Hohenheim’s appeal regarding the financial crisis: “Do not let the economic crisis become a self-fulfilling prophecy!”    [13.10.08]

Although the real estate crisis and the banking and financial crisis are bad enough, an economic crisis that would have dramatic consequences for us all would only occur if banks, companies, politicians, the media and citizens believe it is likely to happen or either consciously or unconsciously contribute to the economic crisis becoming a self-fulfilling prophecy.

However, a serious economic crisis can still be averted if all parts of society fulfil their individual responsibility in this critical situation. We, the signatory professors of the Faculty of Economic and Social Sciences, Hohenheim therefore call on the banks, politicians, academics, companies, the media and citizens to assume responsibility during the current financial crisis so that a self-fulfilling prophecy does not gain momentum and a global economic crisis does not set in.

In our opinion, this means that the different societal groupings must act in the following way:

Responsibility of the banks

1.. The banks have to reveal the true extent of the current financial crisis. Each banking establishment must immediately disclose in full detail the potential risks to their own financial position due to the real estate and financial crisis. Confidence in the banks taking responsible action can only grow if new risks and failures that were previously unknown cease being announced and admitted "in a piecemeal manner".

2. Solidarity between the banks in Germany should remain strong during the current situation. All banks are in the same boat. If confidence dwindles again, then all institutions will suffer financial distress. Therefore, individual banks that experience difficulties must be bolstered by all other banks as hitherto. In the future, the state may only be called upon as the “rescuer” in exceptional circumstances, since this shows that industry-specific solidarity is limited.

3. . The banks have to use their international influence to create a stronger and integrated global regulatory bank system. More importantly, the financial system must also be regulated in Anglo-Saxon countries. The banks must immediately communicate their interest in an internationally integrated banking supervisory body to the people.

Responsibility of politicians

4.Above all, politicians must ensure that, in future, the global financial world is not subject to such financial crises as they appear in their current form. We call on politicians to develop ideas about the form international financial regulation should take and how the Anglo-Saxon states can be integrated.

5. Politicians should not pursue partisan interests during the financial crisis. Whoever attempts to pursue an ulterior electoral campaign by exploiting the subject of the “financial crisis” or only pursue national interests on the international stage, does so to the detriment of society and, ultimately, to his own goals.

6.In addition, politicians must be open about the burdens that have accrued for the public authorities as a result of the crisis. Only such openness will provide confidence in the actions of politicians during the current crisis situation.

7. Politicians must also help banks settle their bank balance sheets. If the banks have to immediately and fully enforce all valuation allowances, then this will lead to significant loss disclosures. This will weaken the banks and destroy the confidence that was placed in them once again.

Responsibility of academia

8. Politicians require assistance when developing a bank and financial supervisory authority that functions on an international basis. This can and may not be demanded solely by the banks and financial institutions themselves. Instead, academia must be called upon given its independent nature. It must put forward proposals as quickly as possible for setting up an international bank and financial supervisory authority that is also politically enforceable.

Responsibility of companies

9.Companies may not exploit the financial crisis for “free-rider effects”. It is irresponsible to say that economic difficulties, which occurred for other reasons, are due to the financial crisis. “Conveyor belts” do not suddenly come to a standstill just because of the financial crisis, but rather because bad products, exorbitant prices or a poor service are being offered!

Responsibility of the media

10. The media should not fuel the impending “Self-fulfilling prophecy mechanism”! For this reason, we request that the reporting on the financial crisis

• is done in a non-exaggerated manner,
• is balanced and objective in terms of the format of its contents and
• is in no way sensational

. Otherwise panic will be fuelled, which in the end could contribute to the economic crisis becoming a self-fulfilling prophecy.

Responsibility of citizens

11. . Even each individual is called upon in the current situation. There is no reason to panic! Citizens can continue to have confidence in our banking and financial system. Citizens who clear their savings accounts and create their own large private cash stocks must be aware of the fact that this poses a threat to our economic system. If we all do this, then this promotes negative development and will lead to a dramatic recession in which we will all lose out in economic terms.

12. We citizens will ultimately have to have patience. The financial crisis did not happen overnight and will not disappear overnight, either. In spite of this, we may be confident that the measures taken by politicians, banks, associations and companies are of help and our economic system also has ample capacity for self-healing.

signed

Prof. Hans-Peter Burghof
Institute of Business Studies, Holder of the Chair for Bank Management

Prof. Markus Voeth
Institute of Business Studies, Holder of the Chair for Marketing

Prof. Stefan Kirn
Institute of Business Studies, Holder of the Chair for Business Informatics

Prof. Mareike Schoop
Institute of Business Studies, Holder of the Chair for Business Informatics I

Prof. Harald Hagemann
Institute of Economics, Holder of the Chair for Economic Theory

Prof. Christian Ernst
Institute for Household and Consumer Economics, Holder of the Chair for the Economics of Social Services

Prof. Jochen Streb
Institute for Cultural Sciences, Holder of the Chair for Economic and Social History

Prof. Rolf Caesar
Institute of Economics, Holder of the Chair for Finance

Prof. Ulrich Mell
Institute of Cultural Sciences, Holder of the Chair for Protestant Theology

Prof. Christina Escher-Weingart
Institute for Legal Sciences, Holder of the Chair for Civil Law

Prof. Ulrich Schwalbe
Institute for Economics, Holder of the Chair for Microeconomics, especially Industrial Economics

Prof. Gerhard Wagenhals
Institute for Economics, Holder of the Chair for Statistics and Econometrics

Prof. Alfons Backes-Haase
Professor of Business Education and Management Training

Prof. Michael Schramm
Institute for Cultural Sciences, Holder of the Chair for Catholic Theology and its Didactics and Business Ethics

Prof. Dirk Hachmeister
Institute for Business Studies, Chair for Accounting and Finance

Prof. Michael Schenk
Institute for Social Sciences, Chair for Communication Science and Social Research

Prof. Werner F. Schulz
Institute of Business Studies, Holder of the Chair for Environmental Management

Prof. Armin Dittmann
Institute for Legal Sciences, Holder of the Chair for Public Law

Prof. Thomas Beißinger
Institute for Economics, Holder of the Chair for Services and Employment Market Economics

Prof. Diethelm Jungkunz
Chair for Business Education and Management Training of the Universität Hohenheim

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