Fox News' favorite economic pundit isn't Joe Manchin -- it's somebody even worse
FOX News is exultant! Not only have they found a new Senate hero in Joe Manchin—a Democrat no less—but also in one of the Democratic party’s past policy stalwarts, Harvard Professor Larry Summers. In addition to having briefly served as President of that supposed bastion of American liberal thought, Summers has served as Secretary of The Treasury under President Clinton, and as the Chief Economist of the World Bank, which, for Trump world, is an instrument for strengthening big government globally and, God forbid, multilateralism!
What has propelled Summers so prominently into today’s Fox News/Trumpist spotlight, however, has been his persistent criticism of the Biden administration’s economic policy agenda, beginning with the American Rescue Plan of 2021—which probably saved millions of American families from sinking into abject poverty during the past 20 months of pandemic. In an interview on Bloomberg in March of last year, Summers described it as “…the least responsible macroeconomic policy we’ve had in the last 40 years…”
Until recently, Summers was also critical of the proposed Build Back Better (BBB) program. I say recently, because like the policy chameleon he admits to being (“when circumstances change, I change my opinion…”), in a recent CNN interview with Fareed Zakaria, he expressed support for the program, acknowledging that because it is “investment,” it is essential for long term growth and will not necessarily prove inflationary; a risk that he had been trumpeting loudly along with the Maserati-driving Manchin and others in the Fox News orbit. Indeed, as far back as 2014 in a seminal paper published by the Center for Economic policy Research (CEPR), Summers was warning of the dangers of “secular stagnation” triggered by the Federal Reserve’s low-interest rates and limited monetary instruments for addressing stagnant growth and rising prices.
While his debates with Nobel Laureates Paul Krugman and Joseph Stiglitz, as well as former Federal Reserve economist Claudia Sahm, over whether and how long inflation is “transitional” may ultimately prove vital in determining how Congress acts in relation to President Biden’s BBB plan, what is significant for now is the damage that his comments may have already done to the Biden agenda, to the Democratic party’s Congressional prospects in 2022, and to President Biden’s re-election prospects in 2024.
But then controversial statements, erroneous policy prescriptions and abrupt reversals have been a consistent hallmark of Larry Summers’ career. They have also, however, contributed to keeping him ever-present in the public policy spotlight—Nobel Prize or not.
As the World Bank’s Chief Economist from 1991-93 he signed a draft policy memorandum that in February 1992 had been publicly leaked and reproduced in the New York Times. The memo, on its face endorsed the view that dumping toxic waste from developed countries into poor African countries made good economic sense. In addition to embarrassing the Bank and angering many of its staff and African shareholders, his giving priority to the impact of such actions on economic growth over its health and environmental consequences contributed to his relatively brief two-year tenure as Chief Economist.
In 1996, as Deputy Secretary of the U.S. Treasury, Summers was one of the leading architects of the effort—led by Harvard’s Institute for International Development—to administer shock therapy (a Milton Friedman inspired package of neo-liberal policies intellectually driven from the University of Chicago) to a former Soviet economy transitioning from Communist central planning to market mechanisms. This was a policy mix of rapid privatization, stabilization, and comprehensive liberalization that led to the stripping of state-owned assets by former senior party and KGB officials, many of whom have become the oligarchs of today. As highlighted in a United Nations Human Development Report issued early in the millennium, this contributed to creating in Russia, one of the world’s most unequal economies, while entrenching Vladimir Putin in his current leadership position and transforming him into one of the world’s richest men.
While still at the Treasury, during the Asian financial crisis, Summers in collaboration with the IMF, in 1997 advised the Korean authorities—then in the throes of deep recession—to raise interest rates and impose severe austerity on public expenditure and social support. According to Joseph Stiglitz, then the Chief Economist at the World Bank, and prominent Korean economists, these policies contributed to serious structural inequality and a distorted growth pattern that took almost a decade to correct.
During this same tenure at Treasury, along with then Secretary Robert Rubin, Summers (along with Rubin a former Wall Street executive) was one of the leading advocates for the deregulation of financial services in the US, including President Clinton’s 1999 partial repeal of the Glass-Steagall Act. Today, it is widely acknowledged—including by former President Clinton himself, who in a 2010 television interview admitted the policy advice had been wrong—that repealing Glass-Steagall had contributed to the sub-prime mortgage crash of 2007-8.
Summers’ aversion to government regulation has also extended to the environment where, as a member of both the Clinton and Obama administrations, he opposed American leadership in strengthening green-house gas and fossil fuel regulations as well as endorsement of the Kyoto protocol of 1997. As one of his colleagues on the Obama transition team, Reed Hundt wrote in his book A Crisis Wasted, Summers “…effectively rejected a grand strategy of investing enough in clean power to replace carbon power.” Indeed, until his relatively recent 2015 call for a carbon tax, his support for policies driven by climate science had consistently been subordinated to his calls for deregulation of the fossil fuel sector.
Perhaps none of his previous errors in judgement, however, have been as egregious as a 2005 seminar in which, as President of Harvard, he laid out the hypothesis that the under representation of women in science and mathematics was due primarily to “…the different availability of aptitude at the higher end…,” and less to patterns of socialization and gender discrimination. Despite a subsequent apology in which he sought to distance himself from his own remarks, not long afterwards in early 2006, he was pressured by the Harvard faculty into resigning as President.
Which brings one back to his being recently and frequently cited by Fox News and the Trump world policy pundits. The fact that at virtually every stage in his career he has often been wrong in judgement and key policy prescriptions, means little to Fox and the Trump policy team. To them, the important point is that, like Joe Manchin, he is identified as a Democrat, with intellectual heft, whose views can do serious damage to the Biden policy agenda, a damage that would have global consequences, though especially amongst liberal democracies.
The failure to adopt the policy mechanisms of a more regulated, equitable and sustainable economic growth (a growth pattern generally opposed by Fox, today’s Republican party and apparently Larry Summers) risks not only undermining US economic leadership and the resilience of democracy in the face of threats from illiberalism and autocracy, but also opening the door to a Republican congressional majority and re-election of a Trumpist Republican to the White House.