Summers's views strike chord in Asia

NEW DELHI, India -- Lawrence H. Summers, the former US Treasury secretary and Harvard president, has maintained a low profile in the United States since he stepped down from the university post last year amid controversy.

But in Asia, Summers appears to be the man of the hour. His views on the importance of Asia's growth, the challenges of globalization, and the danger of the huge US trade deficit are widely promoted by policymakers and economists. He is eagerly solicited for lectures and keynote speeches, where his characteristically unvarnished opinions creep into discussions of fiscal policy.

On Tuesday, Summers spoke to an audience that overflowed a ballroom at the Taj Mahal Hotel in New Delhi, telling hundreds of economists, government officials, and business executives that most of the action on global warming needed to "take place in the developing world."

The industrial world was responsible for much of the problem, he said, but most of the solutions must come from the developing world, where emissions are growing the fastest and infrastructure is still unbuilt. The developing world should "demand" that it be compensated and supported for taking actions "in the interest of all," he said.

"Larry is very stimulating intellectually and an 'out of the box' thinker," said Isher Judge Ahluwalia, the chairwoman of the Indian Council for Research on International Economic Relations, the group that invited Summers to speak.

Summers's participation in and influence on Asian economic policy dates back to his role as the chief economist at the World Bank in the early 1990s.

While eminent Indian economists like Jagdish Bhagwati, a proponent of unfettered free trade, were arguing against regional trade alliances in the mid-1990s, India and other South Asia countries were pushing for them, in part because Summers supported the alliances, said Saman Kelegama, the executive director of the Institute of Policy Studies of Sri Lanka and coeditor of The South Asia Economic Journal.

"Larry was one of the main proponents" of regional trade alliances, Kelegama said, "and his view was considered seriously."

On that issue, "South Asia generally goes along with Summers," Kelegama added, which is why the region has pursued the South Asian Free Trade Alliance and other bilateral alliances while negotiating in the World Trade Organization.

In a series of visits to China, India, Singapore, and Hong Kong since early 2006, Summers has reiterated several themes that have special resonance in Asia, but have yet to be widely accepted in the United States.

Among them are the idea that growth and changes in Asia are the most important thing to happen during our lifetimes, that the United States and Europe have not yet appreciated the impact of these changes, and that the global imbalances from the United States' current-account deficit -- nearly $1 trillion in 2006 -- could have severe consequences.

Summers has been sharply critical of current US fiscal policy and the way that Asia sustains borrowing by the United States by continuing to purchase government debt. During a visit to Mumbai in March last year, Summers warned the Reserve Bank of India of the United States' "unsustainable and dangerous" current-account deficit.

In Beijing this January, he asked hundreds of economists and policy makers at a Global Development Network conference to consider the fact that $2 trillion from developing Asia, invested in US Treasury bills, was making a "zero real return." Imagine instead, he said "all the opportunities in these countries for productive investment."

Summers visited Singapore for the International Monetary Fund conference in September, then stopped in Hong Kong, where he told those attending an Asia Society dinner that 300 years from now, what will be seen as the most important event of these times will not be the end of the cold war, the terrorist attacks of Sept. 11, 2001, or the war in Iraq, but "the rise of Asia and all that it meant for people in Asia and all that it meant for the world system."

The governments of China and India have both announced that they will invest their foreign exchange reserves in new areas, which will divert them from US Treasury bills.

Subir Gokarn, the chief economist at Crisil, a ratings agency in India, said that Summers's remarks about "the race to the bottom, and the adverse effects of globalization" strike a chord in Asia.