Harvard Professors Discuss Financial Crisis

In panel, social sciences professors present bleak look of Western economy

Natasha Kovacs

Jeremy C. Stein (left), Kenneth Rogoff (middle), John Y. Campbell (right), and Niall Ferguson (not pictured) speak on the events leading up to the global financial situation today and the impact on future economic policies.

Four prominent social sciences professors specializing in economics offered a bleak future for the Western markets in the third semi-annual Dean’s Conversation panel yesterday.

Economics Department Chair John Y. Campbell moderated a spirited discussion between Economic Professors Jeremey C. Stein and Kenneth S. Rogoff, and History Professor Niall C. D. Ferguson. The panel touched upon poor short-term investment strategies in western countries, faulty “fire marshalling” of these investments, and China’s comparatively better economic health.

Rogoff—whom Campbell introduced as one of the economists on the panel who accurately forecasted the current economic crisis—discussed the lack of proper monitoring of mass short-term debt.

Rogoff compared borrowers to the members of the audience who, instead of sitting in the second row, stood in the back of the room “in case [the panel] is boring and they want to get out.”

“People get nervous and want to get out quickly when borrowing,” Rogoff added.

He said that such trends created “big vulnerability” in the American market, which ultimately collapsed—as Rogoff had predicted in a paper about a year and a half ago.

On his part, Ferguson said that he does not agree with “the rationalizations of other economists.” Instead of relying upon mathematical models like most economists, Ferguson said he used the field of history to better predict economic trends.

“I looked at what actually had happened—not at some mathematical model,” Ferguson said. “History shows us that when liquidity dries up, then there’s a problem.”

Ferguson also said he believed that China’s recent recovery from its economic crisis proved its long-term stability—perhaps posing competition to western economic power.

“We are living through a turning point at which the East overtakes the West, unless something drastic occurs,” Ferguson said. “China will have a larger GDP in 2027 than America.”

But America is nevertheless friendlier to entrepreneurship than China is—a valuable asset, Ferguson said, for the future of American finance.

Social Sciences Divisional Dean Stephen M. Kosslyn introduced yesterday’s panel discussion as a deliberate attempt to initiate conversations.

“My hope has been events like this will start conversations later,” Kosslyn said, “with members not only from the same school but also actually from the same department.”

—Staff writer Gautam S. Kumar can be reached at gkumar@college.harvard.edu.

—Staff writer Julia L. Ryan can be reached at jryan@college.harvard.edu.

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