Doug Criscitello, Executive Director of MIT’s Center for Finance and Policy
From MIT Golub Center for Finance and Policy
As the keynote speaker at a recent conference of the International Consortium on Government Financial Management held in Washington DC, I had the opportunity to discuss with representatives from over 40 countries one of the primary challenges facing governments around the world – citizen engagement.
My remarks emphasized that recent populist movements should be a wake up call to everyone involved in government – including those in the budgeting and finance communities – on the need to turn citizen cynicism into engagement and buy-in.
The growing availability of technology and data should be enabling a highly informed citizenry (i.e., voters) armed with actionable information. Moving beyond tired factory-like mindsets where government financial staff spend their days grinding out reports, preparing audit remediation plans and manually executing budgets, a modern approach enables technology to drive iterative, customer-focused engagement and creates and marshals electronic resources.
Ask most finance experts about the “world’s largest financial institutions,” and you’ll hear names like Citigroup, ICBC (China’s largest bank) and HSBC. However, governments top the list of large financial institutions, with investment and insurance operations that dwarf those of any private enterprise. For instance, last year the U.S. federal government made almost all student loans and backed over 97% of newly originated mortgages. Add to that Uncle Sam’s lending activities for agriculture, small business, energy and trade, plus its provision of insurance for private pensions and deposits, and you’ll discover it’s an $18-trillion financial institution. By comparison, JP Morgan Chase, the largest U.S. bank, had assets totaling about $2.4 trillion.
While government practices differ across countries, the basic story is much the same everywhere. As the world’s largest and most interconnected financial institutions — and through their activities as rule-makers and regulators — governments have an enormous influence on the allocation of capital and risk in society. And as financial actors they are confronted with the same critical issues as their private-sector peers: How should a government assess its cost of capital? How should its financial activities be accounted for? What are the systemic and macroeconomic effects? Are the institutions well-managed? Are its financial products well-designed?
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I am just back from an exciting weeklong trip to China to meet applicants for a new program MIT Sloan is helping develop at Yunnan University for women entrepreneurs. The program is part of Goldman Sachs’s 10,000 Women Initiative. Goldman’s initiative is a $100 million campaign designed to provide business and management education to promising female entrepreneurs in developing countries.
I met 15 candidates and found them each to be impressive – educated, articulate, and brimming with ideas. They have already experienced some success: some of them had at least 1 million yuan in revenue, which is about $150,000. Read More »
We are at the beginning of the Big Data era, and there is widespread anticipation that this will be a huge benefit to companies. I’ve been attending the World Economic Forum in Davos and in my `Data to Decisions’ panel we heard CEOs tell how Big Data can reinvent everything from CRM to internal processes to product design.
We also heard that there are significant challenges in data sourcing, permission agreements, data quality and of course privacy concerns, as most Big Data is personal data about customers. Fortunately these challenges can be addressed by conventional business practices.