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Smart countries learn, adapt policy successes of others
By Jeffrey D. Sachs |
October 9, 2012, Tuesday
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IN many of history's most successful economic reforms, clever countries have learned from the policy successes of others, adapting them to local conditions.
Through a process of institutional borrowing and creative adaptation, successful economic institutions and cutting-edge technologies spread around the world, and thereby boost global growth. Today, too, there are some great opportunities for this kind of "policy arbitrage," if more countries would only take the time to learn from other countries' successes.
For example, while many countries are facing a jobs crisis, one part of the capitalist world is doing just fine: northern Europe, including Germany, the Netherlands, and Scandinavia. Germany's unemployment rate this past summer was around 5.5 percent, and its youth unemployment rate was around 8 percent - remarkably low compared with many other high-income economies.
How do northern Europeans do it? All of them use active labor market policies, including flex time, school-to-work apprenticeships (especially Germany), and extensive job training and matching.
Likewise, in an age of chronic budget crises, Germany, Sweden, and Switzerland run near-balanced budgets. All three rely on budget rules that call for cyclically adjusted budget balance. And all three take a basic precaution to keep their entitlement spending under control: a retirement age of at least 65. This keeps costs much lower than in France, and Greece, for example, where the retirement age is 60 or below, and where pension outlays are soaring as a result.
In an age of rising health-care costs, most high-income countries - Canada, the European Union's Western economies, and Japan - manage to keep their total healthcare costs below 12 percent of GDP, with excellent health outcomes, while the US spends nearly 18 percent of GDP, yet with decidedly mediocre health outcomes. And, America is the only for-profit health system of the entire bunch.
In an age of climate change, several countries are demonstrating how to move to a low-carbon economy. On average, the rich countries emit 2.3 kg of CO2 for every kg of oil-equivalent unit of energy. But France emits just 1.4 kg, owing to its enormous success in deploying safe, low-cost nuclear energy.
Sweden, with its hydropower, is even lower, at 0.9 kg.
In an age of intense technological competition, countries that combine public and private research and development (R&D) financing are outpacing the rest.
Happiness
And, in an age of pervasive anxiety, Bhutan is asking deep questions about the meaning and nature of happiness itself. In search of a more balanced society that combines economic prosperity, social cohesion, and environmental sustainability, Bhutan famously pursues Gross National Happiness rather than Gross National Product.
Many other countries - including the United Kingdom - are now following Bhutan's lead in surveying their citizenry about life satisfaction.
The countries highest on the ladder of life satisfaction are Denmark, Finland, and Norway. Yet there is hope for those at lower latitudes as well. Tropical Costa Rica also ranks near the top of the happiness league.
So here is one model economy: German labor-market policies, Swedish pensions, French low-carbon energy, Canadian healthcare, Swiss energy efficiency, American scientific curiosity, Brazilian anti-poverty programs, and Costa Rican tropical happiness.
Of course, back in the real world, most countries will not achieve such bliss anytime soon. But, by opening our eyes to policy successes abroad, we would surely speed the path to national improvement in countries around the world.
Jeffrey D. Sachs is professor of economics and director of the Earth Institute at Columbia University. Copyright: Project Syndicate, 2012.www.project-syndicate.org
Through a process of institutional borrowing and creative adaptation, successful economic institutions and cutting-edge technologies spread around the world, and thereby boost global growth. Today, too, there are some great opportunities for this kind of "policy arbitrage," if more countries would only take the time to learn from other countries' successes.
For example, while many countries are facing a jobs crisis, one part of the capitalist world is doing just fine: northern Europe, including Germany, the Netherlands, and Scandinavia. Germany's unemployment rate this past summer was around 5.5 percent, and its youth unemployment rate was around 8 percent - remarkably low compared with many other high-income economies.
How do northern Europeans do it? All of them use active labor market policies, including flex time, school-to-work apprenticeships (especially Germany), and extensive job training and matching.
Likewise, in an age of chronic budget crises, Germany, Sweden, and Switzerland run near-balanced budgets. All three rely on budget rules that call for cyclically adjusted budget balance. And all three take a basic precaution to keep their entitlement spending under control: a retirement age of at least 65. This keeps costs much lower than in France, and Greece, for example, where the retirement age is 60 or below, and where pension outlays are soaring as a result.
In an age of rising health-care costs, most high-income countries - Canada, the European Union's Western economies, and Japan - manage to keep their total healthcare costs below 12 percent of GDP, with excellent health outcomes, while the US spends nearly 18 percent of GDP, yet with decidedly mediocre health outcomes. And, America is the only for-profit health system of the entire bunch.
In an age of climate change, several countries are demonstrating how to move to a low-carbon economy. On average, the rich countries emit 2.3 kg of CO2 for every kg of oil-equivalent unit of energy. But France emits just 1.4 kg, owing to its enormous success in deploying safe, low-cost nuclear energy.
Sweden, with its hydropower, is even lower, at 0.9 kg.
In an age of intense technological competition, countries that combine public and private research and development (R&D) financing are outpacing the rest.
Happiness
And, in an age of pervasive anxiety, Bhutan is asking deep questions about the meaning and nature of happiness itself. In search of a more balanced society that combines economic prosperity, social cohesion, and environmental sustainability, Bhutan famously pursues Gross National Happiness rather than Gross National Product.
Many other countries - including the United Kingdom - are now following Bhutan's lead in surveying their citizenry about life satisfaction.
The countries highest on the ladder of life satisfaction are Denmark, Finland, and Norway. Yet there is hope for those at lower latitudes as well. Tropical Costa Rica also ranks near the top of the happiness league.
So here is one model economy: German labor-market policies, Swedish pensions, French low-carbon energy, Canadian healthcare, Swiss energy efficiency, American scientific curiosity, Brazilian anti-poverty programs, and Costa Rican tropical happiness.
Of course, back in the real world, most countries will not achieve such bliss anytime soon. But, by opening our eyes to policy successes abroad, we would surely speed the path to national improvement in countries around the world.
Jeffrey D. Sachs is professor of economics and director of the Earth Institute at Columbia University. Copyright: Project Syndicate, 2012.www.project-syndicate.org
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