Farewell, Then, Larry Summers

This would be a good time to re-read Joshua Green's profile of Tim Geithner, and the subsequent discussion on his blog (my comment on the profile; Josh's response to that and other comments; my response to the response). To remind, that portrait described a Geithner who had put himself firmly in charge of economic policy -- more firmly than appearances suggested. I remarked that I found it hard to imagine Larry putting up with the subordinate role this picture implied: if Josh was right, why was he still in the White House? Well, we have the answer, and just as Josh suggested: after the end of this year, he no longer will be.

Of course Summers has good reasons to move on in any case. If he stayed beyond the end of the year, his tenure at Harvard would be jeopardized (I hear conflicting reports about whether his leave could be extended). But part of what is going here is that the economics team was from the start over-rich in talent (and egos) and under-specified in terms of who does what. I wrote this in December 2008.

He has surrounded himself, for the most part, with extremely able people. This is a welcome contrast from the Bush administration, which was marked by mediocrity or worse in so many of its appointments. It is admirable in Mr Obama to value ability over loyalty and to want to understand every point of view before coming to a decision. But in giving key executive jobs to people who may disagree with him and with each other about important points of policy, there is a cost, and I wonder if he has given it due weight. He has made it much harder to delegate.

Presidents always have to adjudicate among competing points of view: the job amounts to little else. Get the best advice, Mr Obama likes to say, and then act on it. But is he prepared for the torrent of issues he faces? Does he expect to manage everything himself? In key policy areas, he seems to have appointed teams that will need close supervision. Rivals are fine in the seminar room. In the boardroom or cabinet room, they can cause a lot of time and energy to be expended to little purpose.

Who will be in charge of economic policy: Lawrence Summers, director of the National Economic Council and chief White House economic adviser, or Tim Geithner, Treasury secretary? (This is to say nothing of former US Federal Reserve chairman Paul Volcker's new commission.) Perhaps they will cope easily with this ambiguity and agree with each other about everything that matters, but maybe not.

As it turned out, not.

I am wholly invested as a Summers admirer -- and not just because he is attacked by conservatives and progressives alike (nearly always a good sign). His combination of economic insight and practical governing experience is simply unmatched: he is a unique talent. Abrasive, yes; lacking in modesty, maybe just a little. But if I were president of the United States, there is nobody I would value as highly as an economic adviser. His departure is a serious loss for the administration's human capital. That said, he was miscast at NEC. If what Obama required from that desk was a dispassionate and self-effacing distillation of policy advice from far and wide, Summers was not the man. If what he required was a deputy to Geithner, Summers was absolutely not the man.

Who should replace him? The White House is apparently keen on a business executive (a constituency said to be under-represented in the administration) and preferably a woman (Christina Romer's departure must be made good). Obama cannot think that the job is worth a damn if tokenism of this sort carries any weight. In fact, the idea of appointing a representative of corporate America strikes me as worse than vacuous: it institutionalises the classical governance error of conflating pro-enterprise and pro-business. Those ideas are not merely different, they are flatly opposed. The first instinct of a successful CEO is to rig the market to the advantage of his own company. A "business-friendly" NEC is the last thing the US needs.

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