Howard Davies

A lot of students seem to know who you are without knowing exactly what you do – what does the role of Director entail on a week by week basis?

I sometimes wonder as well! Roughly, I would say about half the time is management. The Director’s management team meets every week, which makes all kinds of decisions about all kinds of routine, daily things. Then I chair the Academic Board, the APRC, which is the Resource Allocation Committee, the Promotions Committee, and the Appointments Committee. Then there are others that I don’t chair but that I still go to, like the Council, the Court and the Finance Committee. This is an organisation with a turnover of about £150 million, so you have to have good management control and financial control.

Another quarter of my time is on a combination of fundraising and external representation, which merges together, because if you’re talking to an alumni group, they want to know about the School, but also in the long run they are probably going to be financial supporters. Fundraising for a university isn’t “Give me money”, it’s explaining what the School is doing and talking about interesting people within the School.

The other quarter of the time is activities within the School. Some teaching - I lecture on the Law and Accounting programme and others. Also, some student things, for example I’m currently rehearsing for ‘The Wizard of Oz’. Also some research that I do myself - I don’t do a full scale academic job but I’ve published one book since I’ve been here and I’ve got another one coming this month, and quite a lot of articles as well.

Your public profile, whether it is chairing the Man Booker Prize or appearing on Radio 4 to discuss the World Economic Forum, is relatively high. Is this something that you feel is beneficial for the school?

If you look back at the LSE tradition, the distinctive feature of the school is that it has always been an engaged academic institution. Some people like to claim that it’s had a particular political leaning, which I don’t really think is true. If you look at the combination of people here - you’ve had the likes of Hayek and Popper at one end to people like Laski and the Webbs on the other. But whoever it’s been most LSE Directors have been actively engaged in political policy. Giddens clearly was, in a different way from me, and certainly Dahrendorf and Beveridge were. That’s the tradition of the job, and I think people like that. Many of the students here are interested in what’s going on in the outside world, and the fact that the School is engaged in that debate seems to fit.

School

We reported last week that the School has a surplus which it is using for capital investment. What difference will the various redevelopments make?

First of all, about this surplus. If you look at our finances the core activities of the school, the teaching, research and degree programmes, is about the break-even proposition. Where we make surpluses is on executive education, the summer school, Enterprise LSE, residences in the summer and things like that. That’s where the profit comes from. If you look at our balance sheet, we’re relatively highly indebted for this sector. Oxford and Cambridge have basically got no debt because they were sort of given their land. Most of what we’ve got we had to buy. We don’t get much Government support. We get about £3 million a year for capital, and since the New Academic building is costing £70 million, you’ve got to make the money yourself.

My view when I arrived here was that the facilities of this place did not match its international reputation, so I thought we had to go for a major redevelopment project. The first stage is the New Academic Building, and then we have to redevelop St Philip’s. That will be a brand new Students’ Union building. The Students’ Union facilities here are, in my view, poor. I mean, they’ve got character. The Underground and the Quad are fun places to be, they generate good events, but they’re not great. Clearly the sports facilities are poor, so the only way you’ll do significantly better is with a new building.

So we’re doing that next, and then in about 2011 we can empty the Students’ Union and the towers above it, and redevelop it. That’s the tricky bit, because it’s right in the middle. Nobody can hide the fact that that will be quite disruptive, and that’s why we need to do the other thing first.

The one thing that I think we’ll be able to do sooner is the sports facilities. So I think we can refurb the gym as a temporary solution until the new building in four or five years.

Won’t the ever-increasing student numbers place a strain on facilities while work is going on?

We shouldn’t have a problem maintaining the numbers we’ve got. I don’t think we’d be able to expand and I don’t want to expand any further. 9,000 is what we planned to do by 2011-2012. The new building gives us an extra 125,000 square feet, and almost doubles the teaching space in the School.

You’ve said that the School should be aiming for a first on People and Planet’s environmental performance league. Are we on course this year?

I think so. We’ve increased the amount of green energy, and also there were various technical things that hit us last time, like not having a travel plan on the website. In fact our travel is not a big deal. I was at a meeting of international university leaders, and the guy from Yale said “I think we should commit to having low emission vehicles in all our fleets”. So I said “We don’t actually have a car.” He just laughed; it never occurred to him that we could have a whole university and not own a vehicle at all. So on things like travel we’re very good actually, because almost everybody comes in on public transport. We haven’t got a car park. We have a bike scheme that a load of people use, so I think we’ll do well on that – we just didn’t have a policy stated on the website.

We’ve also set up a new sustainable LSE partnership, which I chair, which met for the first time just recently, and various workgroups below it, so I hope we’ll do better this year – but the bars always going to be raised.

Students

You have said in that past that it is important to ensure MSc Courses offer value for money. Do they?

Well, it really relates to the teaching taskforce. Value for money in education is a tricky concept. On the one hand, if you look at demand, there’s not an issue. Demand has gone up 23% this year for Masters programmes. If you were just a business, you’d say “Well what the hell! They all want to come.” The second aspect of value for money is what people do afterwards, and there you wouldn’t say there is a problem, I think we’re the highest starting salary on graduation. One reason that people come here is that it does improve their market value.

On the other hand, I don’t think that’s all we should be doing. There is evidence that people’s satisfaction with teaching here is not what we would like it to be. That’s what the teaching taskforce has been looking at, in terms of contact hours, class sizes, use of graduate teaching assistants and everything else, and I hope that we can put more into that. Obviously this is something that you have to bring the academic community along with, because it’s largely their work. So we’re going to be taking a set of proposals to the Academic Board in the Summer Term, and I hope that we can get agreement on it, but we’re still debating it at the moment.

You are now two years into the five-year planning process to renew the curriculum. How instructive has that been, and how much change should we expect to current academic programmes?

Well, the planning process here was what I call ‘decibel planning’. He who shouts loudest, gets most. We thought that this was not ideal, and given that we had an extra 1,000 students to share around we started a process to look at what sort of degrees we didn’t have. We’ve now brought in an MSc in Finance, an MSc in Financial Mathematics, which has got an absolute mountain of applications, an MSc in Race, Ethnicity and Post-Colonial Studies and others. So it was a good process that has produced a set of new degrees. There will be a continued roll out because you have to refresh the degree portfolio. For example, the European Institute had a degree on the growth of Europe to the east. Well that’s kind of happened now, so courses get revamped. Also, a big chunk was the new Management programmes.

Students’ Union

What are you expecting from the new Sabbatical team?

The students’ union plays an important role in the management of the school. What we need is a good sounding board on the issues that are of interest of us running the school. We’ve had a good response on athletics. We’ve said we are prepared to invest some money in this, what do you want? I can guess what a 19-year-old girl wants to do with her spare time, but I don’t know. It’s much better if the Union can intermediate in that way. You need Sabbaticals who care about that part of the job. I’m not stupid and I’ve been here for five years and I know that there are other things that student politicians want to do. They want to debate the state of the world, and that’s fine. I hope that they don’t spend all their time on that, because the reason that they are paid to be full time sabbaticals is not for that. It’s because they have a role in the running of the school. What I hope is that you get people who do care about the school as an institution, who are worried about the basic stuff about how we teach and facilities. Because that is an important element of decision making process. That’s what I hope for every year, and I am sometimes disappointed!

But this year for example Ruhana has really thrown herself into that. She’s been to every meeting of the teaching taskforce, she’s surveyed people, and she’s held focus groups. That’s what we want.

Any other thoughts on the outgoing Sabbaticals?

Fadhil has been a very assiduous attender of things. He’s certainly never shirked the job.

You occasionally have to push and prod about issues in relation to the School, because they can get distracted on to other issues. It seems that the Union’s finances have been soundly managed. I have no complaints about the Sabbaticals this year.

You are presumably aware of the new General Secretary from his time campaigning against the appointment of Peter Sutherland. Firstly, did you ever expect the protests that arose following the appointment?

No I didn’t really, because there were students involved in the selection process. I was surprised because normally here, although people may have different views about things the School’s got fairly painstaking decision-making processes. Sometimes I think extensively painstaking, but it does. Unlike many places the students are heavily involved in decision-making. They were involved in decision-making on my reappointment, which is unknown elsewhere, and in the appointment of the Chair, and I don’t know of anywhere else where that is the case. Normally, once a decision is made here – one of the advantages of painstaking processes is that when a decision is made, people say “Okay, I’ve had my say”. In this case, I thought people would say “Well that’s the decision. He may not be the person we’d have chosen, but that’s what it is.” They did not, and that was I think disappointing. Anyway, he is chairing Councils, so they’ll just have to live with it.

Do you foresee any problems with the two working together on Council next year?

I presume he wouldn’t be prepared to be General Secretary if he didn’t know what it involved. Not attending Council meetings would be rather curious, so I presume he’ll turn up!

Much has been made in the press of the Israel Divestment motion. Considering the School-backed proposals for a forum on the Arab-Israeli conflict, are you concerned about anti-Semitism on campus?

There are three dimensions to this. Firstly, the Students’ Union’s right to engage in these issues. I’ve no problem with that and I am prepared to stand up for that and do so when pressed on the issue. That’s fine.

The second thing is the implications for the School. As far as the divestment is concerned, I think there’s a lot of confusion. The LSE does not invest any of its students’ money in anything, actually, except short term deposits. We are net debtors, asking me about my net investments is like asking how I invest my overdraft, it’s meaningless. The idea that there is money coming from student fees that we are investing in arms companies is just not the case. Now we do have an endowment, that’s money that’s come from other people, effectively all of which is hypothecated income for scholarships or Chairs. That’s the money that we invest, and it’s almost exclusively invested in index funds, usually Charitrack. We have about £55 million. This is compared to Harvard’s £30 billion pounds. £55 million across the whole of the world’s investment markets is trivial.

That said, we do think it is reasonable to debate whether the School should have more of an active investment policy. We have typically been passive investors. With £55 million, some of which is in boxes and little pots with specifications from individual donors, there’s a limit to what you can do, but we are discussing whether we should have a responsible investment policy and say there are some things we will do and some things we won’t do. That’s still under debate.

The third point is that it is the case that some of the student societies, the Israeli society and the Jewish society, did approach the school to say that they were concerned about community relations, and they felt that this was spilling over into a degree of hostility which was not a good thing. They asked if we would support a kind of dialogue process within the student body. We said yes, and there are one or two people here who have experience of conflict resolution, so we offered their assistance. So far, I don’t believe this has started. There have been proposals and societies have come back and said they don’t like this or that. They are still engaged in a debate, and I haven’t seen the latest terms of the debate except when I see it in letters to The Beaver. But I am concerned that the school should not be seen as a place which is hostile to students of any particular community, whoever that might be. I think so far we’ve managed to achieve that. I think there are people who are concerned that it has been a hostile environment and that I don’t like. That’s why we were prepared to support this dialogue.

There are people out there who have thought that the School has passed motions as opposed to the Students’ Union. There are people who thought the Students’ Union passed the first motion, which had the more inflammatory language in it. I get emails congratulating me on passing a resolution as Israel as an apartheid state, and have to point out that I haven’t passed any resolutions and furthermore the resolution that did get passed did not actually use that language. There’s a lot of misunderstanding.

The Future

Your term runs until 2013, what are your remaining ambitions for the School?

First of all, the big plan for the campus. To get that done, without getting in to more debt than we can manage, is obviously the big thing that I have to do. The other thing is to keep the LSE relevant.

For example, the economics of climate change. We will be the big British centre for the economics of climate change. I’m trying to raise some money to build a bigger research programme and I’d like to think that people around Europe will say, the LSE is the place to go for the economics of climate change. That’s why I persuaded Nick Stern to come back to the school to build that. I also think there is a gap in the market for an academic institution that is engaged in diplomacy. I continue to hanker after having a proper Middle East centre here, and also I would like to develop further our urban work, because I think that the big social and environmental issues will all be addressed in the big cities.

Those are not ambitions I can personally achieve on my own; they depend on gathering together groups of academics who want to do them. At a school of this kind you’ve got to be fleet of foot and be able to develop new centres and degree programmes. For example, I’d like to have an MSc Economics of Climate Change which meant that you were training people who could go into governments and corporations and would have a tool kit so that they could understand what makes sense in terms of investments to reducing carbon emissions. I think that would be our best contribution.

Joseph Stiglitz

For a man who has just uncovered the simply vast amounts of money his country is squandering on a war he describes as “stupid”, Joe Stiglitz is surprisingly jovial. He is quick to laugh and engages with a wide smile, and doesn’t strike you as either a bookish Nobel laureate or as the “green eye-shaded accountant” that the Bush administration attempted to dismiss him as.

Bush now has another reason to dismiss Stiglitz, following the publication of ‘The $3 Trillion War’; named for the true cost he believes America will pay for its decision to invade Iraq. Standing on the brink of that day’s fifth anniversary now is the time to assess what Stiglitz points out is “the second longest war in America’s history, after the Vietnam War, and the second most costly, after World War II.”

Stiglitz provides many examples of what could be bought for a fraction of the price of the Iraq War – the USA’s spending on autism research equates to four hours in Iraq, ten days fighting costs $5billion, which amounts to total American aid to Africa each year, and one sixth of an Iraq War would pay the United States’ social security needs for the next half-century.

Of course, despite its cost, World War II was famously credited with lifting America out of the great depression, and has helped to promulgate the cliché that war is good for the economy - a misconception that Stiglitz aims to correct. “Wars use resources that could have been used to promote economic growth, and the fact is that since Keynes we know how to stimulate the economy in more constructive ways. This war has been particularly bad for the economy because of the impact that it’s had on the price of oil (oil prices per barrel have risen from $25 before the war to $100), and because it was totally deficit financed. Even as we went to the war we had large deficits, but then the Bush administration actually lowered taxes for the rich. The symptoms didn’t show up because they were hidden by lax regulation which flooded the economy with liquidity which was buoying the economy as these other factors were depressing it. We were in effect living on borrowed money and borrowed time, and a day of reckoning had to come, and it’s now come.”

Stiglitz believes that the actions of the regulatory authorities have had a direct impact on the current financial crisis. “The monetary authorities thought they had to do what they needed to do to keep the American economy going. The high oil prices and the war was having an adverse effect on the economy, and they simply did what they thought was right, but in a very myopic, short-sighted way – and it worked, in a very myopic, short-sighted way. The symptoms of what the war was doing, of what the high oil prices were doing, were not evident. They now have become evident. But the problem is, by postponing the cost we have increased the cost. The cost the economy is going to have to pay, not only the American economy but the global economy, will be a multiple of what it otherwise would have been.”

There can be no doubting Stiglitz’s determination to keep the issue of the war at the forefront of political debate at this crucial time for American politics. As far as he is concerned, it is the biggest issue there is. “My work focuses on the economics of the public sector, and you might say that the Iraq War is the single largest public project that the United States has undertaken. Typically when we begin a project like building a bridge, we do a cost-benefit analysis. We certainly don’t undertake a large project without looking at the cost. This was a war of choice. But we began the war without thinking about the cost.”

For Stiglitz, however, there is more than just the financial cost to consider. There is also the cost to the idea of democracy. “This was a war that, in part, was allegedly to spread democracy. Democracy means that citizens ought to be able to participate in decisions, and meaningful participation means that they have to know the consequences, and among the consequences are the costs. It seemed to me that if we are going to be talking about democracy then it was important for the American citizens to know what this particular project was costing. The Bush administration did everything it could to hide the costs from the American people. I’m testifying in congress on Thursday, and one of the points I’m going to make is that we should not have had to write this book, and if we did have to write the book it should have been a lot easier.”

Stiglitz explains how the Freedom of Information act was required to uncover even rudimentary information about the number of people injured in the war. In the course of the investigation he also turned up more alarming discoveries, such as the fact that the military were denied a request for MRAPs (Mine-resistant ambush-protected armoured vehicles) which Stiglitz argued would have saved a large fraction of lives, at a short term cost which will now be far outweighed by caring for the injured.

With a war this badly managed, it seems to me that those in charge must be either highly incompetent or highly corrupt, I ask Stiglitz which he sees. “There are elements of both. The Bush administration deliberately tried to obscure what these costs were and has continued to try to obscure it. Particularly the way the money has been appropriated in 24 separate bills, including emergency appropriations five years after the war started. When you go to war it’s an emergency, but five years later you should be able to plan. The way they have deliberately hidden information clearly shows an intent for people not to know. But there’s also an element of what you might call self-deception. The bureaucracy has been created to have a whole set of checks and balances, because you realise that people like to please their superiors. The Bush administration short-circuited many of these checks and balances, and the predictable consequence is that the quality of information was lower than it otherwise would have been. Then they said “How could we have known?” So they were responsible in part for the low quality of information, and many of the specific things they did predictably raised costs. For example, the behaviour of the contractors that were hiring people from Nepal and the Philippines rather than hiring Iraqis, fed the unemployment, while the failure to safeguard the weapons caches, meant that you had an explosive mixture: unemployed young men with weapons, and that explosive combination exploded. Now that was predictable.”

He points out the $19.3 Billion that Halliburton have received in contested contracts in Iraq, and describes current defence spending as “corporate welfare.” He bluntly observes “weapons don’t work against enemies who don’t exist.”

Looking to the future, it is hard to resist wondering how Stiglitz views the upcoming presidential elections. He is blunt about the differences between the candidates. “What is clear is that McCain’s policy, saying that we may be there for 100 years, is not the right policy. If you extrapolate what 100 years would cost, it’s huge. If you ask what the benefits are, it’s hard to ascertain. Obama has been quite forthright in saying he’s not against wars in general, but he is against stupid wars. And this was a stupid war. He was aware of the kind of divisions that existed, and therefore the difficulty of obtaining a sound outcome to the war, and he’s called for a quick withdrawal. I think that those are all policies that are consistent with prudent actions.”

How does he rate the chances of seeing Obama in the White House? At this question he smiles and nods, a look of real excitement in his eyes. And would this mean a return for the man who spent three years as chair of President Clinton’s Council of Economic Advisors? “Perhaps”, he laughs, but maybe a different job this time. At least Obama has already expressed a desire to have Stiglitz as an advisor. The current administration’s response to Stiglitz’s appearance before Congress was derisory. “People like Joe Stiglitz lack the courage to consider the cost of doing nothing and the cost of failure. One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11,” said White House spokesman Tony Fratto. "It is also an investment in the future safety and security of Americans and our vital national interests. $3 trillion? What price does Joe Stiglitz put on attacks on the homeland that have already been prevented? Or doesn't his slide rule work that way?"

Whoever wins in November, the world should listen to Stiglitz. Whether or not Joe can catch the ear of the next administration could have a serious effect on the cost the globe is forced to pay for Bush’s most spectacular folly.