A review of The End of Poverty by Jeffrey Sachs (Penguin)

Clive Hamilton The Age, 2 July 2005 This book could be subtitled, My Amazing Adventures as an International Economic Guru. Having saved Bolivia from the perils of hyperinflation (when he was just 30) and rescued Poland and Russia from the deadweight of communism, our superhero has now set himself the biggest challenge of all delivering the world from the curse of poverty. Jeffrey Sachs is a Harvard-trained economist who has become something of an academic superstar with his unusual mix of neoliberal economics and willingness to attack the IMF for its dogmatism and the Bush Administration for its lack of concern for the poor and bullying approach to world affairs. As a result he has been embraced by many who dislike Bush and the IMF but have no understanding of economics and power politics. The foreword to the book was written by rock celebrity turned poverty campaigner Bono, and never were a more oleaginous and self-obsessed thousand words penned. According to Bono, the marriage of placards and markets was a natural one and he tells the story of how he and Jeffrey bonded over their mutual determination to abolish poverty in Africa while flying first-class over that benighted continent. Of Sachs he writes: In time, his autograph will be worth a lot more than mine. Gosh, surely he will never be that famous! The warm reception given to this book by people who should know better is a testament to the decline of political understanding among progressives after two decades of neoliberal victories. A bleeding heart is a good complement to, but no substitute for, a hard-headed analysis of social structure and the deployment of power. In Jeffrey Sachs Harvard meets MTV. One cant help thinking that Western colonialism has morphed into a new way of disempowering the Third World: if only we in the West can find it in our hearts then we can abolish poverty. I know, lets have a rock concert and all the young people will realise that the answer lies in their hands. But stripped of the narcissism, what is Sachs answer to global poverty? How can he support his claim that extreme poverty can be eliminated by 2025? Sachs has developed a new sub-discipline called clinical economics. Each failed economy is unique and its ailments must be carefully diagnosed before a prescription suited to the condition can be written. Sachs includes helpful checklists to diagnose the causes of economic decline and formulate a cure for the malady. He says that his new economics was developed by observing his wife Sonias clinical practice of paediatrics. An economy is like a human body, he argues, and only an economic doctor willing to understand its complex workings can cure it. Of course, economies are not in any sense like bodies, not even in their complexity; if we want a

medical analogy, a better one might be a dysfunctional hospital run by a drug company with a commercial interest in perpetuating illness. Sachs clinical economics is little more than standard neoclassical economics. Just like the IMF colleagues he likes to attack (many of whom he says he trained), Sachs believes above all that the answer lies in markets. For all of the encomiums written by well-meaning but nave enthusiasts praising Sachs for tempering his economic theory with real world experience, Sachs cannot escape his training. In US graduate schools in economics, the free market is king. Its not just an analytical framework, its a worldview that gets into the bones of every graduate. At one point Sachs recounts how in the 19th century the East Indies and the West Indies did not benefit from the opening of trade with the West and quotes Adam Smith to the effect that the maldistribution of the gains from trade was due not to trade itself but to the military advantage that Europe had over the natives. Thats the problem with trade, foreign investment and privatisation; the theorems of the textbooks are always turned into reality by actual people with their own interests. One could make the same analysis about the maldistribution of the benefits of the recent US-Australia Free Trade Agreement and indeed the world trading system managed by the WTO. Somehow the poor countries always seem to get screwed, whether it be through multinational drug companies destroying local firms making cheap drugs, Third World food producers unable to get access to lucrative Western markets or corrupt elites skimming profits at every turn. In The End of Poverty Sachs details how he has applied his clinical economics around the world. He is happy to claim the successes the recipe for Polands transition to a market economy was tapped out by Sachs late one night in a Warsaw newspaper office. For good measure he claims to have raised a billion dollar currency stabilisation fund in a week. But he denies responsibility when things go badly wrong, as they did in Russia. When Russia accepted Sachs shock therapy the results were disastrous. The economy collapsed in the early 1990s resulting in mass poverty, destitution and a sharp and unprecedented increase in the death rate. Although he claims the privatisation process happened after he had cut his links with Russia, many of the nations principal productive assets fell into the hands of crooks, triggering an economic and social catastrophe that Russia is still trying to cope with. Undoubtedly Sonia has medical indemnity insurance to cover her for any mistakes; her husband, per contra, seems infallible. Sachs praises the anti-globalisation movement for being well-meaning but chastises it for attacking global corporations. Its not their fault, he insists; its our fault for not providing the right guidelines. The apogee of this dangerous naivety comes in his claim that oil companies like ExxonMobil should not be blamed for global warming. Climate change occurs because government isnt doing its job. It is as if Sachs has systematically wiped from his consciousness the vast accumulation of evidence that ExxonMobil in effect determines US government policy on climate change. But in the textbooks we find

one box for firms and another for government and the only flow of money is from government to firms to buy staplers. Like all of us he wants capitalism to have a more human face, except that the institutions best suited to compelling capitalism to be more humane have been under sustained and effective attack by the advocates of the free market, including Sachs, for two decades. In the sixties and seventies a flourishing debate about poverty and development saw the emergence a school of economists and other experts who understood intimately the impact of poverty in the Third World and what it would take to solve the problem. They supported capitalism but were not one-eyed fans of the market. But reading Sachs you would think that he alone discovered the problem of underdevelopment. The great thinkers of development studies Paul Streeton, Michael Lipton, Fernando Cardoso receive no mention at all from Sachs. Even the venerable Amartya Sen, who was awarded a Nobel Prize for his work on poverty and development, attracts only one dismissive reference. Sachs ignorance of intellectual history is matched by his lack of generosity. Like his fellow economists who control the institutions of global economic management, Sachs is a cheerleader for Enlightenment rationality. Yet time and again he must give awkward acknowledgment to the fact that the power of a few is enough to cancel out any amount of rationality. But for Sachs power is never a structural feature of the world. Its something that somehow ends up in the hands of rogue Third World dictators or corrupt CEOs; the bad apple theory of power. How the Russian oil barons must smile into their wine glasses and give thanks to Jeffrey Sachs political naivety. As each chapter recounting his exploits passes, the reader begins to wonder whether Sachs imagines himself to be not so much a skilled healer as a messiah. Not even the most brilliant doctor pretends that only he or she can solve all ills, yet the underlying message of The End of Poverty is that the author alone has the solution to the worlds problems. No wonder he has found comfort in the company of superannuated pop stars more familiar than anyone with raging egos and shameless self-promotion.

Clive Hamilton is Executive Director of The Australia Institute and co-author of Affluenza (Allen & Unwin 2005).