As Doug Henwood recently wrote in Jacobin, the madness surrounding GameStop should serve as a reminder of the uselessness of the stock market — a giant casino where a small number of people get rich from trading trillions of dollars of securities per day, while raising virtually no capital for real investment.
Realizing this, progressive economists have endorsed a financial transactions tax, a small levy on each securities transaction that would raise tens of billions of dollars per year while shrinking the massive volume of pointless trading. It’s a no-brainer policy that would make the economy fairer and more efficient — and at one point during the Obama administration, it was actually being seriously considered.
That is, until Larry Summers intervened to quash the idea.
Which brings us to an important question: Why hasn’t Larry Summers been driven from public life?
Late last year, Summers reared up again from his neoliberal abyss to argue that Americans, in fact, should not receive more federal money during the worst pandemic in a century. “Some argue that while $2,000 checks may not be optimal support for the post-Covid economy, taking stimulus from $600 to $2,000 is better than nothing,” Summers wrote in Bloomberg. “They need to ask themselves whether they would favor $5,000, or $10,000 — or more. There must be a limiting principle.”
Too many people, Summers said, are doing just fine right now — and America can’t risk helping everyone. “Further adding to earnings when losses are being replaced seven times over seems hard to justify — especially at a time when pent-up savings totals $1.6 trillion and is rising,” he continued. “If writing universal checks is a good idea, why not do it after household incomes have reverted to normal?”
Summers has worn many hats in his illustrious career. He was chief economist at the World Bank, treasury secretary under Bill Clinton, and the director of the National Economic Council under Barack Obama. Along the way, he also found time to be president of Harvard. He is a man of disastrous influence, floating from one sinecure to the next to preach that money need not be redistributed too aggressively to those in need.
There must be a limiting principle is the pivotal phrase here. It might as well be branded on every neoliberal politician, economist, and pundit who insist that the wealth of America’s prodigious rich should not be jeopardized for the mere sake of ensuring a decent life for ordinary people. Summers should be forced to tell every parent on a food pantry line that the American economy must have a limiting principle.
What’s bizarre about so many economists allegedly on the Left is how small their imaginations remain. They fret at the prospect that someone, somewhere, who seems less than deserving might get help, too. The Ivy League economist argues that aid must be microtargeted and means-tested, the pool of eligible recipients vigilantly limited.
But precarity can visit almost anyone. During the COVID-19 pandemic, millions of jobs have disappeared overnight. Millions of otherwise healthy people have suddenly fallen severely ill. Even if someone who gets a $2,000 check doesn’t need it at the moment, it could easily cover their rent in the event their employer lays off workers or a family member gets sick.
Summers, though, has never seen it that way. He may insist on a limiting principle for programs that help ordinary people, but throughout his career he has opposed any limiting principle for those who need money least.
There was the $20 billion in taxpayer funds that went to rescue currency traders when Mexico’s peso faltered in 1995, the enormous IMF bailouts of Asia and Russia in the late 1990s, and multitrillion rescues of the financial sector in 2008 and again in 2020. The argument, from Summers, was rather simple: financial institutions must not be allowed to take crippling losses, even if those losses were the fault of the companies in question.
But the logic changes when it’s ordinary individuals, rather than multibillion-dollar corporations, who need help. Immediately, the concern shifts to inflation, interest rates, and the national debt. Banks can be too big to fail, but the working class is too small to rescue. American capitalism can always tolerate more individual ruin.
The wonks propose boosting unemployment insurance in lieu of direct payments. But few of them have had to wait months for their benefits to arrive, calling and emailing and even tweeting to no avail. Few have experienced their state-issued debit cards suddenly, without explanation, ceasing to work, resulting in a terrifying interruption of payments. For many Americans, $2,000 can cover multiple months of rent. Summers, who has raked in millions from hedge funds and speaking fees, will never understand that reality. Money so small means nothing to him.
There have been signs that neoliberals like Summers will enjoy somewhat less influence in the Biden administration than they did under Clinton or Obama. Biden’s White House economic advisers are noticeably to the left of Summers, and so far the new president has bucked the advice of deficit hawks.
Let’s hope it lasts. Summers and his fellow Clintonites are always in search of a limiting principle to keep efforts to alleviate hardship from getting out of hand. What we need is a limiting principle on the baneful influence of neoliberals like Larry Summers.