A sizeable crowd assembled Tuesday in Finney Chapel to hear noted economist Paul Krugman expound on the economic challenges currently facing the United States. Krugman, a professor of economics and international affairs at Princeton University and a regular columnist for the New York Times, gave a talk entitled, “The Japan Syndrome: Why Can’t We Lick the Business Cycle?”

His address focused on the rise and fall of the Japanese economy throughout the 1980’s and 1990’s, and how the similarities between the economic situations in Japan and the United States have recently given economists cause for concern. Krugman argued that Japan’s 13-year struggle with recession may indicate that the current recession in the United States will be harder to recover from than any other in the post- World War II era. “If [Japan] can’t find their way out, you have to wonder: if it can happen to them, can it happen to us? The resemblance between the United States in the ’90s and Japan in the ’80s is… spooky,” Krugman said.

Krugman emphasised that the current recession in the United States, which many economists agree began last March, was preceded by a sustained period of economic growth in the 1990’s. Technology developing rapidly, stock prices soared, and consumer confidence was tremendous. The situation in Japan in the 1980’s was quite similar, until, 13 years ago, their economy hit a slump from which it still has not fully recovered. In the past, Krugman stated, it was easy for Americans to blame the economic woes of Japan and other Asian nations on poor corporate governance—companies that did not provide enough information to stockholders and that did not have transparent accounting practices. However, the Enron scandal has shown that Americans are not immune to potentially dangerous corporate practices. “We have some corporate governance problems of our own, and I very much doubt that Enron will be the end of the story. So it turns out that there may be more resemblances than we’d like,” Krugman said.

What makes this recession different from those of the recent past, and what gives Krugman cause for concern, is that it has turned out to be harder to control than other recessions in the postwar era.

“Basically, from the 1960s up until the 1990s, each recession happened because the Federal Reserve got worried about inflation and stamped on the brakes,” Krugman said. These recessions were essentially created by the Federal Reserve, according to Krugman, and were relatively easy to end; when interest rates were lowered, consumer spending bounced back. This is not the case with the current recession, according to Krugman, and lowered interest rates have not been as beneficial as in the past. Though many economists think that the worst is over, Krugman disagrees. “The only thing that’s keeping us afloat is the insane optimism of American consumers,” Krugman said.

After the lecture, many Oberlin students used the opportunity to ask questions on a variety of topics. Students inquired about Krugman’s views on the Free Trade Agreement of the Americas as well as his views on globalization. Sophomore Behrad Mahdi asked Krugman to discuss his philosophy of economics as it relates to developing countries. In response, Krugman expressed his belief in free trade as a boon for developing countrie. In his view, the success stories among developing countries have come about through export-led growth. However, he also emphasized his personal outrage over the small amount that the United States gives to other countries for humanitarian aid.

Krugman’s address was sponsored by the Robert S. Danforth Memorial Lecture Fund, which was established to promote closer ties between Oberlin College students and the areas of business and finance. In addition to being a professor, Krugman is a widely published author as well as a consultant to the International Monetary Fund, the World Bank and the United Nations.