The Nobel-Prize winning economist Joe Stiglitz wrote an anti-Summers manifesto in Sunday’s Times (maybe just online, not sure) that is, I think, important.
It’s called “Why Janet Yellen, not Larry Summers, Should Lead the Fed.”
Stiglitz begins by saying that he knows and has worked with both Fed chair candidates, and that the subject of who should be nominated to run the Fed may seem an unusual topic for a column that usually focuses on global economic inequality. But Fed decisions, he adds, have a huge impact on the economic status of the poor and middle-class around the world. And…
…the bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.
Stiglitz notes Summers’ role in the repeal of Glass-Steagal, but he then goes on to discuss something that I haven’t seen anyone else raise: the impact of Larry Summers’ and Bob Rubin’s decisionmaking during the financial crises of the early 1990s. (It’s a subject Stiglitz covered persuasively and eloquently in Globalization and Its Discontents.)
At Treasury in the 1990s, Mr. Summers encouraged countries to quickly liberalize their capital markets, to allow capital to flow in and out without restrictions — indeed insisted that they do so — against the advice of the White House Council of Economic Advisers (which I led from 1995 to 1997), and this more than anything else led to the Asian financial crisis. Few policies or actions have greater culpability for that Asian crisis and the global financial crisis of 2008 than the deregulatory policies that Mr. Summers advocated.
Stiglitz writes that Summers’ advocates talk up his experience in crises, and rather wickedly concedes that “to be fair, Mr. Summers has been involved in several crises.” It’s just that Summers’ actions before, during and after them have a) led to crises, b) exacerbated crises, and c) enhanced the likelihood of subsequent crises.
Essentially, Stiglitz says, Summers has gotten things wrong pretty much every time he had a chance to get them right.
Joe Stiglitz’s feelings about Larry Summers are well-known, at least in the world of people who follow economic debates. Still, it’s a big deal when a Nobel Prize-winner takes such a public stand against a potential presidential nominee. His conclusion is stark and, I think, devastating:
The country has before it one candidate who played a pivotal role in creating the economic problems that we confront today, and another candidate of enormous stature, experience and judgment.
I had begun to think that Summers’ nomination, if not his confirmation, was a done deal. Now, with the rising drumbeat of opposition and the President politically weakened from his bizarre handling of the Syria issue, I’m not so sure.