Lecture address ‘Great recession’
Published: Monday, September 19, 2011
Updated: Monday, September 19, 2011 13:09
Roosevelt University welcomed distinguished lecturer and economist Dean Baker to the University last Monday where he spoke on the great recession, how we got here and prospects for recovery.
In her welcoming address, professor Margaret Rung, director of the Center for New Deal Studies (who sponsored the event) compared Roosevelt's social justice message with today's economic climate.
"We have a responsibility to restore economic equality like Franklin and Eleanor Roosevelt would have," Rung said.
A packed audience filled Ganz Hall as Baker took the podium following an introduction by President Chuck Middleton.
Baker drew parallels of the current recession to the 1930s Great Depression, in which he found that the economic differences today are not nearly as severe as they were during America's greatest economic turmoil.
Unemployment rates peaked at 25 percent in 1933 compared to a 2009 peak at 10.2 percent, which was the highest the current recession has seen. Despite that small silver lining, Baker said it does not negate the fact that this financial meltdown could have been prevented.
"What I find most frustrating is that this was self-inflicted," the Chicago native said. "Myself and other economists were the first to identify the conditions that would lead to the bursting of the housing bubble. We predicted it in 2002, and it occurred in 2008."
The government's bailout of the banks that was complicit in the housing collapse was a move Baker strongly disagreed with.
"While it's good that we were able to keep the financial system operating, we missed an opportunity to change how banks do business and make them agree to new terms," he said. "Without the government's help, the banks would have gone solvent."
Baker also outlined the differences in social movements and responses to each financial crisis. In the 1930s when a group of veterans were promised a bonus they did not receive, they marched on Washington and camped out on the National Mall to demand their benefits.
Baker said that level of activism is not present today. He calls the response in Wisconsin by workers when their collective bargaining rights were threatened similar but yet very different.
"It's really striking when you compare the activism today," he said. "What we see today is responses to having something taking away whereas before citizens demanded new rights and better conditions."
In order to get the economy back on track, Baker proposed several solutions, including targeting a higher inflation rate, hiring young people to do meaningful work at a lower cost and creating infrastructure projects, which are included in President Obama's latest jobs bill proposal. But Baker's chief advice is to create a bigger stimulus.
"The simple logic is that the stimulus wasn't big enough to lead consumers to spend," Baker said. "Ideally, we need to get a stimulus through Congress that can drive the economy back in the right direction."