FT's Boffo New Chief Rubinomics Advocate
Former Treasury Secretary and ousted Harvard President Larry Summers debuts a column today on the pages of a pink, foreign newspaper. Seeing as how the editorial bent of this pink, foreign newspaper is unabashed Rubinomics, Summers is a great fit, and this article is a boffo first play from scrimmage complete with a John Kenneth Galbraith quote. Summers's mission in this column is to reiterate the oft-iterated theme that globalized capitalism is leaving people behind, people in the middle specifically. Like any Rubinomics treatise Summers's piece is written in a code whose purpose is to conceal true intentions, and yet the meaning is often crystal clear, although I am not sure as intended. Take the title, "The Global Middle Cries Out for Reassurance." Summers thinks, or pretends to think, that the global middle class is merely crying out for signs that globalization benefits them and then they'll happily go along. Maybe that's what is heard by the time the cries reach Harvard, but what the global middle is really crying out for is sinecures. They want protected status, isolated from change and Schumpeterian creative destruction. Summers could have said that the global middle cries out for participation or enfranchisement, but he didn't because they don't. The global middle class wants to keep what they got, they want a guarantee, and Summers's choice of words is ironically revealing.
So who are the middle class? Maybe it is obvious, but Summers doesn't really say. He mentions median family income in the US and average family income in Mexico (hmmm, why median in US and average in Mexico???) specifically. I don't think average Mexicans are crying out for a sign, any sign, that globalized capitalism will benefit them. Rather, it seems like they are globalizing themselves and high-tailing it across the Rio Grande.
More generally, Summers talks about "middle-income countries without natural resources struggle to define an area of comparative advantage." Really? How about the Irish, who, liberally endowed with peat bog and sheep, are now richer than their Continental brethen via pharma research, semiconductor manufacture and other brainiac commercial endeavors? Estonia? Iceland? Resource pikers, these countries have opted simply to open their doors to capital and promised not to beat capitalists over the head too much and that is it. And they are booming.
Most tellingly, Summers gives the game away by telling us who is benefiting from globalization, poor workers around the world and owners of assets - capital and labor. If the world economy were just one big factory, those reaping the gains would be the factory owners and the workers on the line. The HR department, not so much. Chief Anti-Sexual Harassment Training Officer and Executive Vice-President for the Prevention of Carpal Tunnel Syndrome? Stagnating. It is uncomfortable to hear this, but alot of Summers's middle class are bureaucrats, paper pushers who the system hires because it has to not because it needs to. In addition, alot of Summers's middle are teachers, policemen, postal carriers and government administrators. God knows society needs these people (most of them at least) but they made a choice to enter the public sector. Why is capitalism being judged by what it delivers to people who've never signed on with a capitalist institution to get in on the capitalist system? I've grown up around NYC firemen all my life and I deeply appreciate my children's teachers. These are noble callings, but nobody signs on to do that work for the ability to reap the gains of the capitalist system. If capitalism doesn't shower riches on these people, what's the problem? A business executive is simply going to make more than a cop, but that doesn't mean the exec is more important than the cop. Money isn't a good way to keep societal score. If the cop is benefiting from improvements in his life that capitalism brings (like cheaper food, or safer cars or, say, better bullet-proof vests) what is there really to lament? I can't lament standing on the platform if I never get on the train. For some, being on the platform is better, for others being on the train is better. De gustibus. Rubinomics pretends these choices don't exist and that fairness means rewards should be shared regardless of risk. It is about transfers of wealth from those who got on the capitalist train to those who made other choices. It is about taxing the private sector for the benefit of the public sector. It is about protecting Paduchans at the expense of Peruvians. Rubinomics is a political strategy, not an economic one. Insofar as Rubinomics will continue masquerading as economics, Summers is an eloquent proponent thereof.
So who are the middle class? Maybe it is obvious, but Summers doesn't really say. He mentions median family income in the US and average family income in Mexico (hmmm, why median in US and average in Mexico???) specifically. I don't think average Mexicans are crying out for a sign, any sign, that globalized capitalism will benefit them. Rather, it seems like they are globalizing themselves and high-tailing it across the Rio Grande.
More generally, Summers talks about "middle-income countries without natural resources struggle to define an area of comparative advantage." Really? How about the Irish, who, liberally endowed with peat bog and sheep, are now richer than their Continental brethen via pharma research, semiconductor manufacture and other brainiac commercial endeavors? Estonia? Iceland? Resource pikers, these countries have opted simply to open their doors to capital and promised not to beat capitalists over the head too much and that is it. And they are booming.
Most tellingly, Summers gives the game away by telling us who is benefiting from globalization, poor workers around the world and owners of assets - capital and labor. If the world economy were just one big factory, those reaping the gains would be the factory owners and the workers on the line. The HR department, not so much. Chief Anti-Sexual Harassment Training Officer and Executive Vice-President for the Prevention of Carpal Tunnel Syndrome? Stagnating. It is uncomfortable to hear this, but alot of Summers's middle class are bureaucrats, paper pushers who the system hires because it has to not because it needs to. In addition, alot of Summers's middle are teachers, policemen, postal carriers and government administrators. God knows society needs these people (most of them at least) but they made a choice to enter the public sector. Why is capitalism being judged by what it delivers to people who've never signed on with a capitalist institution to get in on the capitalist system? I've grown up around NYC firemen all my life and I deeply appreciate my children's teachers. These are noble callings, but nobody signs on to do that work for the ability to reap the gains of the capitalist system. If capitalism doesn't shower riches on these people, what's the problem? A business executive is simply going to make more than a cop, but that doesn't mean the exec is more important than the cop. Money isn't a good way to keep societal score. If the cop is benefiting from improvements in his life that capitalism brings (like cheaper food, or safer cars or, say, better bullet-proof vests) what is there really to lament? I can't lament standing on the platform if I never get on the train. For some, being on the platform is better, for others being on the train is better. De gustibus. Rubinomics pretends these choices don't exist and that fairness means rewards should be shared regardless of risk. It is about transfers of wealth from those who got on the capitalist train to those who made other choices. It is about taxing the private sector for the benefit of the public sector. It is about protecting Paduchans at the expense of Peruvians. Rubinomics is a political strategy, not an economic one. Insofar as Rubinomics will continue masquerading as economics, Summers is an eloquent proponent thereof.
posted by Donny Baseball at 3:46 PM
4 Comments:
I have always found it fascinating that intelligent people like Summers and Rubin could not think straight when it comes to basic economics. Perhaps they have some kind of psychological issues that prevent them from thinking logically. Or maybe they are just not that smart and therefore easily confused and not able to think on their own. Or maybe they were brain washed by the education system. I have no idea. It's a mystery.
No, they're smart alright. They suffer from the "Fatal Conceit" as Hayek explicated it.
How do we know they are smart? If they are smart, then how could they be fooled by socialistic ideas?
Rubin's background is in law and risk arb. As everyone knows, success in risk arb depends more on luck and having the right information than deep analysis. So it's easy to understand why Rubin is not a deep thinker. Furthermore, it explains the superficiality of Rubinomics. I doubt that Rubin is an intellectual heavy weight. However, I think Rubin is a very good "people" person. So in a sense, he is smart with people (and politics).
Summers' background is in academic research. I am not too familiar with his work, but I read an old paper of his on gold (in which he concluded that whenever real return of stocks and bonds is low, gold should do well). Needless to say, I was not impressed. It was the typical useless academic research crap. Now, if Summers could not even recognize pseudo science from real science, and good research from bad, then I would say that he is not that smart. He definitely is not an intellectual heavy weight, in my opinion. And too bad for Summers, it seems that he is not smart with people either.
Well, now that you explain it you have a good case. I have relied on an Occam's Razor view here - you don't get to rise to where Rubin rose to at Goldman by being a dummy. Goldman is one of the most ruthless talent filters in the world of business. So Rubin gets a pass. Can you become Treasury Secreatary under Clinton and President of Harvard by being mediocre? That's a tougher one. You've won over my skepticism on Summers.
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