November 23, 2008 / 5:12 AM / 11 years ago

Summers gets second chance at economy

WASHINGTON (Reuters) - Few people get a chance to save the world once, much less twice. Lawrence Summers will need all his intellectual firepower to make his second round as a key U.S. economic policymaker match up to past ratings.

A brainy 53-year-old academic and politician, Summers will be named to head President-elect Barack Obama’s National Economic Council, a transition official said.

The appointment, expected to be officially unveiled on Monday, will mark Summers’ second turn in the Washington spotlight after serving as Treasury chief for 1-1/2 years from July 1999 until January 2001 under then-President Bill Clinton.

One of his more famous moments came early in 1999, when Time magazine put Summers — who at the time was No. 2 at Treasury — his boss Robert Rubin and former Federal Reserve Chairman Alan Greenspan on its cover as “The Committee to Save the World” for their efforts to quell a currency and financial crisis that was sweeping emerging markets around the globe.

This time the challenges are even more daunting. The global economy is reckoning with a financial crisis that many believe is the most virulent since the 1930s, and which appears to have already driven the United States into recession.

Summers, who was viewed as a top contender to be Obama’s Treasury secretary, has kept a high profile through regular speaking engagements.

He recently called for “speedy, substantial, sustained” stimulus measures that he said would have to last for years to lift the economy out of its current slump.

When his last Treasury stint ended in 2001, Summers moved on to a controversial tenure as president of Harvard University. He resigned from that post in mid-2005 after a firestorm over whether innate differences accounted for the fact that more men than women entered science and engineering courses.


Though it was seen as a blow at the time to his record of success, Summers continued to teach at Harvard and had enough supporters for having brought the topic into public discussion to emerge with prospects largely unscathed.

It wasn’t the first time Summers had gotten into hot water. In 1991, when he was chief economist at the World Bank, Summers suggested in a memo that developed countries should export more pollution to poorer ones since those countries would face less costs from lost wages or illnesses, given that their wages already were so low.

The memo presented the argument in pure economic terms that seemed ironic and hard to take seriously, but nonetheless infuriated other bank members when it became public.

Still, despite the occasional impolitic comment, Summers has never lacked a forum to speak out on economic issues.

In September, he testified before Congress in support of a second economic stimulus program, warning that the U.S. economy was in “a highly uncertain state with very significant risks to the downside.”

Since then, that uncertainty has turned into the early stages of what many forecasters fear will be a lengthy and potentially deep recession — and calls for a new package of stimulative measures seem certain to intensify.

Summers is a proponent of “economic internationalism,” a term he used earlier this year in a Financial Times commentary arguing that globalization has brought benefits to U.S. workers that might be expanded through more free trade agreements.

That might be a tough sell among fellow Democrats on Capitol Hill, many of whom express deep misgivings that free trade has meant shipping millions of American jobs abroad.

In any event, he will have his hands full as the Obama administration grapples with the many bailout programs that Treasury is running for troubled financial firms, trying to guide the U.S. economy back onto a more prosperous path and revamping U.S. regulation to try to ensure another crisis of this type never erupts again.

For Summers, a wunderkind who became a full professor at Harvard at 28 and who has never been known for his smooth manner, it may help that Congress remains under Democratic control and possibly more receptive to his initiatives.

Summers is intense, often blunt-spoken and more likely to be dandruff-flecked than polished in his regular appearances at global forums and august events like the annual retreat at Jackson Hole, Wyoming, for central bankers and other top economic thinkers from around the globe.

But his presence at such events is a mark of respect for his achievements have earned him and a sign of his willingness to rise to a challenge or debate, a quality that he will need to steer the wounded U.S. economy to health.

Reporting by Glenn Somerville

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