Summers Defends Globalization, Third World Development

As Harvard’s president, Lawrence H. Summers has used his bully pulpit to defend affirmative action, criticize anti-Semitism and promote public service.

But last night he returned to more familiar territory—economics—defending industrialization before a packed ARCO Forum.

In the first of three speeches on globalization he will deliver this week, the former Treasury Secretary said that American interests are tied to the economic growth of the developing world and that growth invariably increases income, health and education levels in poor nations.

“The overwhelming preponderance of evidence is that increases in economic growth rates are associated with very substantial increases in all aspects of development we care about,” he said.

The speech disputed the view of some prominent economists that pursuing capitalism and economic growth has led to financial collapses and left out the poor.

Summers said developing countries’ growth rates are tied to three factors—integration with the global economy, stable state finances and currency and enforcement of property rights and contracts.

That last factor is “probably the most important but most difficult to be rigorous about,” Summers said.

But in the absence of sound internal economics rules and institutions to encourage investment, “there is very little correlation between [international] aid flow and economic outcomes,” he said. “If one wants to understand why some countries are more successful, the answer lies overwhelmingly in their own policy choices,” he added.

Summers said he would discuss the role of the International Monetary Fund, capital flow and political considerations in encouraging third-world growth in his speeches today and tomorrow. But he noted that industrialized nations must take a “tough-minded” approach to developing countries and realize that no “small changes in policy or magic bullets would make a huge difference.”

Summers did not mention Joseph Stiglitz, a Nobel-prize winning economist whose 2002 book Globalization and Its Discontents attacks the market-based international economic policy Summers and former Treasury Secretary Robert E. Rubin ’60 advocated under the Clinton administration.

But Kennedy School Dean Joseph S. Nye said afterwards that Summers gave a “first-rate” and “extremely clear” presentation opposing views like Stiglitz’s.

Summers has criticized Stiglitz—who also worked as an economic adviser to President Clinton from 1993 to 1997—more directly in the past.

Speaking to Harvard Summer School students last July, Summers said that Globalization and Its Discontents was “shot through with factual inaccuracies” and that its challenges to globalization and to Summers specifically made him “very angry.”

“Most of the references that include my name may or may not be accurate,” Summers said of the book in July. “The majority of the factual assertions are wrong.”

Much of yesterday’s speech focused on the benefits of economic growth and globalization.

Summers displayed multicolored graphs detailing how efforts to create market economies, even when not targeted at the poor, nevertheless generally increase the income of the poorest sectors.

And countries that experience economic growth are more likely to become democratic, he said.

He added that per capita Gross Domestic Product (GDP) has a “remarkably strong” correlation with decreasing child mortality rates.

“There is no rich country in the world where children breathe lead in the capital city,” he said in reference to the environmental benefits of economic growth.

But Summers said that economic growth and development have unfortunately “come to be very much separated in the global mind.”

He cited his 12-year-old twin daughters’ social studies textbook as a prime example. The book, he said, is ambivalent in its treatment of the Industrial Revolution, giving weight to both the benefits of growth and discussions of how industrialization led to exploitation.

“There’s a view I find myself acutely uncomfortable with—that growth is a mixed virtue,” he said.

He also criticized what he called “espresso-sipping Westerners” whose positions would deny the opportunity for citizens of third-world countries to buy western goods.

Summers emphasized that his remarks represented his personal views, not those of the University, the Clinton Administration or the current White House, eliciting laughter from the audience.

At the end his speech, Summers fielded questions on a wide variety of economic issues, including hedge funds and international AIDS prevention.

Summers will also speak today at 7 p.m. and tomorrow at 4 p.m. in the Starr Auditorium.

The Godkin Lectures, in memory of former political journalist Edwin Godkin, began in 1903. Past speakers, selected by Kennedy School professors, have included Adlai Stevenson, Nelson Rockefeller and the late Daniel Patrick Moynihan. Paul Samuelson, a Nobel-prize winning economist and Summers’ uncle, gave the lecture in 1986.

—Staff writer Elisabeth S. Theodore can be reached at theodore@fas.harvard.edu.