Jeffrey Sachs was once a magnet for criticism over the market-based shock therapy he prescribed for Eastern Europe. Today, he is calling for the United States to move more in the direction of a social democracy, with Germany as a role model.
Interview Conducted By Benjamin Bidder
Jeffrey Sachs was an aspiring economist when the planned economies of the Eastern Bloc collapsed 30 years ago. The American advised the leaders of Poland to undergo market-based shock therapy. During the privatizations in Russia at the beginning of the 1990s, he served as an adviser to then Russian President Boris Yeltsin.
“Politics in America is basically a fight between those with a college education and those with a high school education.”
At the time, the New York Times described Sachs as “probably the most important economist in the world.” But given that Russia soon sank into poverty, some media in the West labelled him as a cold-hearted neoliberal.
Today, Sachs is championing a fundamental reorientation of the American economy. The man who was once the godfather of the birth of capitalism in Eastern Europe is now working to curb the influence of the free market in the United States. Sachs even endorsed self-proclaimed “socialist” Bernie Sanders for president. In an interview with DER SPIEGEL, he discusses his expectations for President-elect Joe Biden.
DER SPIEGEL: The people of the United States voted Donald Trump out. Do you expect him to leave peacefully?
Sachs: He will leave probably kicking and screaming. He is not going to go easily, but he would certainly go. There is no way for him to bully his way through even with a friendly Supreme Court. If that were to happen, the crisis here would be so much deeper than anything we’ve experienced since the Civil War that I would regard that as not a realistic scenario.
DER SPIEGEL: In the past, you have worked as an adviser to push through economic reforms in countries that were in great need of them — in Russia after the collapse of the Soviet Union, for example. What would you advise a Biden government to do?
Sachs: I believe in the value of a social market economy, or a social democratic economy, which means a market economy that is governed by the rule of law — and with social institutions that guarantee universal rights for health, education, the environment and social protection. This requires a mixed economic system with a strong role of government playing its role in social services, environmental protection and fostering the rule of law.
DER SPIEGEL: You became famous for your work as an adviser to then Russian President Boris Yeltsin, during the wave of privatizations in Russia. The media portrayed you back than as a die-hard neoliberal. Now you’re close to the “socialist” Bernie Sanders. When did you change your views?
Sachs: I didn’t. In Poland in 1989, a reporter asked me a very similar question.
Sachs fetches an article from the “New Yorker” magazine from 1990 and reads aloud:
“As we took a table in the hotel’s cafe, I asked Sachs whether he worried about coming polarization of wealth. And I said, look: I’m no particular fan of Milton Friedman or Margaret Thatcher or Ronald Reagan’s version of the free market in the United States terms. I’d be identified as a liberal Democrat, and the country I admire the most is Sweden.”
Sachs: But the point is, whether you’re trying to create a Swedish model or a Thatcherite England: Starting from where Poland was, you move in exactly the same direction.
DER SPIEGEL: Are there other countries, other models the US should follow?
Sachs: I would advocate the most standard European model of universal health coverage. The U.S. health care system is broken because it is private, unequal, financed largely out of a worker’s earnings or out-of-pocket expenses. It is about twice as expensive as Germany’s system, with no better results in any way. And so, health reform is fundamental.
Our society is remarkably unequal and indeed the politics in America is basically a fight between those with a college education and those with a high school education. This is the real social divide in the country; people with a college degree vote overwhelmingly against Trump, white people with only a high school degree vote mostly for Trump. That is a class divide that comes from the fact that higher education is out of reach for working class households.
DER SPIEGEL: How can that split be bridged?
Sachs: The income difference of those with university education and those without university education is huge, and it determines so many aspects of life that we need deep education reform, which is a major challenge. We have around $1.6 trillionof student debt on the backs of today’s young people and middle-aged Americans. Many of them are in the worst of all worlds: They didn’t have enough income to finish their degree, but they have a lot of debt because they got one or two years of education and then had to drop out because of income reasons. They’re indebted but without the benefits of a degree.
And we need to invest in infrastructure. Our country has been unable to build modern infrastructure for 30 years. The last major infrastructure program of the United States was our highway system, built between 1955 and 1975. We are remarkably deficient in areas like 5G, and even access to broadband in some regions. We’re remarkably deficient in environmental safety in the coastal areas, which are highly vulnerable to rising sea levels, for example.
DER SPIEGEL: Isn’t it strange that the world’s largest and richest economy obsessively slashes its central government to the point of starvation?
Sachs: The truth is that since 1980, when Ronald Reagan was elected president, we’ve had a very libertarian government, which in the American context means to cut social welfare, to reject the responsibilities of government on the environment, and to minimize government spending on infrastructure based on the ideology that low taxes are the most important method of economic development. Trump’s only economic strategy was tax cuts and easy money from the Fed. It produces short-term results, but also comes with huge budget deficits and lack of public services, a lack of public infrastructure, a lack of environmental regulation and a lack of social protection.
“The first explanation is race; many white voters do not want to support legislation that they perceive to be giving benefits to African-American people.”
And that’s America’s problem. Now, having said all of this, Biden will only be able to take modest steps because the ideological divisions are strong. The public understanding of these issues is very, very low because we don’t have a good public debate in the United States.
DER SPIEGEL: How could a President Biden change that?
Sachs: We suffer from a very low quality of media, like that of Rupert Murdoch’s media empire, which is a propaganda system for this libertarian philosophy. Also, our political system is very corrupt at this point. Around $14 billion were spent in this election cycle, with big money backing both parties, meaning that politicians are more oriented toward tax cuts for the rich than social protection for the poor. It means that whatever progressive steps Biden proposes will face opposition, but at least he won’t blow up the world! At least he will point to us in the right direction. Since he is a gentleman and a unifier he may be able to make a breakthrough to work together with moderates in the Republican Party to actually solve legislative approaches to these issues.
DER SPIEGEL: Millions of people have just lost their jobs, and many are struggling to put food on the table. Why is this anti-public-spending ideology so popular in the U.S., even with people who are suffering as a result of it?
Sachs: It’s not normal what we see. The first explanation is race; many white voters do not want to support legislation that they perceive to be giving benefits to African-American people. From the 1930s to the 1960s, from Franklin Roosevelt to Lyndon Johnson, there was officially sponsored residential segregation, especially in the newly built U.S. suburbs, where much of Trump’s support was found. Whites in many places supported social programs during the 1930s to 1960s because they viewed them as benefiting mainly white people. But when the Civil Rights movement came in the 1960s, suddenly many white voters began to oppose social programs, because they perceived them as supporting African-Americans. Ever since the Civil Rights movement of the 1960s, we have not had significant breakthroughs of new social spending.
DER SPIEGEL: Why do so many devout Christians support Trump and that kind of agenda?
Sachs: German Lutheranism is extremely different from American evangelical Protestantism. American evangelical Protestantism has a philosophy that is called the prosperity gospel. It is preached by our mega-preachers. It says that poor people meet their economic needs not by social programs, but by the grace of Jesus Christ alone. If you pray hard enough, if you believe hard enough, you don’t need government programs. God will fill your bank account. That is the philosophy for tens of millions of white evangelical Americans. I find it sad. Inequality and hardship comes from grim market realities, technological forces and other phenomena, not a lack of faith. I spend a lot of time begging for better health coverage, more social protection, but mega-preachers tell their parishioners simply to give more tithes to the church and to pray harder.
DER SPIEGEL: It sounds a bit like a fanaticism, actually.
Sachs: It’s been extremely odd for me professionally to work so much in Europe, where the basic ideas of a social market, or of a social democratic, or even a Christian Democratic philosophy are in the mainstream. And then to live in the United States, where those mainstream ideas are viewed as extremist left-wing, communist ideas.
DER SPIEGEL: How often are you called socialist?
Sachs: Trump’s whole campaign was to call Biden a socialist or a communist; it’s a kind of primitive discourse. His white working-class evangelical base has no international perspective, no institutional understanding of the health system or other issues.
“The U.S. population is absolutely less happy, less productive, and less healthy because of these deficiencies. Our life expectancy is far behind Germany and Sweden.”
DER SPIEGEL: On the other side of the aisle, Bernie Sanders proudly calls himself a “socialist.” Where does this obsession with a misused term come from?
Sachs: I was his adviser. I personally advised that what he is proposing is better called “social democracy,” not what he labeled as democratic socialism. The usage of those words in the U.S. is very particular and has a very idiosyncratic history. We have never had a social democratic party in the U.S. But there was the “Democratic Socialists of America” movement in the 1960s and 1970s that was against the Vietnam War. They had an economic program that was essentially like Swedish social democracy. Things got very confused in the rhetoric in the U.S. At first, Bernie Sanders was attacked for being a socialist, which is odd because everything he says is completely mainstream European Union politics. And then Biden, who is somewhat to the right of Sanders, but still left of center, was attacked as being a socialist because Bernie Sanders is in the same party as him.
DER SPIEGEL: You keep mentioning Europe and the social market economy. Is it your view that the U.S. should become more like Sweden or Germany?
Sachs: For sure. By every standard, the U.S. is suffering from high inequalities, from privatization of public services. The U.S. population is absolutely less happy, less productive, and less healthy because of these deficiencies. Our life expectancy is far behind Germany and Sweden. Our environmental dangers are far greater. A mainstream European structure would suit the United States very well. But’s a hard sell here.
DER SPIEGEL: Other economists, like James Robinson, argue against that, saying the U.S. would soon lose its unique economic power, the drivers of innovation, the dynamic growth.
Sachs: This is really a big mistake. This idea gives too much credit to individual businesses and too little credit to the role of public-private initiatives for technological change. In many ways, we’re still living today on the legacy of state-sponsored research, from computation and the internet to solid-state physics. It was our public space program that put a man on the moon, our genomics program that sequenced the human genome, our internet program that created the internet, our semiconductor initiatives that created basically micro-processing. All of this had a strong public side to it. This market idea, that you must have small state and no social protection, is a very simplistic misunderstanding.
DER SPIEGEL: What about the political structure of the United States? Do you see Europe as a role model, as well?
Sachs: The president of the United States has enormous power, far too much power. It’s a deep flaw of our constitution. Of course, if Congress is divided, he won’t be able to do much legislatively. But the president can make war or peace. The president can unilaterally break trade agreements or enable trade. The president by himself, can withdraw the U.S. from treaties. If I were authorized to write the U.S. Constitution, I would never do it the way it is. This is a document that is 233 years old and out of date. But we should have a parliamentary system, I’m sure.
DER SPIEGEL: You called the political system in the U.S. today an oligarchy. Isn’t it too harsh to compare America to countries like Russia and Ukraine?
Sachs: The plutocratic elements of our politics — very big money changing hands and determining the direction of our politics — has prevailed until now. Whether it’s the lack of effective action on climate change because of the oil lobby; whether it’s the deregulation of finance at the behest of Wall Street, which created the mega crisis of 2009; or whether it is the tax cuts that foment the large unemployment, these are all symptoms of politics that does not reflect the basic needs of the average person but the interests of these elites. I’m not saying that the U.S. is in the situation of the Soviet Union in 1991; it certainly is not. On the other hand, it is not a healthy society or a healthy political system. It is too much dominated by powerful lobbies, especially Wall Street, the military industrial complex, big oil, and privately owned prisons, which is horrible.
DER SPIEGEL: We have lobbying in Europe as well.
Sachs: In Germany, people pay their taxes and the wealthy people are not so politically powerful, whereas in the U.S., the wealthiest people are extremely powerful because they fund the campaigns of the politicians. Both Biden and Trump had many, many billionaires giving them lots of money for this campaign. Recent history tells that these billionaires then say they want tax cuts and they’re not very interested in the social spending. That is very different from the European setting.
DER SPIEGEL: If we look at oligarchies like Ukraine or Russia, we see new governments and reformers come and go, but the oligarchs stay. How do you fight an oligarchy?
Sachs: (hesitates) I am thinking a lot about that, but I don’t know the answer. What strikes me is that we just had a full year of nonstop campaigning without a single day of memorable, substantive discussion of any single issue, not even of COVID-19, not of climate change, not of inequality. We have lost the capacity in the U.S. to have a public deliberation that is based on rational discourse. Without that, it’s not possible to bring about long-term transformation. Our democracy has many flaws, but we’re blocked, most importantly, by public lack of understanding of the real situation in the world today. How could we have a more intelligent public discussion?
DER SPIEGEL: The millions of Trump voters appear to have thought that he would bring institutional change.
“That is dangerous; we know that individuals can change the course of history in a disastrous way. Trump is such a man, a very dark and distorted personality.”
Sachs: The paradox is that the working class in America, especially the white working class, is endorsing Trump rather than, say, social democratic leaders. That is not a constructive approach to political change. It’s more of a kind of gimmick, a reality TV show with a con man in front, rather than a platform of public policy. How we’re going to change is a huge question, but the starting point is to win an election.
DER SPIEGEL: Some pundits argue that U.S. interests will stay the same, regardless of who is sitting in the Oval Office.
Sachs: That is completely mistaken. There is a vast difference between Biden and Trump. It starts with the individual personality. Trump is a dangerous person and he is a mentally disordered individual: a chronic liar, a narcissist, a megalomaniac. And I’m speaking clinically, not in a partisan manner. That is dangerous; we know that individuals can change the course of history in a disastrous way. Trump is such a man, a very dark and distorted personality. Believe me: I’m 66 years old. I know we have had bad governments before. I lived through Nixon, and I lived through George W. Bush, two awful presidents. Trump is in a class of his own. Joe Biden is a completely different kind of person. He believes in peace. He believes in multilateralism. The world will be much safer under Biden than it is under Trump.