Is Larry Summers the Canary in the Mine?

One-time champions of free trade, economic liberalization and globalization – like Larry Summers, former treasury secretary with the Clinton administration – now unveil their doubts. Globalization presents competition, and perhaps potential threat for the US is how a trio of analysts summarizes Summers’ argument in an opinion essay for the Financial Times. His “apparently nationalist argument is couched in appealing distributional terms,” explain Devesh Kapur, Pratap Mehta and Arvind Subramanian. The three agree that US workers have experienced wage stagnation and increasing inequality. Yet the hyper-mobility of capital, which Summers blames for woes of US workers, was designed by him and others in the US and foisted on developing nations. The authors trenchantly observe that developing nations changed intellectual-property and other laws to accommodate US wishes less than a decade ago. Summers overlooks other means for taming globalization, including “progressive taxation, improving education, strengthening the bargaining position of labour and improving the safety nets.” Suddenly finding themselves losers in a game of their own invention, US players refuse to reflect on their own policies that encouraged greed and produced inequality. Instead, they find it convenient to change rules mid-game, snatching a few short-term gains and shrugging about potential risk for the global economy. – YaleGlobal