The Price of Civilization – Economics and Ethics After the Fall
Jeffrey Sachs, Random House, 2011
Sachs says, “Much of this book is about the social responsibility of the rich” and about society’s shared values and the need to plan ahead to achieve common goals. The book is also a diagnosis of the failure of the American economy to achieve society’s common goals since the 1970’s and makes recommendations for future economic reforms. Sachs argues that there is a consensus on some key beliefs about how the economy should work. Equality of opportunity accompanied by individual responsibility to make the maximum effort to help themselves are central beliefs in America, along with a broad agreement that the rich should pay more taxes. There is also consensus around environmental protection and a belief that big business is too powerful. Sachs argues, however, that there is are gaps between what Americans believe and what the mass media selects to tell about these issues and finally, what politicians decide to do about them.
The American political system usually thought of, as the two-party system of Republicans and Democrats, is really a single system run by and for the wealthiest in America. Sachs describes how the first successful corporate takeover of the political system was the ‘military-industrial establishment’ identified by Eisenhower in the 1960’s. Through four converging trends, the American political stage has evolved to the perfect feedback loop of wealth begetting power, power-begetting wealth. The four trends are identified by Sachs as first, the overly strong representation of individual districts versus a weak national level party system; second, the growth of mega-lobbies, like the military-industrial complex, but now many fold; third, the direct financing of election campaigns by corporate interests (Big Oil for Republicans versus Wall Street for Democrats); and fourth, globalization and the race to the bottom for workers, while power concentrates at the top.
Public opinion doesn’t matter. The evidence is clear in the actual behaviour of the US government. In an incredible list of big issues the point is made. The decisions to act or not act are stunning: the Bush tax cuts for the wealthy ‘extended’ and now still in negotiation as the Fiscal Cliff approaches (I am writing this in Dec. 2012); the war in Afghanistan continues; the public option for healthcare dropped; the alternative energy technologies undeveloped; the bank bailouts continue while they pay out mega bonuses to top executives.
The rise of consumerism across society and its concomitant, advertising, underlies the shift from ‘needs’ to ‘wants’ in Americans’ psychological makeup. Economists habitually misread how markets really work when they ignore the influence of manipulation. We were warned about this shift many times. Sachs lists such warnings coming from George Orwell (1940’s), Vance Packard (1950’s), John Kenneth Galbraith and Marshall McLuhan (1960’s), Noam Chomsky (1990’s). But who’s listening?
In 1996, the Telecommunications Act in the US completely deregulated the mass media. Formerly, under the FCC, the rules required some programming not supported by advertising and required alternative points of view (the Fairness Doctrine http://en.wikipedia.org/wiki/Fairness_Doctrine). It also limited ownership to prevent monopolizing local access through joint control of print, radio and TV. All that is gone and we are left with corporate media giants like Disney, Comcast, Westinghouse, Viacom, Time-Warner, and News Corporation. Sachs concludes Part One of the book with this: “We are a technology-rich, advertising-fed, knowledge-poor society”.
In Part two of the book Sachs addresses what can be done to regain prosperity and civic health in America. He starts with a Buddhist-like proposal for more ‘mindfulness’ regarding needs as individuals and as a society. (The Buddhist belief system includes: self, work, knowledge, others, nature, future, politics and the world.) He goes on to make specific proposals for setting new economic goals in the areas of employment and quality of work-life, education, poverty reduction, the environment, the federal budget, governance, national security, and happiness/satisfaction.
To achieve these goals a mixed economy of government and the marketplace must be respected with a commitment to both efficiency and fairness and sustainability.
Interventions in key areas are needed to accomplish the change. The link between education and better paying jobs is an obvious area for improvement. Subsidizing the return to school, at all levels of education, for those under 25, can reduce immediate unemployment numbers. Job sharing would also increase employment and rebalance work and leisure. A more active intervention stance in the marketplace with respect to specific job training needs to be accepted as the proper role of government. Similarly, ECD (Early Childhood Development) needs to be a focus for intervention. Improved schooling at the early to middle grades and publicly funded quality daycare, as is done in Sweden and Quebec, will help lift people out of the poverty cycle.
Health Care reform continues to be stalled in America with only partial success under Obama, extending basic coverage to the poor. Costs remain excessively high as the corporate interests of private health care insurers; pharmaceutical companies and the AMA (American Medical Association) successfully blocked further public entry into the lucrative market they control.
Energy security is discussed as well as military spending. 5 percent of GDP or approximately US$1 trillion is spent on the military. In 2011 government debt was 36 percent of GDP and projected at 75 percent by 2015. It costs 1.5 percent of GDP to pay the interest, projected to be 4 percent by 2020.
In order to reduce the deficit, cuts in spending are proposed, especially by Republicans, but also by Democrats. Favourite targets are foreign aid and government waste. Sachs analyzes these and demonstrates that the proposed savings would be a very small percent of GDP. (Foreign aid = 0.2 percent of GDP; waste, identified by the National Commission on Fiscal Responsibility and Reform = 0.6 percent of GDP http://en.wikipedia.org/wiki/National_Commission_on_Fiscal_Responsibility_and_Reform).
True healthcare reform and military spending cuts, on the other hand, could save up to 3 percent of GDP. Going back to his previous analysis of how to rebuild America in a positive way (investing in health care, education and infrastructure) Sachs arrives at a budget with cuts equaling new spending (-3 percent; +3 percent). This leaves projected federal spending of 24 percent of GDP by 2015 (revenues = 18 percent of GDP).
Tax revenue in the US is suppressed by the ideological opposition to government spending. Yet spending is out of control. There is no Value Added tax in the US whereas in all European countries and Canada there is. Sachs details his proposals for reversing the pattern of the last 30 years that saw the richest part of society paying less than their fair share in taxes. By re-organizing tax payments and closing loopholes it would be possible to reduce the debt-to-GDP to a sustainable level. He insists that this is not ‘class warfare’ but rather sharing of prosperity.
In the closing chapters of the book Sachs, echoing Stephen Covey’s book ‘7 Habits of Highly Effective People’, recommends 7 habits for government:
– set clear goals and benchmarks
– mobilize experts
– make multiyear plans
– be mindful of the future
– end the corporatocracy
– restore public management
Sachs calls for a third party to emerge in America to lead with these goals and he calls for a constitutional change to proportional representation and a mixed presidential-parliamentary system that sits a longer term of four to six years. His final hope is that the millennial generation will drive this change.