Commentary Magazine


Topic: Lawrence Summers

The Next Fed Chairman

The chairman of the Federal Reserve is, arguably, the second most powerful office in Washington. So who gets to occupy that office is always subject to politics and fierce lobbying. But since the Democratic Party holds the White House and the Senate, the arguments over whom to appoint are not about fiscal policy or basic economic philosophy, they’re about what sex the next chairman should be.

There has never been a female Fed chairman and so, feminists argue, the next one must be. Personally I wonder when, if ever, this first-X-to-be-Y obsession of the left (and journalists, but I repeat myself) will end. It is more than abundantly clear that one’s gender, ethnic background, race, etc. are no longer any impediment to gaining high political (or corporate) office. But I suspect that twenty years from now there will still be breathless headlines heralding the appointment—for the first time in history!—of a left-handed gay former dentist of Lithuanian descent to the office of third assistant deputy undersecretary of homeland security.

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The chairman of the Federal Reserve is, arguably, the second most powerful office in Washington. So who gets to occupy that office is always subject to politics and fierce lobbying. But since the Democratic Party holds the White House and the Senate, the arguments over whom to appoint are not about fiscal policy or basic economic philosophy, they’re about what sex the next chairman should be.

There has never been a female Fed chairman and so, feminists argue, the next one must be. Personally I wonder when, if ever, this first-X-to-be-Y obsession of the left (and journalists, but I repeat myself) will end. It is more than abundantly clear that one’s gender, ethnic background, race, etc. are no longer any impediment to gaining high political (or corporate) office. But I suspect that twenty years from now there will still be breathless headlines heralding the appointment—for the first time in history!—of a left-handed gay former dentist of Lithuanian descent to the office of third assistant deputy undersecretary of homeland security.

The feminist wing of the party wants Janet Yellen, currently the vice chairman of the Fed’s board and former president of the San Francisco Federal Reserve Bank. The Wall Street wing of the party, led by Robert Rubin, wants Lawrence Summers, former secretary of the treasury under Bill Clinton and former director of the National Economic Council under Barack Obama. Both have had distinguished careers as economics professors. In other words, both have first-class résumés for the job.

And there is not a whole lot of difference between them in terms of policy. Yellen has never met a monetary stimulus she didn’t like, and that would make Wall Street nervous. Summers is currently a consultant at Citibank (where Democratic financial politicians wait out their occasional exiles from Washington) but is hardly a fiscal conservative. Neither is likely to place a priority on getting the Fed out of the stimulus game and back to maintaining price stability.

The Wall Street Journal is not terribly impressed with either candidate. The New York Times (are you sitting down?) prefers the more liberal Janet Yellen. But, except to the gender-obsessed, it won’t make a lot of difference which one wins this fight.

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Lying About the Stimulus

James Pethokoukis has done an excellent job redacting some of the revelations that were uncovered by a piece in The New Yorker by Ryan Lizza about the first days of the Obama White House. One of the source materials for Lizza’s piece was a 57-page memo by economist Lawrence Summers written in December 2008. Summers, who would soon be appointed head of the incoming president’s National Economic Council, provided a fascinating blueprint for the new administration policies. Pethokoukis lists 11 main points that tell us all we need to know about the economic stimulus package that the Democrat-controlled Congress passed at Obama’s behest.

Chief among them is this: the nearly trillion-dollar expenditure package was primarily about implementing Obama’s political agenda, not fixing a damaged economy.

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James Pethokoukis has done an excellent job redacting some of the revelations that were uncovered by a piece in The New Yorker by Ryan Lizza about the first days of the Obama White House. One of the source materials for Lizza’s piece was a 57-page memo by economist Lawrence Summers written in December 2008. Summers, who would soon be appointed head of the incoming president’s National Economic Council, provided a fascinating blueprint for the new administration policies. Pethokoukis lists 11 main points that tell us all we need to know about the economic stimulus package that the Democrat-controlled Congress passed at Obama’s behest.

Chief among them is this: the nearly trillion-dollar expenditure package was primarily about implementing Obama’s political agenda, not fixing a damaged economy.

The Summers memo is clear evidence that much of the rhetoric put forward by the administration and allies was patent hogwash. The point of the stimulus was to keep campaign promises about making sure federal dollars flowed to pet projects, especially on the energy sector (think Solyndra), not the vaunted benefits to the economy that were promised.

Other points gleaned from this memo is the fact that the administration knew the deficits they were piling up were dangerous and that, despite subsequent claims it should have been even bigger, those inside the White House already knew more spending was not realistic. They also knew the price tag for this boondoggle was higher than they said it was.

It makes for important reading now, but the main conclusion to be drawn from this investigation is that much, if not all of what we were told about the stimulus was a flat-out lie. Above all, the public must treat the president’s promises of the benefits of future expenditures — to be financed by tax increases — to the sort of scrutiny the original stimulus did not receive.

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RE: RE: Kagan Nominated

During her career, Elena Kagan, like Justice Roberts before her, seems to have kept her eye always on the possibility of getting to the Supreme Court. The one item in her résumé not consistent with that was her opposition to allowing military recruiters access to interview students at the Harvard Law School. She even signed an amicus brief backing a Third Circuit opinion that was overturned 8-0 by the Supreme Court.

As Bill Kristol points out, tracking Ed Whelan’s fifth point, Elena Kagan appears anti-military here, not just pro-gay. She has consistently blamed the military for implementing what was, in fact, an act of Congress (and a Democratic one at that) that had been signed into law by a Democratic president. Does she think the military has a moral obligation to mutiny in this case?

Why would she do this? I have no inside track on her thinking, but I wonder if she realized that failing to take this position could have cost her her job at Harvard. As Lawrence Summers found out, and Kagan’s successor as dean of the Harvard Law School, Martha Minow, is currently demonstrating, the Harvard faculty does not take kindly even to questioning liberal orthodoxy, let alone espousing apostasy. Perhaps she figured that getting canned as dean would look worse on her résumé than appearing anti-military, which was probably her inclination anyway.

During her career, Elena Kagan, like Justice Roberts before her, seems to have kept her eye always on the possibility of getting to the Supreme Court. The one item in her résumé not consistent with that was her opposition to allowing military recruiters access to interview students at the Harvard Law School. She even signed an amicus brief backing a Third Circuit opinion that was overturned 8-0 by the Supreme Court.

As Bill Kristol points out, tracking Ed Whelan’s fifth point, Elena Kagan appears anti-military here, not just pro-gay. She has consistently blamed the military for implementing what was, in fact, an act of Congress (and a Democratic one at that) that had been signed into law by a Democratic president. Does she think the military has a moral obligation to mutiny in this case?

Why would she do this? I have no inside track on her thinking, but I wonder if she realized that failing to take this position could have cost her her job at Harvard. As Lawrence Summers found out, and Kagan’s successor as dean of the Harvard Law School, Martha Minow, is currently demonstrating, the Harvard faculty does not take kindly even to questioning liberal orthodoxy, let alone espousing apostasy. Perhaps she figured that getting canned as dean would look worse on her résumé than appearing anti-military, which was probably her inclination anyway.

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Unemployment Insurance I

If an astronomer were to casually claim that Ptolemy was right and the sun revolves around the earth, or if a paleontologist were to suddenly subscribe to Archbishop Ussher’s idea that the world was created as we know it now in the night preceding October 23, 4004 BCE, they would be laughed out of their disciplines. The evidence for the modern understanding of such matters is, after all, overwhelming. So to make such a claim would require massive and unequivocal data to back it up.

However, if an economist does the equivalent, the entire profession, instead of collapsing in laughter, says, ” . . . . oh, look! A squirrel!” Economists, it seems, suffer no loss of respect by their peers if they utter ex cathedra pronouncements that are in flat contradiction of the most basic tenets of the discipline. All they have to do is to be advancing a political agenda at the time, and all — no matter how ridiculous — is forgiven.

When Senator John Kyl said that “continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Paul Krugman wrote in his New York Times column “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.”

Really? Here’s what Paul Krugman wrote in his own textbook, Macroeconomics:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. … In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

As James Taranto pointed out, “It seems Krugman himself lives in two different universes — the universe of the academic economist and the universe of the bitter partisan columnist.”

When the Wall Street Journal noted last week that extending unemployment benefits tends to keep unemployment high by reducing the incentive to look for work — and quoted Lawrence Summers, writing in 1999, to that effect — they received a furious letter from Mr. Summers, now head of Obama’s National Economic Council. The Wall Street Journal had a field day in response, pointing out that,

The Summers argument is that increasing unemployment insurance increases aggregate demand and thus reduces unemployment. This is because he and the neo-Keynesians believe that the impact on macroeconomic demand of this jobless spending outweighs the microeconomic harm on individual incentives. In other words, if government pays people for not working, then more people will work. Subsidize unemployment and you will somehow get less of it.

Summers’s idea is the economic equivalent of a perpetual motion machine.

If economists want to get the same respect that people give to real scientists, they are going to have start behaving like real scientists. They have to denounce nonsense from a fellow economist when they hear it, even if that economist is wearing a political hat rather than an academic one.

If an astronomer were to casually claim that Ptolemy was right and the sun revolves around the earth, or if a paleontologist were to suddenly subscribe to Archbishop Ussher’s idea that the world was created as we know it now in the night preceding October 23, 4004 BCE, they would be laughed out of their disciplines. The evidence for the modern understanding of such matters is, after all, overwhelming. So to make such a claim would require massive and unequivocal data to back it up.

However, if an economist does the equivalent, the entire profession, instead of collapsing in laughter, says, ” . . . . oh, look! A squirrel!” Economists, it seems, suffer no loss of respect by their peers if they utter ex cathedra pronouncements that are in flat contradiction of the most basic tenets of the discipline. All they have to do is to be advancing a political agenda at the time, and all — no matter how ridiculous — is forgiven.

When Senator John Kyl said that “continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Paul Krugman wrote in his New York Times column “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.”

Really? Here’s what Paul Krugman wrote in his own textbook, Macroeconomics:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. … In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

As James Taranto pointed out, “It seems Krugman himself lives in two different universes — the universe of the academic economist and the universe of the bitter partisan columnist.”

When the Wall Street Journal noted last week that extending unemployment benefits tends to keep unemployment high by reducing the incentive to look for work — and quoted Lawrence Summers, writing in 1999, to that effect — they received a furious letter from Mr. Summers, now head of Obama’s National Economic Council. The Wall Street Journal had a field day in response, pointing out that,

The Summers argument is that increasing unemployment insurance increases aggregate demand and thus reduces unemployment. This is because he and the neo-Keynesians believe that the impact on macroeconomic demand of this jobless spending outweighs the microeconomic harm on individual incentives. In other words, if government pays people for not working, then more people will work. Subsidize unemployment and you will somehow get less of it.

Summers’s idea is the economic equivalent of a perpetual motion machine.

If economists want to get the same respect that people give to real scientists, they are going to have start behaving like real scientists. They have to denounce nonsense from a fellow economist when they hear it, even if that economist is wearing a political hat rather than an academic one.

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Obama Economic Team Tied up in Spin

The Obama administration is lowering expectations and getting tangled up in its own spin. On one hand, the Obama economic team needs to prepare the public for a period of high unemployment:

The economy is growing again, but at a pace unlikely to quickly replace the 8.4 million jobs erased in the recession that began in late 2007. More than 11 million people are drawing unemployment insurance benefits.

“We’ve got a long way to go,” said Lawrence Summers, director of the National Economic Council. “We’ve inherited a terrible situation, the most pressing economic problems since the Great Depression in our country.” [In case you thought the Obama team was ever going to stop blaming George W. Bush, think again.]

Christina Romer, head of the White House Council of Economic Advisers, said consumers still face “a lot of head winds” from the financial crisis. For example, debt and credit difficulties are hampering stronger job growth.

They were echoing the words of Treasury Secretary Timothy Geithner, who said last week the administration was “very worried” about returning to a more normal jobless rate of around 5 percent.

Summers said Obama was preoccupied with creating jobs. “The trend has turned, but to get back to the surface, we’ve got a long way to go,” Summers said.

Preoccupied? Well, that can certainly be said of health-care reform, but what, precisely, has Obama been doing to promote job growth? Certainly raising billions and billions in new taxes in the guise of health-care “reform” and allowing the Bush tax cuts to expire aren’t helping job creation. Nor will cap-and-trade, if the Obama team has its way.

And the job picture is likely to get worse, not better, as more workers return to the job market, as this report explains:

Some economists assert that the unemployment rate, which held steady at 9.7 percent in March, is likely to be driven higher as many more such people are lured into looking for work by hopeful signs of recovery.

The number of people looking for jobs rose by more than 200,000 in March compared with February, according to the Economic Policy Institute — and that’s a good sign, economists say. It means that Americans are seeing more jobs being created, and that they’re optimistic about their prospects.

But the supply of new jobs — 162,000 in March, the biggest monthly increase in three years — will accommodate only a fraction of the unemployed. Some economists say the jobless rate will not recede to pre-recession levels near 5 percent for four more years.

Meanwhile, the buckle-your-seat-belts-it’s-going-to-be-a-bumpy-ride warning runs headlong into the Obama team’s persistent defense of the original stimulus bill, which was supposed to keep unemployment at 8 percent. Christina Romer proclaimed, “I think it has done exactly what we would say it would do.” Uh… not really. Needless to say, Republicans are pouncing on the insistence that everything is going exactly according to plan. “Romer’s comments are likely to raise the ire of Republicans in Congress. On Friday, the office of Senate Minority Leader Mitch McConnell (R-Ky.) released a memo showing that the stimulus has failed to keep unemployment under 8 percent as the administration said it would do.”

In sum, job growth is anemic, and the Obama administration cannot identify  a single effective policy it has advanced to promote job creation. Instead, it has run up a mound of debt and pursued policies that are likely to hamper rather than to facilitate job growth. The administration’s spinners can’t quite decide — brag about their expertly designed stimulus or lower expectations for any relief in the near term from sky-high unemployment? Frankly, the Obama team can spin all it likes; the voters can see for themselves that Obama administration and Democratic Congress have failed in their own stated goal to keep unemployment below 8 percent and promote robust private-sector job growth.

The Obama administration is lowering expectations and getting tangled up in its own spin. On one hand, the Obama economic team needs to prepare the public for a period of high unemployment:

The economy is growing again, but at a pace unlikely to quickly replace the 8.4 million jobs erased in the recession that began in late 2007. More than 11 million people are drawing unemployment insurance benefits.

“We’ve got a long way to go,” said Lawrence Summers, director of the National Economic Council. “We’ve inherited a terrible situation, the most pressing economic problems since the Great Depression in our country.” [In case you thought the Obama team was ever going to stop blaming George W. Bush, think again.]

Christina Romer, head of the White House Council of Economic Advisers, said consumers still face “a lot of head winds” from the financial crisis. For example, debt and credit difficulties are hampering stronger job growth.

They were echoing the words of Treasury Secretary Timothy Geithner, who said last week the administration was “very worried” about returning to a more normal jobless rate of around 5 percent.

Summers said Obama was preoccupied with creating jobs. “The trend has turned, but to get back to the surface, we’ve got a long way to go,” Summers said.

Preoccupied? Well, that can certainly be said of health-care reform, but what, precisely, has Obama been doing to promote job growth? Certainly raising billions and billions in new taxes in the guise of health-care “reform” and allowing the Bush tax cuts to expire aren’t helping job creation. Nor will cap-and-trade, if the Obama team has its way.

And the job picture is likely to get worse, not better, as more workers return to the job market, as this report explains:

Some economists assert that the unemployment rate, which held steady at 9.7 percent in March, is likely to be driven higher as many more such people are lured into looking for work by hopeful signs of recovery.

The number of people looking for jobs rose by more than 200,000 in March compared with February, according to the Economic Policy Institute — and that’s a good sign, economists say. It means that Americans are seeing more jobs being created, and that they’re optimistic about their prospects.

But the supply of new jobs — 162,000 in March, the biggest monthly increase in three years — will accommodate only a fraction of the unemployed. Some economists say the jobless rate will not recede to pre-recession levels near 5 percent for four more years.

Meanwhile, the buckle-your-seat-belts-it’s-going-to-be-a-bumpy-ride warning runs headlong into the Obama team’s persistent defense of the original stimulus bill, which was supposed to keep unemployment at 8 percent. Christina Romer proclaimed, “I think it has done exactly what we would say it would do.” Uh… not really. Needless to say, Republicans are pouncing on the insistence that everything is going exactly according to plan. “Romer’s comments are likely to raise the ire of Republicans in Congress. On Friday, the office of Senate Minority Leader Mitch McConnell (R-Ky.) released a memo showing that the stimulus has failed to keep unemployment under 8 percent as the administration said it would do.”

In sum, job growth is anemic, and the Obama administration cannot identify  a single effective policy it has advanced to promote job creation. Instead, it has run up a mound of debt and pursued policies that are likely to hamper rather than to facilitate job growth. The administration’s spinners can’t quite decide — brag about their expertly designed stimulus or lower expectations for any relief in the near term from sky-high unemployment? Frankly, the Obama team can spin all it likes; the voters can see for themselves that Obama administration and Democratic Congress have failed in their own stated goal to keep unemployment below 8 percent and promote robust private-sector job growth.

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Can the Obama Administration Afford Any More Missteps?

As problems continue to mount and the president’s approval ratings continue to sink — the latest Rasmussen poll has Obama’s approval rating down to 44 percent, a new low — there are a lot of different, and damaging, story lines developing around the Obama administration. You can add a lack of basic competence to the list.

To take just one example from yesterday: on NBC’s Meet the Press, White House economic adviser Christina Romer was asked if the recession was over. Her first answer was that according to the “official definition … I think we have, at least in terms of GDP, reached that point” — before she then added qualifiers, inviting a follow-up question. When Romer was then asked, “So in your mind, this recession is not over,” she answered, “Of course not. We have — you know, for, for the people on Main Street and throughout this country, they are still suffering. The unemployment rate is still 10 percent.”

Now compare that answer with what Lawrence Summers, director of the National Economic Council, said on ABC’s This Week: “Today, everybody agrees that the recession is over, and the question is what the pace of the expansion is going to be.” (Apparently “everybody” does not include Summers’s colleague Christina Romer.)

This is what is known as sending mixed messages; to have it done by two of the Obama administration’s leading economic spokespersons on a basic economic issue makes it all the more harmful.

The dazzling intellect and multitasking mastery of those who inhabit Obama’s World seem to be producing something less than was advertised. You can add to this the much more serious misplay by Harry Reid on his Medicare buy-in “compromise,” which has been soundly rejected by Senators Joe Lieberman and Ben Nelson, two key votes Majority Leader Reid needs if he hopes to pass health-care legislation. Reid’s effort to portray health care as “inevitable” — and his effort to pressure Lieberman into supporting legislation that the Connecticut senator clearly finds unacceptable — has not only failed; it has badly backfired. And as if determined to make a bad tactical mistake even worse, Reid’s aides are now trashing Lieberman as a person who broke his word. That is something that strikes me as not only untrue — I have worked with Senator Lieberman over the years and always found him to be a man of integrity — but bordering on insane. Why do they want to attack the character of a man whose vote they presumably still need?

Governing involves missteps; that is an inherent by-product of exercising power and needs to be factored in when judging an administration. Still, add these incidents to others and you have a picture emerging of an administration and a party that are not only overmatched by events but that also look downright pitiable at times. This is the kind of thing, especially so early in the life of an administration, that can easily become a proxy for a wider inability to govern. Come 2010, voters are likely to extract a cost for this.

As problems continue to mount and the president’s approval ratings continue to sink — the latest Rasmussen poll has Obama’s approval rating down to 44 percent, a new low — there are a lot of different, and damaging, story lines developing around the Obama administration. You can add a lack of basic competence to the list.

To take just one example from yesterday: on NBC’s Meet the Press, White House economic adviser Christina Romer was asked if the recession was over. Her first answer was that according to the “official definition … I think we have, at least in terms of GDP, reached that point” — before she then added qualifiers, inviting a follow-up question. When Romer was then asked, “So in your mind, this recession is not over,” she answered, “Of course not. We have — you know, for, for the people on Main Street and throughout this country, they are still suffering. The unemployment rate is still 10 percent.”

Now compare that answer with what Lawrence Summers, director of the National Economic Council, said on ABC’s This Week: “Today, everybody agrees that the recession is over, and the question is what the pace of the expansion is going to be.” (Apparently “everybody” does not include Summers’s colleague Christina Romer.)

This is what is known as sending mixed messages; to have it done by two of the Obama administration’s leading economic spokespersons on a basic economic issue makes it all the more harmful.

The dazzling intellect and multitasking mastery of those who inhabit Obama’s World seem to be producing something less than was advertised. You can add to this the much more serious misplay by Harry Reid on his Medicare buy-in “compromise,” which has been soundly rejected by Senators Joe Lieberman and Ben Nelson, two key votes Majority Leader Reid needs if he hopes to pass health-care legislation. Reid’s effort to portray health care as “inevitable” — and his effort to pressure Lieberman into supporting legislation that the Connecticut senator clearly finds unacceptable — has not only failed; it has badly backfired. And as if determined to make a bad tactical mistake even worse, Reid’s aides are now trashing Lieberman as a person who broke his word. That is something that strikes me as not only untrue — I have worked with Senator Lieberman over the years and always found him to be a man of integrity — but bordering on insane. Why do they want to attack the character of a man whose vote they presumably still need?

Governing involves missteps; that is an inherent by-product of exercising power and needs to be factored in when judging an administration. Still, add these incidents to others and you have a picture emerging of an administration and a party that are not only overmatched by events but that also look downright pitiable at times. This is the kind of thing, especially so early in the life of an administration, that can easily become a proxy for a wider inability to govern. Come 2010, voters are likely to extract a cost for this.

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Alien Investors

The last I heard of Lawrence Summers, he was performing somersaults as president of Harvard, trying to ingratiate himself with the faculty he had offended by, among other things, frankly discussing some ideas–taboo in academia–about the linkages between sex and success.

The somersaults were to no avail. Summers’s tenure as president came to an abrupt end last year and he returned to his post teaching economics as the Charles W. Eliot university professor. This was Harvard’s loss and our gain, for whatever one made of his ridiculous efforts to back away from his own thoughtful if provocative words, he is back in the public eye not as an administrator of an impossible faculty but as an economist with his finger on a number of vital issues.

One such issue is the accumulation of capital reserves and sovereign wealth funds (SWFs) in the developing world. Governments ruling industrializing countries are sitting on huge and growing piles of cash. They need to park this money somewhere. Increasingly, as Summers is not alone in pointing out, they are shopping abroad and “are now accumulating various kinds of stakes in what were once purely private companies.”

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The last I heard of Lawrence Summers, he was performing somersaults as president of Harvard, trying to ingratiate himself with the faculty he had offended by, among other things, frankly discussing some ideas–taboo in academia–about the linkages between sex and success.

The somersaults were to no avail. Summers’s tenure as president came to an abrupt end last year and he returned to his post teaching economics as the Charles W. Eliot university professor. This was Harvard’s loss and our gain, for whatever one made of his ridiculous efforts to back away from his own thoughtful if provocative words, he is back in the public eye not as an administrator of an impossible faculty but as an economist with his finger on a number of vital issues.

One such issue is the accumulation of capital reserves and sovereign wealth funds (SWFs) in the developing world. Governments ruling industrializing countries are sitting on huge and growing piles of cash. They need to park this money somewhere. Increasingly, as Summers is not alone in pointing out, they are shopping abroad and “are now accumulating various kinds of stakes in what were once purely private companies.”

The pace is accelerating, notes Summers:

In the last month we have seen government-controlled Chinese entities take the largest external stake (albeit non-voting) in Blackstone, a big private-equity group that, indirectly through its holdings, is one of the largest employers in the U.S. The government of Qatar is seeking to gain control of J. Sainsbury, one of Britain’s largest supermarket chains. Gazprom, a Russian conglomerate in effect controlled by the Kremlin, has strategic interests in the energy sectors of a number of countries and even a stake in Airbus. Entities controlled by the governments of China and Singapore are offering to take a substantial stake in Barclays, giving it more heft in its effort to pull off the world’s largest banking merger, with ABN Amro.

What exactly is the problem with this? Discussion of this trend, notes Summers, has focused almost entirely on issues of local control, openness in decision-making, and in certain sectors, the national-security implications, as in last year’s scuttled attempt by Dubai to buy a company that manages American ports. Although those issues are all worthy of close scrutiny, Summers sees a deeper problem:

The logic of the capitalist system depends on shareholders causing companies to act so as to maximize the value of their shares. It is far from obvious that this will over time be the only motivation of governments as shareholders. They may want to see their national companies compete effectively, or to extract technology or to achieve influence.

We have seen the degree of concern over News Corp’s attempt to buy the Wall Street Journal. How differently should one feel about a direct investment stake of a foreign government in a media or publishing company?

If these are not yet burning issues, the foreign acquisitions of recent months, and the growing quantity of cash available to governments like China’s, tell us that they will be soon.

Congress, however, shows no sign of paying heed to the implications of foreign governmental investment. Yet what would be the consequences, for example, of a shield-law for journalists, of the kind Congress is once again considering, if some of the reporters making use of such protection to ferret out, say, Pentagon secrets, were the employees of, and under the control of, a rival or hostile power?

Is anyone thinking about such things, and what is to be done? Summers himself does not have an answer, but at least he has made the problem a focus of debate. If that seems inadequate, it also seems wise.

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Dr. Faust, My Cleaning Lady, and Me

This morning my cleaning lady E., expecting an affirmative response, asked me whether I was pleased by the appointment of a woman to the presidency of Harvard University (where I am a professor). A year ago her English was not good enough for such a question. College-educated in São Paolo, with what I believe was a major in government, she tells me a female president will be able to smooth over the troubles of the previous administration. Evidently, she perceives the ascendancy of Drew Gilpin Faust as a boost for her own chances of advancement in America. Apparently, Brazilian women gained fully equal legal rights only in 1988.

Just a day earlier I was reading Heather Mac Donald’s post at City Journal‘s Eye on the News, in which she remarks that “The feminist takeover of Harvard is imminent.” Her warning struck a nerve. When the Women’s Lib movement started up in America in the 1960′s, I predicted it would do as much damage here as Bolshevism had done in Russia. I felt almost vindicated in my fears when I watched the feminist culture of grievance at Harvard help to topple President Lawrence Summers (a controversy I wrote about in the pages of COMMENTARY)—who tried to pacify the aggrieved women by appointing none other than Drew Faust to head a Task Force on Women Faculty. That Task Force won a $50 million commitment to increase faculty “diversity efforts” at Harvard. In the past, the call for such “diversity” has been a code name for greater ideological conformism, since those appointed through it are expected to share the ideological premise that brought them the job.

My Portuguese is not up to E.’s English, so I cannot explain to her the difference between a woman and a Women’s Libber. She is still fighting the original feminist battle for equal rights and opportunity; I oppose the demand for preferential group advancement. But E. is keen, and she sees from my hesitation that I am not quite as inspired as she is by this appointment. We will watch events unfold at Harvard with unequal expectations.

This morning my cleaning lady E., expecting an affirmative response, asked me whether I was pleased by the appointment of a woman to the presidency of Harvard University (where I am a professor). A year ago her English was not good enough for such a question. College-educated in São Paolo, with what I believe was a major in government, she tells me a female president will be able to smooth over the troubles of the previous administration. Evidently, she perceives the ascendancy of Drew Gilpin Faust as a boost for her own chances of advancement in America. Apparently, Brazilian women gained fully equal legal rights only in 1988.

Just a day earlier I was reading Heather Mac Donald’s post at City Journal‘s Eye on the News, in which she remarks that “The feminist takeover of Harvard is imminent.” Her warning struck a nerve. When the Women’s Lib movement started up in America in the 1960′s, I predicted it would do as much damage here as Bolshevism had done in Russia. I felt almost vindicated in my fears when I watched the feminist culture of grievance at Harvard help to topple President Lawrence Summers (a controversy I wrote about in the pages of COMMENTARY)—who tried to pacify the aggrieved women by appointing none other than Drew Faust to head a Task Force on Women Faculty. That Task Force won a $50 million commitment to increase faculty “diversity efforts” at Harvard. In the past, the call for such “diversity” has been a code name for greater ideological conformism, since those appointed through it are expected to share the ideological premise that brought them the job.

My Portuguese is not up to E.’s English, so I cannot explain to her the difference between a woman and a Women’s Libber. She is still fighting the original feminist battle for equal rights and opportunity; I oppose the demand for preferential group advancement. But E. is keen, and she sees from my hesitation that I am not quite as inspired as she is by this appointment. We will watch events unfold at Harvard with unequal expectations.

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