The Biden Advisor Series: Larry Summers, Economic Menace


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Larry Summers

Last month, reports surfaced that former U.S. Treasury Secretary Larry Summers is among the advisors to the Joe Biden presidential campaign. Although he started his career as an academic economist, Summers’ involvement with Democratic presidential campaigns stretches back at least to 1988, when he served as chief economic adviser to the failed Dukakis campaign. Since then, he has been a chief economist of the World Bank, a member of the Clinton and Obama administration, and a hedge fund adviser.

Summers has been advising the Biden campaign on economic policy, particularly on a plan to revitalize the economy in the aftermath of the novel coronavirus pandemic. This announcement was met with outcry from several organizations and commentators, due to concerns over Summers’ personal and professional past. Particularly, his actions as a high-level adviser and economic decision maker have consistently put working people last and served only to push the world economic system further towards one that benefits only an elite few.

While his stint at the World Bank in the 1990s is perhaps best known for the memo Summers’ signed indicating “under-populated countries in Africa are vastly underpolluted,” which he later claimed was written in jest, what’s more concerning is the aspects of the role he took seriously. As chief economist, Summers spearheaded structural adjustment programs that imposed stringent conditions on debtors. By forcing austerity and liberalizing policies that benefited US corporations, he bears some responsible for the consistent decline in living standards in parts of the developing world throughout the 1990s.

This work continued during Summers’ time in the Clinton administration. Whether it was domestically or internationally, much of the policy that came out of the Summers Treasury Department eroded protections for working people through austerity and liberalization.

His record on the environment is abysmal and, unlike the pollution memo, cannot be so easily written off. During the Clinton administration, he was a leading voice against U.S. participation in the Kyoto Protocols, a 1992 international commitment to reduce greenhouse gas emissions, and against U.S. leadership on climate issues in general. Domestically, he argued that the 2000 California energy crisis was caused by excessive government regulation and encouraged the state government to relax environmental standards, a position he shared with the infamous Enron executive Kenneth Lay.

Although he rose to prominence due to his economic expertise, the results of his actual economic policy advice while working at Treasury have been even more destructive than those of his environmental advice. Like many economists his hindsight is quite perceptive, but his foresight leaves something to be desired. In 2009, he decried the situation with AIG, calling “the way it was not regulated, the way no one was watching” outrageous. If only Summers realized this in 1998, when Clinton, acting in part on the then-deputy Treasury Secretary’s advice, refused to increase regulations on the derivatives market.

Particularly, regulators were raising concerns about over-the-counter (OTC) derivatives, a financial instrument that does not trade on an asset, which is often used to make speculative, risky investments. Then in 2000, Clinton signed the Commodity Futures Modernization Act, which prevented virtually all regulation and oversight of OTC derivatives and, according to the Financial Crisis Inquiry commission’s 2011 report, marked a “key turning point in the march toward the financial crisis.”

Summers has repeatedly admitted that the regulatory scheme he helped to implement in the late 90s was woefully inadequate. No one can foresee the future, but surely Joe Biden can find economic advisers who haven’t already caused so much destruction with their career.

The destruction wrought by Summers didn’t end with the Clinton administration. When the recession hit, Summers found himself in a new post, director of the National Economics Council, where he quickly became a key Obama administration economic policy adviser. Before Obama had even assumed office, Summers worked to ensure that the economic stimulus package was small and few of the benefits actually reached the working class. He also personally lobbied to make sure that regulations, such as those restricting executive pay at firms receiving federal money, were taking off of the stimulus package.

Summers is among the members of the Obama administration that bears the most responsibility for the slow and uneasy recovery that followed the 2008-09 crisis. Jobs for many Americans were slow to return, and rather than using the stimulus for “shovel ready” projects or setting up a modern Works Progress Administration, Summers was among the group that pushed for hundreds of billions of dollars in tax credits and a relatively paltry amount for infrastructure.

Despite supposedly being his area of expertise, Summers’ advice did not fare any better on the international scene. Whether it was pushing for austerity in South Korea, regime change in Indonesia, or privatization in Russia, he used his position of influence in international economic policy to funnel wealth away from working people and into the hands of the corporate elite. In some cases, this group of elites included colleagues and friends of Summers from Harvard.

The United States now faces economic uncertainty that has drawn parallels to the 2008 crash. As the country and the rest of the world continues to grapple with a historic pandemic, all working people will require leadership that considers the impact of decisions on all people, not just the wealthy few. Larry Summers, in his many past positions of immense power and leadership, has shown himself lacking any sort of solidarity with working people, both in the United States and around the world.