Who won the ænaked hateÆ debate?

In a great debate about the IMF, Larry Summers and Allan Meltzer went head to head at the CSFB conference.

As predicted, naked hate prevailed at the opening debate of the CSFB investor conference. The pairing of Larry Summers and Allan Meltzer was a masterstroke.

It is not often in Asia that two people say unabashedly what they think in a public conference. Issues of ‘face’ normally intervene. But the debate between the former Secretary of the US Treasury and the head of the Congress-appointed Meltzer commission, was very lively indeed.

Both men had publicly criticized each other in the past, with Summers, for example, accusing Meltzer of poisoning the well of economic debate. And as Summers took the podium to make his speech, he belittled Meltzer’s prior keynote speech as “at best misguided”, and spoke of Meltzer’s proposals for the IMF as a “superficially attractive approach” but said that they would not work.

At this point the gloves came off and Meltzer asked for a few minutes to rebut Summers’ accusations, which he did with some gusto. Meltzer is a monetarist, and anti-interventionist, and has strong views on reforming the IMF and the World Bank. Summers disagrees with almost all of Meltzer’s views on these subjects and calls them dangerous.

However, Meltzer definitely won over the audience thanks to the blasT way Summers seemed to indicate that American foreign policy objectives and the IMF were mutually aligned. Meltzer was applauded when he stated that this state of affairs was fine when the cold war existed but should no longer persist. He said the IMF should be independent of the US Treasury and not act as its “slush fund” to bail out only those countries that mattered to its foreign policy – such as Turkey, which the US views as essential to its policy in the Middle East.

“You make it sound like America’s interests and the IMF’s are totally aligned,” Meltzer said to loud claps.

The glaring intellectual point that came out of the debate was that the US would have used the IMF to bail out Thailand in 1997 if it was relevant to US strategic concerns. The fact is that Thailand is of no consequence to US foreign policy. And yet from Thailand spread the contagion that caused the Asian crisis.

Both men spoke well, and Summers laced his speech with good jokes. For example, on the subject of economists (of which he is one), he said he had been told in Russia that “an economist is someone who is pretty good at figures but doesn’t have the personality to be an accountant.”

However, the best put-down of the debate came from Meltzer. During an argument about US tax cuts (Meltzer for, Summers against), Summers put himself in a position that was untenable and Meltzer pounced.

“So, you’re saying,” he said, “that you can’t cut taxes when there’s a deficit, and you can’t cut taxes when there’s a surplus.”

Even Summers had to shake his head and say: “That was good. That was very good”, at the eloquence of this statement – which basically cut his argument to shreds.

The only pity was that CSFB’s Asian head, Stephen Stonefield, had to reluctantly wind things up after an hour and a half. Unlike most conferences, people would gladly have sat for another hour.

The conference, which occurs in Hong Kong just before the Sevens rugby tournament, has been CSFB’s most successful ever, with 1800 registered delegates.

People will talk about the Summers/ Meltzer debate as one of the highlights of the year.

Tomorrow: an exclusive Q&A with Meltzer.