What goes down — will come up

Speaking about the economic outlook at a luncheon sponsored by the SMU Faculty Club in February, Niemi didn’t mince words: “2009 looks like a painful year.”

To the SMU community and national audiences, faculty members like Niemi offer historical context, scholarly deliberation and research to explain recent economic developments. Cal Jillson, political science professor in Dedman College of Humanities and Sciences; Ravi Batra, economics professor in Dedman College; David Croson, business economics professor in the Cox School; Kathleen Cooper, senior fellow of the Tower Center for Political Studies, Dedman College; and Bruce Bullock, director of the Maguire Energy Institute in Cox, are only a few of the SMU experts recently quoted in the media on the economy. They see providing such perspectives as part of their educational mission.

Niemi, who holds the Tolleson Chair in Business Leadership, credits Bush administration tax cuts for fending off the downturn until the end of 2007 and believes that a $787 billion stimulus package passed by Congress in February was necessary. “Nothing else seems to be working,” he says. “We need a shock to the system, a huge infusion of new spending.”

Although the final legislation may not be perfect, “there’s a lot of job creation in the stimulus package that hasn’t been accounted for yet,” he says. He notes that refilling shrinking state coffers ultimately could boost the economy by putting furloughed state employees back to work around the country.

“Reticence, reticence everywhere”

Tom Fomby, professor of economics in Dedman College, agrees that any stimulus initiative is better than nothing.

“It’s like exploratory surgery,” he says. “We will finally get to the cancer and remove it, but there’s a lot of repairing to be done in the process. It doesn’t always work as we may like, but we have to do something.”

Fomby, who is also a research associate with the Federal Reserve Bank of Dallas and a consultant to the World Bank, visualizes “an L-shaped recovery” forming. “The economy will slide down, then stay flat for a long period” before steadily ticking upward.

“The unusual nature of this recession is that it’s happening worldwide,” he says. “In previous recessions, other countries weren’t affected in the same way at the same time, so we could rely on them to help pull us out. Now, we’re a global economy and world trade is stymied.

“There’s reticence to lend. There’s reticence to buy. There’s reticence here, reticence there, reticence, reticence everywhere,” he says, adding an economics spin to Coleridge’s poem, The Rime of the Ancient Mariner.

Trade protectionist rumblings in Washington worry Fomby. His research tracking Texas’ financial status indicates that if the North American Free Trade Agreement is dismantled, “Texas will be seriously affected and we could see the unemployment rate go up. On a national scale, trade wars potentially could deepen and prolong the recession,” he says.

Such unprecedented global circumstances pose intriguing questions for economists. “There’s more contemplation of market regulation and rules of commerce,” Fomby says. “We’re coming to better understand efficient regulation – which markets need more regulation, which markets need less.”

The interconnectedness of links in the world economy is becoming clearer. “What has happened in the past two years has demonstrated how important the credit market is to our global economy. When the markets freeze up, there’s a much more profound effect than we have appreciated in the past,” he says.

“New economic history is being written as we speak.”

Redefining the good life

Paul Escamilla also believes the recession presents opportunities to learn and reevaluate. And like Fomby, Escamilla, an author, adjunct professor of preaching and associate director of public affairs at Perkins School of Theology, finds poetry in the fiscal crisis.

“The narrowed economic environment in which we find ourselves globally reminds me of a couple of lines from Emily Dickinson: ‘By a departing light/We see acuter quite/Than by a wick that stays.’”

“When things aren’t so sunny, in that ‘departing light,’ we start to think with more intention about our true source of fulfillment. What we mean by ‘the good life’ changes into a more classical notion,” he says. “We become less focused on our comforts and conveniences and begin to think about relationships, community and responsibility.”

Escamilla’s latest book, Longing for Enough in a Culture of More (Abingdon Press, 2007), hit the shelves before markets plummeted. As a reflection on building a richer life by simplifying material needs and focusing outward, its themes are especially relevant. He believes the worst of times can bring out the best in people.

While people are not flocking to worship services in exceptional numbers, “the church has seen a strong and steady expression of generosity and compassion in giving,” he says. “To the degree that we are compassionate, we find resources. It is more our compassion than our resources that provides the catalyst for responding to others’ needs.”

The Silver Lining

Cox’s Niemi contends that Texas’ fortunes will not diminish drastically, and when the national rebound begins, the state stands to prosper. He predicts that companies will leave high-tax states and relocate to Texas. The flood of employers and job seekers could boost the state’s population by as much as 50 percent through 2030, he says. Florida, Georgia, North Carolina and California also will gain population. Two of those states, Florida and California, are major sources of SMU’s enrollment.

“You can’t separate higher education from the underlying strength of the economy,” he says. An influx of affluent, well-educated migrants ultimately could benefit SMU, he adds. “Think of the demand [for their children] to get into SMU. Think of the quality of our freshman classes. It’s a good time to be in Dallas, Texas.”

— Article by Patricia Ward

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