Bob Dylan once sang, “Ain’t no use jiving, ain’t no use joking, everything is broken.”
David Brat says that’s the state of today’s economy, and says everything we know about what is being termed a recession is wrong.
“If you’re thinking we’re in a recession and you’re expecting a quick recovery, the best scholars in the world say that’s not the case,” Brat said, noting normal economic growth could take a decade to see.
Brat spoke at Thursday’s Economic Forecast Breakfast at the Institute for Advanced Learning and Research and at Danville Community College. The events were sponsored by American National Bank and the Barkhouser Free Enterprise Center.
Brat is the chair of the economics and business department at Randolph-Macon College, and works as a special legislative assistant to Sen. Walter Stosch, R-Glen Allen, and serves on the Governor’s Advisory Board of Economists. He also has a master’s degree in divinity from Princeton Theological Seminary. He recently received a large grant from BB&T to study and teach the moral foundations of capitalism.
Brat says the country’s economic woes run soul deep.
“It’s a financial crisis, not a recession,” he said, doing his best to explain the complexities of the country’s economic situation.
Brat explained the typical hallmarks of a recession, including a sharp investment increase after the downturn is over. Investment remains flat, he said.
“If it was a recession, business investment would have shot up,” he said.
Instead, he said, it’s far more serious.
“We broke the financial system,” he said. “We actually broke the infrastructure.”
Citing Harvard Professor Kenneth Rogoff, Brat said a misdiagnosis of the crisis will lead to bad policy and bad forecasts. He told those in attendance not to believe that the economy is sprouting genuine signs of life.
There are “little glimmers here and there,” he said, “but it wasn’t for real.”
The Federal Reserve is buying 80 percent of treasury bonds, he said.
“The government’s distorting everything, trying to save us in the short run,” he said.
The global economy is overleveraged. Ultimately, he said, pointing to the European debt crisis, the country’s economy is headed for disaster if changes aren’t quickly made. And the answer, he said, is not in economics, but ethics.
“Bankers are the solution, not the problem,” he said, adding, “[Washington] D.C. knows this.”
Brat says the cheaters are winning, noting investment bank Goldman Sachs has back its client list after being fined for its role in the subprime mortgage debacle. The major banks that were responsible were rewarded with bailouts.
Brat spoke in greater depth about the country’s ethical bankruptcy later at DCC.
Wall Street is no greedier than it ever was, he said, the country just lacks an ethical foundation. The problem, he said, is that for many years, schools have not been requiring courses in ethics, religion or philosophy. Right and wrong are no longer clearly defined.
“What moral language do we have to share?” he said.
He added, “The Judeo-Christian tradition, in my view, is responsible for the formation of this country since 1640.”
Brat said that when discussion of that tradition was eliminated from curriculum, no other ethical system replaced it, leaving an ethical vacuum.
“Religious ethics are out, but nothing took its place,” he said.
Instead, he said, the culture is rejecting both tradition and human reason, leaving no criteria for right and wrong. He urged those in attendance to enter the conversation.
“Ethics is worth digging into,” he said.
Nicole Meadows, who is studying in the administrative support tech program at DCC, intently listened and stayed for the question and answer session when other students headed out to their next classes. She enjoyed the presentation.
“It was interesting because it had elements of economics and ethics,” she said.
Jeffrey Haley, president and chief executive officer of American National Bank, heard Brat speak at another event and wanted to bring him to Danville. He said he did not know how deeply Brat would broach the ethics discussion.
“I’d never heard that part,” Haley said. “I was pleasantly surprised. It opened my eyes.”
He added, “As a banker, I’m used to numbers and the traditional economist view on things. He brought a different dimension when he brought the ethics discussion to the debate.”
Jackson reports for the Danville Register & Bee.