One of the admissions in the talk that a key White House economic aide, Lawrence Summers, gave Friday to the Council on Foreign Relations (another FutureOfCapitalism.com post about the Summers talk is here) was this one: "It is too early to know how successful our policies have been. It is not even clear how we will know ultimately whether they have succeeded, because of the difficulty of constructing a counterfactual and knowing what would have happened without intervention."
It's actually a pretty stunning concession, that there is essentially no way of knowing whether the interventions into the economy begun by President Bush and his Treasury secretary, Henry Paulson, and advanced by President Obama, did any good, because we can only speculate about what would have happened otherwise.
That did not stop Treasury Secretary Geithner from claiming, just a day after Mr. Summers's speech, that his actions had turned "the global economy around." Here is Mr. Geithner's statement issued Saturday at the G8 Finance Ministers' meeting:
There are encouraging signs of stabilization across many economies. The rate of decline in GDP growth in the major economies has slowed, ...Financial markets reflect greater confidence in the stability of banking systems....Where we have seen improvements, they are the result of the unprecedented scope and intensity of policy actions to support demand and financial repair. The coordinated recovery programs set in motion in the context of the G-20 meetings helped stem the sharp erosion in business and consumer confidence and have begun to turn the global economy around.
Mr. Summers's point on Friday was that we don't know whether improvements in growth rates or financial markets are "the result" of "policy actions" or whether they would have happened anyway, or with different policy actions. Maybe Mr. Summers should be assigned to start editing Mr. Geithner's speeches. Or maybe the two could have a public debate on the point. At the very least, it would be illuminating to hear Mr. Geithner's response to Mr. Summers's point. To judge by his statement Saturday, he doesn't take Mr. Summers's warning seriously.
