Larry Summers, a widely known economist, Clinton administration hotshot and former Harvard chief, is no stranger to controversy. Now, he seems keen to put his reputation as a sound, liberal and globalisation-friendly economist to test. Summers, in a series of columns for Financial Times in London, has called for US policymakers to rethink economic globalisation. Apparently, poor American workers, who, he argues, are struggling under competition from the developing world, need protection. So, says Summers, let?s junk the sureties of the liberal economic order?globalisation ultimately benefits everyone?and think of new economic realities. In plain English, Summers is asking for some old-fashioned statist subversion of liberal policies. Of course, this could be a political pitch for a job in a Democratic administration, especially a Barack Obama administration. Obama has expressed similar protectionist sentiments on the campaign trail. But to give credit to Summers, one can?t ignore his intellectual arguments, even if there?s a job application behind it.
Let?s give Summers his main fact and assume that he is correct in saying working-class Americans have a reason to feel gloomy about their economic prospects. He is, however, wrong about the causes of their ills. Summers completely ignores domestic factors while squarely pointing an accusing finger at developing countries. To take one example, his claim that competition from China for natural resources is one of the major factors behind rising food prices for Americans conveniently ignores the fact that the US itself, by using foodgrain for biofuel, has done much more to raise prices. To take another example, he argues that progressive taxation is a way to address the problems of low-income Americans, but that this idea has taken a beating because of tax competition from overseas. George W Bush?s tax cuts had more to do with his domestic political interests than any international competition. Summers?s appeal for international cooperation on standards of taxation and labour codes must reek of double standards to most developing countries; that?s protectionism in the guise of good advice. Ultimately, the point may not be the lack of intellectual coherence in Summers?s new economics, but whether America?s new administration takes Summers seriously.
