Antonio Fatás can hardly believe how it all worked out.
As a professor of economics at Insead in Singapore, Mr Fatás receives a sabbatical every seven years. And it just so happened his last leave of absence was spent with the IMF during the onset of the worst economic shock since the Great Depression.
“It started in 2008. [That autumn] Lehman Brothers fell, so it was during the biggest part of the crisis,” says Mr Fatás, who travels to the Middle East regularly for Insead, which has a campus in Abu Dhabi.
“It was also the US election. It was a very exciting year to be in Washington DC and at the IMF. I cannot say I planned all this to happen at the same time,” adds the Spanish economist, who joined Insead in 1994 after studying for an undergraduate degree in economics at the University of Valencia in Spain and a PhD at Harvard University.
The collapse of Lehman Brothers sparked panic across the global markets – and inside the IMF, Mr Fatás recalls.
“Oh yes [it was the]same because obviously at that point everyone calls everyone to try to understand what is your advice because these are things you don’t see everyday.”
The fund immediately set about trying to understand what led to the crisis. As an outsider, Mr Fatás did not take part in all debates but he was involved in a project that strove to understand central banks’ roles asset price bubbles. Some believed the Federal Reserve had contributed to the crisis by keeping interest rates low, creating more borrowing.
But Mr Fatás and others discovered the Fed was responsible for some of it but the majority of the problem had nothing to do with central banks.
“It is much more to do with the behaviour of the individuals who are buying a house. Interest rates don’t influence our behaviour that much. That was a little bit of a surprise,” says Mr Fatás.
His research became part of the IMF’s regular World Economic Outlook report, which was cited by the Fed Reserve chairman Ben Bernanke in a speech. And he also had the opportunity to explain his position to Mr Bernanke first-hand two years ago when he was called in as one of three professors for informal talks on fiscal policy.
They spoke about what they knew, what would happen as a result of the large debt problems in the United States – which now stands at almost US$16 trillion (Dh58.77tn) – and what other countries had done.
“[Mr Bernanke] is a very, very normal person. He made a joke, which I thought was good. Some of us were saying we need a crisis to wake up politicians and he said, ‘Just tell me what crisis you need and I will create one,'” says Mr Fatás.
But if central banks, governments and financial institutions rely on professors to help explain what is happening in the economy, how have business schools responded to the crisis?
Professors at the Hult International Business School, which has a campus in Dubai decided to commission research on the banking meltdown. “Hult has taken the implications of the events subsequent to 2008 very seriously indeed,” said Nick van der Walt, an executive director of the school.
Professors have been reviewing the reasons for the crises for the past five years, while a global research project has been commissioned to see how the requirements of employers have changed to determine how Hult’s syllabuses may need to be adjusted.
But professors at the school have already started emphasising certain areas, such as corporate ethics. It is an approach that has been mirrored by institutions elsewhere.
“It’s caused the school to revisit how we teach and what we need to emphasise again or reinforce,” said Rickie Moore, an associate professor of entrepreneurship at Emlyon Business School in France.
“We are the factory for these people. We kind of fuelled this race, this ambition for extreme competition,” added Mr Moore, who came to the Emirates this month as part of a week-long visit by a delegation of Emlyon students and faculty to study business in the UAE.
Four years on from the onset of the crisis in the world economy, professors are still researching the causes. But it was not the world’s first financial storm, and it will not be the last.
“This will happen at some point in China. It will happen at some point in Brazil, because it happens in many countries,” Mr Fatás says.
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