Jim West, Moravian chair and professor of economics and business, provided perspective on the current economic crisis at a Forum for Ethics in the Workplace panel discussion, "From Wall Street to Main Street: How the National Crisis Affects Us All," held October 15.

If the federal government and federal reserve bank had reacted quickly and resolutely after the 1929 stock market crash—taking on risk from troubled financial institutions, as they have in recent weeks—the Great Depression probably would not have been as traumatic, asserts Jim West, chair and professor of economics and business.

Recent gyrations on Wall Street have caused Jim's own stock, as an expert in economics, to rise. He's been interviewed four times by Channel 69 News since mid-September, and on Wednesday, October 15, he appeared as a panelist for "From Wall Street to Main Street: How the National Crisis Affects Us All," a Forum for Ethics in the Workplace discussion held at the Priscilla Payne Hurd Science Center at DeSales University.

"Several factors contributed to the magnitude of the present crisis," explained Jim. "The complexity of a rapidly evolving global economy, together with technological changes, have resulted in innovations in financing. Financial engineering brought us stock futures, forwards, options, and swaps—which the market doesn't know how to value in times of financial trouble. That can make company balance sheets look bad, and because companies now are owned globally, the problem has spread worldwide.

"Added to this is the mortgage crisis, largely instigated by the failed policies and fundamentally dishonest financial structure of Fannie Mae and Freddie Mac, which have allowed private profit while the public absorbed the risks."

Cautious Optimism ... and a Big Concern
There is some reason to believe the current crisis will not develop into something like the Great Depression, however. "The broader economy is showing signs of weakness, and we no doubt are facing a recession. But given the willingness of the U.S. government and foreign powers to react quickly and in concert, coupled with the market’s own ability to fix problems—such as a fragmented banking structure—a long, deep depression is less likely," Jim said. "Keep in mind that our Constitution assigns ultimate responsibility for the supply of money to the federal government."

"The biggest concern may be that the blame for all this will be placed at the feet of the free market system," added Jim.

Defenders of capitalism and the free market system worry about the extent of government ownership of banks under the present bail-out plan, a fear that Jim West shares. "The biggest concern may be that the blame for all this could be placed at the feet of our free market system, as happened during the Great Depression, resulting in other problems decades later," he added. "We must hold onto our free market economy—within the bounds of honesty, ethical behavior, and rules. The free market system has generated tremendous wealth that has benefited the United Sates and the world." At the conclusion of the panel discussion, Jim related his personal experience, having lived in both Slovakia and India, where people suffered for years due to the lack of a free market economy.