Both the United States and Europe are rocked by high inflation. Both will likely slide into recessions this year or next. But the situation is much worse there than here, according to Harvard economist Larry Summers, because of Europe’s dependence on Russian oil and gas.
“We are largely energy self-sufficient,” Summers told a top of the globe spectators at Harvard Kennedy School Thursday night. “Europe is completely dependent on imported fossil fuels.”
During the session, moderated by Linda Henry, Boston General Manager Globe Media Partners, Summers, said Europe, especially Germany, has made itself economically vulnerable by not diversifying its energy supplies. Germany depended on Russia for 55% of its gas before the Russian invasion of Ukraine in February.
To rely on Russia was “to get into trouble if you didn’t fully trust President Putin. . . that is, you were looking for trouble,” said Summers, who served as Treasury secretary in the Clinton administration and president of Harvard from 2001 to 2006.
Russia has reduced its energy shipments to Europe in retaliation for its financial and military support for Ukraine. European countries have lined up alternative suppliers, including Norway, but there are still widespread concerns about life-threatening shortages this winter.
Meanwhile Britain, which gets most of its gas from Norway and now has to pay more, plans to spend around $150 billion to subsidize residents facing utility bills that will nearly double from those of last year.
Summers, when asked about the impact of China’s struggles with COVID lockdowns and extreme heat waves, said it would reduce the country’s exports and also reduce consumption at home.
“It will slow down global growth,” he said of China’s economic slowdown. A plus, he said, would be lower commodity prices since China is a major importer of oil, soybeans, gold and copper.
However, Summers said his biggest concern was that “a weaker China could become a more earthy China.” Without increasing prosperity to keep its society together, the government could turn to nationalism and foreign scapegoating to promote cohesion, he said.
Asked by Henry about his outlook for the local economy, Summers said he’s optimistic Boston will remain vital due to its focus on life sciences, which will drive innovation in this century.
“We have the talent,” he said. “The question is, are we going to support him?”
“It’s a central issue for this city,” he said.