 Bilkent professors met to discuss the current economic crisis in the "Global Crisis: Wrong Policies or Wrong Education?" symposium. Three Bilkent professors -Erinç Yeldan, Selin Sayek Böke and Refet Gürkaynak - and one professor from the Department of Economics of METU -Ebru Voyvoda - shared their ideas and offered solutions on Thursday, October 22. Bilkent University's Department of Economics organized the event.
Professor Erinç Yeldan introduced his views on the whys and hows of the financial crises and what the world has learned and must unlearn from it.
Yeldan pointed out that until the 1980s the profitability of the industry was much higher than the profitability of the finance sector, but the trend was decreasing. When stagnation began by the end of 1970s, the majority of politicians started liberalizing finances, and the financial sector began to grow rapidly, earning excessive returns. This situation created a discrepancy between the reality of industry and the financial world. This difference began to increase day by day. Yeldan said sometimes this trend reaches a breaking point and everything blows up, like what we faced last year.
Prof. Yeldan also outlined what the impacts of the crises have been for Turkey: "This crisis is very different than the crises we faced before, since it directly hit the industrial sector. This situation created a negative effect for the producers looking to find foreign finance."
In the second part of his speech, Prof. Yeldan proposed that the ideology of neoliberal globalization and praising the market system has most likely come to an end. He supported this idea by quoting an article in the "Financial Times" from March 24, 2008, where Martin Wolf wrote: "Remember the date March 14, 2008, because that day the global free market capitalism ideology died." (On March 14, 2008 the U.S. government bailed out investment bank Bear Stearns.) Prof. Yeldan also stated that this crisis was the result of the flawed economic ideology taught in our schools. Today's books hide the negative effects of the free market system and the bubble it creates.
Asst. Professor Selin Sayek Böke started her speech by disagreeing with Prof. Yeldan's ideas on the differences between periods of financial crisis and the shortcomings of free market economy. She first explained that the current crisis is not different than the previous economic crisis because of four common problems the world has dealt with in the last 200 years. These are: the swift increase in asset prices, rapid accumulation of high debts, inverted U-shaped growth before the crisis, and current account deficits. Based on these issues, she argued that the problems we face are no different than the ones we have coped with before.
"I don't believe the idea that the economic ideology we have developed is wrong because it supports the free market economy," she said. "If we do not intervene in the market, it will find the right way in the end. But this does not mean that the market does not need government regulation. Of course there will be some cases where the market needs government intervention, but the most important thing here is to understand these times and apply the right policy." She concluded her speech by re-stating that the problem lies in faulty government policies, not free market ideology.
Asst. Prof. Ebru Voyvoda spoke next on the negative results of blindly believing in an idea.
"Beliefs are dogmatic ideas which close people's eyes to the outside world and cause people to make mistakes," she said. She cited the crisis that began at the end of the 1990s. Countries in the far east consumed less, but produced a lot and sold their products to nations like the United States. These countries had export-oriented growth strategies, and because of this, pushed the United States to consume more. Finally, the United States gave in to foreign deficits. Importantly, the far eastern countries also invested their money in the United States. This caused U.S. current account deficits to continuously increase. The United States was inevitably left with an enormous economic crisis.
Voyvoda thought this narrative was incomplete and said, "If we do not look for a cause behind this crisis by asking questions such as why Asian countries produce a lot, why the U.S.A. let this consumption trend continue, we can never understand the main reason behind the crisis." Asst. Prof. Voyvoda concluded with the answer the British Queen received when she asked prominent economists to give her an explanation for why they didn't not foresee such a crisis: It was their collective lack of imagination. She said if they had asked enough 'why' questions, they would have been able to see the warning signs.
Assistant Professor Refet Gürkaynak started his speech by talking about under which conditions the the free market economy is expected to deliver efficient outcomes.
"Leaving the market to itself does not mean that it always does the right thing," he said. "The point here is whether your intervention will make things better or not." He believes regulations would be effective in obvious market failures, but interventions in small problems may produce worse results than intended.
After the speeches, the panelists answered questions from Bilkenters who seemed very interested in the causes and effects of the financial crisis and its impact on our country.
İsmail Uyanık (EE/V)
|
