TWO BAILOUT PLANS FOR PLANET EARTH
Dr Wasiq N. Khan
BOOK REVIEW
Common Wealth: Economics for a Crowded Planet. By Jeffrey Sachs.
London: Penguin, 2008. Pp. xi+386. £9.99 (paper); ISBN-978:
0141026152.
Hot, Flat, and Crowded: Why The World Needs a Green Revolution and
How it Can Renew Our Global Future. By Thomas Friedman. London:
Allen Lane, Penguin Group, 2008. Pp. 444. £20 (hard); ISBN978:1846141294.
IPPR Volume 5 Number 1 (October 2009)
pp. 90-96
© 2009
International Public Policy Review • The Department of Political Science
The Rubin Building 29/30 • Tavistock Square • London • WC1 9QU
http://www.ucl.ac.uk/ippr/
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Smith, K.E. European Union Foreign Policy in a Changing World. Cambridge: Polity,
2008.
Smith, M. E. Europe’s Foreign and Security Policy: The Institutionalization of
Cooperation Perspectives. Cambridge: Cambridge University Press, 2004.
TWO BAILOUT PLANS FOR PLANET EARTH
BOOK REVIEW
Common Wealth: Economics for a Crowded Planet. By Jeffrey Sachs. London: Penguin,
2008. Pp. xi+386. £9.99 (paper); ISBN-978: 0141026152.
Hot, Flat, and Crowded: Why The World Needs a Green Revolution and How it Can
Renew Our Global Future. By Thomas Friedman. London: Allen Lane, Penguin Group,
2008. Pp. 444. £20 (hard); ISBN-978:1846141294.
Jeffrey Sachs, the Director of the Earth Institute at Columbia University, is the
world’s most active fire-fighting economist. Having, over the last twenty years, taken on
the liberalization of planned economies in the former Soviet bloc as well as the stubborn
problem of hyper-inflation in Latin America, Sachs has more recently, in The End of
Poverty: Economic Possibilities for Our Time1, set his sights on designing multi-year,
multinational, and multibillion dollar projects to eradicate extreme poverty, control
malaria, and stimulate a four-fold increase agricultural productivity in Africa. His current
work, Common Wealth: Economics for a Crowded Planet2, aims no lower; Sachs now
has a plan and budget to simultaneously mitigate global climate change, control
population growth, protect biodiversity, reduce extreme poverty, and forestall serious
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1
2
Sachs, J. The End of Poverty: Economic Possibilities for Our Time (New York: Penguin, 2005).
Sachs, J. Common Wealth: Economics for a Crowded Planet (London: Penguin, 2008).
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world water shortages. For someone who was once best known for advocating market
based solutions to government failures in centrally planned economies and is still
associated with the term ‘shock therapy,’ Sachs’ recent work may represent a shift in
thinking emblematic of the times we live in; large portions of his recent books, The End
of Poverty and Common Wealth, are devoted to explaining why free markets have failed
to safeguard common resources, are inadequate at providing public goods, and will not
kick start development in regions caught in poverty ‘traps.’
Sachs’ proposals to head off a five-way-gathering global catastrophe are
persuasive and his plan is methodical, but all require a massive shift in government
spending priorities, a large increase foreign aid, and the creation of several new
international organizations that would expedite critical initiatives. Using a broad range of
quantitative data from geography, demography, economics, and ecology, Sachs clearly
describes what threatens the world and what it will cost to mitigate and, in many
instances, eliminate these threats. Those expecting a pessimistic rumination on inevitable
catastrophe will instead find a hopeful book that carefully tallies the costs of positive
interventions and compares these to the costs of inaction.
Sachs argues that once the prevalence of extreme poverty is reduced, runaway
population growth will cease which will, in turn, mitigate biodiversity loss, reduce fresh
water scarcity, limit carbon emissions, and ease global warming. Much will depend,
however, on the willingness of rich nations to spend at least 0.7 per cent of their gross
domestic products on foreign aid as well as on the research and development of new
technologies to generate clean energy from renewable sources, produce food in
environmentally sustainable systems, and preserve fresh water supplies.3
In short,
solutions are available, but only if humankind were to fully absorb the urgency of the
crisis, be willing to cooperate, and to give generously.
Sachs believes strongly in setting concrete goals in international development
endeavors and using these goals to monitor progress. Well known for supporting the
United Nation’s Millennium Development Goals, Sachs, in Common Wealth, lays out a
detailed budget for seven specific priorities. To fund climate change mitigation, so that
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3
Ibid., pp. 245, 310.
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increases in the global average temperature do not exceed two degrees centigrade by
2050, Sachs proposes that rich donor nations spend 1 per cent of their combined GDP or
approximately $350 billion per year while poor countries spend approximately $125
billion per year for an indefinite period into the future on efforts to reduce greenhouse gas
emissions.4 To help poor countries better adapt to the negative side effects of a warming
globe, Sachs estimates that $70 billion per year from rich countries will be needed for the
foreseeable future. The bill for the conservation of biodiversity would come to $35 billion
per year. Interventions to combat desertification would also cost rich nations $35 billion
per year – again for an indefinite period. The same price tag of $35 billion is the annual
outlay needed to support efforts at stabilizing global population growth so that total world
population peaks in 2050 at 7.8 billion and the world population growth rate falls to zero
by 2050. The costs of research and development needed to create a new generation of
sustainable technologies for energy generation will require an annual outlay of $70
billion, again for an indefinite period of time. Assistance for poor countries to ensure the
achievement of the Millennium Development goals by 2015 and the eradication of
extreme poverty by 2050 will require an annual outlay of $245 billion for the next five to
forty years. In total, the costs of keeping the world from being destroyed would be about
$840 billion per year for an indefinite period into the future. Sachs believes that much of
this can be met by redirecting available funds from military budgets, bilateral aid
programs, and a broad array of other expendable revenue sinks. The United States, for
example, currently spends approximately $1.6 billion per day or $572 billion per year on
defense (more than the rest of the world combined and twenty times the world average
per capita military expenditure).5
Sachs argues that military budgets, agricultural
subsidies, and various other programs in rich nations could be pared down or eliminated
and the revenue easily redirected to areas where the social rate of return is much higher.
He notes that one crucial intervention proven to drastically reduce malaria, the provision
of anti-malarial bed net protection to every sleeping site in Africa, would cost as little as
a one-time outlay of $1.5 billion while yearly Africa suffers from at least $12 billion in
lost economic output directly due to malaria – in short, for every dollar spent on bed-nets,
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4
5
Ibid., p. 310.
Ibid., p. 274.
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approximately $8 could be recouped in the form of increased labour productivity,
reduced spending on health care, and this could easily be achieved through a reduction in
the bloated spending on sectors such as defense and agriculture in rich nations.
Sachs has been criticized for his faith in the ability of aid from rich to poor
countries to solve such a wide range of deeply entrenched social problems. William
Easterly, among others, has claimed that trillions of dollars have been spent since the
Second World War on aid from rich to poor countries and he notes that the level of aid
per capita is negatively correlated with economic growth and social development.
Easterly and others have also argued that foreign aid fosters dependency in poor countries
and this undermines precisely those social institutions that might enable poor countries to
do more to help themselves.6 Sachs pre-empts these criticisms by describing several past
triumphs of foreign assistance programs including India’s Green Revolution, the
eradication of small pox, polio, and the success of the Global Fund for Tuberculosis,
Malaria, and HIV/AIDS.
A weakness in Sachs’s proposals is that no specific timeline is proposed. While it
may be possible to convince rich nations to donate 2.4 percent of their yearly output to
fund critical initiatives aimed at saving all terrestrial life, a plan such as Sachs’s becomes
a much tougher sell when the anticipated funding would be needed for an indefinite
period of time. The problem of donor-fatigue needs to be considered in light of the fact
that development grants to poor countries were once described as sunset programs that
would expire once specific targets for economic growth and social development had been
achieved. Instead development programs and many development bureaucracies have
grown in size over time and, in the worst instances, fostered long-term dependency.
Sachs’s proposals would be more convincing if he were to explain how his plan would
avoid repeating the mistakes of past foreign aid initiatives.
Thomas Friedman, the three time Pulitzer Prize winner and foreign affairs
columnist for the New York Times, is best known for writing popular books on American
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6
Doubts regarding the efficacy of foreign aid programs can be found in Easterly, W. The Elusive Quest for
Growth (Cambridge: The MIT Press, 2002), Weaver, C. Hypocrisy Trap: The World Bank and the Poverty
of Reform (Princeton: Princeton University Press, 2008), and Svensson, J. “Foreign Aid and Rent-Seeking,”
Journal of International Economics Vol. 51 (August 2000): pp. 381-40.
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foreign policy, the Middle East, globalization, and environmental affairs. To his fans, he
is distinguished by an uncanny ability to present complex political-economic ideas in an
engaging, accessible, and conversational way. Though he was an early and fervent
proponent of invading Iraq and has been described, by critics, as an apologist for the
worst excesses of globalization and free markets, he is a hugely influential maker of
American public opinion. In his most recent book, Hot, Flat, and Crowded: Why The
World Needs a Green Revolution and How it Can Renew Our Global Future7, Friedman
passionately argues for immediate action to prevent a global climatic apocalypse.
Friedman’s intended audience is American and to them he argues that the United States’
world leadership position, badly eroded in the post 9/11 era, could be recovered if
Americans were to spearhead a ‘green revolution’ to convert their fossil fueled based
economy into one that relied on renewable sources of energy which would in turn reduce
carbon emissions, mitigate climate change, protect biodiversity, and bolster American
economic competitiveness – all the while restoring the United States’ moral prestige and
spearheading a global movement dedicated to sustainable and ecologically sound
development. Friedman’s proposals for change have a very different slant from Sachs’s
and, at times, appear to be diametrically opposed to Sachs’s emphasis on top-down forms
of international cooperation. Friedman is extremely skeptical of the capacity of massive
governmental or intergovernmental spending programs to generate the necessary changes
and innovations to bring about sustainable forms of economic growth.8 A revolution in
how energy is generated and used would require very context-specific adjustments such
as taxes on carbon intensive production or consumption, price floors on fossil fuels, and
careful attention, at all points, to local political alignments to ensure that what was
proposed would work in tandem with local interests.9
Friedman does not discuss water scarcity or extreme poverty. He is almost
entirely focused on the threat of climate change. Unlike Sachs, he makes no attempt to
link extreme poverty, runaway population growth, and water scarcity with global
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7
Friedman, T.L. Hot, Flat, and Crowded: Why the World Needs a Green Revolution and How It Can
Renew Our Global Future. London: Allen Lane, Penguin Group, 2008.
8
Ibid., pp. 244, 246.
9
Ibid., p. 336.
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warming. Instead, Friedman argues that the primary cause of global warming is the
fossil-fuel-intensive economic growth paradigm.10 Hot, Flat, and Crowded goes a lot
further than Sachs’ Common Wealth in actually describing the manner in which a
sustainable-carbon neutral economy would function, where the savings and efficiencies
would be greatest, and what types of new technologies and public policies would be
needed to convert our current economic system into one that was cleaner and greener.
Friedman, like Sachs, does not think free markets can do much to protect common
resources or provide public goods, but rather than correcting this by creating new United
Nations agencies with massive budgets, Friedman favours country specific corrections
that involve some spending and a lot of market tweaking – a carbon tax, subsides and tax
credits directed to producers of solar, geo thermal, and wind based power equipment and
some strategy to counteract the lobbying of interest groups ranging from oil companies to
coal and auto producers.11
In comparison to Sachs, Friedman is more sceptical and worried about the
prospects for mitigating global climate change and, to his credit, he provides more detail
describing the technological and political obstacles that would have to be overcome
before mitigation were achieved; the result is a portrait of a difficult and complex
challenge that will require great sacrifice and global perseverance to overcome. Sachs’
tone is much more hopeful -- he does not dwell on the obstacles to affecting positive
change, but focuses on the affordability of the solution; implicit in this point of view is
the idea that if goals are clear and budgetary commitments are met, then what remains is
not necessarily a painful and costly adjustment, but a steady advance to a better world
based on the self-evident merits of the cause.
Wasiq N. Khan‡
REFERENCES
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10
Ibid., p. 32.
Ibid., pp. 17, 245.
11
‡
Assistant Professor of Economics and Finance in the Economics and Finance Department at the Faculty of
Natural and Social Sciences, Franklin College Switzerland.
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Easterly, W. The Elusive Quest for Growth: Economists’ Adventures and
Misadventures in the Tropics. Cambridge: The MIT Press, 2002.
Friedman, T. Hot, Flat, and Crowded: Why The World Needs a Green Revolution and
How it Can Renew Our Global Future.. London: Allen Lane, Penguin Group,
2008.
Sachs, J. Common Wealth: Economics for a Crowded Planet. London: Penguin, 2008.
Svensson, J. “Foreign Aid and Rent-Seeking,” Journal of International Economics 51
(August 2000): 381-402.
Weaver, C. Hypocrisy Trap: The World Bank and the Poverty of Reform. Princeton:
Princeton University Press, 2008.
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