Legal Commentary

President Shalala on the Recession/Depression: "Overreacting is an important strategy in a crisis"

By Professor University of Miami School of Law

UM’s President Donna Shalala has written a remarkable letter to the UM community,

Some random thoughts before a long weekend:

Overreacting is an important strategy in a crisis. My mind-set is that we always have to do more than necessary during any kind of financial crisis.

In this one, cash is king, so we have asked everyone to eliminate all unnecessary spending—from snacks, to paper, to travel. It is the little things that add up to big dollars. We will sit on the dollars so we don’t have to borrow to pay for necessities and can preserve our reserves.

It’s really not confusing. I’m sure most of you are doing the same thing in your personal budgets.

We can do this. Our goal is to protect your job, our core programs, and continue to get better. We can do this—yes we can!

Concerning yesterday’s jet crash in New York’s Hudson River—one of our students was on that plane. He will graduate in May because he had an angel on his wing and a courageous pilot in the cockpit, and the New York/New Jersey community had an emergency plan that worked.br>
On the occasion of Monday’s celebration of Dr. Martin Luther King Jr.’s birthday, I would like to share my favorite speech. It is one few have ever read—the address Dr. King delivered in acceptance of the Nobel Peace Prize in 1964. Please click here to access this brilliant speech, which rings every bit as true 45 years later.

As usual, send me your ideas and have a safe and happy weekend.

Overreacting is an important strategy in a crisis. It may even be true; there’s a real chance that Pres. Shalala’s attitude, and the cost-cutting she’s imposing on all of us, is the best policy for the University’s long-term flourishing. But the collective action consequence of multiple overreactions to a recession or other financial shock is a depression. The University has basically frozen its considerable construction plans for the next 6-12 months. That will have substantial knock-on effects on the local community. We’re all being asked in various ways to economize. It could be much worse of course, and may yet be; I am deeply grateful for tenure, and worry for my friends and neighbors without it.

Clearly, one of the biggest challenges for the Obama financial team will be to turn this psychology around; “fear itself” is emergent and palpable when it prompts even the usually indomitable Shalala to urge us to do overreact — something only a step or two from panic.

Full post as published by Discourse.net on January 17, 2009 (boomark / email).