Prof. Jeffrey Sachs spoke yesterday evening at Seattle Town Hall about his new book The Price of Civilization:  Reawakening American Virtue and Prosperity. 

For anyone not familiar with his work, Jeffrey Sachs is about as far left as you get here in the US.  Paul Krugman is the only other person I can think of who comes close.  It’s kind of ironic really since he first came to fame (or at least I first heard of him) back in the 1990’s when he was prescribing “shock therapy” to Eastern European countries moving from Communism to market economies.  Right is the new left, I suppose.

Sachs book, and his talk last night, are about the current economic and political crisis in the US.  I haven’t read the book, but I scribbled a few notes. Here’s a summary of his remarks.

Sachs traces the roots of the current crisis back to the 1970’s when the US faced a number of serious challenges, including:

• The end of the Bretton Woods system, the international monetary system that had been in place since the end of World War 2. 
• The oil price shocks of 1973 and 1979 which set off a period of prolonged high inflation
• The long, painful ending of the Vietnam War
• Watergate
• The beginning of the end of US dominance of the auto industry as Japanese car makers started to make inroads in the US market
• Lastly, and most significantly but least recognized at the time, the opening of the Chinese economy to world markets in 1978 by Deng Xiaoping. 

According to Sachs, today’s crisis originates in a misdiagnosis of these events by Ronald Reagan (elected president in 1980), by Reagan’s reaction to them, and by the continuation of Reagan’s policies more-or-less unchanged by every Administration since, Democratic and Republican. 

Reagan’s diagnosis was his famous assertion that “government is the problem.”  To “fix” it he set about dismantling the US government; a trend which continues to this day.

The Republicans, Sachs says, have for the last 30 years demonized government and cut taxes for the rich.  The Democrats have done basically the same thing, they just agonize about it.

What the events of the 1970’s really signified, Sachs claims, was the beginning of the modern era of globalization.  While globalization has had tremendous benefits, it also causes real problems.  For the US, the main problem has been the elimination of millions of manufacturing jobs.  More precisely, globalization has eliminated a path to the middle class for people with a basic high school education.  As evidence, Sachs notes that median real incomes for male workers in the US has been flat since 1973. 

This in turn is leading to a more divided, unequal and less socially mobile society.  A high school education is no longer a path to a decent middle class life in the US.  People with college and higher education – only about one third of the US work force – have done much better, and their unemployment rates are far lower.  Income and wealth inequalities are larger today than they’ve been at any time since the Great Depression.  

Sachs prescription won’t appeal to many people:  higher taxes.  On income, wealth, corporate profits, financial transactions, and carbon.  He didn’t have time last night to go into details about who would pay how much, but it’s going to be mostly people at the top since all the economic gains of that last 30 years have gone to that group.

His rationale is that if we want “civilization”, that is, a society that provides decent health care, affordable college education, research in basic science, a system of justice, environmental protection, etc. we need a functioning government to provide them.  The free market won’t.  And in no other industrial country do people expect the market to provide them.  (Sachs uses the countries of northern Europe as his “touchstones”.)  Government must.  It’s absurd to think we can accomplish all these things by slashing spending and cutting taxes, in other words by dismantling government.

I think Sachs’ analysis of the situation – his diagnosis — is really compelling.  In the US today, with a gridlocked Congress reflecting a deeply divided electorate, we have a situation where there’s vehement disagreement about what the problem is, let alone what the solution should be.  Sachs’ asks us to take a step back and look at the situation from a longer term perspective.  I think this leads to some pretty important insights.  He’s saying the US has never seriously addressed the challenges posed by globalization.  This makes sense to me.  It helps explain the deep-seated sense of frustration and unfairness that’s felt across the country these days, and seems to be driving the recent “occupy X” protests.

Like most people, I’m not wildly excited about paying more taxes, and I certainly do not believe “government is the solution” in all cases either.  But the truth is the US is about the lowest taxed industrialized nation.  It doesn’t appear we’re much better off though.  In fact by important metrics such as life expectancy we’re worse off.  And it really is ludicrous to think the country can reduce its deficit, get the economy growing again and have the kind of “civilization” we want without increasing the revenue side of the government’s budget.  (Sachs quips that once you cross the border into D.C. “arithmetic stops.”)

With an election in just over a year, and a completely dysfunctional Congress, it’s highly unlikely any of Sachs’ ideas will get implemented.  Still, in the face of Tea Party nihilism, it’s valuable to have a voice like Sachs’ on the other end of the political spectrum providing a deeper, more coherent understanding of our current predicament, and urging us to recognize there are other paths we as a society can choose to follow.