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The Plutocrats Are Living It up: Larry Summers' Gilded Path to Money and Power

Larry Summers’ shuffling from Harvard to the White House is symptomatic of a new American plutocracy that keeps the gears of corruption greased.

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It should come as no surprise at this point that the Health Care Delivery Policy Program’s sponsors included industry giants Aetna, Blue Cross Blue Shield, Merck, and Stryker.

How do these people defend such obvious conflicts of interest? The case of another CBG project, the Harvard Electricity Policy Group (HEPG), is instructive. HEPG is also chaired by CEPR’s Professor Hogan, and is funded by dozens of energy companies with a good deal of common financial interest in electricity policy. Ten years ago HarvardWatch wrote about Harvard’s role in promoting Enron-backed energy deregulation in its report, “Trading Truth”, noting that Enron was a major contributor to HEPG while “much of the research agenda of the HEPG [centered] on deregulation of the electricity market” — the central component of Enron’s fraudulent business model. Hogan authored numerous studies, sometimes in collaboration with a consulting group that received funding from Enron, arguing against market manipulation as a cause of the California Electricity Crisis, and against price caps as a solution, positions that were proven wrong but highly favorable to Enron. We now know from Enron emails that the company was moreover planning to take professor Hogan and others on an “energy deregulation road tour” across the country to persuade other states to adopt the California model.

In response to the HarvardWatch report, Hogan and HEPG’s executive director argued in response that Enron was only one among many funders, that HEPG didn’t take official positions on policy, that many of Hogan’s conclusions about the California electricity market had contradicted Enron’s. All of that is true, and that’s why the Center’s structure works. It’s also why the Brookings Institution and CFR have emerged in recent decades as the government and media’s favorite sources of new political solutions. Corporate-friendly proposals that arise organically from discussions between government and business elites brought together within old institutions funded by a long list of corporate and wealthy individual donors are much more politically viable than those coming directly from a bank lobbyist, an oil company, or a group closely affiliated with one. Corporations don’t dictate specific views, they nurture hundreds of views within a safely constrained spectrum and run with what works best.

The conflicts of interest at CBG are pervasive, but not ubiquitous, so there are always counter-examples for Hogan to cite. Many events and research projects don’t interest the companies funding them, and those that do are not always favorable. Current Senior Fellows include bankers from Goldman Sachs, Morgan Stanley, Lehman Brothers, Wells Fargo, and Salomon Brothers, but there are many others from academia, government, or elsewhere in the private sector. The Center has hosted dozens of events promoting obvious corporate talking points, as well as events with more diverse and critical views.

But how many of CBG’s hundreds of faculty, fellows, or events have ever substantially undermined the interests of the Center’s sponsors, and how many have advanced them? If a CBG program was mostly critical of a sponsor, would it stay funded? If the Center’s sponsors created the same research center with the same faculty and staff outside of an academic institution, would it have the same credibility? Would CBG academics ever push for corporate social responsibility rules that would hurt Coca-Cola’s bottom line?

Harvard, like any university, is always in search of money to add to and expand its programs. Its fundraising offices contantly reach out to wealthy alumni and their companies about possible donations and what they might fund. Harvard faculty, facing cutbacks and  job insecurity, need resources and attention to defend and advance their careers, and are attracted to positions backed by a fresh flow of big money. Big business, on the other hand, is constantly looking for the most effective PR its charitable giving can buy and new ways to strengthen its influence over government policy. Meanwhile, currently serving politicians and their staff are especially receptive to policy reforms backed by their corporate friends and donors but credible to the public. Finally, elites entering and exiting government need transitional work, more prestigious education for their resumes, and opportunities to network and test new ideas in a competitive but collegial environment.

 
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