Larry Summers, the revolving door, and the World Bank
Remember Krishnan Guru-Murthy’s interview with Larry Summers in January? He asked about Inside Job‘s allegations that Summers was a clear beneficiary of the revolving door. Now see if you can spot a recurring phrase in Larry’s answer:
Whatever I did or did not do, right or wrong, in the Clinton administration, I had earned no significant sum of money prior to working in the Clinton administration, or, in association with the financial sector, for more than five years after I left the Clinton administration. And so any suggestion that what I did in the Clinton administration had to do with loyalty to the financial sector — I think is a bit absurd.
That’s four mentions of “the Clinton administration” in the space of two sentences. The idea, it seems, is that if you wait a few years before availing yourself of that revolving door, then that means you can’t have been conflicted in office.
This interview has new salience right now, not only because Summers is arguably the favorite candidate to be the next head of the World Bank, but also because John Cassidy has now confirmed what many of us predicted well in advance: Summers is back working at DE Shaw, and presumably making many millions of dollars per year for doing so. This time, he didn’t wait five years; he didn’t even wait one.
Now according to Larry’s own logic in the answer he gave to Guru-Murthy, it’s perfectly reasonable, given the alacrity with which he accepted DE Shaw’s millions, to ascribe his actions in the Obama administration to loyalty to the financial sector. We now know that when Summers was giving this interview, he was already back at work for DE Shaw. Which is why he was so careful to confine his answer only to his activities during the Clinton years. If accused of being a creature of the revolving door during the Obama years, he could adduce no such defense: he literally left DE Shaw to join the Obama administration, and then revolved straight back into that job when his temporary government gig was over.
Cassidy is right to point out that Wall Street ties are hardly unprecedented in World Bank presidents. But there’s still something opportunistic and sleazy here: Summers isn’t a banker, so much as he’s just selling the fruits of his government experience to the highest bidder, even as one of his rivals for the World Bank job, Jeff Sachs, is taking to twitter to remind anybody who will listen of even sleazier episodes in Summers’s past.
Sachs isn’t helping his cause with that kind of tweeting. But the truth is Summers can’t relish a contest between himself and Ngozi Okonjo-Iweala. Summers paid $31 million (Harvard’s money, of course, not his own) to settle a lawsuit over Andrei Shleifer’s disgraceful behavior in Russia, while keeping Shleifer at Harvard as a faculty member in good standing. Ngozi Okonjo-Iweala, by contrast, well, I’ll let her tell the story:
From 1967 to ’70, Nigeria fought a war: the Nigeria-Biafra war. And in the middle of that war, I was 14 years old… We were on the Biafran side. And we were down to eating one meal a day, running from place to place, but wherever we could help we did. At a certain point in time, in 1969, things were really bad. We were down to almost nothing in terms of a meal a day. People, children were dying of kwashiorkor. I’m sure some of you who are not so young will remember those pictures. Well, I was in the middle of it. In the midst of all this, my mother fell ill with a stomach ailment for two or three days. We thought she was going to die. My father was not there. He was in the army. So I was the oldest person in the house. My sister fell very ill with malaria. She was three years old and I was 15. And she had such a high fever. We tried everything. It didn’t look like it was going to work.
Until we heard that 10 kilometers away there was a doctor, who was able … who was giving … looking at people and giving them meds. Now I put my sister on my back, burning, and I walked 10 kilometers with her strapped on my back. It was really hot. I was very hungry. I was scared because I knew her life depended on my getting to this woman. We heard there was a woman doctor who was treating people. I walked 10 kilometers, putting one foot in front of the other. I got there and I saw huge crowds. Almost a thousand people were there, trying to break down the door. She was doing this in a church. How was I going to get in? I had to crawl in between the legs of these people with my sister strapped on my back, find a way to a window. And while they were trying to break down the door, I climbed in through the window, and jumped in. This woman told me it was in the nick of time. By the time we jumped into that hall, she was barely moving. She gave a shot of her chloroquine, what I learned was the chloroquine, then gave her some, it must have been a re-hydration, and some other therapies, and put us in a corner. In about two to three hours, she started to move. And then, they toweled her down because she started sweating, which was a good sign. And then my sister woke up. And about five or six hours later, she said we could go home. I strapped her on my back. I walked the 10 kilometers back and it was the shortest walk I ever had. I was so happy that my sister was alive. Today, she’s 41 years old, a mother of three, and she’s a physician saving other lives.
It’s almost inconceivable to me that Barack Obama, the proud African-American who wrote Dreams from My Father, could ever with a straight face claim that Larry would be a better choice to run the World Bank than Ngozi. Larry has made it abundantly clear that the only thing he values more than money is power. His decision to rejoin DE Shaw is what economists would call a “revealed preference”. And what it has revealed, as if there was any doubt, is that Summers is not the right person for the World Bank job. He wants to work for DE Shaw? Fine. Let him stay there.