It’s an exaggeration to say Jeffrey Sachs sparked the end of Communism in Eastern Europe, ushering in the end of the Cold War, in a single day. But maybe not as much as you’d think.
Sachs, a developmental economist, was reminiscing recently with an interviewer about how it all went down in summer of 1989.
Sachs was then a young Harvard-trained hotshot who’d made a name for himself helping South American countries like Bolivia and Peru stem runaway hyperinflation while maintaining democratic rule — something previously thought impossible.
A high-ranking Polish government official called Sachs up. He wondered if the American could work a little of his magic in Poland, whose economic doldrums had deepened over the course of the Cold War.
Sachs was intrigued. One of his great heros was Lech Walesa, the Polish trade-union leader who’d risen to prominence as head of a party called Solidarity, which was pushing for democratic reform in the Iron Curtain country. Now Solidarity had come to power, and change was in the air.
The Polish government official’s name was Jacek Kuron, and he was one of Walesa’s top deputies.
Kuron explained what he wanted from Sachs – a little shock therapy to get Poland on a new track. Sachs thought he might be able to oblige. And so the two men sat down together in Warsaw and commenced discussion — as revolution literally unfolded around them.
Kuron didn’t speak English, so Sachs brought a friend to translate. Sachs told Kuron he had some ideas about how to get Poland out of a centrally planned economy.
“Jacek was chain-smoking, and he had his whisky alongside,” Sachs said. “For several intense hours—really among the most amazing hours of my life—I was explaining what I thought, and he kept pounding the table and going, ‘Yes, Yes, I understand!’ Then sometime around midnight, in his little smoke-filled flat, he said, ‘Okay, now you have to write up the plan. It has to be ‘How Poland re-joins Europe.’ I said, ‘Okay, Mr. Kuron, within two weeks I’m going to get it to you.’ He said, ‘No! Tomorrow morning. I need it now!'”
The translator was the business manager of the new non-Communist newspaper that had just been allowed to start up as part of the revolution. “So we went in the middle of the night to what was a kindergarten room, which had been taken over as the newsroom. There was literally a board over the sink. A first-generation IBM computer sitting on it. And so, from 12 midnight till 6am I typed out the plan for ending central planning and converting to a market economy. And it became the basis for Poland’s economic playbook.”
Poland would turn out to be the first Eastern Bloc domino to fall as market economies replaced command economies one by one. And “shock therapy” became shorthand for rapid transition to capitalism.” (In fact it’s a bit less direct than that, Sachs explained. “It’s removing the central authority so that Adam Smith’s invisible hand can rise up to fill the void.”)
“Shock therapy” isn’t without controversy, and Sachs, who would go on to advise Bernie Sanders in his presidential runs, has detractors on both sides of the political spectrum. His star has also dimmed a little after his audacious plan to pull Africa out of extreme poverty went pear-shaped. But there’s no denying the impact Sachs had on the world on that very Big Day—and night—in the summer of ‘89.