So recently I attended an event where eminent Harvard historian, Niall Ferguson, and senior fellow at Schwartz Center for Economic Policy Analysis, Jeff Madrick, spoke about the current economic crisis.  These two men are both highly regarded individuals when it comes to academic matters, especially when it concerns economic history.  Madrick, it seems, is a liberal Keynesian academic while Ferguson is very much conservative and classical on economic matters; the guy thinks the Federal Reserve caused the Great Depression.  Overall it was very enjoyable to see these two intellectuals spar when it came to the issue of debts, Keynesian economics, the outlook of the American economy, and President Obama’s economic policies.

            On debts the two men differed greatly.  Ferguson, the more articulate and charming of the two, lambasted America’s absence of “thrift spending” and called for people to save more out of their income.  He argued, that according to basic economics, saving would in the long run better serve the American economy.  Madrick, in response, said the average American income, adjusted with inflation, has flat-lined and perhaps even decreased since the late 1960s; thus by in large, the idea of there being an overly consumerist American is a myth.  Ferguson shot back saying regardless, data proves debt is increasing when compared to previous decades, and that Madrick’s focus on middle class spending is the wrong way to approach it.  Because in reality, according to Ferguson, the debt is largely from the rich, upper class, and that it is precisely the mishandling of this money amongst the rich that greatly contributed to the current financial mess.  The two men continued to argue over whose data was “more right”, so the moderator moved on to a different topic.

            As for Keynesian economics, Ferguson handsomely critiqued it as mainly a form of economics that has become too politicized and simplified to be efficiently utilized by the government.  But more fundamentally, he believes the long-term effects of intensive Keynesian economics, such as large deficits and debt, eventually hamper and stagnate the overall economy.  He cited the current state of the Japanese economy to support his view.  Madrick, in defense of Keynesian policies and now Obama’s, said the massive intervention and regulation of government both fiscally and monetarily is necessary.  The loss of entire businesses, financial structures, and the economic lives of individuals must be avoided if possible, and it is Keynesian policies that do exactly that.  Both Madrick and Ferguson did agree however that Keynesian economics has become oversimplified and too politicized though.

            As for the outlook on the American economy, both had very pessimistic views, and Ferguson said the Obama Administration’s predictions of economic growth next year were that of “fairy tales.”  They both blamed economists, yet surprisingly not themselves, for being unable to see this financial hurricane coming.  Although on a lighter side, Ferguson remarked that the United State is doing much better than many other countries, especially the East Asian ones, where GDP is expected to fall about 10% and that the U.S. bailout, when proportionately compared to China’s, is relatively small.  The U.S. will instead, in Ferguson view, will have a GDP contraction of only around 2 or 3 percent.

            Now as for President Obama’s policies, both had their criticisms, but it was really Ferguson who had the harshest words.  The man said the main issue now was the incoming collision that would occur between Obama’s monetary policy and his fiscal policy.  Ferguson warned that the tremendous debt resulting from Obama’s massive fiscal increases and the Federal Reserve dropping the interest rate to near 0% would cause very high interest rates in the near future.  The Harvard academic was very concerned about this, because such a future will harm the economy over the long run.

            I must say though, Niall Ferguson, despite the fact he’s opposite me when it comes to economic matters, is a man whom I greatly admire and respect.  His intellectual prowess and charming wit, not to mention his great ability at articulating himself, always leave a deep impression upon me.  Jeff Madrick was great too, but Niall was really amazing; it’s people like him that make me want to become a renowned academic. I recommend all you guys check out Ferguson further; he’s also a great history writer!

Tags: economy, ferguson, harvard, history, jeff madrick, keynes, keynesian, madrick, niall ferguson, obama