The American Economic Growth Challenge: Larry Summers Speaks at Smith College
Erin Richards '15 & Michelle S. Lee '16 Associate Editors
On Monday, March 31, the Department of Economics sponsored a talk from Larry Summers held at Weinstein Auditorium.
Lawrence “Larry” Summers started his career as an economics professor at Harvard University. He left Harvard for a period of time to work as the chief economist at the World Bank. Shortly thereafter, he was appointed Secretary of the Treasury during the Clinton Administration and later as 27th President of Harvard University. Three years following his leave from Harvard University, Summers was appointed by President Obama as Director of the National Economic Council until 2010. He currently works for hedge fund D.E. Shaw & Co, amongst other business interests, and contributes to national publications as an economics columnist.
Summers opened his lecture by commending the work of Smith College President Kathleen McCartney, who previously worked for Summers as Dean of Harvard’s Graduate School of Education. He commented on the capital of the female student body at Smith, saying, “The largest untapped reservoir of potential is this generation of women.” Summers then jumped into his discussion on American economic concerns as a whole, ultimately referencing the necessity of economic growth and investment as the fastest way to recover from the 2008 recession.
He proceeded to explain that the current rate of growth, generally determined by GDP, was hovering at a rate 10 percent lower than its expected level. He elaborated, “Why did the estimate decline? It’s not because of productivity, but because not as many people are working. They are working less and for less capital. It is that we are not bringing the resources to bear.” Summers offered a solution of rebuilding and improving American infrastructure, using the example of John F. Kennedy Airport, as a measure of increasing economic productivity.
Summers also incorporated economic challenges in the perspective of college students. “More college seniors will live at home [and] get a job that is not on a career path than six years ago. At the average college those differences are very large,” he said
He argued the ultimate effects of this economic slack, or shortage of productivity, would detriment US markets in the long run. “Every year we accept economic slack, is a year that we accept a reduction of future potential in the American economy. I would suggest to you that patience is the wrong strategy,” Summers said. Summers returned to his original argument of increased public and private investments. He emphasized the lowered opportunity cost of current investment due to historically low interest rates, which US firms and public sectors should be taking advantage of. Summers additionally elaborated that accelerating the US growth rate at a quarter of one percent for the next 75 years, would absolve the budget deficit.
“I do not think it is a difficult choice. Yet it is a choice that our country has been unwilling to make.… Sometimes the easy solution is the right solution,” Summers concluded. By working to increase demand we can avoid the phenomenon of secular stagnation and put our country back on the path of growth.”
Following his lecture, Summers opened up to a Q&A panel from the general audience, discussing a range of topics from minimum wage to immigration reform. Whether Summers’ theory is right or wrong can be left to further discussion. However, his appearance at Smith College generated a crowd and left students, faculty and visitors considering his arguments as they exited Weinstein Auditorium.