A good step forward.
John Kenneth Galbraith is one of the few who can truly lay claim to the mantle of "public intellectual." His long and varied career as an economist, administrator, campaign adviser, political activist, diplomat, journalist, and professor has few equals.
Galbraith was born in Canada and immigrated to this country to complete a graduate degree in agricultural economics at the University of California-Berkeley. In 1934, he accepted a teaching job at Harvard, where he taught on and off for five decades. But he also has served in government. In 1940, he went to Washington to work for FDR. He ultimately was appointed deputy administrator in the Office of Price Administration, which made him the price-control czar. He then joined the U.S. Strategic Bombing Survey and analyzed the effects of the U.S. bombing of Germany. His conclusion, that the bombing helped prolong the war, infuriated many. He also did a stint as an editor for Fortune magazine under Henry Luce, who hired him because, in Galbraith's words, he discovered that "with rare exception, good writers on business were either liberals or socialists.
"From 1961 to 1963, Galbraith served as U.S. Ambassador to India, probably the most beloved to Indians of all the people who have held that position. He also acted as an adviser to the two doomed Adlai Stevenson Presidential campaigns and to the successful bid of John F. Kennedy. In his spare time, he helped found Americans for Democratic Action and became an outspoken opponent of the Vietnam War. He campaigned for Eugene McCarthy in 1968 and for George McGovern in 1972. His last shot at Presidential politics was in the 1980 campaign of Ted Kennedy.
But it is his work in economics that has had the most effect. In The Great Crash 1929 (Houghton Mifflin, 1954), he talked about the speculative mania and the misplaced policies that led to the Great Depression. In The Affluent Society (Houghton Mifflin, 1958), probably his best-known book, Galbraith contrasted "public squalor" with "private affluence" and contended that massive public investment was needed to improve social goods in spheres where the private sector was unwilling to invest. In The New Industrial State (New American Library, 1967) and Economics and the Public Purpose (New American Library, 1973), he postulated that large corporations created a "technostructure" of professional managers, who could manipulate both supply and demand by creating artificial consumer desires. His most recently published book is Name-Dropping: From FDR On (Houghton Mifflin, 1999), a reminiscence of famous people Galbraith has encountered on his long journey.
On August 9, Galbraith went to Washington to receive a Presidential Medal of Freedom. The official citation said: "John Kenneth Galbraith has contributed immeasurably to the life of our nation. With clarity, wit, and a keen social conscience, he has made complex economic theories and processes comprehensible to a wide audience and highlighted the social and ethical impacts of economic policies. A tireless reformer of the free enterprise system, he has resolutely promoted social justice and challenged conventional assumptions in his Harvard classroom and in the public arena."
I interviewed Galbraith, now ninety-one, in March at his home in Cambridge. I was ushered into his study by his maid, who is from India. After a short while, his wife, Catherine, dropped by and spoke with me in Hindi, a language she picked up during Galbraith's ambassadorship. Catherine showed me to the bedroom, where he was convalescing from a fall.
Question: How do you plan to vote in November?
John Kenneth Galbraith: Well, I've become accustomed to supporting politicians who are more conservative than I am. This is not entirely a surprise. But I'm certainly going to support Al Gore because, on the whole, he's the more sensible figure and you vote not for the perfect but for the best. Coupled with that is a special situation. Fifty-odd years ago, I was in charge of price controls in World War II and had a ceiling on overall prices. Everybody who was subject to general maximum price regulation wanted an exception and went to Congress to persuade a Congressman, or a group of people on the Hill, that I was being a menace to their industry. One of my few supporters all those years was Al Gore's father. Ever since, I have had an association with the family, and partly in that association I'm supporting Al Gore.
Q: How about Ralph Nader? Do you have any interest in third party politics?
Galbraith: Ralph is an old friend of mine, and he does a useful job in displaying a position, but he's not relevant to the election process, not even as a third candidate.
Q: You don't see any hope at all for third party politics?
Galbraith: No, I do the best with what exists. Third party politics, at least since La Follette, has always had an element of romance. For the sake of The Progressive, I will say that La Follette was relevant, but he was the last.
Q: A New Yorker profile a year ago mentioned that some of your fellow economists regard your views as heretical. What is the state of economics today?
Galbraith: It is what it has always been. It combines those who pursue the truth with those who pursue the rewards of orthodoxy and those who pursue what is comfortable to the rich.
Q: You've written about the last speculative mania, which led to the stock market crash in 1929. Do you feel that many of the same conditions exist today?
Galbraith: That's the question I was hoping you would ask me because that's the most important of our time. The problem of the modern economy is not a failure of a knowledge of economics; it's a failure of a knowledge of history.
The inborn instability of capitalism has been part of the history of the system for several hundred years, including recurrent speculative episodes. There should be no doubt in anyone's mind that we're now having another one of those speculative episodes. The oldest Galbraith rule is that when you hear that a new era has dawned, you should take cover. At the present time, we have a swarm of people in the stock market--not out of knowledge, not out of expectation, but out of basically a gambling instinct, the hope that prices will go up. This is coupled with something that has not had sufficient attention--a very large volume of margin trading, which is the formula for ensuring that when trouble comes, it will be exceptionally painful. They will get worried that they must sell or pay, and you will have the classic rush to sell. All this is being ignored by people who have persuaded themselves that this is a "new era." But that persuasion will one day come to an end.
Q: What's your assessment of the Fed and Alan Greenspan?
Galbraith: A very complicated mass of things influences the economy--the speculative effect, government policy, consumer borrowing and spending, the level of technical innovation (which I concede, although everyone emphasizes it too much), and much more--including, of course, the rate of inflation. There is an enormous thrust in our time to have a simple answer. And that simple answer is that all depends on Alan Greenspan and the Federal Reserve. And Alan, who is an old acquaintance of mine, is a marvelous performer in the impression he gives of enormously great perception. I think the role of the Federal Reserve is enormously exaggerated.
Q: What about the World Trade Organization, globalization, the World Bank, and the IMF?
Galbraith: I depart from some of my liberal colleagues on this. For larger political reasons, I am for a close global association in trade and financial matters, rather than the opposite possibility of excessive nationalism, as manifested in the two world wars. So I accept the global complex and global trade more than do some of my liberal colleagues because I consider this a wise alternative to national tension and conflict.
Q: Could we review some of the concepts that you've introduced into economics and see if you think they still have relevance? For example, the concept of "countervailing power." Galbraith: Over the years--over the century just passed--one of the important counters to monopoly power in the corporate world was the development of countervailing power, certainly by trade unions, certainly by farmer cooperatives, certainly by other corporations. Power begets power, and I still hold very strongly to that view, which I first published, believe it or not, some fifty years ago.
Q: How about the concept you introduced in The New Industrial State of an all-powerful corporate bureaucracy?
Galbraith: I talked about the consolidation of power in the hands of the corporate bureaucracy, as distinct from the stockholders. To this view, I still strongly adhere. I was just looking at the current corporate statement of General Electric and its forthcoming stockholders meeting. There were half a dozen proposals by stockholders to be voted on. All, just as a matter of course, were rejected. The power of the corporate bureaucracy--the power of technostructure (a term that did not take off)--is something to which I still adhere.
Q: Does that power still hold sway over consumers?
Galbraith: I would say we're all subject to the daily pressures of consumer persuasion. The notion that you would initiate a new product without preparing the way by persuasion and advertising and salesmanship is fantastic. It's an integral part of the system.
Q: Another observation you're famous for is juxtaposing "public squalor" with "private affluence."
Galbraith: There's no question that in my lifetime, the contrast between what I called private affluence and public squalor has become very much greater. What do we worry about? We worry about our schools. We worry about our public recreational facilities. We worry about our law enforcement and our public housing. All of the things that bear upon our standard of living are in the public sector. We don't worry about the supply of automobiles. We don't even worry about the supply of foods. Things that come from the private sector are in abundant supply; things that depend on the public sector are widely a problem. We're a world, as I said in The Affluent Society, of filthy streets and clean houses, poor schools and expensive television. I consider that contrast to be one of my most successful arguments.
Q: Who have been your major economic influences?
Galbraith: I would have difficulty settling on any one. I've been a faithful reader of the great classical documents of economics, or tried to be. The first book in the field that I ever read was Principles of Economics by Alfred Marshall. I suppose subsequently I would have to pick out Keynes, Adam Smith, Marx.
Q: What was it like working in Washington with FDR?
Galbraith: The years of the Great Depression were a superb time for economists because people not knowing what could be done or what should be done would always assume that maybe an economist had the answer. If you were just a lawyer in Washington, you were nobody. But if you were an economist, you might have the answer.
And I still identify those years with FDR, and then, of course, the war years, as the high point of an economist's life. From the spring of 1941, I controlled all prices in the United States. You could lower a price without my permission, but you couldn't raise a price without my permission or that of my staff. I began with a staff of seven and ended with something like 12,000 or 14,000. Only an economist could be accorded that sort of responsibility.
Q: How would you contrast FDR with JFK?
Galbraith: Well, they were Presidents in very different times. Roosevelt was the central world figure in the two great disasters of this century--the Great Depression and World War II. By contrast, JFK came in relatively peaceful, agreeable times. There was the Missile Crisis, but one can't attribute to the Kennedy years anything like the problems that Roosevelt stood over and surmounted.
Q: You were in the news a few months ago for your reassessment of Lyndon Johnson.
Galbraith: That was the most widely reported piece I've written in years, arguing that while we hold LBJ responsible for the Vietnam War, we should not allow that to color the fact that he had a very strong civil rights program, which was wonderfully effective in many of its aspects. Those days you couldn't get on a bus going to the South without expecting a riot over something or the other. All of that has disappeared thanks to Lyndon Johnson.
Q: Aren't you working on a new book?
Galbraith: Oh, inevitably. I've been writing a book called The Economics of Innocent Fraud. I published part of it already in The Progressive ("Free Market Fraud," January 1999). But I've been interrupted these last few months. It deals with all of the things we do, in an innocent way, to cover up the truth. I begin with the renaming of the system. It used to be capitalism. But that evokes Marx and Rockefeller. So now we speak of the market system. That is a nice bland expression, which forgets those off-color references. Then I write about work. We talk of the enormous virtues of work, but it turns out that that is mostly for the poor. If you're rich enough or if you're a college professor, the virtue lies in leisure and the use you make of your leisure time. Next, I go on to the stock market, where I show, I think without a doubt, that what is called "financial genius" is merely a rising market. That whole effort has given me a good deal of pleasure.
Q: You wrote a book a few years ago called The Good Society: The Humane Agenda (Houghton Mifflin, 1996). What would, in your view, constitute a good society and how would we get there?
Galbraith: I would put primary emphasis on a good standard of living equitably distributed. It can't be equal, but one that eliminates the terrible cruelty of poverty.
I end with the highest of Galbraith's principles: Nothing so denies a person liberty as the total absence of money.