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April 4, 2008

Choose to save world

Jeffrey D. Sachs is critical, but optimistic.
CYNTHIA RAMSAY

New York, N.Y.
Missed opportunities and bad choices have put the United States in its current economic predicament and have hindered the alleviation of world poverty, according to Jeffrey D. Sachs, director of the Earth Institute, professor at Columbia University and special advisor to United Nations Secretary-General Ban Ki-moon.

Named among the 100 most influential leaders in the world by Time magazine two years in a row, Sachs' impressive resume includes being a research associate of the National Bureau of Economic Research, director of the UN Millennium Project and president and co-founder of Millennium Promise Alliance, a nonprofit organization aimed at ending extreme poverty in the world. He has been an advisor to the International Monetary Fund, the World Bank, the Organization of Economic Co-operation and Development and the World Health Organization, among other international agencies. He is known for his work as economic adviser to governments in Latin America, eastern Europe, the former Soviet Union, Asia and Africa. He has authored hundreds of articles and many books, including Common Wealth (Penguin, 2008) and The End of Poverty (Penguin, 2005).

Sachs took the time to speak with Charlie Rose, host of the eponymous syndicated PBS talk show, at the 92nd Street Y in New York City on March 25. The discussion focused on two main topics: the economic situation in the United States and global poverty.

"We've gotten into a very big mess ... almost intentionally," said Sachs of the current credit crisis, which he traced back to former chairman of the board of the U.S. Federal Reserve System Alan Greenspan. Sachs claims that Greenspan pumped up the money supply whenever the American dollar weakened, made sure that anyone who wanted credit received it and set about deregulating the system. Sachs said even Greenspan's colleagues warned Greenspan about what would happen if the Fed didn't "put on the brakes." The result of not listening, said Sachs, has been the housing bubble, which the central bank did not pop, and increased borrowing from abroad.

"Things like these are not predictable, but the behavior was imprudent," said Sachs. "Our government did not put on the brakes." Now, he continued, the government is unpopular, weak and fighting a war that no one supports, with borrowed funds. As to current Fed actions, Sachs said, "There's a little too much hyperactivity right now," noting that all the liquidity – created by lowering interest rates and bailouts – has only resulted in things like needing almost $1.60 US to buy one euro, higher gold prices and wheat prices of some $1,000 a ton, tripling the price of the basic input for bread.

As the U.S. economy weakens, said Sachs, Americans will buy less from other countries: "I think we'll have a recession. I think the rest of the world will have a slowdown," he predicted. The effect of the credit situation on the rest of the world remains to be seen, he said – it will depend on "how badly infected are [bank] balance sheets abroad."

While having more criticism for the Fed and its actions, Sachs was optimistic. "There is good reason to believe that consumers have woken to the fact that they can't have negative saving," he said.

"The next president's going to inherit a weak economy," he continued. "There's no doubt about it." However, he assured the audience, the United States is still one of the strongest economies in the world. "We don't rule the roost anymore," he said of American influence, which has been waning since long before the current crisis, because other countries' situations have improved. "We've got to get used to living in a world with more dispersed power."

Sachs then spoke at length about some of his experiences advising foreign governments, such as Poland and states from the former Soviet Union. During this period of his career, he said, he learned that aid decisions were not based on economics and common sense necessarily, but rather geopolitics. He said that, in the early1990s, the United States missed a prime opportunity to develop a friendly relationship with Russia because people in the U.S. administration at the time wanted the Russians "on their knees."

"We poisoned the well, unfortunately," he said. "We didn't make an effort and we pay a price."

Sachs stressed the need for Americans to try and understand what other countries are thinking, feeling and seeing. He worries about the fallout from anti-Islamic rhetoric and said, "The idea we are in some civilizational challenge is wrongheaded."

Also misguided, he said, are military solutions to what are essentially social or health-related problems. "We can find common cause all over the world," said Sachs, if we, Americans, focus on two areas: the fundamentals, such as dealing with malaria, AIDS and drought in poor countries; and working together with other nations and organizations. "Let's send weapons of mass salvation," he quipped.

When he first became involved – in 1995 – with the problems in sub-Saharan Africa, Sachs said, "There was death everywhere." He asked himself, "What the hell is going on here?" The extreme poverty, amount of disease and lack of electricity and other infrastructure were Africa's problems, he said, and they required a different diagnosis and solution than those of other countries with which he had worked. While this may seem obvious, it was not to organizations such as the International Monetary Fund, who wanted to head down the privation, economic liberation route immediately, explained Sachs. "It was shocking to me to see the same blah, blah, blah from Washington," he said, in a situation that bore no resemblance to that of eastern Europe after the fall of communism, for example.

Sachs explained that, with all the bureaucracy, it took him two years to discover that the United States was doing "nothing" about AIDS. Now, he said, the American government is providing some $6 billion to $8 billion of funding, which is an improvement, but not nearly enough in his view. If the rich world gave 10 cents out of every $100 of their income, he said, then that would be about $40 billion a year and that would buy primary health care for all the poor.

"If you want to secure America's future, that would secure America's future," he said.

With $1.5 billion, you could eliminate all the deaths from malaria – estimated at one to three million per year, most of them children – for five years, continued Sachs. That much money would buy bed nets, which last five years, for all the sleeping sites in Africa, he explained, before bringing home his point, that the United States spends about that much each day on the military. "That's choice," he said. "That's what we've got to figure out in this country: how to choose." He concluded, "We're actually just not meeting the challenge."

With all the talk of foreign aid, one audience member wanted to know if this was all Sachs could recommend for the problems of the developing world. "Of course I'm interested in economic development," responded Sachs, but when you have nothing, no one comes to you on a market basis to help. He said that, while most of the good things that happen arise from markets, you need roads, a clinic, food, water and other basics to get started. In answer to a similar question, Sachs said, "I like capitalism," explaining that it has produced higher living standards and increased longevity and is adaptable. What he doesn't like, he said, is right-wing, ideological capitalism; people who say that we can't help the poor, that we can't have universal health care, even in the United States, which he called "the most unfair system in all the rich world and there's no reason for it."

Technology is the key to alleviating poverty and achieving sustainability, said Sachs, who is also very concerned about climate issues. Indigenous knowledge has a place, he conceded, but the conditions these people are facing are unprecedented. With more than 6.7 billion people on the planet to feed and transport, among other things, he said, "we need a technology-based approach." 

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