As the "New Economy" Crashes, to What Degree Will Mainstream Economists Change Their Stripes?

By Mark Engler, Dollars and Sense. Posted January 3, 2009.

Sachs is at his best when he takes up some of the grit of political polemics, like when he blasts the religious right and the Bush administration for undermining U.N. family planning efforts shown to effectively empower women, promote reproductive health, and curb runaway population growth. But lobbyists and special interests are too seldom found in Sachs’ account of political decision-making. Rather, he presents bad policies as the result of “ the declining sense of global responsibility felt by U.S. politicians” —something that can presumably be remedied by his impassioned argumentation, his many charts, his appeals to long-term self-interest, and his quotations from John F. Kennedy.

Digging Deeper

As global markets weather a new period of turmoil and instability, Sachs’ ultimate confidence in the world economy’s abundance will fail to comfort many. Whereas Sachs dismisses concerns about peak oil on the grounds that “[w]e might run out of conventional petroleum in a few decades, but we have centuries left of coal and other nonconventional fossil fuels, such as tar sands and oil shale”—which new technology, of course, will allow us to effectively exploit—there is no shortage of analysis suggesting that limits on natural resources are real and that the consequences are dire. Likewise, there are ample observers of capitalism’s recurrent downturns who will note that the unfettered market is not just limited in its ability to do good, as Sachs would have it. It can also do ill, creating crises—financial and environmental—virulent enough to raise serious doubt about neoliberalism’s sustainability.

While global capitalism itself may be adaptable enough to survive the demise of its most recent laissez-faire incarnation, the transition will mean real pain for people across the globe. This will be felt by the millions of working people in advanced industrial nations with bad credit and stagnant wages who now face foreclosure on their homes. And it will likely be felt by poor in global South as well—those who receive neither enough aid nor enough income to escape hunger and disease. These people will be denied because countries that are clashing over oil resources and adopting beggar-thy-neighbor economic policies in an attempt to soften the downturn at home are those least likely to engage in Sachs’ cooperative, multilateral campaign to end poverty.

That a reinvigorated charity drive will not suffice to solve global economic problems is almost certain. The more difficult question is whether the financial and environmental problems neoliberalism has created might also thwart Ha-Joon Chang’s strategy of neo-Keynesian, neo-developmentalist engagement with the global economy. We must ask whether there is still space for more countries to replicate the economic success of past winners in a world of peak oil, global warming, and geopolitical instability—or whether these challenges will demand a more creative and thorough-going set of changes for an international order that, in a time of crisis, is rapidly being made obsolete.

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Mark Engler, a writer based in New York City, is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, 2008). He can be reached via DemocracyUprising.com.

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