Comments 30

Sustainable Development Economics

Nov 25, 2014 Jeffrey D. Sachs

Free-market and Keynesian approaches dominate today’s economic debates. Yet neither approach is delivering good results, underscoring the need for a new Sustainable Development Economics, with governments promoting new types of investments.

PARIS – Two schools of thought tend to dominate today’s economic debates. According to free-market economists, governments should cut taxes, reduce regulations, reform labor laws, and then get out of the way to let consumers consume and producers create jobs. According to Keynesian economics, governments should boost total demand through quantitative easing and fiscal stimulus. Yet neither approach is delivering good results. We need a new Sustainable Development Economics, with governments promoting new types of investments.

Free-market economics leads to great outcomes for the rich, but pretty miserable outcomes for everyone else. Governments in the United States and parts of Europe are cutting back on social spending, job creation, infrastructure investment, and job training because the rich bosses who pay for politicians’ election campaigns are doing very well for themselves, even as the societies around them are crumbling.

Yet Keynesian solutions – easy money and large budget deficits – have also fallen far short of their promised results. Many governments tried stimulus spending after the 2008 financial crisis. After all, most politicians love to spend money they don’t have. Yet the short-term boost failed in two big ways.

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Jeffrey D. Sachs

Writing for PS since 1995
292 Commentaries

Jeffrey D. Sachs, Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, is Director of Columbia’s Center for Sustainable Development and of the UN Sustainable Development Solutions Network. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, Building the New American Economy, and most recently, A New Foreign Policy: Beyond American Exceptionalism.

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0 Comments on this paragraph, 32 in all 32 Comments on this article

John Brian Shannon Jan 13, 2015

Hi Jeffrey,

“The boom, not the slump, is the right time for austerity at the Treasury.” - John Maynard Keynes (1937) Collected Writings

We know that when governments spend, that money goes out into the economy and travels around, and everywhere it goes (almost), it gets taxed -- so much so -- that whatever the original stimulus amount, all of it will be recouped via taxation within 11 years (it used to be 15 years, now it's 11 years, or less).

Therefore, with a time lag of 11 years, whatever stimulus money has been placed in the economy, will be returned in full to (the IRS, a different branch of) the government.

But not only will the 'principal' be returned in full within that time frame, while the money was let out it contributed to the overall economy, and if sufficient stimulus was injected into the economy (early enough) at the onset of recession, it may well have contributed mightily to the macro economy.

Not to mention dramatically improving the lives of hundreds of thousands, perhaps millions of citizens (who might otherwise have found themselves unemployed for the duration of the recession).

'Getting all of the money back' after 11 years is only one small part of stimulus spending. Keeping, and even adding momentum to the economy and positively affecting the lives of huge numbers of people, is what keeps a country vibrant and patriotic.

It's been said that, "You can't eat GDP," and for certain, that's the truth. What really counts, is using money to further national goals in the largest possible context.

Money was invented to serve people, not the other way around.

Your work showing the productivity difference between those in energy poverty and those recently released from energy poverty, make a compelling case for stimulus as a way to cause money to serve people, while contributing efficiently to GDP. (Win-Win)

It's certainly gratifying to see money at work for real human beings, and adding so much value to societies, as opposed to money that just sits collecting interest (or whatever form of appreciation) and producing nothing tangible.

Generously boosting the economy at the onset of recession (the earlier the better) has been proven again and again.

But unrestrained spending during boom times appears to cause a loss of fiscal discipline which in turn, causes other problems such as accountability issues.

I still say that a flat income tax for everyone who earns over $25,000./yr is the best way to reduce frictions between socio-economic groups in a society and (bonus) works to keep the government honest and accountable. And plenty of stimulus at the earliest onset of recession, with austerity mandatory beginning 24 months after the recession has been declared over.

Best regards, JBS
http://johnbrianshannon.com/2015/01/11/how-new-energy-policy-save-eu/
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Jeffrey D. Sachs Dec 24, 2014

Brad Delong insists on the reliability of low-cost, high-impact fiscal multipliers. That seems very far-fetched. The original US stimulus in 2009-10 underperformed the CBO growth forecasts at the time. SInce 2012 the sharp US fiscal contraction has been accompanied by accelerating and now high growth and falling unemployment, not the "depression" that Krugman constantly warned about. Other countries also abandoned the Keynesian approach in the past 3 years, either because they hit capital-market constraints or because they decided that the build-up of public debt was simply not worth the meager (if any) stimulus results.

Yes, I've followed the events carefully, and most countries and certainly the US have backed away from the belief in low-cost and highly reliable large Keynesian multipliers.

I should add that I have long favored higher, not lower, government investments, but have done so from a long-term growth and equity perspective, not short-term stimulus point of view. The (so-called) "Keynesian" emphasis on stimulus distracted the US political process badly from long-term investment planning and finance, and led to the easy and repeated resort (even by the so-called progressives!) to tax cuts rather than the long-term tax increases that we really need for long-term growth, social equity, and environmental sustainability.

Finally, let me add that so-called Keynesianism has very little to do with the real Keynes, as I'm sure that Brad DeLong, an avid reader of economic history, knows very well. Keynes was far more clever than to believe in simplistic stable multipliers, and he advocated budget balance over the cycle (as is well known), and did not himself advocate fiscal expansion in the UK once the unemployment rate had declined to (around) 11 percent in 1936-7.
- Rami Kiwan Dec 24, 2014
  
  The stimulus worked, especially in the U.S. Had the ARRA not generate the results initially expected, because it was simply a far-from-enough package: $787bn for an economy of $16tr. As Krugman argued, we needed a three times as big stimulus package.
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J. Bradford DeLong Dec 24, 2014

Has Jeffrey Sachs not followed the literature on the surprisingly large effectiveness of fiscal stimulus post-2008 and on the about-as-expected effectiveness of quantitative easing? Or is he just ignoring it?

Brad DeLong
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srinivasan gopalan Dec 17, 2014

The article has not come a day too soon when country after country has been vacting its rightful space for public investment and instead preferring the markets to determine the relative allocative efficiency of sparse or in many cases scarce resources. Though one is averse to draw lessons from communist giants of the Middle kingdom or for that matter under the pugilistic Putin of present-day Russia, a pale shadow of the mighty USSR with its motley satellite countries in tow, one cannot but draw the obvious conclusion that at the end of the day it was the public sector investment merrily injected by the State that was responsible for development of modern infrastructure in the case of Chna and a bearable edifice of infrastructure in Russia today. It is sad that countries like India which always followed Buddha's famous middle -path of marrying the virtues of both in the form of promoting joint sector today stands opposed to funnelling funds for public sector. The private sector is not in a mood to invest funds as they find the borrowing route to set up and expand operations not sustainable under the extant dear money policy of the apex bank! The unpleasant upshot is a big logjam and a rickety infrastructure that cries in dire need of repair, renovation and in many cases even maintenance to service millions of users! The time has come for all level-headed people to follow the model that best suited them in the past instead of blindly aping some ideologies that leave everything to free market canons. On what basis, as the poet Hazelit brilliantly wrote centuries ago, that "when we see nothing but progress behind us, are we to expect nothing but disaster before us??". One need not be held hostage permanently to new fancies that may not pass the test of contemporary and compelling circumstances that the world is noe uniquely privy to. G.Srinivasan, Journalist, New Delhi.
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Mr Econotarian Dec 3, 2014

What scientific data do we have to show actual value of government investments? I believe it is likely that some level of roads, power, and sewers are needed, but one has to prove the marginal value of enhanced investment beyond the basics.
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Mr Econotarian Dec 3, 2014

When comparing China and US government spending, it should be kept in mind that the Chinese government only spends 25% of China GDP, whereas the US government spends 40% of GDP. The French government spends 57% of GDP, so in reality there is no austerity there. Switzerland's government spends only 34% of GDP, and has excellent infrastructure.

In reality, the US governments (federal, state & local) spend together about a trillion dollars a year on each of pensions, health care, education, and defense, with very little going to actual infrastructure investment.
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Mr Econotarian Dec 3, 2014

Regarding "Free-market economics leads to great outcomes for the rich, but pretty miserable outcomes for everyone else", are you arguing that the people in China were better off under Mao when 20 million people starved to death under a completely government-run economy, or are they better today when freer markets have been allowed to grow in China?
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Wayne Davidson Nov 30, 2014

Governments and by default, economists and their understanding of risk in complex systems is at best, retrospective, never predictive. Unless the environmental and consequential costs of CARBON are factored into the economic equation the ultimate cost of retrospective consequence will impoverish habituated humans. RW

"The single greatest intellectual obstacle to environmental realism, as apposed to practical difficulty, is the myopia of most professional economists. The flaw is especially noticeable in microeconomics, which treats the patterns of choices made by individual consumers.
The weakness of economics is most worrisome, however, in its general failure to incorporate the environment."
Edward o Wilson
- Douglas Costello Dec 1, 2014
  
  You could say that the economists have doubled down on their adherence to the belief that everyone runs optimisation calculations in the mind when making everyday decisions.
  
  Most people respond emotionally hence the growing value of behavioural economics but the economists don't want to know about why we make apparently irrational decisions. Only irrational to them not to the decision maker.
  
  Could we benefit more from requiring government economists (treasury, finance) to have a minimum of ten years work experience in the real (market place) world where almost everyone except them and politicians actually resides.
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Greg Richardson Nov 30, 2014

The USA's loss of its AAA standing had less to do with "easy money and large budget deficits" than with the on-going tussles between the country's Democratic President and Republican Congress over debt limits and everything else. Its Debt ratios are hardly worse than those of most "AAA" countries.
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michael rafferty Nov 30, 2014

This is an amazing piece, not so much about what it says, but because the person who says it was the chief advocate of shock therapy, a strategy that was about letting markets rip, and let the costs of that fall where they may. That Prof. Sachs has re-discovered planning is welcome, but perhaps he might, for proper disclosure, have written about the failed project of un=planning.
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Avraam Dectis Nov 30, 2014

.
Good point about China. They put a far larger share of GDP into investment and their GDP growth rate is usually at least twice ours.

Also it should be mentioned that the Chinese do not allow stalker gangs to openly poison people.

These two comments are a bit of a stretch:
1) "Keynesians want governments to think only about the short run"
2) "Nor do Keynesians think through the kinds of public investments that are needed; for them, spending is spending."
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Michael Warhurst Nov 29, 2014

The answer is in North Dakota and Germany. Germany, which out exported China. In Germany 70% of the banking is done by MUNICIPALLY OWNED banks which bring financial help to local businesses which grow local economies and create local jobs and employment. There is only one state in the USA which has no debt, no deficit, strong public education, low unemployment etc. North Dakota! There is also only one American state which owns its own bank - no surprise its North Dakota! In 1935 The Bank of Canada was created which Canadians own and the Canadian Finance Minister holds ALL of the shares. The Bank of Canada immediately began creating debt free money for the government to spend DEBT FREE into the economy creating jobs building schools, hospitals, roads, railroads, highways, ports, etc. As a result of government created money spent into the economy debt free creating demand and private jobs and resulting greater consumer demand, Canada exited the Great Depression in 1937 five (5) years ahead of the USA and Britain who have private for profit corporations as their central banks and who needed WW2 to finally exit the depression. And who fell into recession in the 1950's as a result of having to pay back their WW2 debts to private for profit bank corporations like the Federal Reserve. Inflation! inflation! was the chant from the corporate economists; higher interest rates! higher interest rates! cried the greedy self interested Wall Street creatures.
There are two ways to take money out of an economy which experiences inflationary trouble. Higher interest rates which suck money from the middle class and the Wall Street hated option of taxation of those sucking up the money and wealth. If the Constitutionally mandated Treasury was creating money for the U.S. Government to spend debt free into the economy and the only taxation was for the purpose of riding the economy of any dangerous inflation. If the U.S. Constitution was being followed and the U.S. Treasury was creating money for governments to spend into the economy and only using taxation as a brake on dangerous inflation; the U.S.A. would be the envy of the world instead of the most indebted and financially crippled big government in the history of the world!! Private money creation for a whole economy creates debt which can never be repaid because every loan which gets money into the economy must be repaid with interest, so there will never be enough money to repay the debt plus the interest as all new money is created through debt! PPP in the modern history of money has always resulted in heavy government losses because the private corporate partners take the profits through management fees etc. etc. and can simply declare bankruptcy while the government of the U.S.A. can never just declare bankruptcy without crippling social chaos. 99% of the PPP projects in Canada have resulted in huge government losses through both expenses and lost income while corporate partners get all the fat!
Return to Treasury created money, and tax inflation away. This is the only solution for which the U.S.A has absolute historical proof of its superiority. Lincoln had the Treasury create money for his Army of the North, while Davis borrowed money from Europe for the Army of the South. Well we know how that turned out! Lincoln demonstrated the huge superiority of government creating money and spending it into the economy versus debt created money. The South was forced to sell almost all of it's assets at fire-sale prices to 'carpet-bagger bankers' and in some places has only recently economically recovered and others have never recovered.
Those who control money control democratic governments - which eliminates the democracy part! Therefore the only democratically responsible solution is for democratic governments to create money and spend into the economy; otherwise it's a dictatorship of the 5% over the 95%!
Republicans, like the good minions they are, are secretly attempting to get 35 States to sign bills which outlaw States from owning banks; because Wall Street wants to bring North Dakota into debt slavery like all of the other States, and destroy the only proof that publicly owned government run money creation is the only solution! Markets always control prices of goods and services, their single and only legitimate economic function, and taxation takes care of excessive money supply. Most importantly, the ruinous problem of democracy always being crippled by privately held government debt, is eliminated.
- Mr Econotarian Dec 3, 2014
  
  I would suggest that the recent economic performance of North Dakota may be better explained by the prolific fracked Bakken oil fields than any state level bank.
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Giorgio Di Maio Nov 29, 2014

"Even the US lost its AAA standing."

Yes, but only because of the "fiscal cliff" debate, not because the government debt soared.
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Rajnish W Nov 28, 2014

The article is a fantastic analysis of the dilemma the worlds eco system faces. Here are some thoughts for the future..

The future is PPP and I say this because it brings the benefits of both systems to play. The thing we all have to work at is the method to get the best out of PPP. It is the missing Link, the in-between ethos which could run our infrastructure and several monopolistic industries.

Most nations have already tried their hand at such partnerships, beginning with Germany UK and the US during the Wars when it was private enterprise that was harnessed to deliver Guns, Jeeps and Tanks. To cope with inefficiencies of the Public Sector many Railways and Utilities have been privatised in Europe. Governments prod and nudge the enterprise in myriad ways with incentives, subsidies, taxes and penalties essentially to focus enterprise in a certain direction. But these are methods that work with a huge wasteage of resources. I reckon we need to evolve methods of creating synergy and for best results the methods need necessarily to be democratic.

The passion created during war, the sense of pride created in doing it for your country was man made! Created and fostered, for a manmade boundary line! An awareness of the collective good can take its place. A sense of pride in doing it for mankind, the beginnings of which are already upon us in the climate change debate, is a healthy beginning. It is growingly evident that natural resources require collective decisions larger than our boundaries will allow. Just as it was evident in the creation of the Bretton Woods institutions that a body beyond the nation state must exist.

Public Private Partnerships need necessarily to evolve from a realisation that our current methods arent working and that we need to contribute to make our ecosyatem whole and complete.
UK and Australia have many instances of cultural adjustment anomalies and so does India... India is debating whether it needs a Planning Commission which seems to have outlived its purpose.
The PPP model is painful as it brings diametrically opposite realms together, but that is the beauty of it when it succeeds. India has two iconic tales of success in Delhis power utilities which now run as joint ventures in 51 percent private 49 percent public mode from 2002 and Delhi has no power shortages anymore! Nobody wanted to lose their secure govt jobs and it took a decade for a new culture to evolve, it is largely the same people who run these today and produce these great results.
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Trissia Wijaya Nov 27, 2014

This indeed what happening currently in Indonesia under President Joko Widodo, while democracy and economy are intend to be incompatible each other. Government ambitious desire in boosting investment, especially for developing infrastructure by cutting fuel subsidy, is undoubtedly such a big deal. It is caused by the inadequate knowledge among human resources whom are so favored with "Keynesian" and even put misconception toward that point. They love the instant result and always strive for instant development too, while the democracy is ultimately used for legitimate the actions. Sustainable development economics considerably for developing countries to reduce the gap of income and pursue people's welfare. Compared with Singapore, I think that Singapore economy model is the best example for answering Asia countries' need. Their advanced economic has been built by both side effort, comprises government and their people who fueled with the spirit of enterpreneurship to support each other. Once Lee Kuan Yew ever said that the Singaporean code of conduct is not democracy, but the disciplinity. Despite of his "dictatorship", the disciplinity has been flourshing Singapore economic and increasing Singaporean's competencies. On the other word, the six keys of capital goods, Singapore has.
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David Kelland Nov 27, 2014

I'm sitting here trying to figure out why the US losing its AAA rating (from an agency that didn't know diamonds from coal back in 2006), which caused ten-year yields to drop 50-100 basis points, mattered to our economy.
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jagjeet sinha Nov 26, 2014

In a world where power equilibrium - created by mutually assured destruction - the only way to emerge as the winner is by ensuring State Capitalism intervention within respective spheres. Free market forces of the Private Sector are tactical playgrounds, with Strategic Sector driven by State Capitalism. What is Strategic and what is Tactical changes with time, development, and results. The Anglosphere scored over Europe not by confrontation but by building its sphere, driven by The State where needed. The Cold War was won similarly. The looming confrontation with China seems to fit the pattern where different spheres compete by ensuring Victory based on strengthening from within. Professor Jeffrey Sachs in emphasizing the role of State Capitalism in areas considered Strategic - not Tactical - is in synch with Professor Joseph Stiglitz elsewhere who cites EBOLA as example where Only The State - and Multilateral - efforts can deliver. The twin voices of the two JS perhaps reiterating the obvious that had got obfuscated due the Private Sector appearing to be more efficient and successful than the Public Sector. The twin Nobel voices are timely reminders of the need for funding State Capitalism in sectors that remain Strategic in confrontation in the 21 century - that are different from those in Century 20/19/18/17/16.
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Joshua Ioji Konov Nov 26, 2014

All correct but no guidance how such system of economics would self-adjust or be artificially adjusted so no bubbles or high-inflation occur? The system is much more complex than good wishes.
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Leo Arouet Nov 26, 2014

Es un artículo interesante. Pero dejó algo fuera de lugar que el bienestar de las personas sólo se deban a los diversos tipos de capitales. Colocar esto es reducir los problemas del mundo a la economía, dejando de lado la ética y los valores que se necesitan para tener un mundo mejor. Se puede invertir en infraestructura, pero sin la ética éstas no funcionan. Ya que toda infraestructura es dirigida por un hombre. Por ejemplo, hablemos de la construcción de un puerto. Para la construcción se concesiona a una empresa, la cual en vez de optar por la calidad del puerto, optará por su visión economicista de la vida, y éste tratará de ahorrar costos en detrimento de la infraestructura.

También si la corrupción no se combate de nada sirve todas los demás capitales. Entonces, nos damos cuenta como sucede en Ferguson que el problema no es tanto, los capitales sino la ética. De aquello que impide ver qué está bien o qué está mal.

Estas cumbres del 2015 son importantísimas hay que llegar a un acuerdo sobre el desarrollo sostenible, que incluya inclusión social, ética, justicia y cuidado ambiental. Todos ños tipos de capitales importan; pero si no hay la ética ni un capital social fuerte, en sentido positivo, no podremos lograr los objetivos que nos vamos a proponer este 2015.
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Penelope Bell Nov 26, 2014

Under the current Western systems, Investment surely needs to be led by the private sector. How else is a government financed? ... but government must then pick up the momentum in a timely manner to support that momentum with infrastructure to keep it going - so it becomes a circulatory economy - the one inter-dependent upon the other. I believe you cannot divorce one from the other.

In our Western democracies when governments run out of money and cannot afford to spend on infrastructure the economy stalls. If the private sector runs out of money nothing can be financed and we see an even greater stalling. The current problem surely is spiraling Western debt with Keynesian deficit spending gone mad. It is destroying Western economies, with all developed nations showing flat growth since the GFC. Developed economies have run out of steam.

We must ask ourselves is perpetual growth the right model? How much growth can our planet sustain? There must come a time when it can give no more. I think we have already passed that point. Resources are depleting faster than replacement rates, ecosystems already fragile, fragmenting under the strain. I was disappointed that the G20's primary agenda was growth.

Surely a different model, a stable and sustainable economic model based on static growth is the imperative, such as a steady static economy? Sustainable with birthrates level pegged to death rates. Over-population is destroying the very eco-systems we need for our survival and not one government is addressing this - perhaps hoping the reality of depleted resources, of a barren wasteland, of global water shortages, of empty factories with no raw materials to process will be something that won't affect them in their lifetime. Maybe it won't, but what kind of a legacy is that to leave to their children and grandchildren? I see this as one massive 'meism' - a heinous and agregious travesty.

Why wait until it is too late and economies are so depleted, none can afford to restructure, compelled instead to chase their tails in a downward spiral in a survival bid, only to descend to an inevitable death? A highly plausible and credible model for a sustainable and steady economy has been well researched and analysed by CASSE - The Centre for The Advancement of a Steady State Economy. Top drawer, world class iluminaries have worked on the model which has been well-received. You can read about CASSE's model here - http://steadystate.org
- William Cash Nov 30, 2014
  
  Do you really believe money comes from the private sector? How do you think governments start? The government creates the money and puts it into the private sector, not vice versa.
  We have a fiat system and the government can create as much money as it needs and is only limited by inflation.
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Procyon Mukherjee Nov 26, 2014

How different the world is with investor cohorts in S&P 500 buying back their own stocks with easy debt, the share buy-back program has touched almost $1 Trillion in 2014 alone; Bloomberg mentions that 95% of all profits have gone into this program (http://www.bloomberg.com/news/2014-10-06/s-p-500-companies-spend-almost-all-profits-on-buybacks-payouts.html) .
This is an extreme example of investors taking away entire surplus which otherwise could have gone into expanding and growing products and markets and capacity. This is a lopsided view of the world where we buy our bright futures without actually investing in the things that would create that future; whether or not this is sustainable is another matter.
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Gimel Wicaksono Nov 26, 2014

Moving toward a central planner agency is not a good way to solve the problem of sustainability. It has a questionable point when Prof. Sachs pointed out that the government should lay ground works by providing suitable public investment to attract more private investment. I remember as one of the residents in one developing country, we got used to the project of building streets to "no where", installing unnecessary regulation, boosting the wrong side of industry and putting more pressure to industries by increasing the minimum wage above the affordable ones, creating more tense than peace. Well, under "well behaved" government which is assumed to be able to plan appropriately then maybe the premise of more public investment would be suitable and for a country which lacks those public investment severely that may be appropriate. But for a country that already passed its early development stage, the problem is more complicated and missallocation of resources is rampant and likewise the corruption. In that case, private investment might be difficult to attract.
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Michael Public Nov 25, 2014

Ok, good - we have identified what we need to have a good society - lets now identify why we are for the most part going in the opposite directions. This is a much harder thing to do because when done honestly it leads to the conclusion that political, economic and cultural structures must be torn down and rebuilt anew and no economist can say that when their salary flows from those who must protect the current establishment. Good article, but steers clear of the hard discussion.
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Ken Presting Nov 25, 2014

Prof. Sachs is one of my favorite thinkers today, and I commend his list of six forms of capital. But it is a mistake to see Keynesian economics as an opponent of sustainability.

Keynes' concern was to charge the public sector with the ultimate responsibility to minimize unemployment. This is necessary because the private sector quite naturally wants to minimize its labor costs. It is crucial to understand that humanism is the foundation of Keynesianism.

Sachs is taking cheap shots to blame Keynesian policies for the USA losing its AAA bond rating or for corporations hoarding profits instead of investing or raising wages. Keynesians have no objections to public investment in infrastructure, to labor unions organizing for higher wages, or to taxing corporate profits. The standard slogan is "raise taxes during the recovery, not during the recession."

I would argue that there is no opposition at all between Keynesian economics and Sachs' vision of sustainable development. He is correct to emphasize the need for sustainability - that issue was unknown in Keynes' own time. But if Keynes were writing today, I'm sure he would be on Sachs' side too.
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Aljaž Plevnik Nov 25, 2014

If we look at countries like Italy, Slovenia, Croatia or Greece we find a big problem. Those countries have a huge debt. They simpy do not have money for big infrastructure programes. Even if they have money the next big problem is crony capitalism. So in my opinion the first thing is to restructure the debt. Second is smart privatisation and building a strong and independent judicary sistem.
Only when public finances are in order we can have huge infrastructure project wih public money.
Another big problem is that too much money is spend on retirement pension programs.
Most of EU countries can not do it alone. We need a more active role from ECB. On one side Germany should spend more money on infrastructure programs because it can. But southern countries must first fix their finances.
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John Brian Shannon Nov 25, 2014

Hi Jeffrey,
A third school of thought is rarely discussed these days, yet has a wonderful track record of success during good times and bad.

I'm talking, of course, about the Nordic economic model, where (among other things) the whole system is geared around making a success of each individual -- instead of the "Greed is good." mantra of Gordon Gekko.

That is one end of the spectrum which ultimately plays out where the 1 percent say, "We've got a good racket going here, to hell with the other 99 percent."

While the other end of the spectrum was extant in the former Soviet Union, where the most common phrase heard from workers in those days was, "As long as they pretend to pay us, we will pretend to work." -- Which no doubt hastened the fall of that system due to the resultant low productivity of workers.

Yet, who could blame those workers?

Both Gordon Gekko's U.S.A. and the Soviet Union de-incentivized workers to the point that the USSR eventually lost all productivity and good will towards creating a bigger and better overall economy -- at least from the workers'/citizens perspective.

In Norway, all 'of age' residents of the country whether they're citizens of Norway or not, are automatically eligible for a full university or vocational education at no charge for tuition to the student.

Some might say that this is a grossly expensive way to improve a society.

But anything is nothing, unless you can compare it to something.

Let's compare Norway's free university education system and corresponding extremely low crime rate -- to the university education/crime rate (yes, completely and profoundly related to education) in the U.S.A. which has the highest incarceration rate in the world, more handgun murders than the rest of the world combined, and more serious offenders than any other country, yet obtaining a university education is very difficult these days, except for the manor born, or at least, the upper middle class.

Gone are the days when a large middle class could afford tuition, and gone to Asia are all those jobs that would allow lower income students the opportunity to 'work their way through school' in order to obtain a degree.

The emphasis in both the former USSR and the U.S.A. is on anything but the outcomes for individuals, rather in the former, all of the emphasis was put on overall economic output (and screw the workers), while in the latter, all of the emphasis is on profit/productivity (and screw the workers).

In either case, the workforce is treated with the least amount of importance possible, in the quest for a larger national goal. Yet one failed and the other is now failing.

By putting workers at the cornerstone of national success, as Norway has done (not only with free university or vocational education) and other countries, such as Sweden and Germany, graduate and doctoral education levels per capita are very high compared to other nations, while crime rates are almost non-existent as compared to other nations.

Universal health care/dental care, government funded daycare, generous and mandatory maternity leave and job-sharing schemes in those countries, allow workers and families to work hard and succeed, and yet, have a life outside of the workplace.

Better pay and benefits, better education, a real hope of attaining a 'real life' worth living and an infinitely safer society, all combine to raise productivity, profits and overall economic success in countries using the Nordic model, or in the case of Germany a modified capitalist model.

Ideology is nothing. Success is everything. When we see problems in our own society, we should be looking for a working model elsewhere to emulate. Of course it could be scaled and adapted to North America.

Rather than continue to look through the wrong end of the telescope, we should be looking at how we can incentivize workers and their families, not de-incentivize them as we've been increasingly doing in recent decades.

McJobs and shrinking benefits is us simply daring our workforce to say to us, "As long as they pretend to pay us, we will pretend to work."

It's not cosmetic, it's systemic. We need to fundamentally address how we treat the cornerstone of our economic system, the individual workers and their families or our system too will one day face collapse from within.

When the workers no longer care, it will already be too late.

Cheers, JBS

Read here:
http://johnbrianshannon.com/2014/09/04/economy-if-norway-can-do-this-why-cant-every-country/
and:
http://johnbrianshannon.com/2014/09/08/economy-can-switzerland-amazing-success-story-be-exported/
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Rentz Hilyer Nov 25, 2014

With a fundamental conflict between economic growth and environmental protection, and since "Without natural capital, ... the other kinds of capital are easily lost," consider that the costs of economic growth may now be exceeding the benefits. Economic growth is failing to provide increased quality of life for the vast majority in the developed world. Long-range government investment strategies are imperative, but instead of promoting growth, could focus on developing a new economic system for our now full world, such as a steady state economy, with stable population and per capita consumption.

http://steadystate.org
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