Jeffrey Sachs: “The Price of Civilization” | Talks at Google

Jeffrey Sachs: “The Price of Civilization” | Talks at Google


>>Female Presenter: Thanks everyone for coming.
So Jeffrey Sachs is the director of the Earth Institute and professor
of sustainable development and health policy
and management at Columbia University. He’s also a special
advisor to UN secretary general, Ban Ki-moon– on the
Millennium Development Goals, designed to reduce extreme
poverty, disease and hunger by the year 2015. He’s been
twice named one of the 100 most influential leaders in the
world by Time Magazine and is sought worldwide for his
economic advice and his unique capacity and global
experience in complex economic problem solving. Today he
will be talking about his new book the price of
civilization. So please join me in welcoming Jeffrey
Sachs. [Applause]>>Jeffrey: Thanks Stephanie. Hi everybody.
Pleasure to be back here, because each book I write, I get to
come to Google Downtown. So it’s a good incentive. That sounds
funny. This book is about the U.S. and we’re here
at the center of American success. So you have a very particular
view of the U.S. from the position of Google — one
of the world’s great companies, one of the most dynamic
companies, and the leading sector of technological change. But the rest of the U.S. economy — you’re
not the rest, but a lot of the U.S. economy — is
in a terrible mess. And a terrible financial, budget, and, I
claim, moral crisis as well. So I have tried to write
this book for myself to understand what is it that got
the U.S., a company capable of producing a Google and
others like Google, into a situation where Americans in
general feel dreadful, where 80 to 90 percent of
Americans feel that the country is way off track, where
91 percent of Americans disdain Congress. And I think
the approval rating is about 9 percent. And where the
police had to vacate the park down the road here early
this morning and we’ll see whether a court order defends
the First Amendment or whether we really have a country
where you can’t aggregate to protest anymore. Because
this isn’t just about a park; this is about highly
visible social protest. And I think it’s dreadful that
the police came in to move people out. Really shoddy
behavior. And I hope the courts find it unconstitutional. So that’s the puzzle that
I think is the puzzle that is really before us. And,
as I was writing this book, I started with the financial
crisis in 2008. And this is something pretty understandable.
But it has antecedents and the antecedents were
the deregulation of the financial markets in the
1990s. That has antecedents in the deregulation of the
financial markets in the 1980s. And I found myself going
back to try to understand the story of U.S. change
really from the 1970s onward, because I think the 1970s
was a transition in American economic history, political
history, as well as a transition in the world economy.
From the end of World War II, up through the end of the
1960s, America’s economic dominance of the world was
completely unquestioned. America’s technological dominance of the world was completely unquestioned.
America’s geopolitical dominance of the world was
questioned only subject to the Cold War arms race, but
not in any deeper way within the non-Communist world.
And that began to change in the 1970s. And I think that
that’s where one has to understand what has happened. In
my view, what you are living and what the U.S. is living
is a combination of the geopolitical and technological revolution that began in the 1970s. It’s the
combination of globalization and the digital revolution.
Each one makes possible the other. Without the computer
and digital age, there would have been no globalization
the way we have it. And without globalization,
the likes of Google would not really be conceivable in
its current context. The 70s opened up the world of globalization
economically. And it was a very unsettling decade for
the whole world, including for the United States. In
1971, the exchange rate system that had dominated the world
from the end of World War II until [clears throat] 1971 came to an
end. It was called the Bretton Woods Exchange Rate System. [clears throat] It ended in August
1971. It set the world’s currencies floating against
each other. It was part of a decade of high inflation.
In 1973, we had the first soaring oil price increases in a
century, basically. When OPEC gained control of its oil
stocks from the major oil companies and in 1973, for a lot
of reasons, monetary, resource-based, and geopolitical —
the oil prices increased roughly a factor of four times.
And in the same year, 1973, there was a major El Nino
which was the first time we had a soaring rise of food
prices. These are all preludes to things that are pretty
common to us now. In the latter half of the 1970s, the
U.S. felt other parts of globalization. And most
importantly the manufacturing base of the United States
started to be threatened by international competition for
the first time. Japan was the leader of that. We had a
lot of tumultuous trade negotiations at the end of the 1970s with Japan. And of
course, in 1978 the biggest change of all in the world
economy began but under the radar screen entirely for
roughly a decade and that was the opening of China which
began with Deng Xiao Ping’s succession to power. That
whole process of creating a global economy [clears throat] in my opinion
has been preeminent in the huge dislocations that America
has faced over the next 30 years. But the purpose of my book
is to understand the interplay of those market forces with politics. And the politics that
accompanied globalization began in 1981. And it is the
combination in my view of a path that Ronald Reagan began
and that became entrenched in this country for 30 years
with globalization that really explains where we
are today. So in 1981, president Reagan was elected.
And on January 20, 1981, he made a statement which I think
is one of the most important statements of modern American
political economy. One of the stupidest statements I
know, but one of the most important statements as well.
And the statement was that government is not the solution
to our problems, government is the problem. What Reagan
was doing and what brought him to power was a claim. The
claim was that the tumult of the 1970s, the high
inflation, the oil price shocks, the slow growth, the high
unemployment, the competition or the job losses that all
of that somehow reflected an overbearing government. It
was not a hard sell for him in a lot of ways, because
the — a lot of the public was fixated on the war on
poverty and the social programs of the 1960s. And the
claim, which I view was wholly erroneous, that somehow
those programs — the institution of Medicare, the
implementation of other social policies, the war on
poverty in its various aspects — was the element that
led to the instability of the 1970s. And so, the essence
of restoring a sound economy for Reagan was to quote ‘roll
back government’. It’s a hypothesis that one would
entertain in a graduate seminar or maybe a first year
economics class. I think that it is one that bears no
relation to reality on the substance of fiscal policy, on
the magnitudes involved, on the possible pathways from
this kind of — these programs that Reagan attacked to
actual outcomes, which in my view were [clears throat] almost wholly
related to the changing structure of the world economy,
the changing nature of technology, the integration of
global production systems, the relative rise of other
countries in the world economy and so on. But Reagan
made a diagnosis and he had a political force behind him
which was mainly the rise of the sun belt and the
backlash that was continuing to the civil rights era.
And it was enough to squeak by in the 1980 election. He
didn’t quite squeak by. There were three candidates, but he just got a tiny majority over 50 percent
of the popular vote and won a pretty solid vote of
the electoral votes. Reagan started a process in this country
that continues basically to this day and that has
proven to be impervious to change of administration, change
of political party, and time. What Reagan started
was a drastic cut of top tax rates for highest earning
individuals and wealth holders. The rate came down from
70 percent top personal marginal tax rate to 28 percent.
Then it was briefly lifted again. It’s fluctuated in the
30s since then; it’s now at 35 percent. But that was Reagan’s lasting
contribution. Capital gains taxation and other categories like carried interest which is
applied to hedge funds and some other financial intermediaries
is at 15 percent. Capital gains tax rates are now
15 percent. They fluctuated, but the main thing Reagan
did was make a long-term, sustained, politically sustained,
transformation of the top tax rates in the country. At the same
time what he did was slash one major part of government.
And that is government services and public investment.
So we have three kinds of government programs at the
federal level. We have our war machine, which we call the
defense budget. And I call the offense budget, most
of the time. And that is about a third of the budget. We
have the entitlements programs, or the transfer programs
which are social security, Medicare, Medicaid, veterans
benefits and food stamps as the predominant ones. And
that’s — I’m sorry — Medicare and Medicaid is about
5 percent of GDP. Social Security about 5 percent of GDP.
The military about 5 percent of GDP. And then
veterans and food stamps and other two to three percentage
points of GDP. Then we have a third category of programs
which are all the public services — the direct provision
by government of services — whether it’s things
like job training or education, Pell Grants, National
Science Foundation, NASA, transportation, highway
system and so on. Environment — all of the interior department
programs. Energy systems and so on that the federal
government maintains. Reagan tried to cut the transfer
programs and failed. George Bush, Junior tried to cut the
transfer programs and failed. They more or less
continued on as — mostly as programmed with some
expansion of coverage–, but mainly rising costs of health
care and rising coverage because of an aging population
since the 1960s there’s been little dent of that part of
the budget. The military has tended to vary depending on
which wars we’re in from somewhere between 3 and 6
percent of GDP. And we’re at about 5 percent of GDP right now.
Not so much different from when Reagan was in office.
The part where Reagan succeeded in his goal of rolling
back government was this civilian discretionary — or the
non-security discretionary budget. And that was cut
roughly by half as a share of national income from the
time that Reagan came in till the end of Reagan’s administration and roughly till now. And this
has been, in my view one, of the decisive and lasting
elements of American reality that probably is on par with
the cuts of the tax rates. So Reagan — the Reagan revolution,
which has been 30 years of persistence, has had
three successful sustained elements. Successful
in terms of the objectives of the authors of this revolution.
One was a deep and persistent cut of top tax rates.
The second was a massive deregulation of the financial
industry of broadcasting and media. And substantially of
the environment. So significant deregulation. And the
third were sharp cuts that have lasted in the
non-security discretionary budget of the United States.
We’ve now done this for 30 years. The reason I wrote
this book is that I think it’s a disaster, what’s come out
of this. And I just want to show you a little bit of the
reality of this and then I’m going to turn it — open it
to questions. Of course, one of the things that happened
is a remarkable widening of inequality in the United
States that began in 1981. You see that we have a
U-shaped income distribution measured as the share of the
top one percent of households in household income. It
reached a peak in 1929 when the top one percent of
households in an era of unregulated speculation and the
tax cuts and other policies of the Harding Coolidge
Hoover decade of the 1920s brought the share of the top 1
percent to about 24 percent of total household income.
Then came the Great Depression. World War II, the New Deal,
very steep increases of top tax rates. And you see
that there were about three decades where that flat line
at the bottom of the U shows that the top one percent of
households had a share of the income of about 10
percent, 9 to 11 percent of total household income.
Reagan came in 1981 and that’s exactly in fact when this
curve starts to increase. There were many parts of it —
globalization would have already driven some inequality.
We know that because this curve turns up in just about
every high-income country in the world. But it’s the
United States that has by far the biggest increase.
Because it’s really only in the United States that
government amplified the forces of globalization to lead
to this remarkable surge of incomes and, I should say,
wealth at the top. The bottom line is — in red — is
the share of the top 0.01 percent of households. We have
120 million households in the United States. So 0.01
percent is 12,000 households. Those 12,000 households
take in about 5 percent of total household income. And
that is more than the bottom 24 million households in the
United States. So we have quite deeply entrenched poverty at the bottom and extraordinary wealth
at the top. What happened in the middle is quite
notable. And that’s shown on the right-hand side. This
is the median earnings of full-time, year-round, male workers.
They peaked in 1973, which is a really astounding,
surprising feature of the U.S. economy. It’s been 38
years since there was, since we reached the peak of the
median male worker. For women workers, the picture is
different. It’s continued to rise from much lower levels
than men. And also, for two reasons, which are hard to
disentangle — at least hard for me to disentangle. One
is women faced massive discrimination which has gradually
eased. And the second is that women are in the
non-traded goods sector of the economy to a much higher
extent than men. So male median workers who are
basically high school grads faced the decline of the
tradeable sector in response to globalization. The
peak employment in manufacturing in the United States
occurred in 1979 when we reached 19 million workers in
manufacturing. And since then, it’s come down to about
10 million. So men faced a sharp decline in the sectors
where men predominate whereas women are more in the
service sector which is mainly a sheltered sector up to
this point vis-a-vis international trade. And so,
somehow the combination of reducing discrimination and
less impact of globalization has meant that women’s
median earnings have continued to rise a bit whereas male
earnings peaked already in 1973. I think that these two
pictures basically depict the American phenomenon pretty clearly.
And that is that the combination of globalization and Reaganomics has meant stagnation
in the middle, soaring wealth at the top, and deepening
poverty at the bottom — other than for the elderly. And
recent statistics suggest that the poverty of the elderly
may be more than is conventionally captured by the
standard poverty rates. Now, in normal countries of
which the U.S. is not one, government actually acted to
do something about these increasing tensions. In
national economies facing a very radically changed global
economy. And the main response that one would like to
see in response to globalization is rising skills
accumulation and helping all parts of the society to gain
a foothold in remunerative work. One of the facts of
globalization has been a sharp widening of the wage,
education gradient. I think I have a picture of it.
Yeah. Education — or earnings have risen only for those
with Bachelor’s degrees or above, on average, in the United States.
And so, one of the responses that one would have wanted is an
upgrading of educational attainment and skills attainment. The conventional way would be
a higher through-put of college graduates. Probably
there are new, creative, unconventional ways with different
kinds of skills qualifications. But on essentially
all counts that we can measure, the United States has
stagnated in the educational attainments both in terms
of raw numbers like proportions completing a 4-year’s Bachelor’s
degree. And as also stagnated in effective training
of certificate programs, more focused post-high school skill
programs. And we have the irony of very high unemployment
and a huge shortage in the U.S. economy of what
you guys do. It’s very hard to hire programmers. You know
that. And it’s very hard to hire them at what I would
call reasonable salaries. You know that, too. And
that’s one of the facts of our economy, which is that
globalization has given a premium to skills. It’s given
a premium to educational attainment. It’s given a premium
to various kinds of skill attainment. But the through-put
of U.S. education system has — it’s budged, but it’s
barely budged in the process. And what other governments
did in northern Europe, which are the countries I
most admire. Countries like Korea which have been most
successful in rapid catching up into becoming high-income
countries. The government invested very heavily in the
whole life cycle of education, and human capital development
from preschool and early childhood development
all the way through University. The United States did
the opposite, basically. We’ve been cutting spending in
this area. There is lots of political economy why that
is, but that’s the path that Reagan set us on. So,
a summary that I think is a fair summary is that all high-income
countries experienced rising inequality and job loss in
the manufacturing sector in response to globalization and
technological change from the 1980s onward. The United
States is the country that has ended up with the
biggest inequality. The biggest underclass. The most
dug-in poverty. And the least public response to this
challenge up until now. And almost nothing has changed
the direction of actual policies for 30 years. So let me
just show you the upshot of this. This is, for me, the
essence of our Washington problem. We have many other
problems in this country, but this is our Washington
problem. Our Washington problem is that we have lots of
important things to do that we need to do collectively.
Almost a — actually not almost — a very dirty word in
the United States — the idea that we should do things
together as a society. But there are public goods and
public services, and they’re vital for a couple of
reasons. One, markets don’t provide these goods and
services adequately. And second, poor people can’t avail
themselves of these goods and services without help.
Education is a classic example of this, already recognized by Adam Smith as an area of society
where the government needs to play an important role.
So, these are all the categories of our non-security
discretionary budget. The part I mentioned that Ronald Reagan
slashed — it includes legislature and the court system,
agriculture, commerce, the education department, which I
think two thirds of the Republican candidates want to
eliminate entirely. The energy department, which would
be responsible for actually helping America to make a
transformation to a low carbon future — something that
we have no interest in doing it seems at the moment.
Public health. Affordable housing which we left to Wall
Street rather than to government policy. The Interior
Department which is, of course, our public lands
management. Justice department, labor department, which
is job training, active labor market programs. Transport
which would mean high speed rail if we happen to live in
China, but means Amtrak if you live in the United
States, which is no speed rail half the time. Environmental Protection Agency, NASA and
so on. So here’s what has happened to all of that. As
I said, Reagan came in, and if you look all the way
on the left, that sum of activities was between 5 and 6
percent of national income at the end of the 1970s. Too
small. Low compared to other countries. Because we do
very little in labor market policy. We do very little
for early childhood development. We give no family support
to speak of in this country or almost no family
support. We don’t do housing policy and so on other
than the crazy way that blew up through Fannie Mae/Freddie
Mac and subprime mortgages, because we don’t do direct
budget outlays as other countries do. But we were
doing 5 to 6 percent. Then Reagan came and you see the
collapse of the discretionary programs as a share of national
income down to about two and a half percent. It continued
all the way through every administration. There’s
really very little difference between Democrats and
Republicans in this country in terms of what they really
mean when they’re in office, because the more fundamental
politics is much more dug-in than the yakking on the
cable news shows. And the basics of the Reagan era — low
tax rates at the top, low spending for public goods
and services, and deregulation has been a constant, not
a partisan variable. This continued up through 2009.
You see this little spike, which is in my view one of the
more useless things our country has tried to do. That’s
called the stimulus legislation. The idea of the stimulus
legislation was, “we have a crisis; we should jolt the
economy back to normal.” The mistake of that concept was
the economy wasn’t normal. The economy was in structural
transformation, not in short-term business cycle crisis.
And a temporary jolt is pretty useless. And that’s what
came out of the stimulus — very little. We had a blip.
It came back down. And what you can see, which I find to
be the most alarming single fact of our politics today —
something that’s almost unremarked upon I would add in
our political life is that what Congress and the White House
have agreed to in August is this category of the budget
should be capped at a rate of increase lower than
inflation so that the share of this spending relative to
national income will continue to decline so that all
those things that I mentioned — the environment, science, training, education, affordable housing,
the justice system — all of that, transport — will
be less than 2 percent of national income. That’s
the trajectory we’re on. So we’re basically closing down
government other than those big buildings on Constitution
Avenue, if you happen to go to Washington for some strange
reason. And there is no reason to go to Washington
except if you want to lobby for tax breaks or you’re a tourist
to see those big buildings and wonder what they do
inside. Because actually, they don’t do anything anymore.
And that’s the whole idea of this country. We
want just those big buildings. The interior department,
great; labor department, fascinating. And we even have
a debate, “should we have them? Should we not have them?
They could be turned into giant Starbucks or something.”
And that’s where we really are. My view is that
we have a very very deep structural crisis in this country.
We have half the population not making it. And feeling
the pull of poverty. We have people like you and Google
making it. And making it quite spectacularly. So
we have a dual economy. The luxury industry is booming
right now. The money at the top is booming. Corporate
profits are booming. You have plenty of tax privileges
to keep those corporate profits as well. The share of taxation
of corporate income as a percent of national
income is basically historic low at this point. The
corporate sector is only paying 1.5 percent of GNP in
corporate taxes, because you’re able to book the profits
overseas, keep them overseas at effectively almost 0
taxation. And we’re told that the only thing we can do in
this country is follow this curve down to oblivion, which
is the path that I think we’re on if we continue this
way. And that’s the — more or less the bipartisan
consensus. So the Republicans would like to slash further.
Right now we’re collecting about 15 percent of GDP in
federal taxation. Maybe we get back to 17 percent
of GDP with the full business cycle recovery — if such
a concept is even meaningful anymore. The Republican plans
are more or less to try to stabilize at 15 percent
of GDP. You just about what that means from a budgetary
point of view. The military right now is 5. Social
Security is 5. Medicare, Medicaid is 5. That’s 15 already.
Interest on the debt is going to be 2 to 3. That makes
17 and a half or 18 percent. And all of this stuff which
I call “government,” that’s all on borrowed money. And
they just want to close down as much of that as possible.
The Democrats basically disagree with that — kind of.
But mainly Democrats are the party of hand wringers. We
know we need to cut; it’s terrible. And to wring their
hands and to agree on the cuts. And the Republicans are
the happy party. We’re going to cut. We’re going to cut
six departments, I can’t remember what they are. [laughter] I know
it is — whatever it is — I don’t care what it is. It
could be interior — EPA — fine. Doesn’t matter. They
can’t wait to solidify this income distribution. That’s
the whole goal right now on the Republican side. Make
this income inequality permanent. Put it off bounds of
politics. Institute a philosophy in this country of Ayn Rand that not only do you have no right
to ask anybody anything. If a rich person gives something,
they’re just demeaning and debasing themselves. That’s
Ayn Rand’s philosophy. Not only is there no right, not
only is there no responsibility, anything that reeks of a
contribution of rich and powerful to the rest of society
is a debasement of human values. It’s the worst
perversion of philosophy that I know that is taken
seriously by a segment of the American population. And
the Democrats don’t have the fire power and the stamina
to resist any of it. Fundamentally, both political parties are taking campaign contributions
from the top one percent. They’re taking campaign contributions
from the major corporations now after Citizens
United. Obama doesn’t have the guts to fight this. I don’t
think he wants to fight it necessarily, but he doesn’t
have really the guts or the stamina to fight it. And the
Republicans — are not only not fighting it, this is the
whole purpose of the modern Republican party. And so, I
think it’s likely that we’re going to continue on this
kind of trajectory with a meaner and more divided society
unless there’s a break in the politics. And, from a
programmatic level, I don’t think it’s too complicated
what to do. And my view is that we need to tax several
percent of GDP more in order to be able to expand
spending on education, on early childhood development, on
science and technology, on low carbon energy systems. On
other environmental protection. We simply don’t have the
means right now in government to be able to fund basic
public goods and services and public investments to
modernize the economy and to make sure that we have an
inclusive society. So I think we need probably about 4
percentage points of GDP more on the tax side as a
minimum. And I recommend a steep increase of top
marginal tax rates. I recommend a wealth tax on very
high net worth — above 5 million dollars — a 1 percent
net worth tax. I recommend a — basically removing the
deferral privileges of companies on their offshore
profits. Because this deferral is really an invitation
to serial amnesties, quote unquote, like the one we’re
working up to now that companies park their profits
abroad, they wait a few years, they’re able to bring them
back, and we’re essentially in a system where we’ve
gutted the corporate tax rate. And so, I think we should
claim at least a percentage point more in corporate
taxation, at least a percentage point more in income
taxation. A percentage more in GDP in net worth
taxation. And then, there are a handful of other taxes.
And simply enforcement of the tax laws, which by itself
is estimated — would yield at least another percentage
point of GDP. But I favor a carbon tax. I favor a
financial transactions tax. And I favor stiffer enforcement of our tax code. And the sum in
my view could realistically increase revenues by four
or five percentage points of GDP and give us a chance
to avoid this decline to what I think would be a society of locked-in
poverty, inequality, and increasing unrest. Now, neither
political party comes close to supporting this. Paul
Ryan officially declared my book un-American and contrary
to the principles of the founding fathers. I officially
declared him a hack politician who is on the take of
David Koch and has a few scruples of any sort that I’ve
been able to notice. But, when you do the basic
arithmetic, either we eliminate the government [clears throat] and we
slash programs for the poor — which is the Republican
platform. Or we just gradually asphyxiate government,
which is the program of Obama, or we change direction and
admit we can’t pay for civilization with the tax system
we have right now, which has a vote of one so far. But
actually more than one, because I think that the Occupy
Wall Street movement is just on target, in fact. It may
be a little inchoate to the lazy pundits in our
mainstream media. They may not like painted faces. They
may not like kids sleeping in tents. But the truth of
the matter is the Occupy Movement is the first social
response in this country to a reality that’s been
underway for 30 years, is serious, real, and almost
completely unreflected in our politics. My view
moreover, which I expressed in an op ed piece in the
Sunday New York Times this past Sunday was that the
Occupy Movement in the end is actually going to prove to
be something real, more than a sleep in the park. It’s
really going to prove to be a turning point. Because
this picture — while it’s possible — it’s dreadful.
And if it happens, America will be a lot worse than any
of us wants to imagine as a society. And I think there’s
a growing realization of this — though not at all yet in
our public rhetoric. Our political rhetoric is going to
go one more notch of slashing government probably in the
next month or two with this super committee. And par for
the course, it’s being done behind closed doors. It’s
just the antithesis of democracy — in my view of
everything that’s going on. And Obama’s role is the
antithesis of leadership. In my opinion. And he’s the
guy I support and voted for, mind you. I just find him a
profound disappointment in how he’s governing. So, I
think there is a change that is possible, vital, and I’ll
just end with what it means if it comes about. I
analogize our current situation to roughly where we were 100
years ago. Maybe fair to say 115 years ago, when the
Progressive Movement started in the United States. There
was a massive financial crisis, in fact in 1893, and
that’s what brought Williams Jennings Bryant to his
famous campaign message that we will not be crucified on a
cross of gold. And that was the beginning of the
Progressive Movement at the national level in fact. The
Progressives actually got their president with Teddy
Roosevelt in — after McKinley’s assassination. And
Roosevelt brought in an era of quite basic reform that
tamed the financial industry, ended up creating the Fed,
ended up creating the graduated income tax, created fair
labor standards, strengthened antitrust legislation. In
other words made — made a lot of campaign finance
reforms also, which — all of which, like an arms race, get
beaten by new loopholes and exceptions. But in the early
years of the 20th century, played an important role.
Woodrow Wilson was the second great Progressive president. And he presided over the introduction
of a number of the constitutional amendments. Also
the direct election of senators, women’s suffrage which
were all part of the Progressive era. I think this
is like where we are right now. That movement took 20 years.
It’s not something that happens overnight. It doesn’t
happen by a walk in the park. That’s kind of an opening
shot. But I think that this basic idea of the U.S. experiencing
fundamental socio-political change is real. It’s happened
three times in the last century. The Progressive Movement, the New Deal, and the 1960s. I’m
old enough to have seen that one. It was fun. It was exciting.
It was transformative. It created civil rights
and women’s rights. It opened up society a lot. It stuck
with me. And I think that that’s what we’re going to
begin to see now. Thanks very much. [Applause].>>Jeffrey: Please.>>Male #1: Yeah, I guess it’s a little weird.
I graduated from high school the year before the peak in 1973.>>Jeffrey: You’re a 72 grad?>>Male #1: Yeah
>>Jeffrey: Yeah, me too.>>Male #1: Okay. But there’s something — I’ve
had this really strong impression ever since then, okay? In
that I remember before getting out of high school
and perhaps it was just I was a kid, but I used to listen
to politicians debate stuff. And I remember always being
a Democrat. I remember thinking, “the Republicans are wrong,
but they’ve got good arguments and what they’re
saying is reasonable, but they’re just wrong.” People
are sometimes wrong, and they were consistently
wrong. But the farther I’ve gotten from sort of getting
out of high school, the more and more when I look to that
side, I say, “No, it’s not that they’re wrong, they’re
just disconnected from reality. This stuff doesn’t
make sense. It’s not what I’m being taught in school.
It’s not what’s in the economics books. It’s not
what’s in history books. It’s just totally disconnected
from reality.” And so, I guess the question I would
ask here, maybe you’ve told us what happened, okay? But why?
How has it been possible. And for goodness sakes, particularly
here when we talk about the median income, the
vast majority of the American people are being totally screwed
by this process. And they’re being told on a regular
basis that they’re being screwed. They’re being given
this voodoo economics. Ridiculous economics. Just insanity.
Laffer and everybody who came after him. People who
were discredited the moment they came out. And yet
the — how can I say this — the nonsensical side of this
debate has been given tremendous respect and tremendous
following ever since it began. How in the world could
this have happened and how in the world do we fight what
appears to be a completely irrational opposition?>>Jeffrey: Yeah. I think the — I of course
— I put most of the blame on my side. Maybe your side. Which is
the — being so ineffective in responding to this.
And I would say the Democrats got deeply corrupted in
this process. So when I listen to them, I just see rot rather
than — I see something a little bit more rational,
but this stimulus for example — I thought that was
a preposterous response to America’s real challenges. That’s
my side. What are we packaging within four weeks — a
900 billion dollar mess — and calling that policy? And
I said to President Obama that that is the kind of thing
that gets you in trouble, because you prove that you’re
not a steward of the American people’s income. It’s
just — seems to be throwing money at problems. And
I argued with my former colleague Larry Summers about
this. I disagree strongly with Paul Krugman about
this. I think the American people look at both sides and
they don’t understand either side. The Republicans do
seem to most Americans to be absolutely antithetical to
their values and the American people have it pretty well
pegged that the Republican party is in the interest of
the rich and the super rich. And that’s what the opinion
surveys show and the people get it. But they don’t find
the Democrats giving any answers. And so, the sad part of
this was it was Clinton who brought Robert Rubin into
the White House. Why do we have to have the chairman
of Goldman Sachs come in as treasury secretary, lead
deregulation and Glass-Steagall, and then go be Number 2City
Group. On my side, I don’t know. But that’s inappropriate.
And so, the Democrats are deeply tarnished. Why you
have a financial crisis and Obama brings in Summers
who had presided over this deregulation ten years
ago. Brings in everybody from the investment banks. And every
single senior person in the White House has come
from an investment bank basically. That’s my side.
So I don’t think that there’s a great alternative on
offer right now. The Republicans, I agree with you — it’s
la la land except they know what they’re doing. You know,
they’re playing on a lot of ignorance and propaganda.
But this whole anti-climate change thing for example
— this is David Koch, this is the oil industry, this
is Rupert Murdock, this is sheer game. This isn’t a
science debate. This is pure corporate propaganda
— period. And they’re good at it. Because they got Roger
Ailes at Fox news who was Nixon’s image maker. You
know, they know how to do this kind of propaganda. But
our side doesn’t pick up. My side. And so, I have to
say we got one far right party and we got one center
right party. And we’ve got the rest of America scratching
their heads saying, “we don’t like Washington, because
nobody’s representing us.” And that to my mind is the
biggest problem that — you know, one side is really,
as I said and I think you feel it the same way from
a moral point of view — completely un-understandable from
the perspective of the most — just modicum of decency, compassion,
basic standards of values — but the other side
is dishonest.>>Male #1: If what you’re saying is right,
I spent most of my youth growing up overseas — places like Ethiopia
during revolutions, in Berlin when the Russians were
— when the government becomes that disconnected from
the people.>>Jeffrey: And it’s the right and the duty
of the people to overturn it I think is the expression.>>Male #1: There is only one thing that happens.
That is not just people sitting in the park. That is violence.
How do we avoid that?>>Jeffrey: My belief is that we’ve had — I
hope we do. I think that the path that we’re on is incredibly
dangerous. And I think the way we avoid it most likely is
to come together around a set of proposals — a platform
— and elect candidates that are going to carry that
out. Our structural problem is our politics on both
sides are on the take. And so, they’re not offering the
median voter — answer their happily duopoly on the
right of keeping taxes low and slashing the rest of
government. And that’s kind of a safe comfortable incumbent
duopoly that’s not capturing the center. I think a
good political entrepreneur who’s clever could
capture the center and capture power or political movement
could do so. The trick is big money can’t do that and
won’t do that. So my view, structurally, is that the
solution is, “How do you run and win power without campaign
contributions?” That to my mind is the real structural
challenge. And my view is that it’s possible these days.
If everyone’s got their Androids. If everyone’s tweeting. If everyone is using YouTube and
Facebook and every social network — what we ought to do
is create a platform that is the free campaign platform
— the whole social media platform. You have a message,
we’ll retweet it a million times in a day. We’ll make sure
that videos go viral. We’ll use Facebook network that’s
created of a nationwide friends of progressive ideas. And
enable candidates to run without being on the take.
So that’s the revolution in campaign tactics that I
think could be the breakthrough. And then, if the platform
is right, then I think the rest can follow. That’s my
strategy. What do you think? You ready?>>Male #1: The Internet will set you free?
[laughter]>>Jeffrey: Yes. What do you think, guys?
You’re Google. [Applause].>>Jeffrey: All right. Can you guys make the
right platform? Google dot democracy.org? All right. We may
tax you a little bit more in the meantime also, but.>>Male #2: Jeffrey, thank you for being here.
Thank you for showing all these graphs. You talked about
your admiration for the northern European countries
and Korea in particular. I don’t know if you have the
information here. Will you be able to share some of those
graphs or –>>Jeffrey: Yeah yeah. Let me just show you
one thing.>>Male #2: Thank you.>>Jeffrey: Yeah. Actually, let me show you
one thing. We watch a lot of TV in this country. That’s a little
bit of a distraction, but I think it actually is part
of our distraction as well. And the countries that
I really like are on the — well, Italy, that’s interesting. [laughter] But okay. Let me show you the —
here’s the
big difference of what happened in this country. And
what happened in the rest of — in other places. So
basically, on the left-hand side is the change —
arithmetic change — of tax to GNP ratio compared to 2008
minus 1965. So it’s the rise of the tax share of
national income. And you can see that every high income
country has higher tax collections as a share of GNP than
the mid 1960s except for one country. That’s us all the
way at the end. We’re the only country that resisted
raising revenues in this country. That’s the whole story that
I’m talking about. We decided we’re not going to pay for
government. Everyone else pays for government. And the
social democracies had very — they were already high and
they had big increases. The result was that the United
States, for example, just in one category — social
spending — this includes some of the transfer programs.
We have the lowest level of social spending of any
country. This is basically Medicare/Medicaid, Social
Security, food stamps. Sweden, Denmark, Belgium, Austria,
France — they’re 10 percentage points of GDP higher than
we are. The countries that I really admire most in their
performance are Netherlands, Sweden, Finland — Norway,
Sweden, Finland, Denmark, Netherlands, Germany. In
general, they’re spending 10 percent of GDP more than
the United States. They’re taxing about 15 percentage
points of GDP more than the United States, because they
also don’t run a budget deficit. So they’re spending a
lot and they’re paying their way. And life is really
nice in those countries by the way. There’s no poverty.
Everybody gets five or six weeks of paid vacation. Of
course, it’s paid within the context of their jobs and
the state. Everybody gets maternity and paternity leave
for several months. Nobody gets super rich. There’s
some inherited wealth, but nobody gets super rich.
That’s the price that they pay. That’s what they want,
which is a society of high affluence, very superb
education, very competitive industries, internationally competitive industries, highly innovative.
They pay a lot of government spending for the innovation.
So Sweden invests very heavily of public funds as well
as having companies like Ericsson and others that are
doing private sector innovation. And they paid for it basically
by — our taxes are, right now, 27 percent of GDP.
In the normal time before 2008 were our taxes were about
30 percent of GDP. Sweden, Denmark, Norway, Finland, Netherlands
about 45 percent of GDP. It’s a whole different environment.
The main difference by the way is that in those
countries there’s a lot of support for families. There’s
day care. There’s maternity leave. There’s help for
low skilled households. There’s early childhood development
support. There’s more investment for poor children
in schooling. They don’t let anyone fall away. And the result
is evident when you live there as I have in Sweden
or when you visit, which is infrastructure is very
well maintained, education levels are uniformly
high, there are no pockets of poverty and there’s very
high social mobility. Whereas, by the way the other shocking
thing about the United States — let me show you
one more graph. I’m going to have to stop, also, and
I know you do as well. This is a graph showing the correlation
of parental educational attainment and children’s
educational attainment in the OECD countries. So a high
correlation means of course highly educated parents raise
children who end up with high educational attainment.
Low education parents end up the opposite. The countries
over on the left with the lowest correlation or as
shorthand very high educational mobility intergenerationally — Finland, Iceland, Norway,
Canada. The United States actually has the highest
intergenerational correlation at this point. So we pride
ourselves as being very highly socially mobile. But if
you’re born to a family where your parents don’t have
a high school degree the chance that you’re going to
graduate Bachelor’s degree in this country, probably under
10%. You just can’t make it. The combination of
the poverty, the lack of social support, the neighborhood
factors, the intra-familial factors. The high tuition
rates. So this is why we’re ending up really as the most
stratified of all of these countries. Because we don’t
invest in any of this equalization. And that I think is
going to be our killer. The data just came out — if
you’re a Hispanic young man in this country — 25 to
29 — only 11 percent have a Bachelor’s degree. African-American young man — 25 to 29 — 16
percent. In this society, in a world economy, what kind
of incomes, jobs, life prospects does that mean? Very
poor. Very unstable. Very erratic. And you know? Some
people say that’s fine. But I think what it’s going to
mean for the corrosion of our society is extremely serious.
And I think the process is already begun. And it
wouldn’t take a revolution to correct this. It would just
take a few percent of GDP to correct it. That’s the beauty
of it. And the question is, “are we going to wait
till there is an explosion or are we actually going to correct
it?” I was reading last night about the Bonus Army
in the Great Depression when the veterans were demanding
some help in 1932. Hoover sent in the troops. And many
people were killed and wounded. And then, in 1933, they
struck again and Roosevelt sent Eleanor Roosevelt to the
camp. And she discussed and negotiated with them and
they made a program so that the veterans would get jobs
in the CCC, the Civilian Conservation Corps. And the line
that came out of it was “Hoover sent the troops and
Roosevelt sent his wife”. And it’s the kind of society we
want. If we’re clearing the parks with police with
batons, we’re going to end up in the Hoover world. And,
if we send the Eleanor Roosevelts of the world and try to
figure out something, we’re going to end up with some
decency. Thank you very much. [Applause]

47 thoughts on “Jeffrey Sachs: “The Price of Civilization” | Talks at Google

  1. Dr. Sachs: Is the financial crisis really all about deregulation? What about Fannie Mae and Freddie Mac? Doesn't government distortion of the housing market deserve a mention? Given your academic crentials and high level experience, II was expecting deeper analysis from you.

  2. Sachs misses the root of the evil by blaming greed instead of corrupt policy. Freddy and Fannie enriched politicians and created a crisis where bankers were incented into excessive risks. The problem is not a lack of governmenf control or human nature to make money. Too much bad policy is the problem. His argument would be stronger if he acknowledged and attempted to refute this valid assertion.

  3. Sachs is over-optimistic about the possibility for change. Congress is so completely paralyzed that they'll run the country into the ground before allowing a few percentage points of GDP to slide.

  4. fuk this guy. his free market theories fuked up a lot of developing nations. fuk free market. Govt protectionism and intervention FTW for developing nations.

  5. Dr. Sachs says the government (both parties) are completely incompetent, yet he calls for more government? Dr. Sach's seems to miss what is right in front of him. Private companies like Google are what make this country great while the federal government is representative of all that impedes our progress.

  6. Every time you over centralize power & authority you have abuse. Food prices: you can track the rise of food prices with the rise of Corporations running big farms & increasing costs of pesticides & fertilizers. Historically cutting spending & taxes on everyone causes a boom in the economy.

  7. Take the time to read Paul Ryan's review of this book in the Wall Street Journal. He, of course, dismisses Sachs's entire plan but I think it's worth checking out what a supposedly "reasonable and intelligent" politician has to say about it.

  8. – there a even better explanation of the problem – in the video when capitalism hit the fan. there are alot of good ideas in the rbe – which would give us all sustainable abundance

  9. in this time of people like romney saying 47% of the people see themselves as victims ( more like 80% in my op really are victims) and romney saying -in his best marie antoinette imitation – borrow money from your parents and start a business – as a solution to you college graduates job woes. there could come a time like the french revolution – a civil class war. where the arguments will be decided by heads being lopped off of the ruling class.

  10. Nothing against Jeff, but I had the feeling the first guy at the end with questions was trying to get an answer to a question that didn't get answered…and then was ignored.

  11. Government protected shareholding corporatism and central banking are not what I would call capitalism.

    The illusion is that the options small government or small corporations are mutually exclusive…both are possible, but neither are likely. Shareholding corporations are a government construct, and are as big of a problem as government.

  12. Government protected shareholding corporatism and central banking are not what I would call capitalism.

    The illusion is that the options small government or small corporations are mutually exclusive…both are possible, but neither are likely. Shareholding corporations are a government construct, and are as big of a problem as government.

  13. i would agree with that – but go further and a different direction – i really cant recall the video (6months) i will rewatch it. i did agree with an angry rant he had at the philly fed – bill still uploaded it. but i dont agree with capitalism in general not just the corruptions you mention. you mention only some of its corruptions and not its inherent flaws. my comment 6 months ago is worth exploring check out" when capitalism hits the fan also "zeitgeist moving forward" a video about the rbe

  14. So being a crybaby is now a well rewarding profession, also known as an "economics professor" – and we are actually subsidizing this bizarre propaganda.

  15. Lets jump forward to 2016. The European Model is in a disaster. They have lived fat and happy off the military and economic protection of the US. Their military budgets have averaged about 3% of their GDP. We in the US have carried NATO to the tune of 70% plus. They have become a weak and cowardly people off the strength of our US military and economy. Should the "Great Russian Bear" decide to walk over them they would barely have the heart to defend themselves or their loved ones. So don't tell me about how wonderful Europe is. While I am not at all a "Hawk", I am also not a blind fool. I was not a fan of the Bush administration and it's wars of "Globalism" and am hardly a "Right Wing Neocon". In fact I despise the neocons. While I can agree that what Mr. Sachs has had to say brings up a lot of great points the real problems are far more systemic than what the liberal mind can comprehend. Look at LBJ's "War on Poverty". A trillion dollars later and worse than ever. I would go on to some solutions (common sense) however I truly do not believe the liberal mind can comprehend something so obvious. Thank you for suffering through my diatribe and please forgive my excessive use of parenthesis (I love using them). Adios Amigos.

  16. Please watch video of Taleb..how he crushed this NWO economic hitman…no idea what his points are…there are no solutions from what he said at all…

  17. This video is a bunch of nonsense. It is the removal of the gold standard in 1971 that caused inflation and the cost of living to rise, and real wages to stagnate. Hence, why the stagnation trend started in 1970 and not the 80s. Women weren't liberated in the 70s, they were liberated when they didn't have to work because their husband could bring home a paycheck that went far enough to support the whole family. If the dollar was backed by gold and the money supply was still finite, when Americans started buying more foreign goods and sending dollars abroad, it would have resulted in price deflation from less dollars at home. This natural balancing mechanism would have prevented as much U.S. industry and production shifting overseas as our exports would have been cheaper and more competitive.

    True, foreign competition caught up to the U.S. in the 70s, but how did they catch up? When the country had low to no income taxation, and a small government, we rose to become the world's industrial power and unquestioned economic leader. After two decades of 90/70% income tax rates on business and the rich, and the creation of the modern welfare state, we lost that lead. Those high tax rates screw up incentives for businesses by encouraging them to maximize expenses and minimize profit, even if the expenses are not usually a wise decision. The prosperity of the 50s and 60s were the result of 150 years of economic freedom and minimal taxation, the stagnation following it was the result of bad government monetary & fiscal policy via the removal of sound, asset backed money and the expansion of the size and role of government.

  18. The Roman Empire built roads, viaducts and wonderful buildings, the British Empire built the world's railways and developed many countries around the world. The American Empire has only invaded and murdered millions of people and stolen their resources, but thankfully it is coming to an end and good riddance.

  19. Capitalism can never work for the majority by definition because it encourages a take over by the few. The USA is an example of extreme capitalism and it is a third world country. Pot holed roads, archaic railways, no health care, and millions upon millions trying to live in old shacks called mobile homes, and each and every U.S. citizen owes around $ 400,000. A young person has two choices, go to college and get a massive debt around their neck or try to get a low paying job in one of the large retail outlets. If I was unfortunate to be born in the U.S.A I would be out of there as soon as I was able.

  20. the guy – who created for the tothshields the shocktherapie and the rotten jewish olligarchs.. killed basicly millions..

    the synagogue of satan – looking like some harmless dilettants – feakshow – kiss each other the butts…

    nice try…

  21. Since the Reagan presidency, income inequality has increased steadily and persisted through today. Surprisingly, Neither Mr. Obama nor the Occupy movement did anything to reverse it.

  22. Go to 53:00 where Sachs, as Yakkun remarks below, predicts that a political entrepreneur could capture the center (and one side, left or right) and thereby the presidency. Voila: Mr. Trump.

  23. Never mind the American Capitalism . You are really a winner of Capitalism .
    How do you like the so- called the great civilization, the evil communist China, it has
    murdered eighty million innocent Chinese people and made billion and half Chinese
    to be the slaves and tools for the sake of conquer the world. If you do agree the socialist
    system is better, then just look at the communist China over there you would be able to
    make a statement to criticize about communist, if you do, you will be in custody or disappear.
    So, be a honesty intellect. By the way if you compare capitalist to the socialist countries
    the socialist countries are much more corrupted. besides you will lost freedom.

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