The third annual International Politics and Economics Symposium, “Crisis and Confusion: Responses to Global Economic Turbulence,” was held at Middlebury’s Rohatyn Center for Global Affairs last Friday.
Michael Bordo, a professor of Economics at Rugters University, spoke at the first panel of the day. The panel, titled, “Is the Crisis of 2007-2008 Unusual? An Historical Perspective” examined how the most recent financial crisis related to those in the past and, most importantly, the Great Depression.
Bordo explained, “Though the financial crisis of 2007-2008 is seen as the worst since the Great Depression of the 1930s, it was not as major an event in the 1930s or even the 1890s.”
He, critical of Federal Reserve, found that the policy lessons the Fed has taken from the 1930s crisis did not apply. He said, “The financial crisis of 2007-2008 was primarily a banking crisis, which involved both traditional banks and non-bank financial intermediaries, or shadow banks.”
He continued, “The traditional view of a banking crisis was a banking panic or a liquidity crisis. It involved a scramble by the public for means of payment, stock market crash that leads to fear that loans will become unavailable at any price. A banking crisis is a prolonged disturbance that is resolved by government agencies other than the lender of last resort.” Bordo concluded with policy lessons from history.
Professor of Economics Robert Prasch enjoyed the symposium due to its relevance and timeliness. “Professors at Middlebury know what I think, so it’s great to have this symposium with famous economists and political scientists, and to engage with them,” he said.
Josh Kruskal ’15 introduced Graciela Kaminsky, professor of Economics and International Affairs at George Washington University.
“It’s great that we do the symposium, it’s exciting to bring these speakers to campus and to get outside perspectives and discussion on campus,” said Kruskal, an International Politics and Economics major.
Kaminsky, whose work has been published in The Economist, lectured on the varieties of sovereign crises in Latin America from 1820-1931. “Sovereign crises have been the bread and butter of developing countries for centuries. Now they have come back with a vengeance with developed countries who are in the midst of a sovereign crisis,” she said.
She added, “Crises occur in the midst of vulnerabilities in the periphery, but with a healthy financial center. Crises in the financial center are rare disasters and there is a need to examine longer episodes of financial globalization.”
Kaminsky examined the first episode of financial globalization from 1820-1931.
“There are varieties of crises: systemic crisis and idiosyncratic defaults, defaults with large and small debt reduction rates, short and long default spells. Overall, the crises occur in bad times. But the estimations indicate that many crises occur because of problems in the financial center that led to international liquidity crunches and of course to a shadow in the periphery. Increase in international liquidity doesn’t solve insolvency, large debt reduction does,” Kaminsky said.
Sanela Smaka ’15 introduced Matthias Matthijs, assistant professor of International Political Economy at the John Hopkins School of Advanced International Studies for a lecture titled: “Do Washington and Berlin Handle Economic Meltdowns Differently? Ideas and Leadership During Times of Crisis.”
In the lecture, Matthijs explained, “The global financial crisis and the Euro crisis, though similar in magnitude and potential for international conflagration, had quite different outcomes. The global financial crisis shored up relatively quickly over the course of 2009, while the Euro crisis sputtered on.”
Matthijs concluded, “I love the title of this symposium, Crisis and Confusion, because political scientists cannot predict revolutions just as economists only predicted 2/7 of the last crises.”
“This symposium is really reflective of the International Politics and Economics department,” said Smaka. “We covered the United States, Latin America and Europe with two economists and a political scientist, and came up with a dialogue, which is what combines IPE and why I love the department.”
