Larry Summers has been wrong about so many things over so many years (remember how he prevented Brooksley Born from even inviting comment on the regulation of the sub-prime securities that caused the financial crisis when he was Secretary of the Treasury.). Here he is wrong again in saying that a lack of confidence and trust in government means that investors should take more responsibility for infrastructure: “he urged investors to cluster around infrastructure and investment that helps solve inequality, concluding that investors that integrated ESG early will benefit. Not only from the good things’ happening to such companies, but also from future investor demand.” Investors can and should and are paying more attention to ESG, but as investors, not policy makers, which governments are uniquely situated to do because it demands the kind of accountability that only the political system can provide.
Summers does not say much here. Whose fault is it that “society isn’t working?” Who does he think is in the best position to address those issues? What responsibility does he take for that loss of trust considering that he could have prevented the financial meltdown?
However, Summers said that perhaps the most “profound question” rests with the successful functioning of US democracy and America’s continued ability to “lead the world” and cooperate with other nations. He noted that the pandemic has come against the backdrop of existing challenges from crumbling infrastructure to declining life expectancy, racial injustice, inequality (particularly in health and education) and an unwillingness to support global institutions. “Society isn’t working,” he said, adding that the US’s “polarised and ineffective” society is now on show to many countries who look to the US as an example – something he referred to as “an immense challenge.” Summers said that whatever delegates’ view on the role of government versus the private sector, any bigger role for the US government demands a confidence and trust that is lacking in the country today. He also said that he finds it “hard to believe” that the size of the US deficit doesn’t matter. “The amount I can spend is related to the present value of my income. Budget deficits matter and any suggestion they don’t is misguided.” However, he flagged that viewing the budget deficit in terms of something to be “controlled” wasn’t helpful, and said the size of the budget deficit should be seen in the context of multiple factors, including low borrowing costs. Moreover, equally concerning as the budget deficit is the educational deficit, potholed roads, and the country’s lack of readiness for the climate crisis. “I don’t subscribe to the orthodoxy that excessive borrowing is so damaging,” he said.Society isn’t working: Larry Summers | Top1000Funds.com