JEFFREY SACHS IS NOT A GOOD GUY: HERE'S WHY
by John Spritzler
July 18, 2023
The URL of this article for sharing it is https://www.pdrboston.org/jeffrey-sachs-is-not-a-good-guy
Jeffrey Sachs is famous for having been intimately involved in Poland and Russia after the fall of the Soviet Union as an economic advisor who advocated what he called, and still defends in his own words here, "shock therapy." Sachs's "shock therapy" was an atrocious attack on the working class!
Immediately below is a long extract from a year 2000 article explaining what this shock therapy was all about, and how absolutely horrible it was [the bolding is mine] for ordinary people in the former Soviet Union. Following this extract is an article I wrote about Jeffrey Sachs in 2001 about his deceitful keynote speech to an AIDS conference at which I was in attendance as an AIDS clinical trial researcher.
[Start of extract]
Russia’s descent into gangster capitalism began in the early 1990s when Russian market reformers attempted to introduce capitalism in one fell swoop—on the advice of Western advisors, particularly Harvard University “shock therapist,” Professor Jeffrey Sachs and his capitalist provocateurs at the Harvard Institute for International Development (HIID).
In 1990 and 1991, as Gorbachev’s reform program stalled and his government was collapsing, Sachs and his Institute colleagues advised Yegor Gaidar, Yeltsin’s first economic czar, to dismantle quickly most of the controls and subsidies that had structured life for Soviet citizens for most of the century. Sachs predicted a more or less smooth transition to a normal western-style capitalism, once the initial shock of price decontrol was over. In the early nineties, Dr. Sachs bragged about how his prescriptive shock therapy had cured Bolivia’s hyperinflation in nine days. Eastern Europe’s and Russia’s reform, he allowed, might take longer.
Sachs could think this because, like most mainstream economists, he has a completely ahistorical understanding of economics. Like Adam Smith, Sachs believes that the “propensity to truck and barter” is built into human nature. So he supposed the transition to capitalism would be a natural, virtually automatic economic process: start by abandoning state planning, free up prices, promote private competition with state-owned industry, and sell off state industry as fast as possible—and economic growth and prosperity would follow. As he wrote in 1990:
All this [shock therapy] will reduce real wages sharply in 1990, by 20% or so relative to 1989. That is a brave step. But this decline will not mean an equivalent decline in actual living standards. These will in fact fall much less sharply, bolstered by the end of shortages and the end of the ‘inflation tax’ now eating away at households’ cash balances, genuine gains not reflected in the real wage indexes.1
The crucial thing, Sachs stressed, was not to waste time on half measures or hopeless “third ways” such as a “chimerical market socialism” but to force the transition to a western-style market economy as fast as possible. So Gaidar and his successor, Anatoly Chubais, wasted no time and went “all the way.” Russia got the shock: On January 2, 1992, price controls were lifted on 90 percent of traded goods, and by the end of 1994, three-quarters of Russia’s medium-sized and large-scale industrial enterprises had been privatized—“sold” off (stolen, would be a more accurate description) to management, underworld gangsters and the like—and the private sector produced 62 percent of Russia’s officially reported gross domestic product (GDP).
The Demodernization of Russia
The result was an unmitigated disaster. In the first year of reform, industrial output collapsed by 26 percent. Between 1992 and 1995, Russia’s GDP fell 42 percent and industrial production fell 46 percent—far worse than the contraction of the U.S. economy during the Great Depression. Worse, pace Dr. Sachs, it has yet to recover. Since 1989, the Russian economy has halved in size, and continues to drop.
Real incomes have plummeted 40 percent since 1991; 80 percent of Russians now have no savings. The Russian government, bankrupted by the collapse of economic activity, stopped paying the salaries of millions of employees and dependents. Unemployment soared, particularly among women. By the mid to late nineties, more than forty-four million of Russia’s 148 million people were living in poverty (defined as living on less than thirty-two dollars per month); three quarters of the population live on less than one hundred dollars per month.
Suicides doubled and deaths from alcohol abuse tripled in the mid-nineties. Infant mortality reached third-world levels while the birthrate plummeted. After five years of reform, life expectancy fell by two years (to seventy-two) for women and by four years (to fifty-eight) for men—lower than a century ago for the latter. Currently, deaths so greatly exceed births that the Russian population is falling by about one million per year. If these trends continue, in the next thirty years Russia’s population is expected to fall from 147 million to 123 million—a demographic collapse not seen since the Second World War.2
“Economic reform” has also brought the mass abandonment of children. By the end of 1998, at least two million Russian children were orphaned—more than at the end of the Second World War—and only about 650,000 live in orphanages. The rest were homeless. A year after leaving orphanages, one in three becomes an alcoholic, one in ten commits suicide. In what was once the second industrial power in the world—where schools turned out far more scientists and engineers per year than the United States—ten million children currently do not attend school.
This human catastrophe, which mainstream economists call “bumps on the road to a market economy” is more accurately summed up by Professor Stephen Cohen of New York University as the “endless collapse of everything essential to a decent existence.”
It is also the process of creation of a true Russian proletariat. Under communism, Russian workers certainly did not own the means of production, but they did, and many still do, in a real sense “own” their jobs. They had long-established rights to housing, state-provided medical care, childcare, and numerous subsidies from the state. These social property rights are being destroyed in the process of transition to a “normal” market economy.
Divested, “freed” from control, possession, or ownership of means of production, the majority of people of the former Soviet Union are forced to come to the market with, in Marx’s words, “nothing to sell but their skins.” Though probably more than they bargained for, the architects of the transition insist that a certain degree of pain was unavoidable, at least in the short run, in order to give Sachs’ “New Russian” entrepreneurs the freedom to remake the economy, thereby opening the way to greater prosperity for all. Let us turn now to the new entrepreneurs, the other great class of capitalism.
Sachs’ reforms gave the “New Russian” entrepreneurs their freedom, to be sure. But instead of investments rationalizing the economy along capitalist lines, Russia’s new bourgeoisie just plunged into a hellish free-for-all of “grabification”—a brutal struggle to steal everything they could get their hands on. They plundered the nation’s wealth of natural resources, sold state-owned gold, diamonds, oil, gas, Siberian forests, even plutonium, and unloaded them on the West to amass their private fortunes. And, as we’ve seen in the money-laundering scandals of late, they also privatized billions of dollars of western aid.
Instead of plowing their stolen wealth into productivity-enhancing investments, as Sachs’ reformers had hoped, they have, for the most part, just socked their loot away in secret western bank accounts or squandered it on yachts and villas on the French Riviera. By the mid-nineties, Russia’s red bourgeoisie had stashed more than 150 billion dollars in foreign bank accounts, investments, and properties. At home, they’ve “invested” in furs, limousines, and high living. And they’ve hired private armies of gun thugs to defend their stolen wealth and possessions (from each other).
But this is only until, as the Thatcherite Economist frankly acknowledged, the “legitimacy” of these stolen properties can be ratified by compliant governments—as were the enclosures in England or the vast land grabs in the nineteenth-century United States.
In 1994, a U.S. Treasury official told journalist Seymour Hersh that U.S. shock therapists failed “to anticipate fully the viciousness and rapaciousness” of Russia’s new mafioso capitalists: “Much worse than the American robber barons. These guys take the fillings out of teeth after murder. It’s a nightmare.”3 Sachs explains these unhappy results by blaming the political culture of the old Communist regime. But this cannot be a sufficient explanation for the wholesale plunder brought on by the transition to capitalism throughout the post-Communist world. The main reason is that capitalism as a social system requires such a one-time wholesale expropriation of social property.
Why? Because capitalism requires capitalists, a class of people vested with an effective monopoly ownership of the means of production. But as Sachs himself points out, prior to 1989, Russia’s industries, mines, and natural resources “were nominally owned by the state and thus by nobody.” The nomenklatura collectively monopolized control of the means of production but they did not own them privately. The class had to be created. Sachs’ protocols for the transition contain no discussions of robber barons or gangster capitalists. Fetishizing an abstract ahistorical model, Sachs imagined that once prices were freed, once private enterprise was legally permitted, “capitalists” would somehow appear, stride forth, and take command of the economy.
But where were these capitalists to come from? In 1990, no one in Eastern Europe or Russia had significant monetary wealth or private property in the industrial means of production. There was no bourgeoisie—not even a pre-revolutionary bourgeoisie to give the economy back to. As the joke went in Poland, “What were they to do—give the Lenin shipyard back to the Lenin family?” So no one had the means to buy the factories, the mines, the forests, the collective farms, or to hire labor. That’s why they all feared that western investors would just come in, buy up everything, and take over the whole economy.
So who were the capitalists, the “New Russian” entrepreneurs, supposed to be? Sachs was quick to rule out the workers: “[T]he overriding aim should be to transform state enterprises into private corporations, with transferable ownership shares, rather than, say, into cooperatives or firms self-managed by their workers.” Sachs also insisted that “[T]he government must…stop managers walking away with state property.”
If not the workers and not the managers, who would become the capitalists, the owners of the private corporations? How could the reformers go “all the way” to set up a “western-style” capitalism without capitalists? To set up the basis for “normal” capitalist accumulation, they needed to carry out “primitive accumulation”—capitalists had to be created. Individuals had to take possession, privatize property, factories, mines, wells, and forests. But since no one had the money to buy these state properties from the government, there was no feasible way this privatization could be done legally, legitimately, or morally. And given Sachs’ insistence on the need for speed in the transition, there was no time for a native capitalist class of small entrepreneurs to grow up over decades or centuries into large corporations. This class had to be hothoused, virtually overnight. And it was. In the end, a combination of elements of underground mafiosa, the nomenklatura, especially the top managers of certain industries, and segments of the intelligentsia —these people were essentially drafted to privatize the economy criminally. Indeed, Sachs and the HIID bear much responsibility for the creation of Russia’s criminal capitalists because they drafted many of the privatization decrees. Indeed, the U.S. government is now investigating whether, and to what extent, the HIID broke U.S. laws by funneling hundreds of millions of United States Agency for International Development (USAID) dollars into the hands of corrupt privatizers like Anatoly Chubais and his cronies, and to what extent Harvard academic advisors personally profited in the process.
In sum, a decade after the latest generation of Harvard’s “best and brightest” did Russia, the one-time superpower has been effectively demodernized. The economy is in ruins; the country is saddled with more than 150 billion dollars in debt; healthcare and social services have been gutted; 70 to 80 percent of the population survive at subsistence; a third of the country’s population is now living in extreme poverty, many on the verge of starvation; and a class of gangster capitalists has supplanted the Stalinist bureaucracy. And this is what U.S. economists call a “rational,” “normal” economy.4
The Economist (January 13, 1990), p. 23; the following quotes from Sachs are also from this article.
Michael Specter, “Russia’s Degenerating Health: Rampant Illness, Shorter Lives,” New York Times, February 19, 1995.
Atlantic Monthly, June 1994, p. 79, also the source of the quote on page 2.
Some measure of the depth of despair among the victims of the transition to capitalism in Russsia is revealed in a recent poll on attitudes to reform. When asked, “What economic system would you prefer?” 48 percent of Russians polled said they would prefer “state planning and distribution,” while just 35 percent preferred “private property and the market.” To the statement “It would have been better if the country had stayed as it was before 1985,” 58 percent answered “yes;” only 27 percent said “no.” See the Economist, December 18, 1999, p. 21.
For a lengthier analysis, see Richard Smith, “The Chinese Road to Capitalism,” New Left Review (May-June 1993), pp. 55-99. The following description draws from that article.
The methods and extent of offical corruption have been widely reported in China and the West. One of the best sources is a widely read new book Zhongguo de xianjing [China’s Pitfall] (Hong Kong: Mingjing chubanshe, 1998), by newspaper reporter and former economist He Qinglian, which pushed the limits of official tolerance. Though not yet available in translation, see the review by Liu Binyan and Perry Link in the New York Review of Books (October 8, 1998)
[End of extract]
I first ran into Jeffrey Sachs in 2001 and wrote this article about him May 11, 2001.
DID THE JEFFREY SACHS AIDS SPEECH DESERVE APPLAUSE?
[Note to readers: An earlier version of this article was written based on the author's recollection of the speech. This version is based on more accurate quotations from the audio tape of the speech on the web at www.retroconference.org (sorry, no longer a live link--J.S.)]
At the February 4 AIDS conference in Chicago (the 8th Conference on Retroviruses and Opportunistic Infections) Jeffrey Sachs gave a keynote speech calling for the U.S. government to spend $2 billion a year to buy HIV drugs from pharmaceutical companies and provide them free to HIV infected Africans.
Jeffrey Sachs' speech received a big applause because the audience was very happy to hear an influential economist like Sachs, who is a major player on the world scene, expressing the concern that all good people have for the plight of 37 million HIV-infected people in sub-Saharan African countries where 17 million people have already died of AIDS in the last two decades. According to a UN report, life expectancy in nine of these countries is expected to fall by 20 years due to AIDS, and most people in these countries cannot even pay the $1.50 price for a simple HIV test, never mind the thousands of dollars pharmaceutical companies charge for their treatments.
Jeffrey Sachs' Speech Covered Up The Real Cause of Poverty and AIDS in Africa
Sachs' speech was profoundly dishonest, and hurt rather than helped efforts to make HIV drugs available to the Africans who need them. Sachs devoted the first half of his speech to an explanation of Africa's problems that eliminated any mention of the fact that they are in large measure caused by the exploitation of African people and resources by corporate powers based in the developed nations. He spoke as if the poverty of Africa were just a fact of nature, with statements like: "The essence of Africa's crisis is fundamentally its extreme poverty and therefore its inability to mobilize out of its own resources even the barest of minimum resources to address any of the public health crises that Africa faces."
Large corporations own the richest resources on the African continent, for example the oil fields of Nigeria and the diamond and gold mines of South Africa. Instead of examining the actual relationship between these corporations and governmental bodies – the way they influence local governments to respond to corporate rather than public health needs – Sachs described international corporate leaders as people who have been unconcerned with Africa. Sachs spoke of "the utter, complete, total 100% failure of international policy to address this crisis in the poor countries of the world." He said that "The international response [to the AIDS pandemic in Africa] essentially could not have been less...a lot of hand-wringing but no real assistance" and "We essentially have done nothing." These descriptions seem calculated to cover up the role of corporations in creating the conditions of extreme poverty and social dislocation wherein AIDS has flourished. An honest speech from a world-renowned economist would have explained how the poverty and related conditions that are driving the AIDS epidemic in Africa are not the cause of Africa's problems, they are the symptoms of corporate exploitation of Africa; and any attempted solution which fails to deal with this reality cannot succeed.
From the early days of European colonialism to the present when multinational corporations dominate African economies, wealthy Westerners have been extracting the mineral and agricultural wealth from the continent – not to mention labor in the form of slaves in the past and cheap labor in Africa today. To cite just one example, consider the role of Shell Oil Company in Nigeria. Shell Oil Company owns 30 percent of the state oil company and provided arms to the Nigerian military government's police forces to guard its oil installations. Most of the oil comes from the Niger delta where the Ogoni people live. Every year the delta is polluted by 2.3 billion cubic meters of oil from some 300 separate spills, almost one a day. Shell Oil is destroying the natural resources on which agriculture depends. When Ken Saro Wiwa, an Ogoni writer and environmentalist, led protests against Shell Oil's destruction of the people and the environment, the military government executed him and eight fellow Ogoni activists. In Ken Saro Wiwa's last words he condemned Shell Oil's "ecological war" and its "dirty wars against the Ogoni people" and predicted that "the crimes of that war [will] be duly punished." But according to Jeffrey Sachs, Africa's problem is that western corporations "essentially have done nothing."
Western elites have for centuries promoted weak governments in Africa which don't stand up against Western corporations and which are unresponsive to the people's needs because such governments are exactly what corporations like Shell Oil require to plunder and despoil the continent. The effect of this is poverty, malnutrition, environmental catastrophe, little or no public health measures, and the AIDS epidemic itself because people in poorer health are, as is well known, more susceptible to infectious diseases.
Even prostitution, which is often named as a main cause of the African AIDS epidemic by those who do not want to address the role of exploitation and poverty, is largely the result of multinational corporations owning the major resources of the continent. In South Africa, for example, the Anglo-American Corporation, a mining company, dominates the South African economy, and posted a 3.48 billion U.S. dollars profit for 2000. Without any other way to support their families, men are forced to leave their families and travel hundreds of miles to live in barracks and work in mines owned by an elite. The rate of serious and fatal injuries is so high that the risk of HIV infection seems small in comparison. Women, similarly desperate, survive by prostituting themselves to the men. None of this would happen if these people were really in possession of the resources of their own country, in the absence of which their government is, at best, a fake democracy. (Former South African Presidents Nelson Mandela and now Thabo Mbeki opposed apartheid, but not corporate control of South Africans, and for this reason the corporate elite have backed them. Harry Oppenheimer, a major shareholder in Anglo-American Corp., said "We owe an immense amount to Mandela. If it had not been for him, we would not have had the peaceful transition.")
As a professor of international trade, Sachs certainly knows that companies like Shell Oil and Anglo-American Corp. are draining Africa of its wealth. Yet Sachs told his audience that the "essence of Africa's crisis is fundamentally its extreme poverty." This is simply a cover-up, and as intellectually bankrupt as a physician diagnosing a patient's illness as due to "extreme illness."
Sachs' speech shielded the very people who are responsible for the problems of poor Africans by describing their crimes of commission as simply acts of omission. Sachs defended the pharmaceutical company owners by telling the audience that "They are, and I think not rightly, becoming public enemy number one" and by describing the pharmaceutical companies' law suit against the South African government (to prevent it from importing generic HIV drugs bought at cost from a company in India) as "misguided" and "naive" rather than denouncing it as an example of the exploitative social relations that are the cause of the poverty and AIDS in Africa. At a more recent conference in Norway on AIDS drugs for Africans, Sachs shocked AIDS activists by launching into a blistering attack on the generics industry, and requested that the activists stop their campaign to license cheaper generic drugs and instead "respect" patents on medicines even in countries where patents do not exist. One leading activist, James Love, told a Boston Globe Magazine (June 3, 2001) reporter, "The more he [Sachs] hangs out with the Merck guys, the more he's focused on helping Merck. It's bizarre. It's simply not in the poor's interest to have the highest levels of intellectual property rights protection. He should be horsewhipped for saying that."
Identifying With The Exploiters
Another part of Sachs' speech was devoted to convincing the audience to identify with the wealthy corporate elite, including the pharmaceutical companies, and to look at the world from that point of view, in particular to view ordinary Africans angered by unequal access to AIDS drugs as a threat. Sachs used phrases like "We" and "Americans" as if ordinary Americans benefited from or had any say in policies carried out by elite corporate and government leaders. He spoke, for example, of "a decade in which Americans enjoyed $9 trillion of capital gains – and we've only lost 1 of those in the last 9 months – so we're still up $8 trillion ladies and gentlemen..."
Sachs graphically described how to view the world if you are somebody enjoying "$9 trillion of capital gains," telling the audience:
"It's one thing to have a world where the rich countries are $35,000 per year and the 600 million in the poorest of the poor countries are below $350 per year and many $250 per year, and it's quite another to have a circumstance where millions of people are dying before our eyes from conditions that could be treatable with new products and pharmaceuticals that could save their lives, and they know it. It's a very dangerous situation that we're in from all aspects – ethical, public health, economic and political... We have recognition among our national intelligence council, Central Intelligence Agency, other intelligence estimates in the past year, the UN Security Council and other fora, a recognition that this pandemic fundamentally threatens U.S. interests...The pharmaceutical companies themselves I think are beginning to understand the risks... They are the target of a growing amount of activism..." [All bolds are mine, since the quotes are from an audio tape.]
By citing the CIA and framing the suffering of Africans as a threat to "our" economic and political interests, Sachs asked the audience to side with the wealthy and powerful in the world and to consider the merits of giving poor Africans a little today to prevent their taking much more of what they rightfully should have tomorrow.
The Sachs Speech Was About Public Relations, Not Public Health
Sachs' proposal for $2 billion per year for AIDS drugs for Africa doesn't really match the magnitude of the problem and he knows it. He admitted himself that this sum of money is "for a macro-economist, mere rounding error." His proposal did not include the most effective protease inhibitor class of drugs, and it did not include any realistic measures for developing the clinical infrastructures required to actually deliver the treatments to those who need them.
Sachs' proposal wasn't really about public health; it was about public relations for the world's corporate elite and, in particular, damage control for the pharmaceutical giants. It was meant to persuade the audience of three thousand scientists motivated by humanitarian goals to think of those who are really responsible for the unequal access to HIV drugs – the pharmaceutical companies and the class of corporate and political leaders they rely on to operate – as the good guys, and to think about the lack of HIV drugs for Africans the way the CIA thinks about it, as a problem because of the social upheavals that may result from people's anger.
What Will Really Help Africans – In Both the Short and Long Term?
What HIV-infected Africans need most of all is precisely what political and corporate leaders and their spokesmen like Jeffrey Sachs most fear – revolutions to make this a more democratic and equal world where neither capitalist nor communist nor socialist elites hold power. Only then will the thousands of medical researchers and clinicians and public health workers who want to develop treatments and vaccines and hopefully one day a cure for AIDS be provided the resources to accomplish this and to make these things available to all, and only then will they be freed of the profit-driven and social-control driven interference of wealthy elites who only care about making money off of these humanitarian efforts and protecting their power in a very unequal and undemocratic world. Even in the short term, the pressure on political and corporate leaders to provide AIDS drugs to Africa will be greater if Jeffrey Sachs fails in his efforts to divert criticism away from them, because their fear of being perceived as part of the problem instead of the solution is the only reason they have for providing the drugs in the first place.
Who Is Jeffrey Sachs? (as of 2001)