What's ahead for 2006

“Next year I expect that growth will be a little bit slower in the United States and marginally slower in the rest of the world.” That was the 2006 economic word from Michael Mussa, AM’70, PhD’74, at Wednesday’s Business Forecast Lunch. “Some of you will say that’s a pretty boring forecast,” Mussa, a senior fellow at the Institute for International Economics, admitted to the audience of GSB alumni and other Chicago business leaders. “But in economics, boring is good.”

Since the Graduate School of Business began the forecasts in 1954, the annual event has expanded far beyond Chicago. By the end of February, ten prognosticators will have shared their best guesses with alumni in 13 cities, including Brussels, Hong Kong, and London.

Joining Mussa at the leadoff event (and doing a reprise the next day in New York) were GSB professor of economics Randall Kroszner and GSB professor emeritus of business administration Marvin Zonis. Kroszner, who served on President George W. Bush’s Council of Economic Advisers from 2001 to 2003, batted .500 on his 2005 forecast. He came in on the money on trade balance (absolute value) and real government spending but overestimated real business investment—instead of the 9.5 percent growth he predicted, 2005 actuals are at 5.6 percent. Like Mussa, Kroszner sees more of the same for 2006, including a continuing “disconnect” between economic performance and public perception: “Despite the terrible tragedies of Katrina and Rita in August and September,” he pointed out, “the GDP data released last week show that the economy grew at 4.3 percent during the third quarter. No major industrialized economy in the world has had such strong growth over the last couple of years.”

Zonis, a principal of Marvin Zonis + Associates, political risk consultants, offered rapid-fire assessments of global hot spots and bright spots. On the upside, he said, “a new dynamic is beginning to spread in the Middle East, driven largely by Muslim revulsion at the violence perpetrated by the terrorists against other Muslims.” On the downside, “President Bush thoroughly misunderstands the nature of the Iraqi conflict.” Rather than continuing to see Iraq as “the central front in the global war on terror,” Zonis said, Bush should look “in Pakistan and Afghanistan—home to terrorist leaders—and to Western Europe—where terrorists are generated.”

M.R.Y.

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The first of the GSB's Business Forecast Luncheons, held in Chicago on Wednesday, filled a Hyatt Regency ballroom; Michael Mussa, AM'70, PhD'74, punctuated a prediction; GSB dean Ted Snyder moderated the panel of prognosticators (from left: Marvin Zonis, Mussa, and Randall Kroszner).

Photos by Dan Dry

December 9, 2005