Sunday, October 29, 2006

Larry Summers calls for smart populism

Larry Summers, formerly a treasury secretary and more recently of Harvard fame, now writes for the Financial times (emphasis mine): / Comment & analysis / Columnists - The global middle cries out for reassurance

... Let us be frank. What the anxious global middle is told often feels like pretty thin gruel. The twin arguments that globalisation is inevitable and protectionism is counterproductive have the great virtue of being correct, but do not provide much consolation for the losers. Nor can they rally support for policies that maintain, let alone promote, international integration.

Economists rightly emphasise that trade, like other forms of progress, makes everyone richer by enabling them to buy goods at lower prices. But this offers small solace to those who fear their jobs will vanish.

Education is central to any economic strategy, but there is a limit to what it can do for workers in their 40s and beyond. Nor can education be a complete answer at a time when skilled computer programmers in India are paid less than $2,000 a month.

John Kenneth Galbraith was right when he observed: “All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership.” Meeting the needs of the anxious global middle is the economic challenge of our time.

In the US, the political pendulum is swinging left. The best parts of the progressive tradition do not oppose the market system; they improve on the outcomes it naturally produces. That is what we need today.

There are no easy answers. The economic logic of free, globalised, technologically sophisticated capitalism may well be to shift more wealth to the very richest and some of the very poorest in the world, while squeezing people in the middle.

Just as the Federal Housing Administration’s effort to make owner-occupied housing more available after the second world war was a crucial part of the policy approach that permitted the Marshall Plan to go forward, so also our success in advancing international integration will depend on what can be done for the great global middle.

Our response will affect not just the livelihoods of millions of our fellow citizens but also the prospects for continuing global integration, with all the prosperity and stability it has the potential to bring.
Summers is effectively echoing Krugman's call for the "smart populist" -- the heir to Teddy and Franklin. I have no ability to predict how the US electorate will respond. I would not have favored a populist six years ago, but Bush has broken me. If populism is the only other option, bring it on.

PS. Kudos for Summers for pointing out the obvious. Education is not a complete solution -- or even much of a partial solution.

No comments: