Jeffrey Sachs: The Strange Case of Dr. Shock and Mr. Aid. Japhy Wilson. 2014.
This book is from the undisguisedly partisan Verso Counterblasts series said to be “challenging the apologists of empire and capital” that also targets Bono, Thomas Friedman, and others. The author, who is not an admirer, divides Jeffrey Sachs’s career into two portions. In the first portion Sachs is a Harvard professor delivering neo-liberal economic shock therapy to Latin America, countries of the former Soviet Empire, and finally Russia. In the second portion he is a Columbia professor championing aid to poor African nations and denying his earlier association with neo-liberalism and his responsibility for the devastating effects of earlier shock therapy, particularly for Russia.
Shock therapy was devised by Milton Friedman and the Chicago School of Economics to spread neo-liberal economics (market fundamentalism) around the world. It was antidemocratic in that it exploited a major crisis, such as a major economic collapse or fall of government, to rapidly impose extreme neo-liberal economic reforms without public debate before the population was able to organize against the harsh realities to follow. The four pillars of the neoliberal project were free trade, deregulation, privatization, and austerity. In developing nations, implementation included crushing labor unions and ending protection for native industries with resultant increasing unemployment, falling standards of living, and increasing inequality. Considerable coercion was required for the antidemocratic imposition of these reforms when their draconian consequences inevitably encountered strong popular resistance. This took the form of years of assassinations and torture in Pinochet’s Chile, organized disappearance of 30,000 opponents in Argentina, and violent overthrow of the democratically-elected parliament in Yeltsin’s Russia. Most of this violence was directed against workers and peasants who objected to harsh shock therapy rather than against communist revolutionaries as claimed by state propaganda.
As a thirty-year-old Harvard professor, Jeffrey Sachs began his career as a shock therapist in Bolivia in 1985. The crisis of hyperinflation was used as a rationale for imposing the entire neo-liberal reform package. Hyperinflation was tamed, but with severe social consequences that included increased unemployment from 20% to 30%, decreased real wages by 40%, and significantly increased poverty and inequality. Nevertheless, these results earned the approval of the neo-liberal IMF, and Sachs went on to advise the Latin American governments of Brazil, Argentina, Peru, and Venezuela. In 1989, the transition from communism to democracy provided Sachs with the opportunity to bring neo-liberal shock therapy to Poland. Ironically, the government by Solidarity, the workers’ party, implemented the fundamentally anti-worker changes. By 1993, industrial production was down by 30%, unemployment, which had been nonexistent, was up to 25% in some areas, and poverty and inequality were dramatically increased. Fortunately for Poland, enough democracy remained so that even Solidarity and Lech Walesa were defeated in elections and the neo-liberal policies were discontinued. Nevertheless, Sachs’s experiment was once again celebrated in the corridors of global power, and he went on to advise countries throughout the post-communist world from Slovenia to Mongolia.
Sachs reached the pinnacle of this phase of his career in 1991 when he was invited to Russia to serve as economic advisor to President Yeltsin. Although Sachs was unable to acquire the debt restructuring and the aid he thought necessary from Washington and the IMF, the entire package of neo-liberal reforms was deployed in an atmosphere of government crisis without popular support. Indeed, Yeltsin got parliament to award him the right to govern by decree for one year while instituting the reforms. However, the consequences of these reforms were so disastrous that parliament withdrew its support. Yeltsin responded by illegally suspending parliament and attacking its building with tanks, then operated for the next three months as an unlimited dictatorship to force through further neo-liberal reforms. Finally, the December 1993 parliamentary elections demolished the party of the prime minister, and the new prime minister announced that “the era of market romanticism [was] over.” Sachs’s time at his pinnacle was also over. He resigned in January, 1994.
The economic crisis induced by shock therapy in Russia has been described as the longest and deepest recession in recorded human history. Between 1991 and 1998, GDP declined by 43%; industrial production fell by 56%; capital investment fell by 78%; 80% of firms went bankrupt; 70,000 factories closed with massively increased unemployment; food production fell by half; living standards dropped by half; people living in poverty increased from 2 million to 74 million; suicides doubled; deaths from alcoholism tripled; and life expectancy lost 5 years. What emerged was not a vibrant commercial society, but a brutal class system of vertiginous inequality, in which notorious oligarchs and their cronies were utilizing the power of the state to appropriate natural resources and asset-strip public companies.
According to the author, the next phase in Sachs’s career was the transformation from Dr. Shock to Mr. Aid as noted in the book’s title. This consisted of efforts to rehabilitate his reputation by denying responsibility for the Russian catastrophe, distancing himself from neo-liberalism, and advocating aid for the impoverished in Africa and elsewhere. In 2002 he left Harvard to head the Earth Institute at Columbia University with an annual budget of $87 million to focus on sustainable development. That same year he was appointed by Kofi Annan to chair the UN Millennium Project for which funding was delayed. In 2006, he launched the Millennium Villages Project, an ambitious development program with funds from multiple sources, to combat poverty for 500,000 Africans in 83 villages of Ethiopia, Ghana, Kenya, Malawi, Mali, Nigeria, Rwanda, Senegal, Tanzania, and Uganda.
In the final portion of the book, the author attempts to rebut evidence for Sachs’s transformation and for Sachs’s claim that his earlier role had been mischaracterized. Many examples are provided for earlier statements by Sachs strongly advocating neo-liberal policies in Bolivia, Poland, and Russia that are denied in his later statements. His responsibility in Russia is mitigated somewhat by the failure of Washington and the IMF to provide necessary aid and debt restructuring. For the second phase of Sachs’s career, the author notes challenges to Sachs’s claims for success of the Millennium Villages Project, particularly the lack of comparison to control villages to document the significance of any changes.
The author presents Sachs’s later representation of himself as a critic of libertarianism and the free market fallacy and as identifying with the social democracies of northern Europe as misleading. He reports that Sachs never advocates collective action or the strengthening of unions and that his loyalty continues to lie firmly with the capitalist class and the defense of its privilege. He reports that Sachs insists that deficit cutting should start now and that suffering from austerity is not an anomaly but an adjustment to be accepted. He maintains that Sachs’s strategy of population control, technical fixes, and market-based solutions and his endorsement of the existing distribution of wealth and power is entirely in conformity with the agenda of today’s ruling classes. These are the author’s conclusions.
On the other hand, the author appears to distain even the more humane mixed economy variety of capitalism that prevailed until the rise of Chicago School neoliberalism forty years ago. And Sachs does lead a large organization pursuing sustainable development and has mobilized considerable funding to fight third world poverty. In my view, the reader needs to pursue multiple other sources before deciding whether the present Mr. Aid Sachs has sincerely distanced himself from the shock therapy of the earlier Dr. Shock Sachs.