How Jeffrey Sachs saved the world but failed to save Russia

If there is one thing that most economists, especially those of the Keynesian variety, have in common, it’s refreshing arrogance. This, in spite of their having failed to predict every economic disaster of modernity.

Moreover, when they tried the Keynesian response to the 1929 stock market crash, they instantly turned it into the Great Depression – without, however, suffering a dent in their self-confidence.

Yet Jeffrey Sachs, with his cosmic conceit, proudly stands out even against that general backdrop. In his modest self-assessment, Jeffrey can wave a magic Keynesian wand to turn a moribund economy into a land flowing with milk and honey.

One can only wonder how, say, Singapore, starting from scratch, managed to become a major success story without the benefit of either Keynesian economics or Jeffrey’s advice. Presumably, had she sought it, she would now own the world.

Sachs’s stock in trade is applying the principles of national welfarism internationally. Along with Keynes, whom he worships with nothing short of religious piety, he believes that, when a country is in dire straits, it can steer itself out of trouble by spending money it doesn’t have.

Still, the funds have to come from somewhere, and the list of possible sources isn’t endless. Essentially it comes down to printing money, borrowing it or getting infusions from richer countries.

Jeffrey Sach’s speciality is this last solution. He believes that wealthy nations, especially the USA, should act towards poor ones the way the social acts towards idlers on the dole.

A trip to a South London council estate will show how this stratagem works at the micro level of families. Not to cut too fine a point, it destroys them, robbing them of any initiative and turning them into lifelong addicts stuck at the end of the welfare needle.

A somewhat longer trip to Bolivia, which Jeffrey, in a tastelessly self-serving article on the BBC website, cites as his epic coup, will show how destructive such economic alchemy can be at a macro level.

Since, according to Descartes, all knowledge is comparative, the Bolivian trip would be particularly educational if followed by a quick detour to Chile, a country very similar to Bolivia historically, ethnically and demographically.

At roughly the same time Gen. Pinochet sought economic guidance from the commonsensical Chicago School, the Bolivian government turned for advice to the fully paid-up Keynesian Sachs.

Sure enough, he recommended that the country should crawl to the USA, arm outstretched, palm turned upwards. In his munificence and omnipotence Jeffrey then facilitated a huge infusion of unearned capital into Bolivia.

The trick worked, in the same sense in which a second or third mortgage on your house would work – until you’ve spent all the money and now have to repay it, which you can’t do because you have no job.

By contrast Chile opted for the free market solution, with equally spectacular results. What wasn’t equal was the comparative duration of success.

In spite of its present socialist government working tirelessly to undo Pinochet’s reforms, Chile is still reasonably prosperous – and infinitely more so than Bolivia, which is reeling from the delayed action of Jeffrey’s expertise.

But he mentions Bolivia only in passing. The real point of Sach’s article is to blame the West for refusing to bail out Russia the same way it bailed out Poland after 1989.

After all, “Mikhail Gorbachev… was prepared to see Europe reunited in peace in democracy… Once again, drawing from Keynes,… I championed… international assistance… Yet I watched in puzzlement and growing horror that the needed aid was not on the way.”

By his own admission, it took Sachs the next 20 years to get his head around this inequity. Finally it dawned upon him that “the West had helped Poland financially and diplomatically because Poland would become the Eastern ramparts of an expanding Nato.”

I could have spared him two decades’ worth of soul searching by pointing out a few fundamental differences between Poland and Russia, those that would have justified the West’s bloody-mindedness towards the latter, had it indeed been displayed.

But first let’s get our facts right, for the West wasn’t as heartless as all that. Between 1989 and 1998 Western countries provided $66 billion in aid to Russia, on top of food aid loans, trade credits and debt rollovers.

Obviously Jeffrey doesn’t see such paltry amounts as worth mentioning. They simply don’t qualify as international aid, as far as he is concerned. He doesn’t cite the sum that would have satisfied his keen economic sense, but probably none of us would be able to count so high.

Jeffrey seems to realise that the West regarded Poland as a safer bet for long-term partnership than Russia, which is good. Twenty years of feverish thought bore fruit.

What isn’t good is that he regards this judgement as being grossly unfair to “the great man” Gorbachev and the only marginally less great Yeltsyn and Putin.

Suddenly, rather than merely doubting Jeffrey’s professional qualifications, one begins to wonder about his IQ.

Yes, both Poland and Russia emerged out of decades of communist rule, the most satanic regime in history. There was a minor difference though: Russian communism was self-inflicted; Poland’s communism was inflicted by Russia.

They weren’t equal partners in a love affair; they were rapist and victim. That’s why, though many individual Poles had done a Faust, Poland as a nation had nothing to repent before being admitted into the fold.

Also, throughout communist rule the country remained generally loyal to the Western confession of Christianity, which was a useful foundation to build on. And, at no point in her history was Poland either hostile or dangerous to the West.

Russia, on the other hand, has been both hostile and dangerous throughout much of her history and certainly since 1917. In 1989 Russian ICBMs were still targeted at Western cities, and the country had more tanks than the rest of the world combined.

At least twice during the post-war years Russia took the world to the brink of a nuclear holocaust. In every military conflict worth mentioning she found herself on the other side from the US and her allies. At least four times since the war she committed direct aggression against European nations, while fomenting anti-Western militancy all over the globe.

After the ‘collapse’ of the Soviet Union the West couldn’t help noticing that the post-collapse state was run by the same unrepentant operators of the previous satanic regime, be it party officials like the ‘great man’ Gorbachev and the only marginally less great Yeltsyn (both, incidentally, with lifelong KGB connections) or KGB officers, such as Putin.

This time, however, there was an extra dimension: both groups were now organically fused with organised crime – to a point where the different elements of the alloy became indistinguishable.

Under such circumstances, advancing to Russia even the $66 billion that escaped Jeffrey’s attention represented criminal folly on the part of the West.

Every one of those dollars vindicated Peter Bauer’s maxim that foreign aid is the transfer of capital from poor people in rich countries to rich people in poor countries. Hence the ‘great man’ Gorbachev’s wealth is now in the billions; while Putin’s pilfered fortune is bigger than that by an order of magnitude.

Economists like Jeffrey do enough harm even when they stick to their own discipline, about which they are supposed to know next to everything. Let them meddle in things about which they know next to nothing, and watch them destroy the world.


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