By Contributor on April 12, 2006
By John Kenneth Galbraith

This excellent month I’m called upon for two celebrations—one for the distinguished career of Robert Heilbroner, the most interesting, innovative, and influential of liberal economists, and the other for The Progressive magazine, now ninety years young. I here venture the same theme for both. It is this: Most economists commit what I, in a professionally cautious way, call innocent fraud. It is innocent because most who employ it are without conscious guilt. It is fraud because it is quietly in the service of special interest.

Let’s begin with capitalism, a word that has gone largely out of fashion. The approved reference now is to the market system. This shift minimizes—indeed, deletes—the role of wealth in the economic and social system. And it sheds the adverse connotation going back to Marx. Instead of the owners of capital or their attendants in control, we have the admirably impersonal role of market forces. It would be hard to think of a change in terminology more in the interest of those to whom money accords power. They have now a functional anonymity.

But most of the people who use the new designation—economists, in particular—are innocent as to the effect. They see nothing wrong with their bland, descriptive terminology. They pay no attention to the important question: Whether money—wealth—accords a special power. (It does.) Thus the term innocent fraud.

The fraud also conceals a major change in the role of money in the modern economy. Money, we once agreed, gave the owner, the capitalist, the controlling power in the enterprise. So it still does in small businesses. But in all large firms the decisive power now lies with a bureaucracy that controls, but does not own, the requisite capital. This bureaucracy is what the business schools teach their students to navigate, and it is where their graduates go. But bureaucratic motivation and power are outside the central subject of economics. We have corporate management, but we do not study its internal dynamics or explain why certain behaviors are rewarded with money and power. These omissions are another manifestation of fraud. Perhaps it is not entirely innocent. It evades the often unpleasant facts of bureaucratic structure, internal competition, personal advancement, and much else.

This innocent or not-so-innocent fraud masks an important factor in the distribution of income: At the highest levels of the corporate bureaucracy, compensation is set by those who receive it. This inescapable fact fits badly into accepted economic theory, so it is put aside. In the textbooks, there is no bureaucratic aspiration, no reward for bureaucratic achievement, no bureaucratic enhancement by merger and acquisition, and no personally established compensation. Bypassing all of this is not a wholly innocent fraud.

A more comprehensive fraud dominates scholarly economic and political thought. That is the presumption of a market economy separate from the state. Most economists concede a stabilizing role to the state, even those who urgently seek an escape from reality by assigning a masterful and benign role to Alan Greenspan and the central bank. And all but the most doctrinaire accept the need for regulation and legal restraint by the state. But few economists take note of the cooptation by private enterprise of what are commonly deemed to be functions of the state. This is hidden by the everyday reference to the public and private sectors, one of our clearest examples of innocent fraud.

Take the common outcry about corporate welfare. Here the private firm, as it is called, receives a public subsidy for its product or service. But what is called corporate welfare is a minor detail. Far more important is the full-fledged takeover by private industry of public decision-making and government spending.

The clearest case is the weapons industry. Given the industry’s command of the Congress and the Pentagon, the defense firms create the demand for weaponry, prescribe the technological development of our defense system, and supply the needed funds—the defense budget. There is no novelty here. This is the military-industrial complex, a characterization that goes safely back to Dwight D. Eisenhower.

Any notion of a separation between the public and a private sector—between industry and government—is here plainly ludicrous. Nonetheless, the absorption of public functions by the arms industry is ignored in all everyday and most scholarly economic and political expression. And what is so ignored is in some measure sanctioned. I hesitate here to speak of innocent fraud; it is far from being socially benign.

What we must seek in these matters is reasonably evident. It is the use of plain language to express the clear truth. We can then take pleasure from the discomfort the truth so often evokes.

John Kenneth Galbraith, emeritus professor of economics at Harvard University, is the author of “The Affluent Society” and many other works.

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By Wendell Berry

Manifesto: The Mad Farmer Liberation Front

Love the quick profit, the annual raise,
vacation with pay. Want more 
of everything ready made. Be afraid 
to know your neighbors and to die.
And you will have a window in your head.
Not even your future will be a mystery 
any more. Your mind will be punched in a card 
and shut away in a little drawer.
When they want you to buy something 
they will call you. When they want you
to die for profit they will let you know. 
So, friends, every day do something
that won’t compute. Love the Lord. 
Love the world. Work for nothing. 
Take all that you have and be poor.
Love someone who does not deserve it. 
Denounce the government and embrace 
the flag. Hope to live in that free 
republic for which it stands. 
Give your approval to all you cannot
understand. Praise ignorance, for what man 
has not encountered he has not destroyed.
Ask the questions that have no answers. 
Invest in the millennium. Plant sequoias.
Say that your main crop is the forest
that you did not plant,
that you will not live to harvest.


Say that the leaves are harvested 
when they have rotted into the mold.
Call that profit. Prophesy such returns.
Put your faith in the two inches of humus 
that will build under the trees
every thousand years.
Listen to carrion—put your ear
close, and hear the faint chattering
of the songs that are to come. 
Expect the end of the world. Laugh. 
Laughter is immeasurable. Be joyful
though you have considered all the facts. 
So long as women do not go cheap 
for power, please women more than men.
Ask yourself: Will this satisfy 
a woman satisfied to bear a child?
Will this disturb the sleep 
of a woman near to giving birth? 
Go with your love to the fields.
Lie easy in the shade. Rest your head 
in her lap. Swear allegiance 
to what is nighest your thoughts.
As soon as the generals and the politicos 
can predict the motions of your mind, 
lose it. Leave it as a sign 
to mark the false trail, the way 
you didn’t go. Be like the fox 
who makes more tracks than necessary, 
some in the wrong direction.
Practice resurrection.

Wendell Berry is a poet, farmer, and environmentalist in Kentucky. This poem, first published in 1973, is reprinted by permission of the author and appears in his “New Collected Poems” (Counterpoint).

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