The Price of Civilization: Reawakening American Virtue and Prosperity by Jeffrey D. Sachs Page A

impending environmental crises. This is the case of climate change, deforestation, loss of biodiversity, land erosion, and many kinds of large-scale pollution. In all those cases, unprecedented environmental destruction is under way and getting worse, but without market signals in place to guide us back to sustainable technologies and business practices.
    Figure 6.4: Primary Commodity Prices (Inflation-Adjusted), 1992–2010

Source: Data from International Monetary Fund World Economic Outlook, 2011.
    The issue of environmental sustainability is a huge one that could take us too far afield here. I earlier tried to provide an overview of the interconnected and complex challenges in my book Common Wealth . In the current context, though, I would like to emphasize that America’s sustained prosperity will require solutions to the rapidly encroaching resource pressures.
    There are two main obstacles to a sustainable trajectory. First, the scientific and technological know-how to deploy more sustainable technologies (such as massive supplies of low-carbon energy from solar power) still needs large-scale research and development. Second, we need to overcome the power of corporate lobbies in order to impose regulations and market incentives that will steer markets toward sustainable solutions. So far, the corporate lobbies of the polluting industries have blocked such measures.
    Free-market economists, once again including Hayek and Friedman, have recognized the need for public action to protect the natural environment. And Americans have consistently agreed, expressing strong environmental sentiments on a wide range of environmental challenges. 14 Yet this basic truth has not yet found political expression in the United States because of the power of Big Oil and Big Coal. In chapter 10 , I’ll suggest some possible policies to break the hammerlock of these special interests.
    America’s Failed Response to the New Globalization
    To sum up the findings of this chapter, America has failed to respond effectively to the challenges of the new globalization. The manufacturing sector has shrunk as factories and employment have been shifted overseas. The working class, especially, has been squeezed. Economic policies did not exactly stand still but in factresponded perversely: taxes on the rich were cut; the manufacturing sector was allowed to decline in the face of growing foreign competition; employment in construction was temporarily spurred by easy money from the Fed and subprime lending, but that expedient lasted only until 2007, when the subprime bubble burst. The 2008 financial crisis was therefore a crisis of utterly mismanaged globalization. The United States had responded to the long-term loss of manufacturing competitiveness by the temporary expedient of a housing boom. When the boom was followed by a collapse, U.S. unemployment soared and the emptiness of U.S. short-termism was exposed for all to see. What is remarkable is that even after the collapse of the bubble, Washington was still unable to come up with any long-term, serious responses to America’s waning competitiveness, instead turning again to the very same policy mix that had failed previously: easy money, tax cuts, large budget deficits, and, starting in 2011, cuts in government outlays on education, infrastructure, science, and technology, the very areas in which the United States needs to invest to regain its long-term competitiveness.

CHAPTER 7.

The Rigged Game
    Here’s the conundrum: A healthy economy is a mixed economy, in which government and the marketplace both play their role. Yet the federal government has neglected its role for three decades. Just when the government was needed to chart a course through the twists and turns of globalization, it went AWOL. Or, more accurately, it turned the levers of power over to the corporate lobbies. America’s economic failures are therefore at least as much political as economic. This chapter examines the