Sustaining Prosperity Symposium at University of Calgary’s School of Public Policy

by Diane Francis

Dr.Rajan and Diane Francis

I participated in a fireside chat with Dr. Raghuram Rajan last week at a dinner event sponsored by the University of Calgary’s School of Public Policy. He is a world-class economist, former chief economist for the IMF and a professor at the University of Chicago as well as a special advisor to the Government of India. His speech was entitled “Fault Lines and the Future of Market Democracies”.

Dr. Rajan was one of the first, in 2005, to publicly warn former Fed Reserve Chairman Allan Greenspan that there were serious fault lines, due to the lack of rules and regulations, within the global financial system. His warning came true in 2008 when the financial system collapsed. He maintains fault lines still exist.

He blamed Europe and the U.S. for their massive and inappropriate expansion of easy credit (to individuals in U.S. and governments in Europe) and suggested this passified the poor or poorer nations for being left behind in globalization.

His advice is that America retrains and educates its poor to level the playing field and to close the gap in incomes between the 99% and the 1%.

In my question and answer session, he agreed that consumption levels in the rich world must decrease to make room for increasing levels in the poor world because there were not enough resources. I labeled this reality the “great markdown” and the world’s “dirty little secret”, and he defined it as an adjustment that could be accomplished slowly.