23 Jan 2012

Larry Summers denies blame for financial crisis

Krishnan Guru-Murthy interviews Larry Summers, one of the most renowned economists in the world, the man who ran the US economic policy for Barack Obama and Bill Clinton.

Larry Summers is one of the most renowned economists in the world and the man who ran the US economic policy for Barack Obama and Bill Clinton. He was over in Britain giving evidence to the London School of Economics about how to stimulate growth in the UK economy.

He suggests the Chancellor should change course and spend more on a stimulus package. But a memo he wrote to Barack Obama in 2008 has just been published in the United States and is causing quite a stir. It reveals he urged caution against the idea of a one trillion dollar stimulus package and the Nobel Prize winning economist Paul Krugman has been fierce in his criticism of this in the New York Times.

Summers has spent his career moving between the World Bank (for which he is currently being tipped as the man Obama will nominate for the top job), the government, academia and financial services. He was briefly portrayed in the Facebook film The Social Network giving the Winklevoss twins short shrift when they wanted him to take action against Mark Zuckerberg who they claimed had stolen their idea. He has joked about his appearance in the movie and not denied the general idea of what happened. However he is much more prickly about the more recent feature documentary about the financial crisis Inside Job, narrated by Matt Damon, in which Summers comes in for some severe criticism. He is often portrayed – he believes unfairly – as a sort of godfather of deregulation, for arguing against the regulation of complex financial products such as derivatives. He also paved the way for the creation of huge banks that were then regarded as too big to fail.

As well as asking in the first few minutes about his thoughts on the British economy when we met I put some of the criticism about both Larry Summers periods in office to him. If you are more interested in the American answers skip to about seven minutes in!