Economic Principals

David Warsh continues to write about a story that seems to be ignored by the profession and the press.

A major reason is Harvard University’s Russia scandal. Summers’ temperament and his policies at Treasury, both under Robert Rubin and as secretary himself, and how they might have contributed to the financial meltdown, would weigh in the balance, too. From a distance of twelve years, the Russian episode may seem musty with age. Who cares what happened when Harvard undertook its mission to Moscow in the brief heyday of the Russian robber barons?

To recap: a young Harvard professor, Andrei Shleifer, a Russian émigré, is hired by the US Agency for International Development in 1992 to advise the government of Boris Yeltsin on behalf of the US government. In 1997, Shleifer is caught investing in the Russian economy (and trying to set up his wife in a government-licensed business there) and fired by USAID. For the next eight years, he is shielded, at least to some extent, by his friend and mentor, Larry Summers, first at the Treasury Department, then as president of Harvard.


In 2004, a Federal judge finds Shleifer and Harvard to have committed civil fraud and orders Harvard to repay. Two years later, when Summers is asked to resign the Harvard presidency, his conduct in the affair is described as one of the reasons. When he returns to Washington as senior advisor to President Obama, listed among his brain trust is none other than Nancy Zimmerman, Mrs. Andrei Shleifer.