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We most need to seek local solutions to local issues

Friday, October 24, 2025 14:02

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Sir, I refer to Dani Rodrik’s “We should seek local solutions to global issues” FT October 16, 2025. He favors “Instead of top-down regulation and conventional subsidies, rely on open-ended collaboration between public agencies and private actors.”

I’m not so convinced about that; the documented track record of such collaborations is not, except for some interested private actors, that marvelous. Much more needed is to allow local non-governmental market solutions to local issues.

I had studied high school and university in Sweden so, after getting my MBA at IESA in 1974, I decided to travel around Venezuela for a full year, harvesting rice, sorghum and sunflowers. That in order to get to know my country better and, truth be told, to try to salvage an investment going sour.

That year left an indelible impression, namely the importance of banks in small cities and communities e.g., Calabozo. The presence of a local bank or a branch loan officer from one of the larger banks, allowed local bankers to identify and respond directly to the needs of local farmers, small businesses and entrepreneurs.

Little by little that all started to disappear before my eyes when many local banks, much to please the status seeking of its shareholders and directors, began to consolidate with the Big, or established their main office in the capital.

1988, with the Basel Committee’s risk weighted bank capital requirements, if colloquialisms are allowed, shit hit the fan.

By decreeing risk weighted bank capital requirements (insanely) based on that what’s perceived as risky is more dangerous to bank systems than what’s perceived or decreed) as safe, banks had to hold much more capital/equity against e.g., loans to small town businesses.

Out went the loan officers (like your George Banks who went to fly a kite) and in came the dangerously creative bank financial engineers.

As I was not from the public sector, had in fact been quite critical of it, even before Hugo Chavez, strange circumstances and coincidences had me end up as an Executive Director at the World Bank, 2003/04. There I did what I could to voice my concerns, especially during the discussions of Basel II.

Not much luck in having these echoed… not there… not with Academia and not with the many NGOs purporting they defend the interests of developing countries.

Why? I guess there is not too much interest and consultancy profit in banks of Calabozo and alikes

Fast forward to August 29, 2025. That day I asked both Grok and ChatGPT; “What is the impact on small cities of the risk weighted bank capital requirements?”

https://subprimeregulations.blogspot.com/2025/08/ai-grok-what-is-impact-on-small-cities.html

https://subprimeregulations.blogspot.com/2025/08/ai-chatgpt-what-is-impact-on-small.html

Sir, do you think the regulators will read and acknowledge AI’s answers?

PS. Here The document that I presented at the High-level Dialogue on Financing for Developing at the United Nations 2007.

@PerKurowski

Source: http://teawithft.blogspot.com/2025/10/we-most-need-to-seek-local-solutions-to.html

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