The Price of Civilization_ Reawakening American Virtue and Prosperity - Jeffrey D. Sachs [9]
Retracing Our Steps
America’s problems may seem insoluble today, but that’s mainly because the United States has gotten out of the practice of true social reform and problem solving. Once we start to diagnose our real ills and chart a course to solve them, practical problem solving will prove to be realistic after all. Despite all the challenges—budget deficits, financial scandals, lack of proper public education, corporate lying, impunity, antiscientific propaganda, and more—the U.S. economy remains highly productive and innovative. Even with the steep downturn after the 2008 crash, the average per capita income is around $50,000 per person, still the highest in the world in a large economy. There is no overall shortage of goods and services to go around. There is no deathly squeeze on food supplies, water, energy, or health care systems. There is a continued outpouring of new products.
Our challenges lie not so much in our productivity, technology, or natural resources but in our ability to cooperate on an honest basis. Can we make the political system work to solve a growing list of problems? Can we take our attention away from short-run desires long enough to focus on the future? Will the super-rich finally own up to their responsibilities to the rest of society? These are questions about our attitudes, emotions, and openness to collective actions more than about the death of productivity or the depletion of resources.
In the following chapters, we will retrace our steps as a nation. How did the world’s leading economy reach such a position of despair, and apparently in such a short period of time? We will diagnose America’s ills by studying four dimensions of the American crisis: economic (chapters 3 and 6), political (chapters 4 and 7), social (chapter 5), and psychological (chapter 8). By taking the economic, political, social, and psychological facets together, we can piece together an understanding of how America went from decades of consensus and high achievement to an era of deep division and growing crisis. That story will enable us to look forward toward solutions.
CHAPTER 3.
The Free-Market Fallacy
After decades of global economic leadership, America began in the 1980s to forget the basic lessons of economics, parroting slogans (typically about the wonders of the free market) while neglecting the art of economic policy. One of the most basic and important ideas of economics—that business and government have complementary roles as part of a “mixed economy”—has been increasingly ignored, to my amazement and consternation. This chapter aims to help make up the lost ground.
In this chapter I discuss the three main aims of an economy—efficiency, fairness, and sustainability—and show that the government must play an active and creative role alongside the private market economy to enable society to achieve them.
The Age of Paul Samuelson
Fortunately for me, I was well educated in the merits of the mixed economy during my student years (1972–1980), by intellectual giants who had done much to guide America’s economy after World War II. The era of economic thought from the 1940s to the 1970s can be called the Age of Paul Samuelson, the economic genius at MIT who personified the economics profession during the heyday of America’s global leadership. More than any other economist of his time, Samuelson provided the intellectual underpinnings of the modern mixed economy created in the United States and Europe after the Second World War.
As a freshman at Harvard College, I studied from Samuelson’s famed introductory