Why does Larry Summers have more lives than a cat?
He was fired as president of Harvard, did not exactly serve President Obama brilliantly as economic policy czar, and now seems to be in line for the presidency of the World Bank, a post traditionally chosen by the president of the United States.
The deadline for the selection is this Friday, March 23. The appointment is supposed to be made official at the April meeting of the World Bank.
Earlier this month, the White House leaked a short list of three names, Summers plus U.N. Ambassador Susan Rice and Massachusetts Senator John Kerry—neither of whom want the job. Brilliantly subtle signaling, that.
Pointedly excluded from the list was Columbia University economist and world citizen Jeff Sachs, an adviser to the U.N. Secretary General Ban Ki-moon and a very serious crusader against world poverty. Sachs took the unprecedented and marvelously transparent step of nominating himself and publicly campaigning for the job, but he is a onetime rival of Summers at Harvard, a critic of administration financial policy and at the Bank he would be nobody’s cat’s paw.
It speaks volumes that Sachs’ candidacy is not being taken seriously at the White House, though 27 members of the House have urged his appointment as have leaders of several smaller developing nations.
Nominally, the World Bank president is selected by a majority of the voting shares. The US and Europe together control a majority and invariably vote as a bloc. Ever since the World Bank and its sister institution the International Monetary Fund were founded in 1944, one has traditionally been headed by an American and the other by a European. The current head of the IMF is Christine Lagarde, former French finance minister.
Summers’ appointment is all but certain, bur there are two ways that it could still come off the rails. There has been some criticism by third world nations seeking a more open process. And Summers has plenty of detractors in Europe. More generally, smaller nations have been pushing the idea that one of the big-three international economic institutions—the Fund, the Bank and the World Trade Organization—be headed by someone from the Third World.
But this will not happen with the Bank presidency any time soon. Perhaps when the WTO job opens up.
Small third world nations don’t have the influence to demand an alternative and the larger ones—China, India, Brazil—do not have a rival candidate. The closest thing to serious pushback has been a guarded comment by the Mexican finance minister, Jose Antonio Meade, current chair of the G-20, asking for a more open process.
So the only practical way Summers’ nomination will be blocked is if Obama has second thoughts or if some major European leader decides that he or she can’t abide Summers and decides to spend serious political capital demanding an alternative.
However British Prime Minister David Cameron is happy to play his usual role of lap dog to the U.S, the French are consumed with an election that President Sarkozy is likely to lose, and German Chancellor Angela Merkel has her own problems.
Summers bombed as president of Harvard. He not only offended a large segment of the faculty, but gambled recklessly with the university’s endowment based on his own seat-of-the-pants theories, losing billions. At the time people said, “Thank God this man is not running the entire economy.”
Then President-elect Obama chose him to run the U.S. economy. As head of the National Economic Council, where Summers was supposed to serve as an honest broker, he functioned more as martinet. On policy issues, he resisted a larger stimulus, as well as more fundamental reform of the financial system. Some latter day reports have suggested a bitter rivalry with Treasury Secretary Tim Geithner, but Geithner is said to be fully supportive of Summers’ appointment to head the Bank.
Summers did a stint at the Bank before, as its chief economist. He was not popular among its third world clients or its staff.
So why does Summers keep falling upward, from failure to promotion?
Three reasons. He has powerful allies and patrons, and his views on the primacy of finance are congenial to theirs. Former Goldman and Citibank executive (with pit stops in between in D.C.) Robert Rubin, Summers’ partner in the financial deregulation project of the Clinton era, is the most influential of these. Summers has a capacity to persuade people of his sheer brilliance, which leads some people to excuse both his mistakes and his temperament. But most importantly, Barack Obama likes Summers, and Obama is loyal to a fault.
Summers wants this job. Barring last minute doubts on Obama’s part, he will get it.