Building a new American economy
A critique of the analysis of Jeffrey D. Sachs
Jeffrey D. Sachs is University Professor and Director of the Center for Sustainable Development at Columbia University, where he directed The Earth Institute from 2002 until 2016. He is also President of the UN Sustainable Development Solutions Network and a commissioner of the UN Broadband Commission for Development. He has been advisor to three United Nations Secretaries-General, and currently serves as an SDG Advocate under Secretary-General Antonio Guterres.
The need for a technologically advanced infrastructure that drives productivity
In Building the New American Economy (published in 2017 by Columbia University Press), Sachs maintains that the United States needs to rebuild its infrastructure, because its current infrastructure is deteriorating due to insufficient maintenance, and it is in any event outdated, built for the economy of the 1950s, based on the automobile, steel, and oil. We need a new infrastructure that reflects today’s technological capacities and environmental needs, with such characteristics as: self-driving electric vehicles in the cities; high-speed rail lines for transportation between cities; and an energy system based on noncarbon energy sources, such as wind, solar, hydro, and nuclear. A new infrastructure that is socially and politically sustainable, with the development in the inner cities of affordable housing, decent public schools and public health facilities, and efficient transportation. A new infrastructure that is environmentally sustainable, with intelligent waste-disposal strategies as well as anticipation of dire environmental threats. A new infrastructure constructed on the basis of social and political consensus and a long-term plan.
Sachs maintains that as the need for a new infrastructure was becoming increasingly evident, the government was not able to respond, because it has been locked in gridlock. Both political parties, he maintains, are responsible for gridlock, which is caused by the fact that both political parties have a flawed vision for America. Republicans call for smaller government, not seeing that we need a government that acts decisively and intelligently to stimulate economic growth and to address rising inequality and environmental threats. Democrats counter with advocacy for larger government, but without well-thought priorities, programs, and policies. Because of their fundamental ideological flaws, neither vision has the capacity to attain the consensual support of the people.
Sachs calls for the forging of a new national consensus based on the concept of sustainable development. The new consensus would affirm the need for greater public and private investments in sustainable development, and it would include agreement concerning the means to finance these investments on the basis of planning in both the short and long term.
There is a consensus in the world on sustainable development, Sachs points out, forged in various organizations of the United Nations. The world consensus on sustainable development focuses on three primary goals: promoting worldwide economic growth and employment; promoting fairness to women, the poor, and minority groups; and environmental sustainability.
Most Americans, Sachs recognizes, would be pessimistic about such a proposal for a national consensus on sustainable development. And he acknowledges that the reasons for the pessimism are real. Recent decades have seen economic stagnation in the form of slow rates of growth and flat or falling real incomes. In the last thirty-five years, factory jobs have been shifted oversees in the corporate search for higher profit, or they have been lost to automation. These dynamics, combined with conservative social policies, have contributed to the doubling of the levels of social inequality during the period.
Meanwhile, the accumulated government debt rose from 35% of GDP in 2007, a not unreasonable figure, to 75% of GDP in 2015. In an article published in Common Dreams in 2023, Sachs updated this report, noting that the accumulated public debt had reached $24 trillion, equal to 95% of the GDP, by 2022. The biggest reason for the tremendous rise of the public debt has been America’s wars since 2001, supplemented by state expenses caused by the 2008 financial crises and the Covid-19 pandemic.
Sachs notes that these problems are compounded by the fact that politics has become deeply divisive and toxic. And it has become corrupt, with politicians adapting to the expectations of the four powerful lobbies formed by the military-industrial complex, Wall Street, the health care sector, and Big Oil.
Some analysts, Sachs observes, maintain that we are at the end of two centuries of economic growth and are entering a new era of secular stagnation, because we’ve run out of big new inventions that keep the economic engine going. Smartphones do not measure up to great economic-driving inventions like the steam engine, electricity, the automobile, and aviation.
Sachs believes that the “secular stagnationists,” as he calls them, are misguided. He declares that “we are not at the end of progress, at least not if we get our act together.” He maintains that a long-term tendency to stagnation occurs when societies do not invest adequately in their future, and slow long-term economic growth is the predictable result. In the case of the United States, net savings and investment have declined since the 1960s, contributing significantly to a decline in long-term growth.
Sachs argues that we need higher saving and investment rates, both public and private, directed toward productive capital in order to overcome tendencies toward stagnation. We need to invest in the development of scientific and technological breakthroughs in genomics, nanotechnology, computation, robotics, and renewable energy. But instead, we have been cutting government investment in science, even as the need became clearer and more urgent. In the 1960s, he notes, 4% of the federal budget went to nondefense research and development, in contrast to 1.5% today. As a share of GDP, federal R&D declined from 1.23% in 1967 to 0.77% in 2015.
In my view, Sachs’ proposal for significand and sustained national investment in a technologically advanced infrastructure is on the mark. As I will indicate below, his proposal is consistent with the approaches of the countries constructing socialism that have had significant achievements since the 1980s in the expansion of productive capacity as well as the implementation of social goals.
What drove Western modernization?
Sachs assumes that technological invention has been the driving force of modern economic growth for the last two centuries. In this assumption, he is on common ground with the great majority of Western or Western-influenced analysts. But another major cause of Western economic development can be seen from the vantage point of the conquered peoples of the world; namely, the Western European conquest and colonial domination of the world from the end of the fifteenth to the beginning of the twentieth centuries, a conquest that included the indigenous American nations and societies, Africa, the Islamic World, South Asia, and Southeast Asia (but not including China and Japan). Conquest provided the material foundation for the incorporation of new lands, natural resources, and peoples into the expanding modern world-system and capitalist world-economy, which found new labor and materials and new markets with each new conquest. To be sure, technological inventions played a central role in the continuing vitality and expansion of the European project of world domination, but the conditions and possibilities for the inventions were established by the primordial fact of conquest.
European colonial domination of the world occurred in two stages. First, the Spanish conquest of the Americas in the sixteenth century enabled the discovery of silver and gold, which stimulated the modernization of agriculture, the expansion of manufacturing, and the diversification of production and labor in Britain and Western Europe. This first stage of modern economic development provided the foundation for English and French conquests that were initiated following 1750, which constituted the British and French colonial empires that attained culmination in the twentieth century. This second stage of conquest provided the material foundation for the last two centuries of world economic growth, to which Sachs refers. (See “The Spanish and Portuguese conquest of the Americas, 16th century: The origins of the modernization of Northwestern Europe,” May 25, 2021; “The European conquest of Africa and Asia, 1750-1914: History must be understood, not ignored,” May 28, 2021; “European conquests of the Age of Exploration: The origins of the capitalist world-economy,” April 11, 2023; and “European conquests in the Age of Empire: The world-system becomes global,” April 14, 2023).
In his (typical) blindness to the importance of colonialism in shaping the modern world, Sachs sees only half of the source of the problem of the stagnation of the American economy. It is true, as Sachs stresses, that the American political establishment failed to lead the nation toward the necessary investment in the future of the national economy. But it is also true that this failure occurred precisely at the historic moment in which the world-economy was destined to enter a period of stagnation, inasmuch as the world-system had overextended and overreached the geographical and ecological limits of the earth, and thus had run out of new lands and peoples to conquer.
In not seeing the point of view of the colonized, Sachs of course is not aware of the solution to the multidimensional crisis of the world that has been continuously proposed by Third World governments, which is to a considerable extent consistent with his own proposals. Not aware of this, he is not in a position to appeal to American citizens on the grounds that a fundamental shift in U.S. economic and foreign policies along the lines that he proposes would be fully consistent with constructive world tendencies. And for this reason, it would have the full support of the peoples and governments of the world, greatly reducing the need to protect U.S. national interests by military and other coercive means. Consciousness of this world situation would delegitimate the pretexts of the military-industrial complex and would fundamentally change the public debate on issues of national security.
What can be done?
Sachs notes that, in seeking to control state deficit spending, we generally look for tax cuts, with little recognition of long-term consequences. However, Sachs maintains, investing in our future requires robust rates of public and private investment spending, which would require increasing tax revenues, so that the new infrastructure investments would have an economically sustainable source of funding.
In addition to raising tax revenues, we also need to restore the government’s capacity to plan complex investments. In recent years, nearly every major infrastructure project has become tied up in regulatory knots and public controversy, Sachs maintains. We need to restore the capacity that we had in the days of the national highway program and the moonshot.
And we need, Sachs maintains, financial system reform, to shift Wall Street from high-frequency trading to long-term capital formation. J.P. Morgan’s banking firm financed much of America’s new industrial economy of the early twentieth century, through investments in steel, railroads, industrial machinery, consumer appliances, and the new telephone system. Wall Street should return to its core vocation of directing the long-term savings of pensions and insurance funds into the long-term investments needed for a revival of long-term growth. “Wall Street’s future vocation should be to underwrite the new age of sustainable investments” in renewable energy, self-driving electric vehicles, connecting smart machines in integrated urban systems, high-speed rail, and so on.
Sachs maintains that private investment in the new infrastructure is being held back by a lack of national direction. Decisions must be made at the national level concerning what the infrastructure priorities and long-term policies will be, and once a national direction is defined, private investors will see opportunities for investment and profit, knowing that certain structures will be in place.
I have questions with respect to this notion of state direction and investment stimulating private investment. Although the establishment of priorities and policies by the federal government would be a definite stimulus to investment in new infrastructure, it would not necessarily be enough. Since 1980, the corporate and financial elite has opted for short-term profits in financial speculation and factory relocation, at the cost of the long-term needs of the national economy, thus clearly demonstrating self-interested priorities. So, the question today is, beyond the state taking the lead in investment in the new infrastructure, what economic incentives could be created that would induce the large corporations and financial institutions to now do what they up to now have not done?
The countries constructing socialism today debate this question, a phenomenon that is beyond Sachs’ horizon. The countries constructing socialism have arrived to see the virtues of private capital and a market in stimulating production and productivity, and so private property is now recognized as a sector of the economy in these nations. But in their systems, the state seeks to direct the economy. They continually must ask one version or another of the question: how does the state channel private enterprise toward the satisfaction of social needs and political policy goals without suffocating the productivity of private enterprise? In the case of the United States, the question might be: if new taxes, tariffs, restrictions, and regulations were implemented by the state with the full support of the people, would the corporations relocate all or part of their enterprises offshore?
In countries constructing socialism, the dilemma of state-directed productivity is not presented as a pretext for state disengagement from the economy, as occurs in countries where the corporate class rules. Rather, the approach taken is to address the dilemma through careful planning for gradual but persistent change combined with constant vigilance, with government and party leaders observing the effects of laws and regulations with respect to both productivity and social needs, making adjustments as necessary. The lessons they are learning through such critical and practical experience may be helpful to us in the advanced economies of the West, especially since the countries constructing socialism have been since the 1980s advancing in productivity and also in the attainment of social goals with respect to education, health, the eradication of poverty, and raising the standard of living. (See “Socialist socioeconomic formations: Lessons from real socialism in the global South,” June 7, 2022; “China models a new type of socialism: The most advanced example of a new socioeconomic formation,” June 10, 2022; “The advance of socialism in Vietnam: The Doi Moi policy renovates socialist construction,” July 5, 2022; “Realist pragmatism in socialist Cuba: Cuba’s socialist-oriented mixed economy under state direction,” July 29, 2022).
Giving little attention to the debates on the question in countries constructing socialism, Sachs proposes, writing in 2016 after the election of Trump, that the new president and the new Congress quickly establish a national commission on twenty-first century infrastructure. Said commission would include members of Congress, executive branch departments and agencies, state and local government representatives, academics, private business, and civil society, which would put before the nation a compelling vision of a smart, inclusive, and environmentally sustainable infrastructure.
In my view, the proposed national commission would function to guarantee corporate rule in the coming age. Although Sachs writes that the politicians and the departments of government are beholden to the major lobbies, he nevertheless proposes a commission formed primarily of persons with high political positions, who have based their successful careers on the support of the big lobbies. Academics would be of no help, taking into consideration the fact that the academic world has failed to offer anything beyond superficial critique of American imperialism and its fall into decadence. Similarly, the highest members of the business community have demonstrated their loyalty to themselves. The participation of “civil society,” which presumably could include “activists” of the Left and the Right, would offer little insight. In addition, given the uncivil character of public debate, in which every individual has their insights as well as their oversights, it is hard to imagine a civil public discussion of these issues and the emergence of consensus in the commission or the nation. It is unlikely that the results of such a commission would be satisfactory to a consensual majority of the people.
Cuba in the 1950s was in a similar situation. The political institutions were lacking in legitimacy. Conflict was normal. Opinions were divided. In this situation, the way out proved to be not a public discussion by a commission but a comprehensive unifying proposal, informed by a correct understanding of the sources of the problems and the necessary steps that must be taken for the good of the nation and the people.
It was Fidel’s comprehensive and unifying proposal, formulated as the Moncada manifesto of 1953, universally known as History Will Absolve Me, that moved the nation past hopeless confusion and division. It was a proposal characterized by solid understanding of necessary concrete measures, and it contained a vision for the future of the nation, such that it was able to attract the consensual support of the people. Within six years, it brought to political power a movement committed to implementation of its promises. In this way, political direction and clarity of national purpose were established in Cuba, overcoming division and confusion. The military genius of Fidel, which enabled his guerrilla force to defeat a much larger and better armed military force, would have been worthless, had it not been for the very high level of support of the people for the Moncada proposal.
The Cuban experience is exemplary and paradigmatic, but it is not exceptional. Indeed, the triumphant and sustained revolutions in the modern world have been led by exceptional leaders who understood the conflicting dynamics of the social and political situation, and who had the capacity to explain to the people the necessary road. They should not be called prophets, because they have in no case claimed to have truth revealed to them by God. Rather, they believed that they understood certain universal truths important for all humanity, and on this basis, they could see the necessary concrete steps. They possessed the capacity to explain the concrete problems and universal principles to the people, with whom they were committed. They possessed unbounded commitment to the dignity of their nation and to its wellbeing, and especially the needs of the poor. Shiite Islamic theology speaks of “the virtuous servants of God,” a category that perhaps applies to them. They include Toussaint, Mao, Ho, Fidel, Kim, Khomeini, Gaddafi, Nyerere, Chávez, and Evo, among others, whose insights and contributions to human progress have been hidden from us by a mountain of lies.
Following the historic examples of the virtuous servants, I would say to Sachs that we should begin not with a commission but a proposal. A comprehensive, scientifically informed, and politically intelligent proposal put forth by an alternative political party and/or presidential candidate possessing political maturity and world historical consciousness, enabling it to mobilize and educate the people in the search for an alternative road for the nation.
But the idea of a commission should not be discarded. A presidential candidate or an alternative political party could come to power on the basis of a comprehensive proposal, which could include the promise of the immediate formation of a Commission to further develop the proposal. The President/Party could promise at the outset that members of the Commission would be selected on the basis of their relevant knowledge and commitment, and not on the basis of any position that they might hold in the corrupt and discredited institutions of the nation. The proposal of the Commission could be further debated by the people, with recognition that the strength of the proposal itself would bring civility and coherence to the political process of the nation. In the final analysis, the validity of the proposal would be decided by the people, with the constructive participation of true leaders offering reasoned argument.
Conclusion
The key is investing well in the future sustainable economic development of the nation, and to invest well, we need to have a plan, a well-designed plan that takes into account the complexity of the challenges that the nation confronts. A plan that defers gratification by holding back on current consumption in order to invest in future scientific knowledge, technology, education, health services, and infrastructure, and protection against future environmental threats.
Sachs is on the mark in seeing that both the conservative concept of limited government and the liberal approach of Big Government are seriously flawed, and neither can address the nation’s problems. The conservatives do not recognize the necessary role of government in responding to serious challenges and in stimulating economic productivity. The liberals support social programs that do not necessarily increase productivity and that are funded through state deficit spending. Politicians on both sides of the aisle and government bureaucrats are captured by the military-industrial complex, Wall Street, Big Pharma, and Big Oil, caving in to their interests, thereby consolidating the incapacity of the political system to effectively and intelligently address the question of the long-term sustainable development of the American economy.
The people have enough common-sense intelligence to see that both conservative and liberal approaches to government are half baked, and therefore neither can attain a solid consensual majority. Moreover, the people have consciousness of the control of the political process by the corporations. At the same time, leaders capable of analyzing the sources of the problems and persuasively leading the people in the necessary direction have not emerged, thus giving rise to a deep and pervasive pessimism and cynicism.
In the current situation of confusion and division in the nation, the people do not have the conditions for a national debate on these questions that could possibly lead to consensus. Leadership must emerge, showing the people the necessary road, putting forth a comprehensive proposal for the nation on the basis of consciousness of projects emerging in the Third World plus China, where political maturity and historical consciousness are emerging. And where important insights are being formulated, contributing to the further development of the universal spiritual and cultural legacy of humanity, on the basis of the synthesis of traditional philosophies and cultures, the political philosophies of the modern West, and the consciousness of the people’s revolutions of the modern era.
If virtuous servants of the people were to emerge in the United States, putting forth proposals for consideration, the people would have the intelligence to recognize them and to lift them up as the true voice of the people. The people would find their voice, calling their fellow citizens to the participation in the new project, as well as amending the details of the project on the basis of their experiences. A consensual majority would emerge, capable of using the constitutional structures of the Republic to establish direction and national purpose, thus expanding and deepening the American foundational promise of democracy.
Numerous leaders would emerge, whose voices previously had been silenced by the practices of a corrupt and toxic political system. By and large, the new leaders would not be those who have attained voice in the current political, economic, academic, and media institutions of the nation; nor would they be “activists,” who have emerged as organizers of expressions of frustration and superficiality, sometimes employing bullying and/or mob rule tactics in the context of a corrupt and toxic political system.
The new leadership of the new American democratic project must have double consciousness. That is, it must be based on the premise that the sources and solutions of the problems of the nation are both domestic and international. Accordingly, the new project would be inspired by the revolutions of the modern world that have expressed themselves in other lands; and it would be a project of cooperation with the governments of the world in the construction of a new international economic order and an alternative more just and sustainable world-system. It would learn that creative solutions to the challenge of economic growth joined to social responsibility are often found in cooperative projects of trade, investment, and scientific research developed by two or more nations or by the nations of a particular region. It would appreciate that each nation and each people are an inseparable part of humanity, each with its culture and political-economic system, but all bound together by the common heritage and common destiny of humanity.
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