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Fatwah / November 11, 2008

But let’s return to the Summers timeline. After his stint in the Reaganomics brain trust, he returned to Harvard to serve as one of the university’s youngest professors. In 1988, he was Michael Dukakis’s chief economic advisor, but when that campaign failed to bring Summers to power, he turned to America’s great rival, the former Soviet Union, to try out his economic experiments. In 1990, Lithuania, a restive Soviet republic seeking independence, hired Summers to advise on that country’s economic transformation. Poor Lithuania had no idea what it got itself into. This was Summers’s first opportunity to tackle a country in economic crisis and put his wunderkind theories into practice. The results were literally suicidal: in 1990, when Summers first arrived, Lithuania’s suicide rate was 26.1 per 100,000 and falling. Just five years after Summers got his hands on Lithuania’s economy, life became so unbearable under the economic transition that the suicide rate nearly doubled to 45.6 per 100,000, worse than any other ex-Soviet republic in transition. In fact, it was the highest suicide rate in the world, suggesting something particularly harsh and brutal about the economic transition in that country as opposed to the others, where suffering and pain were common. Things got so bad that in 1992, after just two years of Summers-nomics, the traumatized Lithuanians voted the communist party back into power, the first East European nation to do so–even though just a year earlier Lithuanians actually died on the streets fighting communism.

Fresh off his success in Lithuania, Summers moved to the World Bank, where he was named the chief economist in 1991, the year he issued his famous let’s-pollute-Africa memo. It was also the year that Summers, and his Harvard protégé Andrei Schleifer (who worked with Summers on the Lithuania economic transformation), began their catastrophic “rescue” of Russia’s crisis-ridden economy. It’s a complicated story involving corruption, cronyism and economic devastation. But by the end of the 1990s, Russia’s GDP had collapsed by more than 60 percent, its population was suffering the worst death-to-birth ratio of any industrialized nation in the twentieth century, and the financial markets that Summers and Schleifer helped create had collapsed in what was then the world’s biggest debt default ever. The result was the rise of Vladmir Putin and a national aversion to free markets and anything associated with Western liberalism.

But that’s not all. Summers, through Schleifer, was also tainted with some of that country’s corruption, which resulted in a US Justice Department lawsuit against Schleifer and others. While Schleifer was being paid by US taxpayers to advise the Russians on capital markets in the 1990s, his wife, Nancy Zimmerman, bought and traded Russian equities for a Boston hedge fund she ran–they even used Schleifer’s US taxpayer-funded offices to run Zimmerman’s Moscow-based hedge fund operations.

How close were Larry Summers and Andrei Schleifer? According to former Boston Globe economics correspondent David Warsh, Summers and Schleifer “were among each other’s best friends,” and Summers taught Schleifer “as an undergraduate, sent him on to MIT for his PhD, took him along on an advisory mission to Lithuania in 1990, and in 1991, shepherded his return to Harvard as full professor, where he was regarded, after Martin Feldstein and Summers, as the leader of the next generation.”

In 2000, the Justice Department sought $102 million in damages from Schleifer, one of Schleifer’s Harvard associates and Harvard University in a conflict-of-interest suit resulting from Schleifer’s role as the lead US adviser to Russia’s economic reforms–questioning the way Schleifer and his wife profited from his position. Schleifer’s Harvard team in Moscow was funded by USAID in a no-bid contract, and supported by Summers as soon as he moved into the Treasury Department in 1993. So Schleifer benefited from his relationship with Summers twice: first, by getting a choice contract as the US government’s man in Moscow in the 1990s when Summers was in power in the US government, one that benefited his wife’s hedge fund (earlier this year, Portfolio suggested that the Schleifers’ hedge funds made them billionaires ). Then after Schleifer returned to Harvard to face the lawsuit, Summers, now president of Harvard, presided over a controversial settlement that all but let his protégé off the hook. Thanks to pressure by Summers, Schleifer kept his chair at Harvard, where he continues to teach today.

Summers’s other favorite man in Russia was Anatoly Chubais–who consistently ranks at the top of Russia’s “ most hated man” polls. Chubais was executor of the Russian government’s privatization program, in which state companies worth tens of billions of dollars were handed over to insiders for a fraction of their worth in blatantly rigged auctions. Summers praised Chubais as a “demigod” and called Chubais and his free-market cohorts “the dream team.” In September 1998, after Russia’s capital markets collapsed, along with billions in US-taxpayer-backed loans, Chubais boasted to a Russian newspaper, “We swindled them.” By “them,” he meant the Western and American aid institutions that funded his reforms.

In light of all of the corruption, cronyism and devastation that have marked his career, Summers’ statements about an under-polluted Africa or intellectually-inferior women no longer seem like provocative eccentricities but part and parcel of the Summers shtick. And now there’s talk that President-elect Obama may hand the keys to national treasury to Summers–meaning that he’ll be in charge of overseeing a trillion-dollar taxpayer bailout of the entire financial industry, a process already rife with conflicts of interest, cronyism and corruption==as detailed by Naomi Klein.

The bailout, as currently implemented, threatens to devastate America’s economy much as Russia’s and Lithuania’s were devastated before. The idea that this is exactly the right time and place to put Larry Summers in charge of our economy’s future is so frightening that it makes the Sarah Palin vice presidential choice seem almost quaint by comparison. Let’s hope the rumors are wrong.

This article was first published at The Nation. Mark Ames is the author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.

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7 Comments

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  • 1. Jim Pivonka  |  November 18th, 2008 at 11:47 am

    Thanks for this. While I was pretty familiar, I thought, with the history of these events Summer’s involvement in them had escaped me completely. He was a cipher to me, except for his time at Treasury working for Rubin, who I have had a lot of respect for, and his utterly disastrous time at Harvard. I am so glad that community and institution spat him up before he did serious and lasting damage.

  • 2. Arthur Stamoulis  |  November 19th, 2008 at 11:15 am

    For folks on Facebook, there is a new group called “Is Larry Summers Really the Best We Can Do?” Please join it and share your thoughts…

    http://www.facebook.com/home.php#/group.php?gid=43314915989&ref=mf

  • 3. Huzzah  |  November 19th, 2008 at 11:57 am

    Is this supposed to be a humour site? It reads like a comedy of evil errors nonetheless.

  • 4. Corky_screw  |  November 27th, 2008 at 4:54 am

    These guys are about to do some serious damage (obama’s administration). The same happened in the great depression (54 banks bought up) as now, except that the treasury is long since privatised (1913) and the 35% fed tax never goes into gov’t hands – so why should they care to help you get your lost money back if they stole it from you (ever since the fed’s inception)?

  • 5. The Obama seduction &laqu&hellip  |  September 2nd, 2009 at 3:17 pm

    [...] polluted” and women as being “genetically handicapped” when it comes to maths. As The Exiled points out: “Summers’s track record, in which he oversaw the destruction of entire [...]

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  • 7. There will be no recovery&hellip  |  September 17th, 2010 at 5:17 pm

    [...] an eerily prescient article, Mark Ames predicted the mess that Summers would create We all know in the backs of our minds that Barack Obama’s [...]


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