JOHN KENNETH GALBRAITH – RELENTLESS FIGHTER AGAINST THE POWERFUL

By Uwe Jean Heuser

[John Kenneth Galbraith was a renowned economist, professor and author of many books including “The Affluent Society” and “The Great Depression.” In the 1960s, he was aghast at the coexistence of private affluence and public squalor. He mocked trickle-down economics as the horse-sparrow theory: horses must be fed to sparrows can live. This commemorative essay published in DIE ZEIT Nr. 36, 8/26/2009 is translated from the German on the World Wide Web, www.zeit.de/2004/36/Rezension.]

The giant from Harvard is 75 years old. Many insights of John Kenneth Galbraith have become new again. The uncontrolled hired managers of big corporations were suspect to the leftist economist long before the Enron scandals moved them into a bad light. He also criticized the financial industry before the New Economy crash.

When this critic of capitalism who loved glamour and earned much money with his books now takes up his pen again, he is always worth reading. “This is a 65-page treatise on the myths, lies and false perceptions of today’s capitalism,” we read in the introduction. Even though these are his old themes and theses meant for contemporary America, they are fresher than the attacks of many anti-globalists who could be his grandchildren.

Compared to other economists, Galbraith was always a word genius. As a literary critic, he knew the importance of words in conversation. Calling capitalism a “market system” annoyed him – as though it were only a mechanism for coordinating supply and demand and not also a mechanism involving power and powerlessness. Its bureaucracies were successfully sold as very efficient “management” while the state administration structures were generally hated. Galbraith regarded the difference as trifling.

Today the state is increasingly dominated by private enterprise in his opinion. The lobbies of industry are strong and the powerful give each other exclusive information. Power appears very clearly in the military industry. New weapon systems are developed automatically and forced through the legislatures.

Voters are greatly influenced by advertising campaigns and private enterprise interests, not only consumers, the critic said. His great colleague Paul Samuelson reproached him for not being a real economist. “Nothing could concern me less,” Galbraith responded. He included his politics in his analysis and focused on the institutions that guide citizens, for example banks and their advisors. This branch sells predictions of the unpredictable, Galbraith wrote. Resisting is very hard since the predictions come in the garb of professionalism and power. However in reality all its prognoses are worthless since the fate of a market or business cannot be foreseen. Therefore the so-called experts simply write what their big customers want to read. The economists on Wall Street are not free from this pressure.

All this is in the rhythm of myths. For Galbraith, the power of the American Federal Reserve and its chairman Alan Greenspan is a delusion. Interest-rates do not really play an important part in recessions because hardly any business invests in recessions. In the boom, everyone invests because they can buy something. That is a gross simplification, as with many statements by Galbraith. Still the idolization of Greenspan provokes such an answer.

Again and again managers break all limits. Laws and district attorneys alone cannot curb them when they violate their duty. Only a vigilant public can keep a tight rein on them. The problem lies here. In the next boom, all skepticism will presumably be forgotten.

But Galbraith was different. More than all others, he was a critic of power who did not need to justify himself. Because that instinct never left him, he remains interesting, even for those who want to promote capitalism.

John Kenneth Galbraith
The Economies of Innocent Fraud
Truth for Our Time, Houghton Mifflin Corp, Boston 2004