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Transcript
Rob Johnson:
I’m here with a fellow Detroit veteran, Jeffrey Sachs, who has been on with us before, but is one of the leading lights all around the world and has been for many years. I always pay tribute to my good friends the Romels, because when I was an undergraduate at MIT they turned me on to this brilliant graduate student who was a friend of their family, and I’ve kept track ever since. Anyway, Jeff is the Director of the Institute for Sustainable Development at Columbia University. And he’s also the head of a sustainable development solutions program or initiative at the United Nations. Jeff, thanks for being with me again.
Jeffrey Sachs:
It’s great to be with you. And yes, fun to be fellow Detroiters.
Rob Johnson:
Yeah. What I always say is we were canaries in the coal mine. Because as children, we got to see a cauldron of unsustainability. I always tell the joke that when I got to MIT, I took my first economics course and the guy was in microeconomics. The guy said something about equilibrium, and I raised my hand. I was not trying to be a jerk. And I said, “Isn’t that like assuming a happy ending?” Because we had gone through the race riots, the STRESS forces, anti-war movement, all these things and Detroit was a cauldron. And a lot I think of both of our parents friends were under the pressure of the decline of Detroit somewhat after 1970. And we saw what you might call diseases of despair in an earlier incarnation.
And so I think now there’s a whole lot of stress, Maybe that’s why you have such a clear vision. Is that your training from the streets of Detroit set you on the right course. Anyway, let’s talk a little bit about a number of things. So recently I saw you on the BBC talking about US-China relations And took quite a bit of issue with how it was being framed. And I know you’ve written pieces, Project Syndicate in February was an extraordinary piece. We are turning a corner. Climate change is now in everyone’s awareness, it can’t be done without U.S. and Chinese collaboration. Let’s talk about what you think is mischaracterized in the potential for U.S. and China to work together.
Jeffrey Sachs:
I think the basic point is we need a world in which cooperation is the dominant mode, whether that’s to fight a pandemic or to fight climate change or to promote the development. We can’t do this in a divided world. And yet the tensions between the U.S. and China have been rising, I think, dangerously so and I believe unnecessarily so. So that puts me a bit at odds with the a lot of people in the United States. I would say most of the political class at this point which takes it more or less for granted that China’s an enemy, at best will have harsh, competitive relations could get worse. I view all of that as wrong-spirited, wrongheaded, bad analysis contrary to my own eyes and ears over the past 40 years.
I’ve been going to China since 1981. Typically a couple of times a year at a minimum often several times a year. I’ve been all over China for decades visiting remote areas, visiting western China, Xinjiang, visiting Tibet, visiting Yunnan, visiting the coastal regions. And I do not see China as the enemy, I do not see China as the hostile force out to undermine U.S. well-being, which is actually even taken as an article of faith in our formal foreign policy documents that China’s out to undermine the United States and undermine the world. I think that this is absolutely a dangerous perspective. And by the way if you believe it, the solution is sit down and negotiate and talk to the other side and solve problems.
But not this kind of name-calling, shouting through the press. Of course it was even more insane when we had a president on Twitter, because we should not have politicians on Twitter. I’m not sure we should have Twitter at all frankly, but we should not be doing foreign policy by tweets. We should be discussing, solving, brainstorming, presenting evidence, analyzing but not just name-calling, unilateral sanctions attacking Chinese companies. warning as our officials do everywhere in the world, “Don’t you dare buy from Huawei. This will cause a great damage to your relations with the United States.” We’re making threats all over the world that aim to really stop China’s continued economic and technological development.
I think it’s disgusting and stupid, frankly. Those are the two adjectives that I would use. They do not comport with our well-being with our national needs and certainly not with the world’s needs. That’s what I called out. There aren’t too many voices in the United States unfortunately calling for balance. We have both political parties that are anti-China. The Biden administration just about every time it opens its mouth about China’s negative. Trump was crazy so that was erratic, but Biden is not positive, not even neutral and not so far saying, “Let’s sit down and negotiate.” In fact the formal position is we’re not going to have a strategic dialogue with China because we can’t trust them and we don’t come out well in such strategic discussions. That’s always a mistake. President Kennedy said, “Let us never negotiate out of fear but let us never fear to negotiate.” That is the right position. And the position is sit down and talk, because so much is a misunderstanding, so much is biased thinking, so much is lack of perspective that unless we talk we can’t understand each other and we can’t solve problems.
Rob Johnson:
I sense what you might call echoes hang over habit structure from the Cold War Where the United States and Soviet Union had very different ideas for the structure of the system. And we’re usually what I might call dusting off that playbook and bringing it back out. But you yourself said in your Project Syndicate article I recall, look at Xi Jinping speeches at the World Economic Forum. He’s not talking about an alternative system to market, how do I say? market capitalism or, I guess, there’s different things related to state ownership and others, but he’s talking about participating in a globalized market system.
Jeffrey Sachs:
Yeah. And I think what he’s talking about by the way most importantly is a multilateral system of international law. So even before we get to the specifics of economic institutions, we have a UN Charter, we have a Universal Declaration of Human Rights. Let’s use those instruments as our guiding principles and let’s operate within a multilateral framework. Now Xi Jingping says that’s what they want to do, I would put it to the test. The U.S. is the one that walked out of all the agreements that doesn’t abide by international agreements. We’re the one that say, “No, no, we’re not going to be part of the International Criminal Court.” We’re the ones that is not a party to the Convention on Biological Diversity, we’re not a signatory of the International Covenant of Economic, Social and Cultural Rights.
There are so many parts of international law that we don’t abide by, because a lot of United States action really is in the Trump mindset. He put it vulgarly and crudely, but it is, “No one’s going to tell us what to do. Not the UN, not anyone else.” As if law is some kind of punishment. Well if you think that you’re almighty then you say, “I don’t want to be constrained by international law.” And that has been a U.S. view of the U.S. right-wing for a long time. But I think China actually wants international law, because they see that with international law they wouldn’t be held back they would be responsible for their own development. I think that they are proud and believers that if they have an international rule of law they’re going to thrive. I think that’s true too. It’s a very talented nation, a great civilization, a great history, a lot of catching up to do because of the horrible period under European and Japanese imperial pressure and war.
So China’s catching up, good. That’s what I would like to see in the world, countries overcoming a sorrowful past history that had a lot to do with the imperial dominance which was the 19th and 20th century experience up until the mid-century of the 20th century after World War II. And that’s not pernicious, that’s not against U.S. interests but it is pro-China interest. And my feeling is, that’s great. I want to see China develop, but American policymakers they’re horrified, oh, they’d be bigger than us. Well yeah, they have four times the population so of course China would be bigger than us. Oh, they would catch up in technology. Yeah, why not?
Capable people investing heavily in research and development. The idea that necessarily diminishes the United States is the kind of dangerous zero-sum thinking that will get us into a lot of trouble if we persist in that. And you’re right, Rob, that the playbook is the Cold War and there is a reading of the Cold War that, God, didn’t we do great. We went toe to toe with the Soviet Union and they ended up collapsing. That’s not how I read the Cold War, I read the Cold War as strongly unnecessary, extraordinarily dangerous, almost brought the world to annihilation. Annihilation, I’m not using the term casually. And it’s something that we should be trying to avoid desperately not to go back to that kind of danger which existed in that time.
Rob Johnson:
My acquaintance and recently partner in making a video Daniel Ellsberg, whose book The Doomsday Machine, talks about not just the bilateral conflict, but the burning of the upper atmosphere and the nuclear winter that can basically turn us into an ice age and destroy the food sources all over the earth.
Jeffrey Sachs:
No one has been more vivid, more correct, more perspicacious than Daniel Ellsberg about these risks. That’s a phenomenal book, The Doomsday Machine, but it’s based on a phenomenal history. He was assigned, as you know very well, as a RAND officer after being a brilliant student in the first days of game theory at Harvard. He was assigned to look at nuclear policy of the United States, and he came to the horrifying realization that we had a finger on not only on the button but on the button that would destroy the whole world.
And that our doctrine was just about any accident could trigger a full scale nuclear attack that by U.S. intelligence estimates would take out 700 million people or so, because it was going to be an attack to destroy the Soviet Union and China. Even if China wasn’t directly involved, why not? We should target them as well. And then as usual with the idiocy of our intelligence agencies, they didn’t understand any of the atmospheric dynamics and the physics that would have ended our lives too. So they had this idea, yeah, we’ll go kill 700 million people, why not? And then America will thrive instead of then we’ll all die together.
So that’s what Ellsberg realized. And as readers of that book learn, because it’s a stunningly interesting book, he was going to reveal this too but never got around to it after the Pentagon Papers. Because when he buried the secret documents about the nuclear policy they ended up in an avalanche, a local avalanche and probably in a waste dump or something else. But he never was able to recover the documents and ended up writing about them. And I actually want to go back to the opening of this interview, he’s another great Detroiter so we should remember that.
Rob Johnson:
That’s right. He went to Cranbrook.
Jeffrey Sachs:
Yeah. And-
Rob Johnson:
Absolutely. Yeah. He and I’ve talked about that. Daniel is fascinating because I think the story was that his brother buried the documents. They went with the Pentagon Papers first even though he thought this was really the challenge that he had to post. And brother, when people were snooping around and investigating, got out and buried things in what became a condominium development. And with all the landfill they lost all the papers. But that’s-
Jeffrey Sachs:
… Yes. Heavy rain washed away the papers apparently, so the brother-in-law was out there digging trying to find this crucial documents which they never recovered.
Rob Johnson:
Never found them. I had a very fortunate experience. When I was at MIT I pretty much finished my undergraduate work. so I took a lot of the graduate courses in arms control and disarmament and the application to game theory. But Bill Kauffman, George Rathmann, George Warina were my advisors. And I was a TA once for Bill Kaufman who put me in a cubicle. And one day he walked in and when he said, “You know I never told you this, but you’re sitting in Daniel Ellsberg’s desk.” And apparently that’s where he’d been when he had that experience as the Pentagon Papers were being released. He was a fellow at MIT for a short period of time.
Jeffrey Sachs:
You know, I started Harvard College in the fall of 72. And in those days, I don’t know if it’s true today, we were given a list of books to read before coming to the college and then faculty would give lectures to the students during the freshman week. And one of the books we were asked to read was Papers on the War by Ellsberg. And in that book, I think 1970 or 71, he has an essay called the Quagmire Myth and the Stalemate Machine, which is the single best analysis of the Vietnam debacle that anyone has written. It’s an astounding essay. And the point of the essay was that Lyndon Johnson knew, of course, that Vietnam wasn’t an unexpected quagmire. It was hopeless and it was a stalemate. And it meant hundreds of thousands of U.S. kids in the Vietnamese jungle and delta, and many dying and Johnson knew it was all hopeless.
But as Ellsberg explained the goal was just, don’t surrender past the next election. But there’s always a next election and so it was really the stalemate machine. And so Ellsberg showed a mode of thinking about foreign policy that started from the realization that our government lies, lies repeatedly, lies recklessly, lies deliberately, lies provably. Lyndon Johnson was an inveterate liar. And there are many tapes, of course, where he explains openly to Richard Long and to others, “Yeah, we can’t win this thing. I know that damn well. But I’m not going to get out because of what this would mean for national politics.” And we need really to get beyond this kind of governance where it’s based on lies because it’s not a game. It may seem like a very clever game to politicians, but the whole planet depends on us solving problems. And that’s true with China today. We need to sit down, analyze together, and work out solutions not play games.
Rob Johnson:
Yes. Well I reached to another friend of mine, Orville Schell, who wrote a book yours few years back called Wealth and Power with John Delury. And in that book he went to the same places you did, the Opium War, the Japanese invasion, and the woundedness of a national identity and the recovery of that as he said, “Many people in China will suppress their individuality if they think they are contributing to erasing what you might call eradicating that dark period of shame.” At the same time he talked about the United States with its big muscles, Cold War mindset, and wanting everyone to fold in and conform to their system. And he predicted that this would be a very rugged experience, this collaboration cooperation that both, I think, you and I see as necessary right now. Now I want to bring one other piece, one other ingredient.
Jeffrey Sachs:
It’s very interesting, Rob, if I might just say that it shows the very long shadow of history and of culture, and how it operates in ways we don’t even understand but it affects mindsets and perceptions of the world. Both stories in some way go back actually to the 15th century in China. China made, I think, the single worst economic policy mistake in the history of civilization in 1434 when the Mandarins in the Ming Empire decided to scrap the naval fleet of the famous admiral, Admiral Zheng He. Which at that point in the 1420s, and 1430s was traversing the Indian Ocean, long distance trade, great navigation capacity they would have discovered the Americas also, either around the
Rob Johnson:
Christopher Columbus would have been a small potato.
Jeffrey Sachs:
Exactly. It could have happened in the Pacific Ocean, Pacific Rim, it could have happened around the Cape of Good Hope but they scrapped it all. China really suffered heavily because of that. And then to skip over several centuries quickly, by the time the 19th century came around China didn’t realize what was happening with the Scientific Revolution and the Industrial Revolution. And the British Empire just beat the heck out of them in the Opium Wars. And from 1839 to 1949, 110 years, it was disaster for China of every kind, Taiping Rebellion, the Boxer Rebellion, the extraterritorial treaties, the Warlord period, the Japanese invasion, the Civil War.
So by the time the PRC was proclaimed in 1949, China was in impoverished wreckage and shell of itself. What had been the great leader of civilization was desperately impoverished. That’s the China mindset, never let that happen again. Perfectly understandable mindset. Now I think our mindset is formed in a very different way that starts in the 15th century. England started its imperial escapade, So it started in Wales, in Scotland, in Ireland. And in a way the English just went on fighting and won wars for centuries. And so the English mindset is, continue to conquer until you have an empire on which the sun never sets.
And that was achieved by the 19th century, it gave the Anglo-Saxon Protestant spirit the sense that this was a destiny. And it was transferred to the Anglo-American, manifest destiny of our own continent.And as soon as the wars of extermination and genocide were completed in the United States against Native populations, that Anglo-American vision spilled out into empire. The same way in the Caribbean, in the Philippines, in China. And we’ve gone on building that empire. World War II was the moment where the baton was passed from the British Empire to the American Empire.
But this is a mindset that still pervades American thinking. It’s the myth, the founding myth of our country that our manifest destiny is also a global destiny. And this is what we’re meeting with China right now, two long shadows of history. And we need to understand each other not fight with each other. And if we understand each other we will inhabit this small world together much better and peacefully. And that’s where I think history and understanding and culture could play a huge role.
Rob Johnson:
I’m always reminded of a book by a Native American who had a westernized named Jack Forbes, called Columbus and Cannibals. He cited what he called a disease called Wetiko, which is a mindset that is poisonous, fueled by fear, fueled by greed that led to the devastation of environments, indigenous peoples, and that outreach towards empire as a compulsion and done in a self-righteous manner. But I think there’s a funny blind spot that I saw you take on on that BBC program. Which is, a lot of people in the United States say, “China’s an authoritarian country and they don’t treat people right.” And in some regions there’s pretty good evidence for that.
And you said, “Yeah, but what about how the United States treats people? Like African Americans that runs its prison systems and all the kinds of things.” That we’re not in a place where, which I might call, we’re going to go save the world unless we change how we practice what we preach ourselves. And I thought you’re standing up to that mind frame really created quite a luster, quite a momentum in that conversation at BBC.
Jeffrey Sachs:
I have a foreign policy doctrine I call Jesus is foreign policy. Because in the Gospel of course Jesus famously says, “Why do you point to the mote in the other’s eye when you have the beam in your own eye.” And what Jesus is doing in the Gospel is explaining basically how not to judge in the wrong way. And he’s saying, “You better take care of your own base, your own ethics in order to be able to be ethical with regard to others as well.” And we have, of course, a terrible blind spot. Here in the United States has walked out of the Paris Climate Agreement under Trump, walked out of the World Health Organization under Trump, walked out of UNESCO, cut aid, behaved atrociously, imposed unilateral sanctions. That’s all abroad, not to mention all of the civil rights and human rights violations at home.
And the first thing we do when the Biden administration comes in is point the finger at them, even in the shadow of the insurrection that we had on January 6th. Well, that’s not how to behave. How we should behave anyway with the new administration is to meet and say, “Let’s hope for good cooperation. And that we can come to a mutually beneficial understanding.” So that’s how you greet someone anyway, as a civilized human being. But in Alaska we did just the opposite. We opened first words, “What about Xinjiang? What about Hong Kong? What about Taiwan?”Jeffrey Sachs:
Fighting words the very first moment of interchange as if the United States didn’t have a lot of explaining to do about having a weird, psychopathic president over the preceding four years, and can we pick up the pieces to get something normal going again. So this is my basic point which is we need to behave in a civilized way so that we can have a civilized relationship with other countries. And in a nuclear armed world it’s insane to do otherwise.
Rob Johnson:
I want to make a little bit of a pitch. I used to be for many years an adjunct professor at Union Theological Seminary and taught a course on economics and theology. And they have a continuing education course called union beyond. And one of their professors Obery Hendricks is writing, excuse me, is conducting and teaching the political economy in the Kingdom of God as a-
Jeffrey Sachs:
There you go.
Rob Johnson:
… A correspondence course. And it is all kinds of stuff. He’s written a book that I remember looking at years ago, The Politics of Jesus: Rediscovering the True Revolutionary Nature and How it’s Been Corrupted. And then he talks all about the politics of Jesus, just as I’m not surprised. Because I’ve seen you in the halls of the Vatican, I’ve seen the things you’re exploring which you might call framing the relationship between economic theory and the deeper moral teachings.
Jeffrey Sachs:
I do think, as you know, what Pope Francis is telling us is extremely pertinent for us. He’s written two wonderful encyclicals, one called Laudato si’ which is about climate change and about environmental destruction. And he says, “Do not destroy creation, we depend on it. We are a part of this world and nature doesn’t forgive it will kick back very hard.” And then he wrote a second encyclical called Fratelli tutti, a brotherhood of all or a brotherhood and sisterhood of all, properly translated. And it’s really a perfect accompaniment to the sustainable development encyclical because it’s about encounter with others.
So it’s framed around the Good Samaritan who helps the person in the road. And it’s basically wisdom, pastoral wisdom, of how to get along in this world. And I think that that is part of ancient truths. Of course, the ancient world also had its nonstop wars and genocide, so it’s not as if they knew necessarily better but the teachings of how to get along we can remember as being extraordinarily important. And Pope Francis is basically saying right now we need a world that recognizes its interdependence. Actually he says, “We need a plan for our common home.” And he’s absolutely right about that.
Rob Johnson:
Let me come back a little bit to the dynamic between the United States and China. I’ve worked quite a bit in China starting around 1990 and ran the Quantum Emerging Growth Fund. Non-Japan Asia portfolio was my focus. I’ve been going there for many years and many of the trusted people, I’ve never met Xi Jinping but many of the high level people I have met repeatedly. And they say one thing to me after Donald Trump came into office, “We had tried the 2025 and there are concerns about property rights or access to our financial markets, so we understand all those things. But what we don’t understand is why we are being blamed for the American leadership, not just under Trump but before that.
“Engaging in globalization when we’re a very large country that had at the starting gate a per capita income roughly 140th of the American per capita income. And the Americans did nothing for their own people in the transformation, in the adjustment assistance, in the retraining and reallocation, and the winners got their taxes cut, got to keep the money offshore. The exacerbated class divisions. And we were powerless to do anything about that and now we’re being blamed for that.” And I think-
Jeffrey Sachs:
Interesting.
Rob Johnson:
… I didn’t have anything to say. But
Jeffrey Sachs:
Yeah, it’s an interesting point. I think broadly speaking the notion in any event that China is somehow a source of major U.S. social ills is Trump amplified, if I could put it that way wildly. But I would say more than that, there is a point which is true that as trade with China expanded there were places in the United States in the Midwest, I think predominantly, that did lose jobs to the import competition from China. And it’s the second lesson of trade, because I used to teach trade at Harvard, it’s the second lesson of trade theory that trade expands the pie, that’s the first lesson. But the second lesson is it doesn’t necessarily distribute it the way that you would want it distributed.
There can be absolute losers and more than fair winners. But the theorem that Paul Samuelson the great economist proved about trade already about 80 years ago, is that the winners can compensate the losers so that everybody can be made better off. That’s what you teach in trade theory that look, the pie is going to grow but the slices of the pie could really leave some people short. But it’s possible that those that are getting the huge slice of the pie they could share something so everybody’s slice is bigger than it was without trade. Well we didn’t have that at all because our society, our politics, our political economy since Reagan was so antisocial democratic, so anti-sharing that losers where losers in the moral way not only in the financial way. Hey if you lost tough for you, you must be a loser.
And Trump was, of course, the most extreme weird expositor because for him they’re killers and they’re losers. So when Trump came in the only thing he really did was cut taxes for the rich even more. But what he claimed that he was going to do was reverse the trade with China, and that that would bring back some jobs. And I think that was a part of his success in 2016 elections because he carried by a sliver those swing industrial states in the Midwest and that’s what put him into the White House. The truth is that’s not where the jobs were really lost, the jobs were lost automation to technology, and so forth. Those are not jobs coming back. So it was all based on phony economic or false economic perception.
But even if it were true, the right way to handle an issue of inequality is through U.S. redistribution rather than closing down global trade. You close down global trade everybody loses, you redistribute then the winners help to compensate the losers. But that’s a mindset that America doesn’t have because we’re lacking that discourse in American political economy, that winner should help losers. In the American mindset and it’s a pretty complicated cultural mindset, it goes back to John Locke, it goes back to the Puritans, it goes back to the prosperity gospel, it goes back to the racism. The mindset is, if you lose that’s pretty tough but you’re probably a loser. And if you’re depending on somebody else’s help you’re really a loser.
So, that’s an American view which is quite distinctive in our culture, really pernicious. But it feeds into the China question because the Chinese leaders can’t really understand. Well, if you have some people that need help why aren’t you giving them the help? Why are you blaming us? Just like you said. And they’re right. The truth is that cooperation that’s been a mutual gain but not an equally shared gain. And China doesn’t face the same thing vis-à-vis Europe, because in Europe I would say the social democratic ethos is pretty pervasive. It’s not the American ethos that if you lose that’s your tough luck. It is much more, somebody will come to help you pick up and you certainly won’t lose your health benefits because those are for everybody.
Rob Johnson:
Yeah. It’s fascinating. You’re bringing back all kinds of readings. As I mentioned I was an undergraduate at MIT and I took History of Thought with Paul Samuelson. And he wrote papers-
Jeffrey Sachs:
Okay, there you go. And he made a lot of that economic thought.
Rob Johnson:
… Yeah. But he made a lot of, what I’ll put, late papers that were like asterisks. Because he could see what was happening particularly as U.S. and Japan pressures and the pressures on the auto industry were emerging. Right after he got the Nobel Prize I think he was intended to give a speech on international trade and it had to be postponed till the next year. But he gave a speech that was about that we do not compensate the losers, and it could exacerbate social unsustainability as we now call it.
He also wrote about the implications in a world of changing technology. That the winners get, what you might call, the cash to go invest in technology and the dynamics can create a place where in the first allocation you might have been better off, but in the long run you might have been a loser if you didn’t do the proper transformational path.
Jeffrey Sachs:
He was very unhappy that there was a grandiosity and simplification by the free trade advocates in the U.S. including academics. That said, “Free trade is great leave it at that.” And Samuelson in 1941 wrote a, I think it was 41, wrote a paper that became known as the Stolper-Samuelson theorem. And the Stolper-Samuelson theorem showed how you could have absolute losers from trade in a context where trade was making a bigger economy. Just what I was mentioning earlier. So, he was the formal author of the models that displayed why you need internal redistribution. His answer was, “Don’t stop trade but make sure that you take care of everybody.”
And a lot of free trade proponents failed to add the proviso take care of everybody, and then the trade opponents failed to understand the benefits of trade. So a lot of people that are politically sympathetic with say on the left or center left are anti-trade, but they don’t understand that’s not really the right way to proceed. We wanted an integrated cooperative world but we want to take care of everybody, so it’s more open trade plus social democracy. That’s the Scandinavian vision of this. I think it works the best.
Rob Johnson:
Yes. Well I’ll tell you, I found this paper Samuelson wrote it’s called International trade for a rich country delivered to the Swedish-American Chamber of Commerce in New York City, May 10th of 1972. And I think you’re going to get a kick out of the quote. Samuelson says, “Why is it harder for a rich man to enter the kingdom of heaven than for a camel to pass through the eye of a needle? There must be a reason. And I suppose that reason is better known to Europeans who have had to put up with American tourists for a century than two Americans themselves. Affluence breeds self-confidence even to the point of arrogance. As Samuel Butler said, “There was always a certain lack of amiability about the go getter.’” And I have-
Jeffrey Sachs:
Oh my God! Who could write like Samuelson by the way?
Rob Johnson:
… Oh, man. I know. And I had an experience that resonates with everything that you’ve been saying about U.S. versus Europe. There was a gentleman named Leaf Progralski who ran the consulate for Sweden in Europe.
Jeffrey Sachs:
I know Leaf very well.
Rob Johnson:
And I’ve known Leaf because I was involved in the Swedish devaluation when I worked for Soros in 1992. And he and I have worked together ever since. And Leaf brought me to a meeting where a bunch of Swedish economists said they wanted INET to consider something. That forever the European Donald had been considered sclerotic and the American model of deregulating the supply side to reallocate factors of production was viewed as dynamic in the growth model that should be emulated. And they said to me, “Given automation and given globalization and given that Donald Trump is now president,” this was 2019 January, “what we see is that a Swede says, ‘I love the robots.’ Because it increases the production possibility frontier, the envelope of possibility. And I am confident that I will get retraining. My health insurance, my pension, and my children’s education, so I want to be part of the dynamic in America you’re breaking down.” That was the punchline of what we’ve wanted him to hear.
Jeffrey Sachs:
Yeah. That’s fantastic By the way the Swedish model was really always based on that idea that we shouldn’t resist actually productivity increases, new technologies, international trade because everyone will get taken care of. So that bigger pie will end up more vacation time, more leisure time, better healthcare. So they’ve been on that theme for a long time. And it’s really true that today you get the anti-trade or anti-technology reaction if you don’t have a system that shares. Because then it really is a fight of losers against winners and you just end up with social struggle.
Rob Johnson:
Well going back to the echoes of our time in Detroit, I’ve seen an awful lot of what I’ll call otherness. A man named Arjun Jayadev and I wrote a paper once where we looked at regional variations in economic activity. And particularly places that were being plundered by our steer state and local budgets, automation or import penetration that was new, it was a time of adjustment. And what we saw was survey evidence indicating that these shocks created despair. And what we saw in lockstep was indicators of racial animosity up with economic despair. So we created what you might call an otherness that promoted a dysfunction, which Peter Temin has written about in his book on The Vanishing Middle Class.
Where we stopped the rungs in the ladder of the education system because we became so divisive about not educating those others. And so I went back to the Swedes and I said, “Well maybe it’s because you’re more racial-ethnically homogeneous, that you can do this and take care of each other. We have a very big challenge to overcome based on the, what I’ll call, the scar tissue of my formative years in Detroit and what I see going on around the nation.” You know what his answer to me was, “You might be right. But if you don’t overcome that scar tissue the prevailing model will be China. Because they know how to use the state to make these transfers.”
Jeffrey Sachs:
Yeah, that’s very interesting.
Rob Johnson:
I’m just saying.
Jeffrey Sachs:
And of course it was a Swede, Gunaar Myrdal, who came to the U.S. in 1946 to tell us about the racial challenge that needed to be overcome in his book The American Dilemma. And they’re still trying to teach us about that.
Rob Johnson:
Yes. Well, we’ve been focusing on the dynamics among the economies that want to participate. Where do you see Russia these days? Are they also aspiring to join? Or are the echoes of polarity from the Cold War between the U.S. and Russia overpowering and getting in the way of those possibilities?
Jeffrey Sachs:
Russia really sadly lost its most important opportunity already back in the 1990s. And of course, there’s never an end to the hope for a new approach. But the biggest problem in Russia, in my view, is that though the talents and education are really very strong, Russia went the way of a petrostate already in the 1990s. After the end of the Soviet Union they had essentially a lot of scientists and engineers and capacity that had all been locked up in the military-industrial complex of the Soviet Union. And the most important thing for Russia should have been to mobilize that knowledge and technology and industrial capacity for civilian purposes, and especially integrated with Europe.
Jeffrey Sachs:
And I always thought that this was the opportunity for Russia in particular to upgrade for example, its civil aviation. That it could probably keep alive civil aviation but it couldn’t do it unless it was teamed up somehow with Airbus or teamed up with the German industrial quality and so forth. Because there were very significant gaps that came from the complete militarization of technology and scientific expertise for decades in the Soviet period. But instead what happened was, oil and gas became the guiding force of the Russian economy.
Gazprom became the central enterprise. And a number of oil companies to fight with the oligarchs who would own the oil, and the gas became the dominant political motif. The easy money from these massive fossil fuel rents became the mechanisms of corruption and the mechanisms of state power. Not unique to Russia. I wrote about the resource curse a long time ago and Russia suffered it, we suffered it also. By the way we did suffer it.
Rob Johnson:
They also called it the Dutch disease in some places.
Jeffrey Sachs:
It was the Dutch disease. And it meant that you chose the rents not the innovation, the hard work, and the financial and human investment. And Russia went that way. Well of course, there are many things to say about foreign policy, but things really got off track. And the U.S. was not helpful as usual, the political dynamics in Russia were not helpful. But really by 2008 cooperation had collapsed. The U.S, I think, did a dreadful thing inviting Ukraine to join NATO back in 2008, and Georgia to join NATO. That would be something like China proposing to Mexico a military alliance. The United States would not say, “Oh well, that’s Mexico’s choice.” That would be a casus belli and it was in the Russian context.
The U.S. was completely stupid and irresponsible to try to push NATO right up against Russia’s borders in that way. They had done it already in the Baltics, but that’s small states and with a very different history. But Ukraine? Think of Russia’s whole history, Ukraine was the buffer against the European armies coming to invade Russia, whether it was Napoleon or Hitler or so many other perceptions and this led to a complete breakdown of normal relations. And that’s where we are till today right now. So, Russia did not modernize a civilian high tech economy even though it’s filled with talented people. Oil is no longer much of a pillar of an economy of 150 million people, relations with Europe and the U.S. are in an awful shape. It’s all very sad. It’s a huge loss of opportunity.
Rob Johnson:
Yes. And there was what you might say, a tremendous stock of artistic sophistication, human capital, scientific knowledge that could have been redeployed.
Jeffrey Sachs:
Absolutely.
Rob Johnson:
But when you talk about America being in the dance, the people who experience the dread of the Bay of Pigs are the people who went into Ukraine. I’m talking about not the same human beings, but Daniel Ellsberg could have told you how daunting and frightening the Bay of Pigs experience was.
Jeffrey Sachs:
Exactly.
Rob Johnson:
In Cuba right off our beachhead we did something like [crosstalk 00:53:22].
Jeffrey Sachs:
Yeah. We almost destroyed the world over it. And then we can’t understand why China’s not thrilled to have U.S. troops circling China, circling the South China Sea while we openly talk about the Quad countries Japan, Korea, Australia, India as the protection against China. Look at a map, would you like to be encircled that way? I wouldn’t. And so when we create this kind of direct threat and then we say to the other side, “Why are you worried? We’re not a threat we’re a peace loving people. We just want to have troops all around you.” It’s not viewed with such equanimity from the other side. And like you say, we should reflect how the United States reacted to the Cuba-Soviet alliance that started to take shape in 1960 almost led to the end of the world in 1962, until today drives our politics. Even today we can’t find a way out of this mess. And it’s used for domestic political red meat to win votes in Florida, to be as hostile to normalization with Cuba as possible.
Rob Johnson:
Yeah. Last thought. Going back to this question of how U.S. elites and governance neglected to support American people in the onset of globalization, development of China, and automation. We have a situation now where I believe that Trump capitalized on that woundedness. But a lot of the things that we’ve been fighting with China about have to do with intellectual property rights, pharmaceutical rights, access to financial markets these are all the high margin services now picking a fight. These are companies who’ve probably been violated because they did a foreign direct investment, then they watched factories like theirs being replicated rather than expanding the scale which they thought was the original promise.
This is some of the exed about the China 2025 program. But it looks to me like the wealthy and the powerful now have joined both parties the demonization of China. And perhaps the fear in the Biden administration of not doing that, which you and I both think is ominous. But the fear of not doing that is what you might call the general population which was wounded by globalization, has been taught to blame the Chinese rather than their own leaders. And they fear losing control. The Biden administration fears losing control of the House, the Senate, and perhaps the White House. How do we overcome that? How do we overcome the false consciousness of the general public about who’s responsible, that my Chinese ally pointed out when he said the Chinese were powerless to create the transformation within America.
Jeffrey Sachs:
There are, of course, many deep currents of American politics and the China issue is one of many. And to understand any of our dynamics domestically, we have to look not only at foreign policy issues but even more at racial divides and at wealth divides. So the questions of America’s plutocracy, the questions of America’s tradition of white supremacy, and the questions of America’s tradition of foreign policy exceptionalism are all on the line right now. And so there’s a lot of angst, anxiety, confusion, claims, and counterclaims. When it comes to China it is certainly the trigger of the current phase of relations was China’s breakthrough to becoming a high tech innovative country. And it was specifically the Made in China 2025 program which was a pretty brash statement.
I think from a tactical point of view I would not have suggested that China put it the way it did. But basically China said, “Okay. Here are the 10 top technologies, we’re going to dominate them.” Okay. If they had said, “We’re going to advance in them.” It would have been tactically smarter, less hubris. Of course we have our own hubris we need to come in first, we’re going to win the race to the moon, and so forth. But the gist of it is straightforward in my view, which is that China said, “We’re going to move to the forefront of key technologies.” Most of them semiconductors, advance their transport, precision medicine, precision agriculture, renewable energy, robotics, and so on.
Good list, smart policies, the right kind of innovation led development that China needed. Now that scared the wits out of American policymakers first of all, and it also violated the implicit idea that American policymakers naively had about China. Because it wasn’t that Americans said, “Well, they’re going to become like us.” What American policymakers believed is China would become wealthier and it would develop but under the wing of the United States. We would be clearly in the technological lead, we would be organizing global principles, and there would be a place for China just like there would be a place for the whole world in development.
So it was a American led mindset. And it used to be called the flying geese model of development that Japan propounded, we’d be the goose in front, we would always be in the lead technology. And then China started saying, “No way, we’re going to innovate.” And that is really the trigger to all of this now which is, hell no and you’re cheating and we’ve got to stop you, and this is a great threat. And of course it also gets implicated in the integration of AI and semiconductors and everything else into the military sphere, into the security sphere, into the surveillance and cyber warfare sphere. So that’s a lot of the problem, which is that our semi-crazed policymakers view all of this not just in the lens of economic competition, but in the lens of military dominance.
Which is again, little bit boring, little bit predictable and very dangerous to have a mindset the way that our policymakers do. That’s what’s going on right now, this is a war of technology they think. Now as an economist it’s all mind-boggling to me because in economic think technology is the way we do things, the way we solve problems, the way we overcome climate change, the way we stop poverty, the way we treat people for health. It’s not a general saying, “My God, if we don’t have the best autonomous weapons that can murder other people with AI we’ve got to stop China.” So the idea that it’s all a technology battle is wrong, dangerous, zero-sum at best but negative-sum in reality. But that’s really what we’re up against right now.
And that’s why the real battle for the moment is America trying to stop the advanced microchips from going to China. I almost sure, I’m not absolutely sure because I’m not at the cutting edge knowledge of this, but my guess is that this is a two or three-year work around hindrance for China not some existential threat. China now has thousands of semiconductor companies that are being absolutely showered with cash to figure out how to make small nanometer microcircuits. And they’re good and they’re smart. And my guess is they’ll figure out how to do it and then they’ll get on with making low cost phones again and 5G systems and so on.
But it would be so much better if we were recognizing that this doesn’t have to be award to the death, and God forbid that it becomes one, but rather an opportunity actually to decarbonize our energy systems, solve problems of transport and mobility, help poor people get educations. If we thought about it in those terms we’d come to a very different perspective and a new kind of foreign policy.
Rob Johnson:
Yeah. Well, I can only imagine that in the heavens Sun Tzu who wrote the Art of War is just shaking his head both sides for the provocation of Chinese 2025 and the reaction. It’s not what he recommended in his book. It’s like none of us are reading it.
Jeffrey Sachs:
It’s not quite what Deng Xiaoping recommended either. I think it was a little bit tactical misstep. But truly even with tactical missteps, if in 1434 they stopped the fleet maybe in 1434 maybe in 1450 they could have revived it again. You don’t go down a path to destruction because of a misstep or a complication, you try to solve the problem.
Rob Johnson:
Yes. Well how would I say, Jeff? I’ve admired you ever since being a kid in Detroit. Today’s conversation did nothing but increase that. This was very facile, vital, deep, thoughtful. When I think about having children and grandchildren, I think about who are the beacons that give me a reason for thinking that we might deliver them a better world. And you’re right at the masthead.
Jeffrey Sachs:
Well you’re you’re doing a great job and that is so important in this also, because it’s the thing that we need to make the world right. So let me congratulate you on that. So happy to be with you today.
Rob Johnson:
I’m happy to be with you too. Thanks for being here and I look forward to our next chapter and
Jeffrey Sachs:
Fantastic. We’ll do it again soon.
Rob Johnson:
… Just stay real close. Stay close. Great. Thank you.
Jeffrey Sachs:
Thanks so much.
Rob Johnson:
And check out more from the Institute for New Economic Thinking at ineteconomics.org.
