Washington Life Magazine
Washington Life Magazine
Interview with a Public Servant
Larry Summers & Gene Sperling
Larry Summers & Gene Sperling

As Washington Life focuses in on some of the fascinating people that live and shape ourcity, we thought it would be interesting to have Gene Sperling, former head of theNational Economic Council [NEC] in the Clinton White House, interview formerTreasury Secretary, Larry Summers, on life, leadership, the economy, and his future asthe 27th president of Harvard University.

Gene Sperling:Larry, you not only havetwo uncles who won the Nobel Prize [his mother’s brother, Ken Arrow, and his father’sbrother, Paul Samuelson], but both of your parents are quite brilliant and well-knowneconomists as well. At what age were you aware that there was something special aboutyour family in this regard?

Larry Summers:Let me first say that oneof my brothers is a doctor, and the other is a lawyer. So my parents like to say that myfamily worked out perfectly with a lawyer, a doctor, and a son who went into the familybusiness. I don’t know when I first became interested in economics; I expect as we weregrowing up, we were probably a little more exposed to ideas like why stores that wereshort on things raised their prices.

GS:At what age did you start thinking youmight follow in the “family business”?

LS:When I was in high school I tookadvanced economics and at the same time studied along with the course my mother wasteaching at Swarthmore College in Introductory Economics. I went off to college atMIT thinking I was going to major in math or physics, but ultimately I decided that whatI was really interested in was the application of analytical reasoning to practical policyquestions. That’s what economics brought together for me. I was always very interestedin the world of government and public policy, so I suspect even as I was interested in anacademic career, I was interested in also having a career where I could be directly involvedin public policy.

GS:How about when you were 10 or 12years old? Do you remember what you wanted to be then?

LS:For a long time I wanted to be the secondbaseman on the Philadelphia Phillies. And then for awhile after that, I wanted toplay at Wimbledon, but a lack of coordination, alas, intruded on those objectives. Thehigh point of my family’s athleticism was when my younger brother was briefly on theSpaulding racket’s free list.

GS:The free list – that’s a blast from the pastfor any of us tennis players.

LS:Were you on the free list?

GS:I was on the Wilson list.

LS:Competitive as always (laughing)

GS:Bob Katzman, who is now a FederalJudge, once told me that for a while you were one of the top, if not the top, debaters in thecountry. What age was that?

LS:That was when I was an undergraduateat MIT. I traveled all over the country, attending debate tournaments and debatingissues ranging from gun control to national health insurance to control of energy prices.In the process I learned in a very powerful way that there are many different perspectiveson any issue.

GS:What things do you remember yourparents instilling in you, that you consciously or unconsciously have tried to pass on to yourthree children?

LS:I have tried very hard to instill a sense ofcuriosity in my kids and to give them a sense that things that happen have practical explanations.So, we’re always discussing questions ranging from why rainbows happen to why arestaurant is organized the way it is, to why there are traffic jams. I think the world is anintriguing place, and it’s very important to try to understand it as well as one can.

GS:A couple of times when we were in themiddle of the Asian financial crisis, and things were very heavy, you added a little levityby giving us your daughters Pam and Ruth’s opinion on the dilemma of themoment. Can you recall a couple of times where they interjected their opinions?

LS:There was an occasion when we wereinvolved in a large support program or what others might call a bailout when the phonerang Saturday as we were eating lunch. It was a call in connection with the financial crisis.The kids were 8 years old at the time, and were annoyed that I had to take it andPammie said “Daddy, don’t answer the phone — you’re just gonna give them the moneyanyway, so you don’t need to talk about it.” And Ruthie responded, “ Pammie, don’t youunderstand, they’ve given those people money before, and they’ve wasted it. So daddy has tobe very careful.” In that conversation, one sees the debate on policy interests and themoral hazards that were going on in the situation. I learned a certain amount about someof the basic urges that were behind some of the more strident anti-globalization protestsin Seattle. Years ago, when my daughters were about five, the cab didn’t come, I got veryangry, and I said that’s what happens when you have a monopoly, you get poor service.And they said, “What’s a monopoly, Daddy?” So, I tried to explain that a monopoly was asole producer and so forth, but it didn’t get through. In an alternative attempt to explainthe idea of competition, I said, “Suppose you were in a toy store and they didn’t have thetoys you wanted and they weren’t nice to you. What would you do?” I was hoping for theanswer, go to a different store, but they responded, “I’d get mad at them and steal thetoys.” I think that there is a little bit of that kind of petulance in the resistance to openmarkets and trade.

GS:One thing many people have read inyour bio is that at age 28, you were one of the youngest tenured professors at Harvard. Withsuch a quick rise at such a prestigious institution was there a lot of resentment from oth-ers?

LS:I was very happy during my years atHarvard and had a lot of friends, most of who are still good friends today. One of thevery nice things about universities compared to Washington, is that people are rather lessrank-conscious, and so I was very involved with a lot of different people.

GS:One of the most exciting aspects of pub-licservice is that there are a lot of moments when one person, or a few people, can have amajor positive impact. But we rarely talk about the flip side, those moments when youfear that if your judgement is off, you can have a negative impact. Can you think ofmoments where you really felt the weight of the world on your shoulders?

LS:You know, I think that one can’t or oneshould not take a major position in government if one’s not prepared to accept responsibilityfor making critical and important recommendations or judgements. I always feltthat my obligation was to make the best informed judgements that I could and thatwas what I did. I could sleep very comfortably at night knowing I had brought all thecapacity that I had to bear to a given problem. That doesn’t make it easy or simple tomake these judgements, but in a way one has to step back from the magnitude of theissues. I think that one has to think through the cost and benefits in a clear-headed way.That was very much the culture that Bob Rubin set at the Treasury and one I learnedfrom.

GS:You mentioned Bob Rubin. One thingwe both have in common is that we both were his Deputy [Gene Sperling at the NECand Larry Summers at Treasury] for a couple of years. Can you identify one thing in termsof personal style or management that you learned from Bob during your extraordinarypartnership with him?

LS:I think that probably the most importantthing I learned from Bob was the importance of weighing and balancing every pointof view that comes with a decision, and the ultimate need to come to a clear decision.There are many people who can’t accept ambiguity and can’t come to a judgementuntil things become black and white. In many ways leadership is being able to cometo a conclusion in situations where times lend a shade of gray.

GS:Our friend Bob Reich [former LaborSecretary] has probably indirectly been critical of both of us for overemphasizing payingdown the national debt. How do you react those who suggest that you’ve over-emphasizeddebt reduction and fiscal discipline, at the expense of things like universal healthcoverage?

LS:That’s a very important set of issues. Mybelief and approach is that a strong economy is the best of all social programs when extrajobs and extra incomes are created, where jobs are looking for people, as well as peoplelooking for jobs. It drives employers to train young, unskilled people [so that] people aremoved from welfare to work. Employers must then develop childcare centers, so that momsare able to work and employers will be able to retain them. Then the question is, if that’sright, how important is debt reduction to having a remarkably strong economy like theone that we enjoyed during President Clinton’s second term? And here I think theevidence of timing is really very suggestive. Yes, in many ways, the credit belongs to theAmerican people for their ingenuity, their entrepreneurship, their information-technologyskills, and their hard work. The American people were not slouches in the late eightiesand the early 1990s, when the economy was stagnated.

GS:So what changed?

LS:The principal thing one can identify is adiscontinuity in the economic environment— the dramatic change, beginning in1993, in the path of the Federal debt, from a sharp upward span to a downward one. Andso my judgement that debt reduction needs to be imperative is not based on a judgementthat the financial market’s soundness is more important than the welfare of poor people, itis a judgement based on what will have the largest impact on all Americans over time. Iam terribly fearful that if we were to abandon the goal of fiscal discipline, either for the sakeof measures on the tax side or on the expenditure side, that economic performance willrevert to the kind of performance we had when we were accumulating debt. I thinkthat would be very, very costly to all Americans.

GS:How would you propose to achieve afree trade agreement for the Americas that will promote trade while ensuring thatnations cannot engage in a “race to the bottom” by diluting their environmental regulationand labor standards to attract investments?

LS:“The “race to the bottom” issue is animportant one. But, not having free trade does not avoid competition through lax regulation.And FTA, by promoting coooperation and raising living standards increases thedemand for environmental protection and therefore works to help the environment.Also, trade agreements work to curb and discipline unfair trade practices.

GS:Larry, in your last couple of years, youstarted pushing for a tax credit for vaccines. It was very surprising, not only within theAdministration, but around the world, to have a major finance minister focusing onAIDS and vaccines. What motivated you to use your platform of Secretary of Treasury togo into a rather unconventional area for a minister of finance?

LS:First let me say that this is an area whereI hope to maintain some continuity between my interests in government and in my newposition at Harvard. I think it is of enormous importance that the world makes the necessaryinvestments in what might be called “global public goods”. Goods that will haveenormous benefits for humanity, but where benefits to any single country may be relativelylimited such as vaccines for tropical diseases, new agricultural technologies that canempower the poor in Africa and Asia, solutions to global environmental problems, anddeveloping techniques to raise literacy in poor countries which is an issue that I know youhave been very interested in. It seems to me that one of the challenges for the global systemis to find ways of spurring the development of these goods that are in the globalinterest. This is something universities can do on the research side and something theUnited States as the world’s richest country and only superpower, very much needs totake a lead in. My reading of the evidence is that there are staggering benefits to all ofhumanity from the development of vaccines against AIDS, malaria, and tuberculosis.

GS:Would it be better to have a governmentcrash program to develop these vaccines?

LS:I think you and I share the view that itis better to have a competitive mechanism that tries to harness market forces to getresearch done rather than a major public program. Unfortunately, on a pure market basissuch vaccines are likely to be limited because these diseases primarily afflict very, very poorpeople. And that’s why some augmentation from the outside is so important, which wasthe objective of our tax cut. This is something that I put a lot of time into when I was at theTreasury, and why as Secretary of Treasury I was most proud of my participation in gettingCongressional support for large-scale debt relief for the poorest countries in theworld. We worked hard to set up regular forums for the American finance minister tomeet with his counterparts not just from the industrial countries, but also from the nationsof Latin America, Asia, and Africa. One of the most moving experiences I had as Secretaryof the Treasury was the opportunity to visit Africa and to focus attention on theissues relating to AIDS, and the connections between debt relief and AIDS.

GS:Let’s now turn to Harvard. Five yearsfrom now, The New York Times is doing its review on your first five years at Harvard.What’s the headline, and the first couple of paragraphs that you’d like to see?

LS:It’s a very good question, but at thispoint, I am talking to a large number of people at Harvard and elsewhere, and trying tothink through what some of the most important priorities are. So, that’s not a questionI’m able to answer at this point. I do think that one of the ironies of this moment thatabounds in paradox is that on the one hand, technology is ever more important, and onthe other hand, there’s probably been no moment when it was more important foryoung people to have direct personal interaction with faculty members than the present time.

GS:What would your advice be to aHarvard student who wants to be a history major, but has everyone telling him or her tomajor in something more practical?

LS:I think it’s hard to give generic advicewithout knowing people better, but my sense is that developing the capacity to think, toexplore, to create, and to understand is much more important than any specific body ofknowledge that one learns as a young person. It is most important for people to concentratein whatever they can be passionate about.

GS:GS:As you speak to young people atHarvard and around the country, how do you plan to address the issue of public service? Doyou think there’s a different attitude, less or more enthusiasm or just a different perspectiveon public service for those who are in what is probably the dot.com or post-dot.com generation?

LS:If you look at statistics of volunteerismamong college students, they have never been greater, yet their interest in political life showsconsiderable evidence of attenuation over the last quarter of the century. I’m not entirelysure whether the solutions lie in the educational process or whether they lie in aspects ofpolitical life. Some of the issues, like the ways in which campaigns are financed or the waysin which political dialogue is carried on, may tend to be a bit corrosive. One of the crownjewels of Harvard is the Kennedy School, which is really directed at working to establishpublic service as a profession, as much as law and medicine are professions. Its mission,both in the United States and globally, is something I want very much to support.

GS:How about you personally? I knowenough about your life to know that you have given up the opportunity for considerablewealth for different forms of service. How would you describe to young students atHarvard what’s motivated your own choices?

LS:I think it’s a combination of alwayswanting to do what I found most exciting and where I felt I could make the greatest contribution.I was able to feel I was making a contribution during my time in Washington. Ithink I can make a contribution, as well as have a wonderful, stimulating, experience atHarvard. For other people, the right choices might be different. I’ve always had a desire tobe comfortable and to make sure my family is comfortable, but the pursuit of wealth, for itsown sake, has never driven me.

GS:You can pass on this, but I was recentlyasked this question—I actually thought it was kind of interesting to think about—if youcould have dinner with anybody in history, who would you like to have a conversationwith for two hours?

LS:Who did you answer?

GS:Ghandi.

LS:Isaac Newton, because I think his intellectpenetrated more subjects and advanced human comprehension of the world aroundus more than anyone else. Winston Churchill, who combined a deep knowledgeof history and a capacity to analyze history, write, think, and lead, would be a close second.

GS:Our mentor, Bob Rubin, would havecautioned anyone against making great pre-dictions on the future of the economy. Howworried are you about the short-and long-term of the economy?

LS:The market will fluctuate, and the economywill too. I think there are important issues of excess capacity and concerns aboutwhat will support consumption spending that will be with us for some time going forward—probably for well over a quarter or two. For the long-term, the American economydoes appear to have seen some increasing rate of growth associated with the infusionof information technology.

GS:The fact that productivity stayed higheven in the weak fourth quarter of 2000 was a good sign that productivity gains are morepermanent. Yet some people are fearful that with the slowdown of capital investments,some of that productivity growth could be diminished. Where are you on whether ornot the significant increase in productivity we saw over the last five years is a lasting changeor a relative glitch?

LS:The longer forward you want to forecast,the longer back you should look. I’d be surprised if the productivity phenomenonwas not with us for the next several years. I think the further out one looks, the moreuncertain one has to be.

Lawrence H. Summers will become the 27th President of Harvard University on July 1,2001, and he served as US Treasury Secretary from 1999–2001. Mr. Summers’ tenure withthe Department of Treasury began in 1993, first as Under Secretary for International Affairs,and then as Deputy Secretary from 1995. During his time at Treasury, he engineered anhistoric paydown of U.S. debt, worked successfully to extend the life of the Social Security andMedicare trust funds, and led the effort to enact the most sweeping financial deregulation in 60years. Internationally, he worked to reform the international architecture and the IMF, tosecure debt relief for the world’s poorest countries, and to combat international money laundering.Prior to joining the Clinton Administration, Summers served as VicePresident of Development Economics and Chief Economist of the World Bank from 1991 to1993. Tenured at age 28, Mr. Summers was a Professor of Economics at Harvard Universityfrom 1983-1993. He was named the Nathaniel Ropes Professor of Political Economy in 1983.Summers served as a Domestic Policy Economist on the President’s Council of Economic Advisersfrom 1982-1983 and served on the faculty of the Massachusetts Institute of Technology economicsdepartment from 1979-1982 where he also received his B.S. degree in 1975. In 1993,Mr. Summers was awarded the John Bates Clark Medal, given to the outstandingAmerican economist under 40. Currently Summers is the Arthur Okun DistiguishedFellow in Economics, Globalization, and Goverance at The Brookings Institution.

Gene B. Sperling is currently a guest scholar at The Brookings Institution where he is focusingon universal education in the world’s poorest countries in addition to overall economic andfinancial issues. As President Clinton’s national economic adviser and director of the NationalEconomic Council (NEC), Mr. Sperling was one of the principal negotiators for the1997Balanced Budget Agreement and the Financial Modernization Bill. He also playedkey roles in the 1993 and 1997 Deficit Reduction Acts and the policy of saving the surplusfor Social Security and debt reduction, and in successfully concluding the historic China-WTOagreement in Beijing. Mr. Sperling graduated from the University of Minnesota andYale Law School, and attended Wharton Business School. He is a native of Ann Arbor, Michigan.


 



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