10 ms·

Larry may be right on some points, but given his past support for and architecting of deregulation of the U.S financial system (including the repeal of the Glas

by nemo 11y ago

Larry may be right on some points, but given his past support for and architecting of deregulation of the U.S financial system (including the repeal of the Glass-Steagall Act) while he was in the Clinton admin., along with support for the disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering and political failure, as well as gambling with Harvard's endowment and losing the school $1.8 billion, triggering layoffs and budget slashing, I think we'd do well to find advice from those with a less predictable and disastrous track record.

alienjr 11y ago
"support for the disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering" Lack of privatization in Post-Soviet states lead to massive human suffering. In Poland the government constantly subsidies all companies that weren't privitzed in 90s. What's worse quality of products and services in these industries is terrible. That's why for instance electricity in Poland is one of the most expensive in Europe. And it is impossible to change anything because all these companies are highly unionized and have huge political influences during elections. Little state ownership may work fine in countries that has different culture in rest of the economy has been capitalistic for last 200 years. In Post-Soviet world it is disastrous. Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia.
- RobertoG 11y ago
  "Gazprom and other state companies were overtaken by the Putin's mafia" That is called "privatization".
  - jahewson 11y ago
    Sort of. The Russian government still owns a majority stake in Gazprom and Putin's conquests have been under the banner of moving corrupt private oil companies back into the public hands of Gazprom. So it's really a landgrab by the state, which happens to own a private company. But it was the US's policy of rapid "shock" privatisation which resulted in the unmanaged sell-off of the original state assets in the 1990s and the creation of those oligarchs. It's like selling USPS for $1m - that's not privatisation, it's madness.
    - RobertoG 11y ago
      I agree that Russia is a very extreme case, but it would be difficult to find any place in the world where privatization was not done in the benefit of a few friends of the people in power. Mexico and Carlos Slim comes to mind for instance.
  - ArkyBeagle 11y ago
    It was a reaction to a power vacuum. A very severe power vacuum. Frontline's "Putin's Way" is highly instructive. Failed states are dangerous.
- zurn 11y ago
  Many European countries have very large (dominant even) state owned power companies that work pretty well. But really the argument about Russian privatization is that it ought to have been executed less poorly, for example not donating most state property to a few corrupt oligarchs.
  - xixi77 11y ago
    I would not use words "poor execution" to describe a process that achieved its exact intended effect. Nor does it have anything whatsoever to do with any American economic advisors. It only looks like a failure if we assume that the Soviet (and post-Soviet Russian) state considered its subjects as stakeholders, which has never been the case.
- nemo 11y ago
  I haven't got a problem with privatization per se, and recognize that some approach to privatization was called for. I have major problems with the disastrous "shock therapy" approach to privatization that was actually applied where the US economic advice was what created the mafioso oligarchs.
  - xixi77 11y ago
    You are grossly overstating the influence of the "us economic advice", which was zero. The mafioso oligarchs needed and used none of it.
    - jahewson 11y ago
      You might want to read up on this. It was US economic advice which led to the rapid sell-off of public assets which resulted in the creation of the oligarchs in the first place.
      - xixi77 11y ago
        Seriously, I do not need to read up on this, I was there. But one does not really need to have first-hand experience to see the deliberate deception in klein's "shock doctrine" and the like: for example, different countries in the region had markedly different timings, different implementation of reforms, different rhetoric, and different resources; but the outcomes pretty much fall into two groups: places where people demanded and expected accountability on part of government (ie. baltic states, and a few former warsaw pact countries) did relatively fine, and others devolved into oligarchies (ie. the rest of the former soviet union).
  - drumdance 11y ago
    Here's Jeffrey Sachs' account of his role: http://jeffsachs.org/2012/03/what-i-did-in-russia/ http://jeffsachs.org/2012/03/what-i-did-in-russia/ You can see he did NOT advocate shock therapy and resigned when he realized he could do nothing about growing corruption.
    - 11y ago
- Mikeb85 11y ago
  > Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia. You must have missed the Boris Yeltsin era...
- eli_gottlieb 11y ago
  >Lack of privatization in Post-Soviet states lead to massive human suffering. No, lack of rule-of-law and stochasticity (allowance of firms to succeed or fail on their own merits) lead to massive human suffering. If you "privatize" everything without solid rule-of-law and with bank bailouts, you get massive human suffering and no growth. If you "nationalize" things without solid rule-of-law and without allowing experiments in new ways of doing things, you get massive human suffering and no growth.
  - meatysnapper 11y ago
    thank you. people take "rule of law" for granted.
snowwrestler 11y ago
Repealing Glass-Steagall was not a bad thing. In the recent financial meltdown, diversified financial institutions like JP Morgan survived, and less diversified institutions like AIG, WaMu, Bear Sterns and Lehman did not. Even the i-banks that survived, like Goldmann and Merrill, did so by diversifying. Goldmann became a bank holding company and Merrill merged with B of A. I don't have the background to address the other points, but the focus on Glass-Steagall annoys me because the counterproof is so obvious.
- maxerickson 11y ago
  Goldman became a bank holding company so that they could access a fed emergency lending facility. Without that lending facility, they probably would have collapsed. They didn't hesitate to organize their new bank in a way that was profitable, but they didn't diversify to survive, they begged for a different legal classification so that they could get a big loan. AIG collapsed because instead of a boring insurance company, it was a boring insurance company with a bunch of people trading crazy financial derivatives. Under Glass-Steagall, the insurance business wouldn't have been exposed to those derivatives.
  - snowwrestler 11y ago
    > Under Glass-Steagall, the insurance business wouldn't have been exposed to those derivatives. Glass-Steagall was a law that regulated banks, i.e. financial institutions that accepted deposits. AIG would never have been covered by Glass-Steagall. This is one reason I find the topic annoying: people ascribe all sorts of effects to Glass-Steagall that it did not actually do.
    - rustynails 11y ago
      I know little about this topic. Can you please help me understand. Wikipedia says the act applies to banks and securities, https://en.m.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation https://en.m.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legis... I thought AIG provided securities. I'm sure I'm missing something obvious as it's not something I know anything about
SovietDissident 11y ago
"disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering and political failure" Communists around the world killed between 60 million and 100 million people (there is debate among scholars as to the exact number).[0] Stalin killed the "wealthy" peasants, enslaved Eastern Europe, and carted millions off to work camps in Siberia (where they would eventually die or become broken people). Pol Pot killed 2 million of his own people as a "social engineering" experiment (after studying Rousseau). Mao killed 45 million in 4 years. Can anyone say "massive human suffering and political failure"? It's true that the Post-Soviet states have had mixed results, based upon which have privatized industry and enacted pro-freedom policies, and also based upon which people retained trace Enlightenment notions of the government's relationship to its citizenry. Estonia, for example, has flourished: "The foundation was laid in 1992 when Mart Laar, Estonia’s prime minister at the time, defibrillated the flat-lining economy. In less than two years his young government (average age: 35) gave Estonia a flat income-tax, free trade, sound money and privatisation. New businesses could be registered smoothly and without delays, an important spur for geeks lying in wait."[1] In Russia, a heavy-industrial and resource-based country (partly thanks to Stalin's 5-year-plans and massive capital theft from the Eastern Bloc countries), former Communist officials assumed ownership of state assets during the transition, and it predictably has not done as well. Again, we can argue that liberalization has not occurred to a great extent in countries such as Russia, where a strongman still rules. (It's probably the case that places with massive natural resources have had greater struggles, as there was probably better opportunity for collusion by the political oligopoly. Less resource-rich countries have on-average fared better.) We can have an intelligent discussion comparing each of those countries based on the different policies they have enacted. However, to drop historical context of life (and death) during the Soviet era is completely ludicrous. [0] https://en.wikipedia.org/wiki/Mass_killings_under_Communist_regimes https://en.wikipedia.org/wiki/Mass_killings_under_Communist_... [1] http://www.economist.com/blogs/economist-explains/2013/07/economist-explains-21 http://www.economist.com/blogs/economist-explains/2013/07/ec...
- nemo 11y ago
  I'm not saying they shouldn't have privatized at all, I'm saying the way they privatized was disastrous. Summers was deeply involved in supporting terrible policy and putting corrupt US economic advisors in Russia to advise Yelstin. Those US economic advisors then worked to profit off the policies they were pushing.

by nemo 11y ago

alienjr 11y ago

"support for the disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering" Lack of privatization in Post-Soviet states lead to massive human suffering. In Poland the government constantly subsidies all companies that weren't privitzed in 90s. What's worse quality of products and services in these industries is terrible. That's why for instance electricity in Poland is one of the most expensive in Europe. And it is impossible to change anything because all these companies are highly unionized and have huge political influences during elections. Little state ownership may work fine in countries that has different culture in rest of the economy has been capitalistic for last 200 years. In Post-Soviet world it is disastrous. Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia.

RobertoG 11y ago
"Gazprom and other state companies were overtaken by the Putin's mafia" That is called "privatization".
- jahewson 11y ago
  Sort of. The Russian government still owns a majority stake in Gazprom and Putin's conquests have been under the banner of moving corrupt private oil companies back into the public hands of Gazprom. So it's really a landgrab by the state, which happens to own a private company. But it was the US's policy of rapid "shock" privatisation which resulted in the unmanaged sell-off of the original state assets in the 1990s and the creation of those oligarchs. It's like selling USPS for $1m - that's not privatisation, it's madness.
  - RobertoG 11y ago
    I agree that Russia is a very extreme case, but it would be difficult to find any place in the world where privatization was not done in the benefit of a few friends of the people in power. Mexico and Carlos Slim comes to mind for instance.
- ArkyBeagle 11y ago
  It was a reaction to a power vacuum. A very severe power vacuum. Frontline's "Putin's Way" is highly instructive. Failed states are dangerous.
zurn 11y ago
Many European countries have very large (dominant even) state owned power companies that work pretty well. But really the argument about Russian privatization is that it ought to have been executed less poorly, for example not donating most state property to a few corrupt oligarchs.
- xixi77 11y ago
  I would not use words "poor execution" to describe a process that achieved its exact intended effect. Nor does it have anything whatsoever to do with any American economic advisors. It only looks like a failure if we assume that the Soviet (and post-Soviet Russian) state considered its subjects as stakeholders, which has never been the case.
nemo 11y ago
I haven't got a problem with privatization per se, and recognize that some approach to privatization was called for. I have major problems with the disastrous "shock therapy" approach to privatization that was actually applied where the US economic advice was what created the mafioso oligarchs.
- xixi77 11y ago
  You are grossly overstating the influence of the "us economic advice", which was zero. The mafioso oligarchs needed and used none of it.
  - jahewson 11y ago
    You might want to read up on this. It was US economic advice which led to the rapid sell-off of public assets which resulted in the creation of the oligarchs in the first place.
    - xixi77 11y ago
      Seriously, I do not need to read up on this, I was there. But one does not really need to have first-hand experience to see the deliberate deception in klein's "shock doctrine" and the like: for example, different countries in the region had markedly different timings, different implementation of reforms, different rhetoric, and different resources; but the outcomes pretty much fall into two groups: places where people demanded and expected accountability on part of government (ie. baltic states, and a few former warsaw pact countries) did relatively fine, and others devolved into oligarchies (ie. the rest of the former soviet union).
- drumdance 11y ago
  Here's Jeffrey Sachs' account of his role: http://jeffsachs.org/2012/03/what-i-did-in-russia/ http://jeffsachs.org/2012/03/what-i-did-in-russia/ You can see he did NOT advocate shock therapy and resigned when he realized he could do nothing about growing corruption.
  - 11y ago
Mikeb85 11y ago
> Look at Russia for intance - Gazprom and other state companies were overtaken by the Putin's mafia. You must have missed the Boris Yeltsin era...
eli_gottlieb 11y ago
>Lack of privatization in Post-Soviet states lead to massive human suffering. No, lack of rule-of-law and stochasticity (allowance of firms to succeed or fail on their own merits) lead to massive human suffering. If you "privatize" everything without solid rule-of-law and with bank bailouts, you get massive human suffering and no growth. If you "nationalize" things without solid rule-of-law and without allowing experiments in new ways of doing things, you get massive human suffering and no growth.
- meatysnapper 11y ago
  thank you. people take "rule of law" for granted.

snowwrestler 11y ago

Repealing Glass-Steagall was not a bad thing. In the recent financial meltdown, diversified financial institutions like JP Morgan survived, and less diversified institutions like AIG, WaMu, Bear Sterns and Lehman did not. Even the i-banks that survived, like Goldmann and Merrill, did so by diversifying. Goldmann became a bank holding company and Merrill merged with B of A. I don't have the background to address the other points, but the focus on Glass-Steagall annoys me because the counterproof is so obvious.

maxerickson 11y ago
Goldman became a bank holding company so that they could access a fed emergency lending facility. Without that lending facility, they probably would have collapsed. They didn't hesitate to organize their new bank in a way that was profitable, but they didn't diversify to survive, they begged for a different legal classification so that they could get a big loan. AIG collapsed because instead of a boring insurance company, it was a boring insurance company with a bunch of people trading crazy financial derivatives. Under Glass-Steagall, the insurance business wouldn't have been exposed to those derivatives.
- snowwrestler 11y ago
  > Under Glass-Steagall, the insurance business wouldn't have been exposed to those derivatives. Glass-Steagall was a law that regulated banks, i.e. financial institutions that accepted deposits. AIG would never have been covered by Glass-Steagall. This is one reason I find the topic annoying: people ascribe all sorts of effects to Glass-Steagall that it did not actually do.
  - rustynails 11y ago
    I know little about this topic. Can you please help me understand. Wikipedia says the act applies to banks and securities, https://en.m.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation https://en.m.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legis... I thought AIG provided securities. I'm sure I'm missing something obvious as it's not something I know anything about

SovietDissident 11y ago

"disastrous privatization of the economies of the Post-Soviet states that's lead to massive human suffering and political failure" Communists around the world killed between 60 million and 100 million people (there is debate among scholars as to the exact number).[0] Stalin killed the "wealthy" peasants, enslaved Eastern Europe, and carted millions off to work camps in Siberia (where they would eventually die or become broken people). Pol Pot killed 2 million of his own people as a "social engineering" experiment (after studying Rousseau). Mao killed 45 million in 4 years. Can anyone say "massive human suffering and political failure"? It's true that the Post-Soviet states have had mixed results, based upon which have privatized industry and enacted pro-freedom policies, and also based upon which people retained trace Enlightenment notions of the government's relationship to its citizenry. Estonia, for example, has flourished: "The foundation was laid in 1992 when Mart Laar, Estonia’s prime minister at the time, defibrillated the flat-lining economy. In less than two years his young government (average age: 35) gave Estonia a flat income-tax, free trade, sound money and privatisation. New businesses could be registered smoothly and without delays, an important spur for geeks lying in wait."[1] In Russia, a heavy-industrial and resource-based country (partly thanks to Stalin's 5-year-plans and massive capital theft from the Eastern Bloc countries), former Communist officials assumed ownership of state assets during the transition, and it predictably has not done as well. Again, we can argue that liberalization has not occurred to a great extent in countries such as Russia, where a strongman still rules. (It's probably the case that places with massive natural resources have had greater struggles, as there was probably better opportunity for collusion by the political oligopoly. Less resource-rich countries have on-average fared better.) We can have an intelligent discussion comparing each of those countries based on the different policies they have enacted. However, to drop historical context of life (and death) during the Soviet era is completely ludicrous. [0] https://en.wikipedia.org/wiki/Mass_killings_under_Communist_regimes https://en.wikipedia.org/wiki/Mass_killings_under_Communist_... [1] http://www.economist.com/blogs/economist-explains/2013/07/economist-explains-21 http://www.economist.com/blogs/economist-explains/2013/07/ec...

nemo 11y ago
I'm not saying they shouldn't have privatized at all, I'm saying the way they privatized was disastrous. Summers was deeply involved in supporting terrible policy and putting corrupt US economic advisors in Russia to advise Yelstin. Those US economic advisors then worked to profit off the policies they were pushing.