Ross
Anderson, who is professor of software
engineering at the Cambridge University Computer Laboratory, was at
two Davos meetings last year (London and Dubai) discussing
financial regulation. Here he explains what the G20 leaders should
be doing to save the global economy.
My take as a
computer
scientist is that if you want to manage the evolution of a
complex socio-technical system, and keep it predictably dependable
in the face of great and increasing complexity, then you need
architecture.
That means interfaces. The central authority - the architect,
the platform vendor, the regulator, according to context - has as
its primary task the management of these interfaces. They must
partition the system into components that can evolve more or less
independently, and also limit the propagation of failure.
As engineers we understand this well, and after the financial
meltdown of 1929 the world's central bankers also understood
it.
In the UK we had until Big Bang separation between clearing and
merchant banks, stockbrokers and stockjobbers, insurance brokers
and underwriters, and so on. In the US they had the first of these
embedded in the Glass-Steagall Act. Unfortunately, Clinton
abolished that, as a favour for now-tottering Citibank.
What the G20 should be doing is agreeing the future architecture
of the world financial system - in other words, what the interfaces
are and (thereby) which regulator will be responsible for what.
It would also in my opinion be a good idea if Glass-Steagall or
something like it were reintroduced. Governments must guarantee
retail bank deposits; they should not guarantee investment bankers'
casino operations.
Ross Anderson is
professor of software engineering at the Cambridge University
Computer Laboratory.