[Asking the Scholar] Jeffrey Sachs: "The World Should Adopt the K-Green New Deal"

"Asia-Pacific Region Including Korea First to Escape Economic Crisis"
US and EU Face Difficulties Returning to Normal This Year
Global Cooperation Needed for Carbon Zero Policies... G20-Level Response Required
Promoting Green and Digital Transition Post-COVID-19
Maintaining Zero Interest Rates Amid Inflation Until 2025 Impossible
Wealth Tax Increase and International Cooperation Needed to Support the Poor

[Asia Economy New York=Correspondent Baek Jong-min] Jeffrey Sachs, a Columbia University professor known as the "rockstar of the economics world" in the United States, finds 24 hours a day insufficient these days. Many governments and international organizations are seeking his advice to respond to the future after the COVID-19 pandemic.

As a macroeconomist, Professor Sachs graduated from Harvard University with top honors and was appointed as a professor at his alma mater in his twenties, but he did not become complacent. Unlike other leading economists, he has taken the lead in poverty eradication and climate change response on the ground.

Unlike most famous economists, he has led change through action rather than sitting behind a desk. His advisory role to Bolivia, a developing country, helped resolve hyperinflation that reached 40,000%, proving that his theories are not detached from reality but alive and practical. It was natural that former UN Secretaries-General Ban Ki-moon and Kofi Annan relied on his insight and experience.

The economic and social environmental changes caused by the COVID-19 pandemic have provided justification for his theories. The departure of the Trump administration, which ignored climate change and prioritized America First, and the inauguration of the Joe Biden administration also raise expectations for his future role.

Asia Economy asked Professor Sachs about his insights on the changing global economic trends and future after the COVID-19 pandemic, the direction of the U.S. economy, and advice for Korea.

-The U.S. economy is recovering faster than expected, but difficulties are anticipated due to the resurgence of COVID-19. Although COVID-19 vaccines have been rapidly distributed, concerns are growing that vaccination will take a long time. Can the U.S. and the global economy truly return to the pre-COVID-19 state?

△I believe the Asia-Pacific region, including Korea, will be the first to recover from the economic crisis in 2021. The Asia-Pacific region has been most successful in suppressing COVID-19 by implementing effective public health policies.

In contrast, the U.S. and Europe have lagged in economic recovery due to inadequate public health measures. While COVID-19 vaccines will promote economic recovery, it is expected to take the entire year of 2021 to achieve vaccination and herd immunity. Until this year ends, it will be difficult for daily life in the U.S. and Europe to return to pre-COVID-19 normal.

Considering the shift to eco-friendly energy policies and digital services, the business environment cannot be the same as before. I believe all countries worldwide should adopt the 'Green New Deal' policy that Korea is promoting.

-There are criticisms that the U.S. lost economic leadership due to poor COVID-19 response. The Biden administration has announced large-scale economic stimulus, but the dollar remains weak, while China and Korea have quickly escaped the crisis, causing the yuan and won to soar. How will the competition for global economic leadership unfold?

△I believe the Asia-Pacific region is in a more advantageous position than the U.S. in future economic leadership competition. This region has superiority not only in managing the COVID-19 situation but also in all economic management areas. President-elect Biden will seek a turnaround by solving domestic U.S. problems and investing heavily in infrastructure for a transition to a green and digital economy, but severe political polarization in the U.S. is likely to be an obstacle.

-President-elect Biden shows a firm belief in climate change policies. He promised to rejoin the Paris Climate Agreement, which the Trump administration withdrew from. As a leading intellectual in the U.S. who has continuously emphasized climate change response, what climate change measures do you think are necessary going forward?

△All countries must prepare plans and technologies to phase out carbon energy by 2050. Renewable energy and electric vehicles are essential, and electricity should be used for heating and cooking as well. Logistics should aim for 'carbon zero' using hydrogen energy. The aviation sector should use batteries, advanced bioenergy, or synthetic energy. The steel industry must also eliminate carbon emissions. Safe nuclear energy should be utilized, and regional power grid integration should be considered. To achieve this, a structured regulatory framework, public and private sector investments, active research and development policies, and market-based compensation programs are necessary. Plans must be prepared by 2030 for the UN Climate Summit to be held this year in Glasgow, UK.

-The Korean government is also promoting the 'Green New Deal' policy, including nuclear phase-out. What advice would you give to the Korean government?

△Korea and all countries worldwide will unite for carbon-zero policies. Technical harmonization and cooperation at the level of the European Union (EU), the U.S., Japan, China, the United Kingdom, and the Group of Twenty (G20) are necessary. Coordination on international standards, research and development, financing, and other policy tools is also required. This issue will likely be a key topic at the G20 summit in Italy this year.

-Our way of life has completely changed after COVID-19. Which sectors do you see leading future economic development? What industries should governments nurture?

△The major issues that have arisen will continue to influence the future. First, the decarbonized energy system sector, including renewable energy and electric vehicles. Eco-friendly energy sectors such as hydrogen and methane gas are also promising. Second, the digital transformation of healthcare, education, finance, and government functions. Third, the field of pollution-free materials and resource recycling. Lastly, artificial intelligence (AI). Increasingly complex infrastructure, urban transportation, environmental management, and agriculture require more advanced AI.

-Due to COVID-19, savings have increased and consumption has decreased. Many worry that after COVID-19 vaccines are distributed, revenge spending and demand will surge, causing inflation to soar.

△Inflation will occur. However, the likelihood of significant inflation in 2021 is low. Some inflation is expected in 2022. There is a possibility of experiencing considerable inflation rates until around 2025.

-The U.S. experienced a second zero interest rate after the 2008 global financial crisis. If the economy recovers and inflation rises, the Federal Reserve (Fed) will raise interest rates. When will the Fed raise the benchmark interest rate? Will the economy be hit again if the benchmark rate rises?

△If large-scale infrastructure investment for sustainable development requires funding, global interest rates will rise toward normal levels. I expect that within the next decade, interest rates will move away from the current zero level. Zero interest rates cannot last forever.

-There are ongoing warnings that wealth gaps between countries may worsen globally after COVID-19. How should governments respond?

△Along with efforts to end the COVID-19 pandemic, we must accelerate efforts to solve humanitarian issues. We need to help the unemployed, patients, the extremely poor, and the hungry. The International Monetary Fund (IMF) and other international development banks must actively respond to urgent needs.

Of course, COVID-19 vaccines must be shared equitably worldwide. At the national level, benefits of healthcare, education, and digital information should be expanded. Social security systems such as health insurance and pensions, as well as vaccine distribution, must be carefully managed.

The U.S. does not even guarantee basic healthcare services. Many families are starving. Racial discrimination remains unresolved. Yet, the wealthy in the U.S. have become richer than ever. This is why additional taxes should be imposed on ultra-high-net-worth individuals to support social services.

Youngest professor in Harvard University’s Department of Economics

Advisor to the President of Bolivia

Professor of Economics at Columbia University and Director of the Center for Sustainable Development

Economic advisor to UN Secretary-General Ban Ki-moon and head of the UN Sustainable Development Solutions Network

Advisor to the World Bank, World Health Organization, International Monetary Fund, and others

Author of The End of Poverty, Common Wealth, Macroeconomics in the Global Economy, and more