Jeffrey Sachs, the harbinger of bad policy, has written his first post-election column in the Financial Times, “Obama has four years to transform America’s Economy” (FT, Nov 12, page 11, subscription required). No surprises here; his advice is to speed up the destruction of our residual free market economy. He concedes that macro-Keynesianism has proven “outdated and outmoded,” but nevertheless calls for moves to a micromanaged economy.
Here he departs from his predecessor John Kenneth Galbraith, who recognized the inability of centralized planners to micromanage a dispersed entrepreneurial economy, and thus favored the consolidation of business into mega-firms that could (perhaps) be directed politically. Sachs retains part of that tradition (“the US needs massive overhauls of its key economic sectors”), but recognizes that a focus on “aggregate demand” policies is inadequate. The president, he argues, must become “the conductor of deep-seated structural changes.”
If President Obama follows his advice, we may expect a much more interventionist government. The role of capitalism is to plant our always scarce seed corn in the most fertile, most economically productive, sectors. The role of politics is to place it where it will yield the greatest short-term political gains, such as more funds to clean energy (and, of course, a carbon tax).
Don’t expect any moves to liberalize the entrepreneurial creativity that means America will soon outproduce Saudi Arabia in oil production, that has greatly weakened the blackmail potential of Gazprom and of Arab governments — and, of course, nothing that would have encouraged the low-cost energy realities that the private sector has made possible.
In brief, whatever the election might have achieved, rest assured that Jeffrey Sachs is still Jeffrey Sachs.