A Rush Back to ‘Normal’ Would Be the Blunder of the Century

A Rush Back to ‘Normal’ Would Be the Blunder of the Century

Larry Summers knows a thing or two about economic emergencies. As US Treasury Secretary under President Clinton in the 1990s, he led the country’s res

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Larry Summers knows a thing or two about economic emergencies. As US Treasury Secretary under President Clinton in the 1990s, he led the country’s response to financial crises arising in Mexico, Brazil, Russia, and Asia. And as economic adviser to President Obama, he helped formulate the government’s response to the 2008-2009 financial crisis.

Now a professor and president emeritus at Harvard University, Summers advises businesses and chairs the board of the Center for Global Development, a think tank focused on economic inequity. He also launched the Commission on Investing in Health, an initiative aimed at promoting awareness of the economic significance of global health issues.

As the US struggles to cope with the human and economic cost of the coronavirus pandemic, Summers offers words of advice and caution for President Trump and his team. He spoke with WIRED’s senior writer, Will Knight, from isolation at his home in New England. This transcript has been condensed and edited.

WIRED: You’ve helped America respond to several past economic crises. How does this situation compare?

Larry Summers: This has to be as complex, multi-faceted, and as difficult as any crisis we have faced in the last half century. Unlike any economic crisis I have been involved with in the past, it has major life and death elements, and it touches very directly every sector of the economy. It impacts every country in the world, and it is centrally involved with every aspect of the way people live. There is a more ultimate character to this crisis.

Read all of our coronavirus coverage here.

Does getting people back to work after 15 days of lockdown make sense?

I’m not an epidemiologist, so I want to speak with a little bit of caution. But on the basis of everything I know, to try to completely jumpstart the economy after 15 days, or on Easter Sunday would be the greatest policy blunder of the 21st century by far.

The framing—in terms of the adverse economic consequences of our policies versus the adverse health consequences of our policies—is dead wrong in two respects.

First, it confuses the economic consequences of our policies with the economic consequences of the virus. Look at what’s happening in New York City. Within a very short period of time, we would all be social distancing out of fear, not because of a law. So the idea that the economic costs are coming from the policies primarily is foolish, in the same way that observing that there tend to be a lot of people suffering and dying from cancer in places where there are a lot of oncologists is a fallacy. That’s the first error.

The second is failing to recognize that the policies of social isolation–mitigating the spread of the disease, and buying time until more satisfactory testing and contact tracing regimens can be put into place–reduce the ultimate economic damage. Fewer people will ultimately get the disease and the cases that do come will be better managed. How long the economy is shut down will be shortened, and the resources that need to be diverted to health care will be ultimately reduced. This isn’t complicated.

Nine months ago, I ruptured both of my quad tendons. I was put in braces that kept my knees rigid. They were uncomfortable. And they sharply limited my mobility. I pressed my doctors to let me out of the braces. They said, “Larry we can let you out of the braces. But if we do, you are likely to reinjure your tendons and rupture them again and then you’re going to be right back where you started from.” Abandoning our social control investment when it is significantly along the way to bearing fruit would be as foolish as my tearing off my braces.

What advice would you give the president?

In dealing with crises that are truly serious, I don’t think that it’s ever right to think that there’s a single silver bullet. I have no one magic piece of policy advice.

One needs to be candid in one’s communication, so as to preserve policymakers’ and their advisors’ credibility. There will be moments when reassurance is required, but that reassurance will only be effective if credibility has been preserved.

There’s also an old adage: Hope for the best, and plan for the worst, and that is very much right in times of crisis. Usually, it’s a mistake to assume that places and areas where you haven’t yet seen a problem are therefore okay. There’s a rolling wave aspect, where problems surface in more and more places.

Also, in my experience, policymakers more frequently regret having acted too slowly, too tentatively than they regret having acted overly quickly and too decisively.

Playing against an adversary, as in a military crisis, that’s not where my experience is. But when dealing with a financial crisis, an environmental crisis, or a pandemic crisis, when the adversary is in a sense nature, the errors are usually of being too slow and too tentative. Very frequently, the moment the crisis starts to let up, coincides with the first time policymakers make a projection that proves to be too optimistic

Until then, when policymakers are constantly behind the curve, making forecasts that are overwhelmed by events, things are unlikely to hit bottom.

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