Wake-up Call

Resist the Corporate State

Jeffrey Sachs on the American Corporate State

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The Economist   Nov 12, 2011          

Homeward bound

How to turn America around

The Price of Civilisation: Reawakening American Virtue and Prosperity. By Jeffrey Sachs. Random House; 336 pages; $27. Published in Britain as “The Price of Civilisation: Economics and Ethics after the Fall”. Bodley Head; £20. Buy from Amazon.com, Amazon.co.uk

JEFFREY SACHS is an American economist best known for his prescriptions for economically diseased poor countries. The country he now considers most in need of his diagnostic gifts is his own. “Something has gone terribly wrong in the US economy, politics, and society in general,” Mr Sachs writes in “The Price of Civilisation”. American politicians are the stooges of corporations, he says. And American voters have been tranquillised into obesity by saturation advertising.

Such sentiments would appear unremarkable if spouted by an Occupy Wall Street protester. But Mr Sachs, a professor at Columbia University, is a respected, mainstream macroeconomist. Mr Sachs catalogues the familiar problems that beset the American economy: unemployment stuck at 9%, an exploding budget deficit, America ceding technological leadership to China, poorly educated American children.

But this is not principally a work of economics. Mr Sachs blames America’s problems on politics. In the 1960s, southerners began to desert the Democratic Party and Republicans began to build an insurmountable congressional barrier to more activist government, which Mr Sachs deeply regrets. He despises Barack Obama’s Democratic Party almost as much as he does Ronald Reagan’s Republicans: “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.” He is particularly scathing of the “revolving door” between Mr Obama’s administration and Wall Street.

The convergence between the parties, says Mr Sachs, has led to policies that systematically favour capital over labour, keep tax rates low on footloose multinational corporations and starve government programmes that benefit the poor and the unemployed. This, he claims, flies in the face of popular will: he cites polls that find the majority of Americans favour more activist government and higher taxes on the rich.

Mr Sachs’s analysis can be doctrinaire and one-dimensional, but it is almost always grounded in solid economics. Capital, he argues, has prospered more than labour during the era of globalisation. And America’s per head GDP is inflated by spending on an inefficient health-care system and the armed forces. Mr Sachs’s prescriptions are also admirably precise: the federal government should spend an additional 0.5% of GDP on worker training and the same again on early-childhood development; the top tax rate should be raised to 39.6%, which, neatly enough, he says, would raise the equivalent of 0.5% of GDP……….

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