Summers is on to something, here. But wait, this is the Larry Summers, who fired Iris Mack after she warned him about the derivatives exposure in the Harvard endowment. Has Summers finally gotten something right?
Well, not exactly.
For Summers, economic growth means more government spending. What is his "growth" prescription to these financially teetering countries? Why, more debt!! I am not making this up. Summers writes:
Sceptics will rightly wonder how a prescription for more spending by countries that already have trouble borrowing can be correct. The answer lies in the difference between borrowing by an individual and by a country. Normally, an individual helps his creditors by borrowing less, but a person who stops borrowing to finance commuting to work does his creditors no favour. Similarly, since for a country income is determined by spending, a country that pursues austerity to the point where its economy is driven into a downward spiral does its creditors no favour. Yes, there will ultimately be a need to raise retirement ages, reform sclerosis-inducing regulations and restructure benefit programmes. Phased in, commitments in these areas would be constructive. But the prospect for success, politically and economically depends on the restoration of growth.There you have it. In Summers mind, it is only government spending that can restore growth. He totally ignores the fact that governments are bureaucratic, central planning organizations that are the direct opposite of what is required for growth. What is needed is the opportunity for free enterprise and the profit motive to flourish, not more central planning.
The EZ governments have abused the trillions they have already borrowed and so Summers wants to give them more. Amazing.
Clearly, Summers has too much time on his hands. Can someone get him a position as Paul Krugman's man- servant?