Panel discusses global financial crisis

The concern felt by many over the present financial crisis was clear on Monday afternoon when around 100 University students, faculty and community members gathered for a program entitled “The Financial Crisis and its Political Ramifications,” held by the Center for the Study of Public Life and the departments of economics and government.

“Our idea was to provide an opportunity for students to hear faculty who have expertise in the area address these issues and to ask questions about them,” said Dean of the Social Sciences and Interdisciplinary Programs and Professor of Government J. Donald Moon.

Moon, who helped organize the event, was optimistic about the number of attendees.

“I was surprised—and pleased—by the number of people who came out,” he said. “Obviously, everyone is very concerned about the growing financial crisis; it’s a testament to the seriousness of our student body that so many took the time to learn more about it.”

Erik Underwood ’09, one of the student attendees, explained his own motivation for attending.

“If we look at the headlines for the past couple of weeks, you see these headlines of ’apocalyptic crises,’” Underwood said. “I wanted to see their interpretations, from economic and political science standpoints.”

Andrea DePetris ’10 agreed with Underwood, citing her wish to become more engaged with national concerns.

“I was interested in attending the program because I’m not as informed about the financial crisis as I would like to be,” DePetris said. “As a college student living off of a pre-paid meal plan, it’s been too convenient for me to become absorbed in daily routines. This level of disengagement shouldn’t go unchecked.”

The panel, which was facilitated by Moon, featured Assistant Professor of Economics and East Asian Studies Masami Imai, Chairman and Professor of Economics Richard Grossman, Professor of Government and Henry Merritt Wriston Chair in Public Policy Marc A. Eisner, Assistant Professor of Government Elvin Lim and University Vice President and Chief Investment Officer Thomas Kannam. Each panelist spoke on a topic within their discipline, with an audience discussion following.

Imai began by addressing the causes and solutions of the financial crisis. Speaking in front of a PowerPoint slide labeled “What Happened?” Imai detailed the conditions and actions that led to the current crisis in the economy and analyzed the steps of responding to the problem.

“We have to recapitalize the bank system in a way that does not create a severe moral hazard problem in the future,” Imai said. “We have to do it, and we have to do it quickly.”

Grossman then traced some of the financial cycles in the United States and Great Britain in an effort to put today’s issues into a historical context.

“Nothing going on is completely new,” Grossman said. “All this has happened before, and I would say will happen again. This has been the pattern for financial crises for the past two hundred years.”

Eisner and Lim focused on the more political aspects of the present crisis.

“There has been a mischaracterization of the problem by the right and left,” Lim said. “The problem is not just Wall Street and the problem is not just government.”

Kannam brought the issue home by discussing the management of the University’s investments. The importance of this topic was underscored by the recent report of the University’s endowment decline in the 2008 fiscal year.

“We [the University] are trying to take advantage of the cycles,” Kannam said. “Now we’re seeing more opportunities that we’ll benefit from in the long run.”

Lim concluded by explaining that the crisis was also a result of the influence of American culture on people’s decisions and actions.

“The one thing market economies have not learnt to deal with are speculative bubbles,” Lim said. “Because we celebrate the entrepreneurial spirit, we embrace greed and speculation. They are two sides of the same coin. We can no more restrain speculation than we should restrain the entrepreneurial spirit and there is no easy exit from this dilemma.”

For Lim, there was one central problem that must be fixed in order for regulation — and the capitalist system—to work.

“At the heart of it all, we need to be clear,” Lim said. “We need laws that require full disclosure. The key is to find some way to break the chain of alliances and to have multiple and unconnected channels of oversight—and the premise of oversight is transparency.”

Afterward, Underwood reflected on the prospects available for students graduating into an uncertain economic climate.

“I’m either pessimistically optimistic or optimistically pessimistic,” Underwood said. “I can’t decide.”

Underwood went on to note that with issues such as global warming and energy, great change would be ongoing.

“People will have to change the way they live their daily lives,” Underwood said. “Maybe not being able to get a job right after college—that sucks—but it’s a small drop in a much larger problem.”