The real Larry Summers scandal?

I've written maybe 10,000 words in defense of Harvard President Lawrence Summers's much-denounced speech last year on why women haven't achieved gender equality with men in elite universities' math, science, and engineering departments. But that doesn't mean he's without flaw. Indeed, it looks like Summers was peripherally involved in the Scandal of the Century, the looting of post-Soviet Russia, or at least he dragged Harvard through the legal mud in a misguided attempt to protect a close friend who had gone over to the dark side.

Back in 1993, my elderly father would rant that those Harvard consultants who were advising the Yeltsin government on liberalizing the post-Soviet economy were ripping off the Russian people. Being a true believer back then in the Magic of the Free Market, I pooh-poohed his concerns.

Well, my dad was right and I was wrong. We all understand the superiority of the free market these days, but in any kind of market, it still matters very much who owns what. The "reform" of the Russian economy turned out to be one of the great larceny sprees in all history, and the Harvard boys weren't all merely naive theoreticians. Veteran economics journalist David Warsh's EconomicPrincipals.com reported in 2004:

The US government's long-running wrangle with economist Andrei Shleifer and Harvard University over Harvard's ill-fated Russia Project in the 1990s was resolved last week, in the government's favor.

A Federal judge ruled that, by quietly investing on their own accounts while advising the Russian government, Harvard professor Shleifer and his Moscow-based assistant Jonathan Hay had conspired to defraud the US Agency for International Development (USAID), which had been paying their salary.

Harvard had to pay $26 million and Shleifer $2 million in fines.

The Russian-born 45-year-old Shleifer is a superstar of the economics profession. Like Summers, he is the winner of the Clark Medal, the award for top economist under 40. Shleifer became the editor of Harvard's Quarterly Journal of Economics at the age of 28, and is now editor of the American Economic Association's Journal of Economic Perspectives.

Warsh's website reported in 2003:

"Then, too, Shleifer's oldest friend in economics is Lawrence Summers -- who, first as Undersecretary of Treasury for International Affairs, then as Deputy Secretary, was to all intents and purposes his ultimate boss during the period of the alleged transgressions, even though they were separated by several layers of governmental hierarchy."

Summers and Shleifer have vacationed together each year.

Recently, Institutional Investor printed a long expose by investigative reporter David McClintick (author of Indecent Exposure on movie executive/criminal David Begelman, who forged actor Cliff Robertson's name on checks) that begins:

How Harvard lost Russia
Source: Institutional Investor Magazine, Americas and International Editions
David McClintick

The best and brightest of America's premier university came to Moscow in the 1990s to teach Russians how to be capitalists. This is the inside story of how their efforts led to scandal and disgrace.

Since being named president of Harvard University in 2001, former U.S. Treasury secretary Lawrence Summers has sparked a series of controversies that have grabbed headlines. Summers incurred the wrath of African-Americans when he belittled the work of controversial religion professor Cornel West (who left for Princeton University); last year he infuriated faculty and students alike when he seemed to disparage the innate scientific abilities of women at a Massachusetts economic conference, igniting a national uproar that nearly cost him his job; last fall brought the departure of Jack Meyer, the head of Harvard Management Co., which oversees the school's endowment but had inflamed some in the community because of the multimillion-dollar salaries it pays some of its managers.

Then, in quiet contrast, there is the case of economics professor Andrei Shleifer, who in the mid-1990s led a Harvard advisory program in Russia that collapsed in disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed to pay at least $31 million to settle a lawsuit brought by the U.S. government. Harvard had been charged with breach of contract, Shleifer and an associate, Jonathan Hay, with conspiracy to defraud the U.S. government.

Shleifer remains a faculty member in good standing. Colleagues say that is because he is a close longtime friend and collaborator of Summers.

In the following pages investigative journalist David McClintick, a Harvard alumnus, chronicles Shleifer's role in the university's Russia Project and how his friendship with Summers has protected him from the consequences of that debacle inside America's premier academic institution.

Summers's enemies within the Harvard faculty circulated copies of this article just before his resignation. (And here's another article by Warsh on Summers's costly defense of Shleifer.)

Warsh writes:

How did the defendants in the Russia project --Harvard, Shleifer, Hay and, though he was not charged with wrong-doing in the matter, Summers -- convince the [New York] Times, the [Washington] Post and the Financial Times that the collapse of [Harvard's] Russia Project was not a worthy story? What did they say, and how did they say it? To whom, and how often? Let me stress that there is absolutely no question of actual money ever changing hands -- of bribery. At the pinnacles of capitalism, the influence exchange is so deep and liquid that cash is almost never required, except, perhaps, within organizations, in the form of golden handshakes and the like.

Instead, the informal economy of capitalism is one of deference and respect, of favors today and the implicit promise of favors later, of jobs and dinner invitations and admissions to exclusive kindergartens.... Anyone who doubts that this informal economy extends to newspapers knows nothing about how newspapers work.

For at its heart, the Shleifer matter has always had less to do with the failure to export American values to Russia than with the inadvertent importation of Moscow rules to institutions in the United States. That's why Harvard's cockeyed defense is so alarming, why Shleifer's elevation to positions of ever-greater authority in the economics profession is worrisome. No one doubts that he is an original and productive economic thinker. The good news is that it was Shleifer who, as editor of the Journal of Economic Perspectives, published McMillan and Zoido's article on Montesinos [the corrupt Peruvian spymaster who paid much higher prices to suborn media owners than judges or politicians]. That's the bad news, too, since the editorship confers vast and global favor-trading power.

The worst thing of all is that, starting with his long-time mentor Larry Summers, Sheifer's friends don't seem to understand that they failed the young Russian émigré in the first instance, that they in turn have been betrayed and embarrassed. It is true, as Edward L. Glaeser and Claudia Goldin write in their introduction to the forthcoming "Corruption and Reform: Lessons from America's Economic History" that the United States "changed from a place where political bribery was a routine event infecting politics at all levels to a nation that now ranks among the least corrupt in the world." But it is also true that American aid-giving abroad in the 20th century (Herbert Hoover, George C. Marshall, Creighton Abrams) has been remarkably free of high level corruption -- until now.

Why didn't the press do a good job of covering Russian corruption and the Harvard scandal? Well, who was disproportionately involved in the corruption at both the Russian and Harvard ends? I, for one, had no idea until I read Amy Chua's 2003 book World on Fire about "market dominant minorities," that six of the seven "oligarchs" who paid for Boris Yeltsin's 1996 re-election in return for the privilege of buying ex-Soviet properties at absurdly low prices (e.g., Mikhail B. Khodorkovsky was put in charge of auctioning off Yukos Oil, which owns about 2% of the world's oil reserves -- he sold it for $159 million to ... himself) were Jewish. (Five Jewish on both sides of the family, one on one side). And that's in a country where the Jewish population is about one percent.

For some reason, the American media hadn't been very enthusiastic about publishing that highly interesting fact in the seven years following the 1996 Russian election. We all saw what happened to Gregg Easterbrook in 2003 over a triviality, so you can understand why the reticence about this gigantic story.

As I've said before in the context of exploring how Scooter Libby could serve as a mob lawyer for international gangster Marc Rich on and off for 15 years and then move immediately into the job of chief of staff to the Vice President of the United States, the problem is not that Jews are inherently worse behaved (or better behaved) than any other human group, but that they have achieved for themselves in America in recent years a collective immunity from anything resembling criticism. And being immune to criticism doesn't make human beings behave better.

Now, Warsh's website writes:

Gangsta-nomics

Clarifying the impact of Harvard University's Russia scandal and the Andrei Shleifer/Lawrence Summers affair on the economics profession (generally) and on Harvard (in particular) will take years. The outlines of one mechanism, however, already can be discerned. Tracing its workings through offers clues to what may be the controversy's ultimate resolution.

Just as opening the St. Lawrence River to the Great Lakes produced both great economic benefits (the North American Midwest could export grains, iron ore, machinery to the world on ocean-going ships) and some undesirable side effects as well (the introduction into the lake system of lamprey eels and zebra mussels), so sending a team of Harvard University experts to advise the Russian government of Boris Yeltsin in the 1990s improved markets in the former Soviet republic, but at the cost of importing to Harvard certain unattractive Russian folkways.

The most obvious of these is the tendency to view anti-Semitism as a powerful explanatory variable in the resignation of Harvard president Lawrence Summers.

Anti-Semitism was a puissant force at Harvard and most other American universities well into the 1950s, but has diminished dramatically in the past half-century, along with most other social concomitants of religious conviction/association. In Russia, it remains virulent. Harvard economic professor Shleifer, who grew up in Russia, often has been the victim of prejudice there. It has not harmed him in the US, nor his co-religionist Summers, especially in this instance.

Yet as Boston Globe columnist Alex Beam noted last week, Harvard professors Alan Dershowitz (law), Ruth Wisse (literature) and former lecturer Martin Peretz were quick to cite Summers' strong defense of Israel as a factor in what Dershowitz termed an "academic coup d'etat... by the die-hard left of the Faculty of Arts and Sciences." "The question I'm being asked," Wisse told Beam, (before praeteritio-otically dismissing it), "is, 'Was anti-Semitism the driving engine of the coup?'"

The traveler furthest down this road was Professor Edward Glaeser (economics), Shleifer's former pupil, long-standing friend and dogged defender, who told The Harvard Crimson that the act of circulating among the Harvard faculty an article in Institutional Investor by investigative reporter David McClintick was "a potent piece of hate creation -- not quite 'The Protocols of the Elders of Zion,' but it's in that camp.""

So far-fetched was that comparison that Glaeser spent the week apologizing to all and sundry -- especially after an article in The New York Times acknowledged the generally high regard in which the McClintick article is held by asking rhetorically, in its headline, "Did an Exposé Help Sink Harvard's President?"

I vaguely suspect, judging from the title "Gangsta-nomics" that Warsh might be trying to hint at something beyond what he explicitly says: that pro-Semitism was a motivating factor among many of Summers's most prominent advocates and may have had something to do with the mainstream media's reluctance to touch the issue of Harvard's role in Russian corruption.

Steven Pinker, who has become much more objective about Jewish issues in this decade, is an honorable exception -- he was clearly outraged by the ludicrous controversy over Summers's statements about sex differences.

But sex differences between men and women just aren't a strongly motivating political factor for most people -- lesbians being the main exception. We almost all have loved ones of the opposite sex, so the corruption of feminist academics who rip off universities isn't all that motivating -- after all, if Larry Summers has to promise $50 million worth of gender preferences for women to make up for his faux pas, well, who knows, maybe your sister or wife or mom or daughter or daughter-in-law will get a job she doesn't really deserve under the Summers Reparations, so it's hard to get too worked up over it.

In contrast, ethno-racial politics are less likely to divide families into payees and payers the way gender preferences do, so they tend to elicit a lot more organized passion. Thus, many of Summers's most adamant defenders were most outraged not, like Pinker and myself, because he was getting railroaded for telling the truth about women and higher math, but because he told an arguable untruth about supporters of Harvard disinvesting in Israel -- that the movement is motivated by anti-Semitism. (In reality, many of the supporters of Harvard divesting investments in Israel are Jews themselves. Personally, I think Israel divestiture is a bad idea, but then I was against South African divestiture, too, and for the same reasons.)

Further, Warsh's elaborate analogy about zebra mussels coming up the St. Lawrence Seaway might not really be about American intellectual life being mildly tainted by the Russian Jewish rational tendency to blame anti-Semitism for their troubles, but about something much more serious: that American intellectual life might have been corrupted by the vast amounts of money the mostly Jewish Russian oligarchs had to toss around to American academics and public intellectuals.

We American intellectuals cannot be bought, but our affections can be rented for a lot less than, say, a second rate soccer player.

Jake Rudnitsky writes in the eXile about how cheaply American politicians can be bought:

American politicians prove that they can be bought for a song compared to their Russian counterparts, in spite of the fact that the US economy is about 5000 times larger.

While [Jack] Abramoff and his cohort Michael Scanlon have nothing to be ashamed of, thanks to their Abramovich-esque lavish spending habits, the amounts that the politicians were bought with are downright laughable. The highest netting congressman was Arizona's J.D. Hayworth, who came away with just $101,000 for his war chest: and now he's got to give it all back, meaning it was little more than an interest-free loan. More typical were the pols who netted somewhere in the mid-30s, including reps from NY, Michigan and Ohio. Now all that money - totaling about $4.5 million - is making its way to neutral charities. Bush, for example, picked the American Heart Association.

What else do they have to show for it? The memory of watching the Redskins or the Wizards endure another losing season from Abramoff's skyboxes? A few nice meals at one of his fancy-pants restaurants or, for DeLay, Abramoff's favorite, a weekend golf trip to Scotland? Golfing in Scotland! Can you imagine a Russian politician agreeing to so much as show up for a cup of coffee if the payoff is a *** golfing trip to a rain-soaked dump! It begs the question, what's the point of being corrupt if it doesn't make your life much better?

Compare, for a moment, Republicans' woeful attempt at abusing power with another corrupt politician currently in the headlines: Leonid Reiman, Russia's IT and telecommunications minister. The Wall Street Journal wrote him up about a week ago after they got an insider close to Reiman to admit that he's worth about a billion dollars.

If Duke Cunningham's the most corrupt politician in federal history (although I doubt it), think about how far you can get with public intellectuals for even less money!

A reader writes:

I will not be surprised if in fifty years historians judge Clinton/Summers/Harvard/Yeltsin/Oligarchs as a worse (more damaging) scandal than Bush/Oil/Texas/Enron.

I wonder when the Chinese will make their play in that market? Gotta do something with that trade imbalance.

Have you ever noticed that Beijing just plain deserves to own Taiwan?

Okay, that's a pretty lame argument, but I'm sure I could come up with more persuasive-sounding justifications than that for whatever Beijing wants ... but, I just don't feel motivated at the moment. Perhaps some motivation will show up in an envelope one of these days.

My published articles are archived at iSteve.com -- Steve Sailer