Hopefully, you address the question of why there is a lack of effective government. As you yourself have emphasised elsewhere, this lack is pervasive worldwide, and it is consistent over decades. How can so many diverse personalities and teams be so obviously wrong in same ways?

In the US, the government's push for deregulation began not 30 years ago but with the 1971 proposal to Congress to open rail and truck transportation to more lenient practices. That was accomplished in 1976, and then the process continued with the Airiline Deregulation Act, the Staggers Rail Act and Motor Carrier Act - all under administrations before Reagans'.

Does this U-turn have to do with the murders of the three most prominent American leaders in the previous decade? Abroad, does it have to do with many other statesmen's curious deaths, coups and uprisings of dubious origins, and UN-sanctioned economic & military interventions based on false charges [1] [2]?

Are the venerated institutions of education mostly innocent? Are those who benefited from the transformation of government role innocent in the eyes of the law?

Otherwise, it's neither unique, nor very difficult to argue that all these guys have got it wrong.

You are right that for 30 years we have been going in the wrong direction.  For 30 years we have been consuming more than we produce and building a massive trade deficit:

http://4.bp.blogspot.com/_pMscxxELHEg/SXu-IBM6k3I/AAAAAAAAEXE/Q2KYO8ce_9Q/s1600-h/TradeDeficitGDP.jpg

Globalization is the cause.  Not due to lack of internal spending but, rather, lack of control of cross-border flows of goods and capital.

The damping effect of a trade balancing tariff structure would fix that, but neoliberals insist we just need to work harder, study more and accept less and we will be fine.

Sir,

about those Scandinavian economies.  Not all of them are doing that well. Sweden does. Finland does, more or less. Norway does - (but  Norway has oil, lots of it (per capita)).

But Denmark is not doing well. To the contrary. Employment is going down and the economy is stagnant and declining, 'despite' all kind of neo-liberal reforms during the past fifteen years. Why does this country do so bad, compared with all surrounding countries (Germany, Sweden, Poland, Norway)? It has pegged it's currency to the Euro, at an overvaluated exchange rate (the Danish price level is the highest of the entire EU): a beggar-yourself policy. Austerity and internal deflation are supposed to do the job...

Interestingly, Sweden (which does best of all European economies) and Poland (which does best of all transition economies) did devaluate, albeit temporarily (!), in 2009. At this moment and contrary to 2009, Swedish labor costs are higher than Danish ones, again. But Sweden is still thriving and Denmark isn't... 

But I do agree with you on these taxes: there is ample evidence that high taxes can be fully consistent (to say the least) with a thriving private sector.

P.S. - Sweden is projected to have a government surplus, this year.

P.P.S. - Sweden fixed it's banking system quite some time ago, which also helps.

P.P.S. - Sweden has been doing better than Germany, the UK and the USA for quite some time now (since 1998).

There is a wise saying: "You have to be careful what you wish for".

Globalizations started as everything else in human history, for more profit, more power for the strong and wealthy exploiting the poorer and weaker spreading all over the world in order to lower costs and increase income.

But what was not calculated or known at the beginning is that the process created a completely closed, interconnected and interdependent system as the article itself says, from which system there is no way back. Through this evolutionary process we locked ourselves into the multi dimensional network, where whatever happens at one point of the net immediately affects all the other points in the net, and vica versa.

The global crisis shows us very clearly how much we depend on each other, and that no nation or economy can succeed if the whole system does not work optimally.

Thus we have a big problem. We see we are within new conditions we cannot turn backwards, and we also see now that with our previous profit hungry, ruthlessly competing attitude, with the "dream of infinite growth and consumption" we cannot make it work anymore, we only cause more damage. But this is a painful revelation as we are forced to change which we do not want to do.

So now we have a free choice: either we swallow the bitter pill and understand that we have to rebuild human connections, financial and economical systems that suit the new global, mutual conditions, or we continue stubbornly as we did so far, facing an ever growing crisis and complete uncertainity about the future.

Perhaps the success of Scandinavian countries shall not be merely explained by the high level of taxes but by the fact that high taxes ensure sufficient and more importantly STABLE government resources- a fundamental instrument for public policy.

Consequently sustainable government spending- example public procurement in [labour intensive] infrastructure projects along with sustainable resources for education and social security- in turn ensures sustainable development!

If we proceed by recognizing market failures at the current age of globalization and  prevailing information imperfections and asymmetries and conclude that in the real global world market are highly volatile, then taxes will become a core instrument for managing the globalization- counterbalancing its negative consequences and thus ensuring high prosperity with social justice and environmental sustainability?!

Perhaps creation of a Global Political Risk Guarantee Facility that will ensure an individual country from a change of policies in partnering countries would be a plausible instrument for managing Globalization by maximising its benefits and minimizing its costs?!

But of course this will entail putting in place transparent global governance mechanisms to raise political will of all concerned stakeholders in the process that will not be very easy to achieve.

Delivering on UN declarations for an integrated analysis of development
jointly with my co-authors we elaborated an analytical tool called Data Envelopment Analysis (DEA) that is actually capable of deriving the optimal level of different national and international policy measures ensuring maximum sustainable development in the context of globalisation.

It is noteworthy that the framework is flexible and capable to handle not commensurate data- both quantitative and qualitative indicators are acceptable.

The proposed approach can be used to deliver, the analytical underpinning that Global Decision Makers need to take informed policy decision at the age of globalization It is an interactive and iterative consensus building framework that will ensure policy coherence and optimal level of policies for sustainability impact of globalization.

Four applications of our methodology are published: 

A Utility Function Approach for Evaluating Country Performances with DEA – the Twin Goals of Decent Work and A Fair Globalization, "Global Operations Management,"NOVA publishers 2010, (with W.Cooper and S.Thore)“A framework to measure the relative socio-economic performance of developing countries”, Socio-Economic Planning Sciences, Volume 44, Issue 2, June 2010, Pages 73-88. (with N.Adler and E. Yazhemsky) “Using Data Envelopment Analysis to Screen the Possibility of a Fair Globalization”, Portuguese Journal of Management Studies, (with S. Thore) Vol. XIII, No. 1, 2008 “Using Data Envelopment Analysis to Quantify ILO Objectives and Identify Policies Conducive to Decent Work”, Socio-Economic Planning Sciences, Volume 43, Issue 3, Pages 141-220 (September 2009), (with S. Thore), online July 2008

I will be very happy to provide further details!

The US economy is only impacted by global events because we have set ourselves for it to be so.  The US is the only country with the workforce and natural resources to be primarily independant of such things, if we so chose to be.

All of those things that your propose Government should do, they have been doing for decades.  Look how well that's worked out.

I propose that what Globalization needs is less government.  Anything the Government can do, the private sector can do better, cheaper, and MUCH more efficiently.  Government has no incentive to remain current and relevant.  Unfortunately the only incentives that governements have are to pander to constituents, in the attempt to retain the "public service" career.

The larger any governement gets, the more inefficient they become.  The longer they are allowed to remain "public servents" the more intrenched in dogma and pandering they become.

I know from personal experience that Dr. Sachs is a smart man.  So he is either delusional or dishonest in saying that “[f]or 30 years, the US has been . . . cutting the role of government in the domestic economy . . .”.  Apart from airline and trucking deregulation, it is hard to think of a single example of this, and the immense growth of regulation, public landholdings, public employment and government assets over this period demonstrate the premise to be utterly false.

Liberals such as Dr. Sachs would promote diversity in other contexts, and the great mystery is why they are so adamantly opposed to diversity of authority.  Centralization of authority is associated with public policy disasters on every front, and education is perhaps the best example of all.

The vice of banker control is precisely the product of the overly-large government that created the problem, and those who think the remedy is more government are delusional.  So too those who think the solution to an overly-indebted society is more debt. 

Ultimately, faith in government is delusional.  As H.L. Mencken said:  "People do not expect to find chastity in a whorehouse. Why, then, do they expect to find honesty and humanity in government, a congeries of institutions whose modus operandi consists of lying, cheating, stealing, and if need be, murdering those who resist?"  As someone associated with the U.N., which fits this description to a tee, Dr. Sachs should know better.

Thank you Dr. Sachs for a message that needs to be heard loud and clear around the world.

In the U.S., the Republican Party and its media cartel (WSJ and Fox News) go to great lengths to manufacture facts to support their small government narrative. We're forced to endure counter-factual nonsense like "Tax cuts increase revenues" and "We have a spending problem not a revenue problem" and "Tax hikes kill jobs" and "Regulations kill jobs" and "The crisis of 2008 was caused by Fannie and Freddie" and "Climate change is not the global scientific consensus." About 90% of the evidence or greater is against such claims, yet Republican politicians repeat them over and over again and many folks believe it.

The list of their nonsense goes on and on and its up to thinkers like you to continue to fight the good fight, putting the facts and common-sense solutions out there, to help us marginalize the right-wing, rich-financed folks that have taken over one of America's great political parties and are eating this country down to the core.  These folks need to be ridiculed and shunned for their nonsense.

The steps to put us back on track are pretty straightforward:

1) We need to let the Bush/Obama tax cuts expire on schedule in 2012. Income taxes are mainly paid by the wealthy, so letting these expire is a huge win.  CBO says this will avoid adding $3 trillion to the debt over the next decade, plus avoiding $100 billion in annual interest payments.

2) The U.S. is running a $650 billion goods trade deficit, which represents 10-15 million jobs overseas.  No amount of education will offset competition against someone that can provide a comparable service at 25% of the cost.  We simply have to insulate ourselves from the developing countries and let them trade amongst themselves until their living standards are closer to ours.  Only the top 3% of Americans by educational attainment had wage increases over the past decade; we cannot all be in the top 3%.

3) We have to reform entitlements. Social Security is easy; just raise the retirement age, reduce the annual cost of living adjustment slightly, and remove the cap on the payroll tax ($106,800).  Healthcare is tougher and requires we address the cost drivers (e.g., obesity via fax taxes, defensive medicine via tort reform, a shortage of doctors and nurses via educational reimbursement, standardize payment systems, etc)

The key message is that the developed world has to insulate itself from the developing world for awhile. Integration isn't working for the developed countries, who see their wealth and jobs migrating to developing countries as the corporate masters sell out the middle class for their investors' benefit.

I would like to reflect on jimg662's post, as it shows the great misunderstanding most people have today especially in the US.

Nobody "set up" anything here, globalization is a state we arrived to naturally through our development based on our inherent human nature.

We are driven by trying to get more and more for ourselves with minimal effort and investment which together with pouplation growth, technical advancement and the expansion of virtual connections inevitably lead to the global, interdependent conditions we live in today. Globalization is a direct continuation of the "American Dream" celebrated and followed all around the world.

The other misunderstanding is that some people, nations think they can become self sufficient, independent, disconnecting from this global network.

If we carefully look at how the system is set up, how deeply we depend on each other for natural and mental resources, how even our simple everyday necessities are dependant on others, how the ecological and environmental changes envelop the whole globe we can easily see that no country or individual today is capable of becoming independent or self sufficient. There is a great danger in this thinking, considering protectionism, or isolation as this could lead to very unstable international, or civil situations even wars very easily. Just look at how the Canadians reacted for example to the "Buy American" initiative, just imagine how for example China would react if people would stop buying their products in order to help local markets, production...

Finally I do not understand how people expect to continue with infinite growth and growing consumption in a finite place, system. There are no more markets there is no extra hungry consumer who wants to keep buying, unless we colonize more planets, finding new markets to expand into we are just chasing our own tails. With our present way of life we have arrived to a dead end.

We have no choice but to acknowledge globalization, this closed integral system as our living space and learn how to live in this new world in harmony, by completely changing ourselves.

Dear Mr. Sachs

Give up

You forget the common sense widsom of, "fool me once . . .fool me twice"

Globalization is a complete and utter fraud which doesn't do one thing except transfer wealth from poor people in rich countries to poor people in poor countries

As you write, "In high-income countries, notably the US, Europe, and Japan, the biggest losers are workers who lack the education to compete effectively with low-paid workers in developing countries. Hardest hit are workers in rich countries who lack a college education. Such workers have lost jobs by the millions."

Now, Government has fooled these people once.

Now, you advocate that they trust the government.  It is not about to happen

You should be urging sound sane policies that will put America back to work. Seal our borders. Stop imports. Stop proping up European Banks.  Simply said, Stop the Insanity

Gamesmith94134: Outraged European Citizens

Based on the recent fiasco of sovereignty debts in PIIGS, it has tilted the balance of the equality and autonomy that created the civil war within the European Union. After the series of defaults on the loans, austerity programs many applied did not concur with IMF or Moody who gave negative result in matching the demands; treatment on higher interest payments added on the loans for PIIGS after the rating and privatization program was advised and enforced that put its citizen hostages.

I would suggest the zoning on prevention on the hot cash and tax evasion that each zone will have substantiate the standardized exchanges that each must carry its own bonding if necessary and fee on the transcontinental exchanges. Under the shadow of the Lehman Brothers and the failing equity bonds under the appearance and insurance of the Central banks, it needs a guarantor and an arbitrator from the World Bank and a valuator on the exchange like IMF.

Perhaps, bonds that carries over the intercontinental transaction should be scrutinized and settled through the third party medium like World Bank if such transaction is see as part of the sovereignty debts or loan since some may surpass the regular board of securities exchanges of the local central banks; or such transaction would be considered as the laundry like elements that requires policing

The division of arbitrator of World Bank should have taken an advanced procedure safeguard of economical crashes if such lesser of long term investment and creates vacuum by the outflow. Such transaction should use the World Bank to guarantee these transactions are genuine investment instead of laundering purpose or act of trade war that harms the exchange currency nations or parties. Again, these transactions must pay by reserves on the value it acclaimed, or a checkpoint must be established on the transcontinental purposes instead of the later court action in disputing the rightful bearer of the devalued bonds or loans.

World Bank must develop it insurance element and the appraisal power to adjust to the need of the abused including sovereignties debts if World Bank may act in the loaner position that after the central bank failed. It must establish the reserves on the funds in handling the transaction and not by the insurance company or appraisal firm that either failed to see the loophole of the fraud or defiant act on the truth in just collecting fees to pass on like kicking the can down the road like PIIIGS, eventually, it may comes as part of the function amending the global economy that World Bank will offer the loans through the reserves it may developed from the guarantee commission or appraisal commission.

In term of losing track of the transaction that goes through the protective elements, many use the political power through the governments, many of these transactions concealed national secrecy that would not be taxed or revealed by the bankers or receiving parties. So, in order to set a proper track record of these transactions, they should be regulated under IMF or the board of intercontinental exchange which is identified by its Zone. So, the transcontinental transaction must come in the checkpoints or IMF, a fee of authorization would use as tax or tariff that comes through each checkpoint and reported to the involved parties to reestablish the sovereignties right to tariff and tax.

Offering of the World Bank and IMF to boarder service can be a helpful way to ease the tension from dragging on to the global recession if there is no better alternative for the change of guard of the world economics.  Now, it is the calls of World Bank and IMF to take the stand to work within the sovereignties that carry its own currencies and controls all transactions in the fairer trade within its continents while free trade had reaches the epic of manipulation.

In term of currencies, I think after each sustains its sovereignty, the non tradable sector can use the local currencies which can be supervise under the scrutiny of OCED and EU can control itself under the ruling of the World Bank. However, each may join or utilize the EU Euro, British pound, and Russian Rubles in the tradable sectors can achieve the collective bargain in the open trade markets. Perhaps, WTO could cut monopoly or abuse from diversification of limited currencies in the open trading market and each can contribution to the integration of globalization and being monitored by the global security.

Perhaps, the theory in the half full and half empty may put in use of the price and value of the currencies refreshing the preset EU system that each may return to its own sovereignty that gives the flexibility and elasticity on the monetary and political system to sustain the growth in a multispeed world.

May the Buddha bless you?

Really inspiring text.I consider essential be able to remember that states should stablish high taxes if they pretend equal oportunities for anyone.

gamesmith94134 07:28 26 Sep 11

Gamesmith94134: Palestine’s State of Mind

If it wasn’t for Irgun where would the Likud be? Or, how does the Palestine can accomplish without Arabs or Islam just because Hamas and Hezbollah are in jeopardy?

Why cannot HAMAS be Likud of the Palestine if Palestine becomes the sovereign state of Africa instead of being a colony of Israel? Why does history repeat itself in these negative elements? And, I think Mr. Abbas is serious about his parties in his parliament and the full membership of sovereignty state of UN or Africa, not Israel’s; and forward his argument of the two individual sovereignty states in settlement of Palestine and not just PLO.

It is a new era for Palestine and not PLO; if UN must act. It was all justice for Arabs and Islam; Because I, an American, found Israelis or Americans would have no grounds in violation of UN Resolution 242, and the land swap or observer membership for Palestine would achieve any like Camp David or Oslo to procure any agreement like the previous. Since the West Bank or Golan Heights is not the parcel of the peace agreement, why would American undercut their capacity to dispute or to agree by stepping off the mount and let ICJ do its job?

There is no need of a power broker like United States if the only valid settlement shall be agreed only between the Palestine and Israel only; Otherwise, should we go back on Aliya Bet emissaries to decide on why Palestinians are left behind? There is definite repeal its case in Uniting for Peace resolution (the last time was against South Africa’s apartheid regime), it would not die. I do not think neither Israelis nor American will vindicate, even though Palestine’s full membership is denied by the veto of Americans. Why should United States veto Palestine’s membership or undercut its status prior the discussion of the disputes on the land that is far off its shore?

Is it Mr. Obama wash his hands before the blood get on them now? I hope he can sleep better after his veto and streams up the extremists on both sides to make sure Israel can get what it wants, and Hamas or hezbollahs can come forth its own justice and freedom on the next Arab Spring against Westerners. Then, Are we going back to war on Islam again if justice do not apply to Palestine just because Peres’ question to UN to assure its security?

Mr. Ban Ki-Moon, if you has took the office of the United Nations, we must look into your stand on democracy, justice and freedom that represents the wills of most of its members, and not by the peace broker or anvoy who deals with the situation. If you beleive you are the commander-in-chief, you should utilize all components of the system allows, united all branches of World Bank, WTO, ICJ and alike to your administration; then combine OCED, ASEAN, OAS, African Union, and North America to develop it grass-root politics. It is not a hand to hand combat with each politicians or diplomats if you can rule on concensus.

Get involve especially your potential to finance, since many nations are lost after the financial disaster. It is you to unit them to stamp off the hegemony instead of let its populace to kick out the bad apples. United Nations, you make it collective on the grass-root strucrure instead of the brokers of power, now, the power is the concensus.

May the buddha bless you?

@Jeffrey Sachs: You are right about the goverment's role and incorrect policies of the USA government and by all measure the rest of the world as well. However, taxing and making a strong government alone will not solve the problems of Globalization. Our view of the world-economies as well the solutions to improve the situations are all skewed by our misunderstanding of the natural world perceived by our senses and mis-interpreted by our intellect and reasoning capacities. Over the years, physics has been the tool and with matematics we have been able to comprehend the nature and determine our place in this universe. Our biological universe has made us belive humanity and the bio-systems that envelops us are both one and the same. However, this is not true. We (meaning the humanity) are independent of the bio-sphere. The concepts of time,space and perceived atmosherics of this planet are not applicable to the non-biological money, economy and the trade systems of the 21st century. In this space-age, the universe of macro and micro economics need new paradigms to correctly perceive and rectify the problems created by pre-space-age cognitive disnonances. Unfortunately no-one in the academia and/or the government is willing to step out-side of what they have been taught and come to accept as truth; Just as during the renaisance the world came understand, that our planet is not in the center of our universe but the sun is; we need a monumental shift in our perspective of what "Global-economy" really is and how to perceive it, the way it ought to be. I am sure many smart brains than mine, are at work solving these issues and it is only a matter of time before they will have it all figured out; just like Coppernicus did. We just need some patience till that time arrives.  

gamesmith94134 04:37 07 Sep 11

August 29th, 2011

“Gordon Brown had a rule that balanced the budget "over the cycle"; when things got tough, he simply redefined the cycle.”

Each would revive itself with its eco system or the economical system, China would surpass America in the economical comparison in term of its consumption and growth. However, the income of each individuals are compared, American would still way ahead by GDP per capita since the population varies. There are 150,000 American bus driver earns more than 2 million Chinese bus drivers under the scope of consumption and it allowance of growth or population to land use.

If the compatible skill makes the equal pay, it only applies to the same development and environment. A $52,000 American Bus driver is not a parasite in San Francisco, since other labors earns comparatively within its range. But, a $52,000 Chinese driver in Guangzhou sounds excessive in the eyes of most Chinese.

It is way out of balance. Would you trust a Chinese bus driver making $1600 in giving you a ride in San Francisco? I think of how he is going to kill me at his wages because I jeopardize his life with my cycle. Wouldn’t you think so?

May the Buddha bless you?