The United States and Europe are both being buffeted by high inflation. Both will likely slide into recessions this year or next. But the situation is far more dire there than here, according to Harvard economist Larry Summers, because of Europe’s reliance on Russian oil and gas.
“We are largely self-sufficient in energy,” Summers told a Globe Summit audience at the Harvard Kennedy School on Thursday evening. “Europe is completely dependent on imports of fossil fuels.”
During the session, hosted by Linda Henry, chief executive of Boston Globe Media Partners, Summers said Europe, especially Germany, left itself economically vulnerable by not diversifying its energy supplies. Germany relied on Russia for 55 percent of its gas before Russia’s invasion of Ukraine in February.
Relying on Russia was “asking for trouble if you didn’t completely trust President Putin. . . which is to say you were asking for trouble,” said Summers, who served as treasury secretary during the Clinton administration and president of Harvard from 2001 to 2006.
Russia has slashed energy shipments to Europe in retaliation for its financial and military support of Ukraine. European countries have lined up alternative suppliers, including Norway, but there is still widespread concern of potentially deadly shortages this winter.
Meanwhile, Great Britain, which gets most of its gas from Norway and now must pay more, is planning to spend about $150 billion to subsidize residents facing utility bills that will be nearly double those of last year.
Summers, asked about the impact of China’s struggles with COVID lockdowns and extreme heatwaves, said it would reduce the country’s exports and also reduce consumption at home.
“It will slow global growth,” he said of China’s economic slowdown. One plus, he said, would be a drop in 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 may become a more truculent China.” Without increasing prosperity to keep its society together, the government may turn to nationalism and foreign scapegoating to promote cohesion, he said.
Asked by Henry for his outlook for the local economy, Summers said he was optimistic that Boston would remain vital because of its concentration of life sciences, which will drive innovation in this century.
“We have the talent,” he said. “The question is, will we support it?”
“That is a central question for this city,” he said.