Summers In a Tight Spot
On his always thought-provoking blog, Economic Principals, David Warsh adds his insights to the Andrei Shleifer scandal. Warsh has been following this story closely for years, and he makes a number of valuable points.
Such as:
—more bad news will come for Harvard in the form of journalist/author David McClintock, who's working on a feature magazine story about the HIID scandal
—Warsh nicely sums up Shleifer's malfeasance: "Judge Woodlock found that, once installed by the US as its adviser to Russian president Boris Yeltsin, Shleifer invited his deputy Hay to invest with him in Russian oil stocks despite contract prohibitions against such investments, then gradually upped the ante.
"Their illicit activities culminated in an attempt (at a regulatory agency they advised) to vault to the head of the licensing queue a company formed by Shleifer's wife and Hay's girlfriend to offer the first Russian mutual funds. That was the caper which scandalized Harvard's Moscow office. USAID investigated and swiftly shut the project down."
—While the Harvard case is a huge story in Russia, it's gotten almost no play here. The NYT and the Washington Post story both ran only an AP piece on the scandal. (
RB: This is lousy editorial judgment.) Only the Journal covered the story well. (
RB: So irrelevant is the Globe, Warsh doesn't even mention it.)
—Warsh also parses the connections between Shleifer and Larry Summers, making clear that Summers' role in this matter is more complicated than just a matter of friendship. [Italics mine.]
"A somewhat more intriguing figure than Shleifer in the Russia Project is economist Lawrence Summers, Shleifer's mentor and old friend, who taught him as an undergraduate; sent him to the Massachusetts Institute of Technology to train; took him to Lithuania to practice country-doctoring; brought him back from the University of Chicago to teach at Harvard;
helped put him in the Russia job; oversaw, as an increasingly senior Treasury Department official, Shleifer's efforts in Moscow; and, once he returned to Harvard as president, defended his protégé.
"Friendship explains much of Summers' role. A combination of patriotism, arrogance, marital hard times and plain bad judgment explains the rest. The Harvard president is in a world of woe. The likelihood that justice will be meted out to him on any separable basis is not great. The Bad-News Train is bearing down on Larry Summers at 40 miles per hour."
Warsh sums up by wondering why Harvard didn't just come clean in the first place—why the university decided to stand by a figure who, even then, seemed pretty clearly to have ripped off the US government in his desire to enrich himself.
He writes: "Why not acknowledge obvious wrongdoing? Why prefer intelligence to integrity? In the autumn, the venue of the Shleifer matter will shift to the inner councils of the Harvard faculty and to the economics profession. These are the questions they'll be asking then."
That second question—why prefer intelligence to integrity?—goes to the heart of much that is wrong with current Harvard. After all, the fetishization of intelligence over character was the primary, if unspoken, rationale for choosing Larry Summers as president. These hyper-smart chickens are coming home to roost.
