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A last chance

Leaders meet in Washington on 15 November for a summit to attempt to resuscitate a world finance sys

The giant video screen at 745 Seventh Avenue, in Manhattan, is still lit up: only now, instead of the old Lehman Brothers promo, with its tossing oceans and desert sunsets, it projects the ice-blue bling of Barclays Capital, five-storeys high. The problem is, though the lights are still on for finance capital, ideologically there’s nobody home.

Lehman's bankruptcy marked the end of a 20-year experiment in financial deregulation. But it was Alan Greenspan's congressional testimony, a month later, that marked the collapse of something bigger: the neoliberal ideology that has underpinned it all.

It was Greenspan who had begun ripping away restrictions on financial speculation and investment banking in 1987. Last month, he said: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact . . . Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself especially, are in a state of shock and disbelief."

The belief in self-interest as the guiding principle of commerce is as old as Adam Smith. What happened with the Anglo-Saxon model of capitalism was something different: the principle of rational self-interest was elevated to replace regulation and the state. Selfishness became a virtue. Inspired by Ayn Rand's credo - "I will never live for the sake of another man, nor ask another man to live for mine" - the giants of global finance revelled in amoralism. Morgan Stanley boss John Mack's legendary trading-floor motto - "There's blood in the water, let's go kill somebody" - sums up the era.

But the theory was flawed. Instead of safeguarding the property of shareholders, self-regulation drove the system to the point of collapse. Trillions of dollars worth of capital has been destroyed. "My view of the range of dispersion of outcomes has been shaken," Greenspan conceded. That's a logical response when the range of outcomes is clustered around the collapse of the savings system, the evaporation of global credit and the bankruptcy of most banks.

But selfishness was not the only tenet of neo-liberalism. Any definition of the term would include: a belief in the market as the only guarantor of prosperity and democracy; the futility of state intervention in pursuit of social justice; the creative destruction of cherished institutions and stable communities; the shrinkage of the state to regulatory functions only, and then as minimal as possible.

And the problem for the G20 leaders who will assemble at the Washington summit on 15 Nov ember is this: every single one of them has, to a greater or lesser extent, bought into the neoliberal ideology. It has dictated the direction of travel even in economies such as Brazil, India, Indonesia and China, classified as "mostly unfree" on the neoliberal league table.

The summit's most pressing task is to come up with a co-ordinated crisis response: for all the rhetoric, this is a firefighting operation not a second Bretton Woods. In the end, the route to a Bretton Woods-style settlement may be impassable for the weakened, multi-polar capitalism represented by the G20. But, even to begin that journey, there must be an honest reckoning with neoliberalism.

An ideology does three things: it justifies the economic dominance of a ruling group; it is transmitted through that group's control of the media and education; and it describes the experience of millions of people accurately enough for them to accept it as truth. But it does not have to be logical. For this reason, picking logical flaws in neoliberalism has been an exercise with diminishing returns.

For example, Milton Friedman's assertion that free-market capitalism and democracy are mutually reinforcing always looked a non-sequitur after he hotfooted it to Chile in 1975, personally urging General Pinochet to inflict a neoliberal economic "shock", even as the secret police were administering electric shocks to the genitals of oppositionists. But his theories continued to inspire policymakers.

Instead of logic, any balance sheet of neoliberalism has to begin from its outcomes. I will list five negative outcomes for countries following the Anglo-Saxon model:

In the first place, rising inequality. Between 1947 and 1973 the income of the poorest fifth of US families grew 116 per cent, higher than any other group. From 1974 to 2004 it grew by just 2.8 per cent. In the UK, the share of national income received by the bottom 10 per cent fell from 4.2 per cent in 1979 to 2.7 per cent in 2002.

Second, the replacement of high wages by high debt. The real wages of the average American male worker are today below what they were in 1979; and for the poorest 20 per cent, much lower. In 1979, personal household debt was 46 per cent of America's GDP; now it is 98 per cent. In the UK, real household incomes grew, but slower than in the postwar boom, until early this decade, since when they have fallen. The debt pattern, however, followed the US; 30 years ago British households were in debt to the tune of 20 per cent of GDP, now it is 80 per cent.

Third is the redistribution of profits from non-financial companies to the finance sector. In 1960s America, the pretax profits of financial firms made up 14 per cent of corporate profits; now they make up 39 per cent. Most of this profit is not generated from financing productive business: the world's total stock of financial assets is three times as large as global GDP. In 1980, it was about equal to GDP.

The new power of finance capital not only creates asset bubbles, as with the dotcom, housing and commodity bubbles of the past decade, but it allows speculative capital to descend on individual companies, countries and industry sectors, smash them and move on. I present the current economic plight of Hungary as Exhibit A.

Fourth is the growth of personal and financial insecurity, the destruction of social capital and the resulting rise in crime. If you want data, then the four stark pages of membership graphs at the end of Robert Putnam's celebrated book Bowling Alone show the decline of almost every voluntary association in America during the neoliberal age. If you prefer qualitative research, walk the streets of any former industrial city at night.

Fifth is the relentless commercialisation of all forms of human life: the privatisation of drinking water that provoked the people of Coch abamba, Bolivia to revolt in 2000; the creation of a private army of 180,000 military contractors in Iraq, unaccountable to international law. In these and many other instances, the functions of the state have been turned over to private companies to the financial detriment of taxpayers, the material detriment of consumers and the loss of democratic accountability.

But there is a plus side. Since 1992, there has been stability and growth across the OECD countries and beyond, albeit lower than the average growth achieved during the postwar boom years. There has been a marked fall in absolute poverty, with the number of people living on less than $2 a day falling by 52 per cent in Asia, 30 per cent in Latin America (though rising by 3 per cent in Africa) between the years 1982-2002. And though the data is mixed, many of neoliberalism's critics accept that inequality declines as per-capita GDP growth improves.

There has been a huge movement of humanity from the farm to the factory, and 200 million people have migrated from the poor world to the rich. Access to the financial system has brought rising liquidity: access to homeownership and overdrafts for families on low pay was real, whatever its macroeconomic outcome. And above all, the musty cultural and institutional barriers that made life a misery for the young in the 1960s and 1970s are largely gone; the flipside of commoditisation has been the decline of dependency and paternalism in social life.

And this has been the source of neoliberalism's strength as an ideology: borrow big-time, negotiate your own salary, duck and dive, lock your door at night. That is the new way of life for the world's workforce. My father's generation, the generation of organised workers which saw industry and social solidarity destroyed in the 1980s, could never really accept it. But hundreds of millions of people under the age of 40 know nothing else. And if you live in a Kenyan slum or a Shenzhen factory, you have seen your life chances rise spectacularly higher than those of your father's generation, even if the reverse is true in, say, Salford or Detroit.

Until 15 September 2008 (the day Lehman Brothers filed for Chapter 11 bankruptcy protection, the largest bankruptcy in US history), the left and the right were engaged in a political debate that revolved around the balance of these positive and negative impacts. Today that debate is over: we now know that neoliberalism nearly crashed the whole financial system. I will repeat, because the adrenalin rush has subsided and it is easy to forget: neoliberalism brought the world to the brink of an economic nuclear winter. Not by accident but because of a flaw in its central mechanism. It is for this reason that President Sarkozy (once labelled "Monsieur Thatcher" by the French left) declared it dead - not flawed - but dead. "The idea that markets were always right was mad . . . The present crisis must incite us to re-found capitalism on the basis of ethics and work . . . Laissez-faire is finished. The all-powerful market that always knows best is finished," he said.

S o what comes next? Though governments are scrambling to deploy Keynesian anti-crisis measures - from George Bush's tax cut to Gordon Brown's borrowing hike - it is axiomatic that the developed world cannot return to the way things were before the 1980s: the Keynesian model broke down spectacularly, and could cure neither high inflation nor economic stagnation.

It is clear, from the sheer level of pain and trauma inflicted by the changes of the past 20 years, that we have lived through the birth of something. Its founding ideology was neoliberalism; its most tangible result was globalisation; and it was achieved through class struggle by the rich against the poor. But none of these facts can encompass the scale of change.

Because none of them allows for the most fundamental change - that information has become a primary factor of production. C omputing power has doubled every 24 months; the internet and mobile telephony have, in the past ten years, altered the patterns of human life more profoundly than any single economic policy. Info-capitalism has been inadequately theorised: call it "post-Fordism", techno-capital or the knowledge economy, whatever the label it remains the central fact of the early 21st century.

If you accept this, then the experience of neo- liberalism looks less like the dawn of a free-market empire, more like the period between the invention of the factory system and the passing of the first effective factory legislation: between the establishment of Arkwright's mill at Cromford in 1771 and the Factory Act of 1844.

For much of that period, the pioneers of industrial capitalism believed that any regulation would kill the dynamism of the system. They too had a celebrity economist to justify their actions, namely Nassau Senior, the author of the theory that all profits were made in the last hour of the working day. The fate of capitalism, quipped reformer William Cobbett, depended on 300,000 little girls in Lancashire: "For it was asserted, that if these little girls worked two hours less per day, our manufacturing superiority would depart from us."

Child labour was abolished; minimal standards of order and humanity were imposed on the factories. But capitalism did not die - it took off. It is no accident, incidentally, that 1844 was also the year Britain, traumatised by recurrent financial panics, enshrined the supremacy of the central bank and the gold standard in legislation. If the parallel is valid, then the new regulations and institutions under discussion in Washington stand a chance not of killing info-capitalism but of unleashing it.

What are the intellectual sources for the system that will replace neoliberalism? Most of the prophets of doom in advance of the credit crunch were survivors from the Keynesian era: Paul Krugman, Joseph Stiglitz, George Soros, Nouriel Roubini, Morgan Stanley economist Stephen Roach. But with the partial exception of Stiglitz, they remain dislocated from the grass-roots opposition to neoliberalism. In turn, this opposition, dominated by the principles of anarchism and charity, has revelled in its own diversity and lack of engagement with state-level solutions.

As for the world's policymakers they, for now, resemble the Hoover administration in 1930, or if you are feeling really unkind, Chamberlain's British government in 1940. They are confronted by a crisis they did not think would happen. They are approaching it with the only tools they have - but they are the old tools: the old alliances, the old experts, the unreconstructed ideas and plans: Doha, Basel II, the Lisbon agenda. The IMF's conditions for bailing out eastern Europe - public spending cuts, interest-rate rises, privatisations - confirm the pattern.

The aim, made explicit during a speech on 28 October by Catherine Ashton, the EU's new trade commissioner, is to enact crisis measures while explaining to the public that "interventions and excessive use of public subsidies - while attractive today, will damage us tomorrow". This does not match the rhetoric coming out of Paris and Washington about the "end of trickle-down" and the death of laissez-faire; and it tends to ignore the fact that the most fundamental problem created by neoliberalism was not deregulation but the replacement of high wages by high debt. In other words, it is not the policy framework that is in trouble, it is the growth model.

There are three possible ways out. First, the revival of neoliberalism in a hair shirt: less addicted to the celebration of greed; with government spending temporarily replacing consumer debt as the driver of demand; and with some attempt at co-ordinated re-regulation. That is the maximum that can come out of the Washington summit.

Second, the abandonment of a high-growth economy: if it can't be driven by wages, debt or public spending then it can't exist. And if it can't exist in America, then Asia's model of high exports and high savings does not work, either. In previous eras the proposal to revert to a low-growth economy would have been regarded as simply barbarism and regression. Yet there is a strong sentiment among the anti-globalist and deep-green activists in favour of this solution, and it has found echoes in mass consciousness and micro-level consumer behaviour as the world has come to understand the dangers of global warming. Even a mainstream corporate economist, such as Morgan Stanley's Roach, has called for "a greater awareness of the consequences of striving for open-ended economic growth . . . This crisis is a strong signal that [high-growth] strategies are not sustainable."

The third alternative is the Minsky option. Hyman Minsky (1919-1996) was the godfather of modern financial crisis theory: his works, while largely ignored by politicians, are revered by both Marxists and hedge-fund managers. The "Minsky Moment" - a systemic financial crisis that crashes the real-world economy - was not only predicted in his work but theorised as a natural and intrinsic feature of capitalism. What we are going through now, Minsky argued, is the normal consequence of achieving growth and full employment through an unfettered private financial system.

But he had a solution - outlined in the chapters the hedge-fund managers skip and the Marxists dismiss: the socialisation of the banking system. This, he conceived, not as an anti-capitalist measure but as the only possible form of a high- consumption, stable capitalism in the future.

Minsky argued: "As socialisation of the towering heights is fully compatible with a large, growing and prosperous private sector, this high-consumption synthesis might well be conducive to greater freedom for entrepreneurial ability and daring than is our present structure."

Minsky never bothered to spell out the details of how it might be done. But there is no need to, now.

Stumbling through the underground passageways of 10 Downing Street on the morning of 8 October, I saw it done. Tetchy and bleary-eyed, fuelled by stale coffee and takeaway Indian food, British civil servants had designed and executed it in the space of 48 hours. Within days, much of the western world's banking system had been stabilised by massive injections of taxpayer credit and capital.

The problem is, though they have now been there, done that, the G20 politicians have no desire to get the T-shirt.

The G20 summit will meet in the context of a global finance system on life support. Their impulse is to get it off the respirator as quickly as possible; to put things back to normal. But the ecosystem which sustained global finance in its previous form is also in crisis: easy credit and speculative finance were the oxygen, and they have gone.

The policy challenge, in short, is much more fundamental than is being recognised in the run-up to the G20 summit. Gordon Brown speaks of a "new global order" emerging out of Washington. But in reality he is talking about multilateral crisis-resolution mechanisms, not a rethink of the relationship between finance capital, growth and debt.

If the world's leaders seriously intend to "refound capitalism on the basis of ethics and work", there is plenty of source material to start brainstorming from.

I would throw this into the mix, from Franklin Roosevelt's Oval Office in January 1934: "Americans must forswear that conception of the acquisition of wealth which, through excessive profits, creates undue private power over private affairs and, to our misfortune, over public affairs as well. In building toward this end we do not destroy ambition . . . But we do assert that the ambition of the individual to obtain a proper security, a reasonable leisure, and a decent living throughout life is an ambition to be preferred to the appetite for great wealth and great power."

Paul Mason is economics editor of BBC Newsnight; his book "Meltdown: the End of the Age of Greed" is published by Verso in April 2009

Road to the summit

The summit, due to start in Washington DC on 15 November, was first proposed by President Nicolas Sarkozy of France at the United Nations General Assembly debate on 23 September. He urged reform of international institutions, warning that "the 21st-century world cannot be governed with institutions of the 20th century".

On 3 October the US enacted its $700bn bank bailout. EU leaders had initially been confident that their economies would be sufficiently resilient, but the world stock-market collapse now convinced them otherwise. The next day, France, Britain, Germany and Italy agreed to work together to support financial institutions, and issued a joint call for a G8 summit.

On 8 October Gordon Brown announced a rescue package for UK banks. Leaders of the G7 countries (the US, Japan, Germany, Britain, France, Italy and Canada) met in Washington on 11 October, issuing a five-point plan. On 12 October, in Paris, Sarkozy held an emergency meeting of the 15 eurozone leaders, the first such meeting since the launch of the euro. Unusually, Gordon Brown was also invited to attend, and a rescue plan based on the UK model was agreed. The following week, George Bush went to Italy, Germany and the UK in a bid to coordinate response to the turmoil, and on 14 October announced crisis talks to be held between Bush, Sarkozy and President José Manuel Barroso of the European Commission at Camp David four days later. Here, plans for the summit were unveiled.

Attending will be leaders of the G20, which includes the G7 and major developing nations such as China, India and Brazil, along with the head of the IMF and other international institutions. Of the African nations, only South Africa, the continent's biggest economy, will attend; on 27 October the African Union announced it would hold its own summit in response to the crisis.

Alyssa McDonald

This article first appeared in the 10 November 2008 issue of the New Statesman, Change has come

Stuart Ramson for Lumos
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“It’s probably the thing of which I am most proud”: J K Rowling in conversation with Eddie Redmayne

The Harry Potter creator talks to the star of Fantastic Beasts and Where to Find Them about her work with the Lumos charity and the urgent need to end the institutionalisation of children.

EDDIE REDMAYNE: Good evening, good evening ladies and gentlemen.

I am so excited that you are excited! Welcome to Carnegie Hall and – thank you! – Welcome to a very what I hope is a very special evening. More than 25 years ago, an author put pen to paper and created one of the most extraordinary stories that the world has ever seen. Her astounding imagination continues to thrill us, it captivates us, it enthrals us, it moves us, and it leaves us wanting more. And tonight ladies and gentlemen. . . there will be more.

But ten years ago, an unimaginable image and an unthinkable story propelled her down a very different path – where the lives of millions of voiceless children would need saving. The author is J K Rowling, and the path is Lumos.

Tonight, we will cast a light on eight million hidden children around the world who desperately need our help. 

FILM – NARRATED BY J K ROWLING: A child’s life is so much more than the sum of its parts ‐ and the love a family brings holds everything together. From the very beginning, a child thrives on individual care and attention. A baby quickly forges a bond with loving parents – and because of this bond the brain develops with remarkable speed and complexity. Within a safe, secure and stimulating environment a child gets the most out of life; in play, education and friendship their personalities develop freely within safe bounds. But this picture of childhood can be a fragile one. Conflict and disaster can destroy the foundations of family life. When countries suffer the effects of extreme poverty, the bond which holds families together can easily be broken apart. In these circumstances, families can feel they have no choice but to place their child into a so-called orphanage, especially if the child is disabled and needs care the family cannot afford. Community support alternatives may not even exist. That orphanages do exist locally may convince desperate parents that there is no alternative. But once a child enters an orphanage, a very different picture of childhood can emerge. A child must now compete for the unique attention they crave. A lack of individual care harms babies and affects their infant brains at a critical stage. Any schooling they receive is no compensation for the parental love they are denied, and children can become cut off from the world. Ill-prepared for life outside they have very poor life chances, and they are much more likely to fall victim to abuse and crime once they leave an orphanage. And we know there are at least 8 million of these children worldwide. But there is hope ‐ and it lies at the very heart of the problem. 80 per cent of children in orphanages are not in fact orphans but have parents or extended families who could care for them, given some support. And by better channelling of existing donations, we can support these vulnerable children at home. By directing funds away from so-called orphanages we can transform systems of care; we can establish community‐based services and prevent these places from ever taking root. Community‐based services are a better investment for donors: they are more cost efficient than residential care and reward children and communities in the long run. Placing children into orphanages is a choice and not a necessity; it is preventable and reversible. And by giving communities options in how they support families, we can change the lives of millions of children and give them strong beginnings ‐ and the futures they deserve.

ER: So now to hear more about Lumos and its life-changing work, please welcome to the stage its founder. Ladies and gentlemen, the extraordinary J K Rowling.

JKR: Thank you, thank you very much.

ER: So here we are!

JKR: Here we are!

ER: This is a big deal. We’re playing Carnegie Hall!

JKR: We are, yes. It’s actually my second time!

ER: Really? Alright, so in a short while we get to show these people our little movie.

JKR: Yeah, which is exciting and a little bit terrifying.

ER: And we will get onto talking about that in a little bit. But first, the reason we’re all here. So we’ve just seen this film – this is clearly a massive humanitarian issue, and a gigantic undertaking. I wondered: why this issue? Why is it so close to your heart?

JKR: Well, I think Eddie said it really well in his introduction – truth is that I saw a newspaper story about a very small boy, he was seven years old and he was effectively being kept in a cage. And I was pregnant at the time and I saw this image in the newspaper, and it was such a shocking image of this child – holding onto wire and screaming – that I went to turn the page. I went to turn the page because it was painful to look at, and I felt very ashamed. As I went to the page, I thought: No, no, you have to read the story, and if it’s as bad as it looks, you gotta do something about it. So I read the story, and it was even worse than it looked.

So to cut a very long story short, I pulled out the news story – which was all about an institution in the Czech Republic where very young children were being kept in appalling conditions. I went home the next day, Monday, [and] I started to write letters to anyone I could think of – MPs, and MEPs, and the president of the Czech Republic. I wrote to everyone I could think of, and that led me to connecting with experts in this field, and the creation of Lumos.

ER: And so there are eight million children living in orphanages worldwide –

JKR: That we know that we know of! See, I think what’s staggering with. . . what was amazing to me when I first began finding out about this these issues, you think how could eight million children be going through this and we don’t know? But a very small amount of thought shows you they are – as you just said – so voiceless. They are literally hidden from sight. So in fact eight million may be a conservative estimate – there may be more children who have been taken from families that we don’t know about, because record-keeping tends to be poor, which is one of the problems.

ER: And they are institutions that we are saying are harmful to children – I suppose, I imagine, not everyone agrees?

JKR: Absolutely so it is completely understandable that we – and by ‘we’ I mean wealthy Westerners – we may have an idea that institutions are kind. Kind in that otherwise perhaps the child will be on the street, or the child is alone. That’s completely understandable. We tend to have that image in our minds from movies, like Annie, that orphanages can be kind of fun! Actually, that’s not true – even the well-run ones are proven, as we saw in that short film, to do often irreparable harm. You will know, because he has – you have a baby now, who is five months old?

ER: Yup.

JKR: And you will know, as I know as all of us who have anything to do with small children know: that they are hard-wired to demand love. They just come out looking for it, because that’s what they need for brain development. And as was shown in this movie, we know that children who are raised in institutions suffer developmental delays, they tend to be physically stunted, they normally have psychological trauma… it is just not what nature intended for children to be herded together, and not given individual love and care.

ER: And are there sort of studies and statistics which support [this]?

JKR: Absolutely, so I’m not just saying this – plucking this out of the air to tell you. We have 80 years of research now that shows very, very clearly – all the research agrees – that this is very harmful. And in fact Lumos works with scientists in the field who can show you brain scans, showing the difference between a child that’s come from an institution and a child has been raised in a family.

As the movie showed, one large recent study shows that children who come out of institutions were six times more likely to have been abused;

10 times more likely to enter prostitution; 40 times more likely to have a criminal record.

And they were 500 times more likely to kill themselves. So you see we do have this enormous bank of research telling us that we are allowing or even inadvertently causing children to be harmed.

ER: For me, one of the complicated things get my head round – and, I suppose, for people in developed countries like the US or the UK in which institutionalisation is a thing of the past – one of the things we struggle with is there’s this sort of disconnect in terms of how we view orphanages.

JKR: I completely agree. I think a small amount of thought shows us if you imagine what would happen – God forbid – were a terrible natural disaster to hit New York tonight, everyone I think would immediately think “Well, the important thing is I keep my loved ones close to me, we stay together and we get the support we need to rebuild our business, find ourselves a home”… When we put ourselves and our families in that in that mentally in that position we understand. However, what’s happening across the developed world is disaster hits and families are immediately pulled apart: “we’ll take those children from you.” Now, imagine that, in the wake of the disaster, people come to you and say: “that child will get fed only if you give me that child.” And we keep propping up the system, and it’s causing a huge amount of damage.

ER: And so is that why families are being torn apart? Why do parents give them up?

JKR: Right, exactly – for many people, that’s the key question. So when I tell people [that] 80 per cent of these children have parents, then an understandable reaction is “what loving parent could give up their child to one of these places?” But we know that there are three main drivers into institutions. The biggest one, the overwhelming one, is poverty.

So parents who make themselves literally be starving are told “if you want to feed that child, we will take it to the institution – the child will get food in the institution.” So they literally believe “that’s how my child will be fed and survive – I’ll have to give the child.” The other one is disability. We find in the developed world, and certainly this was the case in Eastern Europe, where we’re doing a lot of work, children with disabilities were not integrated. And so parents again were told “if you want medical assistance for a disabled child, or if you want that child educated they have to go into the institution.”

And then the third driver is natural disaster, and this is where a very nasty aspect of institutionalisation comes in. It is often the case in the developed world, the so-called orphanages are run as businesses, and that effectively children are trafficked for profit because we Westerners are generous and we can we give a lot of money to these orphanages. And unfortunately there are very unscrupulous people, who in the wake of disasters use it as an opportunity to get children and corral children as a magnet for foreign money, rather than putting the money into systems of care that would keep families together. So since 2010, there has been a 700 per cent increase in children in institutions in Haiti. 

ER: So, for me. . . what’s the solution? How does one go about it?

JKR: Obviously this is this is a massive issue, a massive issue. And, as you would imagine, the solution is complex but – I bring you hope! This is an entirely solvable issue. This is entirely solvable, and we know how to do it. Doesn’t mean it’s easy – but we know how to do it. So it’s a two-part problem: first of all we have these children, some of them living in truly appalling conditions, whom we need to rescue.

The other part of the issue is we need to stop children going into those institutions in the first place, ever again. Lumos’ ambition – and we believe it’s achievable – is that by 2050 we will have ended institutionalisation globally. Now, that’s going to be a huge amount of work, clearly, but a lot of us are really up for that. So, first thing is we need to put into place different systems of care, and some very good news is institutions are very, very, expensive to run. And if we just redirected the funds that are being pumped into institutions, that alone would enable better systems of care to be set up.

But you also need a lot of expertise, and what we do with Lumos is, we work with people in country who are already trying to change these systems. So that’s the point I always really like to get across, we are not moving into countries and saying: “let us show you how it’s done.” We are walking into countries because in all of these countries there are experts, who know the system’s wrong, but they don’t have the money and they don’t have the clout, and they aren’t connected with the kind of people who can help them change systems. We can go in and help them do, that so that’s what we do. We go in and we try and affect the change.

We also do things like – I mean, we’ve provided urgent medical assistance to children we’ve found in very, very bad situations and so on. So it’s multi-layered, and then the other thing we do is advocacy, so we work with places like the UN and the EU to change policy, to stop this being the default position when disasters happen.

ER: I think I read that every year, particularly in this country [the US], millions of dollars are being given to orphanages.

JKR: That’s right. I have these notes because I want to get the figures right – because normally I just make it up out of my head, like people say “how many house elves are in the Hogwarts kitchen?” and I just [gestures]. But this is really important – I’m not saying house elves aren’t important, they clearly have been massive in my life, they mean a lot to a lot of people. . .

But I want to get this right because this is this important. So, this is an incredible figure: this is how much Americans give to charity annually – how awesome are Americans? – The answer is $375bn. So I mean that is phenomenal, that’s phenomenal and just warms ones heart to think about the generosity. Now, that money was given with the absolute best possible intentions. There’s not one person here tonight, I know, of any age, that does not want to help a child in trouble. It’s a human instinct that we all have.

We know that that money drove a lot of children into orphanages who probably didn’t need to be – well, no child needs to be in an orphanage. But we know that it created a drive-in. And, so what I would like, even if you never give us another penny – I’m so grateful for what you have given us tonight, we will always be able to use money very effectively because these children have very complex needs.

But even if you never give us another penny, if you just walk out of here tonight and explain to people that donating to orphanages or volunteering and orphanages is sometimes propping up some very corrupt people making a lot of money, and if you give your money to community-based services you can actually help ten times as many children. Just checking my notes – ten times as many children.

ER: You mentioned Haiti – that is somewhere that is obviously in our minds of the moment.

JKR: It is, hugely in our minds. In my mind a lot at the moment because, we know and I have more figures here – these are new figures to me, because obviously there’s recently been an absolute catastrophe there. So we now know that there are 30,000 children institutionalised, and the same statistic I keep quoting still applies: the overwhelming majority of those children have at least one parent, and these are families whose livelihoods have been swept away, these are families who were so desperate that they thought that was the only way they were going to keep that child alive. Which is an absolutely heart-breaking thing to me and I know it will be to you also.

There is a lot of corruption in Haiti, and we know that there are people who are called child finders – not childminders – these child finders are out there persuading parents to give up their children to orphanages, and making lots of promises to them about what they can do for that child in terms of protection and care. And those children are not receiving protection and care – rather the reverse.

We know that a lot of child trafficking is going on, and we also know that for each child in an orphanage in Haiti, currently each child is attracting six thousand dollars’ worth of foreign aid, and that’s why it is becoming a business. So people with the best possible intentions are giving money, and I think they might be horrified to see what’s going on. So what I’m saying to you is, for God’s sake don’t stop giving money, but give it right. Give it to NGOs that are working to give people back livelihoods and to support communities, not to institutions.

ER: And Hurricane Matthew has exacerbated that…

JKR: Hurricane Matthew was, as we all know, an absolute nightmare: half a million people lost their livelihoods, we have 900 dead, and it will – unless we intervene in the correct way – continue to prop up this very damaging system. And I will say this because I would like you all to know, that I put my money where my mouth is: I gave a million pounds last week to Haiti to support community-based services. And I’m not saying it for that reason – I kind of cringe slightly as I even say that – because I’m not saying it for that reason. I’m saying that I’m not asking anyone to give where I’m not already giving, but Haiti is a particular catastrophe and I wanted to give extra funds to Haiti right now through Lumos, because Lumos is on the ground right now affecting this kind of change, and really looking out for those children in those institutions.

ER: And recently Bonnie Wright and Evanna Lynch – so Ginny Weasley and Luna Lovegood from the Potter films – who we love! And I think Bonnie is here this evening – but they are two incredibly dedicated Lumos ambassadors, who visited Haiti, and they not only saw the horrific conditions but also they saw the solution that you’ve been talking about Jo and we actually have some footage from the trip here:

FILM – NARRATED BY BONNIE WRIGHT AND EVANNA LYNCH: “Hi, my name is Bonnie Wright and I’m an actress and director. You may know may know me as Ginny Weasley from the Harry Potter films. But today I am here in Haiti with Evanna Lynch, who you may know as Luna Lovegood. We decided to come to Haiti because we’re concerned about the 30 thousand children living here in orphanages instead of at home with their families. 80 percent of these children have families who would care for them but cannot. I was incredibly shocked and upset to find the conditions at the first orphanage we visited. I’ve heard so much about the work that Lumos was doing and from some of the workers here about what these institutions were like, but I think out of this first visit just highlighted how incredibly important Lumos’ work is here in Haiti. The most important thing that I took away from today is that children really need to grow up in families.”

“Without family and without love, children can’t be children. The most important thing as a child is to be with your family, and you have to do everything you can to keep that family unit in place.”

ER: Those are pretty profoundly powerful images.

JKR: They are, they are but you know… we’re obviously doing a lot of work in Latin America now, it’s an area that does have a problem with institutionalisation. But we are very hopeful at Lumos that we could reach a tipping point in five years or so, where we can we can change policy. We are very hopeful that by 2035 – if we can get the funds – we will be able to stop institutionalisation in Latin America. We believe that.

ER: So it’s solvable?

JKR: It is solvable. It sounds overwhelming when you think of that number of children, and the complexity – I’m not denying the solutions are complex. But Lumos is working with absolute experts in this field. They know what they’re doing, they know how to make it work, and what they need are the funds and the support. And the last thing I would say – particularly to young people in the audience today – I would reiterate: we need to change minds.

We need to change minds, because while people are putting money into these orphanages and while people are volunteering in orphanages, a lot of corruption flourishes around those institutions. There is a sense that we are, as ever with the best intentions, propping up something that’s very damaging. Those children should be with their families, and if they can’t be with families, foster care, or adoption, or supported living in small family-style units are all proven to be the best possible alternatives.

ER: What can we do? Tell us what we can do!

JKR: I think its two-part as I say so number one, I am going to firstly say I could not be more grateful all of you being here tonight. You’ve already done the most enormous amount for us to raise money for us and thank you, thank you. So fifty percent of what you can do: if you want to fundraise for us, I will be forever in your debt.

The other half though as I say is, if everyone who is here tonight walked out of here and said: “I get the issue! I know that institutionalisation is wrong, and in future when I donate, when I hear a friend donating, and saying they want to give some money away at Christmas, I will say “not the orphanages.”” But look, if you want to give it to a child in the developing world, look at community-based services. We’re not the only NGO working in the field, we are one of several, so do a little bit of research and make sure that you are supporting families to stay together.

ER: We will spread the word, we will spread the word. That is our job, to spread the word. And I’ve got to say, having known so little about it before, it’s an extraordinary thing and it’s a complicated thing, but as you say solvable. And you must be incredibly proud of the work that Lumos are doing.

JKR: I am – it’s probably the thing of which I am most proud.

This conversation took place on 12 November 2016 at Carnegie Hall, New York City.

This December, the New Statesman is joining with Lumos to raise money to help institutionalised children in Haiti return to family life. In the wake of Hurricane Matthew, funds are needed to help those who have become separated from their families. Please consider pledging your support at bit.ly/lumosns

Thanks to Lumos’s 100 per cent pledge, every penny of your donation goes straight to the programme. For more information, see: wearelumos.org