During Alumni Weekend in April 2002, the Department of Economics hosted a reception and panel discussion titled “Globalization, Equities, and the U.S. Economy.” Many alumni came to enjoy refreshments and hear the panelists. Professor Marjorie McElroy welcomed the alums and introduced members of the department. Professor Thomas Nechyba spoke briefly about the undergraduate program in economics and introduced the speakers: Professor Connel Fullenkamp of Duke; Professor Ed Tower of Duke; Professor Omer Gokcekus, a 1994 Duke alum and visiting scholar from North Carolina Central University; and Professor David H. Feldman of the College of William and Mary, a 1982 Duke graduate and former Duke visiting professor.
Professor Fullenkamp discussed the aftermath of the Asian crisis, drawing on his teaching experience and his consulting work with IMF regulators on issues of finance. He stated that the Asian crisis was due in most part to the misallocation of funds that resulted from a system based highly on relationships. However, he noted that an economy in its initial stages must rely on relationships because there are no other systems established to evaluate credit. Thus, emerging nations must develop market checks in order to create balance. Professor Fullenkamp believes that there is a long road ahead in the aftermath of the crisis, as there is much to be accomplished and uncertainty surrounding how best to accomplish it.
Next, Professor Tower argued briefly that the U.S. stock market is likely to decline by more than 40 percent in the next 10–20 years due to its current overvaluation. Professor Gokcekus then discussed two papers, coauthored with Professor Tower and Rob Fisher and Ryan Gibbs, alums of Trinity College, dealing with the steel industry’s involvement in congressional campaign financing. He presented several graphs illustrating the relationship between campaign contributions and the probability of a “yes” vote for a bill to protect steel. The interesting, and somewhat surprising, result is that sometimes even a small contribution (a couple hundred dollars) was able to convince a politician to vote in favor of protecting steel. He also presented estimates of how much the steel industry needs to contribute to a congressional campaign in order to secure a word of debate in the Congressional Record in favor of protecting it. The surprising answer: less than one hundred dollars. The conclusion: Talk is cheap!
Tower affirmed his belief in what Jagdish Bhagwati calls the “Dracula effect.” Just as the first rays of dawn are fatal to vampires, so is the sunlight of analysis to the political process behind protectionism. The stock and steel research is available online at www.econ.duke.edu as part of the Duke economics department’s working paper collection.
Professor Feldman talked about the tariffs President Bush put in place in March of 2002 to protect steel, and the possible reasons behind them. He noted that steel employment has been shrinking due to increased productivity, not increased imports, which peaked four years ago. Why then, did President Bush choose to protect the steel industry? Only months from having won a highly contested political race, the president was acutely aware that every vote counts; perhaps with an eye to future tight races, the president concluded that appeasing industries such as steel can ever so slightly swing votes in one’s favor. Though there is no easy solution to the steel crisis, the public must remember that it is not foreigners who pay for import tariffs, but rather domestic consumers, in the form of higher prices.
The panelists addressed a variety of questions concerning the current economic environment in South East Asia, the IMF, and globalization. The speakers seemed to agree that though globalization requires an established infrastructure of rules and regulations that may be difficult to develop, globalization should be our aim for the future. After the discussion, alumni and guests were invited to stay and chat with faculty and enjoy the delicious refreshments. What they left was recycled for the annual econ department graduate student/faculty wine and cheese party held that evening.
| —Evelyn Kow, ’02 |
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