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International conference focuses on Irish economy

Dartmouth economist Kenneth R. French '75, left, speaks with Richard Lane following his keynote speech.

Delivering the keynote address at an international conference on the Irish economy at Lehigh this week, Dartmouth College economist Kenneth R. French ’75 discussed the “general principles” that led to the global financial crisis.

“Bailouts and the expectation of bailouts are probably a bad thing,” said French, the Carl E. and Catherine M. Heidt Professor of Finance at Dartmouth’s Tuck School of Business. “The first problem with bailouts is this notion of privatized gains and socialized losses. This is the antithesis of capitalism.”

French, who received his undergraduate degree in mechanical engineering at Lehigh before going on to earn his Ph.D. in finance from the University of Rochester, spoke Thursday evening in the middle of two days of detailed sessions examining virtually all aspects of the Irish economy, from financial regulation to investments and exports to agriculture, energy and health care.

The conference, sponsored by Lehigh’s Martindale Center for the Study of Private Enterprise and the Office of International Affairs, was called “Whither the Irish Economy?” It marked the 10th anniversary of the first conference on the Irish economy sponsored by the Martindale Center in April 2001.

This year, leading economists from Ireland, including John McHale, established professor and head of Economics at the National University of Ireland in Galway, and John FitzGerald, research professor at the Economic and Social Research Institute in Dublin, discussed the severe economic crisis that brought down the “Celtic Tiger.”

Ireland is mired in financial crisis, faced like the United States with a combination of excessive budget deficits, reckless bank lending and high unemployment. The nation’s dramatic change of fortune culminated in bailouts from the International Monetary Fund and the European Union.

The conference attracted coverage from RTE, Ireland’s national, nonprofit public service broadcaster, as well as by The Irish Times of Dublin. Read: Government will only be able to blame predecessor ‘for the next nine months’ 

Paul Richard Brown, dean of the College of Business and Economics, said the conference is an example of Lehigh’s commitment to enhancing its international footprint.

“We owe it to our students. It’s no more complicated than that,” Brown said.

The university’s vision, Brown said, “is a very, very fundamental, unwavering, unconditional view that you are a world citizen.”

'No silver bullet'

For his keynote speech, French was introduced by a fraternity brother from his Lehigh days—Vince Munley ’74, a Lehigh economics professor who now serves as deputy provost for faculty affairs.

French, a research associate at the National Bureau of Economic Research, an advisory editor of the Journal of Financial Economics and a former President of the American Finance Association, told the gathering: “There was no one thing that caused the financial crisis.”

And because there were so many contributing factors, he said, “there’s not going to be one silver bullet.”

French said the widespread belief that government would bail out banks deemed “too big to fail” was a significant contributing factor, causing financial institutions to take risks they would not otherwise have taken.

Among the other factors were real estate losses and something French said he never expected to see in a country where bank deposits of up to $250,000 are guaranteed by the Federal Deposit Insurnce Corporation: modern-day bank runs, straight out of the classic Jimmy Stewart film, It’s a Wonderful Life.

Moving forward, French said, “You’ve got to do what you can to reduce the likelihood that one of these financial crises is going to happen again and reduce the magnitude of the crisis and the complications of trying to deal with the crisis if one does arise.”

Story by Jack Croft and Jordan Reese

Posted on Friday, April 08, 2011

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