As a social scientist I found this book to be wholly disappointing. Jeffrey Sachs is a respected development economist, but in this book he flounders with moral philosophy, politics, finance, and sociology to the detriment of his overall vision. Nevertheless, there is much to agree with in his exposition, not least is the way the American voting public is so easily misled or distracted by unexamined ideas in the media. (I have to say this is evidenced by the preponderance of 5-star reviews at Amazon!)
Mr. Sachs would like us all to be more “mindful.” No problem here–we should be more mindful, especially about the ideas we ingest from questionable sources–but then he leads us down a rabbit hole. One should agree with his indictment of crony capitalism and the sad state of corporate governance, but why does public sector and labor management get off without so much as a raised eye-brow?
Mr. Sachs also rightly argues that our policies are too focused on materialism and commercialism, saying we need to measure Gross National Happiness as much as GDP. Fine, but then he holds up Western Europe as the epitome of a happy civilization. Really? Let us take a closer look at defining “happiness.” Demographics is destiny and if one examines the demographics of developed countries we see that Europe and Japan are in a death spiral. The fertility rate of Europe averages 1.6 children, far below the replacement rate of 2.1. If all these Europeans are so “happy,” why aren’t they reproducing to share this happiness with young ones? The U.S. fertility rate is 2.06, suggesting a stable population rate given our high levels of immigration. (In fact, voluntary migration is probably another good indicator of the perception of happiness–and what country attracts more immigrants than the USA?) Why would we want to follow the current European path to oblivion? (As a Europhile, I certainly hope our European friends turn it around.) Perhaps the definition of happiness should include “faith and confidence in the future,” which may shuffle the ordering of true “happiness” around the world. Compounding his error, Mr. Sachs is too quick to credit secularism to the detriment of religious belief in defining his ideal society. Maybe the Europeans need to “get religion” again in order to want babies?
With his ideological biases, Mr. Sachs veers off track most egregiously in his understanding of US politics. Relying too much on polling data, he takes for granted that his political views reflect those of America. There’s an instant red flag raised by those who venture to explain our politics and that is their particular antipathy for either the Tea Party or Occupy Wall Street. OWS came too late to make the publication date, but Mr. Sachs displays the typical urban media’s antagonism towards the TP populist movement, characterizing it as a white, middle class anachronism. I fail to understand how political pundits can castigate the elitism of crony capitalism and then simultaneously slap down either of these populist voter revolts. Where does Mr. Sachs think the new politics outside the Republocrats is going to come from? Oh, that’s right, the Millennials. Mr. Sachs just assumes that the government idealism of 20-somethings is going to overcome middle-age realities and political disillusionment. There’s a reason for the saying that a 20-year old who is not a liberal has no heart, while the 40-year old who is still a liberal has no brain. More likely, Millennials will learn how to distinguish efficient public solutions from efficient private solutions and move towards a more balanced society that values freedom as much as security.
This takes us to Mr. Sachs foray into budgetary economics (or perhaps he is still mired in politics). He takes for gospel (polling data?) that public entitlements are just a permanent fixture of the civilized state. This allows him to prove that there is no viable way to cut government spending in order to close the deficit gap. But Mr. Sachs needs to get outside the box with his thinking. As an economist he knows that retirement funding and healthcare are private goods by definition. By converting them to public goods we now see the results, and it’s going to get much worse. Social insurance spending on Social Security, Medicare and Medicaid now totals more than 50% of federal outlays. Tax receipts for these programs fall short by more than $600 billion in 2010 alone and will only grow. So, the “social insurance deficit” is roughly 50% of our total deficit. What private insurance pool could possibly survive under these conditions? (None, and nor can the public sector.) How many of us would willingly exchange our private pensions for Social Security, or our private health plans for the public option? Right. Nobody. So why should we do this collectively? If we gradually substituted private programs for these functions through universal savings accounts, 401(k)s and health savings accounts, we could eliminate almost all of the structural deficit Mr. Sachs insists we must close with higher taxes. We could account for market incompleteness with safety net welfare programs for pension and health catastrophes. That’s the only route towards sustainability. Privatization would also increase private savings and capital accumulation.
This brings us to the true solution for most of Mr. Sachs diagnosed ills: widespread capitalism through the broad accumulation of capital across the population. The concentration of capitalism through casino finance, misguided tax policies, private equity and hedge funds, and weakly defended shareholders’ rights is what has caused the divergence of outcomes between the 1% and the 99%. Capital is the source of freedom, autonomy, choice and democracy in a private free market society. (There’s a reason we call it Capitalism and not Laborism.) Globalization has only made this more obvious to all but the ideologically blind. Broad-based capitalism assumes rules and regulations that defend property rights and promote transparency, accountability, and competition. (The best regulator is an open, competitive market–and that goes for democratic elections too.) Foremost, we need to root out the elite practice of “heads we win, tails you lose.”
I like Mr. Sachs and have always profited from his academic research, but book writing and big ideas need more careful vetting from those who offer different perspectives. This books lacks that balance, so readers should seek out the other sides of Mr. Sachs’ arguments. Paul Ryan’s WSJ review is a good counter-point. Lastly, Mr. Sachs needs to understand that Americans are not opposed to taxes, they are opposed to bad value for their taxes. Most of us will voluntarily pay “The Price of Civilization,” as long as it’s not perceived as a rip-off to feather someone else’s bed.