The Price of Civilization by Jeffrey Sachs

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 America. The details of the Fall – if by that he means the collapse of the American banking system in 2008 – do not concern him; it is what the Fall tells us about contemporary American capitalism.

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 United States – 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’s 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 globalisation” 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 of consumerism”.

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 $250,000, and an increase in the top rate of income tax to 40%, a wealth tax, closing of tax loopholes, tightening tax compliance, and increased taxes on oil and fossil fuels, as well as substantial cuts in defence spending.

Implementation of these ambitious reforms calls for “seven habits of highly effective government”. (I can just imagine Sachs and his multi-disciplinary, multi-tasked team jogging down Riverside Drive in New York.) Government must set clear goals and benchmarks, mobilise 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 decentralise operational control of programmes 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. He cites John Anderson in 1980, Ross Perot in 1992 and 1996, and Ralph Nader in 2000 and 2004 as precedents, but prudently omits George Wallace, the racist governor of Alabama, who, in 1968, was the last independent presidential candidate to achieve any votes in the electoral college. Theodore Roosevelt in 1912 would have served his purpose better.

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% to 5% 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’s 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’s diagnosis of America’s ills understates the deleterious effect of globalisation. 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 globalisation has greatly increased the political clout of the winners. Since the 1980s owners of capital have enjoyed not just a big rise in pre-tax earnings, but a substantial cut in tax rates, taking inequality back to levels last seen before the First World War. This has made the task of social democrats like himself that much more difficult. The United States of the 1950s and 60s, which Sachs looks back to as a golden age, did not transfer production abroad, protected itself against imports, and had stringent immigration controls. The wealthy were less rich and less powerful, and there was strong “countervailing” power in the trade unions. All this was swept away by globalisation. But Sachs fails to draw the pretty obvious lesson that globalisation actually destroyed the basis of the plural American society he admires, leaving the “American people” impotent to affect political outcomes.

Finally, Sachs, in my view, has an inadequate grasp of social health or “wellbeing”. He identifies the good society with the happy society, praises the King of Bhutan for making “Gross Domestic Happiness” his goal, and faults Americans only for their deluded belief that happiness can be achieved by ever “higher take-home pay and consumption of goods”. But there are two problems with making happiness the ultimate goal of economic activity. First of all, we don’t actually know enough about what makes people happy. Perhaps everyone living to 90 will increase the sum of “life satisfaction”, perhaps not. Second, happiness is not the same as “wellbeing”, still less is it the same as “goodness”. The ancient Greek concept of eudaimonia, loosely translated as “happiness”, is an admirable and desirable state of being, not a subjective state of mind. So “clinical economics” cannot tell you either how to be happy, or why being happy is good. For the latter one needs a philosophy of the good life, which the good doctor lacks.