Both the U.S. and European economies are being “whipsawed” by globalization, and the failure of governments to cope with that lies behind the collapse of market confidence in the euro area and America, said Jeffrey Sachs, who heads the Earth Institute at Columbia University.
Writing in the Financial Times, Sachs said employment in the U.S. and Europe in the early years of the century was held up only by housing construction, fueled by low interest rates and reckless deregulation.
Jobs for low-skilled workers in manufacturing, and investment in industry, have been lost to Asian competition, while proving a bonanza for the super-rich, who have been able to invest in highly profitable projects in emerging economies, he said.
The poor are hurt twice, first by global market forces, then by the ability of the rich to park money at low taxes in hideaways round the world, Sachs wrote.
An improved fiscal policy would expand investment in human and infrastructure capital; cut wasteful spending on misguided military adventures such as Iraq, Afghanistan and Yemen; and balance budgets in the medium-term, partly through tax increases on high personal incomes and international corporate profits that are shielded by loopholes and overseas tax havens, Sachs concluded.