In a new Financial Times note, Larry Summers defends some key elements of Hillary Clinton’s “pro-worker” economic agenda: higher minimum wage, mandated family leave benefits, tax incentives to boost corporate profit sharing. Of course, since these agenda items come from a Clinton-aligned Center for American Progress report that Summers himself co-wrote, he is really just talking his own book. Not so interesting. But his counter-argument or addendum to Clinton’s “quarterly capitalism” or “short-termism” agenda is thought-provoking:

At the same time scepticism about whether all horizons should be lengthened is appropriate. A generation ago, the Japanese keiretsu system of cross ownership of corporate shares — which insulated corporate managements from share price pressure — was seen as a strength. Yet, Japan’s manifest macroeconomic difficulties aside, companies lacking market discipline have squandered leads in sectors from electronics to automobiles to IT.

Managements of companies that are dissipating the most value, such as General Motors before it was bailed out by the US government in 2009, have often been the most enthusiastic champions of long-termism. Market participants who are willingly placing high valuations on Silicon Valley start-ups that lack any profits and have little revenue may be putting too much, not too little, weight on the distant future. That, at least, is the implication of those who see the inflation of a “technology bubble”.

Corporations hoarding cash that is earning zero in the bank or in Treasury bills would be cheered not jeered by the market if they could be convinced that the companies were putting it to productive use. Many corporations are in this situation of having cash piles but often do not have productive uses for the money. Either that or they cannot convince investors of their projects’ validity. Pushing corporations without good projects to invest is wasteful. Stopping or discouraging them from distributing funds to shareholders is dangerous if it encourages mindless takeovers as an alternative.

Not sure what Summers thinks of Clinton’s plan to raise capital gains tax rates to reduce shareholder-driven short-termism. (I have explored lowering long-term tax rates on investment to achieve the same effect.) And he dances around executive pay reform. But his comments would certainly seem to argue against more interventionist policies to nudge corporate behavior toward more long-term investment. Perhaps the best path forward recommends policies that increase potential productive uses for corporate investment and a higher degree of private-sector competitive intensity where companies feel pressured to innovate and invest.