International Monetary Fund
Published Date:
July 2016
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Lawrence Summers

It is my privilege to introduce someone I have been friends with for more than 40 years. David Lipton and I met very close to the first day of graduate school. In those days we were both younger, thinner, and faster, and for a time, squash opponents. At one brief moment in graduate school, we were actually coauthors of a paper entitled “Multiple Shooting in the Solution of Rational Expectations Models.” And if anybody wants to know about the content of that paper, David probably remembers what it said.

We were friends in graduate school, and I remember being struck by and admiring in David the fact that he found the intellectual gymnastics associated with economics to be not very interesting. What he was interested in was how it helped you understand the world so that you could make it better. He gravitated early on to international economics, and he had—perhaps because of the family he came from—a commitment to recognizing that one could never divorce the economic from the political.

Because he was an extraordinary student, David could have launched what I suspect would have been a terrific academic career, but he chose instead to go to the IMF, where he worked for eight years gaining experience in the political economy of economic stabilization. That prepared him for a period of several years when he worked hand in hand with Jeffrey Sachs. One of them was always calm; one of them was always moderate in his statements; one of them was always gentle and judicious in his approach to all issues. And Jeff and David worked together promoting economic reform in Poland, most notably, as well as in Central Europe and in the early stages of post-Soviet Russia.

It is a vindication of their work that many years later, former Peterson Institute fellow Anders Aslund discovered (not how he would put it) but essentially what his regressions demonstrated was that the closer you followed the Lipton-Sachs program, the more your economy grew between 1989 and 2004—a period of 15 years. I think my boss, U.S. Treasury Secretary Robert Rubin, thought that the single most useful thing I had done in my time as the Undersecretary and Deputy Secretary of the Treasury was having the wit to recruit David Lipton to come work at the Treasury.

In the crucial moments when the United States crafted a response to the economic upheaval in Russia at the beginning of 1993, the fundamental author of that program and of our approach to the former Soviet Union and Central Europe was David Lipton. Merit rises, and David rose from being the Deputy Secretary to become Assistant Secretary, and then Under Secretary. But throughout his time at the Treasury, he had one job really: fireman-in-chief. Every time there was a crisis country—sort of ironic now, but I’ll say it—every time the IMF needed to be second-guessed, David was the person who went to the country, who provided trusted advice to the country and to those of us who were supporting that country.

What impressed me then about David, along with many other things, was not just his wisdom, but that he was tough and balanced. He was insistent that the laws of economics were like the laws of physics: if you violated them, bad things happened, and you really couldn’t wish them away even when their message was politically inconvenient. But he always understood that this was about the lives of tens, if not hundreds of millions of people. At one point at the Treasury, I nicknamed him “KHA Lipton”—short for “Keep Hope Alive” Lipton—because at moments when the rest of us would conclude that the policymakers in some country really didn’t get it, and it seemed that there was really not much that could be done, David would always have another approach to reaching out, another approach to trying to influence the situation, another approach to making things better. All of that without ever relaxing his standards.

The Treasury was a lesser place when David left in 1998 to pursue life in the private sector. Some people go to the private sector to prosper, and I suppose David did prosper to some degree. But he also learned an enormous amount about how financial markets work; about how financial participants think; about how bank risk systems do and do not operate. And because we kept in touch in those days, I knew that he was always committed to returning at some point to public service. By winning elections, George W. Bush probably delayed David’s return to public service relative to what he would have preferred. But in 2008, David was ready to serve, and he served a crucial role on the White House staff working on international economic issues, where he provided an important part of the intellectual agenda for the London summit in 2009, which I regard as being the most successful example of international economic cooperation in the last 25 years. It had David as an unsung hero. And that is one of David’s many virtues. He illustrates the old maxim that it’s remarkable what you can accomplish if you don’t need the credit.

It was natural that the IMF would look to David and that the United States would strongly support him when the position of First Deputy Managing Director at the IMF needed to be filled in 2011. That is a position that has had a number of distinguished occupants in the past, notably current Federal Reserve Board Vice Chairman Stan Fischer. It is a position that David has filled with extraordinary distinction.

It is not that hard to be trusted and liked by the IMF’s client countries and those who receive its funds. It is not that hard to be rigorous and vigorous in insisting on strong standards. It is actually very difficult to be both of those things. And that is something that David has brought to the IMF, to the great benefit of the Fund and to the world.

These have been five remarkable years at the IMF. Could any of us have ever imagined years ago that the IMF would be making the case for more fiscal stimulus in order to have more aggregate demand? That that is the current position of the IMF is a reflection, yes, on the situation of the global economy, but it is also a reflection of its most senior Ph.D. economist, David Lipton. David, the world has you to thank for a great deal, and we are honored to have you here tonight.

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