The Hindu : National : “If Wall Street goes, the U.S. and the whole world goes”

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“If Wall Street goes, the U.S. and the whole world goes”

V.S. Sambandan

There will be no global impact if American crisis is fixed, says academic

— Photo: M. Karunakaran

The dean of Fogelman College, Rajiv Grover.

Chennai: The final passage of the U.S. government’s $700-billion bailout plan later this week will be a critical determinant in restoring global financial markets, Rajiv Grover, Dean of the Fogelman College of Business and Economics, at the University of Memphis, Tennessee, said here on Thursday.

On the current situation and the prospects for the future, Dr. Grover said: “Right now it is just a financial services problem. If this is fixed on Friday or Monday, I do not think there will be a global impact. But if it is not fixed, then the whole economy starts coming down, all the business process outsourcing is gone and it will start spreading like wildfire across the globe, because people will start curtailing the consumption,” Dr. Grover told The Hindu.

“I think it [the global financial crisis] is very, very serious. Lot of people don’t realise how serious it is. People who know what it can do are very, very nervous,” Dr. Grover said. “The average man looks at it as the “bailing-out of Wall Street, [but] if Wall Street goes, the whole country and the whole world goes,” he said.

Pointing out that managing the economy was largely a matter of maintaining public confidence, he said: “It is a confidence issue. Suddenly, if some people decide that the economy is not going to go on well, and there is a run on the bank, then it is all over.”

He compared the possible effect the initial bailout plan would have had on the economy to “giving antibiotics intravenously” and that “now it is like [administering] antibiotics orally.”

With regard to the government’s response to the broader issue of eroding public confidence, he pointed out that the popular portrayal of the government’s efforts as a “bailout, was to some degrees troublesome.” The positive aspects should have been placed before the public, he said. “One could have even portrayed it as the government buying these at a very low price, and that they are erroneously low, that the prices are bound to come up, after which the government will make money and give the tax-payers the money back. There could have been some amount of positive light that this is not purely a bailout; it is also taking advantage of what the conditions are.”

The second issue was that “not enough work was done to convince the masses,” and politicians “did not go out to convince the masses. They just heard what the masses said and voted against [the original bailout plan].” Asked if the current crisis called for more regulation of financial markets, Dr. Grover said: “You just got to make sure that things don’t get out of hand, and be nimble with the national economic strategy.”

Dr. Grover, who held academic positions at various universities, including the University of Pittsburgh, Johns Hopkins and Stanford, before his current position at the University of Memphis, was optimistic on the current trends at privatising Indian tertiary education.

The potential for international tie-ups, he said “is a good idea because of two reasons.” One was that the principles of disciplines such as management sciences are now globally applicable, which called for common practices, and the other was access to the latest academic resources.

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