A Morning Prayers Address by Larry Summers, Harvard Memorial Hall, 9/15/2003: ANNOTATED

Yesterday, I finished reading Michael Sandel's What Money Can't Buy: The Moral Limits of Markets. I found the book interesting albeit a bit disappointing since much of Sandel's discussion failed to penetrate deeper into the relationship between market thinking and morality--or even to take a step further to discuss the relationship between capitalism and morality. (If such matters interest you, read the book forum from last fall's edition of The Hedgehog Review).

In one of his chapters, Sandel mentions a Morning Prayers address that then-president of Harvard University Larry Summers delivered at the university's Memorial Church. After reading the excerpts, I wanted to read the full speech, knowing I would enjoy criticizing Summers's arguments.
As you probably know, it seems increasingly likely that Obama will nominate Summers to chair the Fed despite the reservations that many Democrats have about him and despite his key involvement in the financial deregulation that paved the way for the financial collapse, his notoriously bad temperament, his refusal ever to acknowledge that maybe--just maybe--he might have been wrong, his having lost Harvard a ton of money, his vocal support for outsourcing and contempt for its critics, his past support dumping toxic waste in third-world countries, his chauvinism, etc., etc. The strikes against him are too many to name just now.

The Morning Prayers address that he delivered ten years ago exactly (September 15, 2003) reveals a lot about his worldview and his sense of morality and economics, and it's not flattering.
I'm going to skip the first two paragraphs because they are just introductory. So here goes.

I want to reflect this morning on what the discipline that I am trained in -- economics -- can contribute to thinking about moral questions. Economics provides just one perspective, but one that I think is too rarely appreciated for its moral as well as practical significance.

Indeed, it is fair to say that economists like me rarely appear in places like this. Just why is not altogether clear. But when it comes to preaching economists, it strikes me that there is both a lack of demand and a lack of supply. A lack of demand because so many believe that any economic way of thinking is one that knows the price of everything and the value of nothing. A lack of supply because many economists are instinctively uncomfortable with moral, let alone spiritual, discourse.

Maybe people tend not to invite economists to speak in such venues because, as studies have shown, they tend to be more selfish than those in other disciplines.  (Go here for a review of such studies.)

And yet, it seems to me there are some aspects of characteristic economic modes of reasoning that complement other modes of moral thought. One important thing that is distinctive about the way economists approach the world is their great emphasis on respect for individuals -- and the needs, tastes, choices and judgment they make for themselves. It is the basis of much economic analysis that the good is an aggregation of many individuals' assessments of their own well-being, and not something that can be assessed apart from individual judgments on the basis of some overarching or separate theory.

Economists often like to believe that they have a realistic view of individuals. However, Homo Economicus--the utility-maximizing, rational, self-interested individual of the economics textbook--is more imagined than real. Economists, rather than respecting individuals as such, impose their own set of morals on them. Neuroscientists and behavioral economists (not just philosophers, theologians, and artists) have been challenging the economistic view of the individual.

Summers's comments here imply a denigration of public goods and a failure to acknowledge that public goods like health and education have spillover effects, providing benefits to others beyond the immediate recipient of such services.

I was reminded of these issues as I had a chance over the weekend to engage with many students at the freshman barbecues on issues of moral concern to all of us. For example, many believe that it is wrong to buy imported products produced by workers who are paid less than a specified minimum wage of some sort. We all deplore the conditions in which so many on this planet work and the paltry compensation they receive. And yet there is surely some moral force to the concern that as long as the workers are voluntarily employed, they have chosen to work because they are working to their best alternative. Is narrowing an individual's set of choices an act of respect, of charity, even of concern? From this perspective the morality of restrictions on imports or boycotts advocated by many is less than entirely transparent.

This reminded me of Matt Yglesias's argument after the tragic garment factory fire in Bangladesh that other countries don't need stronger safety laws.

Larry Summers fails to acknowledge that not all choices made in the market are completely free because individuals do not have equal power in market relationships. Rather than offering the widest array of free choice and action, markets can actually constrain individual choice, forcing those with less power or agency into unfavorable arrangements because they lack other alternatives. Boycotts are by no means perfect as a mechanism for influencing corporate behavior, but they aim to shame the employer into improving the conditions for labor, a worthwhile goal by all means. If the sweatshop is the "best alternative" available, then we should demand better labor standards and support greater bargaining and organizing power for the workers. We should also demand better national and international standards for labor conditions and corporate accountability. Summers exhibits a rather crude humanitarianism that reminds me of the arguments of those who defend child labor or oppose the minimum wage and accuse their opponents of paternalism.

Such boycotts are not motivated by "charity," if we take that word in its common meaning. "Concern" and "respect" are closer to the sentiment present. The prominent labor term "solidarity" is probably even more fitting because such boycotts are a way of saying that you will not be complicit in the violation of the dignity of the exploited workers for the profit of the employer.

In a similar vein, it is often suggested that the marketization or Westernization of indigenous cultures is doing great damage. And surely in some cases it is. But here too, the individual-based perspective may help us to see a different side of the moral question -- for an economist would attend first to those directly affected rather than to the judgments of those who are new to the situation. It disturbs the sensibilities of many of us to imagine the TV show "Survivor" being beamed to satellite dishes in rural villages or the pervasiveness of the Nike symbol, but if that is what people want, we need to be cautious about opposing their having it.

Summers appears to believe that a show like "Survivor" or a product like a Nike shoe are born from the dreams of countless individuals, rather than the ideas of a few people in a marketing or product design office.

He also appears unable to comprehend that there could be indigenous opposition to the commercialization of their societies and the infiltration of foreign corporations that comes with the trade liberalization pushed on Latin American countries by the IMF and the World Bank.

There is another observation that is closely related. There is much that is wrong with the market, but one of the things that most bothers many people of faith about market mechanisms is the idea that there is something wrong with a system where we are able to buy bread only because of the greed or profit motive of the people who make the bread. Here I would be very cautious. We all have only so much altruism in us. Economists like me think of altruism as a valuable and rare good that needs conserving. Far better to conserve it by designing a system in which people's wants will be satisfied by individuals being selfish, and saving that altruism for our families, our friends, and the many social problems in this world that markets cannot solve. This is not just an abstraction -- the far larger degree of private charity in this country than in Western Europe, and in Western Europe than in the socialist economies, is worth some reflection -- especially in institutions like this one that are made possible by acts of private altruism.

I'm going to make some of my quick responses first and then go into the longer one.

First, what, in his mind, are the "many social problems in this world that markets cannot solve"? He does not specify what they are or whether he believes that they should be solved by government (i.e. the organized public) or by voluntary individual charity. I'd guess he'd say the latter.

Second, I do not think that anyone is saying that said baker should only bake bread so that he can selflessly provide it for others. He is working for a livelihood; insofar as he is paid, his work is not entirely selfless. He is not merely handing out loaves of bread to the poor on the street. Rather, the critiques of capitalism from people of faith (or lack of faith but ample humanism) seek to eradicate, limit, or deprioritize the role of profit. The quest for profit should not be the reason why the baker bakes bread. His motivations should entail the development of talent, intellect, and personality; the advancement of craft; the performance of a service beneficial to society; and the need to provide for himself and his family if he has one. (I could go on a long tangent on the different moral qualities of dividends and interest, influenced by R. H. Tawney, but I will refrain.)

The underlying ethic of an economy rooted in service would not be altruism alone and certainly not selfishness, but rather a sense of jointness (or interdependence or mutuality), both other-regarding and self-regarding.

Next, to which countries is he referring when he says "socialist countries"? As of now (and it would have been the same in 2003), there are only four countries that ascribe to a Marxist-Leninist form of socialism as state doctrine: China, Cuba, Laos, and Vietnam. China's economy is really more state capitalism than socialism.  Vietnam has also been described as operating under a system of state capitalism. Laos has also moved in such a direction. The left often critiques Cuba for state capitalism as well.

Bangladesh, Guyana, India, North Korea, Portugal, Sri Lanka, and Tanzania all also make references to socialism in their constitutions. Most of these countries have encountered significant privatization since the writing of their constitutions, and North Korea has also received critique and praise for moving in the direction of state capitalism.

But the claim of the contrast between the U.S. and Western Europe is much more clear, so let's look at that one more closely. We can look at charitable giving in two ways: the percentage of people who give and the total amount given.

Every year, the Charities Aid Foundation releases the World Giving Index, which ranks countries by the percentage of people who volunteer time, donate money, or help strangers. (They determine this through a survey. Go to their site if you have questions on methodology). In 2012, the U.S. ranked #13 for "giving money." Ahead of the U.S. (in descending order) were Ireland, Australia, the Netherlands, the United Kingdom, Indonesia, Thailand, Denmark, New Zealand, Malta, Canada, Hong Kong, and Cambodia. Sweden and Luxembourg ranked just below the U.S. The U.S. actually came out last among the Anglo nations, and it was beaten by four Western European countries: Ireland, the Netherlands, the U.K., and Denmark.  It did, however, score far better than countries like Germany (#28), Italy (#35), and France (#53).

In terms of charitable giving as a percentage of GDP, the United States does come out on top according to the Johns Hopkins Center for Civil Society Studies. About a third of charitable giving in the U.S. goes to houses of worship--some of that will go to altruistic purposes like soup kitchens, but not all of it will.

However, the size of the philanthropic sector in the U.S. parallels the weakness of its welfare state. Charitable giving that goes to address poverty, food insecurity, lack of health care access, lack of quality education, etc., are signs of a failure of the state to provide for the basic needs of its populace. Western European countries are much better at providing such public goods and services. An ethic of solidarity or community replaces one of mere charity. And I'd say that's a good thing.

There is much to argue with what I have said. But I will have served my purpose if I have suggested that many of the viewpoints that are dismissed as selfish or "just economic" are motivated not by an unwillingness to grapple with moral issues but with an insistence that often the highest morality is respecting the choices and views of people who we all want to help.

This is very similar to the arguments that Milton Friedman would always make, accusing his critics of being paternalists.

As I noted earlier, Larry Summers fails to comprehend that in the market, not all individuals have equal power or agency; consequently, their freedom of choice is constrained by the market itself. Summers's argument is the ultimate defense of the status quo: Everything is the way it is because individuals have chosen it, so there is no need to change anything.

"You want to raise the minimum wage? Clearly, people are choosing to stay at their jobs with their low wages; they could have chosen to work somewhere else. How dare you liberals try to interfere with the choices made by others!"

And I hope also to have demonstrated in some tiny way, on this first day of classes, what we at Harvard are all about -- the continual search to come closer and closer to veritas through the juxtaposition and consideration of very different perspectives.

At least, he ended the speech well. The juxtaposition and consideration of very different perspectives is central to a vigorous public and intellectual debate. If Obama ultimately decides to nominate Summers for chairman of the Fed, I hope that we see many different perspectives from that of the administration on display in his hearings.