This is the latest in a spate of books provoked by the world economic crisis and one of the best. Jeffrey Sachs calls himself a “clinical economist.” In The End of Poverty he applied his clinician’s skills to the distempers of Africa; in this book he turns them to the hubristic and wasteful habits of the US. The details of the Fall — if by that he means the collapse of the US banking system in 2008 — do not concern him; it is what the Fall tells us about contemporary capitalism in the US.
In structure, the book is a bit like a medical treatise: the symptoms are identified, their causes diagnosed, the cures prescribed. However, the science is a bit of a veneer. Sachs is a very political doctor. This does not mean he has written a bad book. He is a fine economist and statistician, and if you want to stockpile facts and arguments for radical advocacy, this is the book for you. I had hoped, though, for something more arresting than a millennium manifesto for the Democratic Party.
It is also a very American book. This is not just because it is exclusively about the US — with the existence of a few European countries acknowledged occasionally as reference points; it is suffused with classic American optimism. The “American people” are good, but policy has been captured by the “interests.” Dethrone the interests and the goodness of the people will assert itself. American conservatives and radicals both sing to this hymn sheet, differing only about the source of the evil: for the Tea Party it is “big government,” for Democrats such as Sachs it is big business. Both find difficulty in explaining why the good people are so often duped by one or the other.
Sachs’ list of American diseases is familiar: no jobs or bad jobs for those with poor education; decaying infrastructure; collapse of saving; lagging educational standards; increasing inequality; soaring healthcare costs; rampant corporate dishonesty. The diagnostician traces the source of these evils to the “free market fallacy” leading to “Washington’s retreat from public purpose”; to the “new globalization” which cost jobs, lowered wages, and skewed rewards to the very rich; to social and ethnic fragmentation; and to the domination of politics by “corporate lobbies” and “spin masters of the media,” who have distracted the American people with the “relentless drumbeat
Chapter eight, on the techniques of mass persuasion, is full of fascinating details. Did you know that Edward Bernays, the pioneer of public relations and techniques of hidden persuasion, was Freud’s nephew? Or that the average American “consumes” information for 11 hours, 48 minutes a day? Or that the Internet rewires our neural networks, making us less able to concentrate, and monitors our tastes, giving advertisers unrivalled opportunities to target their messages to its users? All of which should, as they say, give grounds for concern.
Having diagnosed the diseases, our clinical economist writes out his prescriptions. These aim to replace the “distracted” society with the “mindful” society. “Mindfulness,” we learn, comes in eight dimensions, and is conveyed along three paths: cognitive, meditative, and practical. These paths lead to eight economic goals for the next 10 years — to “raise employment and quality of work life,” “improve the quality of and access to education,” “reduce poverty,” “avoid environmental catastrophe,” “balance the federal budget,” “improve governance,” “national security,” and “raise America’s happiness and life satisfaction,” The social reform goals can be reconciled with the balanced budget requirement only through a heavy increase in taxes on the rich. Sachs calls for an end to the Bush tax cuts for those with incomes over US$250,000, and an increase in the top rate of income tax to 40 percent, a wealth tax, closing of tax loopholes, tightening tax compliance, and increased
taxes on oil and fossil fuels,
as well as substantial cuts in defense spending.
Implementation of these ambitious reforms calls for “seven habits of highly effective government.” Government must set clear goals and benchmarks, mobilize expertise, make multi-year plans, pay attention to the far future, emasculate the power of the business lobbies, rebuild public management of public projects, and decentralize operational control of programs to the states, while retaining central tax collection. An idea worth extracting from this mind-numbing regimen is that presidential state of the union speeches should always contain a section describing the implications of actions today for an average American 40 years hence.
Extrication of American politics from the clutches of the “corporatocracy” will require the provision of public money for campaign financing, free media time, a ban on campaign contributions from lobbying firms, and a stop to the “revolving door” between lobbying firms and federal employment. However, Sachs doubts whether effective government can be achieved without the rise of a “credible third party” to break the corrupted Republican-Democratic duopoly.
There are at least two omissions from the doctor’s diagnosis. The first is that he ignores the role of inadequate demand in causing the current high level of unemployment and unwanted part-time employment, treating it purely as a supply-side problem. Thus, while aiming to reduce unemployment from 9.4 percent to 5 percent by 2015, he rejects “macroeconomic measures to boost aggregate demand, including more fiscal stimulus and quantitative easing by the Fed.” Instead he offers various supply-side reforms, such as putting “millions of young people currently unemployed” back in school or college, increased job sharing, and job retraining schemes. But current unemployment is both a supply-side and a demand-side problem. Sachs’ dislike of Bush-era budget deficits, which combined huge increases in military spending with tax cuts for the rich, is understandable, but to suppose that supply-side measures alone will halve unemployment in four years’ time is pie in the sky.
Second, Sachs’ diagnosis of America’s ills understates the deleterious effect of globalization. He doesn’t question the economics or morality of offshoring American production abroad, regardless of its consequences for American jobs or real wages, simply saying that the winners should compensate the losers. Not only has this not happened, but it is increasingly unlikely to happen, because globalization has greatly increased the political clout of the winners.
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