Larry Summers on how to stimulate investment in a slow-growth world
There's a substantial need more investment throughout the world and influential economist Larry Summers says some of it may have to come from public investment.
Summers, who has been economic adviser to Bill Clinton and Barack Obama and former president of Harvard University, points to the substantial infrastructure deficits in the U.S. alone as proof that there is a need for more money from somewhere.
He cites the state of the U.S. air traffic control system, which still runs on vacuum tube technology or the fact that oil is still being shipped on trains.
"That's not the infrastructure that we want," he said in an interview with CBC's The Exchange with Amanda Lang. In an indirect reference to the failure of the U.S. to go ahead with the Keystone pipeline, he was critical of the kind of stagnation that seems to take place with decision-making around infrastructure.
I think there's an urgent imperative of getting to adequate levels of public investment- U.S. economist Larry Summers
"Look at the amount of oil in North America that's being shipped on trains. Train transportation of oil was a 20th century technology and not the last quarter of the 20th century," he said.
"I think there's an urgent imperative of getting to adequate levels of public investment. And I think it's also important to reduce barriers to private investment. I am all for environmental protection. I am all for careful review. But those things cannot be allowed to take infinite amounts of time," Summers said.
Summers calls the problem of too much holding onto savings and too little willingness to investment a form of "secular stagnation."
He and former Fed chair Ben Bernanke have debated publicly why it's happening and what to do about it.
Not enough investment
"We all seem to agree that there's too much saving going on and not enough investment. How much is because of too much saving, and how much because there is not enough investment. That's a question that people can debate about," he says.
There has been little incentive to save, with interest rates at record lows, yet businesses aren't investing as they once did, nor are governments.
"When I see an interest rate in Japan for an interest rate of half-a-percent for ten years. That's telling me they have an issue of a lot of savings relative to investment. When I see forecasts for North America and I see growth as slow as we've seen in North America that suggests to me that we've got a problem," Summers said.
The key policy question he sees for economic leaders now is how to right the slow growth that's hurting global economies.
"I think a strategy for growth isn't global is not likely to be a successful strategy. One of the real worries we have is that countries are going to seek to grow by stealing demand from each other, rather than trying to grow collectively. That's an important part of what made the Depression Great," he said.
And that's why he is pushing for public investment where private investment fails.
"While we're not looking at anything like the Depression of the 1930's for North America, we are looking at very substantial challenges. I think we have to make the case for more expansionary policies in the vast majority of the world," he said.