LUISS Open interviews economist Jeffrey Sachs.
Is President Trump anyhow moving towards the “smart, fair and sustainable” economy that you advocate in your book “Building the new American economy” (that has just been translated to Italian by LUISS University Press)? From an economic point of view, how would you judge his first year at the White House?
President Donald Trump has been much worse than I imagined. I was worried right after his election, but the situation is really terrible. The tax cuts he and the Republicans approved are deeply unfair: they raise the budget deficit, they will create tremendous problems in the future and most of the rest of what Trump is proposing – the trade wars, the unfairness of his policies, his cuts on social expenditures, his attacks on multilateralism – are all in the wrong direction.
In your book, you chose to give credit to at least to Trump’s pledge on international trade. An issue on which you recently had what you call a “change of heart”. Why? Weren’t the benefits of free trade one of the few topics on which all economists would agree?
The basic idea is that international trade expands the economy but it can lead to a widening of income inequality. The answer is not to stop trade but to redistribute income. In the United States, capital owners have become even richer and many workers have suffered. But rather than stopping trade, we should be adjusting the tax systems and providing benefits so that anybody can be a beneficiary of trade. What Mr. Trump is doing with his tariffs’ proposals will be highly destructive. It will hurt the U.S. economy, it will hurt other economies and it is likely to lead to a trade war, which will make everybody worse off. So, the point that I made in the book is to recognize that international trade can have distributional consequences that means that some parts of the economy are hurt by trade, but the answer is not to stop trade or to have a trade war, but to use fiscal policies – taxes and transfers – to share the benefits of the open economy.