This warning doesn’t seem to have been heeded by his shadow chancellor, Ed Balls, who announced that he’ll be working with his old Harvard tutor Larry Summers on an “Inclusive Property Commission” to ensure the economic recovery benefits everyone, not just the rich.
On the face of it, Summers’ work as Treasury Secretary under Bill Clinton from 1999 to 2001, overseeing a period of economic growth, should add some weight to Balls’ commission.
His work as President Barack Obama's chief economic adviser, at the helm of his National Economic Council in 2009, and time as President of Harvard would easily add ballast. Nowadays, Summers is back at Harvard University, serving as its Charles W. Eliot Professor at its Kennedy School of Government.
Balls and Summers would have plenty to agree on too as they are both studentsof the Keynesian tradition, and so both supportive of increased government spending to kick the economy back into life.
But HuffPost UK has drawn together ten things Balls should know of his new guru so he doesn't get too carried away with the Summers programme...
1. Summers says cut benefits to reduce unemployment
Iain Duncan Smith would find a meeting of minds with Summers, who once wrote: “government assistance programs contribute to long-term unemployment…by providing an incentive, and the means, not to work.”
2. Summers was a major force in the pre-crash deregulation drive
While in the Clinton administration as Treasury Secretary, Summers managed the passage of the Gramm-Leach-Billey Act in 1999, which did away with many items of banking regulation brought in after the Great Depression, like ring-fencing bank’s retail and investment arms.
"The policies he promoted as Treasury Secretary and in his subsequent writings led to the economic disaster that we now face," wrote Dean Baker, co-founder of the Centre of Economic and Policy Research.
"You’d think this guy had a good track record or something. What is he going to tell Labour to do, have a big asset bubble and try to prop up the UK economy that way?" he told the Huffington Post UK.
"His policies have done the opposite to date [of helping lower and middle income groups]. Bringing Summers on is very much a misstep, as he's associated with a programme that led to the financial crash."
Treasury officials at the time, after the financial crisis later hit, admitted that the administration went too far in stripping away banking regulation. Summers’ one-time deputy Neal Wolin said that officials were “‘intoxicated by the success of the markets’ and went too far.”
“With a Canadian newly installed as governor of the Bank of England, Ed Balls has followed suit and decided to take advice from across the pond. Larry Summers is a proactive and aggressive policy maker who will provide an opinionated sounding board for Balls. With Europe in an economic quagmire, it is laudable that leading UK politicians are seeking advice from the other side of the Atlantic.
“If there was a world’s most wanted list for ‘bad economic policy makers’, Larry Summers would probably top it," Steve Ruffley, chief market strategist at InterTrader, told the Huffington Post UK.
“Summers consistently pushed for privatisation and liberalisation, words which sound good on paper but are indicative of a policymaker who only saw boom and ignored the risk of bust."
3. Summers was especially keen to not regulate the derivatives market
Financial regulators received heavy lobbying from Summers in the late 1990s to keep their hands off the risky market of “derivatives”. Commodities Futures Trading Commission boss Brooksley Born wanted to regulate them, but officials received a lobbying campaign from Summers, then deputy treasury secretary, against such a move.
“Larry Summers expressed himself several times, very strongly, that this was something we should back down from,” officials recall. Summers reportedly said: “I have 13 bankers in my office and they say if you go forward with this you will cause the worst financial crisis since World War II.”
Summers' stance contrasts with officials nowadays, like Tim Geithner, who as Treasury Secretary wrote in 2009 that the derivatives market needed “strong oversight”.
4. Summers actively mocked warnings of the financial crash
Summers was bullishly sceptical of any warnings that the economic boom could turn sour.
In 2005, economist Raghuram Rajan presented a paper arguing that the financial system had seen banker bonuses become dangerously bad influences and the system could see a “catastrophic meltdown”.
Summers chose to dismiss Rajan’s “misguided” paper, scoffing at the paper’s “luddite” premise.
5. Summers opposes breaking up the banks
Ed Balls warns to break up the banks into smaller operations, but Summers would be a fierce opponent.
In one interview, he said he believed that it would "actually make us less stable, because the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven't profits in one area to turn to when a different area got in trouble.
"And most observers believe that dealing with the simultaneous failure of many -- many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment."
6. Summers may have called for toxic waste to be dumped in poor countries
While working at the World Bank in 1991, Summers signed a memo stating: “the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.... I've always thought that under-populated countries in Africa are vastly underpolluted."
Lant Pritchett, who worked for him, claimed that he wrote the memo while Summers only signed it, adding that the memo had been doctored to remove intended sarcasm.
Summers’ environmental credentials weren’t later helped when he said in an interview that year that economic growth shouldn’t be constrained by environmental concerns.
“There are no... limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn't a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs,” he said.
7. Summers' controversial views on gender
Summers does seem to like winding up his audience. As Harvard President, he made a self-confessed “attempt at provocation” while discussing why more men were in science and engineering degrees than women.
His diagnosis? Men are just better. “There are issues of intrinsic aptitude, and particularly of the variability of aptitude,” he said.
8. Summers' millions from the banks
Before serving for a year as the chair of Obama’s National Economic Council in 2009, Summers had been paid over $5 million over the previous year from working at the hedge fund D.E Shaw.
He also received hundreds of thousands of dollars for speaking at institutions like Goldman Sachs (where he raked in $135,000 for an appearance).
9. Summers featured in the Social Network movie…
As President of Harvard University, Summers had to mediate in the dispute over the creation of Facebook, with the resulting lawsuit lodged by the Winklevoss twins against Mark Zuckerberg.
In the movie, Summers is played by an actor as being very dismissive of the Winklevoss twins’ concerns about Zuckerberg.
He later admitted the scene was accurate. "One of the things you learn as college president is if an undergraduate is wearing a tie and jacket on Thursday afternoon at 3 o’clock, there are two possibilities.
"One is they are looking for a job and have an interview. The other is that they’re an asshole.” Summers concluded that the Winklevoss twins were the “latter case”. Ouch.
10. Summers lost Harvard a billion dollars on interest rate bets
During the financial crisis, Harvard reportedly lost nearly $1 billion due to some awry interest rate swaps signed off by Summers in the early years of his presidency.
As Bloomberg reports: "Most of the swaps, signed when Summers, 54, was Harvard’s president from 2001 to 2006, were intended to lock in rates for debt that Harvard expected to issue as far off as 2022, for a 340-acre campus expansion, according to Moody’s Investors Service.
"In 2006 and 2007, Moody’s warned of risks from those so-called forward swaps, though it said the school’s finances and management experience mitigated them. Summers declined to comment on the record about the matter."
Summers bet money the university hadn’t actually borrowed and would not be planning to borrow for a while on interest rates rising. In short, they didn’t and Harvard lost out.
Summers has not commented on this "billion-dollar bad bet".