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Prashanth Cherukuri ’12 (left) and Professor Jonathan Parker were one of two faculty/student pairs participating in the debate over whether Wall Street is responsible for Main Street’s woes.

The Kellogg Debates

Students and faculty consider the question: ‘Did Wall Street’s boom cause Main Street’s stagnation?’

By Daniel P. Smith

12/14/2011 - Who’s to blame for Main Street’s stagnation?

For some, the finger points directly at Wall Street. For others, the fault lies elsewhere — with policy makers and the American public along with the nation’s financial juggernauts.

The first in this year’s Kellogg Debates series considered this question, and explored Wall Street’s role in Main Street’s ills.

As is conventional in formal debate competitions, the participants were assigned positions on either side of the issue, so the arguments they advocated did not necessarily reflect their own personal views.

Professor Jonathan Parker, the Donald C. Clark/HSBC Chair in Consumer Finance, and student Prashanth Cherukuri ’12 were assigned the position that Wall Street’s boom caused Main Street’s stagnation. Daniel Diermeier, the IBM Professor of Regulation and Competitive Practice, and student Michael Fishbein ’12 were assigned the opposing stance.

Each panelist provided a three-minute opening statement Nov. 29 to moderator David Besanko, the Alvin J. Huss Distinguished Professor of Management and Strategy. The audience posed questions on topics ranging from globalization and the pre-recession consumption boom to policymaking and the shareholder value revolution.

Parker, who for the purposes of the debate argued for Wall Street’s culpability, said that bungled investments and mismanaged risks incited the nation’s financial discord. Cherukuri took the position that Wall Street not only caused the financial turmoil, but also gained from its recovery with government bailouts.

“The systems and incentives of Wall Street benefit short-term bets,” Cherukuri said.

Diermeier noted that it was convenient to brand Wall Street the scapegoat, but cited much broader trends, namely economic inequality and wayward politics, as the true causes of Main Street’s sluggishness.

“Blaming Wall Street is as accurate as blaming Warren Buffett or Steve Jobs,” Diermeier said. He later added: “This is the outcome of political choices.”

Fishbein pointed to data illustrating the growing income gap between the rich and the middle class since the 1970s. “The stagnation of the middle class began long before the Wall Street boom,” Fishbein said.

Now in its second year, the thrice-yearly “Kellogg Debates” series, sponsored by the Kellogg Student Association’s global affairs and academic committees, spotlights global issues and is one of many learning opportunities available to students outside of the classroom.

“The Kellogg Debates are a lively and provocative way to stimulate conversations in the student body about contemporary policy and political issues,” Besanko said. “It’s fascinating to me to see the well-researched and formidable arguments that the student-faculty teams make to advance their positions, and I always come away having learned something.”