Economics should be a practical field: Jeffrey D. Sachs
The senior UN adviser and economist on the future of free trade and climate change in the Donald Trump era
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New Delhi: Jeffrey D. Sachs is a professor of economics, a global leader in sustainable development, senior UN adviser and best-selling author. He is also the co-recipient of the 2015 Blue Planet Prize, which recognizes environmental leadership. He has twice been named among Time magazine’s 100 most influential world leaders. Sachs was called by The New York Times as “probably the most important economist in the world", and by Time magazine as “the world’s best known economist".
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In an interview on the sidelines of the Hindustan Times Leadership Summit in New Delhi, Sachs talked about the future of free trade and climate change in the Trump era; effect of India’s demonetisation policy; the moral and existential imperative for India to aim not just for economic development but sustainable development, and how he can champion India’s cause globally. Edited excerpts:
You have argued against the Trans-Pacific Partnership (TPP). Why?
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I was against TPP mainly because I thought it gave too many privileges to large firms and because it didn’t address this domestic income distribution issue. If the US had said: “We’re for TPP but we’re also going to increase redistribution from rich to poor, we’re going to have more training programmes, we’re going to help people who lose jobs get quickly and properly accommodated", then I would have been for TPP.
Do you think the era of free trade is coming to an end with the victory of Donald Trump?
No one can predict accurately what the future holds. But it is imperative that we understand clearly why free trade has become a big issue and how to solve the problems it has created.
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Free trade has led to a vast majority of winners but also many losers within a country. And when the domestic politics fails to take care of people who have lost out, then you get a political backlash like in the US and Britain.
Countries need to stay with free trade because that’s good for them and the world, but they also need to compensate the losers so that they can adjust as well.
Donald Trump was absolutely right to say free trade has hurt people—and it’s what won him the election. While it is true workers in the mid-west lost jobs, he incorrectly says it is because China has been unfair or Mexico’s been unfair. That’s a very populist argument. Many Americans feels victimized, so they’d rather blame China rather than blame the US politics, which is the main problem.
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America has an internal issue of winners and losers, not an international issue of fair countries and unfair countries engaged in global trade. To solve our problems, we have to help people who don’t have funds by giving them a tax break, or an earned-income tax credit or free tuition rather than big student debt, big businesses have to be fairer and pay higher taxes.
Trump has threatened to pull America out of the Paris climate pact. When the largest economic power and the second largest greenhouse gas emitter takes this stand, does that not put the entire planet in danger?
Yes, it does. That is why I have been deeply involved in the Paris climate negotiations, advising President Obama. I put some key ideas that found their way into the final agreement—in the Paris climate agreement—especially around long-term plans. So, now, every country is asked to make a long-term plan to the year 2050 and I made a project called the ‘Deep Decarbonization Pathways Project.’ India with IIM-Ahmedabad was one of the participants in that. Each participating country was to make a plan to the year 2050, and what we showed in this project is that decarbonizing the world energy system is practical, and it’s within reach of each country and it’s not too costly and it could really save the climate.
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I’m trying to develop this plan now into a series of practical, national programmes. In the US, we never had such a long-term plan, and partly under my suggestion, the Obama administration in November launched the first ever US strategy to the year 2050 to show how to make deep decarbonization.
Now that President Obama is leaving office, how will your plan—which has been put into the Paris agreement—remain on track?
My job will be to defend climate change inside the US. And when the politicians object to this, to call them out and expose their lies that work to the advantage of political lobbies rather than even their own beliefs. But even if it is their beliefs—what do they know? They’re not climate scientists, so their beliefs aren’t even interesting, much less important. My job will be to make sure that science is put in the front row now more than ever, and that we’re acting on the basis of science, not on the basis of the big oil lobby, or the big coal lobby, or the strange beliefs of scientifically ignorant politicians.
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Do you think Trump would sit across with someone like you and hear you out?
He’s going to hear from me one way or another, whether it’s going to be face to face or it’s going to be in the press, but I’m personally going to devote myself to make sure America does not backtrack on climate change.
Are you going to ask for a meeting with Trump first before you start criticizing his policies on the economy, trade and climate change?
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I’m not interested in criticizing; I’m interested in results. And some of the best results that I had on alleviating global poverty was with George W. Bush, somebody from a different party and different political persuasion from me. But he really came through in a big way on issues that were important to my work on fighting malaria and fighting Aids. So I’m hoping Trump will also take a practical view. He says he wants to build infrastructure, I wrote a piece just afterwards that said, “Great; we’ll support you but as long as the infrastructure is clean and green," then let’s build the best clean and green infrastructure for America, then maybe there can be a meeting of the minds.
So you think Trump can be persuaded on doing the right thing on climate change with an economic argument?
Exactly. Don’t build pipelines that are just going to be scrapped. Don’t build coal-fired power plants that are going to have to be shut. Build for the future, don’t build for the past.
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You have advised many governments and heads of states for over four decades to move towards sustainable development growth. What do you see as your key accomplishment?
I’ve taken it to be my job to use my voice, my access, my ability to put rigorously planned, financially viable, practical plans—that I developed with the world’s leading experts—on public health and climate change get implemented. I’m the proudest of areas where I helped scale-up public health in fighting malaria and fighting Aids. I helped to devise something called the Global Fund to Fight Aids, TB (tuberculosis) and malaria that has been very effective. Because of it, malaria deaths have come down by many hundreds of thousands per year, many lives are being saved as it is a very practical plan. And I like the practical approach. Economics should be a practical field. It is the moral imperative of economics to improve human well-being. That’s what we economists should aim to do above all.
While most global economists have spoken against demonetisation in India, you are reasonably optimistic about it. Why?
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Yes, I am in favour of it. I think that if the government uses it properly to move to electronic, transaction-based economy, this will be quite a positive step. If it’s nothing more than a short-term dislocation and returning to the old system, it will be really—a very bad effort. But, what I do believe for all of our countries is that we should be moving to e-payments, and if Paytm and others become the instruments for transactions in India—Paytm and from what I’m told even the street vendors, the fruit sellers, they now have on their phones the payments—that would be quite an effective way to improve the transparency, the efficiency, and the fairness of the Indian economy. So, there is of course a question mark: is this a detour back to the old system, or is it really a major push towards a new system? If it is the latter, then it will prove to be a real contribution.
What is your view of the Modi government’s performance to date?
India has a huge problem today. And it can’t look away or keep doing business as usual. The country has the highest population density in the world. Land and water are very scarce in many parts. You can’t breathe the air. You can’t find water. There are persistent droughts and failure of crops in a country where nearly 800 million people live on agriculture. This is not sustainable.
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And while India is achieving economic growth with the Modi government, it needs to do more. India needs to aim for not just economic development but sustainable development. Which means asking three critical questions: Is there growth? Is it fair growth and includes a majority of the population? And is the growth environmentally sustainable?
We don’t yet see a clear strategy of India on these fronts from the current government. On the green strategy, for example, India seems to be in two minds; on the one hand there’s a big solar mission—that’s good—but on the other hand, there’s a big coal mission as well.
On the one side, there’s a great move to digitization. On the other side, there is a major water crisis and environmental crisis that is largely unaddressed. So, India has economic development, but these days that’s not good enough. I would push the government harder for a more well thought through long-term strategy.
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Is it realistic for the Modi government to aim towards sustainable development without compromising GDP growth and jobs?
Yes, it is absolutely possible with proper planning. What is India’s water strategy? What is India’s environmental strategy? What is the air pollution strategy? Because without addressing these existential issues with well thought through rigorous long-term planning, India will derail despite economic growth. This is the most important challenge that this government faces.
You have been critical of dismantling the Planning Commission of India. Why?
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What I’m concerned about is not whether something is dismantled or not but whether the capacity exists for serious long-term planning. Planning has become a bad word. It’s just meant to imply Licence Raj or Soviet system planning.
In the United States also, the whole idea of long-term planning is considered ideologically dangerous, somehow Leftist. This is crazy. There are urgent complex issues that require planning. But we don’t have any part of our government that plans well except for Pentagon. This must change. I’d rather plan for peace and not just for war.
You are a big champion of India in global forums. How will you help going forward?
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I want to campaign around the world very strongly for India to get financing for clean air, clean water and clean energy. But I don’t want to hear excuses from this country that we’re not going to go down this path because it’s too expensive or others should do it first.
I’d rather India lay out clear and compelling plans; and then asks for help, whether it’s in technology or financing globally to make this happen in a short period of time. I would regard it as my responsibility then, whether at the UN, or in other capacities, to help raise financing for India so that it can become a leader in sustainable development in the 21st century.
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