Larry Summers may see some irony in Janet Yellen being named Fed chair instead of him, if a man who ping-pongs between public service and lucrative hedge fund jobs sees irony at all. When he was president of Harvard, he blamed the lack of women in top positions on biases in society and the way we test and reward aptitude—both true—but also on genetic differences between men and women.
Though his point had some validity—society does punish female genetic traits, like the ability to get pregnant—the irony is that Yellen overcame the hurdles Summers listed. She’s proof of his point.
Unprecedented leader in uncharted territory
As a woman, she also puts us in uncharted territory. While some say it makes no difference, I hope it does. Women are smarter with money and are better traders. Similarly, our economy is in uncharted territory with low inflation, near-zero interest rates, and weak, though steady, job growth.
When you’re in uncharted territory, maybe you need a leader without precedent. In a society that is still hard on working mothers, she didn’t just follow a path to her position. With her Nobel-laureate husband sharing equally in raising their son and valuing her career as highly as his own, Yellen hacked her own path through the jungle.. Her machete was her unflappable calm, her irrefutable math, her unapologetic compassion, and her abundant reserves of common sense.
The real engine of the economy is workers, not investors
Larry Summers is now pushing the Depression-era “secular stagnation” theory, which says our economy is simply incapable of generating enough demand to sustain long-term, non-bubble growth. In simplistic terms, we are losing our ability to want things. And that lowers investor confidence, apparently.
Summers forgets that market confidence is not something investors and traders create. They just reflect it. Real economic confidence comes from abundance in society. It can come from the simple idea that when people are homeless and jobless, it is not a problem of charity or morality. It’s a problem because the engine of our economy is wasting fuel.
Compassion is profitable
Recently, Phoenix and several other cities announced that they had basically ended the problem of homelessness among veterans. How? They used taxpayer money to put them in homes. They didn’t adopt some moral position about a grateful nation owing those who served. They didn’t have a surge of charitable feeling. They did the math. It cost about $600 a month to house a veteran and give him access to health care. It cost nearly $3000 a month to jail him off and on and have him using the emergency room.
Yellen’s father was a family doctor during the Depression and served the Brooklyn dock workers, hard-working people with minimal education. She grew up seeing them come in, pay $2 a visit when they could, nothing when they couldn’t. She saw the look when someone had lost his job and knew that he had lost more than a paycheck.
Losing a job is just as demoralizing to a middle-class person as a poor person—often worse. If you lose your job as a maid, chances are you’ll find other homes that need cleaning. But what if you’re, say, a radiologist? You spent eight years in med school and residency to get there. You live in a nice neighborhood, have nice things, maybe even met your spouse in the kind of social circles you can belong to if your title is “Doctor.” Then your job, like many diagnostic radiology jobs, was outsourced to India, where an equally qualified radiologist will do it for $1000 a month. Now, many radiology tasks are done by machines.
Losing your job to another person is one thing. But what does it say about you if most of your job can be done by a robot? You didn’t just lose a job or a paycheck. You lost much of your personhood.
What’s an economy for?
Janet Yellen knows that tapering bond purchases can’t directly affect problems like that. But she also knows that the markets don’t drive the economy. People with jobs and the self-confidence that comes with them drive the economy.
I’m launching The New Capitalist.org to explore this simple question: “What’s an economy for?” I’ve heard a lot of answers. The New Capitalist answer is this: An economy’s main purpose is to help people create opportunities for themselves and each other to live dignified lives and do meaningful work. Everything else — controlling inflation, making credit affordable — is subordinate to this goal.
What do you think an economy is for? Hint: If your answer contains the word “shareholder,” you’re thinking of a corporation, not an economy. I know, they’re people now and they may even decide our elections, but people are people, too. Leave your answer below, please. Teach me.
