Jeffrey Sachs was once hired by the Bolivian government to advise it on how to reduce its very high rate of inflation. Sachs told the Bolivians exactly what any college sophomore could have told them: Stop printing so much fucking money. They did, and Sachs won his spurs as an international economic advisor. He later parlayed this bit of nothing into an appointment as director of Harvard’s once-highly-regarded Institute for International Development, which collapsed under the burden of a major scandal that happened on Sachs’s watch. Sachs, who’s always been better at career management than at economics, managed to land on his feet as director of something called the Earth Institute at Columbia University, which seems to be intended as a version of the World Bank without all that boring banking stuff.
Sachs comes to mind today because of the simply awful Deep Thoughts he posted at Project Syndicate. He begins with this stunning bit of nonsense:
We live in an era in which the most important forces affecting every economy are global, not local. What happens “abroad” – in China, India, and elsewhere – powerfully affects even an economy as large as the United States.
If this guy truly believes that outsourced tech support or cheap textiles are affecting the U.S. economy more than the aftershocks of the financial crisis and the Obama administration’s regulatory assault on potential lenders and employers, then he’s utterly incompetent as an economist. More likely, he’s so used to writing such globaloney that he doesn’t know how to start a Deep Thoughts piece without it.
Next comes this bit of hilarious pseudoscience:
Yet globalization has also created major problems that need to be addressed. First, it has increased the scope for tax evasion, owing to a rapid proliferation of tax havens around the world. Multinational companies have many more opportunities than before to dodge their fair and efficient share of taxation.
To translate from econobullshit to plain English, Sachs is lamenting the fact that capital moves more freely between countries than it has for about a century, and possibly ever. This makes it impossible for any one country to levy confiscatory taxes on the income from capital without driving firms away. Sachs calls investing in lower-tax countries “tax evasion,” which is both incorrect and slanderous. If this guy really doesn’t know the difference between “tax avoidance” and “tax evasion,” then he really should STFU about tax policy altogether. Since the distinction is pretty basic, I’m gonna go out on a limb and just call Sachs a lying weasel on this point.
That doesn’t mean he’s not also wrong on the economics of this, because he is. The international fluidity of capital means that rates of return are more equal across countries than they used to be. This is extremely good news for the places in the world that used to have pitifully low levels of capital per worker–which just happen to be those places that Sachs’s Earth Institute claims to care about so much. The icing on this cupcake of a paragraph is Sachs’s pseudoscientific assertion that he knows what is the “efficient share of taxation” that should be borne by multinational companies. He ought to brush up on the economic analysis of capital taxation, because it is now commonly argued that the tax rate on the income from capital should be reduced to zero in the long run. Even if you aren’t willing to go that far, it’s absurd for Sachs to claim that he somehow knows that corporations aren’t paying the efficient rate of taxes.
Sachs’s ignorance of basic facts is wide as well as deep, as made clear by this assertion:
Globalization has also fueled contagion. The 2008 financial crisis started on Wall Street, but quickly spread to the entire world, pointing to the need for global cooperation on banking and finance.
If the financial crisis started anywhere, it started with the failure of Northern Rock, which managed to fuck up all on its own. The (London) Times summarized things nicely:
Northern Rock became prominent in the mortgage market because of its willingness to relax normal lending criteria. It granted mortgages at six times income, and lent up to 125 per cent of the value of a property.
The U.S. crisis was a direct consequence of how the financial system tried to digest the toxic assets that various agencies of the federal government pressured mortgage lenders to create. Blaming Wall Street for the U.S. meltdown is a stretch; blaming it for bank failures elsewhere (England, Ireland, or Scotland, for example) is absurd. Sachs could say that it all started in Iceland and be less wrong.
Only a total mess like Sachs’s post could actually be improved by concluding (well, just before the obligatory plug for his undoubtedly awesome new book) with this utter banality:
What globalization requires, therefore, are smart government policies.
Got that, people? It’s globalization that requires “smart” government policies. Not prosperity, or efficiency, or even just goddam common sense; no, government could be totally retarded back in the pre-globalization days. Only now does it have to get its shit together.
So it really sucks that we’ve got such a complete incompetent in charge right now, I guess.
At least this idiot Jeff Sachs isn’t advising our feckless chief executive. So we can be grateful for that, anyway.