As I mentioned on ThePanelist.com, I attended Charlie Rose's interview of Jeffrey Sachs at the 92nd Street Y on Tuesday night. Jeffrey Sachs, who is the Director of the Earth Institute at Columbia University and has been an economic advisor to governments in Latin America, Eastern Europe, the former Yugoslavia, the former Soviet Union, Asia, and Africa, as well as an author and the only academic to have been repeatedly ranked among the world's most influential people by Time magazine, is about as close to a household name as an economist can get.
When Rose asked him about the current economic situation, Sachs said, "We'll wait a few years and we'll get out of this mess." Although he doesn't see it as approaching the severity of the Great Depression, he described the mess as "intentional" and pointed fingers at Alan Greenspan, The Fed (who "didn't pull the punch bowl away as the party got started"), and an unpopular and weak administration that is "financing a war that nobody supports." He argued that the behavior was not prudent and that imprudent behavior blows up eventually.
In response to how much the US bubble is affecting the rest of the world, Sachs explained that the weak dollar means we'll buy less from other countries and that the balance sheets of the banks of these countries might be in trouble. "I think we'll have a recession. The rest of he world will have a slowdown but a modest one." He said. "It isn't true anymore that when we sneeze the rest of the world gets pneumonia." Later he added that "[the US is] still the biggest economy in the world," but no longer the sole superpower that everybody fears and admires, the reasons being that we're making a lot of mistakes and the rest of the world is catching up.
Specifically addressing the Fed's bailout of Bear Stearns (BSC - $10.94), Sachs questioned what the company paid in billions in Christmas bonuses to their employees just two months prior. He didn't say definitively whether the Fed did the right thing but noted that the Fed was afraid and it's unclear to us exactly why. Personally, he conceded that he would not have taken the same course of action and thought that the change from Friday March 14th (extending credit for liquidity) and Monday, March 17th was a mysterious one.
As for the rest of 2008, Sachs said, "We don't know, but consumers might have finally realized that they can't spend more than they're saving."
Onto more political topics, Sachs pushed for "weapons of mass salvation" over weapons of mass destruction. He observed that poor countries, even Islamic extremist countries, are looking for partnerships, answers and solutions and we're looking for war. "The idea that we're in some kind of civilizational challenge is completely wrong headed," he said. Trying to solve problems by military means won't be nearly as effective as, for example, sending engineers to help build wells because "the overwhelming truth of these places is that they're in a water crisis."
Rose ended the interview asking when Sachs got on a crusade to end poverty, and Sachs said that his visit to Sub-Saharan Africa for the first time in 1995 "took the breath out of [him] for a decade." In Zambia eight of the 30 counterparts he worked with in government finance died of AIDS and the finance minister missed a meeting because his child had malaria.
Sachs also said that it took him two years to understand that the US was doing nothing to help the AIDS pandemic. As of 2000, $80 million was spent on the treatment of AIDS in Africa. That number rose to $6-8 billion by 2008, largely because the religious constituency of the White House encouraged Bush to take more aggressive action (Sachs credits Bono's influence over the evangelical community).
Sachs thinks we should aim for an annual fund of $40 billion, or 1/10 of 1% of our income, to cover primary health care for the third world. Even just $3 billion (or "a day and a half of Pentagon spending") would ensure that no one else in Africa died of Malaria. (To put it in even broader perspective, we spend $1 trillion on Iraq). "That's how we secure America's future," he said.
When Rose concluded by asking him what he wanted his legacy to be, Sachs said, "That we learned how to live with each other a little bit better. And that we learn that what unites us is more important than what divides us."