On GPS this weekend, historian Niall Ferguson squared off against economist Jeff Sachs on occupy Wall Street. Here's a transcript of what they had to say (you can also watch the lively debate in the video above):
Fareed Zakaria: Jeff, you were at Occupy Wall Street. You've in a sense lent it support. Why do you do that? What do you think is going on there?
Jeffrey Sachs: Well, I think they have a basically correct message that when they say "we are the 99 percent," that they're reflecting the fact that the top one percent not only ran away with the prize economically in the last 30 years, but also took the power, manipulated it, twisted it, broke the law. Brought the world economy to its knees actually, and it's time to correct things. And I think that that's what Occupy Wall Street is really about. The fact that every marquee firm on Wall Street broke the law in a major way, it's now paying a series of fines. Some people are going to jail. People are disgusted about this.
Fareed Zakaria: But isn't what has caused the one percent or five percent of the top to do well, these very broad forces of technology, the information revolution which have empowered global knowledge workers, which have empowered capital rather than labor? So if it's all these much bigger structural forces, is it going to be remedied by some kind of political solution like a Buffett tax?
Jeffrey Sachs: I don't think it is all that. I think that markets caused a widening of inequalities in just about every high-income country. But some governments did something constructive about it, where starting in 1981 the U.S. government amplified this in quite reckless ways.
Because when Ronald Reagan came to office, rather than saying we have globalization, we have competition, we now have to do something about our skills, our technology and so forth, he said that government is not the solution to our problems. Government is the problem. It was a fateful call. And this is the path that we've been on for 30 years of dismantling that part of our social institution which – institutions which could actually help with job training, help with education, help with science and technology in a more effective way.
But more than that, Wall Street didn't just gain from globalization, it has been completely reckless. They gamed the system. They packed toxic assets. They sold them to unwitting investors. They let the hedge funds bet against them. And the SEC is finally calling them to account.
But the public is disgusted because after that happened, lo and behold, the next thing is that they begged for bailouts; they got the bailouts. The moment they got the bailouts, they said, "Leave us alone", "deregulate", "free markets". So they're completely hypocritical in this behavior.
We want everything of ours until we need help, then we want your help, once we get your help, then we want everything again. And it's that kind of impunity that has brought people out around this country deeply angry.
Niall Ferguson: Well, first of all, I think it's important to avoid criminalizing one percent of the population which you just did, Jeff. I mean, there's no question that major financial institutions have been fined and rightly so. But to turn that into an indictment of three million people seems to me –
Seems to me actually rather reckless. And having watched what you said at Occupy Wall Street, I have to say I thought you overstepped the mark and ceased to be an academic and became a demagogue at that point.
Jeffrey Sachs: Whoa, Niall. You're the one who said that this –
Niall Ferguson: No, let me – no, let me finish, Jeff.
Jeffrey Sachs: The last time bankers came close to ruling America –
Niall Ferguson: Hang on, hang on. I let you have – I let you have your say.
Jeffrey Sachs: No, don't call me names like this.
Niall Ferguson: This is a demagoguic argument especially for somebody who knows that the principal driver of inequality has actually been globalization, not malpractice by Wall Street.
The second part of your argument is that banks misbehaved in Europe, too. I mean, those countries that did not go down the Reagan route have got banks that are insolvent, banks that were guilty of incompetence and malpractice.
So you argued that this was something specific to the United States. And the faults of – and the faults of Ronald Reagan.
Jeffrey Sachs: Of course it was.
FERGUSON: Just a second. The banks in Europe are in just as big a mess but they didn't go down the Reagan route. So it's not only bad economics, but it seems to me it's bad history and certainly bad politics.
Jeffrey Sachs: Let's talk what I said and what is important here. And what I've said is that in a society that is so unequal as ours and where the very top has abused the system repeatedly in the banks, the CEOs of this country taking home take-home pay hundreds of times their workers' pay, unlike any other part of the world, the hedge funds and the banks got unbelievable terms of the deal to get capital gains taxes, carried interest down to 15 percent tax rates. So outrageous compared to what the rest of America bears.
Niall Ferguson: You can't believe that this is the reason why the bottom quintile of the population is in poverty and has very limited social mobility. That's nothing to do with what happens on Wall Street, as you well know. The real problem that we have in this country, it seems to me, is declining social mobility, and not enough is said about that.
Jeffrey Sachs: Well, I write a great deal about it. And the big difference of social mobility –
Niall Ferguson: Right. And what is the principal of –
Jeffrey Sachs: The big difference of social mobility in this country is the lack of public financing for early childhood development, for daycare, for preschool, for early cognitive development, for nutrition programs, for decent schools, unlike all of the rest of the high-income world. We do not help the poor. And that's why our social mobility has come to the lowest level of any of the high-income countries.
And we are 10 or 15 percentage points lower in government revenues to help for that. And I'm asking in the book for just a few percentage points and some decency at the top that they start paying their taxes at a decent rate so that we can actually pay for preschool and pay for childcare. And that's what low social mobility is about, Niall.
Niall Ferguson: But when you look at the quality of public education in this country, you can't simply attribute its low quality to a lack of funding. And I think there's a legitimate argument that the biggest obstacle to social mobility in this country right now is not the fat cats of Wall Street, whom I do not rush to defend, but the teachers unions, who make it almost impossible to improve public school in cities like New York where we are today.
Fareed Zakaria: But would you comment on Jeff's basic point which is, you know, yes, it's not true that the gap has been produced entirely because of government policy, but that you could use government policy and government resources to help in various ways. Education may be one part of it, child nutrition would be another part of it. You know, and that that becomes impossible because you're taxing at 14 percent and spending at 23 percent?
Niall Ferguson: So a major problem here is that the projects of transforming the United States into something more like a European country does imply significant increase in taxation as well as in expenditure. And there are two obstacles to this. One, it's very clear that this would not be timely given the situation that the economy finds itself in. And two, most Americans don't believe that that is going to deliver the kind of improvement that they would like to see in education.
Look how the federal government fares and the programs that it does spend a lot of money on. Health care, social security, I mean, it's already insolvent with its provision through Medicare. This is one of the hugest unfunded liabilities in the world. And the answer that Jeff has to the U.S. problem is let's create an even bigger federal spending program on public education. I mean, it's just not credible, Jeff.
Jeffrey Sachs: Niall, you're confusing so many issues. My point is that if we are going to be decent and competitive, we have to invest in it. That's paying the price of civilization. That costs money. The fact that the United States collects in total revenues at all levels of government right now about 27 percent of national income compared with 35 percent and above in other countries is the gap of decency right now where –
Fareed Zakaria: But it's also the gap you're saying of competitiveness. Now, the path to competitiveness for you is a larger government that spends more, correct?
SACHS: If it invests properly, of course.
Niall Ferguson: You can understand why people might be skeptical about that.
Jeffrey Sachs: I'm talking about investment in education. I'm talking about investment in job skills. I'm talking about investment in science and technology. Talking about investment in 21st century infrastructure. And we've been for 30 years demonizing government. We've been demonizing taxation. We have neglected to understand that a proper economy runs on two pillars, a market and government. And until we come back to that basic level of understanding that we need a mixed economy, not just a market economy, we'll continue to fail.
Niall Ferguson: Well, I'm sure the Chinese are listening to this debate with glee thinking, well, there are still academics in the west who think that the route to salvation is to expand the role of the state because that's certainly not what is happening in China. It is not what is happening in India. It is not what is happening in Brazil. The most dynamic economies in the world today are the ones which are promoting market reforms and reining in the rule of the state, which in those countries grew hypertrophically in the 20th century and that is a big problem in Jeff Sachs' argument.
Jeffrey Sachs: Thank you for the lecture. But the catching up phenomenon is quite different from the problems that the United States or other high income societies face right now, and for us –
Niall Ferguson: The problem is the falling behind phenomenon.
Jeffrey Sachs: - and for us to be able to have high prosperity at the living standards we want, we need training, we need education, we need infrastructure, we need governments that can pay for that.
Niall Ferguson: But you forgot and we need higher progressive taxation on the private sector, because that's the most important part -
Jeffrey Sachs: And we need the rich to pay their way, absolutely. Because they've run away with the prize. And they've run away with the prize -
Niall Ferguson: There's a simplification.
Fareed Zakaria: Unfortunately –
Jeffrey Sachs: That's part of the solution, stop calling it just one thing, Niall.
Fareed Zakaria: All right. I don't think – I think this is one of the rare cases where I was superfluous as a moderator. Jeff Sachs, Niall Ferguson, thank you very much.
I love your programme – it is compulsive viewing each Sunday – the Ferguson/Sachs exchange was especially compelling
and I feel that Sachs came out on top – Ferguson crossed the line with his allegation of demagoguery comment
That said, Fareed , I thought you as moderator, missed a great moment at the end to wrap up with the one point they could agree upon: higher progressive taxes on the rich.
Yes, despite opposed ideologies, both Sachs and Fergusson agreed that progressive tax was fair. I ddidn't mind when Fergusson defended Reaganomics as he himself is a Thatcherite. Ronald Reagon and Margaret Thatcher were soulmates in the 1980's, but I found it a bit over the top that he branded Sachs as demagogue.
he strikes me as demagogue also. are you sure people aren't just sucking up because he has money?
Hello Mr. Fareed,
I would like to start by saying – you did not fail, [yet :) ], as a moderator. It was an compelling argument between two view points that we needed to hear. I wish they had more time to take us deeper into their view points. As always, great show. Thank you!
I love your shows and your writing. You are organized, succinct. You are like a neurosurgeon they way you focus so clearly on the real issues at hand, with next to no rhetoric and nonsense. How about some discussion of privacy in the digital age? Would you consider that a global subject?
My husband and I watch your show religiously Sunday mornings. Typically he watches at 7 am while I am asleep and then talks over the show at 10 am when I am trying to watch it!!
That said, Nail Ferguson seriously owes Jeffrey Sachs an apology for accusing Jeffrey of being a demagogue. This couldn't be farther from the truth.
Sacks is correct & Ferguson is the first person I have heard speak that teaches at Harvard or went to Harvard that has no concept of reality. The banks were and are irresponsible just because there was a low interest rate does not give permission to any organization to commit a crime.
Jews were legally imprisoned & killed in Nazi Germany that did not make it moral nor did allow the Catholic Church to help the Nazi escape to South America dressed as priests & nuns. Making whiskey legal does not allow drunk driving but maybe Ferguson thinks the Nazi were correct??????????
Fareed Blew it. Where did they find Mr Fareed "The Freak" Zakaria? He's less journalist than ideologue. Never trust a third world man that fancies "batchi boys" from Afghanistan....
Niall Ferguson was the economic adviser to the McCain campaign. Do you remember McCain's comment that "the fundamentals of the economy are strong" – one week before the 2008 crash? Enough said. For one academic to call another a demagogue was outrageous!
Remember that Fergusen is a historian not an economist. And a right wing revisionist historian rather than a proper academic. His limited and flawed knowledge of economics was gleaned as a narcissistic and belligerent student in Thatchers Britain in the 1980s, when selfishness and arrogance became acceptable. He is unaware that the private sector under-invests in R&D, education and skills, infrastructure, health and that such investment is required to help the private sector generate higher returns...and that the government needs to play a role. This was what Sachs was trying to tell him but he was oblivious to this economic theory. Fareed, I suggest you get Fergusen on with Stiglitz, Krugman, Rodrik or Sen to argue economics. Let's put Fergusen's views to the test.
It appears he ditched McCain early in the campaign when he saw what he was up against.
However, this does not take away from the fact that this rightwing fanatic is given far too much credence and airtime. He should be relegated to Fox News.
Same old, same old. The Barry Goldwater/Lyndon Johnson debate has been going on for decades. We need some new ideas.
mr ferguson's demagogue comment was totally uncalled for. seemed he was from the start more looking to provoke a fight than participate in a serious debate. you should not have this guy on again fareed.
I have the utmost respect for Jeffrey Sachs and his work. I appreciate the rigor of the debate here and his courage and articulation of the issues and problems we face. Thank you, Mr. Sachs.
A free market needs a stable infrastructure platform to work from.Surely nobody can defend the quasi and illegal practices which lead to the crash in 2008. Yes some made a bundle playing with my money, but in the end- I did not. I am OK with the government setting some rules for trading and commerce so I don't end up buying crap filled with hidden crap. Who else is going to do it? I think we saw what happens when the fox is left in charge of the hen-house. The big question is , what degree of government regulation is the right amount?
Fareed et al should have got into that a bit more.
Fareed, as usual, great show. I think i need to read Ferguson's book to properly get his point. I am also on same spectrum as Sachs in their argument.
It really annoys me that Jeffery Sachs talks about "the 1%" as if he's not part of it. Look in the mirror dude! As Ghandi once said, "Be the change you want to see in the world".
This is hardly a guy who is lacking in money or power so I wish he would stop acting like he knows what it's like to be the rest of us. It's so patronizing.
Ferguson arguments were not only offensive but unsubstantiated (typical logic of rightwing extremists): China, India, and Brazil have big governments and huge investments in education, R&D, and infrastructure.
...not so sure about that...read the recent NY TImes story about India's huge problems re: infrastructure – not enough schools, not enough medicine etc.....
Did that man seriously demand we follow the European model of government, where Greece is about to default and the European Union may collapse at any moment?
Lets talk about China, who became an economic super power when it took over Hong Kong and embraced Capitalism and moved AWAY from Solciaism.
It's not always the case that one person can plant their flag in the top of an argument and claim, "I won." But such was the case with Sachs and Ferguson. When Sachs lays out point after point about his ideas and the direction we should take as a nation and Ferguson simply attacks him personally and doesn't lay out his vision from his book, it is clear that Sachs ate Niall's lunch. It's simple debate score keeping. In any discussion/debate, when one party has to stoop to name calling, it's over.
It was especially disconcerting to hear Ferguson simply regurgitate right wing talking points with a level of arrogance that made everything he said not only fall flat, due to the staleness of it but sound so mean-spirited as to sound desparate.
I think that Sachs quickly became too wrapped up in his own righteousness and anger, and was too quick to see Ferguson's points as personal attacks. I, for my part, felt that Sachs was seeming to criminalize 1% of the population by conflating everyone who made more than $380K a year with Wall Street bankers, which a moment's thought shows is incorrect.
So while I realize that most people support Sachs, I felt that Ferguson did a better job of trying to talk policy, rather than personal feeling and experience.
Corporate CEO pay should be set at 80 times of the lowest paid employee including part timers. Example: Low level employee earns $20,000 annually X 80 = $1.6 million for the CEO. Sounds fair. Also: If a company has layoffs totaling 20% of their workforce- the Company Principals should not receive a bonus, including stock, for 5 years after. If a company loses money no bonuses shall be given the year of the loss. How does that sound for fairness?
How did Ferguson get to teach at Harvard? I hope he's not teaching economics.
I was quite disappointed by Niall Ferguson. He presented himself like a politician rather than an academic. He didn't provide a counter-viewpoint so much as a few counter-points to Sachs' argument, some of which were distracting at best (comparing Brazil and China to the US).
Niall Ferguson is always ready to unashamedly defend the interest of his paymasters: bankers and money managers.
I watched, with great interests, this debate between Niall Ferguson and Jeff Sachs. It is interesting that the European background scholar (Ferguson) is more a market fundamentalist while an American scholar more a Keynesianist mixed economy champion.
The essence of Prof. Ferguson's view, however, is very questionable, particularly the way he described the BRICS "market-driven" economies. In the Chinese case, the market has never been as free as Ferguson claimed. The government's finger is always on the "trigger." There is no question that the market share of the economy has been steadily growing in the past 32-year reforms. The Chinese, however, have experienced its excessiveness in housing, healthcare, education, etc. and now are moving toward the European style of social democratic model. Indeed, after excessive communism and excessive marketism, China is moving toward the Goldilock "just right" place.
In the midst of the current unprecedented crisis of Western market extremism, it is time for the world to pause, think and search for a different model of political economy. It should be beyond and away from excessive greed, excessive consumerism, excessive laissez-faire, to mention just a few. A major task of a world leader is to search for a proper balance between the market and the state, between individual need and societal interests, between equality and efficiency, between materialistic growth and cultural/spiritual harmony, and between nurturing the innovative business class and protecting other vulnerable social groups. Yes, the European welfare states are overburdened, but average Europeans are far better shielded from the type of poverty than those less fortunate Americans (nearly 50 million of them living below the poverty line now).
Beyond the substance, I was also surprised to see how confrontational and ideological Ferguson was at the very onset of the discussion. I was wondering where one finds a British gentlemen.
With that, I really want to thank Zakaria for putting together quality discussions seldom seen in American broadcasting journalism.
I enjoyed watching the Fareed Zakaria interview of Jeffrey Sachs and Niall Ferguson. Mr Sachs made some very good points regarding the two pillars of the US economy – Market and Government. I wish that it were true, but the real and disappointing reality is that US Government has now degraded to be just a branch of Business. So now we see the synthesis of the two points of the Sachs – Ferguson debate: US Government is just a branch of Big Business. bought and paid for. So sad.
I normally think Fareed does good job – but he was asleep at the wheel on this one – and didn't hold Sachs feet to the fire in supporting his argument...Sachs is also a nasty debater – takes it to a personal level. I appreciate Ferguson's above board style and actually more all-encompassing and creative thinking. Sachs was sloppy in his thinking – there are enough demagogues in the world...in the end Sachs insights, if you could call them that – were lame.
Ferguson's invocation of China and India was kind of ludicrous. Both of those countries, as Sachs notes, are "catching up." More importantly, both of those countries – especially China – are places where huge numbers of people live in poverty and woudl benefit enormously from further government oversight and intervention. In China, the government knows that it is just a few percentage points of GDP growth away from social and political revolution and collapse. In India, about 50% of the population is illiterate. The question is never "is government necessary?" Government is always necessary, as this economic crisis has shown. The real question is "how do we make the necessary functions of government more effective?" That is the point that Sachs gets which Ferguson does not.
All of you sheep worshiping at Sachs feet are so ill-informed and misguided; Sachs argued for the bailouts that he is now criticizing. Read a book, or ten.
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