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The Long Legs Of the Crash: 13 unexpected consequences of the financial crisisAuthor(s): Daniel W. DreznerSource: Foreign Policy, No. 171 (March/April 2009), pp. 100, 99Published by: Washingtonpost.Newsweek Interactive, LLCStable URL: http://www.jstor.org/stable/20684859 .

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[ MISSING LINKS

The Long Legs

Of the Crash 13 unexpected consequences of the financial crisis

By Daniel W. Drezner

ast year had more than its share of vertigo

inducing headlines: major banks suddenly disappearing, the Dow plunging day after day, and billion-dollar bailouts failing to make a dent in the worst financial crisis since the Great Depression. Already, the Wall Street

way of life seems to have gone the way of the dodo. An entire country-are you reading this, Iceland?-went

belly up overnight. And good luck if your last job title was "mortgage-backed securities trader." But if there are some predictable economic hardships we can expect from the current crisis, there are also

some trickle-down effects that aren't so foreseeable. Here, 13 surprising consequences of the crash:

Your government will get smarter... In a global recession, governments around the globe will be

able to recruit a better class of bureaucrats. Just a few

years ago, the U.S. government had serious recruitment

problems in the Foreign Service because no world

savvy 25-year-olds wanted to work for the civil service

when they could make serious cash on Wall Street. In a severe downturn, however, the stability and security of

a government job look far more appealing.

2..

and more corrupt. Politicians' palms are

about to get greasier. A global downturn shrinks the demand for goods and services worldwide. That

means the security of a government contract will

look pretty sweet to any businessperson struggling to

stay afloat. A January report from Transparency International warned that corruption is bound to

increase worldwide during the current crisis, as

businesses prioritize survival over corporate integrity.

3 Gray skies are gonna clear up (at least a little). The central factor in projections about global

warming is long-term extrapolations of current

economic growth. Thing is, I doubt the

Intergovernmental Panel on Climate Change expected Wall Street to tank as spectacularly as it has. The

longer the global economy stays in recession, the less

greenhouse gases are emitted into the atmosphere. You

still might not be able to breathe easy in Beijing, but your odds just got better.

4

The Internet is about to get a lot more

#@%$ing annoying. Newspapers are looking to online advertising revenue to deliver them from

bankruptcy court (and eventually, total eradication). So, expect more Web advertising on your news

sources-pop-up ads, welcome screens, articles

hacked into ever shorter segments to maximize Continued on page 99

U) CL)

LLJ

FOREIGN POLICY (ISSN 0015-7228), March/April 2009, issue number 171. Published bimonthly in January, March, May, July, September, and November by Washingtonpost.Newsweek Inter active, LLC, a subsidiary of The Washington Post Company, at 1899 L Street, NW, Suite #550, Washington, DC 20036. Subscriptions: U.S., $24.95 per year; Canada, $36.95; other countries, $42.95. Periodicals postage paid in Washington, D.C., and at additional mailing offices. Postmaster: Send U.S. address changes to FOREIGN POLICY, PO. Box 474, Mt. Morris, IL 61054-8499. Return undeliverable Canadian addresses to: PO. Box 503, RPO West Beaver Creek, Richmond Hill, ON L4B 4R6. Printed in the USA.

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Missing Links

Continued from page 100

clicks-that cannot be escaped easily. Or at least not

without getting extremely frustrated.

5

Glory days for evangelicals. Bad times are boon

times for evangelical churches. Economist

David Beckworth of Texas State University has crunched U.S. church attendance numbers and

found that congregation growth at evangelical churches jumped 50 percent during each recession between 1968 and 2004.

6

Your kids will be savers. Macroeconomic realities

in your childhood have a profound effect on your financial choices later in life, regardless of how much

money you make, according to a study by economists Ulrike Malmendier and Stefan Nagel of the University of California, Berkeley, and Stanford

University, respectively. The generation that grew up

during the Great Depression, for example, was more

risk-averse than its parents and its children when it came to money. Your kids, in other words, won't be

addicted to E*Trade, but you'll probably find their allowances stuffed under their mattresses.

7 Skirts will get longer. Here's a piece of Wall Street folk wisdom: There is a rough correlation

between bull markets and bare knees. During boom times, skirts get shorter. In these bearish times,

prepare for hemlines to head south. Somewhat in relation, we'll see something else go north: the age and weight of Playboy centerfolds. Evolutionary biology encourages people to seek "more mature"

mates during times of economic insecurity, argue

Terry E Pettijohn and Brian J. Jungeberg in one of the more interesting studies published recently in the Personality and Social Psychology Bulletin. To support their claim, the researchers showed that dur

ing recessions, centerfolds get older and, well, rounder. Similar studies have confirmed an identical trend in movie comedies-male and female leads get older during recessions.

8 Your military just got bigger. The age group that will be hit hardest by the current downturn? The

world's 18- to 24-year-olds. This group just so

happens to be the prime recruiting age bracket for militaries, which can generally offer a steady paycheck and decent benefits. Indeed, the U.S. Army exceeded its recruitment goals in the last three months of 2008 for the first time in 5 years. And as the war in Iraq winds down, these new soldiers' fears of being deployed in a hostile combat environment should wane. The few and the proud might grow into the many and the desperate.

9 S tate schools will be cool. A prolonged downturn will profoundly affect institutions of higher learn

ing. For the past decade, private schools far outpaced state schools in terms of resources and expenditures as their endowments swelled from the long financial

boom. Many elite universities followed Harvard's lead and adopted need-blind admissions with generous financial-aid packages.

That's all about to change. Endowments in the

United States have declined 10 to 30 percent during the past year, which will make need-blind admissions a thing of the past and financial-aid offers far less generous. The credit crunch will also make it more difficult for young people to secure reasonable student loans.

10 Boomers will refuse to leave the building. A whole tier of older employees who planned

on retiring now or in a few years simply can't-their

401(k) retirement accounts look way too scary. In 2008 alone, U.S. workers aged 55 to 64 who have had 401(k)s for at least 20 years saw their retirement balances drop an average of 20 percent. This means

those who expected promotions when the boomers cleared out are going to have to stew in their own

juices and gripe around the water cooler. Office politics just got a lot nastier.

The world is no longer flat-and fewer people will care. Global downturns often breed protec

tionism and other barriers to foreigners. Cross-border

tourism is likely to plummet. Study-abroad programs will also be affected-the New York Times recently reported a dramatic decline in South Koreans studying overseas. News outlets are also likely to further scale

back their foreign news bureaus to cut costs.

1 2 Nouriel Roubini's frequent flyer miles will go through the roof. One business will be big

this year: conferences on the crisis of capitalism. The

Dr. Dooms and Cassandras of the most recent bubble

era-economists such as Nouriel Roubini, Robert

Shiller, Stephen Roach, and Joseph Stiglitz-will be

doling out advice and "I told you sos" in convention halls and conference rooms around the globe. Indeed, in the month of January alone, Roubini traveled to Istanbul, Dubai, Abu Dhabi, London, Riyadh, Zurich, Davos, and Moscow. The likely difference now? Seats in coach.

13

Great Depression lit will be chic. Eras like to mine the cultural tropes of analogous eras from

the past. So, expect books about the Great Depression to dominate Amazon rankings. Already, Hodding Carter 1v has received a big advance to write A Year of Living Within Our Means, a book about his family living strictly within its budget by using cost-cutting

measures from the 1930s. And somewhere, you just know Ken Burns is making a 25-part documentary on the Tom Joads of this world. FF~

Guest columnist Daniel W Drezner is professor of international politics at the Fletcher School at Tufts University. He is the author of All Politics Is Global (Princeton: Princeton University Press, 2007) and blogs daily at drezner foreignolicy.enm.

MARCH I APRIL 2009 99

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