He’s in the news again this week — after persuading Joe Manchin that the climate and healthcare bill he’s pushing isn’t inflationary. Larry Summers has had a storied career, as the chief economist of the World Bank, the treasury secretary under Clinton, and the director of the National Economic Council under Obama. He also was the president of Harvard University from 2001 to 2006 and remains there as the Charles W. Eliot University Professor.
You can listen to the episode right away in the audio player above (or on the right side of the player, click “Listen On” to add the Dishcast feed to your favorite podcast app). For two clips of our convo — on how the US government spent way too little during the Great Recession and way too much during the pandemic, and how we can help the working class cope — pop over to our YouTube page.
The episode has a lot of thematic overlap with our recent discussion with David Goodhart, author of Head, Hand, Heart: Why Intelligence Is Over-Rewarded, Manual Workers Matter, and Caregivers Deserve More Respect. Here’s a new transcript. And below is a clip from that episode on how our economy overvalues white-collar brain power:
Back to inflation talk, here’s a dissent:
I’ve been reading your blog for a little over a year now, and listening to Dishcast, which is great. I’ve noticed a few things, however, that I would like you to perhaps respond to, or at least consider. First, what you refer to as “wokeness” on the left is, I agree, an obnoxious problem that has been exacerbated by social media. But I think your recent guest Francis Fukuyama has it mostly correct in his new book, Liberalism and Its Discontents, when he identifies illiberal trends on the political left as being more of an annoyance, or at the very least, far less of a threat to the republic than illiberal trends on the right.
Second, I completely disagree with this rather lazy salvo from you: “Biden’s legacy — an abandonment of his mandate for moderation, soaring inflation, an imminent recession, yet another new war, and woker-than-woke extremism — has only deepened it.” It simply is not the case that Biden has not, especially when forced to, hewed towards moderation. Yes, he is attempting to respond to a leftward shift in the Democratic Party by trying to govern more from the left, but this is simply a reflection of political reality. In addition, much of his agenda has been batted down, but more on that in a moment.
Next, inflation and an imminent recession have a lot more to do with what the Fed has done over the last four decades — and definitely since the financial crisis of 2008 — than with Joe Biden. On this theme of a highly financialized economy nearing the end of the neoliberal era, I recommend Rana Foroohar on Ezra Klein’s latest podcast, where she talks about the popping of the “Everything Bubble.” Asset-value inflation, deindustrialization, a perverse focus on shareholder value rather than investing in Main Street or even R&D, and an utter lack of policy solutions, have caused this.
In addition, as Foroohar herself says, the changes we need to make in our economy are going to be, in the short-to-medium term, inflationary. This means policymakers have to start making policy that actually helps both people and infrastructure, which means spending money. Unfortunately, the garden has gone untended for so long that we’re teetering on the brink of becoming a really s****y country if we don’t take more aggressive action.
In addition, with regard to an upcoming recession, Noah Smith wrote on his Substack recently that Keynesian economics would suggest that a quick recession now in order to stomp out inflation would be better in the long run than milquetoast attempts to curb it by raising interest rates too slowly. The idea is that recessions — especially fast and somewhat shallow ones — can be weathered, but inflation that goes on for too long leaves lasting sca