David Rubenstein Sees End to “Great Recession” by Early 2010
David Rubenstein, co-founder and managing director of the Carlyle Group, which is the majority owner of Booz Allen Hamilton, spoke at the Aspen Institute’s Aspen Ideas Festival on July 4, 2009, in a plenary session titled “The Changing Face of the Global Economy: How the Great Recession Has Changed the Investment World Forever.”
The country is in a “great recession,” said David Rubenstein, an economic situation far worse than most recessions, but one that pales in comparison to the impacts of the Great Depression.
“We have a word for recession. We have a word for depression. We don’t have a word for this,” said Rubenstein, co-founder and managing director of The Carlyle Group, one of the world’s largest private-equity firms, speaking on July 4 at the Aspen Institute’s Aspen Ideas Festival.
The recession is likely to end, at least on paper, by the fourth quarter of this year or the first quarter of 2010, but “staggering economic problems” will extend long beyond, said Rubenstein, who served in the Carter administration as the deputy assistant to the president for domestic policy.
The country will be left with higher inflation, interest rates, and taxes, and soaring debt, Rubenstein said. Even after the recovery, he said, growth will be modest, consumer spending will be cautious, the government will remain heavily involved in business, and the nation’s credibility around the world will be damaged.
There is good news, though, Rubenstein said. Despite some fears, the country’s financial system avoided collapse. The U.S. has fared better than Europe, although not as well as China and India. Our country remains the largest economy in the world and will likely stay that way for another 30 years before China eclipses it, he said. The country’s legal system, transparency, and liquidity still make the U.S. the safest place to invest. American universities lead the world, he said, and the country’s top investment in research and development make it the world’s innovation leader.
“It is still the best economy in the world,” Rubenstein said. “It is still the biggest economy in the world. But we still have big problems. It’s not going to change overnight.”
Rubenstein outlined what he called a “big bang” or “perfect storm” of factors that led to the economic downturn. The country hadn’t seen a recession since 2001, he said, even though they typically occur about once every seven years. It had racked up a record amount of debt, but both the government and the financial community were slow to recognize the growing crisis. Corporate buyouts continued long after they should have stopped, he said, and financial institutions were making reckless loans.
Due to increased globalization, he said, when the problems hit the U.S., they reverberated around the world.
“When things started to unravel,” Rubenstein said, “everybody around the world was either affected by it or knew about it instantly.”
The crisis will change the way the investment world works, he said. Leverage will decrease. Transparency and due diligence will increase, and investors will be more concerned about their ability to recover capital. Skepticism about the investment world will grow, he said, the country’s role as a leader in the investment world will decline and more Americans will likely invest outside the country.
“It’s a different era than the one we grew up in,” he said.
Still, Rubenstein cautioned against too much pessimism.
“On the Fourth of July, we should all be proud to live in this country,” he said.
Watch a Clip from the Panel Discussion
Watch a clip from the “The Changing Face of the Global Economy: How the Great Recession Has Changed the Investment World Forever.” panel.
Learn more about Booz Allen's participation in the 2009 Aspen Ideas Festival.
story posted July 7, 2009
