David Jacobson: A New York Times article on 3rd April reveals that Lawrence H. Summers, top economic advisor to Obama, earned millions of dollars last year for his contribution to a hedge fund and for speeches given at events organised by Wall Street companies that received crisis bailouts from the US government.
Despite the fact that he must now be very rich if he’s getting money like that, Summers considers himself to be on the left in the spectrum of American politics. He calls for greater diversity in academia, for example, to help liberalism. "As someone who is a strong Democrat and is a liberal, and does not think that we have won the argument with the country over the last 40 years, rather to the contrary, it makes me wonder whether if you do not engage in intense dialogue with those whom you disagree with in substantial number whether your own arguments will be sharpened and honed to maximum effect," Summers said.
Actually this is an argument that seems to be based on the view that there is some kind of market for ideas, where competition will improve performance. The argument is that there is too great a prevalence of left-leaning people in academia and more from the right would increase competition and force those on the left to improve. This is specious; economics is far from dominated by the left and, in any case, there is little evidence that there is enough in common between left and right in economics for competition between them to have any effect at all.
Summers has been, to say the least, controversial in recent years. He was forced to resign from his presidency of Harvard for a number of reasons, including a speech he made suggesting that genetic differences between men and women explained why there were fewer female than male scientists, and his apparent support for Andrei Shleifer, a “star” economist who invested in Russian shares while advising the Russian government on privatisation. Shleifer, though stripped of the honour of a named chair, remains at Harvard as a full professor of economics (and he and Summers remain friends). Shleifer is one of the most cited economists in the world but his practical work – for example in advising on the establishment of a stock market in Russia – has been less than praiseworthy. His own money has been invested wisely though; one estimate of his wealth puts it at a billion dollars.
Following a case taken by the US government in response to Shleifer’s Russian activities, Harvard – still with Summers as president – made a settlement in 2005 of over $25 million. Shleifer and others (including his wife) involved in his investments in Russia in the 1990s, all also had to make payments totalling a more modest sum of less than $5 million.
With all this controversy surrounding Summers, one can’t help wondering why Obama would choose him as an advisor. It may well be something to do with the fact that there are so few prominent economists who would publically declare themselves to be on the left!
David Jacobson is Emeritus Professor of Economics at Dublin City University Business School. He is the Chair of Commission on Industrial Policy in TASC since 2011. He has written and lectured on various aspects of industrial policy and political economy in Ireland. In the 1990s he was an independent member of the National Economic and Social Council. He has also worked in many other countries, most recently Cyprus and China.