François Villeroy de Galhau: Beyond Brexit, our common challenges and our common answers Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the City Week 2018, London, 24 April 2018. * * * Ladies and Gentlemen, It is a pleasure to be in London again and allow me to thank you for inviting me to speak at City Week 2018. As is to be expected, Brexit is omnipresent on the agenda. But, as the Belgian friar Dominique Pire said when he received the Nobel Peace Prize in 1958, “men build too many walls and not enough bridges”. That is why I am not going to speak about what divides us, but rather about what unites us. We are and will always remain close friends and partners, even if we will no longer be in the same European club. Today I will elaborate on two challenges that should unite us in the near future: the utmost need for active multilateralism and the finance of tomorrow in an interconnected world. 1. The need for active multilateralism International cooperation between countries is more important than ever to preserve the current improvement in the global economic environment: according to the latest IMF forecast, global growth should stand at 3.9% in 2018, after 3.8% in 2017. And we should together resist two temptations: financial complacency, and protectionist escalation.
Indeed, apart from assuring the rule of law, Smith saw two other functions for government: “the duty of protecting the society from the violence and invasion of other independent societies” and the “the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain”. Against the backdrop of these brief reflections on the great Adam Smith, let me turn back to the specific question put to us. I have no doubt that together with a functioning rule of law and limited government intervention, free markets in general and financial markets in particular are the optimal path to the promotion of wealth. I am equally convinced that responsible behaviour has the best chances of flourishing in an environment of economic opportunities and rising standards of living. Trust clearly enhances the rule of law as there will never be enough courts to permanently monitor all market transactions. Modern means of communication and transparency, in turn, are trust-enhancing. Think of seller and purchaser ratings on many internet auction sites. Now, let me conclude my remarks with a final and in my view crucial note of caution. As Charles Kindleberger demonstrated convincingly in his 1978 book Manias, Panics and Crashes, financial markets are prone to phases of irrationality and exaggeration. Such market disequilibria lend support to the need for the rule of law and the utility of limited government intervention in a number of areas.