Who says Lawrence Summers is unpopular? The former president of Harvard University and former secretary of the US Treasury has maintained a low profile in the US since he stepped down from the Harvard presidency last year amid strident criticism, stemming in part from comments he made claiming there were differences in “innate” academic proclivities between men and women. But in Asia, Summers appears to be the man of the hour.
His cautious views on globalization—in particular the danger of the huge US trade deficit—are widely quoted by policymakers and economists. He is eagerly solicited for lectures and keynote speeches in Asia, and his unvarnished opinions often creep into fiscal policy discussions. On Tuesday, Summers spoke to several hundred government officials, ambassadors and academics in New Delhi on “Global Warming and Global Finance”.
“Larry is very stimulating intellectually and an out-of-the-box thinker,” said Isher Judge Ahluwalia, chairperson of the Indian Council for Research on International Economic Relations, the group that invited Summers to speak. “There is a wisdom in the way that he looks at problems which are global,” Ahluwalia said, adding that Summers listens to others' ideas, especially when the topic is developing countries.
Ahluwalia and Summers have worked together in recent months on a small panel whose goal is to map the future of the Asian Development Bank. Summers was the only American participant. The six-member panel decided that by 2020 a “new Asia” would need a “radically” different development bank with a global focus.
In a series of visits to China, India and Singapore since early 2006, Summers has focused on several themes with special resonance in Asia. The astonishing growth and changes in Asia are the most important thing to happen during our lifetimes, Summers has said, adding that the US and Europe have yet to appreciate the effect of these changes. The US, Europe and international organizations have not yet made an important change in their thinking, he told policymakers in Beijing in January. He said, “it is probably not going to be about our impact on a rising Asia, but about rising Asia's impact” on the West. He also asked them to consider the consequences of the “zero real return” from the $2 trillion from Asia that has been invested in US Treasury bonds. Imagine, he said, “all the opportunities in these countries for productive investment.” Summers also routinely warns that global imbalances sparked by the nearly $1 trillion current account deficit in the US could have severe consequences.
During a visit to Mumbai in March 2006, Summers warned the Reserve Bank of India that the US trade deficit was “unsustainable and dangerous.” Summers visited Singapore for the IMF conference in September, then stopped in Hong Kong, where he told attendees at an Asia Society dinner that 300 years from now, the most important event of these times will not be the end of the Cold War, the terrorist attacks of 11 September 2001, or the war in Iraq, but “the rise of Asia and all that it meant for people in Asia and all that it meant for the world system.”
Summers did not attend a New Delhi conference in March about new ways to finance Asian infrastructure, but he was cited so often by government ministers and development specialists that he may as well have been there.
Ramgopal Agarwala, the senior adviser to the Research and Information System for Developing Countries, mentioned Summers extensively in a proposal that Asian countries contribute to a fund that would divert money away from Treasury bonds and into Asian infrastructure. “If exposure to the US deficit is not managed well, we cannot rule out a possible global recession, even depression,” said Agarwala, a former World Bank economist based in China. “Asia can play and has to play a crucial role in correcting these imbalances.” China and India have separately announced they will set up investment funds that are expected to direct money to places other than US Treasury bonds.
Summers’ influence on Asian economic policy has long roots, dating back to his role as the chief economist at the World Bank in the early 1990s. While eminent Indian economists like Jagdish Bhagwati were arguing against regional trade alliances in the mid-1990s, India and other South Asian countries pushed for them, in part because they were supported by Summers, said Saman Kelegama, executive director of the Institute of Policy Studies of Sri Lanka and co-editor of The South Asia Economic Journal. “Larry was one of the main proponents” of regional trade alliances, Kelegama said, “and his view was considered seriously.”
“South Asia generally goes along with Summers” on the issue, Kelegama added, which is one reason why the region has pursued the South Asian Free Trade Alliance and other bilateral alliances while negotiating in WTO.
Summers also reaches a large audience through syndicated columns he writes for Western newspapers. Summers’ remarks about the “the race to the bottom and the adverse effects of globalization” are striking a chord, said Subir Gokarn, chief economist at Crisil, a rating agency. Summers is “somewhat skeptical about the unchallenged and unalloyed benefits of the whole process,” he said. Summers’ downfall at Harvard University, where he stepped down after asking whether women have less innate aptitude in science and math, hardly registered in Asia. “The gender issues didn't get much play here," Gokarn said.