Prime Edition

The Price of Civilization

Jeffrey Sachs

The Bodley Head, London

Pages: 322 Rs. 599

Says money to power, if you pass my bills, I’ll pay yours

Jeffrey Sachs’ book is not just a comprehensive analysis of what went wrong with US economics after the Reagan era, it also provides solutions, writes Madhav Raghavan

MADHAV RAGHAVAN  29th Jan 2012

Jeffrey Sachs is Professor at Columbia University and special advisor to the UN Secretary General

merica, in the 1970s, was a land of crisis. "The problem is the government", cried the Republican Party. And so, when he was elected in 1981, Ronald Reagan took an axe to the federal government.

Downsizing came in four parts: cutting taxes on the wealthy, restraining social spending, deregulating key industries, and privatising core government services. Thus, argues Jeffrey Sachs, who is the Director of the Earth Institute, professor at Columbia University, special advisor to the UN Secretary-General Ban Ki-moon, a very famous economist, and author of this book, began in the US a process that has eventually led to disaster.

As Sachs describes it, the US government today has lost the plot. "The list of recent government failures is long and growing. The intelligence agencies failed to anticipate 9/11. The Bush administration launched a war over Iraqi weapons of mass destruction that did not exist. The Iraq and Afghanistan occupations were totally botched, brought down by ignorance, lack of planning, and corruption of US contractors. Hurricane Katrina shattered our confidence in our emergency response system. The banking crisis shattered our confidence in financial regulation. The banking bailout destroyed any remaining sense of fairness between Wall Street and Main Street. And now we face budget deficits unprecedented since World War II, but continue to grant massive tax breaks to the richest Americans."

But it wasn't always so. Indeed, says Sachs, it was just a few decades ago when the US government was viewed as competent and representative of broad national interests. After all, it had steered the US through the Depression, won World War II, created institutions such as NATO and what would eventually lead to the European Union, led the post-war economic recovery, legislated for public benefit, and sent a man to the moon. So what went wrong?

The post-Reagan straitjacketing of government in the economy, though it happened with strong public support, merely created a power vacuum that has since been filled by powerful corporate groups, namely, Big Oil and Wall Street. Even the mechanism is straightforward. Political candidates increasingly rely on private campaign financing. This creates strong incentives for winners to repay the financiers, typically by easing regulations on their business or turning a blind eye to their activities. Come elections, and the favour is again repaid by funding campaigns, and so on. Moreover, top positions in the administration are mostly filled by leaders of industry and finance, through a 'revolving door' appointment policy. Lobbyists are everywhere. All in all, says money to power, if you pass my bills, I'll pay yours.

The inevitable consequence is that both Republicans and Democrats are hostage to big money, and so nobody really represents the people, certainly not the poor. As a result, President Obama's rhetoric notwithstanding, "the 'temporary' tax cuts for the rich are extended; the unpopular war in Afghanistan continues; the public option for health care is dropped; alternative energy technologies are left undeveloped; and the largest banks get megabailouts and use them to continue to pay outrageous subsidies." In each case, what the people want is the opposite, but to no avail. Yet nobody seems to care.

The lament, however, is the easy part. The difficult part is in figuring out what to do from here, and how to restore the US to preeminence. And here Sachs spares no effort.

The post-Reagan straitjacketing of government in the economy, though it happened with strong public support, merely created a power vacuum that has since been filled by powerful corporate groups, namely, Big Oil and Wall Street.

Broadly, his prescriptions fall into two categories (both likely to be deeply unpopular with Republican ideology). First, he would like to restore the government to a position of economic importance. In some cases, he argues, government is necessary. For example, the free-market doesn't work everywhere. This is not controversial. Even strident free-market advocates like Milton Friedman and Friedrich Hayek knew this about public goods and negative externalities. But also it is only the government that can take the long view, and not succumb to short-termism. For this, government must first be freed of the lockdown of special interests and big money. This, he says, requires people to reengage with government, and be more aware and informed of policy.

is second recommendation is that the rich should pay more in taxes. The top 1 per cent of earners has done inordinately well in the past few decades, with tax rates low by historical standards, and it is time they gave back. Not only will this help bridge the yawning deficit, but the extra money should also help pay for desperately needed public investments and taking care of the poor.

The result of his analysis — the second half of the book — is a comprehensive to-do list. There are goals for government ("mobilize expertise", "end the corporatocracy", "restore public management"), for reducing the fiscal deficit ("reform the health care industry", "scale back unneeded weapons", "reduce international military bases"), for investing in tomorrow ("invest in higher education and child care", "modernize infrastructure", "promote research and development"). Each recommendation is backed by numbers, and argued cogently and powerfully. Certainly, no one can accuse him of failing to outline a solution.

The Price of Civilization is thus an oddly unsettling book. It leaves the reader with a clear idea of what went wrong in the US and presents a total game plan. At the same time, it becomes dismayingly clear how much needs to be done, and just how hard the task is. But for anyone who wishes to know the larger context of the upcoming US elections and the 2010s beyond, it is a must-read.

Madhav Raghavan is a doctoral student of economics at the Indian Statistical Institute, New Delhi.

Newer | Older


iTv Network : newsX India News Media Academy aaj Samaaj  
  Powered by : Star Infranet