Why am I here in Chile? I’m here to visit what is probably Harvard’s most significant external presence. The University’s only regional office that services the whole University, that supports all the things the University does. Harvard’s outpost here enables many of our undergraduate students to study at great Chilean universities, and much more important, to live with Chilean families and soak up the culture of your country. They enable students from our Medical and Public Health schools to do their practice, their rotations in your hospitals and to take advantage of the opportunities that Chile provides. For example, I learned how the very different atmospheric conditions in the north, the middle, and the south of your country are permitting a path-breaking investigation of which aspects of air pollution have the greatest consequences for human health.
But what universities do is about much more than teaching. It’s about contributing to that climate of ideas. Harvard scholars used this office as a base as they worked with the Magellan telescope, several hundred miles from here, where they are learning something that has changed our conception of the way the cosmos works. We’ve known for several decades since the big bang theory that all the galaxies were flying apart at a rapid rate. We assume that, as with any explosion, eventually that process was going to slow down. We learned from that telescope just a few years ago something absolutely stunning and completely unpredictable, which is that all the parts of the universe were not just expanding, but they were expanding at an accelerating rate, and that’s something that’s forcing a rethinking of the basic theories of physics.
Harvard scholars from our Design School are working with partners from Catholic University here on a problem that many years ago was a preoccupation of architects but that frankly the first-rate architects had drifted away from for several decades – how to design attractive, economical, large scale, low-income housing. And they’re doing that here at the Pritzker Prize level in terms of the architecture. And what’s probably more important, they’re doing something that’s pretty uncommon in the design of low-income housing which is they’re designing the housing in close consultation with the people who are actually going to live in the housing. Those projects are having impact not just here in Chile but around Latin America and around the world and certainly at our Design School.
One of our faculty members, an anthropologist, is enhancing our understanding of the Incan civilization by taking what are called khipus, the knotted ropes that constituted their means of written, or at least symbolic, communication. He’s working with some particular structures that function very much like a Rosetta stone for understanding the Incan civilization, to understand that civilization much better. And in so doing greatly enriching what we do in anthropology.
Teaching. The progress of knowledge. These are perhaps the two most important things that we associate with universities. But for a university as fortunate as Harvard, there’s another opportunity we have and it’s one that I think we will need to exploit much more in the years ahead, and that is our capacity to convene people. A project led by our Law School’s Negotiation Project has brought together a group of leading Chileans, leading Bolivians, and leading Peruvians to discuss common and vexing challenges. That’s not going to produce happiness or even diplomatic relations overnight. But it does have the potential to provide neutral ground for greater understanding and that’s something that’s terribly important in this world. One of our professors, Professor Andres Velasco, who I think is here, has worked at the Kennedy School with a group of Chilean leaders from all walks of society to think about his country, and your country’s role in the 21st century, with the aid of the intellectual resources that a great university can bring.
All of this is wonderful from my principal responsibility as president of Harvard because I’m convinced that if Harvard is going to lead in intellectual life it has to lead in understanding what is happening not just in the United States, not just in Western Europe, but in the entire world. But however important it is for Harvard, however important the opportunities to study abroad are for Harvard students, I am also convinced that offices like the one we have here, programs like the ones that we are implementing here, are actually very important in a yet more profound sense.
When the history of this period is written 300 or 400 or 500 years from now, there actually won’t be a large section on the period from 2000 to 2025. Most of us – Professor John Coatsworth is, of course, a prominent exception being a historian – most of us I daresay, if asked to distinguish what happened in the world between 1675 and 1700 from what happened in the world between 1700 and 1725, would give answers that would be rather vague and incomplete.
But it does seem to me that if you think about the period when we’re alive, when somebody looks back over the very long run, yes the fact that the Cold War ended, this defining struggle between these two ideologies, between the United States and Soviet Union, that’ll be in the history books 400 years from now. But I would suggest to you that it will probably be the second story in the history books.
The larger story will be what happened or what didn’t happen as the industrialized world and the developing world came together. Will that be a story of rapid growth and convergence, like the Chilean economy in the 1990s, like the economies of so many countries in East Asia in which literally hundreds of millions of people will see their standards of living triple in a single generation on a rapid escalator towards the greatest standards of living mankind has ever known, with great improvements in literacy and education and opportunity? If that happens in much of what we have traditionally called the developing world, it will be a story that will rank in the history of the last millennium only with the Industrial Revolution and the Renaissance.
But all we have to do is look at the headlines in our newspapers. Look at what happened in Rwanda. Think about what is happening in the Middle East. Contemplate what the projections say about AIDS. Ponder the fact that for the first time in all of human history, with nuclear proliferation, with what mankind is able to do to the global environment, we are able to change not in a place, but in a pervasive way, the conditions for life on earth, to recognize that global integration is not a story that is sure to have a happy ending. And for a university, universities are places that can’t afford to take the long view. There can be no more important challenge in our teaching, in our research, and in our community building, than to make what contribution we can to seeing that that story has a happy ending.
I’ve given some examples of the kinds of difference our teaching makes, the kinds of difference our research makes. When I was in Washington and had a chance to travel all over the world representing my country, I was struck again and again and again and again by the number of officials of foreign governments who I would meet who would say, are you the Larry Summers who used to be a professor of economics at Harvard? I’d say, yes. They’d probably be thinking, God, that class was boring. But that’s not what they would say. They would say, you know the year at Harvard that I spent was one of the most important years of my life and it changed my perspective, and it caused me to understand your country in a different way. That’s a very important thing in a world that is very, very short on understanding.
George Washington is not usually thought of when you think of higher education. But actually George Washington wanted to devote his farewell address as president of the United States primarily to a proposal to establish a national university. Alexander Hamilton talked him out of it because he didn’t think it was really appropriate for a president’s farewell address, and actually Hamilton was probably right. And so Washington only has a couple of sentences about it in his farewell address, but Alexander Hamilton didn’t get to be involved in George Washington’s will. So George Washington’s will is heavily devoted to willing funds for a national university. And the reason Washington gave for a national university was that it would bring – he gave two reasons, one of which looks pretty good today, the other of which is I’ll suggest doesn’t look so good today.
The one that looks good today is he explained that if we have a national university, young people from all over the country would come together and form the kind of friendships and relationships of trust that you can only form when you’re young and that that would then enable them to knit the union together. That was a very powerful argument. In the end a national university didn’t get built and as someone said at the time, Harvard became in many ways that national university.
Washington also said something else that doesn’t look so good today, which is he said if we don’t have a national university our students will go study abroad and they’ll learn all sorts of crummy ideas there, and they’ll come back with all kinds of monarchist ideas that will wreck our country. So the Founding Father was one for two.
But that first idea of Washington’s is a very powerful one. And I must say it seems to me that it is an especially powerful one for the United States today at a time when there’s not been more misunderstanding by the United States of the world, or of the United States by the world, in my adult lifetime. It seems to me profoundly important that we all do our part to promote understanding in all directions. And there are few things that can do that like the genuine interchange that a university makes possible. I thought this before I came here. I think it more securely now because of the chance that I had to talk with a number of our Harvard students about their time here. They’ve had terrific experiences here, or at least that’s what they told me.
But one of the things that was very interesting was that many of them think differently about your country and think differently about your country’s history than they did when they came here, and that many of them were surprised by what they found. And that really speaks to the importance of the reflection that goes on in universities and the importance of that reflection taking place in an international context.
You know, I’ve used this story with some of you before. There was a celebrated congressional leader in the United States who was asked a few years ago whether he planned to go abroad on a congressional recess. And he said, no, I’ve been there. He wasn’t alone, and there are people like him in every country in the world. And if we’re going to have that story in that history book end happily, we need to create institutions that will foster very different attitudes. Universities are very important in that respect as well.
So far I’ve talked about Harvard, what this means for Harvard, why I think Harvard is doing these things, why universities like Harvard doing these things is important to the global system. I want to offer a final provocation of a rather different sort but we’ll come back to the question of universities, and that regards the challenge of achieving stable and rapid economic growth in Latin America. There is a continuing and vigorous debate over growth strategy in Latin America. Many invoke the term “Washington consensus” to refer to some aspects of strategies that were recommended and in some places implemented in Latin America.
What can one say about the growth record of Latin America in the 1990s and early part of this century and its relation to the economic policies that many have suggested? I don’t think anybody can be satisfied with the growth record of Latin America over the last decade. It is certainly true that Latin America grew more rapidly over the last 12 years than it did during the 1980s. It is certainly true that per capita income growth was positive rather than negative. It is certainly true that some countries like Chile during the decade of the 1990s actually performed very well by both historical and international standards.
Still, any candid observer will admit that Latin America’s growth performance during the 1990s did not live up to the expectations that many had at the beginning of the decade. Whenever there is disappointment there’s always a debate. Some people say the right strategy was pursued, it just should have been pursued more fully; it wasn’t implemented right. Some people say, well, the strategy was all wrong and there should have been a different strategy. Some people say the strategy was right but insufficient. I would have to associate myself with the third of these views.
While financial crises were all too frequent in the region, I find it very difficult to point to any examples of slow growth that were plausibly caused by excessive fiscal consolidation or excessive stringency with respect to inflation. I know of no economy that suffered a substantial growth deficit from having opened up too rapidly. And I know of no economy where a strong case can be made that growth was interfered with by the excessive establishment of property rights, independent judiciaries, or the enforcement of contracts.
In short, I don’t think it is easy to make the case that the macroeconomic stability and market-oriented policies that many countries adopted and that certainly were urged by the U.S. Treasury and the Bretton Woods institutions in any case constituted a barrier to growth. Certainly in the major disasters of the decade, the financial crises that befell a number of countries, it is easy to find evidence of the failure to adopt the kind of macroeconomic polices that were suggested by the Bretton Woods institutions.
And so the theory that the basic strategy was all wrong seems to me one that is very difficult to support. What I think is more troubling is this: the measures that constitute the classic approach, if you like, to promoting growth in Latin America really constitute a set of steps for removing barriers to growth. Without property rights, entrepreneurs will not invest. Without openness, knowledge will not flow in and the capacity to export will not exist. Without strong macroeconomic policies, funds will be funneled to government debt rather than to private investment.
Removing barriers is necessary to achieve growth but it may not be sufficient for rapid growth. If you look at the world economy these last five years, there have basically been two powerful wealth-creating forces that have led to substantial increases in the incomes of large groups of people. The process of innovation and exploitation of new ideas has produced tremendous growth in incomes and wealth in the United States arising from increases in knowledge, and knowledge that has very great market value. And the spread of an ever-wider range of types of production to low wage nations, particularly in Asia and especially in China, has driven very rapid increases in income and in standards of living.
In a real sense there are important parts of the global economy – and I think Latin America is, in important respects, included in this group, as are some pockets in the American economy and certainly in Central Europe – that have been caught in between lacking the wage rates and conditions necessary to be a magnet for globalizing production, and at the same time, lacking the energy, dynamism and scientific capacity to be a source of prosperity through innovation. The challenge in the years ahead in competing globally will be how to respond, and there are no simple answers.
Of course it is the case that the creation of good institutions and more effective institutions will be helpful, but the suggestion that institutional improvement is essential, no matter how often repeated, seems to me to be more in the direction of a hope than a policy prescription. It does seem to me, though, that there is one aspect of the performance of Latin American economies that may provide a clue, and it’s a related cluster of facts.
First, if you look at measures of inequality, if you look just within the bottom 90 percent of the population, there’s actually no difference between inequality in Latin America and in the United States. It all comes from the top 10 percent in Latin America. Second, if you look at the return to higher education in Latin America, it both exceeds the economic return to secondary and primary education and it has increased substantially more rapidly. Third, if you think about what is necessary to have successful institutions, surely they need to be led effectively by capable people and those can only be people who are educated.
I cannot help but wonder whether looking at the region as a whole, it is not time to move beyond, not to replace, but to move beyond the policy recommendation, the dominant emphasis should be placed on primary and secondary education, towards a set of policy prescriptions that also emphasize higher education. To emphasize higher education because of its contribution to science and technology. Because of its contribution to reducing what the market is telling us is a tremendous scarcity of leadership at the high end, because of its contribution to building trust and knitting a society together.
This is in part a matter of quantity and increasing the number of spaces available in higher education. It is in part a matter of access. In almost any country in Latin America, any young boy – no matter where he is from, no matter what his parents did or do or think or care – who plays soccer well enough can make the national team. Can we say the same thing about aptitude for mathematics or physics or engineering or law? That is part of leading a society forward.
There is yet one more aspect of strong higher education that I would dare to suggest is very important and that is it’s got a lot to do with the whole idea of democratic values. Great universities are places where anybody can correct anybody else. No matter how young you are, no matter how undistinguished you are, you are free to correct and challenge the views of anybody no matter how old and how distinguished they are. The people who bring the university to you whose names are on the buildings do not get to say who the professors are going to be, do not get to say who the professors cannot be because their views are too offensive. That is a profound democratizing influence on a society, something that I believe is very important.
It’s very interesting to look at what’s happening at the world’s greatest companies. Look at, talk to their leaders. They’re becoming more and more like universities. They used to be hierarchies like the army. The CEO commands, the vice president commands, the group vice president commands the next guy. Increasingly it’s flexible teams, it’s people from all over, it’s going from outside the system. There’s something very powerful about the democratic idea of the authority of ideas rather than the idea of authority.
So I do not have a whole new growth prescription for Latin America. I believe the basic recommendations that have been made for many years continue to be necessary as reductions in barriers to growth. But we do need to think harder than we have in the past about the creation of energy for growth, and in that higher education has a very important role and one that has very important collateral social benefits.
Thank you very much.