Friday, January 20, 2012

The "brilliance" of mainstream economists

Larry Summers is the perfect example of what an economist looks like these days.  This man was once the youngest person to ever get tenure at Harvard.  He has not one but two uncles who have won the Riksbank Prize (Nobel) in economics.  Not surprisingly, he has been disastrously wrong about just about everything he has ever written about—which might be a problem except that economics these days is a "profession" where the surest route to the top is to have been involved in nearly every crackpot decision made in the past 35 years.  That's our Larry.

In a normal world, a guy like Summers would have long since been retired to a home where some poor minimum-wage caregiver has to change his drool buckets every shift.  But economics is more than just another fail-upward gig, the occupation has so ruthlessly run off the sane that there are almost no alternatives to the neoliberal mouth-breathers.  This means a potential replacement for Summers isn't some brilliant Institutionalist who wrote his Ph.D. thesis on market failures and has done amazing work on the factors contributing to structural underemployment—because those people mostly don't exist anymore.  So if you need an economist to run the World Bank and don't pick Larry Summers, you are almost certain to get someone who is just as goofy only without the pedigree or CV.  Or the "brilliance."

Surely President Obama Is Joking About This 'Have Larry Summers Run The World Bank' Thing!
Jason Linkins   1/18/12

The hot scoop of the day, where emeritus members of the Committee To Save The World are concerned, is that President Barack Obama is mulling naming former White House economic adviser Larry Summers to head the World Bank, replacing outgoing Robert Zoellick, whose term will end midway through the year. (This cuts against the previous hot World Bank scoop from last year, where Secretary of State Hillary Clinton was rumored to be in the running for the position.)

But, hey! Larry Summers! How does that grab you? And more importantly, does it grab you in a way that threatens to cut off the circulation of blood to your brain?

Everyone agrees that Summers is brilliant ... just brilliant! So much so, that it seems that whenever anyone has to begin a monologue about Larry Summers, the first few cubic milliliters of breath are always expended on behalf of testifying to that brilliance. Once that's out of the way, however, what follows is often several paragraphs explaining how Summers is terribly unpleasant to be around and often inexplicably wrong. Just the sort of person you want helping Third World nations restructure their debt and Europe survive its calamitous fiscal crisis!

In his recent book, Confidence Men: Wall Street, Washington, and the Education of a President, Ron Suskind rather relentlessly depicts Summers as the pre-eminently dysfunctional cog in the Obama White House's financial crisis decision-machine. This is, on one level, not too terribly surprising -- what the Obama administration inherited wasn't so much the aftermath of the previous administration's policies as it was a decades-long litany of financial deregulation and bad decisions that had Summers' fingerprints all over it. As "Inside Job" director Charles Ferguson put it, "I found Summers everywhere I turned."  
Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy treasury secretary and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial industry. He also successfully fought attempts by Brooksley Born, chairman of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that caused so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws. more

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