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The following article appeared in Left Business Observer #111, August 2005. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.
The long, strange career of Jeffrey Sachs
Jeffrey D. Sachs, The End of Poverty: Economic Possibilities for Our Time, Penguin Press, 416 pp., $27.95
Jeffrey Sachs is a complicated guy. His first claim to fame was as the doctor who administered "shock therapy" in Bolivia, Poland, and Russia. Now he's Bono's traveling companion. Bono wrote the intro to Sachs's latest book ("My professor.... In time, his autograph will be worth a lot more than mine"), and Sachs gushes all over Bono in the text ("Bono brilliantly brought the AIDS tragedy to the attention of several key leaders of the religious right...").
This book is a manifesto and how-to guide on ending extreme poverty around the world. The subtitle, "Economic Possibilities for Our Time," echoes Keynes's famous 1928 essay, "Economic Possibilities for Our Grandchildren," which forecast, rightly, that we would be able to meet all the basic material needs of humankind two generations later - essentially today. We could, but we don't. Worldwide, about 1 billion people live on the equivalent of less than $1 a day, the official definition of extreme poverty; 2 billion live on less than $2, which officialdom considers normal poverty. These estimates have been criticized for being too low, and the definition of poverty for being too crude, but still, the numbers are criminally large.
Sachs uses this book to promote the UN's Millennium Development Goals (on which he is an advisor to Secretary General Kofi Annan), which were agreed to by 147 heads of state gathered in New York in September 2000. These include halving the numbers of the extremely poor and halving the numbers of the hungry by 2015; achieving universal literacy and primary education; promoting gender equality and the empowerment of women; reducing child mortality by two-thirds; improving maternal health; combatting HIV/AIDS, malaria, and other horrid diseases; ensuring environmental sustainability; and developing a global partnership for development (which amounts to a nicer neoliberalism)
Achieving these goals, on Sachs's estimates, would require about $80 billion a year over the next ten years - not much next to current world output of $35 trillion a year. It's equal to about 20 hours of global economic activity. It's not much more, as Sachs shows, than the income of the 400 richest U.S. taxpayers - and that's not counting the rest of the world's rich. But even these modest goals are impossible in the current political environment.
A measure of that environment is Washington's current approach to one of Sachs's obsessions, preventing malaria in Africa, where the disease is ubiquitous. It would cost very little to provide Africans with mosquito nets to sleep under, something that's beyond the means of most Africans. But U.S. policy centers instead around something called "social marketing." Instead of giving away the nets, "social marketers buy advertising, conduct public education campaigns and create brands, hoping to promote the goods at low prices in the commercial marketplace" (as Donald McNeil wrote in the New York Times). They claim that the poor will value more that which they have to pay for, and the sales will cultivate an entrepreneurial class. There's no money in the budget for epidemiological studies to see if social marketing works. Of course, it probably doesn't. But Washington has big ideas about freedom - so who cares that 10,000 Africans die every day of preventable diseases?
On one level, Sachs's analysis and agenda are unremarkable. Many have written on how much the poor of the world suffer, and how little it would cost to reduce that suffering. But we've almost lost sight of a remarkable fact: this is Dr. Shock, Jeffrey Sachs!
Sachs's first moment in the spotlight came in the mid-1980s, with the "stabilization" of Bolivia, a policy package he designed that brought the country's inflation rate from 40,000% to near-0%. Sadly, though, it did nothing to relieve Bolivia's poverty - and the current round of almost constant protests, which have driven several presidents from office (and some from the country) suggests that twenty years later, Bolivians still aren't happy with their situation. But the superficial success of what came to be called "shock therapy" - and it must be conceded that almost no one likes hyperinflation - left Sachs well-positioned in the global market for economic expertise when socialism started unraveling at the end of the decade.
Sachs was an advisor to the Yeltsin government in Russia from 1991 to 1994, and also advised Poland, Slovenia, and Estonia as they were beginning their transitions to capitalism. The last three are mixed successes - on the surface, Poland looks like a success to some, but with the transition came higher unemployment, falling real wages, and aimless cycles of political discontent. Russia, though, was a thorough disaster, one of the worst collapses in human history. Living standards fell and the population shrank, an almost unprecedented event in a country not at war.
Bono's new best friend refuses to accept any blame for the disaster, offering the defense that the Russians didn't take his advice, and the West didn't come through with the big aid package he insisted was necessary. Apparently this is an well-practiced strategy. A 1992 Euromoney profile notes: "Sachs is reluctant to acknowledge mistakes, defining them in terms of regret when governments do not take his advice." In that case, he blamed Poland for not privatizing fast enough. Contrasting with Sachs's regrets over advice not taken, several governments he's consulted with have since characterized the material produced by him and his associates as irrelevant, or, as a Slovenian official put it at the time, "simplistic...kindergarten stuff."
But the outcome illustrates precisely the danger of having the likes of Sachs parachute in bearing the timeless truths of neoclassical economics. Anyone who knew Russia knew that any rapid privatization would immediately lead to the creation of a new corrupt elite through massive theft of state property. Anyone who knew Washington knew that no big aid package was ever going to come through; adding to usual U.S. cheapness, a lot of hardliners wanted to see Russia ground into the dirt. In the words of former World Bank economist David Ellerman, who frequently collided with Sachs's work in Slovenia and has followed him intently ever since, "Only the mixture of American triumphalism and the academic arrogance of neoclassical economics could produce such a lethal dose of gall."
During what officialdom called the transition, there were divisions between those who wanted to reform the existing socialist system and experiment with hybrid forms of ownership, and what Ellerman calls the "clean postsocialist revolutionaries," many of them with American economics PhDs, who dismissed the reformers as tainted nomenklatura and wanted immediate privatization. Adding to the prestige of the revolutionaries were their trusted foreign advisors, like those from the Harvard Institute for International Development (HIID), led by Jeffrey Sachs and partly funded by the U.S. government.
In Poland, Sachs was firmly on the side of rapid transition to "normal" capitalism. At first he proposed U.S.-style corporate structures, with professional managers answering to many shareholders and a large economic role for stock markets. That didn't fly with the Polish authorities, so Sachs came back with a Germanic idea - large blocks of the shares of privatized companies would be placed in the hands of big banks. (As Ellerman recounts it, "Wherever the parade was going, [Sachs] had to be in front.") In both versions the point was to end any hints of worker or social control and institute a conventional capitalist class hierarchy.
His style was always abrasive and domineering; he rebuked the Slovenian parliament for passing a bill without his approval, and dismissed his critics as "idiots" and "self-management imbeciles." Waiting to meet with senior Soviet officials in 1991, Sachs put his feet up on a table. An aide asked him not to do that. Sachs took his feet down for a moment, and when the aide turned away, put them back up. From several public events and an hour-long interview, I can say he comes across as a very unpleasant fellow - cocky, vain, and free of doubt.
HIID eventually collapsed in scandal, when it was revealed that the principals of its Russian project, Andrei Shleifer and Jonathan Hay, along with their wives (who happened to be mutual fund managers), had been buying Russian stocks and dickering for the privilege of getting the country's first mutual fund license, while dispensing advice to the Russian government. (Shleifer was one of the trinity of so-called Harvard Wunderkinder who were to Russia what the Chicago Boys were to Pinochet's Chile; the other two were Lawrence Summers - and Sachs.) The U.S. government sued, and Harvard shuttered the institute. Sachs, who was not involved in the scandal, decamped to Columbia (it's said there was no going-away party from his Harvard colleagues). At Columbia, he was appointed to head its new Earth Institute, an interdisciplinary enterprise that would bring together physical, health, and social scientists to promote sustainable economic development.
Sachs admits to no responsibility for the Russian catastrophe. When I interviewed him in November 2002, I asked him to comment on the (incontrovertible) fact that he's viewed by scores of millions of Russians, as one journalist has put it, as either an emissary of Satan or of the CIA. He answered that he found this question "disgusting," "perverse," and like nothing he's ever been asked before. The global elite leads a very insulated life.
Regrouping, to dissuade him from hanging up, I asked how he justified the tearing apart of the USSR and forcing the country headlong into capitalism when there was little popular support for such a strategy. He responded, illogically, by saying he "wanted to support...the democratization of the Soviet Union." He sung the praises of "transparency and honesty in government," even though the Yeltsin regime he was advising was opaque and corrupt. Asked to comment on published reports that he supported creating an inflation, so as to wipe out the savings of Russians (part of the shock therapists' attempts to start post-Soviet Russia with a clean slate), he bristled further, denouncing the quote as "phony," the question as "indecent," and the interview itself as not being in "good faith."
In his academic work, however, Sachs argued that since China was only very lightly industrialized, it could afford to take its transition slowly. Russia, however, was burdened with the bad inheritance of Soviet industry, which was hopeless and had to go.
As the 1990s progressed, Sachs became more prominent as a critic of development orthodoxy, arguing against the IMF's austere prescriptions after the 1997 Asian crisis, and pressing for debt relief for the poorest countries. He became an economic advisor to the Jubilee 2000 movement (named after the Biblical exhortation to observe a Jubilee year once every fifty years, in which debts would be forgiven). The harder core of the global justice movement has never fully trusted Sachs; he reportedly lobbied to get himself invited to the World Social Forum at Porto Alegre a few years ago, but was rejected. Along with Joseph Stiglitz, he's one of the leading critics of the economic development establishment who's still a member of the club. But there aren't many of them.
For a member of the club, Sachs does use some strong language. The End of Poverty is full of sharp critiques of Western imperialism in Africa and elsewhere. He quotes Mike Davis approvingly on British brutality during famines. He blasts U.S. support of Mobutu and the rest of the posse of Cold War thugs. In late 2003, when Bush asked Congress for another $87 billion to fund the Iraq war, Sachs took to the pages of the Boston Globe to denounce the administration for pursuing an expensive war for oil while neglecting 500 million impoverished Africans. In the op-ed, he reviewed the disgraceful history of U.S. alliances with Middle Eastern despots "to keep the oil flowing," and noted vast reservoirs of ill-will towards the U.S. that that policy had created. He declared that "the world will not tolerate unilateral control by a country that accounts for less than 5 percent of humanity...and the American people will end up paying a high price for the fantasy of hegemony." That's far stronger than anything Paul Krugman would write.
The New Sachs wasn't entirely unprecedented in the utterances of the Old Sachs. In the early 1990s, as he was busily transforming Eastern Europe, he told Euromoney, a banking trade journal, that you shouldn't press debtor countries for repayment if "there is going to be social catastrophe," and that "reform" programs should be "fair," with "burdens and benefits...shared in an adequate way." But those high-minded concerns were overwhelmed by the political realities of the moment, and the results were anything but fair, as poverty and inequality increased in most of the formerly socialist countries (a situation that they've only recently begun to recover from).
People who know Sachs say he's always considered himself on the political left. His father, who died in 2001, was a long-time Detroit labor lawyer and general counsel to the Michigan AFL-CIO. That puts his passion to destroy worker power in eastern Europe in an interesting Oedipal light - and might even explain some of the contradictions of Sachs's politics. But that would be speculative psychoanalysis of a suspect sort, so enough of that.
Heavy debts, IMF austerity programs, and fickle financial markets are Sachs's favorite targets. His views on the rest of the development business are more conventional. In The End of Poverty, he writes as if all the poorest countries need to do is get a rung or two up the economic ladder; the problem is their distance from the ladder, not the ladder itself. That stands in odd contrast with the strength of his anti-imperialist rhetoric. It's as if he can't see the financial arrangements (with institutions like the IMF at their center - there's usually a state center to a financial system) as crucial enforcement mechanisms for the maintenance of orthodox policies. Finance is an instrument of class power, locally, nationally, and internationally.
In our interview, Sachs told me that to become internationally competitive, Argentina and Brazil need to develop their educational institutions and technological capacity - as if the history of a couple of centuries of structural subordination and the present of debt service demands haven't made that difficult to impossible. (Africa's long-term prospects, he disclosed, lie in tourism, services, and back-office operations.) There's more recognition of deep structural impediments in this book, but then he offers his reform agenda as if the structurally dominant would easily consent to a weakening of their domination, which is how they see any "aid" program. Asked how he would deal with the enormous political obstacles to his agenda, Sachs pointed to his own efforts at promoting debt relief, which date back to 1985.
We're back to Sachs's enormous ego, which exposes almost anything he does to the suspicion that he's in it mostly for the attention. But while his work in Russia, though it drew attention, was mostly destructive - something he still can't admit to - his concerns today are a lot more admirable. His criticisms of American warmongering and Western indifference to the poverty of a billion or two of our fellow humans are mostly on the side of the angels. Maybe the best summing up of the latest incarnation of Jeffrey Sachs comes from David Ellerman: "I hope he gets what he wants, but that he doesn't get any credit for it."
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