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Wednesday, August 17, 2011

Sachs: The Great Failure of Globalization

Jeff Sachs:

The great failure of globalization, by Jeffrey Sachs, Commentary, Financial Times: ...I’ve watched dozens of financial crises up close... Neither the US nor Europe has even properly diagnosed the core problem, namely that both regions are being whipsawed by globalization.
Jobs for low-skilled workers in manufacturing, and new investments in large swaths of industry, have been lost to international competition. ... The path to recovery now lies ... in ... upgraded skills, increased exports and public investments in infrastructure and low-carbon energy. ...
The simple fact is that globalization has not only hit the unskilled hard but has also proved a bonanza for the global super-rich. They have been able to invest in new and highly profitable projects in emerging economies. Meanwhile..., they have been able to convince their home governments to cut tax rates ... in the name of global tax competition. ... In the end the poor are doubly hit, first by global market forces, then by the ability of the rich to park money at low taxes in hideaways around the world.
An improved fiscal policy in the transatlantic economies would therefore be based on three realities. First, it would expand investments in human and infrastructure capital. Second, it would cut wasteful spending, for instance in misguided military engagements in places such as Iraq, Afghanistan, and Yemen. Third, it would balance budgets in the medium term, in no small part through tax increases on high personal incomes and international corporate profits that are shielded by loopholes and overseas tax havens. ...
Export-led growth is the other under-explored channel of recovery. Part of this must be earned through better skills and technologies – another reason not to cut education. ...
Sadly, these global economic currents will continue to claim jobs and drain capital until there is a revival of bold, concerted leadership. ...

    Posted by on Wednesday, August 17, 2011 at 06:12 PM in Economics | Permalink  Comments (149)

          


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