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Larry Summers: Economic Idolatrist, or False Prophet?
By Stephan Richter
Friday, November 05, 2010
What a difference a decade or so makes. In the late 1990s, shortly before becoming U.S. Treasury Secretary, Larry Summers was breathlessly hyping the United States. Now, in one of his parting shots as director of the White House National Economic Council, he larded his steady stream of compliments onto India. What does such "ingratio-mania" say about one of America's most influential policymakers?
Part of the job of a top presidential aide is to set the stage for a state visit by one's boss. And few countries matter more these days than India, slated to be the worlds most populous nation by 2028.
India has made impressive progress since 1991, when it finally left behind what was condescendingly called the Hindu rate of (insufficient economic) growth. Since that year, the country's economy has grown at an average annual rate of 6.5%, with considerably faster growth in recent years.
Despite this unquestionable achievement, much of India remains desperately poor. Just consider that the country has fewer middle-class families than Africa. It takes time to move a nation with over one billion people forward.
So when Mr. Summers spoke before the Asia Society in Mumbai in mid-October 2010, one of his obvious goals was to warm up the Indians for a successful visit by his then-boss, President Obama.
The latters upcoming trip to India will be his longest visit to any country as president. And the Indians have long been sensitive about receiving second-class treatment from the Obama Administration, compared to what they believe was first-class treatment by the Bush Administration.
But even more than further advancing the (legitimate) cause of greasing the wheels of bilateral business deals and boosting Indians' sense of self-confidence, Mr. Summers was pursuing two other causes: fawning and putting China into place.
Without a doubt, Mr. Summers has a gift for imaginative oratory. That was on ample display when he announced the emergence of a world shaped by the Mumbai Consensus. He described it as a third way not based on ideas of laissez-faire capitalism that have proven obsolete or on ideas of authoritarian capitalism that ultimately will prove not to be enduringly successful.
He is using this phrase primarily as a counter to an emerging Beijing Consensus, which Cambridge University's Stefan Halper describes as a move away from the market-democratic model and toward a new type of capitalism, which can flourish without the values and norms of Western liberalism." As such, it must indeed make the West uncomfortable.
What is truly remarkable and a real change is Mr. Summers' statement that the Washington Consensus isn't the only game in town any longer. That, from one of the concept's top shapers and global enforcers back in the 1990s, does represent progress a return to humility, it seems.
However, strong doubts are in order. First and foremost, despite his reputation as a ruthlessly honest intellectual, Mr. Summers seems to position himself as a crowd-pleaser and, worse, a man dangerously prone to reveling in notions of cultural supremacy.
To gauge this seemingly needy behavior, consider these words, spoken by the same man: "Not in 500 years has a nation been this dominant in business, technology and culture."
Given that those words, spoken at the World Economic Forum in 1998, referenced the United States, Indians must have reasons for skepticism.
And the Chinese, no doubt aware of the changing objects of Mr. Summers' deep-seated need for idolatry, must be silently pleased. After all, he is evidently a very poor forecaster of economic fundamentals.
Considering how dramatically the United States fortunes have changed since Mr. Summers' 1998 words, the Indians can only hope that they won't be similarly jinxed.
Fortunately, unlike America's, Indias is not a culture comfortable with self-hyping, so they can be counted upon not to become infected with the Summers virus of overdone praise.
One surmises they will see right through it for what it is: the somewhat desperado-like talk of a former leading nation trying to show its continued "strength" by relying on heavy doses of supplicant talk.
Welcome to the brave new world not so much of the emerging new powers, but the submergence of the old ones, including the United States. Indian thinkers, often equipped with long-term horizons, must indeed chuckle.
How so? Well, Mr. Summers' talk is heavily reminiscent of the supplicant addresses delivered by representatives of the British crown back in the 18th century, when they were seeking to soften up the princely states with their immense material riches at the top for the benefits of British rule.
Come to think of it, Mr. Summers' address in Mumbai beyond its conceptual charms is reminiscent of much of British diplomacy outside Europe's borders over the past 50-100 years.
Until the arrival of the current down-to-earth government, the UK's leaders usually stood out for the ostentatious way in which they used rhetorical flourishes to get other countries to continue viewing them as a world superpower.
That is the real context in which to read Mr. Summers' remarks. And in that regard, there is actually a large amount of unintended honesty in them. With America vastly less superior than he thought a mere decade ago, it's high time for changed rhetoric.
There remains one final worry, though. Now out of government, Mr. Summers will obviously again look for remunerative employment something far more lofty than faculty pay at Harvard University.
In 2008, the year before he joined the Obama Administration, Mr. Summers made more than $5 million in compensation from the D.E. Shaw hedge fund and received more than $2.7 million in speaking fees from Wall Street companies that received bailout money.
Now, at that pay level, there were always legitimate concerns about this being "pre-pensation" rather than compensation for actual services.
It was as if to say with a wad of dollars: "Once you're at 1600 Penn, we know you'll keep a watchful eye out for the interests not just of the firm or hedge funds, but the big players in the financial industry more generally.
And that, in his two-year stint in the White House, he certainly did.
The worry now is that Mr. Summers remarks in Mumbai are the overture to his taking a role as a roving global ambassador, door-opener and marketing charmer (if you can believe it) for one of the big players in global finance.
Sucking up to India, because that's where among other emerging markets the money is, could thus be a nifty opening move in his global charm offensive. Stay tuned.
By Stephan Richter
Friday, November 05, 2010
What a difference a decade or so makes. In the late 1990s, shortly before becoming U.S. Treasury Secretary, Larry Summers was breathlessly hyping the United States. Now, in one of his parting shots as director of the White House National Economic Council, he larded his steady stream of compliments onto India. What does such "ingratio-mania" say about one of America's most influential policymakers?
Part of the job of a top presidential aide is to set the stage for a state visit by one's boss. And few countries matter more these days than India, slated to be the worlds most populous nation by 2028.
India has made impressive progress since 1991, when it finally left behind what was condescendingly called the Hindu rate of (insufficient economic) growth. Since that year, the country's economy has grown at an average annual rate of 6.5%, with considerably faster growth in recent years.
Despite this unquestionable achievement, much of India remains desperately poor. Just consider that the country has fewer middle-class families than Africa. It takes time to move a nation with over one billion people forward.
So when Mr. Summers spoke before the Asia Society in Mumbai in mid-October 2010, one of his obvious goals was to warm up the Indians for a successful visit by his then-boss, President Obama.
The latters upcoming trip to India will be his longest visit to any country as president. And the Indians have long been sensitive about receiving second-class treatment from the Obama Administration, compared to what they believe was first-class treatment by the Bush Administration.
But even more than further advancing the (legitimate) cause of greasing the wheels of bilateral business deals and boosting Indians' sense of self-confidence, Mr. Summers was pursuing two other causes: fawning and putting China into place.
Without a doubt, Mr. Summers has a gift for imaginative oratory. That was on ample display when he announced the emergence of a world shaped by the Mumbai Consensus. He described it as a third way not based on ideas of laissez-faire capitalism that have proven obsolete or on ideas of authoritarian capitalism that ultimately will prove not to be enduringly successful.
He is using this phrase primarily as a counter to an emerging Beijing Consensus, which Cambridge University's Stefan Halper describes as a move away from the market-democratic model and toward a new type of capitalism, which can flourish without the values and norms of Western liberalism." As such, it must indeed make the West uncomfortable.
What is truly remarkable and a real change is Mr. Summers' statement that the Washington Consensus isn't the only game in town any longer. That, from one of the concept's top shapers and global enforcers back in the 1990s, does represent progress a return to humility, it seems.
However, strong doubts are in order. First and foremost, despite his reputation as a ruthlessly honest intellectual, Mr. Summers seems to position himself as a crowd-pleaser and, worse, a man dangerously prone to reveling in notions of cultural supremacy.
To gauge this seemingly needy behavior, consider these words, spoken by the same man: "Not in 500 years has a nation been this dominant in business, technology and culture."
Given that those words, spoken at the World Economic Forum in 1998, referenced the United States, Indians must have reasons for skepticism.
And the Chinese, no doubt aware of the changing objects of Mr. Summers' deep-seated need for idolatry, must be silently pleased. After all, he is evidently a very poor forecaster of economic fundamentals.
Considering how dramatically the United States fortunes have changed since Mr. Summers' 1998 words, the Indians can only hope that they won't be similarly jinxed.
Fortunately, unlike America's, Indias is not a culture comfortable with self-hyping, so they can be counted upon not to become infected with the Summers virus of overdone praise.
One surmises they will see right through it for what it is: the somewhat desperado-like talk of a former leading nation trying to show its continued "strength" by relying on heavy doses of supplicant talk.
Welcome to the brave new world not so much of the emerging new powers, but the submergence of the old ones, including the United States. Indian thinkers, often equipped with long-term horizons, must indeed chuckle.
How so? Well, Mr. Summers' talk is heavily reminiscent of the supplicant addresses delivered by representatives of the British crown back in the 18th century, when they were seeking to soften up the princely states with their immense material riches at the top for the benefits of British rule.
Come to think of it, Mr. Summers' address in Mumbai beyond its conceptual charms is reminiscent of much of British diplomacy outside Europe's borders over the past 50-100 years.
Until the arrival of the current down-to-earth government, the UK's leaders usually stood out for the ostentatious way in which they used rhetorical flourishes to get other countries to continue viewing them as a world superpower.
That is the real context in which to read Mr. Summers' remarks. And in that regard, there is actually a large amount of unintended honesty in them. With America vastly less superior than he thought a mere decade ago, it's high time for changed rhetoric.
There remains one final worry, though. Now out of government, Mr. Summers will obviously again look for remunerative employment something far more lofty than faculty pay at Harvard University.
In 2008, the year before he joined the Obama Administration, Mr. Summers made more than $5 million in compensation from the D.E. Shaw hedge fund and received more than $2.7 million in speaking fees from Wall Street companies that received bailout money.
Now, at that pay level, there were always legitimate concerns about this being "pre-pensation" rather than compensation for actual services.
It was as if to say with a wad of dollars: "Once you're at 1600 Penn, we know you'll keep a watchful eye out for the interests not just of the firm or hedge funds, but the big players in the financial industry more generally.
And that, in his two-year stint in the White House, he certainly did.
The worry now is that Mr. Summers remarks in Mumbai are the overture to his taking a role as a roving global ambassador, door-opener and marketing charmer (if you can believe it) for one of the big players in global finance.
Sucking up to India, because that's where among other emerging markets the money is, could thus be a nifty opening move in his global charm offensive. Stay tuned.
