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Failure of collective imagination, Queen told

Queen Elizabeth II

LONDON: She had to wait for eight months but, finally, the Queen has got the answer to the question she famously posed on a visit to the London School of Economics last November.

She wanted to know why nobody had been able to predict the “awful” economic crisis.

“Why did nobody notice?” the Queen asked Professor Luis Garicano, Director of Research at the Department of Management, at LSE obviously concerned about its effect on her own investments which had fallen sharply.

Eight months later, a group of leading British economists has written to her, explaining in lay person’s language, how the crash happened and why nobody saw it coming.

Blaming it on a “failure of the collective imagination of many bright people”, they explain that the “feelgood factor” induced by the economic boom of the nineties lulled some of the brightest “financial wizards” into ignoring the crisis that was bubbling just under the surface.

The letter signed, among others, by LSE Professor Tim Besley who is also a member of the Bank of England’s monetary policy committee, suggests that it was an accident waiting to happen but a “psychology of denial” prevented bankers and their political masters from seeing it.

In a front-page report with the headline “This is how we let the credit crunch happen, Ma’am… ” above a picture of the Queen, The Observer newspaper said the three-page missive explained how the bankers managed to convince themselves and the world’s politicians that they had found clever ways to spread risks throughout the financial markets.

“It is difficult to recall a greater example of wishful thinking combined with hubris,” the economists wrote.

Apologising for failing to predict the crisis, they said: “In summary, Your Majesty…the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”

While not directly commenting on the letter, Buckingham Palace said: “The Queen always displays an interest in current issues and is kept abreast of current issues. Obviously the recession is very topical.”

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