Introduction
After reading Japhy Wilson’s biography of Jeffrey Sachs, “Jeffrey Sachs: The Strange Case of Dr. Shock and Mr. Aid” (2014), the author found himself reevaluating his perception of this prominent economist. Sachs, currently the Director of the Earth Institute at Columbia University with a staff of 850 and an annual budget of $85 million, serves as an advisor to the United Nations Secretary for Millennium Goals promotion and is a fellow at the Rockefeller Foundation. He has authored numerous books, including “The End of Poverty: How We Can Make It Happen in Our Time.”
Early Career and Shock Therapy Advocacy
At 35, Sachs was invited to implement a shock therapy program in Bolivia to curb inflation, achieving moderate success. Soon after, he was approached by the governments of Poland and Russia to assist in transitioning to free-market economies using shock therapy approaches.
It’s worth noting that Sachs, despite his limited experience post-doctorate and newly appointed research position in Harvard’s Economics Department, was entrusted with these significant responsibilities.
Success in Poland and Failure in Russia
Poland’s shock therapy plan was relatively successful, contributing to its current status as one of Europe’s most prosperous economies. This success can be attributed to the Polish population’s commitment and minimal U.S. involvement, aside from occasional support akin to another Marshall Plan for Europe.
In contrast, Russia’s shock therapy journey took a drastically different turn. Sachs advocated for rapid shock therapy, but the Russian populace never fully endorsed his approach. Consequently, the outcomes were disastrous. After several years of advising, Sachs resigned, with his brief collaboration in the process being openly acknowledged.
The Russian Economic Catastrophe
From 1991 to 1998, Russia’s Gross Domestic Product plummeted by 43.3%. Industrial production dropped 56% between 1991 and 1996. By 1998, over 80% of Russian businesses had gone bankrupt, with 70,000 factories shutting down. Agricultural production halved compared to 1886-1990, resulting in the collapse of numerous agricultural factories and loss of domestic subsistence means. The standard of living fell by half, and the number of people living in poverty surged from 2 million to 78 million.
The catastrophic consequences can be attributed to multiple factors, including Boris Yeltsin’s presidency, the Communist Party, Jeffrey Sachs, and the United States. The U.S. government’s lack of intervention amidst Russia’s economic crisis, despite its status as the world’s second-most heavily armed nation, bears significant responsibility. This negligence led to the rise of Russia’s plutocratic crisis, paving the way for Vladimir Putin’s ascent.
Sachs’ Shift in Focus
To salvage his reputation—without defending his free-market stance—Sachs underwent a dramatic transformation, becoming an advocate for poverty eradication and sustainable development. He championed the cause of international aid for Africa, constructing 500 development villages with support from various organizations.
However, Wilson remains skeptical of Sachs’ achievements. He argues that these “Millennium Villages” have demonstrated little success, with minimal resource transfer and questionable outcomes.
Sachs’ Enduring Support for Free Markets
Despite the Russian debacle, Sachs has maintained his faith in free markets and Friedman’s followers. He altered his career trajectory to atone for his past mistakes, distancing himself from the consequences that facilitated Putin’s rise to power.
Key Questions and Answers
- Who is Jeffrey Sachs? An economist and director of the Earth Institute at Columbia University, Sachs has advised on economic policies worldwide and authored books like “The End of Poverty.”
- What were Sachs’ early career achievements? He implemented a shock therapy program in Bolivia and advised Poland and Russia on transitioning to free-market economies.
- Why did Russia’s shock therapy fail? The rapid approach advocated by Sachs faced resistance from the Russian population, leading to severe economic consequences.
- How did Sachs change his focus? After the Russian crisis, Sachs shifted to poverty eradication and sustainable development, constructing Millennium Villages in Africa.
- What is Wilson’s critique of Sachs’ Millennium Villages? Wilson argues that these projects have shown little success and suffer from insufficient resource allocation.
