LSE; one of Ralf s successors and the head of an institution which, I know, means a very great deal to Lord Dahrendorf. We also have a group here who spent the last two days discussing European stories how intellectuals discuss and debate Europe in their national contexts so that is a particular serendipity. We are most grateful to two foundations for supporting this event. The first is the Aurea Foundation in Canada, through the Isaiah Berlin Fellowship. Secondly, the Zeit Foundation in Hamburg; to give it its full name: the Zeit-Stiftung Ebelin und Gerd Bucerius. This is particularly fitting because the whole milieu of Die Zeit, the North German liberal milieu of Die Zeit, so important in the history of the Federal Republic, is one that has meant a very great deal to Ralf Dahrendorf, and of which he has been an important part. The Zeit Foundation is represented here by its Executive Vice President, Dr. Markus Baumanns, and before we move to the main proceedings, I would like to ask Dr. Baumanns to say a few words.

The Dahrendorf Questions

Dr Markus Baumanns Dear Lord Dahrendorf, dear Lady Dahrendorf, dear Timothy Garton Ash, Warden, dear friends of Lord Dahrendorf, A few weeks ago Die Zeit drew attention to the fact that a surprising number of intellectuals and writers who made a decisive impression on post-War Germany stemmed from the year 1929: Michael Ende, Hans Magnus Enzensberger, Anne Frank, Jrgen Habermas, Walter Kempowski, Gnter Kunert, Heiner Mller, Peter Rhmkorf, Christa Wolf and, yes, Lord Ralf Dahrendorf, for whom we are gathered here today. All of those mentioned were ten years old when the Second World War broke out, and fifteen or sixteen when it ended those of them who survived it. All were unable to join the crowd or become perpetrators. Not least because of their early experiences of fleeing, bunkers and ruins, they were the ones who, following the moral and physical low-point in East and West, shaped the cultural renewal in Germany and its moral and political identity. To have survived at all must have been like a rebirth in its own right. It is an age group that, despite or perhaps because of these horrifying experiences in their young years, found the inner strength and resilience to repeatedly identify, analyse, tackle and overcome the unused possibilities, untrodden paths and mammoth challenges of their days. Perhaps it is this very factor that has driven Lord Dahrendorf, this exceptional intellectual, politician and scholar from two European countries, to become what he is. Perhaps it is for this reason that he depicts in his book, Die Versuchungen der Unfreiheit, the ideal picture of an intellectual as one who is able to think independently, who can resist the objection of society, who can express his thoughts clearly, and who can accept reason as the basis of every theory. And now this age group is experiencing a further profound turning point in history; an economic crisis that we contemporaries are only just beginning to comprehend; a crisis that you, Lord Dahrendorf, on the occasion of the 40th anniversary of the Wissenschaftszentrum Berlin in February referred to as a collapse of the structures and mentalities of the economy and societies. You conclude that we are witnesses of how our economic system has changed from a Sparkapitalismus to a Pumpkapitalismus, away from the Protestant ethic and towards loan-financed consumer indulgence. You demand a new attitude, a correction in the mentality of all of those involved, a change in the spirit of the times, that is characterized by a new sense of responsibility amongst the leaders.

ON LIBERTY

And it wouldn't be you if, at the same time, you didn't take the opportunity to point a finger at the academic world. As you said, it has been surprised by the crisis. As you said, it is unfortunately all too true that academic understanding, like Minerva's owl, tends to fly with the coming of the twilight hours. You challenge the academics to be public intellectuals. Not only to publish in academic journals, but also to take a stand in the media, thereby accepting and discharging a greater involvement and responsibility. How important it is for us, we of the subsequent generations, that this special group, the 1929ers, takes a clear and very vocal stance particularly you, dear Lord Dahrendorf. We live in an age that needs orientation, and you are able to set the events of the day against the background of your eventful life. This is something for which we must be endlessly thankful! So however one looks at it, it is certainly an important day in an important age, this 1st of May 2009. For the Zeit Foundation Ebelin and Gerd Bucerius, for its board of trustees and for its Executive Board, i.e. my colleagues Michael Gring, Klaus Asche, Karsten Schmidt, and for myself, it is a great honour and privilege to congratulate you and to bring you personally these best wishes from Hamburg. Please allow me finally to assume the role of an ambassador for Hamburg, and I am certain that, in the name of the city too, and those colleagues in the Krber Foundation and many other friends, I can express our congratulations! Hamburg, your place of birth, the city in which your father Gustav Dahrendorf lived and worked. The place described by you in your memoirs, in the chapter Searching for the Roots of the Dahrendorf Family (Auf Wurzelsuche der Familie Dahrendorf ), as follows: The Hanseatic city, with its public spirit and its open outlook to the world, in the end houses the true roots of the Dahrendorf family. What a compliment to the city! Against this background it is a special pleasure for me to be able to inform you that the biography series Hamburger Kpfe, published by our foundation and proposed by one of the members of our board of trustees, Helmut Schmidt, will in this year publish a volume on the life of Gustav Dahrendorf. Gustav Dahrendorf, the social democrat in the Weimar Republic who, for his knowledge of the attempt to assassinate Hitler on 20th July 1944, was sentenced to seven years imprisonment. He survived the Berlin Gestapo prison and KZ Ravensbrck; your father, who in 1946 was elected to the Hamburg city parliament and became party executive of the SPD. About whom you wrote in your memoirs: I chose politically different paths, more Western-oriented, more liberal ones. But up to the present day, my
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The Dahrendorf Questions

father's world has remained for me the epitome of what is good in the German tradition. We hope that, as a Hamburger Kopf , Gustav Dahrendorf will be drawn to the attention and recalled to the memory of a wide readership in our city and in our country. Dear Lord Dahrendorf, last week I happened to be in the photographic archives of Spiegel in Hamburgs Speicherstadt, the historical warehouse quarter of the city. Browsing through some of the old photos I came across this snapshot, which shows you, in 1968, campaigning for the FDP in the election, accompanied by two delightful ladies and well brollyd by FDP sunshades. Quite apart from the party you were campaigning for, a photo says more than words: you have personally accepted the responsibility to engage yourself as a public intellectual, even to the extent of participating as an actor in res publica. Thank you for this shining example and I hope, along with many other fellow citizens, for many more young ideas and inspirations from you, since they are more important now than ever.

Professor Jrgen Habermas Rationality out of Passion For Ralf Dahrendorf on the occasion of his 80th birthday Here, of all places, I feel what is for me a quite unaccustomed sense of patriotism, and would like to remind my colleagues that for Ralf Dahrendorf there was a life before his life in London and Oxford and that his double life in the German parallel world continues to echo strongly to this very day. Indeed, as an intellectual, as a scholarly author and sharp-minded publicist, who time and again provided a diagnosis of our times, Dahrendorf never left Germany. It was not until the professor of sociology became a lord that we were forced to take note of the fact that he, who was present in the rest of the world anyway, had a sideline in England. Dahrendorf, also, did not first become a star in the English-speaking world. He already was one when we first met 54 years ago. Back in 1955, Helmut Schelsky invited young up-and-coming sociologists to Hamburg. I was only present as a journalist who was to report on the young guards performance for the Frankfurter Allgemeine Zeitung. Many of the sociologists of our generation who were later to become known were assembled there. In what was, when looking back on the old Federal Republic, an illustrious circle of young men, one lecturer from Saarbrcken far outshone everyone else. This brilliant mind, who opted for clarity by
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ON LIBERTY

constructing poignant ideal types rather than for the art of hermeneutics, quickly caught the eye no less by his powerful eloquence than by his uncompromising demeanor, one that already exercised authority. What made Dahrendorf stand out from among his peers was the avant-garde self-confidence with which he set out to dispense with the old and usher in the new. The lead he had already gained on the career ladder was impressive in itself. Aged only 26, he had already successfully become a Privatdozent, having first, with a Masters in philosophy and the Classics, written a doctoral thesis on Marx and then having completed what was for us back then a quite exotic degree, namely a PhD in sociology at the London School of Economics; and very shortly thereafter he was appointed the youngest full professor at the University of Tbingen. Yet, what truly earned him the respect of his peers was his expertise, his familiarity with the sociological discourse in the English-speaking world and his critique of Talcott Parsons, with which Dahrendorf was at the cutting edge of research whereas we backbenchers had still to read Parsons, who dominated the international scene of the day. The thrust of the criticism was clear. Class conflicts that in the final instance are always rooted in power relations drive social developments forwards; thus social conflicts are something desirable and what is needed is not that they be solved, but that they be institutionalised and coped with in a civil form. In the 1950s and early 1960s, Dahrendorf set the standard for our professional debates. Without him there would have been no discussion of role theory in Germany, nor the famous dispute over positivism. His first books, namely Class and Conflict in Industrial Society (1957), Homo Sociologicus (1961) and Gesellschaft und Freiheit (1961) have since become classics. And they already contain the two core hypotheses that paved the intellectual path this liberal thinker was to follow all his life with quite admirable tenacity. The first hypothesis deployed Kant and Max Weber against Rousseau, with Marx being the covert target: Social inequalities cannot primarily be explained in terms of the unequal distribution of property, but result from the necessity to use sanctions to enforce norm-conforming social behavior. Inequalities are the byproduct of a power structure intrinsic to society as such. The second hypothesis turns on classical social democracy and justifies the market as the central mechanism that disseminates freedom: The legal equality granted by democratic citizenship should be read in the first place as an equality of opportunity and not as one generating claims to provisions; in the event of conflict, at least, the freedom for the private pursuit of happiness weighs more heavily than the burden of social inequality. Of course, Durkheim does not get completely forgotten: If the social world boils down
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The Dahrendorf Questions

to only those various opportunities among which we can choose more or less rationally, then the social bond is severely in danger. The anti-utopian drive of the moderate market liberalism, for all its democratic and egalitarian underpinnings, went against the grain of my own outlook. And yet again I was captivated by Dahrendorf s passionate commitment to the political traditions of the Enlightenment. He appealed to his compatriots conscience, stating that German questions had always tended to be national and social questions rather than the liberal and democratic ones of those nations who championed liberty. 1965 saw publication of his book Society and Democracy in Germany it was probably the treatise that had the greatest impact on shaping the political mentality of the population on West Germanys long path to find itself to a democracy that only in the course of the three to four decades following the Second World War managed to divest itself of the residues of authoritarian traditions. For Dahrendorf, sociology has always meant social theory; in the midst of the accelerating growth in social complexity he keeps utilizing his professional knowledge as an instrument for updating his diagnosis of a restless modernity. Sociology once inherited from philosophy the task of grasping its age in thought. Today, however, most members of the profession have largely abandoned this way the classic sociologists saw their role. At present any sociologist sticking to this task of providing orientation and improving the self-understanding of society at large must give good reasons for so doing. Now, Dahrendorf has always conducted his academic business as a homo politicus. He lives, thinks and writes from the vantagepoint of the experience of a German generation that could not but take a position on the epochal shift of 1945. Dahrendorf s latest book, Die Versuchungen der Unfreiheit, is illuminating in this regard. Taking as its examples a group of post-heroic heroes, he develops some kind of a political virtue ethics. I leave aside the issue of whether his selection for the gallery of heroes is completely convincing or whether the virtues of these incorruptible but committed observers are especially exciting. But what I do find interesting is the format that Dahrendorf the sociologist has given his virtue ethics. He describes the history of the countervailing political mentalities of a specific generation born between 1900 and 1910, for which Ernst Glaesers famous novel Jahrgang 1902, stands model. The hero of that novel represents the generation of the unwavering, from which the hard-nosed and active members of the major ideological movements of the age were recruited during the 1920s and 1930s. In other words, the novel presents the militant opposite to Dahrendorf s liberal icons, to the Arons, the Poppers and the Berlins, who unlike many of their peers kept their
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ON LIBERTY

distance from the totalitarian movements on the left and the right. Of course, Dahrendorf s account lets there be no doubt as to the exemplary character of that latter stance. It is the love of freedom that immunised these intellectuals against the temptations of the totalitarian century. What is striking is a fact that the author does not mention. Irrespective of the direction in which the generation born in 1902 marched or did not march, in one respect their members grew up under similar circumstances to those of the generation born, like Dahrendorf, in 1929. Members of the two generations were aged 11-12 at the beginning and 15-16 at the end of the First and Second World War respectively. It was not polarising stances on the events of their day that fused the cohorts born around those two years into generations with a sharp profile, but rather the provocative character of the events, something which challenged them to take a stance. In his book, Dahrendorf leaves his own untempted and more fortunate generation in the wings. Yet even without an express comparison, the parallels and, even more so, the evident differences must have informed his view of that earlier generation of intellectuals who had to prove themselves and could have failed. The generation born later was spared totalitarian temptation and could not have failed at a similar level. This circumstance did of course tempt some of us effortlessly to play through past constellations and to identify free of charge with the morally superior side. Yet here again Dahrendorf is an exceptional case. At the tender age of 15, when others were still stuck in the private jam of their adolescence, he had stuck his neck out politically so far that he got arrested by the Gestapo. So, doubts on radicalism after the fact cant be his problem. If we can nevertheless discern a touch of regret about the unheroic nature of our own life-times, indeed perchance even about that tiny seed of quietism in the biographies of his admired Erasmus figures, then the reason for that must invariably be sought in the impatient mind and the passionate commitment of an intellectual who has, for all his level-headed rationality, remained pugnacious. Would such a person ever, from the depths of his heart, praise like Brecht a country that needs no heroes?

Professor Fritz Stern Lord and Lady Dahrendorf, Nicola and Daphne Dahrendorf, Warden, dear Timothy Garton Ash, I want to thank Ralf for providing the occasion for this splendid event and also thank all those who made it possible. My remarks will not presume to address his
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The Dahrendorf Questions

work, but they are meant as a tribute to a friendship. (I shall try to repress nostalgia; I was a visitor to St. Antonys in 1966-7, a grateful guest of Bill Deakin and James Joll.) Ralf and I first met in early September 1957 at the Center for Advanced Study of the Behavioral Sciences, an idyllic place in California. This was but 12 years after the end of National Socialism and I probably felt some awkwardness in the abstract about meeting a German. But that awkwardness ended instantly. I invited him for lunch at home for the next Sunday, which was federal election day in Germany: the CDU-CSU won over 50% of the vote. We were dismayed. We both had roots in the Social Democratic world: he because of his father, at the end of the Weimar Republic a rising star in the party; I because of childhood memories of the partys resistance to Hitler. It was the beginning of a friendship that arose from many sources, obviously a common interest in German politics, but much more broadly in concern over the German Question: how had it been possible? Dahrendorf thinks we all keep to a certain age: his was 28 that is how old he was when I met him. But what kind of a 28 year-old? The first impression: an intense intelligence, burning with This hard gem-like flame. One gradually understood that he had lived more fully in those 28 years, he had compressed more into those years, than most people do over a long life. He spoke two living languages with equal fluency and wrote in them with elegant precision; other European languages he had picked up. As classical philologist, he had mastered two dead languages as well; he felt critically at home in two countries, soon to be three countries, or much of the Western world; he had two Ph.D.s, he was a philologist-philosopher-sociologist, he was not a Fachmann, a specialist, but a universalist; he was that rare specimen: a brilliantly alive and serious scholar. He was a Wunderkind and has remained one. He had had already the searing experiences with the two great temptations of the last century: he had been a member of the Nazi Jungvolk, as befitted an innocent child of the 1930s; he became an enemy of the regime, and as such was imprisoned in a concentration camp, as was his father earlier; it was the denial of freedom that made him a passionate defender of freedom. For his family, Communist persecution swiftly followed Nazi persecution. He had seen how the Communists in 1945/46 threatened his father, and he never wavered in his rejection of either temptation. So much of his life and work centered on freedom: life chances, the life of the underprivileged, the great and wonderful revolution of 1989: freedom was his credo, he became the first sociologist-activist with the experience of National Socialism ever present.
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ON LIBERTY

No stranger to adventure and ambition, he had an immense appetite: he had crossed the Atlantic as a seaman on a freighter, he had travelled in Europe he had had his Italian journey, what Goethe had experienced as a 37-year-old Ralf had experienced as a teenager and in him too it quickened a poetic vein. In every field he strove to excel: one of the diversions of the Center was the game of horseshoe, and one morning at an impossibly early hour I discovered Ralf in solitude practicing the sport. This is to say nothing of his fierce ping-pong serve except to add that while he played with the great pros, he was gallant to put up with me as well. Perhaps it awakened what a few years later became a political-moral passion: to help the handicapped. At the Center he quickly grasped the limitations of the then prevailing kind of American sociology: its master was there, Talcott Parsons, and Ralf recognised the weakness of the abstractness, of imposing theory without an adequate study of reality. He was as openly critical of the master that is, of Parsons as our Fellow - Fellow Bob Solow - was of Milton Friedman. At the Center, argument prevailed over deference and Ralf was a superb critic, as I very quickly discovered when I began showing him some of my efforts: he read an early draft of my essay on The Political Consequences of the Unpolitical German. Ill never forget that he pointed to a passage on the gymnasium (secondary school) in Wilhelmine Germany: he thought it showed resentment an emotion I particularly abhor. I had to learn that intellectual distaste does not protect one from ones own emotion. In 1960, he published Homo Sociologicus, a searching critique of some of the basic assumptions of mostly American sociologists. In his taunting of abstractions, in his insistence that the individual cant be reduced to a bundle of roles, he cited Robert Musils notion of passive fantasy as an unclassifiable element of the free individual. How rare to find a novelist amidst the great theorists of his discipline. That article is also his pladoyer for a sociology that recognises individual freedom. The essay, a late reckoning with the Center, also included an admiring critique of Max Weber and the consequences of some of his contentions; Dahrendorf reached out to Kant and the Greeks to bolster his argument. No wonder we thought of him as the potential Weber for our times. In subsequent decades we continued to read each others manuscripts or he read my efforts (I couldnt read as fast as he composed). At my home, there is no shelf of books by a single author as large and crowded as Ralf s shelf and there is no file of correspondence thicker than that with Ralf. Most of his letters are in his clear and unchanging handwriting, beginning on May 5th, 1958, an hour before he gave his first lecture in Hamburg on the history of political ideas, and he reported on his
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The Dahrendorf Questions

trip across the U.S.: New York is a magnificent, but also a dreadful place. The greatest thing man ever built but, oh! What can it be like to live in? In 1960, he came to Columbia and found out. And how often he came to the US in subsequent years! And yet in July 1965 he retracted his acceptance to come to the Princeton Institute for Advanced Study in a remarkable letter to Robert Oppenheimer, explaining that his work on the founding committee of the University of Constance would make his absence an act of irresponsibility. To me, who had pushed the Princeton invitation, he wrote that this marked a turn-about: Somebody said to me when one grows older one has got to close doors. It is a sad thing, that, because in all my life I have hated nothing more than closing doors which perhaps is my greatest vice. And of course it has also been his greatest strength: he went through myriad doors, ever ready for a new discovery and responsibility. As he wrote me from Tbingen in 1964 about some new offer from the U.S. he was seriously considering since, as everyone knows, he and Vera are not particularly sesshaft, not firmly settled. Whether in questions of education and its openness to the underprivileged or in the design of a new University to the administration of great and ancient institutions, he was always on the run, and yet always formidably grounded, analysing the specific in light of the broadest political and moral context. In the years after the Center, he became ever more renowned as a scholar and citizen-activist and perhaps his most influential work, his half Tocquevillean book, Society and Democracy in Germany, characterised his form of engagement. I find a pleasing similarity between Ralf and Tocqueville, who after all started out with his great book on Democracy in America and then went into politics and for a short time became foreign minister of his country, with one difference: Tocqueville had been an aristocrat before writing his book, Ralf became one after. In the Preface to the American edition he wrote: Need I really state explicitly that this is a book of passion, much as I may have tried to filter emotion by information and reason? Passion, controlled and often hidden, has marked his entire work. The book is a great argument with other analysts, but one driven by the commitment to identify the virus of inhumanity in German society, a society that he thought had been violently forced into modernity by the triumph of inhumanity, i.e. by National Socialism. I believe he finds his history of the LSE his favorite book well, he is really an historian at heart, a detective, but also a poet of reality. In 1967-8 he entered political life in part, as he wrote me, as a test of the viability and effectiveness of parliamentary institutions. He wanted to test the constitution of freedom, though restless curiosity and ambition propelled him as well. We took similar positions in 1968 and had similar responses to the student unrest of 68 and are probably alike in regretting the mystification and the vilification of 68. It
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ON LIBERTY

was a trying time for me at Columbia, made easier by his intellectual companionship. In any case, Dahrendorf had done great work in the early 60s, demanding an academic system more open to the underprivileged. And Constance wasnt and isnt just a Harvard on the Lake but a radically different institution. He brought English and American touches to the new institution and helped to create an island of excellence. From its successes and failures we could probably learn a great deal. I could watch Ralf as he helped to fashion and guide the great and welcome change in German politics, the founding of the social-liberal coalition in 1969. His many careers left me to indulge in passive fantasy. From Bonn, where, if I remember correctly, he lived in a barn if otherwise equipped with the then still modest trappings of power he went to Brussels, ever learning, observing, reporting, and reforming. He was an early analyst of the deficiencies of the Europe of Brussels and taught us about its democratic deficit. We were at one in rejoicing over the peaceful self-liberation of Eastern Europe, it was the brightest political year in our lives. Ralf in myriad ways tried to anchor the newly-found possibilities of freedom in institutions. Ralf: What an astounding career! Astounding and unique perhaps a model for other 28-year-olds, fired by what used to be called divine impatience. On Liberty has been at the center of our countless meetings, beginning with the very first in 1957. We had shared in the deprivation of freedom: in Ralf s case, he provoked deprivation, he challenged tyranny and paid for it. I suffered that deprivation without having earned it, but for both of us, the experience of unfreedom was dispositive for life and work. And how often we talked of the fragility of freedom, down to very recent times, when I feared the subversion of the constitution of liberty in America, and we both were concerned about the threat to liberal traditions in the face of creeping authoritarianism in the context of spreading terrorism. He has clung to the legacies of the Enlightenment. I once introduced him as a thinker of the 18th century, endowed with the intellectual energies of the 19th century, desperately relevant to the travails of the 20th century. He has no illusions about any inevitable survival of liberty; he believes it takes an active minority to defend liberty and I would like to think that we will all go away tomorrow fortified in our commitment to be part of that active minority. Others will deal with the Dahrendorf Questions, and how often we talked about the relationship of liberty and equality, about the limits of the state and the market, about Britain and Germany! But I also remember the private questions: How can
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I combine my acceptance at the Woodrow Wilson Center in Washington with my commitment to reform the educational system of Malta? Or he would ask me what should be his next book. I would dutifully make a suggestion and at our next meeting he presented me with his most recent and quite different work. In 55 years, 35 books not counting the myriad articles and official reports! Let me end by making explicit what has been implicit in this whole celebration of Ralf s life: It had to be in Oxford. Ralf found a congenial home here; he said it best in his maiden speech at the House of Lords: Britain is a civic country, to which one belongs by shared rights and values of citizenship and not primarily, as in ethnic countries, by blood and origin. Civic countries tend to be open and civilized. I am grateful to have become part of this tradition England has been a home to many persons seeking a free and open society; but I cant think of another foreign-born who was so quickly entrusted with the responsibilities and endowed with the honours as Ralf has been. His place in Britain is a tribute to the constant in his full and changing life, his yearning for an open and liberal world, and a tribute to the country in which he found these ideals embodied. And let me just add that todays journey and his will to be here must be attributed to the spirit of the 28-year-old, quietly defiant and gallant, supported by gallant Christiane; two of his daughters are here as well. The search for freedom and the lure of active citizenship took him to many places and many posts and everywhere he enriched the lives of others. He has been a mentor to all who have striven for a liberal world and a friend to many of its defenders. On all our behalf, I thank him from the bottom of my heart.

Professor Timothy Garton Ash Thank you very much Fritz, for that wonderfully rich and warm personal tribute to the 28 year-old who we have with us today, and to the gallant fighter for liberty. I am going to speak as briefly as I can about the St. Antonys years and the last mere 25 years in Europe, and then I hope we will have a little time for some comments and questions. I first met Ralf Dahrendorf at Passport Control at Brussels Airport. I am sorry about that, there would be many more interesting places to meet, but such are the historical facts. It was a founding meeting of a remarkable initiative that Ralf chaired, called the Central and East European Publishing Project, or CEEPP for short, which was about supporting publishing in Central and Eastern Europe in a then divided Europe. We funded translations between Western and Eastern Europe,
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ON LIBERTY

migr publishing, unofficial publishing and samizdat publishing. This meant that we considered budgets from samizdat publishers, which said things like (budgets were in Deutschmarks in those days): printing, 5,000 marks, translation, 4,000 marks, Schmuggel (smuggling), 2,000 marks. So, if you remember, Ralf, we had a serious discussion about what is a reasonable percentage for Schmuggel. Would, say, 15 percent for Schmuggel be approved of by our funders? Indeed, I have to say we engaged some of us in a little personal Schmuggel ourselves: greenbacks carried in to samizdat journals and really, has one ever done a better days work? That was the beginning of a wonderful conversation that has continued to this day, and I hope will long continue. It was about many subjects but about two above all: Europe and freedom and about how they might go together. It continued through Ralf s ten years as Warden here, and I think it is fair to say that, in a sense, central to that period was the extraordinary year of 1989, which Fritz Stern already mentioned. Ralf celebrated his sixtieth birthday here, in a party on the first of May, 1989. On the second of May 1989, the iron curtain between Hungary and Austria was cut. I am not suggesting any causal correlation here that would be what social science calls the cause-correlation fallacy but it was the time we were in, and that year accelerated in an extraordinary excitement which most of us here will never forget. There were three main elements: reform from above, reform from the imperial centre, and the leadership of Mikhail Gorbachev (with a little help from our St. Antonys Colleague Archie Brown.) The social and political movements from below in Central and Eastern Europe assisted by some of us here, and Western policy both American and West European which, led by people like Tony Nicholls, we also studied in this college. And Ralf s wonderful book, Reflections on the Revolution in Europe, published in 1990, was a product of that time, and, not accidentally, the book of his essays and lectures from his time as Warden was called After 1989: Morals, Revolution and Civil Society. Let me just remind you that what we now call the European Union did not exist when Ralf became Warden of this college. There was a European Community of just twelve member states. Spain and Portugal had only joined the year before. It is remarkable to remind oneself of that. So, part of the story of our conversation about Europe and freedom is the extraordinary story of the successful enlargement of the European Union, what I think we could call the reunification of Europe in the last twenty years. And the key moment in that was the great enlargement to include nine Central and Eastern European countries ten if you count Cyprus as a Central or Eastern European country which happened precisely on Ralf s seventy-fifth birthday, on the first of May 2004.
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The Dahrendorf Questions

Now, I want to raise just three Dahrendorf questions: questions to us, rather than to him, which I think have new relevance today. First of all, reflections on the revolution in Europe twenty years later, and on Central and Eastern Europe in 2009. The central image of Ralf s Reflections on the Revolutions in Europe is of the valley of tears. The message he sent to a friend in Warsaw is, you will have to go through a valley of tears, but you will come out the other side. And he talked about the different time scales: constitutional reform that you could do in six months, economic reform might take six years or more, and the social foundations of liberty, which he optimistically put at sixty years. There was the problem of the different timescales. There were, he said, many diverse ways of moving forward within the constitution of liberty, and I quote, a hundred ways lead forward. Yet, the image is clearly of forward, of progress. That is to say: you went down into the valley, but then you would come up the other side. That is what many people believed. The trouble is that in 2009, in Central and Eastern Europe, people feel that they have reached the ridge of that valley, and instead of seeing the sunlit uplands, they see a descent into another valley in front of them. So, the question is: how does that lead us to reflect upon the revolution in Europe? In my view, the popular claim that 2009 is to capitalism what 1989 was to communism is absurdly hyperbolic. The question is rather: what does it tell us about the particular models of democratic capitalism that were adopted in post communist Europe, how they were adopted and the crisis that they faced? What does it tell us about the expectation of European solidarity within the European Union once you are inside it, which thus far has not been met? The hope was that you would reach the other side of the valley and you would find both some sort of an achieved democratic capitalism and security in the European Union. Now youre in the European Union, and how exactly is that helping? In what way is Europe the answer? The second Dahrendorf question I want to mention just briefly is an absolutely fundamental one, that of Europe and freedom. The question that Ralf and I have often talked about: of the relationship between the two, and particularly between the European Union and freedom. The observation that Ralf has made many times is, firstly, that freedom in the sense of political and civil liberties and human rights is institutionally more clearly anchored in the Council of Europe, the European Court of Human Rights, even in the OSCE, than, until recently, it has been in the institutions of the European Union. And secondly, and this is a key statement of his, that so far individual liberty has been best secured within the framework of the liberal constitutional nation state or, to be more precise, to avoid
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ON LIBERTY

misunderstanding, ltat nation, the State-nation; the nation in which belonging is defined by citizenship; the civic country of which Fritz Stern spoke a moment ago. Now, I take this to be an empirical and analytical statement, and not necessarily a normative or predictive one. But the question remains posed: what is the direct contribution of the European Union as a guarantor and enhancer of individual liberty? I think that is a question very much still of our time, as one follows the development of the constitutional debate which many in this room have participated in, persons such as Jrgen Habermas and Giuliano Amato who was, of course, Vice President of the original Constitutional Convention. And I think it is relevant in contexts that are quite new. How do people called Muslims that is to say, people, particularly in the second and third generation, of Muslim background and of Muslim faith come to feel at home in Europe, come to participate fully as citizens (what we call in short, integration)? So far, the answer has been that it has always gone through national integration and only then to the European. British Muslims are precisely British Muslims, and they are very British. And they defend their place in society in terms of a civic definition of Britain, and of Britishness. French Muslims are very French, German Muslims are very German. I remember a conversation in the outskirts of Paris, Seine St. Denis, a couple of years ago, with a very articulate French Muslim speaking perfect French. His name was Abdelaziz Eljaouhouri, and he said to me, the only problem I have with France is that it does not deliver on the promises the French Republic makes to me as a citizen. And he said, I have a message to Mr. Nicolas Sarkozy: moi, Abdelaziz Eljaouhouri, moi, je suis la France. I will never forget that moment: moi, je suis la France. That is a very interesting reflection on the Dahrendorf question, and not a pessimistic reflection at all. It is to say that in practice, so far, European Muslims establish and embrace their rights and duties as citizens in a free and open society through civic national integration, and only then move on to the European level. My third and final Dahrendorf question relates to the second. It is about the growing diversity of our societies: ethnic, cultural, religious, linguistic. Very often now, the demand is made that in the name of respect or intercultural dialogue or community cohesion we should minimise and even suppress these differences. Censorship is called for, or appeals are made to self-censorship in the name of respect and community cohesion and diminishing conflict. In the 1959 English edition of Ralf s book, Class and Class Conflict in Industrial Society, in a quite different context he concludes on the last page: in a free society, conflict may have lost much of its intensity and violence, but it is still there and it is there to stay. For, freedom in society means above all that we recognise the justice and the creativity of diversity,
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The Dahrendorf Questions

difference and conflict. That is a message also for our times, which is also in a way the message of Isaiah Berlin: that actually you do no service even to social harmony by this kind of forced suppression of conflict, which in the long term merely catalyses and worsens that conflict. And so, here again, I think there is a Dahrendorf question from a quite different context, fifty years ago, which is very much a question for our time. In conclusion, let me say just this. If you look at Ralf s biography and his bibliography, you might think that it is quite chequered, in the sense that it does very many different things. It goes to very many different places, it tackles many different topics. But the truth is that, when you understand his work and his life, there is an absolute consistency. There is a red thread that runs through it all. That red thread is his lifelong passion for liberty. Fritz talked about this and used the word passion, and it is the right word. The Reflections on the Revolution in Europe conclude very simply, I quote: Liberty above all is what I believe in. It is as simple as that. Liberty above all, is what I believe in, and I think that has been true ever since, as Jrgen Habermas said, the dissident schoolboy at the age of 15 was locked up in a Nazi prison camp. And that, I think, is what makes Ralf one of the great genuine and consistent liberal thinkers of our time. For that inspiration, Ralf, for that massive body of work, for all our wonderful conversations, for your friendship and for much else, thank you and happy birthday!

Contributions from the oor Sir Howard Davies Thank you, and could I add my happy birthday from the LSE! If I could just add one brief observation from the LSE perspective and then comment on one of the three Dahrendorf questions. You learn quite a lot about someone when you take over a job they previously had. One thing you learn is that many things in the LSE are attributed to Ralf; whether he did them or not, Im not sure [general laughter]. There are two striking things about the LSE: one is that people love being there, and if you ask them why, they say its because they have a lot of freedom. And indeed departmental autonomy and educational autonomy is very marked. But the second odd thing about the school is that it always seems to make a profit and, at least financially, it is extremely sound; this is also traced back to Ralf. The financial disciplines and management disciplines were very tight. So one thing he managed to create in the LSE, amongst the academics, is the illusion that they have freedom for they are everywhere in chains, financially! So that was a rather clever trick, Ralf, for which Im constantly grateful.
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ON LIBERTY

A comment, however, on your first question about Europe, and it has a slight financial dimension which perhaps doesnt surprise. Its quite interesting, I think, if you look at the European response to the current economic crisis. It throws a sharp focus on what is agreed at a European level and what we accept as European policymaking: we accept its legitimacy. That is to say, clearly we have rules and regulations that are in common and that includes the UK. Outside the UK it is accepted that interest rates may be settled at European level. But, of course, when you get to a financial crisis you dont just need rules and regulations and interest rates, you actually need money. You need taxpayer support if youre going to bail out a bank; you actually have to put the weight of the taxpayer behind it. And that of course we dont have. So at the centre of Europe there is no financial muscle to resolve this crisis at all, and so the financial muscle has had to be provided by domestic taxpayers and, in some cases as in the case of Iceland and the European Economic Area the taxpayer is inadequate. So we were allowing different rules, allowing people to do what they liked, on the basis that there was a taxpayer behind them. But actually the taxpayer was a man of straw, or a man of ice as it may be in this case. We lack a belief in the legitimacy of European political institutions which is sufficiently strong to allow those institutions to commit taxpayers money. The vivid representation of that is the trivial size of the European budget. I think one thing the crisis has exposed is how that budget and the financial capability of European institutions is simply too fragile to cope with questions when you need the financial muscle behind it. That is a big challenge we do need to address in Europe because clearly the absence of it has produced a lot of uncertainty and disappointment in countries that thought being a member of this union meant they would have something to fall back on. It has turned out that there hasnt been very much for them to fall back on, or what they had to fall back on has, in many cases, been rather a disappointment.

Sir Patrick Cormack I would like, as a Member of Parliament, to say how refreshing it is to be here this afternoon and to pay a tribute to somebody who gives parliament a good name! I have been very privileged to work with Ralf Dahrendorf and to admire him over the last 15 or 16 years. He helped to create one of the bridges crossing frontiers, to which Tim referred in the very beginning, through the Visiting Parliamentary Fellowships here at St. Antonys. Thats something that would never have happened without Ralf Dahrendorf s inspired leadership and determination. I worked with him too, on an award for responsible capitalism something to which he has
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The Dahrendorf Questions

dedicated so much of his life and in which he believes so passionately. He mentioned how the capitalist must be responsible, and he has given a lead in his writings and in his speeches, and in the work he did in the creation of that award. And also, he has been, until recently when not so well, a regular attendee of a group I am privileged to chair in parliament which is fighting to maintain a non-elected second chamber. And if there was ever somebody who illustrates the desirability of having people in parliament who are there because of their expertise and their knowledge and what they can truly contribute, and who are not tied to a narrow party-political creed, Ralf Dahrendorf is that man. He has adorned the second chamber in our country from the moment he made that marvellous maiden speech which was quoted from earlier. And I think that he is and I speak in the presence of other members of the House of Commons and of the House of Lords, including his boss the Convener of the Crossbench Peers the most truly remarkable member of parliament that I have ever met. He has given so much to our country without ever detracting from what hes given to the country of his birth. If ever there was a man who exemplified the virtues of dual citizenship, it is Ralf Dahrendorf. But, of course, implicit in everything that has been said by the others is that he is a citizen of the world, a true renaissance man, a man whom everybody who experienced his touch will always remember with gratitude and affection. I take issue with one remark from you, Tim. You talked about the red thread you associate Ralf with a red thread! I think its a golden one! I think that my favourite Ralf story will be of when a couple of years ago he was invested with the highest of German honours, the Order of Merit. He told me with quiet pride that when he received the insignia and turned it over, he found that the first person to wear this particular insignia was Bismarck. Ralf is a wonderful man in every sense, and it is a great privilege to be with you all and pay a tribute from parliament, of which I say he is the outstanding ornament of our time.

Lord (Adair) Turner Well, Id also obviously like to say a very fond happy birthday to Ralf. Ive known him, I think, for fourteen years now. It has been an incredibly rich experience of continually being challenged in my ideas in conversations with him. Unlike Sir Howard Davies, I havent done jobs which Ralf has done before. Instead I tend to concentrate on jobs which Sir Howard Davies has done. And so I dont know whether Id actually like to pick up on Howards comments, but they are very pertinent comments to the interchange of views that Ive had with Ralf.
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ON LIBERTY

I think of myself as pro-European. I think Ralf is a total European, but sometimes he has points of view on the EU architecture and structure which are, perhaps, a little bit more sceptical than I have been. Its very interesting to think about what the role of the EU in Europe is, the legitimacy of European Union and the questions which Tim put forward. I think these are very important issues in this financial crisis. These are very complex issues because the financial crisis raises real issues about democracy, legitimacy and elitist technocracy. One of the things you have to do in a financial crisis is actually make some elitist technocratic things which dont come obviously to democratic processes. We actually have to do some things that most parliamentarians would vote against, like bailing out banks in order to stop having a domino effect across the economy. And, indeed, if you dont do that, you have the most catastrophic impact on liberty. The Great Depression that drove the take-off of the Nazi party (and lets remember in 1929 the Nazi party got 10% of the votes) was an avoidable mistake where mistakes were made not by politicians but by the technocrats operating the gold standard, the monetary system. Its vitally important in this present environment that we dont make similar mistakes. Ive just come back from 4 days in the U.S. talking with policy makers, and I think theyre doing a very good job and theyre getting criticised for it. The Federal Reserve is getting criticised for doing things without congressional support, but they are the right things to do. Somehow, though they are being criticized, they will get away with doing things without congressional support. It is concerning whether in Europe we have the institutions capable of doing the necessary elitist technocratic and rather technical things to stop the financial crisis from circling in a downward direction. When you have these deep, technical things that you have to get right, how do you create institutions people trust enough to make the decisions even though youre not challenging them on a democratic basis day by day and if you do it wont help the quality of the decisions? Can we do this on a European level? And if we cant do that on a European level, are we doomed to the fact that in this recession and in all other recessions the U.S. will do a better job at pulling out of it quicker?

Professor Timothy Garton Ash Ladies and gentlemen, we have one last comment which comes from someone known to everyone here: Ralf Dahrendorf. Our honorand has, very unfortunately for such an occasion, got a very sore throat, so his voice is somewhat diminished. But I hope that with the help of a microphone we can persuade Ralf to say a few words.
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The Dahrendorf Questions

Professor Lord (Ralf) Dahrendorf Im speechless! In more ways than one! In fact, Im reminded of Karl Poppers 80th birthday which I organized at the LSE. I made a great speech praising my beloved teacher (in later years, friend) and everybody was looking at him, and in the end he got up, and, he said Thank you. Then he sat down. It was a great disappointment. And as he was leaving, he said: Ralf, I have spent days writing this speech which I have in my pocket. I forgot about it. This thought enlivens my speechlessness. I am deeply moved by what youve said. Im deeply moved. I am not easily bowled over, and I can distinguish, I hope. The greatest social thinker of my generation and more is Jrgen Habermas; and theres no comparing me to my friend Fritz Stern. He is one of the truly great scholars, and I am not a truly great scholar though Ive tried all sorts of things! I do share with Tim the 1989 experience, and 1989 for the two of us certainly for me was the great moment of freedom. And of all that has happened since, I still believe that 1989 marks one of these moments of progress which are only too rare. There is a lot more, but I would like to thank two others. One is Margaret, the Warden, for having made this possible with the help of Tim, and I am deeply grateful to St. Antonys. Its a great place, a wonderful place. What I said about 89 would not have been possible without St. Antonys, which welcomed new heroes almost every week. We did our little bit though it was not me but Tim who had the courage to do the smuggling! And Id like to thank Christiane, my wife, without whom I might not be here. The questions, they are numerous. But I will say one word a point which has concerned me in recent years. Jrgen Habermas has put his finger on it: I do increasingly believe that without the rule of law our belief in the mechanisms of democracy is just not good enough. The mechanisms of democracy are easily introduced but they dont stick unless there are certain rules basic rules of the game that are observed and enforced. I can only recommend to everybody to reread Jefferson and Madison, the authors of the Federalist Papers, who make this point forceful and clear. That, of course, is one of the greatest issues in east-central Europe. And Sir Patrick knows of this wonderfully I am deep down a parliamentarian: for parliamentary democracy and the way it works. I have reasons to be against an elected second chamber, but not against elections. Parliamentary democracy too needs the rule of law as a backbone, as one of the bases of liberty. Thank you very much. Thank you all very much for coming. It is a wonderful day for us to be here.
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Colloquium to mark the 80th birthday of Ralf Dahrendorf

2nd May 2009

Liberty and the Current Crisis

Timothy Garton Ash Welcome to the Dahrendorf room suitably enough for the Dahrendorf colloquium. I dont propose to waste much time on elaborate introductions, but welcome to the second part of our colloquium, which is more literally a colloquium today because its a conversation in this select group. We have a short list of participants here very brief but, I hope, helpful for identifications. Frank Field, unfortunately, was taken ill yesterday so has had to go home. We will be delighted to welcome at some point our colleague Paul Collier, the development economist, to join us in discussing development, and Leszek Koakowski will be joining us later in the morning. Now, there are obviously at least fifteen themes on liberty that emerge from Ralf s work, and indeed, we had a few other candidates initially proposed, including liberty and security which is an obvious candidate, or indeed
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ON LIBERTY

liberty in what one might call the new authoritarian capitalism. But Ralf and I have simply chosen three subjects that we thought it would be interesting to talk about. I should just say as you can see this is being recorded. We may do some sort of an edited transcript, so if anyone would like to say anything off the record, if for example... Giuliano Amato Please do it now. (general laughter) Timothy Garton Ash Im sure everyone will respect it and it will be excised from the record. So if the chairman of the Financial Services Authority wishes, for example, to tell us that Britain is broke, that will not appear. Martin Wolf Even if it is true. Or, particularly, since it is true. (general laughter) Timothy Garton Ash Particularly were it to be true. The format is very simple. We have a 10-15 minute introduction from one chosen speaker, and then we have 40-45 minutes for an entirely free-ranging conversation. To introduce our first session, which is on liberty and the current crisis, we are delighted to have someone who is I think without doubt one of the most influential economic commentators in the world: Martin Wolf. Martin Wolf First of all I am immensely honoured and delighted to be here at this occasion. Theres a strange family connection which you probably wouldnt know, but my father, who was you might well guess from my name a refugee from Vienna, was for some substantial number of years the London correspondent and then a columnist for Die Zeit so we have a connection which I hadnt realised. I am going to try, because this is such a distinguished group, to stick very ruthlessly to the shorter end of my remarks. And in the process, of course, I am going to do violence to every form of subtlety and analysis of this incredible to me incredible phenomenon, because I hadnt really expected to live through what I regard as quite possibly the most remarkable financial crisis I distinguish here from economic crisis that we have ever had. What happened last autumn, I think, has a global scale on no precedent; as a financial crisis it was vastly more severe than the 30s. Essentially Adair [Turner], of course, will be struggling with this the entire
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The Dahrendorf Questions

global financial system at its core disintegrated. It ceased to exist altogether. And, I have to say, that is not something that I had ever expected to happen, and it has forced us all to start thinking again about what we thought we knew about financial systems and economics. So I am going to, nonetheless, have to deal with this in the most simple way. But I would like to stress the immense significance of this event and, while I think we have avoided almost certainly a depression that follows it although that is not certain we have done so only because, essentially, the major governments of the world have assumed, on their own balance sheets, the balance sheets of the entire financial sector. And it is not very difficult to imagine circumstances in which that will break some or even all of them. So, this is a very, very significant event. Now, Im going to ask three questions. The first: did liberty cause the crisis, is it a consequence of freedom? The second: does the crisis threaten liberty? And the final one: where do we go from here? So first, did liberty cause the crisis? There is a very simple story which was, in essence, that decades of foolish and irresponsible deregulation by naive governments, supported by idiotic economists of course, all from Chicago (general laughter) and not from Oxford deregulated the system with the inevitable and shattering consequences we have just seen. I will give a quote about the consequences from something written on September 5th, 2007, It took foolish investors, foolish creditors and clever intermediaries, who persuaded the former to borrow what they could not afford and the latter to invest in what they did not understand to create the conditions for the current credit crisis. In other words, it was a crisis of deregulated folly. Of course, Im quoting myself. What I would think of as the Marxist-Minsky view is: well thats what capitalism does, if you deregulate and let people behave in this way, and modern behavioural economics in the hands of a man of extraordinary intellectual quality, Bob Schaller would say we are, in fact, simply giddy fools who need to be protected from themselves. So this story is that liberty caused the crisis. Now, I actually think this is part of the story, but is it all of the story? The answer to that seems to me quite clearly no. It is more complicated than that. If Hayek were here at this table he would say of course that it is an inevitable consequence of a fiat money system, an unanchored fiat money system with a government monopoly over the creation of money, with inflation targeting which allowed a long period of setting interest rates above all in the U.S., the most
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ON LIBERTY

important country in the system well below anybodys idea of the natural rate. And that is of course what did indeed happen in the early part of this decade. This had the inevitable consequences of an extraordinary combination of asset price bubbles and credit explosion. In fact it is the case that the last period of comparable monetary policy and credit explosion was the 20s. In fact, only in the last five years or so did private credit ratios in the U.S. match those of the 20s. And of course I would argue that not only is there much in that but this is also related though I wont have time to discuss it further to the emergence of the global imbalances and the extraordinary disruption caused by the nature of the Chinese growth pattern. But beyond this fundamental critique of monetary policy which of course is supported very strongly by a very non-Austrian economist, John Taylor of Stanford, who has written a book arguing exactly on those lines there are other features of our system in which government clearly played a big role in creating this crisis. The encouragement to debt in all our tax systems is striking. The extraordinary incentives provided to home ownership, particularly in the U.S. and particularly home ownership by people who could not in fact afford to buy a home. The basal rules, which again government regulation that were and are both pro-cyclical and ignore significant risk. Most fundamentally, the fact that has been revealed yet again, and is in any case perfectly obvious, that creditors to major financial institutions know that they are perfectly safe, which means that there is actually no reason for any sensibly run financial institution to have next to any equity, because the equity risk is borne by the state. And the fact is that they would do what any sensible people would do. So, my own view on this, the biggest of all questions, did liberty caused the crisis?. As we step back and look at this more closely, we will come to the conclusion that the scale of the breakdown, extraordinary though it is, essentially reflects acts both of commission and omission by governments, and what is needed now is not necessarily vastly more regulation but a completely different approach to, and structure of regulation which pays much more attention to the incentives of the people operating within the system. Of course regulation will always fail, since human beings, individually and even more it appears, collectively, make vast mistakes, especially about the inherently uncertain future, with nods to Keynes. And of course, the financial system is the part of the entire economic system, which is by its very nature, because of what it does, entirely oriented towards making bets on an uncertain future. So, thats what I have to say about did liberty cause the crisis? Does the crisis threaten liberty?
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The Dahrendorf Questions

I am going to suggest though there may well be more that there are four ways in which the crisis might threaten liberty. It may create not merely a much greater permanent presence of government, but a much more arbitrary government. I was struck by Ralf s remarks about the rule of law and you can certainly see in the US, some of the interventions that have been discussed are not yet enacted in the way they were approaching pay, the scandals over bonuses, the whole framework had very much of the feel of arbitrary government. The crisis may threaten globalisation, which is both a consequence of economic liberty and more important I think in very important cases has greatly increased liberty. While we would not regard China as in a way a free country, there is not the slightest doubt that the amount of liberty enjoyed by Chinese people has immeasurably increased in the last three decades, and I would argue that the opening of the Chinese economy with all its consequences was one of the great reasons for that spread of liberty, at a personal level at least, in China. It will increase poverty, and it may well in the process undermine democracy and the legitimacy of democracy, which is of course something that brings us back to our discussion yesterday of the 1930s, and of course it is a devastating blow to Western prestige, particularly for American prestige, and for all its enormous faults and the great mistakes of the last eight years, surely no-one would deny that the West, the United States, remains the closest thing we have to a full work of liberty in the world. I wont go further because I think Ive run out of time in elaborating those four points, I could easily do so, but it seems to me pretty clear that if we do not fix this, and fix it pretty well and pretty soon, that it does create a number of very significant dangers for what had previously been, to my mind, a very satisfactory spread of democracy and more liberal political systems around the world, certainly since 1989, and our own position in the West vis--vis the rest of the world will in the process be very significantly compromised. Thank you. Paul Collier Financial institutions are peculiar within the whole class of business institutions and business organisations, in that they are sitting on these huge potentially liquid assets, and so we know that the managers of these organisations if they are given a free hand loot. They would be crazy not to loot. And that is very different from, say, a manufacturing company, or something like that, where there are much stronger incentives to succeed by actually doing things that are good for the organisation. I think the move to high powered incentives for managers over the last two decades has been disastrous for the financial institutions. Economic theory
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very much believed in high powered incentives, it thought that was the solution to the problem of low manager motivation; management would be tough. But what it failed to appreciate was that the easiest way for a manager to make money in a financial institution is to bend the rules, and they just did not appreciate how soft the rules were. And so institutions which had functioned perfectly well for 150 years break within 10 years of high powered incentives being given to the managers. Thats my first point: the peculiar feature of looting in financial institutions, which doesnt generalise across; it is not a problem of capitalism, it is a problem of finance. My second point Ive only got three is that the housing stock is the big block of assets in the economy. The price of those assets is massively important as collateral for everything else, and basically we have established that the financial system cannot withstand a big fall in the price of this asset class, because it is collateral for so much. If we cannot withstand a big fall in the price of housing, the only thing you can do is you cannot stand a big rise in the price of housing, because what goes up comes down, and so volatility of house pricing is a disaster for the financial sector. Clearly what happened in Britain and America was that the short term political gains to allowing house prices to rise were what attracted politicians, and there was a very simple way to get house prices to rise, which was to remove the restrictions which set a multiple of income and which set a maximum of share of valuation. Once you lift those, you get a one-off big increase in prices which then creates a psychology of boom and momentum. So that is to my mind the second point. My third point, which I floated last night with Martin and Lord Turner certainly Lord Turner disagreed is that the intellectual bedrock for the deregulation of the last 15 years was two things: one was the belief that regulators would always be behind the curve, that regulation was forlorn. The information asymmetry between managers and regulators so favoured managers that regulation was forlorn. The other intellectual pillar was that in any case, regulation was unnecessary because in this panglossian world of rational and efficient markets, it didnt matter, the reputation of firms, of banks was enough to protect. Now, that second pillar was clearly, manifestly, wrong. I think the first pillar was right, that regulation will always be forlorn. What we are now doing is swinging back to regulation, but whats an alternative? Suppose that regulation really is fundamentally flawed. I think that we need a system which can retrospectively trace back and pin responsibility on people and punish them, once a bank has blown up. You cannot have negative wages, and so you cannot use the system of financial rewards and penalties which gets good behaviour. And so we have to criminalise that behaviour. To prove looting would be very difficult, but we do not need to. What I want to see is a law
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The Dahrendorf Questions

against bank slaughter, which will be the intellectual equivalent to manslaughter. Now with manslaughter, if I drive a car recklessly and kill somebody, nobody has to prove intention on my part. They just have to prove that an ordinary, reasonable person behind that wheel would not have done what I did. I think it is the same with banks. If we can show that reckless conduct of a bank would be a criminal offence then even if it takes ten years for a bank to blow up, and these guys are happily retired with their 8 million pension pots, you can still go back and jail them. Thats the one incentive that will prevent reckless behaviour: bankslaughter. Giuliano Amato I know not whether we need bankslaughter as a new crime in our legal systems. For sure, what has happened in the financial markets has been something which would never be allowed in any other market of manufacturing products. I happened to write my first comment on this crisis, when, you remember, Chinese milk producers were caught putting glue in their milk. And I noticed, quite obviously, that what a milk producer is not allowed to do, financial institutions are. For the simple reason that the structure titles include pieces of toxic assets that nobody can perceive and that remain and that somehow pollute the entire system. Now, can I say and this is really a question for Ralf that polluting the system is one of the expressions of my liberty? Martin Wolf was somehow underlining that there is an interaction between individual conduct and public rules. Individual conduct is heavily affected by the incentives and disincentives that come from the legal system. Now, our liberty is there, it is not before the rules. We do not need to go back to the old philosophical theories of the social contracts et cetera, but let us stick to our constitutional systems, to our rule of law-based systems. Liberty does not exist independently of the rules of the system it is a part of. Mostly in economics, I must declare my sort of convergence with the German ordo liberals. I worked on antitrust for several years of my life and I found the constitutional background offered by the ordo liberals an excellent background for understanding when there is liberty or private power, when there is an interaction of free initiatives and when there is an abuse of dominant positions. Now, it is quite clear for me that the interaction that we had in these so-called financial markets was the wrong one. So, my answer is the same as the one Martin gave; it is not liberty, it is that interaction that has not worked because conduct was admitted that necessarily could lead to this kind of disaster. Lets say, we think that market freedom exists as long as the price of the good, or service that is being sold is the outcome of the balance between demand and supply in a transparent context. When you allow over-the-counter titles to be exchanged throughout the market
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with nobody actually knowing their value, it means that you are violating the basic rules of the free market. Because the market is free as long as the buyer is perfectly aware of the price that has to be transparently declared. To the contrary there were products that were supposed to be exchanged bilaterally between the seller and the buyer, and that were offered to the savers throughout the world without any obstacle in the existing public regulations. This is the beginning of the troubled assets saga. When you reach the point that a company such as Lehman goes bankrupt because nobody knows, not even its management, the real value of its assets, there is something that has not worked and this something is not liberty. Gerhard Casper Well, it follows directly, because I thought, as we were talking about the various possible causes, besides foolishness and greed, ignorance was really a very, very important factor. I was close to a troubled German bank last year, and what impressed me most was the ignorance at most management levels of what was happening at the bank. Not only did top management not understand the toxic assets it had and the quality of those assets, but actually understanding was mostly beyond their reach. There is a governance problem here with respect to private institutions, because so many decisions at this bank were made at a middle level and management did not control them. And they had to be made with tremendous speed, often, which leads me to one other factor, that I think we often underestimate. Yes, greed was clearly there, the looting of assets may have been a factor, but I have been much more impressed by the sheer element of competition. Bank X was having a fantastic rate of return, therefore Bank Y also had to have a fantastic rate of return. The shareholders wanted money and in that sense there was an element of greed, but there was also simply the element of, how are you people performing...why can they do so much better? I saw it, for instance, from a university perspective. At Yale, David Swensen did extremely well in managing the endowment through investments in sophisticated assets. Well, other elite American universities decided to follow similar strategies, and now we all have see large declines in our endowments because of the nature of the assets we invested in. I am not sure I know how to resolve the liberty aspect, and we will hear more about this, but very simply, ignorance is a very major factor, and to punish ignorance is almost impossible for the legal system. Therefore there will not be real accountability.

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Robert Skidelsky One of the things that struck me when Martin was speaking was that a lot of the debate about the causes of this crisisis a rerun of the debates about the causes of the Great Depression itself. It somehow makes one wonder whether there is progress in economics. I do see that there is a lot more maths involved in the modern debate, but the principles are very similar. One of the key debates about the causes of the 1929 crisis was the debate between what we might call the money glut and the savings glut theories of the crisis. Now, Martin referred to Hayek, the Hayekians and their take on the current crisis, but the original Hayek, Hayek himself, had this view about the causes of the 1929 crash. The Fed, he thought, was holding the market rate of interest below the natural rate, and in fact what should have been happening in the United States was that prices should have been falling to allow for the technological innovation taking place, but in fact they had an inflation target if you like, which was to keep prices steady, and that meant that there was inflation going on. Now Hayek believed that the cause of that was fiat money, and the only remedy for that was to have a 100% commodity standard, I mean a proper gold standard, and it was the abandonment of that which enabled this monetary incontinence to develop. Now, on the other side, of course, the Keynesian analysis of this kind of crisis would be a tendency for saving to run ahead of investment, I mean thats putting it not very technically. And again, one has that take on this crisis by those who believe that it was somehow a disturbance between the global savings and global investment, and particularly Chinese saving and American investment, that lay at the cause of the present crisis. Now, that could be combined with a monetary bluff thesis in the way that Martin has said, which is that the excess surplus Chinese savings force down world real interest rates and thus enable the credit explosion in the United States, but basically there are these two views on the crisis and I think they are just a rerun of the way that people tried to analyse the earlier depression. So that is my first point, I think that is interesting, it raises the question of how much progress there is in economic understanding. My second point relates to regulation. I rather favour the British common law tradition in this, which is that everything is allowed that is not explicitly forbidden. I would be against the tendency to increase regulation, I would rather try to draw a line, which I think was very much in Keynes, between risk and uncertainty. I think the role of government is to basically guard against uncertainty, and to take precautions against uncertainty, or in language that is now very familiar, take precautions against black swans, try to mitigate their impact as far as you can. In
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risky activities however, I think it is up to the people to take the risk themselves, and I would not want to extend the sphere of regulation into activities which are risky. People should suffer the consequences of their bets. Where the consequences of their bets are individual failure or individual ruin, well that is just part of the system; we live like that. I would say that uncertainty is something that is the function of the state to guard people against, because that is outside the area which can be accurately priced in any way. Timothy Garton Ash The question of law and what law can or cannot do in this circumstance is clearly on the table; the position taken by Paul Collier and what Gerhard Casper said. Who sets interest rates, to put it in absolute laymans terms, and on what basis, also seems to me an interesting one. Then, the broader question, a very broad question, which I think will go through the whole morning: the role of the state. Adair Turner Well, I wanted to pick up Paul Colliers points because they made me think about various things: one, this thing about financial institutions and incentives, and the other about should we, sort of, hang the bankers or put them in prison. On incentives, I do think it is fundamental, I think trying to understand the use of your term, looting. There is undoubtedly the potential in financial institutions, I think more than other sectors in the economy, for rent extraction, for the size of the sector to grow beyond its economically useful function of services to the real economy. And of course, for some economists, particularly those from Chicago, this is difficult to understand because why could it possibly occur where there wasnt a scarce resource like land or mineral resources, how do you get rent extraction, and its something to do with the asymmetry of information between producers and consumers, and the opacity et cetera. And then of course, it has this particular feature that there is something about banks where a large amount of that rent extraction does not actually end up in the hands of the shareholders of those banks, it ends up in the hands of the individuals of those banks, and this is the fact that the way that we get paid a lot in life has always been to attach yourself to something where the return can apparently be immediately identified, and we all know that throughout history a lot of people got very, very rich by getting very small percentages of very large figures. You know, people who introduced you to the Sheikh who had the oil and said, Oh, Im going to take a quarter per cent, and ended up as very rich people. That in a sense is what bankers do, they attach themselves to something where there is apparent transparency that by the end of the year I have made you a lot of money in a way that is not clear for, you know, a research scientist
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The Dahrendorf Questions

of a pharmaceutical company have you made the money yet or not, you cannot measure it, and you do it in an area where there is a large amount of rent extraction. I think this is the sort of theory of why bankers get paid quite such huge amounts of money. But what can we do about it? I do absolutely agree that there is something about the philosophy of the way the world has gone down the route of high-powered incentives. I do not think it is just a problem within banking, and it is quite a major issue about whether we have been quite so right to itemise bonuses and performance-related pay. It is a problem, I think, across a lot of industry. An awful lot of incentives for top management take the form of explicit or implicit options, and if you are paid with an option, what you ought to do is to seal your bets. Basically, if you are a senior executive of a company and you have an option whereby if it goes up you will do well, but if it goes down nobody takes the money off you, you just bet, and sometime in your career, one of these will pay off. I think that is why, for instance, not just in banking but in the rest of the economy, you get a deal orientation. You focus on doing the transformational deal, rather than simply running your company well. But there are some general problems across the economy to do with incentives, options and incentives, and they are particularly important in banking. Do we deal with this by trying to identify the people who caused it, or do we deal with it by trusting regulators and, can you trust regulators to get it right? Now, I am going to take a different point of view, and I start with the observation that when we try and understand what went wrong in 1929, history does not actually record a set of individual bankers I mean it does sometimes, for just anecdotal stories of they made a lot of money and they chucked themselves off window ledges but theres actually almost no serious economic historian who tried to trace it back to banker A was incredibly greedy, and bank X was very recklessly run. We actually tried to work out what occurred in terms of the technical mistakes which were made within the operation of the gold standard, the policy mistakes which were made by the Federal Reserve, et cetera. I suspect that thats right. That in a sense, within the causation of history, the actual individual bankers were working within a system which they did not significantly influence. I certainly think that just as an operational thing, that this recklessness will not work. Let me give you an example, we recently had one of our building societies go bankrupt, actually it has not gone bankrupt and this is an important point to realise. We had resolved it, we had decided that it might have problems in the next two
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years and therefore we would need to take it into public custodianship. But why did they get into trouble? Well, they got into trouble because they extended their loan books into commercial real estate. They were not allowed to do that before 1997, but parliament passed an act in 1997, saying that it was a good idea that building societies should be allowed into commercial real estate, because they thought that this would introduce competition into the commercial real estate market, and indeed, that this would be useful diversification of building society balance sheets, because previously they were entirely focused on primary residential real estate, well, when all that goes well they wanted to diversify. So the management of this building society made loans to hotels in Glasgow and to shopping precincts in Edinburgh, et cetera. Now, who was reckless in this area? Was it the management of this particular building society? Or was it, rather, parliament? Who frankly made in retrospect what was a really silly decision, and I suspect its really parliament who was to blame for this, I think the policy was wrong, not the individual behaviour of the management of that bank, who, within the context of it, made what were not completely daft decisions. I mean, they may have been slightly less good decisions than some other building societies, but the fundamental problem was the freedom which was allowed to them. So, I do think that actually it is the overall rules of the game and Paul, you are saying that the regulators will always be behind the curve; they never get it right. I think we can, by some very strong measures, spread more capital across the system, counter-cyclical capital simply loan-to-value ratios in mortgages et cetera, I think we can simply reduce the volatility of the overall system, and I think we are more likely to by a set of designed high-impact levers where we know that what we are doing is we are simply taking a system which has volatility, we are identifying some things that would tend to reduce volatility, and we are pulling those levers to reduce the volatility of the system. I think that is what we have to do. Timothy Garton Ash Adair, can I just pursue your first point, when you said there is this problem about high-level incentives, betting options, deal orientation. What is to be done about that, if not using the law, or, what Martin said at the beginning, arbitrary government intervention? If you rule out both of those, what is left...? Adair Turner It is intriguing, this, because almost every intervention that we have made so far has made this worse. I think it is absolutely clear that the processes which were
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The Dahrendorf Questions

pushed very strongly in the mid- to late-nineties in Britain, which depended on increased disclosure of top management incentives, generated a comparative status process. It produced a race for the top. Absolutely clearly. It is clear that disclosure completely backfired, because fundamentally, very high-paid business people are driven, up to a certain level, by absolute income, but they all get to that level pretty quickly. Beyond that, they are driven by comparative status. This is the fundamental thing that drives them, and it is quite extraordinary. When you get really, really rich people saying it is unfair that X is paid five million and I am paid four million, and they actually use words like unfair to adjust wage concepts applied at the level of four million a year. And they are like that. Therefore, if you produce league tables which enable you to see where you are, and of course, what you get is that every Chief Executive says, well, of course, I and my fellow executives ought to be paid in the top quartile because we are very good people. How could you possibly say that I am not in the top quartile? It does not take a genius to realise that if every remuneration committee in the country is trying to pay their people in the top quartile, you have an automatic computer accelerator which year by year will increase the total number of remuneration. So, the answer is, I dont know; it is very difficult. What we are trying to do in the Financial Services Authority, and what has been agreed across the world is to force financial institutions to integrate risk considerations into their design of incentive structures. So we are trying to say that if you do pay somebody a bonus, you have got to have a claw-back capability; you have got to be able to not actually pay it to them for three years, and you have got to, in that three years, really work out whether the money that looked as if it was there on December 31, 2007, is there, or whether it turned out post-facto to be toxic. This is the concept that we are trying to use, but we will have to see how effective we will be on that. [Seminar Participant] Youll pay and then claw back, rather than say that youll only pay after a few years? Adair Turner Oh no, you will be told that you have a bonus, but it will be separated off and it will be subject to claw-back on the basis of what subsequently occurs. But our ability to enforce that, as you can understand, depends on getting an international agreement to this, because otherwise it is as easy as anything for somebody, you know, where were they getting paid; they were moving between different financial centres. The
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world has just agreed: the Financial Stability Forum has agreed a set of principles of remuneration, and we have all sat around the table and we have said that we are going to impose these across the world, and we will try our best, but it is... [Seminar Participant] It is still a one-way bet. Adair Turner Yes, which is why I go back to We will try something on that, but it will be less powerful than more capital across the system. One of the most fundamental things that went wrong in the last ten years is that we did not demand enough capital against the trading activities of banks. Now that partly gets to the has there been progress in economics? question, because part of the reason why we did not demand a lot of capital against the trading books of banks was that lots of very, very clever financial economists, running all sorts of mathematical models, were convinced that there was not much risk in the trading books of banks, because you had this trading position but you would always be able to sell it within ten days, therefore you only needed enough capital to cover the ten day movement in prices. I think that one of the interesting things that I would certainly be interested in hearing Partha on, is that there is a general proposition that some of economics took a significant wrong turn into an incredibly mathematically focused path, finance-focused and apparently mathematically sophisticated, but actually mathematically not sophisticated because it was not making the distinction between risk and uncertainty, it was assuming that things were mathematically modelled on risk when they were actually inherent uncertainties. Giuliano Amato If you allow just a word: rating agencies, that we have ignored this morning, were giving their rates on the basis of mathematical models and on the basis of past performances and completely ignored the titles and their prices. This is nothing to do with liberty again. Partha Dasgupta As we are here to talk about Liberty, Im not about to take up the challenge of defending economics today. Let me instead comment on the risk/uncertainty distinction that comes up often in discussions. In recent years, economists have shown that even within the confines of risk, there are serious institutional problems
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The Dahrendorf Questions

societies need to attend to. The insurance industry pays particular attention to moral hazard and adverse selection. As you all know, those problems arise because people dont possess the same information. The presence of either moral hazard or adverse selection is a form of market failure (e.g., the phenomenon of regulatory capture). A frequently discussed example of moral hazard arises from the fact that the risks a fund manager takes are unobservable to those who contribute to the fund. Economists advocate that remuneration should be based on observable performance. In agriculture piece rate wages are an example. In earlier times piece rates were a commonplace because it was found too costly by landowners to monitor workers effort. With mechanization machines set the pace even in agriculture. So piece rates were not needed. In financial markets a different problem arises: how are investors to know the risks fund managers are taking. Like agricultural piece rates, remuneration according to performance suggests itself. The tricky part, however, is to specify performance. Thats what Adair was, rightly, alluding to. A fund manager takes actions that have consequences this year, next year, the year following, and so forth. Economists would recommend that bonuses should be spread out over many periods, not just one. Otherwise the fund manager would invest in high short term returns allied to large future risks in the return. We have seen that at work in recent months. So you shouldnt fault economists if the financial sector chooses to reward its employees on the basis of their short run performance only. The mathematical models deployed for analysing and forecasting the performance of financial markets (e.g. the markets for derivatives) have been greatly fashioned by people who have never studied economics (e.g. ex theoretical-physicists) and financial econometricians. If you read standard texts on the economics of finance, you will get a very different picture of how economists go about trying to understand financial markets. It is a commonplace to complain about the extent to which mathematics is deployed in economics. Interestingly, over the years the economics profession as a whole has become less mathematical, not more mathematical. The problem is not the need for reliance on mathematics (economics deals with quantitative objects, you cant possibly avoid mathematics), what you should be complaining about, when you come across them, are bad economic models. Economists in recent decades have become a great deal more catholic (some would say bold) in their taste. We now work on applied problems (even when doing theory) that were once the domain of anthropology, ecology, demography, geography and the nutrition and political sciences. I know that fact will please Ralf, who used to be bemused by the kinds of problems I and my colleagues in the Economics Department at the LSE used to work on in the 1970s.

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Martin Wolf What is wonderful about this discussion is that it has allowed us to see how many different ways there are of looking at and thinking about this crisis, and its scale, and what we should do about it. I would actually want, as I did not have time to discuss this, to introduce another thing that worries me which is related to Roberts point about what the state is for. I am reasonably sure that it is unfortunately impossible to design a system, I cant think of a way of doing it, which allows the state to intervene only to deal with uncertainty, and not risk, i.e. if enough people engage in risky ventures and they all blow up, the state will intervene. I would just like to focus on this issue, it seems to me we have not stretched it enough. The main characteristic of the financial system, the central part of any market system is that when a set of bets are made, and we do not really need to define for the moment why they made these bets maybe related to monetary policy mistakes, all these sorts of things, and we have talked about incentives. And they go wrong on a sufficiently large scale and they have gone wrong on a simply sensational scale. The entire system is picked up by the state; i.e. by tax payers. Directly, the cost of this will be seen in future high taxes for a generation, which is certainly, I would say, a significant diminution of freedom. It is going to be difficult to know at the moment how much this is going to cost, we will not know at the end. It is actually quite normal in other financial crises, just looking at the impact on public debt, and ignoring recessions and so forth, both the direct cost of bailing out the financial system, and the indirect cost of the debt induced by the recessions that followed the collapse, to increase public debt ratios by 50 percentage points of GDP or much more. So, this is a massive public cost. It seems to me the starting point, therefore, is that you have to regard the financial system as in some fundamental sense part of the state; it is ineluctable that it is part of the state. And this is very worrying if you are a liberal, because you do not want the public sector to be such a huge chunk of the economy but it is. I have made this joke many times, I made this remark ten years ago, after the Asian crisis: you should always take the view that a man it is always a man Im afraid who is running a bank is actually a civil servant. Unfortunately a civil servant with some very defective incentives, but that is actually, who they are working for. Now, Adair has been appointed, as it were, our civil servant, to look after these other civil servants with a very small number of people. Now, I do not have an answer to this, and I have thought about this a lot recently, and I think there are a number of ways
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The Dahrendorf Questions

of thinking about it. But I think it creates actually a very profound problem for our thinking about what the market system is, because it means that here we have this set of institutions, which have made, as it were, the fundamental decisions about how we should allocate our resources towards the future, which every serious analyst of the economy would say is the core decision in a dynamic economy, and they are actually all doing it at the expense, at the risk of the taxpayer in general. So they are, as I say, a branch of the state. Either we change that in such a way that we can create a credible system which allows the state to say, you are going to all collapse, which we have not been able to do for a hundred years, roughly, and this is why Hayek was so intensely involved in this debate of course, for fairly obvious reasons. Or we have to say that is in fact the case, in which case we really have to go through pretty ruthlessly and start asking ourselves, well, to what extent are the incentives under which they operate, or the asymmetric information, such that they are likely to take our interest into account, and is it enough just to raise their capital requirements, I think there are some problems with that. I just want to put this in the very broadest sense. What we are talking about here is in the most profound way the relationship of the core of the market system to the state, and what we have been reminded of in this crisis is that the interrelationship; they are siamese twins and in that fundamental respect, we are not merely nowhere near, we are in a completely different universe from the universe in which the government does its thing, sets rules in a general way, and the market goes and does its thing. That is not how it works. And the fact that that is not how it works should be very troublesome to serious liberals. Timothy Garton Ash Can we spend a moment on that; it is such an interesting thought. Could one at least partially reformulate your question to say, can you have democratic capitalism with nationalised banks? Martin Wolf We have quasi nationalised banks, now they are actually nationalised. The answer to that is that its a very, very good question; I do not know the answer. In the case of the US, and I would expect it to happen here that does leave one of many, many consequences is of course, inevitably, the government will be tempted, and I put it very gently, to use its power, which is now absolute over the allocation of resources, to favour those whom it wishes to favour. This is not a liberal situation, and it is why there is quite understandable reluctance in the US to nationalise banks, but in fact they are nationalising banks.
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Giuliano Amato I call this the animal spirits of public ownership. And it is unavoidable. Ivan Krastev A very short question from somebody who does not know anything about economics. Is it the case that the welfare state was dismantled or is it the case that it was radically transformed, with the banks taking the role played by the welfare institutions two or three decades ago? The only way not to get credit in the US in the 1990s was if you were dead. So, the easy and cheap credits created a parallel welfare system that kept the social peace and kept the system going. What we see today is the collapse of this shadow welfare state centred on the loose lending practices of the banks. So, nationalization of the banks was nothing else but nationalization of this second welfare system. Martin Wolf So it is an ex-post welfare system? Ivan Krastev Yes, exactly. Fritz Stern Just a very quick footnote, really; a comment. I have learnt a great deal in the discussion, and I have only one question in the back of my mind. Is it really correct to talk about what has gone on in the last couple of years or so merely as a financial crisis? Of course it is a financial crisis, but does it not involve much more, and in retrospect, lets say, in a few years, are people not going to say that it was also a kind of moral and psychological crisis, which somehow we have to deal with, explain to people, and so on. In other words, it does seem to me that the conversation, enormously important as it is, leaves out the fact that you are dealing with people. With people, particularly lets say, in the United States, who have developed certain attitudes towards debt, towards wealth, towards honour in other words it is a far-reaching human problem, I think, which was revealed by this economic crisis. Timothy Garton Ash I am very glad, Fritz, that you mentioned the word moral. Wen Jiaobao gave an extraordinary interview to Fareed Zakaria on CNN, some of you may have seen it, in which he said, I think probably untruthfully, but nonetheless interestingly, that he always travelled with two books by Adam Smith the second being The Theory
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The Dahrendorf Questions

of Moral Sentiments and that the Chinese model attempted to combine the two. The second Adam Smith should perhaps be with us at the table. Adair Turner Two points, the first one is: amid this crisis are we overstating how big the fundamental crisis is, or our inability to put it right? Let me just throw out this thought. For sixty years, up until last year, the Western economies, the developed economies had an evolving private banking and private financial system, which worked not badly, which did the allocation of credit and the intermediation of credit and maturity transformation. It undoubtedly had its ups and downs, it had its cycles, it has played its roles in its cycles, it has had individual bank failures; but it was not perceived as the self-generating driver of our major economic problems. We, correctly I think, thought that our major economic problems derived from over-powerful trade unions or under-disciplined financial or fiscal policy, or, you know, rigidities in markets et cetera, this is the first one in sixty years where we have said that the fundamental driver was inside the financial system. So we must be very, very careful of assuming from a one in sixty year event that it is a one in sixty year event because the longer the period, the less certainly you can derive the probability distribution from the observation but it is certainly an infrequent event, and it is an infrequent event from which we can learn. And we can learn what it was that we did wrong in the last fifteen years. And maybe we can restructure another system now, which will give us another century before it does it again. And maybe, if it is another century before it does it again, although when it happens it is a big cost, actually, it is better to have the private enterprise system doing this, and then once a century we have whatever the costs are, and maybe the socially optimal result, seen over many centuries is that once every century you do have a problem which you have to mop up. I mean, you quoted from Ralf yesterday the thing about conflict, that we have to accept conflict. Well, maybe we have to expect an element of turbulence, maybe we have to accept that, you know, we are not going to have a perfect system, and if the imperfection is a one in a century blow-up which produces a fall of GDP per capita of three or four per cent, but not more than that, maybe seen in a century-wide profile thats a perfectly good trade-off. So, lets just be careful of ending up with the whole system is bust, it is the end of the world. Secondly, I think the moral and psychological thing it does raise some very intriguing things about capitalism. Is it important that entrepreneurs and managers believe that what they are doing is morally useful, or is it ok that large numbers of
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people, when explaining why did you do what you do?, can simply say, well, because people pay me for it. Is it ok for a large number of people to fundamentally say, there exists a poker game in town called debt interest trading, it seems to be a legal poker game, I am quite good at it, you know, I did maths at university, you know, the payoff is a couple of million a year, so Ill go and do it. Or is there something corrosive if very large numbers of people are doing that? I do not know, but I think it is quite an interesting question to ask. Martin Wolf I just want to comment on that because I am very with you on this, and it links to this asymmetric information stuff and all the rest of it. You know, why dont we live in Somalia, which is by the way, a completely rational profit maximising society. But one answer is that they dont have any government, of course. But the point I want to make is that if you live in a world of extremely complex financial and economic relationships I am not going to talk about things other than the world we live in in which asymmetric information type problems are pervasive, there are many ways for societies to cope with them. But it seems to me, it is pretty obvious to any normal human being, that the best way to cope with this is a rational belief that you are dealing with trustworthy people. That is to say, they are not going to cheat you. And if you are convinced that they will cheat you, and I think there are places in the world where people are rationally convinced of this, lots of profitable trades will never happen. And you will be very poor. In fact the most certain way to be very poor it seems to me, and Paul Collier has written very interesting stuff in this area is to live in a society where you are absolutely sure that the person on the opposite side of the table is only thinking about how to maximise his or her gain against you. So, I believe that values are very valuable. This is pretty trivial and obvious banal stuff, and I should have thought that this is Weber, isnt it? Then other great people in your [Ralf Dahrendorf s] intellectual tradition. So, it seems to me that if we have created as the dominant ethos of our economy the view that the right thing to do is whatever is in your interests and the devil take the hindmost, and everybody in the economy starts to believe that is the case, we will impoverish ourselves, and that is very damaging, and it is why I take a very different view from Adair. If we now find that as a result of these activities hundreds of millions of people feel they are unjustly impoverished, which is what I think they are going to feel, the bitterness associated with that will be yet another dimension of this, so yes, I do think that economists, by the way they taught people to behave... Then we will
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know there is very good research on the fact that people have been taught economics as opposed to other more civilised disciplines and emerged from university much more amoral than others. There is some very good research on this by the way. One of the things economists have done, and Chicago in particular, has been to pollute the moral universe, and this is a very big issue, I really do think it is a very big issue. [Unidentied Participant] It is a conspiracy to turn people into the kind of people who believe the models that the Chicago school turn out ... Martin Wolf And then when they do it, of course, the model does ultimately blow up, so it does disprove it. But I believe Professor Sterns point is absolutely central. Ralf Dahrendorf Directly related to that: a simple question. Are we talking about a worldwide or a global issue? In my view, climate change is a global issue which affects everybody, and which requires global action. Is this global, or is it something that started somewhere and which can be ended somewhere and where therefore we do not need a Big Bang what we need is action in certain strategic places. It seems to me a distinction which, for the policies we adopt, is absolutely crucial, and in my view this is the intellectual mistake Gordon Brown made with G20: to argue that it is global. I do not believe it is in the same sense global as climate change. I would be particularly interested in Martins and Adairs comments. Adair said something earlier about this. Fortunately for you, I cannot explain in greater detail what I mean; but for the issue of liberty, this is quite crucial. Adair Turner It is a very interesting way to put the question. I think the answer is that the extent to which it is a global issue rather than a worldwide issue is one of the choices that we make, and that we have trade-offs to make here. Unlike with climate change, which is inherently global because of the nature of the physical problem, it would be possible for us to say that we wish this problem as much as possible to be nation by nation or continent by continent, and that in pursuit of that, we are perfectly willing to do things which actually slightly decrease the degree of global flow of capital or trade etc. And this is a very real debate. For instance, we at the moment have large global banks which up until now we have fundamentally allowed to operate as global
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institutions and to move money around the world, and we have looked to their soundness on a global basis, and that is what the FSA [the UK Financial Services Authority] did in relation to Lehman Brothers. We relied on the American regulators to tell us whether Lehman Brothers were fine, and one of the responses to what has occurred is that we are not going to do that in the future, we are going to demand the local operation of each global bank to be effectively separately capitalised, with separate liquidity, such that it can survive. And this issue of whether we, as it were, say you can be a global holding company but they are separate banks is quite important. I think the thing that we do not understand and I said this at a speech just last Monday is: is there a macro-economic disadvantage of that? The moment you say that to these banks, they will say, no, but you are decreasing our costs, you are decreasing our flexibility and you are getting in the way of the global flow of trade, and the thing that I have not got my brain around is, is that true? Is there something about it? It is undoubtedly true that a fundamental problem that we are struggling with is a global financial system without a global government. Theres a wonderful phrase of Mervyn Kings: global banks are global in life but national in death. When they die they are supported by national governments, and when they die national bankruptcy laws, which national entity you had your specific relationship with matters to your position. So one of the fundamental problems we have been struggling with is global finance without a global government, or without global governance, or even without a global treaty organisation like the WTO. There is then one of two directions to go. One of which is to increasingly renationalise it, which is more local capital, more local liquidity, more focus on the local entity, and the other is more global, more intense supervision of supervisors, more intense agreement on global rules. And what do we actually do? Well, we are doing a bit of both. We are doing a bit of, sort of, belt and braces. We are trying to intensify the global cooperation on these issues, both in terms of policy and in terms of what we actually do month by month in the supervision of large global institutions, but we are also increasing the extent to which we try to make sure that our own financial systems have a robustness even against problems in the rest of the world. So we are going in both directions simultaneously. Martin Wolf Well, all I want to say is that I think this brings us very well to the big question of the future of a global economy. The biggest point in my book on globalisation a pretty obvious one is we have created a global economy without global institutions or global politics, and it is underpinned by nation states, and such coordination as
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there is comes indeed, as Professor Habermas has said, from treaties and some fairly weak international institutions. The WTO is probably the most effective of these, and in the area of finance the institutions we have are not very effective. But in general, the reason that is worth saying is that we only realise that this is a big problem when something really goes wrong most of the time it isnt. It is clearly not global like global warming, in the sense that it is not something we cannot possibly deal with without all agreeing to do something, but it is clearly not national either, because as Adair has said, these institutions clearly provide global services, i.e. they provide services for much of the world. And the reason we have discovered that this is a problem is that they are indeed national in death, in other words, as I think Professor Habermas said yesterday ultimately it is national taxpayers that bear the burden, as we have discussed, and when they do so, they expect them to provide national services. That is not going to change. We are not going to create a global fisc that means we are going to deglobalise the financial global system. We have to deglobalise the financial system, and the question is how we can do that with minimal damage to the global economy. That is a very big challenge for Adair and his colleagues in the global financial system. But to give just one aspect of that: one of the things I havent written about, but I have been thinking about it follows logically from what I was saying, and this is the last point I am going to make, that only countries with very big tax resources can afford global financial institutions, and that basically means, I am afraid, the United States. Because they can bankrupt any other country if they make a big enough mess. Now this time, our bank balance sheets were only five times GDP. And as the world grows, and China grows, and HSBC becomes the biggest bank in China I am not saying it will, but it might then we might become Iceland. The Eurozone as a whole could do so if it became a fiscal authority, but it is very far indeed from that, for reasons that Ralf knows better than I do. Now, of course, if the United States did become the home of all the globalised banks, the United States would object passionately to Londons continuing its game of having the same regulatory regime as the US, but looser. Since this is simply a way of undermining the American fiscal position. And they will quite rightly say, this is a hostile act, you are not allowed to do this. I think we are just at the beginning of this game, but it has the most profound implications for the way the system will work, and all of them are very uncomfortable to people like me.

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Liberty, Poverty and Development

Partha Dasgupta I have been given the task of discussing what we know about the links, if there are any, between political and civil liberties and economic development in poor countries. There are many ways to open a discussion on this most intriguing of problems in the social sciences. Here I follow the one I took in the late 1980s. When teaching at the LSE, I was greatly influenced by Ralf s writings on the subject; but it took me some years before I studied democracy and development. You should know that for many decades (until the early 1990s), political and civil liberties sat uneasily in development discourses. Historians of economic thought will not be kind to professional development economists for that neglect. All sorts of ghastly regimes held sway in sub-Saharan Africa through the 1960s-80s, but the only ones development economists denounced were South Africa and Rhodesia. Textbooks had nothing to say about political freedom and civil liberties. Food before Freedom was a frequent slogan. Given that it was a slogan, it must have been taken for granted that there is conflict between freedom and development. Development was taken to mean increases in material wellbeing GNP usually never mind how outrageous a countrys political authorities or civic culture. It is possible that differences in social and economic developments in China and India had a lot to do with the viewpoint I have just recalled. In view of their sheer sizes, those two countries cant but dazzle the intellectual eye. I am circulating a table that summarizes contemporary figures for economic performance and political and civil liberties in China and India (figure 1). The table suggests that societies, at least when they are materially poor, face a cruel choice: between economic development, on the one hand, and political and civil liberties, on the
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other. The last two rows, containing figures for the two types of liberties during the mid 1990s, are taken from Freedom House, an organization that publishes such figures annually. By the way, for those who are not used to the Freedom House indices, the higher the number, the worse it is. The indices run from 1 to 7. 7 is bad news, while 1 is outstanding news. Notice that India scores well, relative to China, on political and civil liberties. India also does reasonably well in terms of income inequality. However, India lags behind China in all other indices of well-being, including income per head, life expectancy, and literacy. So there would seem to be a tension between political and civil rights, on the one hand, and socio-economic rights, on the other.

Figure 1 Contemporary China and India: Comparative Statistics

Population (billions) 1.32 1.17 GDP per head in international dollars (PPP) (For comparison: Sweden: $40,850) Annual % growth rate in GDP Gini coecient of income Literacy rate (male/female) per 100 adults Ratio of girls to boys in primary & secondary schools Doctors per 1000 people Total fertility rate Life expectancy at birth (years) Infant mortality rate (per 1000 infants) % of children under 5 underweight % of population below $1 a day % of population below $2 a day Corruption index* Media freedom index (rank out of 173 countries) Political/Civil liberties index, 1996. Range: 1-7 China 4,660 11 0.45 95/87 1 1.4 1.8 73 24 7 16 47 0.73 167 7/7 India 2,460 7.8 0.33 73/48 0.99 0.6 2.5 65 76 43 35 81 0.48 118 2/4

* % of private rms who paid bribes to government ocials. Data Sources: (i) World Development Indicators (2008), World Bank. (ii) World Development Report (2008), World Bank. (iii) Freedom House, 1998.

Many years ago Seymour Martin Lipset argued that economic development (e.g., growth of GDP per capita) helps to promote democratic practice. The converse, that political and civil liberties might promote material prosperity has also been suggested by social scientists. But as mentioned earlier, development economists have tended to think otherwise.

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Matters are different now. Societal transformation in 1989-1991 is the big reason. Freedom is now often seen as a precondition of development. Amartya Sen has even rebranded development as freedom. I dont believe rebranding a concept illuminates it. In the case of freedom I remain unconvinced it does, because it makes you think that a multi-dimensional object like freedom can be straight-jacketed into an all purpose human good. And by the time you have reduced every human good into freedom, you have converted it into a sort of fluff. There are intellectuals who dont go in for rebranding, but nevertheless see the instrumental worth of freedom everywhere. In 2002 a political scientist wrote that it has been demonstrated repeatedly that non-democratic regimes are unfailingly detrimental to human rights and wellbeing. If only that was so. There are many counter-examples of recent vintage. So, the intellectual pendulum has swung enormously in the past 20 years. But what if you were a citizen of an arbitrary country? Suppose you were about to help draft the Constitution, what kind of Constitution would you favour? Its no good pointing only to India and China, because they offer only a pair of observations. It seems to me a statistical study is what is required. In early 1989 I made a crude statistical study of what, in 1970, were 51 countries with the lowest GDP per capita. I found that those nations whose citizens had enjoyed greater political and civil liberties among those poor countries had also on average performed better in terms of growth in GNP per capita and improvements in life expectancy at birth. (In the case of literacy, the correlation was just the reverse.) The correlation was not strong, but it was positive and significant. Of course, correlation isnt causation, but as I was relating average figures for political and civil liberties in the 1970s to changes in GDP per head, improvements in life expectancy at birth and literacy, I was pursuing the right animal, if you see what I mean. The finding pleased me (but the one on literacy, which went the other way, didnt), but I can tell you I was apprehensive while the computer was calculating the correlation coefficients. What if they turned out to be negative? I cant resist giving you a personal anecdote. Its prompted by Professor Sterns remarks. The paper I have just summarised was prepared in 1988 (and published in the Economic Journal in 1990). As I was not a card-carrying development economist, I was able to bring myself to enquire whether there was statistical evidence of a link between political and civil liberties and economic development. And I used Freedom House indices. When I studied their publication for the first
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time, I found their indices to be based on as objective a set of criteria as you could ask for. They sought data on the suppression of the press, number of days one could be jailed without being charged, the fairness of elections, and so forth. To me the criteria were at the heart of what we generally mean by civil and political liberties. Nevertheless, when I presented my findings, I got a pretty rough treatment from friends and colleagues, who then regarded Freedom House to be a reactionary organization. They told me not to trust their data. Now though, Freedom House data are used routinely by development economists. Subsequently, Robert Barro at Harvard carried out a wider study, not just on poor countries, but in all, 96 countries around the world. And he found that among countries with low very restricted political and civil liberties, there is a positive correlation between political and civil liberties and economic performance (per capita GDP growth); but among countries that enjoy a good deal of freedom, the correlation is negative. In short, the relationship between freedom and economic growth is bell shaped. These are only two empirical studies. Robert Barros publication was in 1996, and there arent that many studies on the subject. Importantly, Freedom House aggregates a multitude of freedoms into a scalar index. When I say a multitude, lets remind ourselves that democracy Ill use that as a shorthand for political and civil liberties means many things at once: regular and fair elections, government transparency, political pluralism, free press, freedom of association, freedom to complain about the degradation of the environment, and so forth. What if you take them one at a time and relate them to economic development? Philippe Aghion and his colleagues have done that. They have studied the relationship between the various components of what we regard as freedom and economic growth in a large sample of countries. They have found that some of the components are positively related, others not so. One problem I have with these findings is that they regard economic development to be synonymous with growth in GDP per capita. There is no mention of environmental issues, no mention of the inclusive wealth of a nation; that is, wealth that includes natural capital. There is a recent literature that has shown that human well-being is related to an inclusive notion of wealth. By inclusive wealth we mean wealth that includes not just reproducible capital (buildings, roads, machines), but also human capital (health and education), knowledge (the differential calculus), and natural capital (ecosystems). So we should be asking whether political and civil liberties are positively related to growth in inclusive wealth. I have no idea whether it is.
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So, what do we take from the literature? It seems to me we have far too little empirical understanding of which aspects of political and civil liberties are most potent in bringing about Sustainable Development, by which I mean development along which inclusive wealth grows. That is why for the moment we should favour democracy. We ought to favour it because it is intrinsically a good thing; and its not known to be in conflict with other things that we care about and may possibly even help to bring about those other things we care about. We should be alert to the possibility that there may be trade-offs between certain components of democracy and those other things we care about. That said, I am increasingly aware that we economists havent following Ralf s advice on these matters. One of the things I learnt from Ralf while he was my boss at the LSE was the supreme importance of what one can only call decency, in not only private life, but also in public life. In a book published a couple of years ago A Very Short Introduction to Economics (OUP) a copy of which presented to Ralf yesterday, the first chapter is headed, Trust, not Demand and Supply Curves. And I want to elaborate a little bit, for five minutes, as to why I think it is such an elusive bird and why Professor Sterns interjection, I thought, was really profound. Ralf has talked of the primacy of the rule of law. The rule of law, however, is consistent with many forms of government; it is not simply a political democracy in the Western mode that can be expected to protect and promote it. Practice of the rule of law, more generally, an expectation of decency in the public domain, creates trust among citizens, as they go about their daily lives. Mutual trust is to my mind the lubricant that makes for economic development. And in my very short introduction to economics I have tried to explain why it is so. Without trust the millions and millions of transactions that are possible would not be undertaken, and all parties would be the worse off for that. Imagine two islands, which are visibly identical. For every person in island B, there is a corresponding person in island A, and vice versa. And for every piece of capital equipment in B there is corresponding capital equipment in A. Imagine that the property rights regimes are identical. Imagine, in fact, that even an anthropologist cannot tell the two islands apart. A mutually consistent set of beliefs in A could be that you cannot trust each other, while in B, there could be a mutually consistent set of beliefs that you can. The islands start off identically, and yet a pair of disjointed set of mutual expectations and beliefs, each of which is self-confirming, would mean that over time the islands would diverge: B would prosper, while A would remain undeveloped.
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How does a society tip from one belief system to another? That seems to me to be the fundamental question in the social sciences, to which we economists really do not have much answer. What we do know is that mutual trust involves a lot of coordination among the actors, whereas mutual distrust doesnt. That is why destroying a society is a lot easier than rebuilding it. You can establish as fine a set of institutions as you care, but it will all come to naught if people dont trust one another. The institutions wont work. The deepest question in the social sciences remains unanswered: how does decency develop among a wide and disparate group of people? Timothy Garton Ash Thank you very much for a wonderful talk, which I think follows on remarkably well from the earlier discussion. Your last point about the ease of destroying and the difficulty of rebuilding trust: in 1989 at the time of the end of communism the joke was: we know that you can turn an aquarium into fish soup, the question is can you turn fish soup into an aquarium? And I think Ivan would agree with me that twenty years on, actually the question is still posed. And the reason it still posed, or a reason it is still posed is precisely the issue of trust, which, to rephrase it, is Ralf s social foundations of liberty. It is his sixty year horizon, I would suggest. Frances DSouza I have to say that for someone who was an anthropologist and then worked on genetics and finally, a human rights activist, this is really a completely wonderful discussion and I have to start by admitting that I am starry-eyed about it. But some of the questions I have, which are by no means new and have come up in many guises in the discussion that we have had today, but nevertheless seem to me to be pressing and indeed, have links to all those disciplines which I have just mentioned. I was talking recently in the post South African election context with some of the members of the ANC government, who express the concern that there was in South Africa an increasing gap between those who have access to income, wealth and services, and that the worry is that at one point this gap is going to become unbridgeable, and what happens, what are the consequences then? And of course, one could say that this was true of countries not just in South Africa, but you already mentioned India and you have mentioned China, but I think also Brazil and indeed, many others, and emerging democracies as well. And I think that by any measure that one has this is clearly going to be unutterably destabilising and in another study that I was looking at recently, it would seem that crime figures per hundredthousand in the population can undoubtedly be related to things such as an
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inequality in access to services and wealth but also a lack of trust in political institutions, and that is what came up in this discussion very clearly. And it seems to me that what these ills in the world require is massive intervention, whether that be intervention on a national or international, even global level, in which case, what sort of intervention and by whom, and what kind of early warning would we have of the gap between those who have and havent becomes unbridgeable, and indeed, what are the consequences of not dealing with it. And these are the concerns that I think all of us have in one shape or form, and indeed have been reiterated here, but I would really like to see whether anyone has any concrete answers to those questions. Robert Skidelsky Yes, I enjoyed that talk very much and I agree about the importance of mutual trust systems, but I just want to explore a little bit the question of why we need trust, which I think you alluded to at the start by referring to information problems. Now, obviously, if we have perfect information, which is the assumption of the Chicago type of economic models, we would not need any trust because I would know whether you would keep your promises; I would know everything relevant about you; I would know whether you are the sort of person who would keep your promises. And if I knew that you were the sort of person who did not keep your promises I would be able to insure against that. So trust is connected with lack of information, but does the information problem have to be one of asymmetric information: what about the problem of symmetrical ignorance? In other words, people will make promises which they intend to keep, but then they are not in a position to keep them. It is not that one person is, in a sense, trying to get the better of another person, but that you actually have a situation of genuine uncertainty. So, I just wondered whether you could explore a bit further why mutual trust systems are essential in order to make any kind of economic activity successful. Partha Dasgupta I would like to respond to that. There is a common perception that information asymmetries are at the heart of societal problems. Partly its a semantic matter, because you can always define information in such a broad way as to make it the basis of any analysis of societal interactions. But that move is unhelpful. The deeper problem a society faces is an absence of trust. Classic examples are coordination failure. Imagine that Martin Wolf comes to me seeking a loan and offers me a favourable interest. We both agree that the deal is mutually beneficial. But there is
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timing problem: Martin could in principle refuse to repay me when the time comes. Imagine that legal channels are unreliable, though not absent, and imagine that the situation where Martin comes to me for a loan arises every year. We are in realms of a repeated game. In any single year there is a time lag between Martin receiving the loan (should I make him one) and he repaying me (assuming he repays me). Such games harbour multiple equilibria. There is an equilibrium in which I trust Martin to repay the loan and he intends to repay. So the deal goes through. And the deal is expected to go through each year. But there is another equilibrium in which he doesnt intend to repay and I simultaneously dont trust him. The deal doesnt go through in the first year and will never go through. Notice that there is no information problem, in the conventional sense of the term. It could be that I know Martins character well, the circumstances he faces, and so forth. The game we are engaged in is one of complete and perfect information. In the former equilibrium, however, we both coordinate on a pair of mutual beliefs involving trust. In the latter equilibrium we coordinate on a pair of beliefs involving mistrust. Both pairs of beliefs are self-confirming. The former equilibrium sustains a mutually beneficial outcome; while the latter is bit of a disaster. And there is no way the observer can tell in advance which equilibrium will prevail. I think we social scientists have hit a road block in not being able to really understand why people trust one another in some situations, while not in others, even when the underlying circumstances are similar. We have all sorts of anecdotes on the matter; that trust begets trust, that face to face encounters are good for the creation of trust; and so forth. We can even invoke evolutionary psychology to back such claims. But in any particular instance we have little to go on. There are all sorts of noise and cues in the background that probably influence our dispositions (to trust the other party or not), of which we are unaware. I dont think it helps to lump all such problems under the label information asymmetries. Paul Collier Trust is endogenous to the rate of growth in the economy and to the structure of society. Homogeneity helps trust. If you have no growth in a society, and the sort of societies I work on in Africa have had forty years of no growth, everything is perceived as zero-sum. So you cannot get trust in that environment. It is simply that these societies are completely fractured; there is no common identity because national identity has never been forged. Sub-national identities triumph, and that is again the death of trust and cooperation. Both of those contrast with China. In China you have got fast growth, you have got very strong national identity. And that is a very false steer the Chinese model for the sort of societies I work in. Now,
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China has got scale, and scale helps to produce accountable government, because it makes personalised power much harder. Tiny societies are personalised societies. It is no surprise to me that the most misgoverned society in Europe is Iceland; it has tiny personalised relationships. But, I think we have underestimated the difficulty of building accountable societies. After 1989, the interpretation was elections. And I saw elections spread all around Africa. They became socially de rigeur; it was like the spread of Christianity in AD. 1000. And then people learnt how to cheat; how to really cheat. And so where we are now is everybody holds elections and incumbents always win them, and so we have elections without democracy. And so, to get democracy properly you need strong checks of balances, but they cannot be produced within these tiny fragmented societies. So, I advocate a phase of international supply of accountability. Not accountability to us, but accountability to citizens. That is what has been missing. Timothy Garton Ash And who would supply it? Paul Collier The international community has to enforce it as best it can. I have various ideas there. Timothy Garton Ash And who is the international community then? Paul Collier It is the democracies. It is not the United Nations, because China is not interested in enforcing accountability. Timothy Garton Ash So it is the state? Paul Collier Yes. Timothy Garton Ash That is clear. I would like to welcome Leszek Koakowski, who has just joined us. Ivan Krastev.
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Ivan Krastev Trust or the lack of trust is a very serious issue for Central and Eastern Europe, so I should start with a joke. It is the 1930s; the place is Warsaw railway station. Two textile merchants meet. One asks the other, Where are you going? And the first starts to think and calculate: If I am going to tell him that I am going to Krakow, he is going to know that I am going to Lublin, so basically he is going to know what I will do there. So he says, I am going to Lublin, and the other, after some consideration, responds angrily, Why are you lying to me? You are going to Lublin! The state of trust in Central Europe today resembles the state of trust in Warsaw railway station. Central European transitions are successful in terms of economic outcomes. The integration of the region in the European Union and NATO was a miracle that happened. In terms of trust building, Central European democracies simply did not manage to produce trust; it was even that they destroyed trust. And the question is, to what extent are democratic institutions preconditioned on a certain level of trust; and to what extent can they build trust? Paradoxically, the 19th century nation-state democracies were better in building and preserving societal trust than the new EU anchored ones. A closer look at Central Europes obsession with corruption will reveal that anticorruption discourse is much more of a discourse on the trust lost; it is a discourse regarding elites, rather than a discourse on the proliferation of the specific practices and attitudes we define as corrupt. Data shows that there is a negative correlation between personal experience with corruption and ones judgement of how corrupt ones society is. So here is my point: I do believe we have reached this very critical moment in which we try to re-tell the story of liberalism not as a story of trust building but as the story of a management of mistrust. My fear is that the new democracies of mistrust built on this assumption are a very different species. Joao Carlos Espada When I first read Dahrendorf s Reflections on the Revolution in Europe, one of the points that most struck me was precisely the crucial importance of trust and the link between trust and civil society. What Dahrendorf says is that civil society is the anchor of the constitution of liberty. But then he adds that, whereas you can make political institutions by design (you can make constitutions, you can have elections, political parties, etc.), you cannot make civil society by design. Civil society grows, it is not made. Therefore, the problem of course is that, if you consider civil society to be the anchor of the constitution of liberty, but on the other hand, if you can see that that civil society cannot be made, it has to grow, how can you square the circle,
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so to speak, how can you make the anchor of the constitution of liberty? I think, as I understood it, that Dahrendorf s approach was that there are things that you can do to encourage and strengthen and promote civil society, even though you cannot make it by design. Among those things you can do, I would stress two, according to my own experience of my own country [Portugal] which has had a relatively recent transition to democracy. One is precisely the idea of the rule of law. You need to create an atmosphere where people really believe that they are obeying general rules and not particular commands, and where people can understand the difference between the two. In our experience previous to the transition to democracy in Portugal [1974], we were all submitted to particular and arbitrary commands, not to the rule of law. This was actually very detrimental to the idea of trust. Particular commands are detrimental to trust and civil society. By contrast, I would say the rule of law is very congenial to the promotion of the spontaneous growth of civil society and trust. The other point is the question of political culture. You need a political culture where trust is valued and stressed, and where civil society not only the state or the government or political decisions are important. How can you foster this political culture? Well, I dont know exactly. If you believe in trust you certainly have to argue for trust, and that is important in itself. I would add that an open atmosphere in a society, open to external exchanges and external influences, open to commerce and trade, is a crucial element conducive to this political culture of trust. A closed society is not conducive to high levels of trust, even though this might seem paradoxical at first. Therefore, I do not think that liberalism is about managing the absence of trust. Liberalism has to be based on a higher level, a sort of spontaneous trust. And, even though Liberalism cannot create trust by design, it can foster an atmosphere which is congenial to trust: an atmosphere of general rules, as opposed to particular commands. Timothy Garton Ash I am getting alarmed at the number of times people have said, this is what we need to do, but I do not know how to do it. I have heard that at least four times this morning. Martin Wolf. Martin Wolf A few very brief points. First, I think it is wonderful as is clear from this discussion though in a very peculiar way, just as you would expect that economics has finally discovered that the subjects, the themes of sociology are actually important. So we
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will make a mess of it of course, because we will do it in a very reductive and mechanical way, introducing notions of multiple equilibria and all these other things, but they are actually quite useful. I think there has been a real revolution in this and Partha discussed this in the last ten to fifteen years particularly since 1989 and the discussion of governance, rule of law and institutions as a central theme with economics, and it was one of the many extraordinary failings of economics in the middle of the twentieth century that it became so mechanistic. So profoundly anti-social or asocial. So that is the first point. The second point is I want to support Partha a bit more. My sense of the literature and I am not as much of an expert on this as he is that we know something very, very important about dictatorship as opposed to democracy: it is a very high variance system. Quite often things go seriously wrong. I do not think that is a point that needs to be stressed. But if you take off from the starting point that the single most important thing is to avoid egregious harm, even if we ignore all the other many reasons why we would legitimately and properly hate dictatorship, that makes a pretty powerful reason in my view to oppose that sort of sloppy development economics which I can remember very well, which is what I think of as the well at least he made the trains run on time view of development. In fact, in most cases, and particularly in very poor countries, the rulers did not even do that, and in fact they murdered many people, and so I think there are terribly powerful reasons for us in general and in exante to favour some form of democracy. The third point, of course, is democracy can be highly liberal. We know this, and this is very, very important. That leads us to the question which has been raised which is, can we do anything to shift the equilibrium from the low trust to the high trust? I am not completely despairing of this, it is obviously incredibly difficult, but it is important to remember that it has been done many times, and it is surely possible for us if we are sufficiently modest to look at the origins, the ways this was done. I will make one final comment on this and this links to our previous discussion. One of the things I have come to the view of, one of the things that reinforces an existing favourable equilibrium on trust, is outrage. One thing that I always think about when I look at society is, if people are corrupt, does society as a whole get outraged, or does society as a whole say, well, what else do you expect?. That is a
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really important difference. So one of the healthiest things that has happened in the United States, which is a remarkable achievement in some ways of creating a reasonably high trust society out of incredible diversity, is that right now, the population at large think that the bankers should be hanged. And even if they should not be and I think they should be the fact that the public think that they should be shows that they are outraged, and the fact that they are outraged means that they have recognised that they [the bankers] have violated fundamental norms, and that is how fundamental norms are maintained. Timothy Garton Ash Just on that point: of course one of the ways outrage is best expressed is through free and independent media, and there is in fact a very clear correlation [here]. Martin Wolf Indeed, that is another way we could generate more trust. Gerhard Casper I will be very brief. Just picking up on Sir Partha Dasgupta, I just want to remind all of us, that one way to manage mistrust is by the rule of law. It is actually one of the basic functions of the rule of law. Of course, rule of law is easily said, but the question is the rule of what law? To that question we have some reasonable answers. For instance, I would assume everyone at this table will agree that an independent judiciary is prerequisite. How we get there is of course another question. Margaret MacMillan Thank you for letting me sit in on this wonderful discussion. Just a couple of things: I agree that sin is inevitable and I do think the rule of law is enormously important. I think also time is important if you want to build trust. If you think how long it took to build trust in Victorian Britain, for example: there was a moral revolution, there was a legal revolution, there was a constitutional revolution. They all happened very, very slowly, and I think you could destroy that so much more quickly than you can build it. I think there is also something we might want to explore in the role of elites. If elites themselves do not have trust in their own system and do not believe in it, then the system is in trouble I want to pick up on Frances DSouzas point about the tremendous gap that opened up, even in democratic societies between the very rich and the very poor, which seems to me absolutely corrosive when you get people who run companies earning a hundred times as much as the people working on the factory floor. That helps to destroy hope, I think, which is a very important part of
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trust. Hope that your children, if not you, will have a better life. And I think elites have something to answer for in countries like the United States and the United Kingdom. And I am wondering this is only speculation whether part of their abandonment of the feeling that morality was not important in the system is somehow tied to the tremendous explosion of computers and information, the sense that we could manage risk, that everything could be built in. We had all these very, very clever people building systems where it did not seem to matter that you had trust, that morality did not seem to matter, that you can insure against all risk, so why did it matter what individuals were doing? So, it seems to me that part of the way we began to think about ourselves was very much affected by the computer revolution, and we began to think that all things could be managed somehow, if we could just get the models, get the information right and that therefore the individual to go back to Fritz Sterns point the individuals reactions and thinking and morality were much less important somehow, because we could insure against all eventualities. Fritz Stern I will try to be brief. If economists are looking for other disciplines to help them, I would also recommend history. Secondly, I would say that already years ago I was concerned about the decline of trust in the United States. The gradual disappearance of trust in very different areas in the United States, and that collectively will bring about a reaction. And then I am going to ask for your indulgence; I will try to do this in a minute or two. A huge historical analogy, which has all the possible faults of analogies and yet, it does not go out of my mind. In the fifteenth century, the Roman Catholic Church was full of corruption. Out of that corruption, in part, came a Reformation, came a mental, intellectual, moral backlash, and so on. And what I am afraid of is that out of the corruption, a very different corruption that has been diagnosed around the table and exists, and in a certain sense, you have put it more under the category of financial crisis, whereas I see it as something larger. Out of that corruption, one sees already a moral backlash in fundamentalism and so on. So, I think we are confronting a very, very serious matter and I am simply throwing in the word Reformation to show how deep a backlash like that can be. Thank you. Adair Turner I think that Martins point that dictatorship or lack of democracy is clear and that establishes an ex-ante proposition in favour of a more democratic and more liberal system. But I think we do have a worrying fact here, but I think it is a fact, which
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is that ex-post it is clear that it is quite possible to have a successful economic development model without freedom, and with quite a significant lack of freedom, and the case is China. And I think we really have to be clear that when you are looking at this issue you cannot just say, well, China is one country and Sierra Leone is another country. China is 1.3 billion people and I do sometimes worry that when we run these correlations and try to do freedom versus growth and work out regressions, well, should we do it? One country one dot, or, to really understand what it is, should we put 25 dots for China, proportional to the population. Because the fundamental fact is that Chinas story of economic growth is very significant, it is the most extraordinary story in an environment where the ability of other countries to follow the successful Western leads is still not clear. We have this amazing breakthrough to growth of Western Europe, the Anglo-Saxon colonial offshoots and Japan, and actually since then, you know, we had the successful breakthrough of some things which were relatively small, the East Asian countries, the city states etc., but great big continents getting that breakthrough; we do not know that we have got a clear path and the most likely one looks like being China. So, it is fundamental and I would like to say one thing: one of the reasons that it is fundamental is a very particular form of restriction on freedom that we do not often talk about. You could say that one of the most fundamental freedoms that people have and in particular that women have is the decision as to how many children they have. Now, the right to decide how many children you have can be restricted in two directions. It can be restricted because you live in a country which will not allow you to use contraceptives, or where the husband will not allow you to use contraceptives, or the priest tells you it is a bad idea, or you do not have enough education. And you can also be restricted by being told that there is a one-child policy. Sadly, I think the one-child policy, although I do not like it, has been far more fundamental to the breakthrough of the Chinese economy than we like to admit, because although we moved on from crude early 1950s development economics which moved large aggregate variables like capital formation as key to it, and then we move onto trust and entrepreneurship, actually, capital formation is fundamental to the development process. I mean, we are richer than poorer countries because we have got more. We wake up in the morning and there is more capital working for us, and if you can have a higher rate of capital formation and hand on that capital stock to a next generation which is roughly the same size as you, so there is not a dilution effect, you get a higher rate of growth. And this is the great bit of work on national income accounting is Allyn Young in the early nineties, who illustrated that there is nothing magic about the East Asian growth path; it was actually fundamentally driven by a higher rate of capital formation. I find this very
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worrying, but I think the Chinese growth path has quite a lot to do with the significant restriction of freedom entailed in the one-child policy, and I do not know what to do about it. But I think it is a fact. Timothy Garton Ash Another I do not know what to do about it. Sir Partha. Partha Dasgupta I think Martin Wolf has been short-changed by Adair Turner. Dictatorship is a complicated notion. Freedom has many dimensions. Party dictatorship is a different political system from individual dictatorship. There are grounds for thinking that the ruling party in China does entertain debates (within the party leadership) over alternative policies. Martin is correct that there is an outrage in todays air. But the expression of outrage is itself a co-ordination problem. I can be outraged, you can be outraged, but if we dont co-ordinate our sense of outrage and speak collectively nothing will happen. And I think we should not be sanguine about the possibilities of collective action, if you like, through this common outrage that we are experiencing. The rule of law most likely is a necessary condition for the creation of trust. In my remarks I have been alluding to sufficient conditions. We dont know what they are. You can establish as good a set of institutions as you like in a particular place, but if people dont trust one another, if they are not willing to behave decently with one another, those institutions can be guaranteed to fail. Every institution harbours multiple equilibria some desirable, others thoroughly undesirable. Its anybodys guess which one will prevail. We social scientists may claim we know that history matters, that traditions matter, and so forth. They probably do. But we dont know how they matter, nor why. Timothy Garton Ash Thank you very much; well I think that was a wonderful conclusion. I think it has been a fascinating couple of hours, which has obviously raised more questions than it has produced answers. I do think that two themes which are constant in Ralf s work have constantly re-emerged. One is that complex which one might describe as trust, rule of law, the morality and ethos of elites, and I do think that Margaret was right to raise the word elites because actually that is what we have been talking about a lot of the time, and maybe we do not talk enough about it.

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The second theme that strikes me very suitably for universities is data and knowledge. The number of times, whether in discussing the financial system where it is not just asymmetry of information but simply ignorance as you put it , whether it is in the problem of trust, or whether it is in the correlation between civil and political liberties and socio-economic development. Where, as Partha rightly said, a lot of this stuff we just do not have the basic data over sufficient years and the reason people use the Freedom House indices is that they are the only ones we have got, however imperfect. And so I think that that too the measurement of what needs to be measured is something which we need to focus our attention on.

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Timothy Garton Ash Our third session has a slightly different theme: liberty and diversity. Ill introduce here Gerhard Casper. He is in my view one of the truly outstanding university presidents of our time and transformed Stanford, I would say, raised Stanford to being one of the truly outstanding world universities. And we thought that it would be particularly interesting to ask Gerhard to introduce this session, because as President of Stanford, he was confronted with this set of issues that is called diversity, or diversity policy. In a certain tension, perhaps, with the classical understanding of liberty, and we thought that might be an interesting way into what is obviously a really important subject of our time. Gerhard Casper Like the Warden said yesterday, I just got a lot of credit for things I didnt do. I would reformulate the topic as liberty, equality and diversity. I will speak from the vantage point of somebody who had to conduct his affairs also as a homo-politicus, as it were. Many have said that we are honoured to be at this event, and of course, so am I. I did not understand until this morning what a pleasure it would be to be here just a very great pleasure. And we thank you, Tim, for what you have done in preparation. Ralf, in 1963, published a book that, curiously enough, has never been translated into English: Die angewandte Aufklrung Applied Enlightenment. It is one of my favourite among his books, I should admit. In Die angewandte Aufklrung, Ralf stressed that equality in the American context is first of all and primarily the equality of citizens qua citizens the equality of their civil rights. Ralf also makes reference to the social preconditions of civil rights soziale Voraussetzungen but uses that concept primarily with respect to the European welfare state. And I think
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it is fair to say that at the time Ralf s book was published, the social preconditions of equal citizenship became the pre-eminent issue in the United States. Now, let me provide you with a little historical context. In 1954, the Supreme Court decided Brown v. Board of Education, and outlawed school segregation. But of course, what qualifies as equality of opportunities in schools remains to this very day a most elusive issue. Then, in 1964, Congress enacted the Civil Rights Act that outlawed discrimination on the basis of race, gender, etc. That had a very dramatic impact in many ways: there is an Equal Rights Commission and so on, but the difficulty of our subject is well symbolised by the fact that the Civil Rights Act, couched in neutral terms, has, in recent years, frequently been invoked by whites against affirmative action. And so it forms the basis for something that, in many ways, it was not intended to deal with. Affirmative action: a really deep governance problem for any democracy. In 1965, Lyndon Johnson issued Executive Order 11246, which required affirmative action in employment decisions of federal contractors, and that of course included universities, because all the research grants we receive from the federal government are structured as contracts. Thus, the federal government laid down rules for affirmative action in employment of, for instance, universities, for anybody from a secretary to a faculty member. And I think the big governance issue is: Congress never enacted any of this. This was all done by the executive branch. Now, Congress could have in theory overruled Johnson, but Congress certainly did not even remotely attempt to do that. Congress was very happy to be off the hook. The executive had taken on a big issue, and its regulations were a surprisingly non-partisan thing. After Johnson it was actually Nixon who not only re-affirmed the Executive Order on affirmative action, but gave it more teeth. Thus on a very important societal issue concerning freedom, equality and diversity, it was mostly the executive branch at the federal level, the federal government, that acted Things moved slowly with respect to affirmative action, with respect to equal opportunities. But then, in 1968, came a traumatic event: the assassination of Martin Luther King. And I think it is fair to say that the assassination of King got all kinds of people to begin to ask whether their ways of thinking were actually right. I shall give you one example. The first time I encountered the issue directly was in 1966 when I became a professor at the University of Chicago law school by the way, somebody will eventually have to defend the Chicagoans, though it will not be me. They have a few more things going for themselves than you all admitted this morning! But I was only at the law school.
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The law school dean appointed a special committee on the admission of black students I was still a foreigner at that time, not an American citizen and I was asked to chair this committee. It is important to note that in the five years before 1969, the law school, which admitted about 150 students a year, had admitted four blacks. Why? Not because they were racist, but because they were obsessed with quantitative predictors of law school performance, law school aptitude tests, undergraduate grades, and so on. There were certain thresholds, and below those thresholds nobody was considered. My committee recommended a special admissions category to gain about 15-20 minority students in the population of 150 students per class. Now why did we do this? We saw this as a contribution to the ideal of an open society, and our concern was, of course, the nature of citizenship in a highly stratified society. And in many ways, as open as the United States is by comparison with many other countries, we were, and still are very stratified. We also wanted to further the educational experience through a diverse student body. How can you have elites, who never, in their elite education, encounter people from far-removed ranges of society? I think it is fair to say that, by the time I became President of Stanford in 1992, affirmative action had been pretty much accepted in American higher education as concerns undergraduate admissions. It was and remains very difficult for graduate admissions, and of course quite difficult for faculty recruitment. These issues existed when I became president, they still exist. When you look at our figures for undergraduate admissions, we have a very diverse student body. Probably Stanfords is slightly more diverse than most of its direct competitors. As to graduate students, it is much more difficult, in particular in the sciences, engineering, and so on, though things are getting a little better, but very, very slowly. However, in 1992, a new set of issues had emerged under the heading multiculturalism. The call was for showing respect to different cultures, recognising their separate identity, not only in the civic world at large, but also in the universities. That, in turn, brought about the phenomenon that the right baptised political correctness. Never mind that this was a term most frequently encountered in conservative media; the fact of the matter is that political correctness was a reality and, indeed, it continues to play a, somewhat subdued, role even now. I was very concerned, as I encountered all of this, about the implications of multiculturalism and the demands flowing from it for the university. So, in 1993, I decided to face parents and incoming students with a speech that I called Concerning Culture and Cultures. The central point of my 1993 speech was the following and in some way you would all say it is obvious, and it should go without
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saying, but it was not obvious and it did not go without saying, and I repeated it over and over again in later years. I said, students were admitted to Stanford as individuals, not in groups, and I emphasised that no university could thrive unless each member is accepted as an individual, and can speak, and will be listened to, without regard to labels and stereotypes. The university, I said, has no right to tell you who you should become, with what groups to associate, or not to associate. But university citizenship entails the obligation to accept every individual member of the community as a contributor to the search for knowledge; in a university nobody has the right to deny another persons right to speak his or her mind, to speak clearly, without concealment and to the point. You understand that this reflected my angst, as it were, that people had become too circumspect, in speaking, because they did not want to run the risk of offending or showing disrespect. In 1995-96, something happened that became extremely controversial the socalled California Civil Rights Initiative, that had been proposed by a conservative black member of the Californian legislature, a senator, who sought to prohibit using race, sex, colour, ethnicity, or national origin as a criterion for either discriminating against, or granting preferential treatment to anyone in public schools, employment, or contracting. This initiative was submitted to the sovereign California is as complicated as Switzerland; we vote on almost everything all the time. The initiative passed by a 54% margin it is still the law of the land, and it has caused, for instance, one of the greatest public universities in the world, the University of California, to engage in a fair amount of pretense because it is, of course, bound by the rules, but nevertheless cannot live with their consequences. I decided to address this whole matter of affirmative action in a statement that I simply called Statement on Affirmative Action at Stanford University. Its bottom line supported affirmative action, though my focus was on the autonomy of academic institutions, especially private ones. The statement got considerable attention, because of my support for affirmative action. However, almost nobody mentioned the many qualifications I put forth. I just want to give you one paragraph from this very lengthy statement: I am of course fully aware of the fact that my view of the matter leads me to take into consideration criteria that are very problematic. There is, first of all, the utter arbitrariness of racial and ethnic labelling. Boxes to be checked may look neat on paper, but there is little underlying or inherent sense. What is race? What is a race? What is ethnicity? How do we deal with racial or ethnic mixing? Why is a child of a black parent
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and a white parent classified as black? Why does one fourth American Indian ancestry qualify a person as Indian, while slightly less does not? Are the classificatory laws of apartheid South Africa what we end up emulating? Is our way out, self-classification, something to be fairly relied on? These reservations, however, do not diminish my belief that institutions such as Stanford . . . need the discretion to do as best they can in their efforts to find and educate the leaders of tomorrow. As we pursue our goals, there is no room for categorical preferences, there is no room for quotas, there is no room for preferring the unqualified over the qualified. However, there is also no room with respect to any applicant for making quantitative, scaleable admissions criteria the sole touchstones of intellectual vitality, talent, character, and promise. That has never been the case at Stanford, and I hope it never will be. It is Stanford's very characteristic that it has never been one-dimensional and yet it has been able, especially over the last four decades, to become one of the world's most selective institutions. Our capacity to pursue many excellences will remain undiminished as long as we continue to get the balance right and do not waver in our commitment to quality. My basic message in this lengthy paper was that the pursuit of affirmative action needed to be tempered by an understanding of its dangerousness; its dangerousness for equality, and for the equal protection of the laws. And we should remember there is a linguistic point here that is subtle but has important consequences. The US constitution does not, as does, for instance, the German constitution, guarantee equality it guarantees the equal protection of the law, thus a white person who was not given a job because somebody else was preferred says, I was denied the equal protection of the law. Now a couple of remarks on rule of law. The Supreme Court stayed away from the issue for quite a while (it had addressed it early on). Then, in 2003, in a case involving the University of Michigan law school, the court actually legitimised affirmative action on the part of universities, but then went on in an opinion by Justice OConnor who is not any longer on the court: We are mindful, however, that a core purpose of the Fourteenth Amendment was to do away with all governmentally imposed discrimination based on race. Accordingly, race-conscious admissions policies must be limited in time.
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And she puts forward the prospect that: One day there will be the happy day when we can do without affirmative action. It is my personal impression that OConnors time horizon was something like 25 years. Now, rule of law. Partha Dasgupta, I totally accept your point the precariousness of rule of law in this context has also to do with the fact that it depends very much on human beings as its oracles, and saying, rule of law does not do an awful lot the Supreme Court could have come out the other way very easily and created a very major problem for us. I came out Ralf, this goes to many of your concerns very much in favour of something about which I nevertheless had many reservations. But as a homopoliticus, as the president of a major institution, I thought it my responsibility. One cannot possibly have a fair multi-racial, multi-ethnic society, such as the United States, without members of different minority groups participating in the governance of the country. Yesterday there was much talk about historical moments. The one historical moment that we should also begin to focus on is Barack Obamas election. What an incredible breakthrough! Obama, of course, poses the very problem that concerned me: he is called black although his mother was white. Perhaps an even more interesting aspect of Obamas election is that he is so diverse in terms of his education and his personality. I think Ralf some time, somewhere used a formulation such as connected but yet diverse: that is the case of Obama!. He is connected diversity incarnate: a Mid-Western background on his mothers side, a Kenyan father, growing up in Hawaii, then Indonesia, then Occidental College in California, Columbia University, Harvard, finally Chicago. I do not know what role affirmative action played in Obamas career. I assure you nobody ever talks about it. Whatever role it may have played, the outcome is a great outcome. Leszek Koakowski Gerhard may I ask you something? I havent heard really. What is affirmative action in the sense you uphold? Not only at university, but anywhere. Gerhard Casper Well, Leszek, thats a fair question, as I did not really address the general issue.. The
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Executive Order 11246, for instance which, by the way, does not apply to undergraduates or student admissions; there we set our own policy basically says you should develop a new outreach; you should develop new criteria for people you consider taking into your institutions and so on. It also says you should establish timetables and you should establish goals. Goals means quantitive goals. Thus when the Department of Labour looks at Stanfords employment, and wants to know whether we have done enough affirmative action, it will actually consider the composition of the labour market, the local labour market, for secretaries and other employees, and will then determine whether that particular group is represented in our labour force to the extent to which one might expect. In reality, this gets more complicated because you do have job qualifications, and you can make your case concerning them. For me, the very difficult and indeed often distressing aspect of goals has been that goals turn into quotas. So, if you take this years number of minority students at a university: x percent African Americans, x percent Chicanos and so on. This year. Now, if next year the number of African Americans were to be substantially less than this year, critics would say, you have abandoned your commitment. In reality goals tend to become quotas and that is very problematic. But you asked what do I approve of? When I first encountered this issue in 1969, at Chicago, the point was simply to try to determine the qualifications of the candidate beyond the quantitative measures such as LSAT scores (Law School Aptitude Test scores) that were allegedly colour blind. But they are not really colour blind. So you try to find out whether a particular person shows other elements in his background and upbringing that would suggest that he might succeed in law school, or in anything else for that matter. Having said that, I have always been very unwilling to compromise on faculty appointments. Though, even there some pretense is occasionally unavoidable. On the whole, I believe universities such as Columbia and Stanford, have gotten it right. We tend to be very careful and conscientious in what we are doing. Leszek Koakowski In other words, it would be fair to say, that according to you, if there is a privilege given, say, to a minority race, that their privileges are acceptable on the conditions that: first of all they are relatively small and secondly that they are not transformed into quota systems. Gerhard Casper Well, relatively small I would not say. The more the better. In reality, they are relatively small.
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Leszek Koakowski So privileges exist; for instance, black people may be assessed in the entrance examination slightly more leniently? Gerhard Casper Yes, no doubt. That is what is happening, there is no question about it, and without it we would not get anywhere in a very hierarchical society. Leszek Koakowski So you are against quota systems? Gerhard Casper Yes. Leszek Koakowski Yes, of course, I agree with you. Any quota systems? Gerhard Casper Yes. Timothy Garton Ash Sorry, Gerhard, can I just follow through on that? So, when you say youve got it right, more or less, Stanford or Columbia, I totally agree with you on the independent side, but by what criteria? Gerhard Casper By the criteria that are so important to Ralf. Trying to do the good thing in a pragmatic way without being ideological about it just working very, very hard. Giuliano Amato I have some other angles to suggest, to consider liberty and diversity. Let us think of the not yet solidified societies the Europeans are dealing with in relation to diversities that are frequently newcomers in our society. Actually the rise of the newcomers in our societies is much more difficult than the rise of the blacks and other minorities in the United States. Let me go back to something that some of you here know a lot more about than I do. When, in this country, a couple of years ago, there was a survey on students of primary and high schools, it came out that blacks were performing much poorer than whites. The proposal was advanced to provide them with something more by segregating them into separate classes. Immediately afterwards, quite happily,
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somebody realised that it was not due to race, but poverty. The low standards of these black students were substantially the same as white students coming from families of the same sections, the same income. So, when we think of the social preconditions of equal citizenship we have to realise that sometimes, the diverse ones suffer, not from their diversity, but from the poverty that their diversity impose upon them in the countries of their new lives. But what strikes me about liberty and diversities in the European context and I am also speaking from my experience as Minister of the Interior dealing with immigration is the fact that diversity becomes a source of fear both for the newcomer and for the hosting community. I still remember a survey that I had from low sections of Italian cities. Several old women reacted to the newcomers by saying: I cannot feel free to go out anymore, because when I walk out, I listen to them they are there, they speak a language I dont understand, and I am scared. I am scared only for the reason that she does not understand what they are saying and so she is not used to diversities. Therefore, they are being limited in their freedom. Consider that in one of our cities, Padua, there is a wall dividing the immigrant section from the other parts of the city due to drug trafficking, to criminal acts that are being committed it is not something without any reason at all, but it is sort of a refined reaction to that kind of frequent misconduct. And at the same time, the liberty of the Italians, the French, the Germans, seems to be limited. So, we have to face a fact of life, which was clearly explained in the last research by Bob Putnam on integration and similar in universities it is much easier than with uneducated and poor communities. So, the synergies of diversities with each other apply to universities Palo Alto, electronic engineers, etc. In poor communities there is a conflictual reaction. The level of trust Putnam testifies decreases: the more the diversities in a community, the less the level of trust. So, there is this gigantic problem of policies of integration just to make liberty compatible with diversities. In the sense, and I go back to mutual trust, that is not only a prerequisite for economic development, but also for, lets say, community life. If we mistrust each other there is no community life, and there is no freedom, each of us toward the other. So, there are several chapters that enter into the scene: what are immigrants supposed to do when they enter? How do we build a two way process? Dont forget that in our European Union, formally and officially by the European Council, the process of integration is defined as a two-way process. Both of us have to adapt; not only the newcomers, which is an important ingredient for the necessary transformations which are the prerequisites
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for granting citizenship. How can you have equal citizenship if you are not even a citizen? And we have enormous differences among us. In this country, children become citizens, which is something I like. To the contrary, in several European legislations, the ius sanguinis still plays a paramount role. The ius sanguinis is the best evidence of inequality, because it implies that unless you already belong to that community, it will be extremely difficult for you to become a member of it. Actually, in my country it takes 10 years to become a citizen. Children, despite being born or studying in Italy, are not considered Italian. I had cases of children that grew up in the country, were educated in the country, and when they reached the age of 18, they had to be expelled, which is incredible. At least for us Europeans the relationship between liberty and diversity has to pass through all these very difficult attitudes. Ivan Krastev My comment is very much provoked by a small and thoughtful article on the perils of meritocracy that Professor Dahrendorf published four or five years ago. In my view, it is fair to claim that the current global economic crisis is among many other things the crisis of the meritocratic-elites worldview and their relation to society. The best and brightest who used to run places like Lehman Brothers are a special type of elite. Because they made it through talent and personal effort, they do not feel any special obligation to those who did not make it. Paradoxically, the story of the last twenty years can be narrated as the story of the emancipation of the elites. The elites broke free; they liberated themselves from the constraints of ideology, territoriality and national loyalty. They emancipated themselves in every possible way. For the first time, you have elites who dont feel uneasy about their success. And I do believe this is a major problem. Its a problem because it goes against the major principle of democracy: representation. You have these elites who are no longer representatives for anyone. As a result of this, the major dividing line is not between the left and the right (of course, in my part of the world you can see this very easily); the major dividing line is between the elites and the people. In the discourse of new populism democracy has been betrayed and the nation-states captured by two privileged minorities: cosmopolitan elites and immigrants or, in the case of Central Europe, the Roma minority. If you analyse the discourse of the populist parties in a country like Bulgaria, you find they hate two groups: the elites and the Roma. And they do believe that these groups are a kind of pair: both of them are not like us, both steal and both are supported by the West. In this sense the new populism represents a new version of the policy of nationalization; it is not about the nationalization of industries but about the nationalization of the elites.

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Timothy Garton Ash And I would just add to that, that the elites, particularly in Central and Eastern Europe, are identified with Europe, with the European Project, and in both Middle Europe and Middle America, they are identified with liberalism. Something we also have to confront. Martin Wolf Thank you very much. I had not intended this, but I will tell a story, which I wouldnt wish to be repeated. Very unwise, perhaps, but very relevant and you will find it quite amusing. About a year ago or so, I was at a very, very high level conference organised by Goldman-Sachs, which had all their partners. And I was on a panel discussing globalisation, protectionism, inequality, and one of the participants was Larry Summers, before his present incarnation. The high point of this for me, was a really remarkable moment in which essentially Larry said: The problem with you people, is you dont know to what you belong; and above all, you dont realise you are an American organisation; and this is very problematic for other Americans. And this is, I think, a big part of your elite point. In a very large way, they are in Huntingtons famous phrase: Davos Men. And they are, of course, the world elite. And if they dont belong to countries, and they dont feel they belong to countries, democracy is in threat. However, that is not what I wanted to talk about. You have not raised a certain issue Giuliano got very close to it but he didnt get there all the way. Were talking about diversity, and really I am going to ask a question of you, and how you think about this now which is religion and ethnicity, and of course, quite specifically, since I have no real reason to be politically correct, the question of the role of Islam in a democratic society, which is a new form of diversity we are necessarily having to adapt to, because I think the things you discussed are old, and actually weve sort of managed them. I tend to your view. Im not very happy with affirmative action, but we seem to have managed it. I thought it was perfectly legitimate for blacks, then it ineluctably extended to lots of people for whom it wasnt legitimate, but we can live with it. Now, religion it seems to me, is a much more central issue for us, because it is a set of ideas. It is not about peoples origins, it is a set of ideas linked of course, with ethnicity. And some of these ideas this has always been true of religion, but it is certainly true in its present form within some of the immigrant communities seem to me, at least, to be intensely illiberal. Not merely intensely illiberal; anti democratic, anti intellectual, indeed hostile to every single value I hold dear. And
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as a result, people who adhere to these ideas which are by no means all of these immigrant communities will necessarily find it impossible, if they believe in these ideas, not to be part of our political community, as described by Ralf Dahrendorf, namely a liberal democracy. Now, having a large number of people who find the values, political systems and legislation of the society in which they live fundamentally inconsistent with their basic values is pretty problematic, it seems to me, for the future of a liberal democracy, and actually raises the question of whether youve got to a point of diversity at which actually the whole becomes dysfunctional. And I would like to know what people think we should do about this. If we can do anything. Leszek Koakowski I know the solution. There was a Russian ideologist, socialist, but he was not Bolshevik, but he was working in the period of the Russian Revolution. He was Polish, actually, but he published in Russian. He was so interested in equality that he came to the conclusion seems quite Russian that if you want to liberate people from conditions that produce inequality, you have to take every child, separate them from their parents, and let them be educated in common, so that all conditions of their rights would be identical. And therefore inequality would be avoided. Now, this idiotic and absurd proposal was perhaps only one solution if you think that equality, we accept might be something else in a legal sense. Now, I should say that this writer was not an ideologist of Bolshevism, on the contrary, for some years, he was negatively stereotyped. After the revolution, he was condemned by the ideologists of Bolshevism who, after all, were not as stupid as to accept this sort of absurdity. But this absurdity is, I think, the most consistent doctrine if you take equality quite seriously as a universal ideal. Timothy Garton Ash Thank you Leszek. At last we have an answer. Gerhard, I suggest I take a few more comments, and then perhaps come back to you. Partha Dasgupta I would like to make a general observation. Many of the issues we have been discussing this morning have to do with the effects of early experiences in a persons life on their life chances (to use a phrase Ralf made prominent many years ago). Much of my own work has been on food deprivation, so I know something about the subject. Nutritional stress at infancy (at the prenatal stage even) has far reaching effects on adult life. Positive feedback between malnutrition and infection in ones early years has horrendous implications in adulthood. The pathways involved are now well understood. Less understood (at least at the physiological level) are the
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pathways by which a childs cognitive development is impaired by nutritional insults. Even less well understood are the pathways that involve human psychology. Social confidence, self-determination, and such attitudes that help to make life something of a success involve early nurture (books in the home; confident and caring parents; and so forth). We have excellent statistical evidence of such pathways, but not an understanding of the pathways. In any event, what we do know is that ones history matters. And its not possible to make up for early deprivation, at least not in all dimensions of ones being. Our lives suffer from hysteresis. Martins allusion to cultural deprivation and Dr. Caspers observations fit in with the point I am making here. The rot starts at the very earliest stages of the lives of the deprived. The pathways Martin and Dr. Casper are referring to, and the ones I have just mentioned, lead to poverty traps. Its no good pump priming higher education if primary- and secondary education are allowed to languish. We economists have a good name for inputs in production that do not substitute for one another, but instead complement one another. We call them complementarities! Education and health inputs are complementarities in a persons life. The cost of making up in later years for education deprivation in early years is enormous. Trying to solve societys education problems by making universities responsible is quite absurd. But that seems to be what political leaders in the UK frequently expect universities here to do. They demand that universities make up for early deprivation in books, thought, and sociability. Timothy Garton Ash Ive been working precisely on this topic and the more one looks at it, the key is in the schools. Schools, schools, schools. Not universities, because it is too late. University is only a way of treating the resulting symptoms, not the core. Joao Carlos Espada Very briefly, two words. One on meritocracy, the other on diversity. I would like to say something in favour of meritocracy, but in a sort of Burkeian understanding, in the sense that being the member of the elite gives you a duty towards the public, and not that sense of arrogance against the public. So, even though meritocracy certainly has many problems, I would give it two cheers not three, just two because most of the other alternatives seem to be more complicated. Anyway, the main point I would like to make is about diversity. I would like to go back to a point that Tim made last night about this new tendency of attacking or
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condemning free speech and free criticism of other views, namely religious views, in the name of respect, respect for diverse views: you should show respect for other peoples views. I of course think that one should respect other peoples views, but that does not mean one has to agree with them, or that one cannot criticise them, or that one ought not to criticise them, sometimes very emphatically. For this reason, I think that this new idea of respect for other peoples views cannot and should not be opposed to the older, and better, idea of liberty, liberty to criticise other peoples views. The point I would like to raise is that this new idea about respect for diversity comes from a different understanding of diversity; different from the traditional, liberal one the one I learnt from Dahrendorf. In the traditional view, diversity and conflict and pluralism are natural by-products of liberty and of equal protection by the law. In an atmosphere of liberty which is basically founded on the rule of law and equal protection by the law people have different views, these views clash, or engage in a conversation. They actually influence one another and things evolve in an unpredictable way. Strictly speaking, the way they will evolve is not predictable. The only thing we can know is that they will evolve under the equal protection of the law. This, I think, is diversity as an unknown by-product of liberty. Another view is that diversity is an end-state to be promoted. If one starts saying this, one enters into a very complicated discussion about what is the right percentage of the right diversity. It is really complicated: how can we know the right percentage of diversity? The main problem, though, is not the complication, but the collateral consequences. If you look at diversity as an end-state to be achieved by design, then you start to think that it is natural to limit liberty in order to achieve a particular end-result. You then end up having to condemn free-speech, if and when freespeech is perceived as a threat to diversity (that is, diversity as a particular end-state to be achieved by design). I would like to say that I am very much in favour of diversity in the first sense, as an unknown by-product of liberty and the rule of law, and very much against diversity in the second sense, as a known particular end-state to be achieved. Margaret MacMillan I think there may perhaps be a useful side of the financial crisis in such issues. The crisis is forcing us in countries where there are these issues over large communities coming into liberal societies and who may not respect the views of their new societies to confront this. The crisis and the tensions are forcing liberal societies
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themselves to define what it is they think is important, and it seems to me that we have been having a discussion which we really havent had in previous decades. Someone mentioned the Obama moment which I think is enormously important and one of the things he did in the election campaign (for which he got much criticised by the Right and the famous Joe the Plumber who appeared everywhere, saying he didnt want to pay taxes, and it turned out that he was quite successful in that he hadnt paid them for years); but what Obama said, which I think was picked up was that you do pay taxes because you get something back out of them, and he reintroduced the notion of responsibility and that we all as a citizenship contribute to society. I think that is important, and the whole financial crisis may make us look again at the rules and the ways in which we protect what it is we value in this society. I hope this will be a positive outcome. The other thing I think with the presence of large immigrant communities this is something that for obvious reasons weve been dealing with a lot in Canada and people like Charles Taylor have written a lot about it is that it has forced Canadians, among others, in what I suppose you would call the majority of society, to define again what it is we think are important, and there are very important clashes. I agree again on affirmative action I think it is necessary to undo particular injustices. The difficulty is that affirmative action will be continued too long, or that it will not include the right categories, and I think that such policies are ways to reach ends, but the danger is they will become somehow permanent in themselves. What a lot of the affirmative action has left out, both in Canada and the United States was class, which is something we dont talk about which is very important. And some of the people that are now benefiting from affirmative action in fact come from middle classes who do not need the benefits of it and there are these silly things, where people find they get benefits they dont really need. I have nephews and nieces who have gone to very good schools in England and who are, I think, one quarter native Canadian. They could get, although they do not need it;. all sorts of special breaks from the Canadian federal government, including free scholarships here, there and everywhere. So yes, there are absurdities at times when you carry on a principle for too long, or you try and define it too carefully, so I think you have to be prepared to change. I think the other thing that liberal societies have to do, is say to communities where their ways, in fact do not fit in. One of the big issues in Canada has been gender, and in a number of immigrant communities women have been treated in certain
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ways and this also happened in native communities where native women have lost their property rights in the banned lands when they marry someone who is not a native, whereas native men do not. And so I think that what is happening is, certainly in Canada, were saying we have certain things we think that are absolutely fundamental; individuals get treated as individuals, women have the same rights as men, and we cannot tolerate, and nor should we tolerate women because of whatever cultural values being treated in this way. I think what were doing is having a very interesting debate about principles, and in some cases one principle must trump another, and so I think I see some positive signs in all this. Timothy Garton Ash I think thats absolutely spot-on, and thats precisely the conversation we need to have. In all our societies, what are the liberal essentials that are simply nonnegotiable? And what are the things on which there can legitimately be negotiation and compromise? I think thats the way to frame it, actually. Giuseppe Laterza Yes, I just wanted to say that as a publisher, this has been a wonderful opportunity to hear some very interesting and thought-provoking things. I remember the first book I copy-edited when I joined the publishing house in 1980, a book in which Ralf talked about life chances. It gave me a great start in this profession and it seems to me that it resonates with a lot of the things you spoke about earlier, in particular what you said about education providing life chances and opening new and bigger doors. So it has a lot to do with this idea of life chances, while other things you said have to do with how intellectuals can, in a pluralistic way, help a number of people to feel themselves part of the community or society. Let me give you just one example: I dont see the fact that somebody earns much more than somebody else as a major problem, so long as reputation is not only made on money. And reputation has to do with the relationship between people and the conception people have of themselves and of the society that they live in. And this, I think, has to do with the same things that a liberal, pluralistic and lively intellectual community has to do with... This is the sense in which I believe Ralf s ideas have made a major contribution to people like me in their work, by giving us some of his strength and transmitting to us some of his passion and perseverance, qualities that both Timothy Garton Ash and Margaret MacMillan to whom I extend my heartfelt thanks for this wonderful opportunity to be here today also have in abundance. Many thanks.
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Jonathan Adair Turner Well, Im very sad that Partha disappeared, because I was actually stimulated by his comments, and I wanted to ask him a question. I wanted to pick up on this absolute insistence, as he said, on the role of the state in education, and the important role. He came to that from the early level at which cognitive development occurs, the stimulus that people have, the hysteresis and life of a person, and therefore in a sense, without going as far as taking all babies away and educating them jointly, we have to find mechanisms of, as it were, freeing people if necessary from the constraints of their own background in order to have the liberty of the development of their life chances, etc. But then I wanted to link that to Martins point about ideas and values. Because not only is cognitive development, in a sense, of the ability to have life chances determined early, but also what you believe and what your values are, are determined early, as in the classic Jesuit give me a child until 7 and hell be a Catholic for life. Well, actually people are very determined by what they are told early on. So, the question then becomes: if we have an absolute insistence on the state in education, how does it relate to the values and ideas? Is it the overt aim of that, and I would say, in answer to this one: yes, is that if there were a Muslim girl from a very devout background, they are giving her an education such that if she wants the choice, she would be capable of saying: I have ceased to be Muslim. But that, to most of the Islamic community, is an incredibly offensive statement. Large amounts of the Islamic community would just not accept what I have said. First of all, in a lot of Islamic areas, the whole idea of apostasy leaving the faith is absolutely unacceptable. Islam is tolerant of those who never had the faith, but if you read the Quran, it is totally intolerant of those who were born into the faith and left it, and is certainly, therefore, intolerant of any state education system which says: one of my overt aims is to make sure that anybody who comes from a background with one set of beliefs has the freedom If they want to choose another set of beliefs. And I think we have to realise that we do face that conflict, and we have to debate it. Now, I am in this, a French Republican, laque etc, but that is a very particular point of view. Timothy Garton Ash I dont think you need to be a French Republican! It is a liberal essential to offer human beings that minimal autonomy in which they can make informed choices.
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That is a minimal essential which we have conceded in this country. We have absolutely conceded it, whilst quarrelling about less important things. Giuliano Amato Just on this question, because, Adair, it is very dangerous to tell Muslim people: if you want to accept liberty and the basic values of our societies, you have to stop being a Muslim. This is really disruptive. I mostly appreciate the goal of those Islamic intellectuals who are now trying to read the Quran compatibly with our times. There are principles we dont accept that may depend on the word of the Muslim God, but there are others that just depend on backward traditions. Most of the gender issues in Muslim culture do not depend on religion but on those traditions. Once I happened to say that my family comes from Sicily, and decades ago the treatment of women in Sicily was not very different from theirs. I spoke of a long standing Sicilian and Pakistani tradition when our public opinion was under the shock of a Pakistani father who had killed his daughter for she wanted to live like any other girl in Italy. My God. I had reactions from Sicily incredible! and also the Ambassador from Pakistan! So, this is the point: there are several aspects of that culture that depend on backwardness, and in the same way as Sicilians changed, Muslim people in our societies may change... Timothy Garton Ash And the Word of God is interpreted in diverse ways. Ralf Dahrendorf Well, it seems to me, the education points are important, but there is one other point. Where does the rule of law emphatically apply? Where do we not make compromises? And here my answer, Martin, would be in what I call the public space: in public spaces narrowly defined, but once defined quite unambiguously defended. I think we should insist on certain values. But I repeat narrowly defined; that is to say we should not get into what happens to the families and in the homes. We should get into peoples behaviour where it is relevant to others. That is the direction in which I would look if I were asked to define those areas in which I am not prepared to compromise, and where I insist I do want us to accept these fundamental values. Frances DSouza Could I just add to that? I think there may well be a fundamental dilemma here. Several participants, but particularly Martin Wolf, have said that the media is a
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vehicle for the expression of outrage and thereby entrenches fundamental norms, but I think we have a tremendous crisis in the media. And not just the print media; obviously also in electronic media, and as everyone will know, this is a wonderful public space for expression of views: quite free, blogging, and twittering, and all the rest of it, but we also know that there are a number of bloggers who are expressing, to put it mildly, hugely politically incorrect views, and they are gaining ground. Now, this operates entirely outside the rule of law, and I wonder therefore, in view of what Ralf has said, whether or not there ought to be some kind of mechanism for dealing with the so-called irresponsible press. Timothy Garton Ash It also operates outside the bounds of the nation state. Frances DSouza Exactly. Fritz Stern Three very quick points. Discussion in the last hour or so reminded me simply of Rousseau: man is born free, he had never worn chains, and Rousseau himself after all developed, in mile, the notion of how important education was, for somebody to then enter into the social contract and so on. And that combination, it seems to me, is something that we have paid insufficient attention to. Secondly I wanted to say, as far as university life is concerned, what hasnt been said explicitly, but Im sure was implicit in Gerhards remarks the position of women in universities has changed fundamentally. And basically, Im glad to say, without much disturbance or trouble. It took a certain amount of conviction, commitment and so on, but we are in the process of doing it. On the other hand, one other thing I wanted to say is that I have an enormously difficult subject, but I have certainly to agree with what Gerhard said about affirmative action. And the fact that it has a political fallout does not deter me at all. But I think one ought to be aware of the fact perhaps not everyone in the room might not even be aware of the fact that affirmative action in the United States was closely related, has been closely related, to the rise of what we call the Neo-Conservatives. In that light, we paid for progress and it was a heavy cost, but part of the [Obama] victory may be that the NeoConservatives had to fall back on their think tanks.

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Gerhard Casper Well, there were so many interesting comments, and it is about time for us to break up. Let me just refer to something that I have been working on in a wholly different context over the last couple of years and that came up in almost every comment in the last hour. It is the issue of how we understand citizenship. It is very intriguing that a 1795 statute it is still the law in the United States provides that a new citizen, as the new citizen is sworn in, has to foreswear allegiance to his/her country of origin. And yet, since a Supreme Court decision in the 1960s, the United States has come to accept dual citizenship. People can now diversify their citizenship portfolios. I think it is fascinating what has happened in Britain over the last 10 years, mostly beginning with the Blair government, and that is: you are taking citizenship seriously, in a way you never have done. You are beginning to imitate the United States. There are now swearing-in ceremonies. It used to be that you would just get your naturalisation papers in the mail. There is much discussion about education for citizenship, which leads us eventually to the role of schools. Every conference always ends by saying schools have to remedy the problems we have identified. But I would like to say that teaching values in schools, which we are often afraid of for being illiberal, is unavoidable in order to deal with these basic issues. It is completely unavoidable. Timothy Garton Ash Gerhard, thank you for beginning and ending what I think has been another fascinating session. Before we break for lunch I want simply to say that this has been a quite wonderful mornings conversation, after a wonderful session yesterday afternoon. And the reason for that, as we all know is Ralf. The wonderful conversation is because of him, animated by him, inspired by him and characteristic of him. And so, I think we might have a round of applause: both to thank ourselves and above all to thank Ralf. Ralf Dahrendorf And a round of applause for you.

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Contributors
Professor Giuliano Amato Prime Minister of Italy 1992-1993, 2000-2001 Dr Markus Baumanns Executive Vice President, Zeit-Stiftung, Ebelin und Gerd Bucerius Professor Gerhard Casper President of Stanford University 1992-2000 Professor Paul Collier Professor of Economics, University of Oxford Sir Patrick Cormack MP Conservative Member of Parliament for South Staffordshire Baroness Frances DSouza Convenor of the Crossbench Peers, House of Lords Professor Sir Partha Dasgupta Frank Ramsey Professor of Economics, University of Cambridge Sir Howard Davies Director of the London School of Economics and Political Science Professor Joo Carlos Espada Director of the Institute for Political Studies, Catholic University of Portugal Professor Timothy Garton Ash Professor of European Studies, University of Oxford; Isaiah Berlin Professorial Fellow, St. Antonys College Professor Jrgen Habermas Emeritus Professor of Philosophy, Goethe University, Frankfurt am Main Professor Leszek Koakowski Emeritus Fellow, All Souls College, Oxford
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Mr Ivan Krastev Chair, Centre for Liberal Strategies, Sofia Mr Giuseppe Laterza Publisher Professor Margaret MacMillan Warden, St. Antonys College, Oxford Professor Lord (Robert) Skidelsky House of Lords Professor Fritz Stern University Professor Emeritus, Columbia University, Provost of the University, 1980-83 Lord (Adair) Turner Chairman, Financial Services Authority Mr Martin Wolf Associate Editor and Chief Economics Commentator, Financial Times

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A select list of books by Ralf Dahrendorf

There have been numerous editions and translations of many of these books. Only translations made by the author himself are included in this list.

Marx in Perspektive. Die Idee des Gerechten im Denken von Karl Marx J.H.W.Dietz Nachf.: Hannover [1953]. 2nd ed. [Die Idee des Gerechten im Denken von Karl Marx] Verleg f.Literatur und Zeitgeschahen: Hannover 1971. (Ed., with an introduction) Gustav Dahrendorf: Der Mensch das Mass aller Dinge. Reden und Schriften zur Deutschen Politik 1945-1954 Verlagsgesellschaft deutscher Konsumgenossenschaften: Hamburg 1955. Industrie-und Betriebssoziologie De Gruyter: Berlin 1956, 4th ed. 1967. Soziale Klassen und Klassenkonflikt in der industriellen Gesellschaft F.Enke: Stuttgart 1957. Class and Class Conflict in Industrial Society Stanford Univ.Press/ Routledge & Kegan Paul: Stanford/London 1959. Homo Sociologicus. Ein Versuch zur Geschichte, Bedeutung und Kritik der Kategorie der sozialen Rolle Westd.Verlag: Kln-Opladen 1958. Homo Sociologicus Routledge & Kegan Paul: London 1973. Sozialstruktur des Betriebes Th.Gabler: Wiesbaden 1959. (Ed., with H.-D.Ortlieb) Der Zweite Bildungsweg im sozialen und kulturellen Leben der Gegenwart Quelle & Meyer: Heidelberg 1959. Gesellschaft und Freiheit. Zur soziologischen Analyse der Gegenwart R.Piper: Mnchen 1961. Several editions. Die angewandte Aufklrung. Gesellschaft und Soziologie in Amerika R.Piper: Mnchen 1963.
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Das Mitbestimmungsproblem in der deutschen Sozialforschung. Eine Kritik Soziol Seminar: Tbingen 1963. Gesellschaft und Demokratie in Deutschland R.Piper: Mnchen 1965. Society and Democracy in Germany Doubleday: Garden City 1966. Bildung ist Brgerrecht. Pldoyer fr eine aktive Bildungspolitik Nannen-Verlag: Hamburg 1965. Pfade aus Utopia. Zur Theorie und Methode der Soziologie R.Piper: Mnchen 1967. Essays in the Theory of Society Stanford Univ.Press/Routledge & Kegan Paul: Stanford/London 1968. Fr eine Erneuerung der Demokratie in der Bundesrepublik. Sieben Reden und andere Beitrge zur deutschen Politik R.Piper: Mnchen 1968. Konflikt und Freiheit. Auf dem Weg zur Dienstklassengesellschaft R.Piper: Mnchen 1972. Pldoyer fr die Europische Union R.Piper: Mnchen-Zrich 1973. The New Liberty. Survival and Justice in a Changing World Routledge & Kegan Paul/Stanford Univ.Press: London/Stanford 1975. Die neue Freiheit. berleben und Gerechtigkeit in einer vernderten Welt R.Piper: Mnchen-Zrich 1975. A New World Order? Problems and Prospects of International Relations in the 1980s University of Ghana: Accra 1979. Life Chances. Approaches to Social and Political Theory Weidenfeld & Nicolson/Univ.of Chicago Press: London/Chicago 1979. Lebenschancen. Anlufe zur sozialen und politischen Theorie Suhrkamp: Frankfurt 1979. Intervista sul liberalismo e lEuropa Laterza: Rome-Bari 1979. (Ed., with an introduction) Trendwende. Europas Wirtschaft in der Krise F.Molden: Wien-Mnchen 1981.
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(Ed., with an introduction) Europes Economy in Crisis Weidenfeld & Nicolson/Holmes & Meier: London/New York 1981. On Britain British Broadcasting Corporation: London 1982. Die Chancen der Krise. ber die Zukunft des Liberalismus Deutsche Verlags-Anstalt: Stuttgart 1983. Reisen nach innen und aussen. Aspekte der Zeit Deutsche Verlags-Anstalt: Stuttgart 1984. Law and Order Stevens/Westview: London/Denver 1985. Fragmente eines neuen Liberalismus Deutsche Verlags-Anstalt; Stuttgart 1987. The Modern Social Conflict. An Essay on the Politics of Liberty Weidenfeld & Nicolson: London/New York 1988 Reflections on the Revolution in Europe Chatto & Windus: London 1990. LSE. A history of the London School of Economics and Political Science 1895-1995 Oxford University Press: Oxford 1995. After 1989. Morals, revolution and civil society Macmillan in association with St Antonys College, Oxford: Basingstoke 1997. Liberal und unabhngig. Gerd Bucerius und seine Zeit Beck: Mnchen 2000. ber Grenzen. Lebenserinnerungen Beck: Mnchen 2002. Der Wiederbeginn der Geschichte Beck: Mnchen 2004. Versuchungen der Unfreiheit. Die Intellektuellen in Zeiten der Prfung Beck: Mnchen 2006.

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