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Regular Features
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Haas Teach-in Highlights Global Financial Crisis by Julia Sommer, Public
Affairs The ongoing global financial crisis prompted Haas School of Business Dean Laura D'Andrea Tyson to cancel classes Nov. 20 for a 1990s-style teach-in. Tyson kicked off the afternoon event at International House by recapping how a small, unpredictable currency crisis in Thailand in June 1997 precipitated a financial and currency crisis that has spread throughout Asia, Russia and Latin America. She remarked that recent policy actions have alleviated, but not cured, the situation. These actions include reduction of interest rates, International Monetary Fund (IMF) loans to struggling countries (especially the recent $42 billion stabilization package for Brazil), and passage in Japan of a bill to restructure the banking system. "Over the last four to six weeks, the risk of a global recession has been reduced," said Tyson, adding that the past two years of financial turbulence have proven the interdependence of the globe's economies. "We need to reduce our vulnerability to global disturbances of this kind," she said. Peter Tarnoff, Under Secretary of State for Political Affairs from 1993 to 1997, gave the keynote address. "Since the Cold War, the dominant theme in international relations has been the globalization of world markets," Tarnoff noted. In the next decade, he said, the world needs to focus on connections between political and economic reform. When the political system is in disarray, as it is in Indonesia and Malaysia, economic planners can't make decisions, he said. The so-called "Asian values" that prevented political upheaval in the past no longer apply," Tarnoff commented. In Asia, "economic mismanagement now provokes outrage," he said, because prosperity brings with it the demand for political and human rights. Tarnoff noted that the global financial crisis is causing enormous human suffering: Thai children unable to attend school, two million jobs lost in South Korea, 50 million Asians falling below the poverty level. But, he said, there is no consensus on political reform and little tradition of participatory democracy in many of the countries suffering from the global financial crunch. "There cannot be economic reform in a political vacuum," Tarnoff warned, adding that democratization in Asia can be messy and uneven and result in anti-American feeling. But over time, he predicted, "the political process will provide support for economic reform." Economics Chair Maury Obstfeld noted that the current global financial crisis is the worst since the 1930s. "The floodwaters have receded, but we're not out of the woods," he said. Obstfeld said the global economic situation is made worse because there is no international lender of last resort akin to the Federal Reserve, no international deposit insurance, severe gaps in regulation and risk due to exchange rate changes. How much governments should intervene to control the movement of capital is a big question, he said, noting that Europeans are giving up national currencies to help stabilize financial markets. Haas faculty chaired panel discussions by Bay Area
business leaders examining the effects of the crisis on the
consulting, real estate, high technology and banking/venture
finance sectors.
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