Monday, December 08, 2008

Obama's Big Mistake: Hiring Larry Summers

Obama has made a disastrous choice of Larry Summers as one of his lead economic advisors. Summers has been for decades a right-wing economist advocating deregulation, ‘free trade,” sweatshops, and privatization--economic policies that resulted in economic collapse in numerous countries including the U.S.

Summers first became famous when he worked at the World Bank in the early 1990s for his memo that Africa is underpolluted and that industrial countries should dump their pollution on Africa. He became even more famous as President of Harvard University by saying women are by our genes less qualified to be scientists than men. Harvard faculty voted overwhelming no confidence in him, so he was fired in June, 2006.

Summers has advocated disastrous economic policies for decades. In the 1980s Summers was first brought to Washington by his thesis advisor M. Feldstein to be part of Reagan brain trust, serving on Reagan's Council of Economic Advisors from 1982-3 where Summers adopted Regan right-wing attacks on New Deal regulation of bank and finance. In 1990 Lithuania hired him to help their transition to a free market. According to Mark Ames in the "Nation," Summers advocated such a harsh, brutal privatization of the economy that within five years the suicide rate in Lithuania jumped to the highest in the world and "in 1992, after just two years of Summers-nomics, the traumatized Lithuanians voted the communist party back into power, the first East European nation to do so."

Summers didn’t learn anything from the Lithuanian disaster because soon he advocated as U.S. Treasury undersecretary under Clinton the same dreadful economic policies for Russia. According to Peter Bosshard, the policy director of International Rivers, “In the early 1990s, he [Summers] was instrumental in pushing through an untested system of voucher privatization for Russia’s state-owned enterprises. As more prudent colleagues at the World Bank such as David Ellerman had warned, his policies resulted in economic collapse, widespread misery and the emergence of the current system of crony capitalism in Russia.”

Summers’ policies in Russia resulted in the Russian GNP plunging 60% while Russian had the worst "death-to-birth ratio of any industrialized country" (Ames). By the end of the 1990s the “free market” in Russia Summers had set up made a spectacular collapse while his protégé Schliefer was accused by the U.S. Department of Justice of corruption in Russia and the Justice Department was seeking $100 million in damages from Schliefer. As Harvard President Summers put pressure on to get Schliefer off the hook. The death rate in Russia was still soaring.

Having helped destroy the economies for Lithuania and Russia, Summers still hadn’t learned anything. By the late 1990s was Deputy Secretary of the Treasury Department under Clinton when Korean and other Asian countries faced by a financial crises. As Deputy Secretary of the Treasury Department, Summers had policies that wouldn’t let South Korea and Thailand have economic stimulus programs like Obama wants now to do. Summer's policies enforced through the International Monetary Found forced the Koreans to sell off cheaply many of their large corporations to U.S. companies and investors. The I.M.F. policies crashed the South Korean economy, causing a severe recession including huge increase of lay-offs, unemployment, much lowered wages, and huge collapse in the standard of living.

As Secretary of the Treasury under Clinton, he is responsible for the current economic crises in the U.S. Naomi Klein says, “Summers along with Alan Greenspan and Robert Rubin were the key architects of the policies of deregulation that created the crisis that we’re living now.” The three sucessfully abolished Glass-Steagal Act from the 1930s that regulated banks, so the three right-wing ideologues got a new law that allowed for mergers that created banks too big to fail. Summers made yet another disastrous decision when his policy said the U.S. government wouldn’t regulate derivatives held by investment banks—these derivatives are weapons of mass economic destruction key to the current financial disaster. Summers in another disastrous policy decision allowed banks to carry huge amounts of debt—33 to 1 in the cast of Bear Stearns. Summers like his boss at the Treasury Department Robert Rubin was a ardent support of N.A.F.T.A and global sweatshops.

Summers has never been a “free thinker” but a dogmatic right-wing advocate of deregulation and privatization no matter how much havoc it costs it country after country decade after decade. His past economic policies have created disasters to the economies of Lithuania, Russia, South Korea, and now the United States. Rivers says, "Larry Summers is not the free thinker which his supporters make him out to be. He has time and again acted as a dogmatic neoliberal with little regard for subtleties such as the history, political culture and power relations in a country."

What’s wrong with Obama appointing such a long-standing right-wing ideologue as a top economics advisor is that Summers never faces any consequences from his disastrous economic policies in so many countries. The whole dialogue about Summers in mainstream media including the December 7, 2008, New York Times article is about how “smart” he is without any documentation of what he’s done. There’s a huge lack of reality in talking about Summers in the U.S. mass media. Reality never seems to matter. All those suicides in Lithuania never matter. All the Russians who died early deaths never matter. All those U.S. workers who lost their jobs because of N.A.F.T.A that Summers loves don't matter.

The Rachel Maddows show had an interview with Representative Peter DeFazio (D-Oregon) about the Obama stimulus package just passed. Rep. De Fazio said, "There’s a pretty good consensus among members of the House that it [spending on infrastruture] should be more. But the dictate from on high in the negotiations with Obama’s advisers — I don’t think the President is there — I think he’s ill-advised by Larry Summers. Larry Summers hates infrastructure, and some of these other economists — who were very much part of creating the problem. Now they’re gonna solve the problem. And they don’t like infrastructure." De Fazio said that 33% of the stimulus package is tax cuts while 7 % is spending on transportation infrastructure. Rep. De Fazio says that Obama advisors like Summers " want to have a consumer-driven recovery. We need an investment- and productivity-driven recovery for this country, a long-term recovery." Also, Summers and the rest of Obama's economic adsiors are living in cuckooland if they think consumers are going to start spending a lot in 2009 as all eocnomic evidence is Americans are saving not spending.

Rep. De Fazio is correct. The last thing this bankrupt coutry needs now is tax cuts. Continuing Republican policies like tax cuts will only lead to protecting the rich who can benefit from reignited consumerism and misery and poverty for millions of Americans now losing jobs and homes. Summer's as Obama's policy advisor looks like the he will treat the United States like he once treated Russia pushing policies to help set up an oligarchy and leading to economic misery of millions of citizens.

1 comment:

keiko amano said...


I enjoyed reading your blog and thought Obama has a huge heart. Once I read that in his childhood, Spielberg had trouble with a bully, and to solve his problem, he recruited the bully into his wonderful project, and in turn, the bully helped him. I don’t remember the detail, but I imagine the project was probably movie related. This example may not be perfect, but I’ve seen two people so far did similar things in front of my eye, and I was very impressed. Anyway, what I want to say is that it is possible to turn negative to positive if Obama really know the troublemaker’s worth. I think only time will tell.

Keiko Amano