Bernanke touts nation’s economic resilience

Federal Reserve Board Chairman Ben S. Bernanke said Wednesday (June 4) that education is both the best hedge against economic uncertainty and a student’s greatest asset, and urged Harvard College’s Class of 2008 to use their education to live rewarding lives and make the world a better place.

Bernanke, who was this year’s Class Day speaker, took his audience for a walk down the U.S. economy’s memory lane during a speech before the Class of 2008 and their family members, who, under gloomy overcast skies and steady rain, crowded into Harvard’s Tercentenary Theatre and into the drier confines of Science Center lecture halls.

Bernanke, a member of the Harvard College Class of 1975, hearkened back to his own commencement during inflation-weary, oil-shocked 1975, and told the graduating seniors that things aren’t so bad. Despite today’s ample gloomy economic news, the last 33 years have created a more resilient economy, largely due to a decline in the energy intensity of many activities, wiser government economic policies, and a consistently tougher anti-inflation stance, he said.

But there are some parallels between 2008 and 1975, Bernanke added, citing a rapid increase in oil prices, rising prices for food and other commodities, and slow economic growth. But Bernanke said the differences between today and 1975 are crucial and “provide a basis for optimism about the future.”

“Today’s situation differs from 33 years ago in large part because our economy and society have become much more flexible and able to adapt to difficult situations and new challenges,” Bernanke said. “Economic policymaking has improved as well, I believe, partly because we have learned well some of the hard lessons of the past.”

Class Day is the traditional ceremony held a day before Commencement, when the graduating class is addressed by a speaker invited by the seniors themselves. Less formal than Commencement’s scripted rites, Class Day provides a chance for members of the Class and College officials to address the students at greater length than is possible during Commencement itself.

Incoming Harvard College Dean Evelynn Hammonds, who took office June 1, endured introductory jokes about her “profound influence on their Class” and “brief, but intense tenure” and explained to the graduating seniors some of the rituals they would be part of on Commencement Day. She described the coming ceremonies as “full of incantation and free of explanation” and, since there is no place in the ceremony for such sentiment, wished the students well as they complete their Harvard undergraduate careers and join the ranks of Harvard alumni scattered around the world.

“It is a noble tradition that you will become part of,” Hammonds said, urging the students to take advantage of their excellent education and make the world a better place.

The Class Day ceremonies also featured two Harvard orators, Deena Shakir and Nicholas Melvoin, the humorous Ivy orations, delivered by William Bailey and Vivien Wu, as well as remarks by Class officers and the president-elect of the Harvard Alumni Association, Walter Morris ’73.

In his talk, Bernanke joked about the Class’ decision to invite an economist to address them, recalling his own Class Day, which featured social critic and comedian Dick Gregory, as well as more recent speakers, including comedians Seth MacFarlane, Sacha Baron Cohen, and Will Ferrell. “Central bankers,” he observed wryly, “don’t do satire as a rule.”

Returning to his theme contrasting yesterday and today, Bernanke said that the rate of inflation is one major difference between the two periods. In the year he graduated, inflation soared to more than 10 percent. Further, the national response to the Arab oil embargo was to enact nationwide price controls that resulted in long lines at gas stations and gasoline being dispensed to consumers only on even or odd days of the month. Monetary policy of the time didn’t help, he said, and it wasn’t until 1979 that inflation-fighting policies were enacted under then-Fed Chairman Paul Volcker.

Another factor mitigating the impact of higher energy costs is the reduction in what he termed the economy’s “energy intensity.” Over the years since 1975, more energy-efficient equipment and practices have taken hold in homes and businesses across the country, lessening the damage done by energy cost increases.

Bernanke cautioned the outgoing seniors that life’s many twists and turns are difficult to predict and they will likely wind up someplace very different 30 years from now than they envision today.

“You cannot predict your path. You can only try to be as prepared as possible for the opportunities, as well as the disappointments, that will come your way,” Bernanke said. “For people, as for economies, adaptability and flexibility count for a great deal.”