From Allen & Overy’s 2011 Annual Review, which I happened to pick up in a visit to one of their offices last week, come some thoughtful essays you wouldn’t expect to find were it the usual firm’s “higher, faster, bigger, stronger, better, wider, longer, lower” sort of exercise in self-congratulatory high-gloss prose.

A sampling.

From Professor Kishore Mahbubani, now Dean of the School of Public Policy at the National University of Singapore and former Singapore ambassador to the UN and President of the UN Security Council:

But now we are seeing the return of Asia.  Why return?  Because, until 1820, the world’s two largest economies were consistently China and India. The last 200 years were a major historical aberration. That is coming to an end.

The financial crisis has dramatically acclerated the shift of power to the East, and has caused a major change in the psychology of Asian policy-makers.

They naturally looked to Washington, London, Paris or Berlin for answers to global problems. but suddenly they are beginning to wonder why their teachers have performed so badly. Asians also feel increasingly confident that they are on the right track. They’ve paid attention to the fundamentals—balancing budgets, saving for the future —and now find themselves in a much better position than the West.

Asians were very puzzled by [the failures of Western financial regulation] because there’s a view in Asia that you need a balance between the invisible hand of markets and the visible hand of good governance. In the West, ideologically, the market is the only thing that matters.

Then there’s this from Jacques Attali, former special adviser to Francois Mitterand and founder and first president of the European  Bank of Reconstruction and Development, a prolific writer with over 50 titles to his name, as well as being founder and chairman of PlaNet Finance, Europe’s largest microfinance organization, operating in some 80 countries.

“Europe’s debt crisis is just one tiny dimension of the global governance crisis.

Very often I say there are two masters who can help us to understand the future. One is Marx who explained that everything moves according to economic laws and his analysis remains a valid way of understanding how capitalism is adjusting to globalisation.

The second is Shakespeare who explained that, whatever laws exist, everything is in the hands of leaders and is affected by powerful forces like loyalty, power and corruption.

As far as today is concerned, Marx would say we are bound to go towards a system of European federalism because the Euro will not last without it. The collapse of the currency would be a disaster, so the leaders will avoid it – at the last minute.

Shakespeare would say: “We just don’t know.”

It’s interesting to note that America faced an identical crisis in 1790. There was a lot of debt in the individual states, which were living together in a loose confederation.

At a dinner, Hamilton, Jefferson and Madison decided to build an army, create a capital named after Washington, draw up a budget and create Treasury bonds. Without that decision, the US would today be as fractured as South America.

The problem for Europe is that we don’t have a Jefferson, Hamilton and Madison to gather together at a dinner. Our policymakers, with very few exceptions, just have not grasped this.


Let’s get the view of Pippa Malmgren, president of Principalis Asset Management, a London-based financial services firm she came to after serving as an economic adviser to George W. Bush, and a senior executive at UBS, as well as being a widely known speaker and writer on the world economy.

“The US has always had an incredible capacity to recover from economic crisis and that absolutely still holds true today.

We’re seeing an extraordinary revival of manufacturing in the US, particularly in the Midwest. As wages in China and other emerging markets rise because of their own inflation problems, China can no longer compete with the West on quality high value added goods. Suddenly it’s attractive to put manufacturing operations in the US.


People are scared of the word “default”. But if you lift the debt burden you give oxygen to growth. If countries default, they reboot, restart and can grow again.

There are different ways to default. The US will default through a higher inflation rate. So will the UK – but coupled with austerity. Countries like Greece and Ireland don’t have that option and will opt for haircut defaults. I don’t think haircuts will be enough and eventually some countries will temporarily print currency again. If they devalue then they can recover.

The elephant on the landscape is Japan. Its debt problems dwarf all those in Europe. But they don’t have the entrepreneurial response mechanism and demographics are against them.


But I’m optimistic, without a doubt. The greatest fortunes are always made in difficult times.

Does this selective excerpt leave you feeling disquieted or inspired?

I have my own answer, clearly and decisively, but first I’d like to ask why your firm hasn’t put out an annual review as wide-ranging and catholic in its coverage as this?  Or one that includes a 30+ page downloadable *pdf of the firm’s financial results?

And to close, Option B.

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