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CNN SATURDAY MORNING NEWS

Interview with Rajeev Dhawan

Aired August 16, 2003 - 07:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THOMAS ROBERTS, CNN ANCHOR: Well, the financial power center of New York took a very big hit from the blackout. Wall Street saw its lowest trading volume of the year yesterday. And although Mayor Michael Bloomberg was on hand to ring the opening bell, many traders played hooky, since they couldn't make it in to work.
Both the New York Stock Exchange and the Nasdaq opened on time and operated with normal trading hours.

We're going talk more, though, about the impact of this massive power outage and the markets overall, the economy, how its affecting that.

Joining me now is Rajeev Dhawan, who's the director and associate professor of management at Georgia State University's Economic Forecasting Center.

Great to have you with us.

RAJEEV DHAWAN, GEORGIA STATE UNIVERSITY: Good morning.

ROBERTS: Once again, because you've been here before.

Let's talk about, who's the big winner or the big losers here? Is it big business, or small business?

DHAWAN: I think the biggest impact was in the small business, you know, the restaurants, the other kind of small businesses that cater to, like, day-to-day living. And I think in the long term, the problem would be for the big businesses, because everybody's looking at this thing, like, Maybe this might happen again. Or may not. And when you have those kind of doubts, the CEOs and the other people, they hold back on the investment. And that's typically the bigger firms.

ROBERTS: And for a lot of the small businesses, though, that you mentioned that are going to be big losers out of this, it's going to be hard for them to rebound so quickly, because there was Thursday evening, where they were in a total blackout, you know, then stepping into Friday.

Now they're regrouping and trying to figure out all their losses and figuring out how this is going to be parlayed, I guess, on to the customer in the weeks to come, right? DHAWAN: Right. Like the restaurants, you know. If they did not get to do the sales on Friday, they can't make it up Saturday or Sunday that easily. If you are a mall, and you did not go in to buy stuff on Friday, you can go back on Saturday and Sunday and make up for the purchases.

So that's why it washes out for those businesses, but not for the restaurants, or which cater to the (UNINTELLIGIBLE) consumers on a day-to-day basis, like delis, you know, stuff like that.

ROBERTS: Well, I guess for those people out there, it depends if you look at this the glass being half empty or half full. Because now that we've gone through and lived through a situation like this, there is the talk now to figure out, OK, how do we make sure that this doesn't happen again?

So from a financial aspect, there are people out there that could gain jobs from the fact that these power grids have to be looked at around the country and also into Canada, and what's going to be done to fix this to make sure that it doesn't happen again, right?

DHAWAN: Yes, you're right on that. You know, the power sector is the place where there's going to be more investment to upgrade the grids and put up some new plants. And, you know, the economy has not been doing too well, you know, contrary to what the numbers come out. If you look at the investment side, that has been really weak, because people have been holding back, the CEOs.

Now, this might be a boost in the arm for the power sector, which usually does big investments. So maybe it will help the economy gain good numbers six months from now. You know, it takes time for them to put up these power grids and new power plants, but that could be one way of jumpstarting the economy in that sector.

ROBERTS: Well, we certainly aren't going to see anything happening completely overnight to jumpstart the economy.

DHAWAN: No.

ROBERTS: So, yes, six months to a year down the line, maybe see a small influx.

DHAWAN: You see, what matters is the mindset. And right now, this power shortage, this blackout, putting a negative thing in the mindset of the CEOs and the executives. Because when everybody's worried, If I build up a big plant, and if I take a risk and expand, and I don't get the power repeatedly, then I could be in trouble.

So that's what is in the back of their mind. So we are hoping that this doesn't happen again. Maybe this was a random thing. You know, maybe some buzzard hawk was diving off, or a chipmunk, and got stuck in a transformer, and the whole thing blew up. That's a really random event. Doesn't happen that readily -- easily or repeatedly.

But if it was a case of, like, really, the grid is really bad, you know, then it's negative, and it can happen again. And that puts the doubt in the mind of the executives, those companies which are dependent really on power, like aluminum and automobile production.

So it's a little bit negative on that side.

ROBERTS: Well, if it was a chipmunk, that's one expensive chipmunk that everyone's had to deal with, 50 million people.

Rajeev Dahwan, director and associate professor of management at Georgia State University, thanks very much for coming in and talking with us...

DHAWAN: Thank you very much.

ROBERTS: ... breaking down the numbers for us. Thanks.

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