The Books Interview: Jeffrey Sachs

Can you summarise the central argument of your new book, The Price of Civilisation?
I'm saying that, on an economic level, we have a set of deep structural problems in the United States. This cannot be solved by short-term stimulus; nor is it something that can be solved by another tax cut. They are much deeper problems, reflective of globalisation and powerful trends in the world, and they require active government in order to address them.

So you're not just talking about the regulatory failure that helped to bring about the crash of 2008?
The interesting thing about regulatory failure is that it happened during the Clinton administration. That reflects the complete failure of my party, the Democrats. Bill Clinton basically sold the Democrats to Wall Street.

The crisis on Wall Street is syndromic of something deeper: our political system has been profoundly corrupted by corporate money and campaign financing. Both parties are part of it and both are playing a game of endless flirtation with the rich.

And Barack Obama has done nothing to close the "revolving door" between Wall Street and the White House, has he?
Everyone was shocked when, to address the Wall Street crisis, he brought in the Wall Street team! Unfortunately, that's the Washington milieu - it is completely pervaded by money. Half of Congress are millionaires. The White House is filled with millionaires. And that, of course, leads to deep popular dissatisfaction with government institutions.

There is popular dissatisfaction throughout the western world. What's special about the situation in the United States?
In sheer monetary terms, politics in the US is the most egregious of all the developed countries' with the possible exception of the almost surrealistic situation in Italy. Italy is in the final stage of this disease.

No one has completely unregulated, private-paid TV advertising the way the United States does. No one has our two-year national election cycle that leads us to a complete frenzy. This is an accident of 1787 - you wouldn't write a constitution that way today.

Do you think Obama's stimulus programme was ill-conceived?
There was a feeling, which I didn't share, that we were about to enter a great depression in 2009 and that we had to do anything to stop it. I thought it was way overdone.

If there was an urgent crisis, it was in the money markets. We absolutely needed emergency central bank responses to that. But the idea that we had to bet the administration on a two-year grab-bag of measures worked out in two weeks, a hodgepodge of spending and tax cuts, was politically toxic.

One of your intellectual heroes is Paul Samuelson, who developed the theory of the mixed economy which America has left behind.
Samuelson mathematised what many writers, going back to Adam Smith, had realised: that markets simply can't function in some areas. Even such a paragon of the free market as Friedrich Hayek is absolutely clear, in The Road to Serfdom, that wherever the market functions, it's an effective resource-allocating mechanism, but that there are many places where it is completely inappropriate. All of that was mainstream when I was started studying at Harvard in the 1970s, but this basic idea has lost its central, almost axiomatic status.

Are there other things that economists are getting wrong?
We are blinded by our metrics. Our metrics are, to a large extent, based on national income, but national income doesn't convey several crucial things about society. It doesn't include distributional considerations, or take account of environmental factors. And it's
a pretty poor measure of well-being.

In the US, not only do we have a GNP-centric discourse, we also have a consumerist discourse that overwhelms everything else. This is a society addicted to consumer debt. America reached a pinnacle of technical efficiency and technological advance after the Second World War, and this is what it brought about.

Jeffrey Sachs's "The Price of Civilisation: Economics and Ethics After the Fall" is published by the Bodley Head (£20)