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“Are we looking at a second Depression? I don’t think so,” said Paul Krugman, NewYork Times columnist and Nobel-Prize-winning economist, during his luncheon address to the Canadian Corporate Counsel Association’s World Summit last week in Vancouver. Then he added: “A month ago, I would’ve said, ‘Absolutely not.’ But today, I’m going to say, ‘I don’t think so.'”
That was the standout quote for me from an economic assessment so pessimistic that at its end, Krugman admitted: “I wish I had some positive things to tell you.” But aside from, as he said, having “people in Washington I can now talk to,” he didn’t have much good news to share. The powerful tremors emanating from Citigroup add to worries that even an astonishing American stimulus package of $800,000,000,000 — a financial adrenalin shot roughly equal to Australia’s entire GDP — won’t cover even half of the expected $2,000,000,000,000 in losses this recession is pounding out. Every country’s economy is in trouble, and even those with the political will and financial tools to address the problems seem stymied. Europe is facing particular challenges, while China — whose financial statistics are “science fiction,” Krugman said — is facing a sharp downturn. He thinks the eventual solution to banks in crisis is going to be nationalization — though he observed that not even the Obama administration is psychologically ready to take that step yet.
Now, another Great Depression is still a considerable distance away (we’re nowhere near 25% unemployment, GDP cut in half, or a stock market reduced by 90%, for example). And since whatever the mainstream media brings you is pre-inflated at least 20% by hype, you could be forgiven for thinking that things are bad, certainly, but not borderline catastrophic. But while Krugman’s grim outlook took me aback, what really struck me was the lack of surprise among audience members, including a lot of general counsel and in-house lawyers from national and global entities. Some of them nodded in agreement and all of them seemed to have had their beliefs confirmed, not undermined, by his remarks. They had the air of people who know exactly how bad things might be.
Law firm lawyers should be concerned by that. They should also be concerned by this: for the most part, surprisingly little was said about the problem of outside counsel costs. This wasn’t because the problem had gone away; from my reading of comments on stage and in conversations, it was because legal costs had ceased to be something to talk about and had become something to be dealt with. The simplicity and finality of that sentiment were unnerving. I asked an in-house lawyer to name one thing her outside law firms could do to make her happier. “Reduce their costs,” she replied. Fair enough, I said; should they do it by outsourcing, or by automating, or by — she cut me off. “I don’t care,” she said flatly. (Patrick J. Lamb reports a similar experience.) Continue Reading