The Price of Civilization: Reawakening American Virtue and Prosperity

Copyright © 2011 by Jeffrey Sachs

All rights reserved.

Published in the United States by Random House,
an imprint of The Random House Publishing Group,
a division of Random House, Inc., New York.

RANDOM HOUSE and colophon are registered trademarks of Random House, Inc.

Library of Congress Cataloging-in-Publication Data

Sachs, Jeffrey.

The price of civilization / Jeffrey D. Sachs.
    p. cm.
Includes bibliographical references.
eISBN: 978-0-679-60502-7
1. United States—Economic conditions—2009– 2. United States—Economic policy—2009– 3. Environmental responsibility—United States. 4. Social responsibility of business—United States. 5. United States—Politics and government—21st century. I. Title.

HC106.84.S23   2011
330.973—dc22                  2011014631

www.atrandom.com

Jacket design: Pete Garceau
Jacket illustration © Dreamstime Images

v3.1

CONTENTS

Cover

Title Page

Copyright

PART I. THE GREAT CRASH

Chapter 1. Diagnosing America’s Economic Crisis

Chapter 2. Prosperity Lost

Chapter 3. The Free-Market Fallacy

Chapter 4. Washington’s Retreat from Public Purpose

Chapter 5. The Divided Nation

Chapter 6. The New Globalization

Chapter 7. The Rigged Game

Chapter 8. The Distracted Society

PART II. THE PATH TO PROSPERITY

Chapter 9. The Mindful Society

Chapter 10. Prosperity Regained

Chapter 11. Paying for Civilization

Chapter 12. The Seven Habits of Highly Effective Government

Chapter 13. The Millennial Renewal

Dedication

Acknowledgments

Further Readings

Notes

Works Cited

Other Books by This Author

About the Author

PART I
The Great Crash

CHAPTER 1.
Diagnosing America’s Economic Crisis

A Crisis of Values

At the root of America’s economic crisis lies a moral crisis: the decline of civic virtue among America’s political and economic elite. A society of markets, laws, and elections is not enough if the rich and powerful fail to behave with respect, honesty, and compassion toward the rest of society and toward the world. America has developed the world’s most competitive market society but has squandered its civic virtue along the way. Without restoring an ethos of social responsibility, there can be no meaningful and sustained economic recovery.

I find myself deeply surprised and unnerved to have to write this book. During most of my forty years in economics I have assumed that America, with its great wealth, depth of learning, advanced technologies, and democratic institutions, would reliably find its way to social betterment. I decided early on in my career to devote my energies to the economic challenges abroad, where I felt the economic problems were more acute and in need of attention. Now I am worried about my own country. The economic crisis of recent years reflects a deep, threatening, and ongoing deterioration of our national politics and culture of power.

The crisis, I will argue, developed gradually over the course of several decades. We are not facing a short-term business cycle downturn, but the working out of long-term social, political, and economic trends. The crisis, in many ways, is the culmination of an era—the baby boomer era—rather than of particular policies or presidents. It is also a bipartisan affair: both Democrats and Republicans have played their part in deepening the crisis. On many days it seems that the only difference between the Republicans and Democrats is that Big Oil owns the Republicans while Wall Street owns the Democrats. By understanding the deep roots of the crisis, we can move beyond illusory solutions such as the “stimulus” spending of 2009–2010, the budget cuts of 2011, and the unaffordable tax cuts that are implemented year after year. These are gimmicks that distract us from the deeper reforms needed in our society.

The first two years of the Obama presidency show that our economic and political failings are deeper than that of a particular president. Like many Americans, I looked to Barack Obama as the hope for a breakthrough. Change was on the way, or so we hoped; yet there has been far more continuity than change. Obama has continued down the well-trodden path of open-ended war in Afghanistan, massive military budgets, kowtowing to lobbyists, stingy foreign aid, unaffordable tax cuts, unprecedented budget deficits, and a disquieting unwillingness to address the deeper causes of America’s problems. The administration is packed with individuals passing through the revolving door that connects Wall Street and the White House. In order to find deep solutions to America’s economic crisis, we’ll need to understand why the American political system has proven to be so resistant to change.

The American economy increasingly serves only a narrow part of society, and America’s national politics has failed to put the country back on track through honest, open, and transparent problem solving. Too many of America’s elites—among the super-rich, the CEOs, and many of my colleagues in academia—have abandoned a
commitment to social responsibility. They chase wealth and power, the rest of society be damned.

We need to reconceive the idea of a good society in the early twenty-first century and to find a creative path toward it. Most important, we need to be ready to pay the price of civilization through multiple acts of good citizenship: bearing our fair share of taxes, educating ourselves deeply about society’s needs, acting as vigilant stewards for future generations, and remembering that compassion is the glue that holds society together. I would suggest that a majority of the public understands this challenge and accepts it. During my research for this book, I became reacquainted with my fellow Americans, not only through countless discussions but also through hundreds of opinion surveys on, and studies of, American values. I was delighted with what I found. Americans are very different from the ways the elites and the media pundits want us to see ourselves. The American people are generally broad-minded, moderate, and generous. These are not the images of Americans we see on television or the adjectives that come to mind when we think of America’s rich and powerful elite. But America’s political institutions have broken down, so that the broad public no longer holds these elites to account. And alas, the breakdown of politics also implicates the broad public. American society is too deeply distracted by our media-drenched consumerism to maintain the habits of effective citizenship.

Clinical Economics

I am a macroeconomist, meaning that I study the overall functioning of a national economy rather than the workings of one particular sector. My operating principle is that the economy is intimately interconnected with a much broader drama that includes politics, social psychology, and the natural environment. Economic issues can
rarely be understood in isolation, though most economists fall into that trap. An effective macroeconomist must look at the big canvas, in which culture, domestic politics, geopolitics, public opinion, and environmental and natural resource constraints all play important roles in economic life.

My job as a macroeconomic adviser during the past quarter century has been to help national economies function properly by diagnosing economic crises and then correcting breakdowns in key sectors of the economy. To do that job well, I must strive to understand in detail how the different parts of the economy and society both fit together and interact with the world economy through trade, finance, and geopolitics. Beyond that, I must also strive to understand the public’s beliefs, the country’s social history, and the society’s underlying values. All of this requires a broad and eclectic set of tools. Like other economists, I pore over charts and data. In addition, I read stacks of opinion surveys as well as cultural and political histories. I compare notes with political and business leaders and visit factories, financial firms, high-tech service centers, and local community organizations. Sound ideas about economic reform must pass a “truth test” at many levels, making sense at the community level as well as the national political level.

A macroeconomist faces the challenge of a clinical doctor who must help a patient with serious symptoms and an unknown underlying disease. An effective response involves making a correct diagnosis about the underlying problem and then designing a treatment regimen to correct it. In my book
The End of Poverty
I called this process “clinical economics.” My inspiration has been my wife, Sonia, a gifted medical doctor who showed me the wonders of science-based clinical medicine.

I didn’t train to be a clinical economist, though fortunately my theoretical training, combined with my wife’s inspiration and some very good professional luck, enabled me to forge an unusual personal path to clinical economics. I was blessed with a first-rate education
as an undergraduate and graduate student at Harvard, where I later joined the faculty in 1980. With life-changing good fortune, I became involved in practical economic problem solving in Bolivia in 1985, and from then on I have built a career at the intersection of theory and practice. I spent much of the 1980s working in debt-ridden Latin America to help support that region’s return to democracy and macroeconomic stability after two decades of incompetent and violent military rule. In the late 1980s and early 1990s I was invited to help Eastern Europe and the former Soviet Union in their transitions from communism and dictatorship to democracy and market economy. That work, in turn, brought me invitations to the world’s two great behemoths, China and India, where I could watch, debate, and share ideas about the world-changing market reforms of those two great societies. Since the mid-1990s, I have turned much of my attention to the poorest regions of the world, and especially to sub-Saharan Africa, to try to assist them in their ongoing fight against poverty, hunger, disease, and climate change.

Having worked in and diagnosed dozens of economies over my career, I’ve come to have a good feel for the interplay of politics, economics, and a society’s values. Lasting economic solutions are found when all of these components of social life are brought into a proper balance.

In this book I will bring clinical economics to bear on America’s economic crisis. By taking a holistic view of America’s economic problems, I hope to diagnose some of the deeper maladies afflicting our society today and to correct the basic misdiagnosis that was made thirty years ago and that still sticks today. When the U.S. economy hit the skids in the 1970s, the political Right, represented by Ronald Reagan, claimed that government was to blame for its growing ills. This diagnosis, although incorrect, had a plausible ring to it to enough Americans to enable the Reagan coalition to begin a process of dismantling effective government programs and undermining the government’s capacity to help steer the economy.
We are still living with the disastrous consequences of that failed diagnosis, and we continue to ignore the real challenges, involving globalization, technological change, and environmental threats.

America Is Ready for Reform

After a thorough diagnosis in the first half of the book, I’ll get specific on what I think we should do. Those specific recommendations will raise several big issues. First, can we really afford more government activism in an era of huge budget deficits? I’ll show that we both can and must. Second, can a program of thoroughgoing reform really be manageable? Here, too, the answer is yes, even by a government that currently exhibits chronic incompetence. Third, is a reform program politically achievable in an era when politics is as divisive as it is today? Successful reforms are almost always initially greeted with a broad chorus of skepticism. “That is politically impossible.” “The public will never agree.” “Consensus is beyond reach.” These are the jeremiads we hear today whenever deep and real reforms are proposed. During my quarter century of work around the world, I’ve heard them time and again, only to find that deep reforms were not only possible but eventually came to be viewed as inevitable.