Professors Speak Out on Financial Crisis

Professors Speak Out on Financial Crisis

Meaghan Haire

The U.S. economy is in a recession. According to the National Bureau of Economic Research, it has been since December 2007. In response to students’ concerns about the economic issues facing the United States today, the Colgate Economics Department held a Panel Discussion on the subject of the crisis. On January 27, eight economists from the department met to discuss the issues in a packed Persson Hall Auditorium. There were not enough chairs to accommodate the number of students attending.

Richard M. Kessler Professor of Economics Don Waldman, the moderator of the panel, opened discussion with a laugh about the crowded audience, and a quip that this was “one topic that anywhere in the nation, you can get a large audience for.”

The panel was made up of Waldman, W. Bradford Wiley Professor of Economics Jay Mandle, Banfi Vintners Professor of Economics Michael Haines, Professor of Economics Tom Michl, Associate Professor of Economics Nicole Simpson and Assistant Professors of Economics Ben Mathew and Dean Scrimgeour. According to Simpson, the Economics Department held a similar event in the fall that was very successful, so they decided to follow up with further forums for discussion.

Simpson remarked that the panel was intended for anyone interested in gaining a better understanding of the recession and the different takes on what is going on with the economy. She believed it would be relevant for everyone, from seniors entering the job market to first-year students enrolled in Introduction to Economics.

The panel discussion began with a brief introduction and summary of opinion on the recession by each member of the panel. Mandle began by suggesting that the current “financial catastrophe had its root in the financial sector.”

Mandle and others also brought up the issue of regulation. They argued that limited regulation of the financial sector had greatly contributed to the crisis.

Haines spoke next and was able to contribute a historical perspective to the issue at hand. He discussed the ways in which the recession is and is not comparable to the Great Depression, arguing that this recession is going to be “bad,” but probably not on the scale of the Depression. He and some of his other colleagues made the contention that it was not the New Deal that helped the United States out of the Depression, but World War II spending. This in turn became a question for debate: are there ways besides war to pull a country out of this type of economic crisis?

Scrimgeour eased the audience’s fears when he stated that this is not the worst crisis he has seen. He reminded students to think of the current state of the economy in Zimbabwe, a country suffering under an unthinkable inflation rate.

Michl noted that the world has entered a crisis in economic theory. He called it “the end of neo-liberalism,” and, along with many of the other professors on the panel, discussed the resurgence of Keynesian ideas on fiscal policy and government spending.

Simpson, in her turn, kindly reminded students that, around the world, there have been 122 recessions since 1960.

Simpson then gave statistics on these 122 recessions, which, on average, lasted four quarters and generally reduced GDP by two percent. However, Simpson does not believe this is an average recession. Recessions that start as a banking crisis generally last considerably longer.

Nonetheless, on an optimistic note, she does not think the current situation will become a depression. Simpson and others on the panel argued that that now is the time for countries to work together towards global economic policy to avoid such an event.

Mathew voiced his view that the financial markets have not been regulated properly, explaining his belief that the financial sector was allowed to take on too much risk.

After each of the economists had expressed their views, Waldman called for questions from the audience. Questions ranged from regulation to the role of China to the hype of the media. The economists offered both personal and scholarly reasoning for their opinions, and it proved to be an informative discussion that lasted the full two hours scheduled.

If such a panel is to occur every semester, students expressed hope that there will be less to talk about and a more positive financial climate to assess come panel time next fall.