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Endless Summers

O wretched countrymen! What fury reigns?
What more than madness has possess’d your brains?

Think you the Grecians from your coasts are gone?
And are Ulysses’ arts no better known?

—The Aeneid

“The real gamble is having the same old folks doing the same old things over and over and over again and somehow expecting a different result,” Barack Obama said in one of his stump-speech applause lines, appropriating a popular definition of insanity. Weary of war and alarmed by the political and professional classes’ unashamed economic hysteria, the nation joined his demand for wholesale change on Nov. 4.

Alas, for all the media flattery of President Obama and the historic moment he affords, the latest candidate of change has become another emblem of stasis. The elite troops of the Elite have not decamped, but are still emerging from their glittering post-racial tribute, taking up positions at the strategic points of the economy with military precision: despite the subterfuge, more a changing of the guard than an assault. During the transition, Obama adviser Anita Dunn admonished those who dared notice the hypocrisy, suggesting the president’s prefab historiography rendered the Cabinet, if not the entire apparatus of government, superfluous: “People who say ‘Where’s the change?’ need only look at the president of the United States.”

That advice no doubt stands. The promised—or threatened, as the case may be—new order will not require new management, even if it demands drastic new methods. The Masters of the Universe are still few, seasoned, and only very gradually renewed. A remarkable proportion of them have passed through one or more of the progressively finer sieves that are the Ivy League, Harvard Business School, and Goldman Sachs’s executive washroom.

Rumors circulate that Larry Summers’s sentence in the purgatory of no portfolio is set to expire. If Ben Bernanke doesn’t retain the Fed chair’s gavel, the ubiquitous Mr. Summers could acquire a title more commensurate with his hard-earned influence.

By March of this year, Summers and his protégé, Treasury Secretary Timothy Geithner, were seen as running the government’s vastly expanded economic domain by themselves. Geithner wobbled early as Treasury chief, committing the dread sin of looking bad on television, but recovered. Later he told an audience of Chinese students that U.S. bonds, of which China is now the largest foreign holder, were as safe as houses used to be, producing rude laughter where before there was quiet deference.

The polite press mostly averted its gaze, still heeding the president’s decree that Timothy was ready for primetime. The episode drew less attention than the confirmation hearing hiccup regarding his personal income taxes, and the fact that it happened abroad lessened attention at home. After all, who cares what the Chinese think?

Should Summers replace Bernanke, serving a president as callow as he is ambitious, his take on the economy before him might resemble Orson Wells’s assessment of his film studio: “the biggest electric train set any boy ever had.” Of course, this won’t be Summers’s first railroad.

Surveying America’s hubris-to-nemesis cycle from humiliating a defeated Soviet Union to the Sovietization of much of our economy, Summers, representing the face and policies of a select and tenacious few, repeatedly appears in the grainy newsreel footage, blended into his surroundings Zelig-like, a confirmed Keynesian (“when circumstances change, I change my mind”) claiming newfound humility among his many talents. Here he is now in real time, a whisper from the jug-ear of a new president desperate to keep alive (and only slightly less mystified than most by the increasingly labyrinthine workings of) the host body that is the productive economy.

After simultaneously holding down gigs as Harvard’s youngest tenured professor and a member of Reagan’s Council of Economic Advisers, Summers was chief economist for the World Bank in 1991 when the Harvard Institute of International Development was employed to assist in the rapid privatization of the former Soviet economy. That effort was led by a trio of Harvard professors: Andrei Shleifer, the Summers protégé who directed the program; Summers’s rival Jeffrey Sachs, who had helped reform Poland’s economy; and David Lipton, who covered the former Soviet bloc for the Treasury before succeeding Summers as undersecretary of the Treasury for foreign affairs.

The institute went as far afield as Harvard Law School for Jonathan Hay, who eventually became the project’s director in Moscow. Young Hay was the program’s very own Dick Cheney, controlling information and access to Yeltsin’s minister in charge of privatization, Anatoly Chubais.

History may eventually judge the Harvard Project more lightly, but for now Russians view the privatization period with slightly less resentment than Germans once held for the Treaty of Versailles. Chubais, sometimes described as Russia’s most hated man, is considerably less popular there than Stalin. Deep resentment of the U.S. remains, while free markets and private property are still viewed with suspicion by elite and common folk alike. Ask not what privatization did to Russia, but what Russia did to privatization.

Harvard shut down the project in 1996 but wouldn’t be done with it until August 2005, finally settling a lawsuit charging Shleifer and Hay with using insider information to defraud USAID. The university agreed to pay an estimated $27.5 million of a $31 million dollar fine.

Summers was then Harvard’s president and controversial with faculty, first for offending and eventually “losing” African-American studies professor Cornel West to Princeton for suggesting, among other things, that West spend more time in class than in the recording studio. I could not find a copy of the professor’s freshman CD, “Sketches of My Culture,” in time to assess it here. I’m as disappointed as you are.

Summers would again anger faculty by treating a group of women scientists more as scientists than as women, openly entertaining the thesis that relative ability might explain the modest history of female mathematicians. At least one scientist refuted this retrograde view of femininity by fleeing, she later explained, to spare herself nausea. The university would eventually atone by pledging at least $50 million more in pursuit of the gender parity that was the subject of the meeting, a remarkable return on the investment of a few hours for the recipients.

Summers’s tenure was less productive for Harvard’s legendary endowment fund. An untimely round of interest-rate swaps, with a notional value of $3.7 billion, was locked in last summer to finance an aggressive expansion program. Forbes would later dub this the “Summers Swap.” Long on derivatives and private-equity partnerships, putting virtually all its cash and then some—through borrowing—to work, the endowment is now stubbornly illiquid as a result of its aggressive strategy, paying interest to hold investments it can only sell at steep losses. Harvard is expected to report a value of $24 billion dollars this year, down from $37 billion last year, when it seemed to be defying the bust. With an operating budget of around $3.5 billion, a third of which was expected to come from the endowment, the university announced it would cut 275 workers.

The prospects of certain higher profile employees of the university continue to improve.  

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Dennis Dale’s blog, Untethered, can be found at www.dennisdale.blogspot.com.

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