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Customer Review

on 27 October 2011
The title of Jeffery Sachs' book is taken from a quote by Oliver Wendell Holmes Jr:

'I like to pay taxes. With them I buy civilisation.' (P210)

That is the key theme of this book. Although centrally concerned with the current state of the USA, it is clear that many of his criticisms of the USA can also be levelled at other countries that have embraced the neoliberal doctrines of the 1980s.

The book starts by charting the, by now, well mapped route that has led us to the current economic mess. Things started going seriously pear-shaped in the 1970s, with Nixon effectively tearing up the post-World War 2 Bretton Woods agreement:

'...the Bretton Woods dollar-exchange system collapsed, basically because America's inflationary monetary and budget policies during the Vietnam War era were destabilizing the world economy. The United States abandoned its monetary links with gold on August 15, 1971. Inflation soared worldwide as the major market economies searched for a new approach to the global monetary system.' (P29-30)

Later in that same decade, of course, came the dreaded 'stagflation' as oil prices surged. In the UK we saw, on the one hand, a rise in union militancy and, on the other, a growing disillusionment with and a reaction against state planning and the 'mixed economy'. In economics, the ideas of Hayek and Friedman appeared to offer solutions - minimising the role of the state would allow the creativity of the free market to regenerate the economy. These ideas neatly coincided with the individualism of the time and the stage was set for Reagan in the US and Thatcher in the UK:

'Together, Reagan and Thatcher launched a rollback of government the likes of which had not been seen in decades. Many of the measures of the Reagan presidency, notably the sharp cut in the top tax rates and the deregulation of industry, won support throughout the economics profession and the society.' (P30)

There was a huge antipathy towards government and a belief that 'society could benefit most not by insisting on the civic virtue of the wealthy, but by cutting their tax rates and thereby unleashing their entrepreneurial zeal.' (P31)

Or, to put it another way, 'Greed Is Good'.

All this has been documented many times before, albeit from different angles. For example, Sachs refers to the rise of Multi-National Companies or MNC's. Colin Crouch similarly notes their growing dominance but refers to them as Trans-National Companies, or TNCs. To my mind, this is not simply a difference of terminology. Sachs himself recognizes that these TNCs no longer hold any loyalty to any national polity - they are, in Crouch's term, 'trans-national' - across and above any local loyalties. Countries find themselves competing to attract these TNCs in the hope that they will pay taxes and provide employment - but, in order to attract them, taxes are lowered, employment legislation limited or repealed. There is, as Sachs says, a 'race to the bottom'.

Of course, money can be converted into power and vice-versa. Sachs details the huge rise in political lobbying. Again, this is not new - Thomas Frank's excellent 'The Wrecking Crew' covered this back in 2008, just before the onset of the current malaise. Sachs refers to a 'corporatocracy' - what others have referred to as oligopoly or even (and quite possibly more accurately in my opinion) kleptocracy.

As far as the political parties are concerned, however heated the debates might appear on the surface, there is little real difference between them, as Colin Crouch has also pointed out, albeit in a different context. Sachs suggests that the Republicans are dominated by 'Big Oil' (besides the obvious - Bush, Cheney et al - Sachs, on two or three occasions, refers directly to the Koch brothers who also help fund the Tea Party) while the Democrats are dominated by 'Big Finance' and Wall Street. The revolving door between lobbying companies, Wall Street and Washington is well documented, executives from Goldman Sachs providing many notorious examples.

The American political system is particularly susceptible to lobbying companies and the associated corporatocracy because, unlike a parliamentary system, the executive is separate from the political parties. This means that members of both houses can put their individual interests ahead of the parties'. Additionally, campaigning costs are so huge that donations from corporations are essential, donations that are considered to be 'investments'.

Sachs considers the role of globalisation. It is interesting to compare Sachs' views with those of Dani Rodrik ('The Globalization Paradox'). Rodrik suggest that there are three areas of globalisation - trade, finance and labour, with labour being the least globalised of the three. It was the globalisation of finance that really started destabilising the system, as money could be moved into and out of countries at the click of a mouse. But Sachs considers the effects of globalisation on labour. Relatively low skilled jobs are easily exported to low wage economies, leaving the less skilled in the developed economies such as the US (and UK) under- or unemployed. The roll-back of state provision of education has exacerbated the effects of this, as poorer students drop out of college, unable to continue their studies.

Sachs also turns his attention to the media, to consumerism and to what he terms 'hypercommercialization' (P146). Going back to Edward Bernays, Sigmund Freud's favourite nephew, he charts the rise of manipulative consumerism and the concomitant fall in communality, as people retreat to their homes, fragmented and isolated. Again, none of this is particularly new (see, for example, Sold on Language) but by bringing it in, Sachs usefully deepens and extends his analysis.

At the end, what Sachs considers is fundamentally lacking from American society at the moment is a sense of 'mindfulness' and balance. Extreme free market libertarianism only benefits a small elite, such as the Koch brothers. On the other hand, too much state control suffocates individual creativity. A middle way must be found:

'Two of the great ethicists in human history, Buddha in the East and Aristotle in the West, hit upon a remarkably similar prescription for the long-term happiness of humanity. "The Middle Path," said Buddha in the fifth century B.C., would keep humanity balanced between the false allures of asceticism on the one side and pleasure seeking on the other...Aristotle gave his fellow Greeks a similar message, that "moderation in all things" was the key to eudemonia, or human fulfilment.' (P162)

In his latest book, Will Hutton argues for a return to Enlightenment values. Really, both Sachs and Hutton are arguing for the same thing. It's also interesting to see writer like Michael Sandel drawing upon Aristotle for theories of justice.

Sachs goes on to propose some rather more concrete actions to get America and, by implication, much of the rest of the world, out of it's self-destructive course - but his underlying principle is one of balance and this 'middle way'. He frequently cites Scandinavian countries - Sweden, Denmark and Norway - as examples of societies where citizens accept high taxes and government involvement in the day-to-day running of society and consider it the 'price of civilisation'. Sachs feels, and quotes statistics to back up his feelings, that there is support for such an approach in the US. His approach is rather more holistic than, say, Dani Rodrik's who sees governments' role as one of curbing the excesses of globalisation, and it is rather more optimistic than Colin Crouch's, who considers governments to be pretty much corrupted by, or subsumed into, trans-national corporations and who looks to external pressure groups and activists (such as, perhaps, the 'Occupy Wall Street' demonstrations) as an alternative.

Frankly, I don't really find any of them finally convincing. I agree with Colin Crouch (and Peter Oborne) that there are now unaccountable ruling elites, thus I don't hold out much hope for Dani Rodrik's idea that governments will be able to control the pace and direction of globalisation. I agree with Sachs that there is a ground swell of support for government intervention, particularly amongst the 'Millennium Generation', but I don't see the ruling kleptocracies relinquishing their famed 'vampire squid'-like hold any time soon. On the other hand, as Vladimir Lenin reminded us, "The Capitalists will sell us the rope with which we will hang them."

All in all, though, a very readable and thought-provoking book. :-)
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