NEW YORK (Reuters) - Like father, Like son. In his new book, “The Predator State,” James Galbraith does justice to the late John Kenneth Galbraith’s tradition of flipping conventional wisdom on its head -- and offering bold prescriptions for a more socially just economy.
He attempts to do so, in large part, by revisiting key moments in U.S. economic history and casting them in a radically new light: one that gets away from an inherent faith in the market and allows for some measure of planning on the part of government.
James Galbraith acknowledges the intellectual appeal of the conservative notion that unfettered markets produce optimal economic results. But he argues theory has failed to find any grounding in practice.
Yet while conservatives have long discarded their own ideology in the real world, its principles still imprison liberal economists and policy-makers, preventing them from offering constructive alternatives, he says.
In one fell swoop Galbraith questions the effectiveness of monetary policy, derides strict adherence to balanced budgets and sets out to debunk what he sees as the myth that America’s economic might has its roots in free trade.
“My aim, in this exercise, is to free up the liberal mind,” writes Galbraith, a professor of economics and public policy at the University of Texas at Austin.
Galbraith traces the success of the American economy over the years to public institutions like Social Security, Medicare and public education, which date back to the New Deal of the 1930s.
“In a properly designed system,” he says, “planning and markets do not contradict each other.”
In short, certain things, especially public goods such as health, education, jobs and a living wage, are simply not adequately provided by a market system. These, he argues, require an active government role in setting priorities and standards.
“You want higher wages? Raise them. You want more and better jobs? Create them,” says Galbraith. “There is nothing really to lose, except ‘free market’ illusions.”
FROM FREE MARKETS TO FREEDOM FROM MARKETS
Galbraith takes issue with the prevailing view that lower wages are consistent with greater job creation. Similarly, he dismisses the idea that rising U.S. wealth inequalities are the product of some inconvenient but inevitable gap in skills.
“To the contrary,” says Galbraith. “Equality is good for employment and vice versa.”
His critique of modern economic thinking is so broad, in fact, that it seems to leave some questions unanswered. Just when are markets appropriate and when are they not? The author does not offer clear guidelines.
But in a world beset with twin crises in mortgage and credit, which analysts of all political stripes say resulted from an excessive shift toward lax regulation, Galbraith’s call for proactive governance does resonate.
Despite some drastic changes in the global economic landscape in recent decades, Galbraith continues, in a sense, to fight for the same principles advocated by his father.
“The great dialectic in our time is not, as anciently and by some still supposed, between capital and labor,” John Kenneth Galbraith once wrote. “It is between economic enterprise and the state.”
History does indeed repeat itself. But as James Galbraith’s new book suggests, that doesn’t mean nothing should be done about it.
Editing by Leslie Gevirtz
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