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Jeffrey Sachs’ The
Price of Civilization: Economics and
Ethics After the Fall, (Vintage
Canada, 2012) is
a remarkable book. True, it focusses on
the economic plight of the United States
of America and it annoyingly refers to
“we” - presumed to be US citizens. Yet
many of the insights are more general –
for example the chapters about the impact
of globalization and of increased
corporate lobbying. The analysis goes
beyond the author’s speculation, drawing
extensively on economic data and opinion
polls to support its claims. I found it
remarkable that calls for fair taxation
and an end to the dominance of corporate
lobbies in politics on ethical grounds and
for the pursuit of happiness could come
from even an apparent democrat in the USA. My discovery of the book
was curiously timely. The thinking seemed
to flow on from my own. (See June
2012 article in which I recall the
thinking of the book Small
is Beautiful.) Sachs’
book is also remarkable in that the hard
bound copy, published in 2011, must have
followed on the heels of Judt’s small
final 2010 book Ill
Fares the Land, which
I also read this September. Sachs seems to
build his economic concerns out of Judt’s
historical/political concerns. Judt’s book
repeats some of his thinking from the
final pages of his book on the forgotten
20th century which I noted in my article
of October 2011. However, Judt’s 2010 book
is a delightful thoughtful readable
political agenda for progressives of all
colours. Sach’s book falls into
two big parts. The first is an analysis of
the evolution of economics of the past 30
years set in a social political context.
It traces the transition from a post war
consensus on mixed economy through the
Regan fallacy that too much government was
the genesis of economic woes to the
present de-regulated tax-starved deficit
era of super-rich with offshore tax havens
and burgeoning unemployed unskilled
labour. The second part of the book
suggests remedies. In each part some
chapters seem more significant than
others. Several chapters stand
out in Part 1. The
Free Market Fallacy makes a strong
case for
mixed economy , favouring free
market in areas where there are multiple
suppliers but government for police, fire,
roads where a single supplier is needed.
Free markets cannot address spill-over
effects like pollution nor can they
adequately promote science and innovation.
Economic fairness which is beyond the
market is also crucial. Most people find
it unfair to have untaxed super rich while
the poor lack food, shelter, safe water
and health care. While
the distribution of wealth and well-being
can be unfair, there must also be fairness
in the due process which governs income
re-distribution from the rich to the poor.
The
New Globalisation introduces the
new huge scale of globalisation stemming
from the arrival of computers, digital
communications and travel so that part of
a production of a phone or car will take
place in a host of different countries.
Sachs does not point out that
international trade agreements were a
crucial ingredient to the new
globalisation– Nixon in China for example.
Without
them it could not have happened. Sachs
also does not note that the agreements can
be ended or diminished in effect by
various kinds of tariffs. But that does
not affect his analysis. Multinational
corporations are the lead protagonists.
More than 25% of corporate profits come
from overseas as compared with 6% in the
1960s. A host of sophisticated economic
activities can now be carried out more
cheaply in China, India, Brazil or
elsewhere. The impact has been ignored or
under-estimated for example by Federal
Reserve chairmen who have treated the US
economy as if it were a closed economy.
Monetary policy had adverse effects when
it was presumed inflation was low from a
productivity miracle within the US rather
than cheap consumer goods from overseas.
Globalization causes convergence of
incomes between rich and poor countries.
It offers investment opportunities which
add riches to the rich and to the skilled
labour market. It adds to the global pool
of unskilled labour which competes with
unskilled labour back home. The big losers
are internationally immobile labour. For
all broad segments of society to benefit
the winners have to compensate the losers.
Mobile capital which invests in China or
relocates an apparel company there gains
from a sharp boost in productivity from
technology inflow, a surge in global
labour supply holding down labour costs
world-wide and gains from the government
cuts to tax and regulation as governments
compete for the capital. All these favour
US investors but jeopardise US workers. Governments
need to band together and agree on minimum
levels of taxation and regulation advises
Sachs. The
Rigged Game explores the increasing
role multinational corporations have
played in US politics influencing the
outcome of government deliberations to
favour their operation, their taxes and
their regulation. The author shows that
this can run counter to public opinion –
for example the avoiding of a public
component in the Obama health care
initiative to preserve the interests of
the private insurance companies. The
final case studies offer depressing
insights into corporate self-interest in
political decision making: tax cuts for
the rich; health care for private
insurance and pharmaceutical companies; an
energy policy torpedoed by big oil and big
coal; financial bonuses from bailouts;
proliferating tax havens. A
final account on corporate spin is deeply
depressing. The oil company PR effort to
deny climate change from CO2 emissions
means that “about half of the American
people deny the reality of human – induced
climate change despite the overwhelming
scientific consensus that human actions
have dangerously disrupted the climate,
with a lot more damage to come.” In the face of some of
the compelling analysis in part 1 of the
book, part II – what to do about it all -
seems tame. One exception is chapter 11 on
Paying
for Civilization. This is a thorough
examination of the big US budget issues:
debt; debt cutting; mandatory programs and
cost cutting – including the military. It
looks at the Nordic experience. It
looks at who decides and concludes local
governments are good providers of public
services but that the federal level must
supplement local financing. It considers
taxes under a heading: “Time for the Rich
to Pay Their Dues.” The present tax cuts
for high income households should go.
Mortgage tax allowances should be limited
to one home. A super tax should be added
at the very top. Coal and oil should be
taxed more. Bank balance sheets should be
taxed. Some form of value added tax (VAT
in the UK) should be introduced. The
result of the chapter is to discover that
relatively modest and reasonable changes
could deal with the US deficit and pay for
the author’s proposed new program needs
for a more just and compassionate society
– “civilization.” In contrast with this
hard analysis, it’s difficult to see how
the US or the rest of us get to Sachs’
“mindful society” (chapter 9) based on the
middle path of moderation of Buddha or
Aristotle. Certainly my own delight in Small
is beautiful economics fits the idea
of happiness beyond craving wealth, but
I’m at a loss on converting society as a
whole. Meaningful work is a highly
desirable goal, but most of us have been
content with other work which allows us to
keep bread on the table with a little
dignity. Sachs does recognise the
challenge of meaningfully engaging
“experts” as well as the public in complex
public decision making. The call for
reviving compassion and meaningful
responses to the poverty trap is a valid
wish. His need for respect of the ecology
– our life support systems and his related
need to assume some responsibility for the
future is equally valid. So is the quest
for a true spirit of honest deliberation
and problem solving in re-forging our
mixed economy in political processes.
Although the seven
habits of good government seem laudable,
how to get them is not clear in that
chapter. Relying on hope in the millennial
generation and hope in those who held
camps on Wall St to express concern over
bonuses for bank CEOs after public bail
out is not a compelling solution. Nonetheless,
all
in all this is a good book full of
good timely ideas about economics and
governance primarily for the USA but
also useful for others. Knowing what
to ask for is the beginning of
change. And Sach helps us with
that. As an activist friend once said
in answer to my question about how we
get there: “By beginning.”  |