The Way to Fight a Recession
One economic power steps boldly. Why can't Harvard?
I'm out one night and spotlights are shining on Newbury Street, attracting me and others like moths to a flame, the lure in this case being the grand opening of a store called Nespresso. It's a high-end coffee seller and I'm more a Dunkin' guy, but, still, there's free champagne and beautiful people (in jeans and a sweat shirt, I'm definitely not one), so I think, why not? I spend an evening noshing on exotic fare and listening to a young singing phenom who, I'm told, cost the promoters a bundle. It all seems very ancien regime, the kind of ostentation one saw before these grim and gray times, but this event is happening in the midst of layoffs, plummeting stocks, and empty storefronts. It is strikingly disconcerting.
A few days later I'm standing along Western Avenue in Allston, construction site of Harvard University's much trumpeted science center. The new complex is just the first part of what has been promised to be an epic transformation of the area. Or at least, that was the hope. The tall red construction cranes are still busy clearing the area, but Drew Faust, Harvard's president, has just announced that the university is putting on the brakes. For the moment, work proceeds, but at the end of the year the school will reassess. This has come as a shock to many, especially Allston residents, who now fear they may be stuck indefinitely with what some call the Harvard Hole. And the rest of the projects? No one is saying, but things don't look good.
Both of these are recession stories, tales of two significant organizations (Harvard, America's oldest college, and Nespresso, a unit of Swiss food giant
Frederic Levy, president of Nespresso's American operations, tells me the company plans to open 10 to 20 new locations in North America over the next two years. We're in the middle of a recession, I remind him, and he dismisses such thoughts. Recessions come and go, he says. Nespresso's plans are long-term, with an agenda of bringing its brand of coffee and coffee makers to all of America. He isn't going to let the vicissitudes of the day stop that.
Not so Harvard. A reported 30 percent drop in the value of its endowment seems to have thrown the university into a tizzy. Granted, that's a lot. But previous years had shown a dramatic rise in the value of the endowment, and the newest drop still leaves Harvard with around $24 billion -- about as much as it had in 2005 and almost double what the university had 10 years ago, when it first announced its expansion plans.
To each its own, I suppose. Yet there are consequences to the decisions of both
Nespresso and Harvard. Economies are strange things. Sophisticated computer modeling, Nobel Prizes, and great thinkers notwithstanding, no one can really explain how to make them grow or why they shrink. Presented with an illness, a group of doctors would pretty quickly figure out how to assess, diagnose, and treat. That's because medicine really is a science. Economics, pretensions otherwise, is not. Put 100 economists in a room, and the only sure thing you'd get would be 100 different theories. One can see this in today's throw-it-on-the-wall-and-see-what-sticks approach to economic policy making or in the profession's slippery language: consumer "confidence," "virtuous" circles, "giddy" (or "panicked") investors. There's an almost self-fulfilling, touchy-feely quality to this: If we believe things are going to be good, then they will be. If we believe otherwise, then they won't be.
So when a company such as Nespresso spends money and makes plans, it sends a message -- the bad times will end, growth will resume. If enough companies behaved the same way, then indeed, the economy would turn. Harvard, too, is sending a message. "If Harvard can't build, who can?" worried one construction industry publication. Perhaps, many will conclude, no one can, and, as a consequence, no one will.
This isn't to diminish Harvard's travails. But it's been around for 373 years and survived revolutions, wars, and other recessions. It's prominent and important enough that it needs to do more than play victim; it needs to be part of the solution. Nespresso, far newer to the scene, looks beyond today to the future. Harvard could learn something from the Swiss.
Tom Keane, a Boston-based freelance writer, contributes regularly to the Globe Magazine. E-mail him at firstname.lastname@example.org.