Larry Summers Presents New Global Economy at WKF wkf2011 l 2011.10.11



Nearly 40% of humanity is now living in countries where standards of living will double in a little more than a decade and will likely increase by 100 folds within about a century. Transformations that may rank with the Industrial Revolution and the Renaissance in terms of their historical significance are currently underway in emerging countries like China and India. In order to learn about those transformations, especially changes that affect the global economy, the 12th WKF has invited one of most honorable speakers former White House Chief Economist Larry Summers. Larry Summers will suggest several scenarios on how the global economy will likely evolve, and point out both opportunities and challenges for businesses, investors and public policy in his solo speech titled `The New Global Economy, scheduled from 13:50 to 15:10 on Tuesday, October 11th.

Summers attended Harvard University Department of Economics as a graduate student at age 27 in 1982. He became one of the youngest tenured professors in Harvard`s history in the following year. He also served as the 27th President of Harvard University from 2001 to 2006. Summers has long been serving as an economic policy advisor to numerous US presidents and presidential candidates since the days of President Ronald Reagan. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was the Director of the White House United States National Economic Council for President Barack Obama until November 2010. As the Director of the White House National Economic Council, he emerged as a key economic decision-maker in the Obama administration, where he drew both praise and criticism. However, President Obama was reportedly thrilled with Summers` work at the White House.

According to The Economist, the "Summers Doctrine" fuses microeconomic laissez faire with macroeconomic activism. Markets should allocate capital, labor and ideas without interference, but sometimes markets go haywire, and must be counteracted forcefully by government. During the Clinton administration Summers blocked efforts to regulate over-the-counter financial derivatives. Summers holds regulators in low esteem, believing that they are not capable enough to understand the complex financial market system. He brought this view with him to the White House, battling the efforts to nationalize banks, enclose bankers` pay, or curb derivatives and trading activity.

Yet, it doesn`t exactly mean that Summers trusts the market. In a famous essay in 1985, he made a point about financial economics that markets may be efficient without being right. It is unfortunate that researchers in economics pay so little attention to finance research, and perhaps more unfortunate that financial economists remain so reluctant to accept any research relating to asset prices and fundamental values," Summers wrote. "Markets overreact- and that means policy has to overreact," Summers said in response to the Asian financial crisis during the Clinton administration. His point was that the government should provide insurance against such panic in the market, allowing investors to make more risks, generate more innovation, growth and welfare. He dismissed arguments that government bailout simply creates moral hazards in the market.

Summers will also participate in a session entitled `Crisis Revisited and Its Solutions: Global Economic Outlook 2012,` planned from 10:20 to 11:30 at Vista Hall on Tuesday, October 11th. Summers and former member of Monetary Policy Committee of People`s Bank of China Fan Gang will have a showdown over the possibility of default of the US government and the eurozone risks in the first session of the WKF. Besides the two, Asian Development Bank (ADB) Chief Economist Rhee Chang-yong will join the session to hold a heated debate pitting the two against each other.

[2011.10.10]

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