The success of business and the success of the United States depend on each other, says former U.S. treasury secretary Larry Summers, and they both rely on “global openness, absence of prejudice, and fact-based decision making.” Summers, who also served as director of the National Economic Council under President Obama, has criticized some of President Trump’s protectionist policy positions and early executive orders, saying they will undermine the country’s economy and long-term interests. When I spoke with him recently, he urged business leaders to stand up for their principles: “If CEOs who employ hundreds of thousands of people are not in a position to speak truth to power, who is going to be in a position to speak truth to power?” What follows is an edited version of our conversation.
HBR: This administration has been in office for a matter of days only. Few businesses want to be completely nonstop in the political sphere, and I would guess a lot of people think they’re picking and choosing their challenges. Should everyone be in the political fray right now?
Summers: You have to make a judgment as to how extraordinary this moment is. I found the pictures of refugees being detained at airports quite extraordinary. I found the spectacle of United States bludgeoning Mexico and talking about building a 60-foot wall with a 2,000-mile length quite extraordinary. Those who don’t find it extraordinary certainly should not speak. But I think there are many who do find it extraordinary, and in that context it seems to me appropriate to speak in a cautionary way.
Look, there are things that can be applauded. There are many who believe that there are important excesses of regulation and who welcome the desire to reduce regulation or to reform corporate taxes.
But if you’re going to talk about your civic responsibility, as many business leaders do, if you’re going to talk about long-termism, as almost all business leaders do these days, what could be a more important long-term issue for American business than American leadership in the world? And I haven’t seen business leaders speaking out against protectionism in public. It’s very clear that, in private, many of them are deeply troubled by the signs that we’re moving in a protectionist direction.
How do you think business people should respond to President Trump’s orders that don’t directly affect them? There seem to be risks and rewards in wading into the political sphere but also risks and rewards in trying to be neutral.
Business leaders always talk about the importance of long-termism. One aspect of long-termism is supporting a society in which a business is embedded. Historically, the track record of business isn’t great at standing up to bad governments, whether it’s in Europe in the 1930s or in Latin America in the 1970s and 1980s. It seems to me that business leaders — of global companies especially — have a huge interest in the United States standing up for an open global system and what I would call Statue-of-Liberty values of openness and freedom, and in the U.S. government making policy based on facts and evidence, not on hunch and gut impression. All three of those values have been importantly challenged in the last days, and I’ve been sorry not to see more business leaders speak up and express their concerns.
The new president has gotten a major shot in the arm from a group of business leaders who agreed to serve on his economic advisory board. That group is going to be meeting this week, and it will be very important to see whether it is willing to speak truth to power and express concerns. Of course, it takes courage. Businesses are at risk for being called out by a tweet that could hurt their share price. But when we talk about long-termism, when we talk about the ultimate values that we try to teach at the Harvard Business School, that CEOs preach, it seems to me that global openness, absence of prejudice, and fact-based decision making are very central. Insisting on the importance of those things is a duty and a responsibility of business leaders.
I think some of the people in this very business council think, “I want to have influence on this administration. If I’m going to have the chance of having influence, I can’t be out there publicly criticizing the Trump administration, even if the stuff pains me.” Is that valid? Can anyone have influence with this administration?
These are judgments that people have to make. Speaking as someone who has worked in senior roles in two [presidential] administrations, I think those who believe that by pulling your punches on advisory boards that meet four times a year you’re somehow going to have a major effect on public policy are very, very naïve. It’s the possibility of lack of legitimacy that is much more likely to have an impact on the behavior of an administration.
The effectiveness trap, where you don’t speak up so that you can remain effective, I think has historically proven to be a comforting delusion rather than a genuine reality — whether in Europe in the 1930s, within companies in the 1980s and 1990s, within the U.S. government during the Vietnam War, or during Watergate.
So would you advise the people on that council whose views are dramatically different from the Trump administration’s to resign?
I’m not expecting or asking anybody to dramatically resign at this first meeting. What I hope is that there will be very honest and direct conversation. My observation — and I saw this in Democratic administrations — is that business leaders were too reluctant to speak what they really felt about policies to presidents. They would sound very different in the pre-meeting than they would once they were in the room with the president. I always discouraged that because I felt they could best serve the president with their candid and direct advice.
But for the sake of their reputations, for the sake of their companies, I would advise them: If they’re basically uncomfortable with the direction of policy, they should not allow their reputations to lend legitimacy to the activities of the administration.
It’s extra tricky with this administration because President Trump goes after individual companies. Starbucks takes a stand and says we’re going to hire refugees, so immediately there’s a “boycott Starbucks” movement started by the pro-Trump people. On the other hand, there was a really positive [consumer] response. If you’re a CEO and you’re thinking about fiduciary duty and thinking that you do have a short-term responsibility to your shareholders, do you just speak your mind?
It is complex, and one does have to strike a balance. If CEOs who employ hundreds of thousands of people are not in a position to speak truth to power, who is going to be in a position to speak truth to power?
There will be loyalty from employees and customers for those businesses who stand up on principle. Those abroad and customers and employees will harshly judge those who simply accommodate out of fear.
But at this point, outside the technology sector, where a number of people have spoken up very vigorously, I think it’s hard to believe that starting from where we are now, we should not be having more clarity.
It’s also true, and maybe this is another important point, that there’s safety in numbers. Perhaps the president could tweet adversely against a single CEO, but I don’t think it would be a very effective strategy to go to war with the Business Roundtable, or to go to war with the Chamber of Commerce, or to go to war with large industry groups, or to go to war with the entirety of the executive council of advisors he appointed. It’s the art of leadership and politics to figure out how to be effective.
I very much hope that my fears are simply a reflection of the fact that it’s early days, and that in the days, and weeks, and months ahead we will see an administration returning more to American norms. Nothing would give me more pleasure, but I can’t say with confidence that I think that’s true.
You’ve mentioned, a couple times, parallels with 1930s Europe. How far would you take the parallel at this point?
If history teaches us anything, it is that authoritarianism is best combated at early stages rather than late stages. I’m not saying that I think that American democracy is somehow lost; very much the contrary. I’ve got great faith in the resilience of American institutions.
But the resilience of American institutions isn’t something that happens automatically. It’s something that happens because people see dangers and take steps. So I think one can learn from the most extreme instances about the kinds of moral ideas that are important, with respect to threats that go beyond, the kind of threats to the functioning of the American system that we’ve seen since the Second World War.
Is President Trump good for business if he’s able to rationalize the tax code, if he’s able to cut some unnecessary regulations, if he’s able to get some infrastructure spending going? The stock market is up.
I’m not sure he’ll get any of those things done. My guess is that people are going to look back at this moment and think that we were in something of a sugar high. You know, the best period of the stock market in the 20th century after an election was the period after Herbert Hoover’s election.
I think that it is hard to imagine something worse for American business over the long run than the United States sacrificing its position of global leadership, than the United States ceasing to be a beacon of freedom and opportunity, and then the United States no longer standing for facts and evidence as a basis of decision making rather than prejudice and rancor.
I think if you believe — as I and so many business leaders do — that the success of business and the success of the United States go together, then you can’t just believe you should help business because it will be good for the United States. You also have to believe that standing up for long-term American values is crucially important to the long-term interests of business.