Professor: This Is No Time For Castor Oil Economics

OSWEGO, NY – The Oswego area is feeling the sting of a recession, according to Ranjit Dighe, an associate professor of economics at SUNY Oswego.

There are some who will tell you it’s not officially a recession, Dighe told members of the Oswego Sunrise Rotary Club.

Ranjit Dighe talks about the current state of the economy with the Oswego Sunrise Rotary Club.
Ranjit Dighe talks about the current state of the economy with the Oswego Sunrise Rotary Club.

“If you look up the word recession, it is a decline in economic activity, and that’s what is going on right now,” he pointed out.

Payroll and employment has been falling every single month of this year.

The unemployment rate is up to six and a half percent, the highest in almost 15 years, he said.

“It’s a recession that, not surprisingly, has been triggered by trouble in the housing market,” he continued. “That’s been going on for a while and it lead to a severe decline in residential construction.”

In New York, the recession is Wall Street-driven, according to Dighe.

“In the first three years of the Great Depression you had a nosedive of investments (1930-33). Then investments stayed low through 1941,” he said. “It wasn’t until World War II that we finally did get out.”

American consumers right now are confronting their debts and having some doubts, tightening their belts, he added.

“That’s well and good for American consumers; everyone should try to live within their means. But when we all do that, however, it tends to make a recession pretty bad,” he explained.

This isn’t the Great Depression, Dighe stressed.

“Those comparisons are everywhere; this is bad, there is reason to believe that this could go on for quite a while. But it isn’t the Great Depression,” he said. “There is a lot more security that is built into the economy; it’s been there ever since the New Deal of the 1930s and a host of other programs that were put in.”

For example, he pointed to FDIC, bank deposit insurance.

“We don’t have runs on the bank anymore. In the Great Depression, prior to 1933, you had massive runs on the banks, even on healthy banks. And thousands of banks went under,” he said.

Also, the federal government is quite a bit more competent than back in the days of Herbert Hoover, he continued.

The $700 billion plan shows that the government is willing to think big and take big action to avoid a depression, according to Dighe.

“This is really unprecedented, $700 billion. We have never had a package anywhere near that,” he said.

Another thing is today, world leaders are much more inclined to cooperate with each other, he noted.

During the 1930s, it was between the world wars, countries were at each other’s throats and were constantly engaged in trade wars, he said.

“A lot of normally cautious academic and business economists are saying the recession will be longer than a year, and perhaps a year or so beyond 2009,” he said.

Oswego is likely to take a hit. It’s a college town and colleges are being hit, Dighe cautioned.

“Student loans are a lot harder to get. That could mean fewer students for next semester. The ones that do get here could be a lot more cash-strapped; especially if tuition is raised by $600 as has been proposed,” he said.

“Credit card standards are getting tighter. That means a lot less disposal income for college students around here, which is going to hurt any local business that gets a lot of business from college students. It’s a vicious cycle,” he continued.

Dighe hopes the government, especially in New York, doesn’t make the same mistakes the leaders did in the 1930s.

“I am hoping Gov. Paterson won’t go the ‘we have to take our castor oil to get better’ route. That castor oil school of economics really made the Great Depression a lot worse,” he said. “This is not a time for the government to say we must be fiscally prudent and tighten our belts. This is a time for government to be deliberately running budget deficits, trying to find sensible places to cut taxes, and create some jobs. This is no time for castor oil economics.”