Corporate long-termism is no panacea — but it is a start

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The real need is for a cadre of trusted, tough-minded investors that will support strong management teams

August 9, 2015

There are not many wholly new areas to open up in economic policy. But in recent months there has been a wave of innovative proposals directed at improving economic performance in general, and middle-class incomes in particular — not through government actions but through mandates or incentives to change business decision-making. The goal is for companies and shareholders to operate with longer horizons and to more generously share the fruits of their corporate success with their workers, customers and other stakeholders.

There are strong grounds for interest in such approaches. After the crises of recent years, the case for relying on speculative markets to drive the real economy — to whatever extent it had validity — is surely attenuated. Instances where successful companies with strong management teams and records of investment have been forced to curtail investment plans are a cause of concern. And we would all like to see middle-class incomes do a better job of keeping up with productivity than they have in recent years.

Such proposals for corporate reform are responding to legitimate policy imperatives, but they also tap into the zeitgeist in another way. At the same time as there is widespread unhappiness with market outcomes, confidence in government has reached a low ebb. So the idea of achieving reform through altered business behaviour, rather than government programmes, is appealing.

The corporate behaviour debate recently taken up by investors, management consultants and even presidential candidates is a very valuable one, which speaks fundamentally to the way in which American capitalism functions. In many aspects it is an overdue recognition of basic market principles.

Businesses will raise wages to a point where the cost is just balanced by the reduced bill for recruiting and motivating workers. At that point, a further increase in wages does not appreciably change their total costs but higher wages certainly makes their workers better off. So there is a strong case for robust minimum wages.

There is also a strong reason for regulating aspects of pay. Usually competition drives desirable economic arrangements. But not always — especially when there is a risk of a race to the bottom. A company that tries to stand out by offering especially attractive family leave benefits , or job security, or egalitarian wage structures faces the prospect of attracting a disproportionately risk-averse work force. So there is an argument for using mandates to level the playing field.

Profit sharing, too, is an area where there are demonstrable benefits in terms of increased productivity — but an individual company that stands out by offering it may encounter difficulties in recruitment because workers are too risk averse. So there is a strong case for tax incentives to spur profit sharing.

At the same time scepticism about whether all horizons should be lengthened is appropriate. A generation ago, the Japanese keiretsu system of cross ownership of corporate shares — which insulated corporate managements from share price pressure — was seen as a strength. Yet, Japan’s manifest macroeconomic difficulties aside, companies lacking market discipline have squandered leads in sectors from electronics to automobiles to IT.

Managements of companies that are dissipating the most value, such as General Motors before it was bailed out by the US government in 2009, have often been the most enthusiastic champions of long-termism. Market participants who are willingly placing high valuations on Silicon Valley start-ups that lack any profits and have little revenue may be putting too much, not too little, weight on the distant future. That, at least, is the implication of those who see the inflation of a “technology bubble”.

Corporations hoarding cash that is earning zero in the bank or in Treasury bills would be cheered not jeered by the market if they could be convinced that the companies were putting it to productive use. Many corporations are in this situation of having cash piles but often do not have productive uses for the money. Either that or they cannot convince investors of their projects’ validity. Pushing corporations without good projects to invest is wasteful. Stopping or discouraging them from distributing funds to shareholders is dangerous if it encourages mindless takeovers as an alternative.

The real need is for a cadre of trusted, tough-minded investors in any given company who can credibly commit to support strong management teams and to provide assurances to a broader investment community so that productive investments are made. Accomplishing that, while maintaining market discipline, is the crucial challenge.

 

The Astonishing Returns of Investing in Global Health R&D

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By Lawrence H. Summers and Gavin Yamey

How to reach a “grand convergence” by 2035

We have a once-in-human-history opportunity to achieve a “grand convergence” in global health—a reduction in infectious, maternal, and child deaths down to universally low levels everywhere on the planet. Read more

Complacency and incrementalism are traps to avoid

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July 12, 2015

Clear-eyed, bold action is what the world requires if the financial drama is to subside.

Against a backdrop of slow and diminishing growth forecasts, recent months and especially recent weeks have seen an extraordinary level of financial drama. While not rising to the level of the systemic global crisis of 2008, or the period of great uncertainty in the late 1990s around the Asia-Russia-Brazil-Long-Term Capital Management crises, markets everywhere seem to be thwarting political aspirations.

Greece’s relationship with the euro area has been a financial soap opera for months, and it is one that is unlikely to end anytime soon. Concerns about German dominance of Europe are now more salient than they have been at any time in the past 70 years.

China’s stock market has been a rollercoaster despite – or perhaps because of – a remarkable (even for China) level of government involvement. And the ability of the Chinese government to deliver the rapid growth on which its legitimacy increasingly depends is very much open to question.

In the US, while the fiscal picture at the federal level appears healthier than it has in a long time, thanks to a marked slowdown in healthcare costs, Puerto Rico is on the brink of the largest municipal bond default in American history.

Tolstoy observed that all happy families are alike but each unhappy family is miserable in its own way. In the same way, each of these situations is driven by its own dynamics. But their concatenation does warrant reflection on some common lessons for financial policymakers and their political masters. Two stand out.

First, there are economic laws like there are physical laws and, as with physical laws, economic laws do not yield to political will. The financial crisis, the great recession and sharp increases in inequality have all properly led to a negative reassessment of the functionality of unfettered free markets. It does not follow, however, that governments can bring about economic outcomes they prefer by fiat. Greece’s problems, of course, relate to the failings of Greek economic policy. But it should come as no surprise that a fiscal contraction in excess of 20 per cent of gross domestic product in an economy that does not have the freedom to loosen monetary policy or to devalue its currency leads to depression, even if policymakers wish otherwise.

Famously, while you can fool all of the people some of the time and some of the people all of the time, you cannot fool all of the people all of the time. In the same way, markets may well be inefficient and diverge from fundamental value, and they may well be subject to government manipulation for significant intervals, but it is a foolish government that supposes it can indefinitely maintain speculative prices at politically convenient levels, as the Chinese authorities may soon discover.

Likewise, if a default cannot be managed, it is tempting to assume that it cannot occur. This is an obvious fallacy demonstrated most recently by European insistence in 2010 that Greek debt would never be restructured. It dangerously invites complacency on the part of creditors and leaves debtors with such large overhangs that they have little motivation to carry out constructive reform.

Second, fundamental imbalances and problems require fundamental solutions. In all spheres, the temptation to incremental policymaking is enormous. Incrementalism is less politically jarring; it preserves flexibility for the future in an uncertain world; it usually requires less admission of past error; and it gives the appearance of prudence. Yet the American experience in Vietnam should be cautionary to those inclined to yield to the temptation of incrementalism. At every step, policymakers did enough to avoid disaster but not enough to offer a prospect of success – until the moment when helicopters left the Saigon embassy and US policy ended in failure.

Financial problems are in some combination always about two things – arithmetic that does not add up and a loss of confidence. Incremental steps that provide some but not large sums of assistance, that postpone but do not reduce scheduled debt payments, and that defer decisions about the future to the future run the constant risk that they will not bring convincing arithmetic into view and will be insufficient to restore market confidence.

There are dozens of examples in financial history when an exchange-rate peg was maintained too long, or debt was restructured too late, or forbearance was carried out for too long. I can think of none where strong action came too soon. Clear-eyed, bold action is what the world requires if the financial drama is to subside. Let us hope against much of the experience of recent years that it will be forthcoming.

Tomorrow Greece votes

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Tomorrow Greece votes. No one can know the outcome yet. Indeed, my bet is that a third of the voters are not yet sure how they will vote. If polls could not get the British election right, I doubt that they can get this one right. Anything can happen, and it would not surprise me if the vote is a landslide, one way or the other. Read more

Both sides may get more of what they fear

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In an interview with Charlie Rose on June 24, 2015 to discuss the debt crisis in Greece, Summers said, “Both sides are going to get more of what they fear if they aren’t able to reach a deal.” Read more

Greece is Europe’s failed state in waiting

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June 20, 2015

When, as now appears likely, Greece financially separates from Europe it will at one level be no one’s fault.

The Greek leaders will rightly explain that having imposed more austerity on themselves than any industrialised country has suffered since the Depression, they could not have done more without light at the end of tunnel in the form of a clear commitment to debt relief. European leaders will rightly explain that they adjusted their positions repeatedly to accommodate the Greeks. They will stress that their citizens would not permit Greece to play by different rules to the rest of Europe. And the IMF will rightly explain that it would have blessed any plan agreed by Greece and Europe that added up.

The trouble is that all the parties are going to get much more of what they fear from a breakdown than they would even from what they regard as an unacceptable compromise. Historians understand how the first world war was allowed to start but are still, a century later, incredulous that it happened. Financial historians may look back at the events of next week and wonder how Europe’s financial unravelling was permitted.

Make no mistake about the consequence of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity in Greece will get far worse than it is today and it will probably become a failed state to the great detriment of all its people and their leadership.

When Greece fails as a state, Europe will collect far less debt than it would with an orderly debt restructuring. And a massive northern out-migration of Greeks will strain national budgets throughout Europe — not to mention the challenges that will, come as Russia achieves a presence in Greece.

The IMF is looking at by far the largest non-payment by a borrower in its history. True, there are good reasons to think enough foam has been placed on the runway to prevent financial contagion. Yet, this was asserted with respect to LTCM, subprime and the fall of Lehman.

Diplomacy fails and catastrophes happen when nations are preoccupied with their own concerns and fail to consider the political needs of their counterparts and become convinced that their counterparts will not take yes for an answer.

Here is an informed outsider’s judgment as to what needs to happen if disaster is to be averted.

The Greek prime minister Alexis Tsipras needs to do what is necessary to make reaching an agreement politically feasible for his fellow Europeans.

That means dropping ideological rhetoric about a new European approach. He must recognise that Greece’s problems are significantly of its own making and make clear that he is absolutely committed to doing what is necessary to keep Greece in the euro area. He needs to be clear that he will accept further VAT and pension reforms to achieve primary surplus targets this year and next, but that he expects a clear recognition that if Greece does its part, debt will be written off on a large scale.

German chancellor Angela Merkel and the European authorities must do what is necessary to make policy adjustments politically tenable in Greece.

That means acknowledging that the vast majority of the financial support given to Greece has gone to pay back banks rather than to support the Greek budget. They must agree on debt relief and recognise the degree of adjustment in Greek spending that has taken place: with nearly 30 per cent of government workers laid off. It also means announcing their intention to accelerate economic growth throughout Europe.

The IMF needs to recognise that this is now not about the numbers. It is about the high politics of Europe. Its job is to stand behind any deal that avoids breakdown.

The hour is late. But it’s often darkest before dawn. Let us all hope that Greece and Germany use this weekend to work back from the brink before Monday’s summit.

The writer is Charles W Eliot university professor at Harvard and a former US Treasury secretary.

A setback to American leadership on trade

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Summers talks about TPP and international economic diplomacy with CNBC’s Squawk on the Street on June 15, 2015.  Summers calls Congress’ action “bad geopolitics.” Read more

Rescuing the free-trade deals

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June 14, 2015
The Senate’s rejection of President Woodrow Wilson’s commitment of the United States to the League of Nations was the greatest setback to U.S. global leadership of the last century. While not remotely as consequential, the votes in the House last week that, unless revisited, would doom the Trans-Pacific Partnership send the same kind of negative signal regarding the willingness of the United States to take responsibility for the global system at a critical time.

The repudiation of the TPP would neuter the U.S. presidency for the next 19 months. It would reinforce global concerns that the vicissitudes of domestic politics are increasingly rendering the United States a less reliable ally. Coming on top of the American failure to either stop or join the Asian Infrastructure Investment Bank, it would signal a lack of U.S. commitment to Asia at a time when China is flexing its muscles. It would leave the grand strategy of rebalancing U.S. foreign policy toward Asia with no meaningful nonmilitary component. And it would strengthen the hands of companies overseas at the expense of U.S. firms. Ultimately, having a world in which U.S. companies systematically lose ground to foreign rivals would not work out to the advantage of American workers.

Both the House and Senate have now delivered majorities for the trade promotion authority necessary to complete the TPP. The problem is with the complementary trade assistance measures that most Republicans do not support and that Democrats are opposing in order to bring down the TPP. It is to be fervently hoped that a way through will be found to avoid a catastrophe for U.S. economic leadership. Perhaps success can be achieved if the TPP’s advocates can acknowledge that rather than being a model for future trade agreements, this debate should lead to careful reflection on the role of trade agreements in America’s international economic strategy.

Four points seem salient.
First, the era of agreements that achieve freer trade in the classic sense is essentially over. The world’s remaining tariff and quota barriers are small and, where present, less reflections of the triumph of protectionist interests and more a result of deep cultural values such as the Japanese attachment to rice farming. What we call trade agreements are in fact agreements on the protection of investments and the achievement of regulatory harmonization and establishment of standards in areas such as intellectual property. There may well be substantial gains to be had from such agreements, but this needs to be considered on the merits area by area. A reflexive presumption in favor of free trade should not be used to justify further agreements. Concerns that trade agreements may be a means to circumvent traditional procedures for taking up issues ranging from immigration to financial regulation must be taken seriously.

Second, there needs to be a balancing of the political costs of legislating trade agreements against those of other forms of internationalism. If a small fraction of the U.S. political capital that has been devoted to the Trans-Pacific Partnership had instead gone to support reform of the International Monetary Fund and adequate funding for international financial institutions and the United Nations, these objectives could have been attained — and with greater benefits than the TPP will deliver. Trade agreements are often defended on the grounds that commerce builds harmonious ties among nations. I suspect that a rebalancing of U.S. efforts toward supporting multilateral institutions that provide financial support for other countries, and away from intense negotiations that demand that those countries change their domestic policies, would help enhance U.S. prestige and influence in the world.

Third, there needs to be careful consideration going forward of the ramifications of trade agreements that include some countries while excluding others. Where the grouping is natural, such as with the North American Free Trade Agreement, or where it reflects a clear political strategy, as with the U.S.-Colombia or U.S.-Jordan agreements, the argument for this approach is much stronger than where there are no obvious criteria for which countries are included. Political necessity has in recent weeks led advocates to increasingly aggressive formulations about how the TPP enables us to gain advantage at the expense of China. We may come to regret this provocation. Certainly, it will be important down the road to consider China’s possible membership in the TPP on terms no different from those applied to others.

Fourth, the global economic challenge we face today is profoundly different than it was a generation ago. Then, just after the Cold War and the Latin American debt crisis, with Asia’s China-led renaissance in its early stages, the challenge was to enable new markets to emerge with the potential for profound benefits to their citizens and the global economy. Trade agreements that encouraged the adoption of market institutions in developing economies and enhanced those countries’ access to the industrial economies were crucial to creating a truly global economy.

Today, we have such an economy, and it has supported the greatest economic progress in the history of the world in emerging markets and is working spectacularly well for capital and a cosmopolitan elite that moves easily around the world. But being pressed down everywhere are middle classes who lack the wherewithal to take advantage of new global markets and do not want to compete with low-cost foreign labor. Our challenge now is less to increase globalization than to make the globalization we have work for our citizens.
None of this is to suggest an end to trade diplomacy. Rather, it is to suggest that such talks must be only one component of a broader approach that has as primary stakeholders not just global companies but also those concerned with economic equity, protection of the environment, opportunities for workers to migrate and financial stability. If the TPP is to be secured, there must be clear signals that international economic diplomacy will turn to these concerns.

Greece Debt Problems Solved Through Growth

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Summers talks with Bloomberg’s Hans Nichols from the G7 Finance Summit in Dresden on May 28, 2015 about the situation in Greece.  Summers says, “Ultimately debt problems are solved through growth.”

Comments from ECB Conference

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I commend Mario Draghi and the ECB for their openness in hosting this conference and allowing the presentation of so many perspectives. In the spirit of that openness I shall offer some iconoclastic observations. Read more

Feldstein Argues Price Indices Underestimate Real Income Growth

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Yesterday, in the Wall Street Journal, Marty Feldstein argues reasonably that conventional price indices underestimate real income growth because they take inadequate account of quality improvements and new products.  Marty asserts very plausibly that properly measured real incomes and wages have not been completely stagnant in recent decades. Read more

Economic growth is ‘not inspiring’

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On May 20th, 2015, Summers said on CNBC’s Squawk Box he expects the U.S. economy to expand at a quicker pace than in the first quarter, but there are still hurdles. Summers predicted growth in the low to mid 2 percent range for 2015. “That’s not inspiring performance,” he said, “but that’s hardly reversion to recession.” Read more

Reform-minded Ukraine merits debt reduction

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May 17, 2015

Ukraine, the international community and its creditors will soon have to reach a conclusion about how to handle the country’s debt. The case for debt reduction is as strong as any that I have encountered over the past quarter century. How the issue is resolved will say much about the extent of international commitment to Ukraine and to resisting Russian aggression. Failure to achieve debt reduction would also confirm the view of those who believe that private financial interests disproportionately influence public policy.

Ukraine is in a state of quasi-war with Russia. Other former Soviet republics, as well as the nations of central Europe are watching anxiously. How this episode is regarded in history will depend as much on what is done for Ukraine as what is done to Russia.

This is especially true as Ukraine has its most reform-minded economic team since independence in 1991. It has shown real political courage in combating corruption and moving aggressively to curb energy subsidies that generated vast waste. Ukraine has done more in the past 12 months to reform its subsidies than most nations do in 12 years.

The moral, geopolitical, and economic case for the provision of strong support is compelling. The International Monetary Fund has done as much as can reasonably be asked with a programme totalling $17.5bn. While bilateral support from the US and Europe could be increased and the World Bank is missing a major opportunity, Ukraine’s viability ultimately depends on what happens to its debts.

The question of debt rescheduling or reduction is not a new one. When countries require assistance, it can always be argued that debt service obligations be delayed or partially cancelled. Usually — as in the case of European countries in recent years, or Asian countries during the 1997 financial crisis — this argument is rejected. The grounds are that with proper adjustment countries can meet their obligations, maintain access to markets and restore growth. Also, a world in which countries were willy nilly encouraged to default in order to meet budget obligations would be inimical to the effective flow of capital.

Over the years a number of international norms have evolved as to when it is appropriate to accept debt reduction. The most important is when a country’s debts are sufficiently large and its prospects sufficiently poor that there is no realistic prospect of repayment. Things become clearer when debt reduction would not be a source of systemic risk to the financial system or license widespread defaults.

All of this suggests a compelling case for debt reduction for Ukraine. The IMF has made clear that for its finances to be sustainable Kiev needs to reduce its current debt service payments and to avoid an excessive build-up of debt over the next five years. On even optimistic assumptions of Ukrainian economic performance and the avoidance of further conflict, this is not possible without debt reduction. Ukraine’s debt is not nearly large enough for a reduction to pose a threat to the world financial system. And why not set a precedent that if you lend money at a high spread to a country that is then invaded, you should not expect the world’s taxpayers to ensure that you are paid back in full?

So Ukraine’s debt should be reduced. Will it happen? Despite the merits, it is not clear. Ukraine’s creditors — led by the investment firm Franklin Templeton, but also with the support of a number of major US fund managers, who are sufficiently embarrassed by their selfish and unconstructive position that they avoid public identification — are playing hardball and refusing any write-offs. Understandably, if there are a substantial group of such free riders, other debt holders including the Russians will not accept writedowns.

It should be unacceptable to taxpayers around the world that their money be put at risk on loans to Ukraine in order that plans be made to pay back creditors in full. The IMF and national authorities should call out the recalcitrant creditors on their irresponsible behaviour. If necessary, Ukraine should be prepared to go into default and not meet its obligations, while at the same time the international community should make clear that it will continue to provide support to Kiev. In the context of these steps, creditors will have little choice but to accept the economic reality of the situation.

There is much in Ukraine that the rest of the world cannot control. But we can make sure that the country’s scarce resources are put to use restoring its economy rather than paying off those who made loans they now regret. And we can seize the opportunity to make clear that the world financial system will be operated to support the global economy not the other way round.

The writer is Charles W Eliot university professor at Harvard and a former US Treasury secretary

Don’t bet against America.

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At the SALT Conference in Las Vegas, NV on Friday, May 8, 2015, Summers told the audience,”This is not a society that is stuck. It is a society that is uniquely able to be resilient through a constant process of savage self-criticism.” Read more

Okun’s Equality and Efficiency

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On May 4, 2015, on the 40th anniversary of Okun’s Equality and Efficiency book, Summers provided remarks at a Brookings Institution celebration. Summers wrote, “Art’s capacity for well rounded wisdom regarding the most important issues of the day was nowhere better illustrated than in Equality and Efficiency: The Big Tradeoff, the book whose 40th anniversary we celebrate today.  I still remember the excitement with which I read it as a first year graduate student.”   Read more

CNBC: Address problems of bond market liquidity

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Former Treasury Secretary Larry Summers said regulators should make a priority of addressing the problems of bond market liquidity, brought on by their very efforts to make institutions safer after the financial crisis.

Summers, speaking Thursday on “Squawk Box,” responded to comments made by JPMorgan CEO Jamie Dimon who said recent volatility in the currency and Treasury markets was a “warning shot across the bow.”

The drumbeat about liquidity questions in the corporate bond market but also Treasury market has gotten louder, and Dimon used his annual letter to shareholders as soap box to warn about the issue.

Bond market participants blame post-financial crisis regulations aimed at making the activities of financial institutions safer by restricting capital use. In the Treasury market, they point to the fact that the Fed holds a massive amount of Treasury supply on its more-than-$4 trillion balance sheet, keeping it off the market. Another issue often discussed by traders is the reduced head count at Wall Street’s primary dealers.

Watch the full interview here.

Not the Right Moment for Lurch to Austerity

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In an interview on April 19. 2015, with CNN’s Fareed Zakaria, Summers said, “This is a moment for us, as a country, to do what a business would do, which is to take advantage of low borrowing costs to invest in our future.” Summers told Zakaria, “This is not the right moment for a lurch to austerity.” Read more

NPR’s Innovation Hub

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Innovation-HubCan government actually make us less innovative?

That may be what’s happening, according to former Treasury Secretary Larry Summers. “The most important scientific discoveries tend to get made by people who are young and at their most creative stage. And the average age when people get their first grant from the National Institutes of Health is now above 40.”

Summers, who also directed President Obama’s National Economic Council, says anemic funding from federal sources may be restricting promising scientists – and depriving America of once-in-a-generation breakthroughs.

“If you look back, the Internet came out of federal government efforts to connect physicists. The semiconductor was a product of federal government research. Going back a long time, Abe Lincoln provided the necessary support that made a transcontinental railroad possible.”

But with companies like Apple and Google sitting on mountains of cash, why not let private industry bankroll great ideas?  Summers balks at the prospect. “No private company would have ever supported Watson and Crick when they discovered the structure of DNA. And yet the fact that life expectancies continue to rise is a reflection of biomedical research.”

“A Long Way to Go” on Women’s Progress

Summers also looked back with us on the media maelstrom that surrounded him a decade ago, when he asked why there aren’t more female professors in elite science departments.

He had considered possible answers during an off-the-record session at the National Bureau of Economic Research. But soon The Harvard Crimson, The New York Times, and others began reporting that some female professors walked out of the room when he said that aptitude or unwillingness to work long hours might factor in.

The next year, Summers stepped down as President of Harvard. But the question he was trying to answer still nags.

Now, he says that hidden biases – “unconscious patterns that many of us engage in” – may be at the root of the problem.

“I think it’s incumbent on all of us,” Summers insists, to send “signals of maximum encouragement to every person of talent and drive to do everything that their talent and drive permits.” He notes that “there’s been a great deal of effort in that regard, and there have been some results,” though “the results are not as favorable as many would like them to be.”

But the former Treasury Secretary and Director of President Obama’s National Economic Council believes that mandating behavior wouldn’t provide an adequate solution. “I’m not a person who believes you make progress on issues like this with quotas or with absolute requirements. I’m a person who believes you address this by changing attitudes and by creating opportunities.”

To that end, he points to a woman who might be his most famous former student: Sheryl Sandberg. Sandberg took Summers’ class on public economics as a Harvard junior, and made a lasting connection. “I was lucky enough to have Sheryl work with me at the World Bank and then at the Treasury. When I was Treasury Secretary, she served as my chief of staff… Perhaps most remarkable of the things she has done is the kind of leadership she has provided to so many other women with the set of concepts in her book, Lean In.”

This fall, a book by the writer Eileen Pollack will mark will mark the tenth anniversary of Summers’ divisive comments by delving into the sorts of subtle slights and assumptions that Sandberg often says cripple women on their rise to the top.

Summers has already read Pollack’s book, from which he “learned a great deal.”

“I think things are moving and they have a long way to go,” he says. “I don’t think any of us have any ground for complacency. I don’t think any of us should believe that all that can be accomplished has been accomplished.”

Hear our full interview with Larry Summers, including his concerns about inadequate federal funding for innovators and his look at higher ed’s moment of great transformation. Click here. 

 

AIIB: We Have Lost Influence

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In an interview with NPR’s All Things Considered on April 16, 2015, Summers discusses the new China-backed Asian Infrastructure Investment Bank. Summers says, “We’re contemplating a major institution in which the United States has no role, that the United States made substantial efforts to stop — and failed.” Read more

Rethinking Secular Stagnation After Seventeen Months

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IMF Rethinking Macro III Conference

I am glad to be here and I salute Olivier (Blanchard) and the IMF for so open a dialogue on so wide a range of macroeconomic hypotheses. What I want to do this morning is talk about three things: I want to tell you why I think that the risk of secular stagnation is an important problem throughout the developed world. I want to contrast the secular stagnation viewpoint with two views that I regard as heavily overlapping – the debt super‐cycle view that Ken Rogoff put forward and the savings glut view that Ben Bernanke has put forward – and explain why I think they’re very similar, but insofar as their nuances of difference, I prefer the secular stagnation view. And then I want to reflect on the policy implications of this general view of the global economy over the next decade. Read more