|
A
man for all markets
At 93, the scourge of contemporary economics, JK Galbraith, is on the attack. The author of The Great Crash tells William Keegan that President Bush's moves against recession are no use at all Sunday October 6, 2002 The Observer Recent reports had said Galbraith looked frail, and he has certainly not been too well. But when this was being explained to me in advance, he grabbed
He began with a paean of praise for Adam Smith, who, he said, had been 'too fully captured by the right-wing'. In Galbraith's view 'much of what he said had large encouragement for the careful and intelligent Left. He was ruined to an extent by his acolytes, many of whom had never read him.' Thoughts of Smith's Theory of Moral Sentiments moved Galbraith to the ethics of the present. 'I have written a long essay, "The Economics of Innocent Fraud" about things that, for self-interest or convenience, we hail as the truth but have no particular relevance to reality.' With an eye on the Bush administration Galbraith said one minor example of this was relevant now: 'You can't stimulate an economy by reducing taxes on the rich. That is popular for what it does for those who get the money, and not for what it does for the economy.' He has always been superb at attacking 'conventional wisdom', a phrase he coined, and his current target is worship of the US Federal Reserve. America is 'having a somewhat painful recession, with no remedial action in sight of any consequence. The administration, in summary, has two lines of action: one is tax relief for the rich. The other is reliance on the Federal Reserve. It is at least consistent. Both are without effect.' This celebrated author feels his greatest achievement was not his books but his time as head of the body responsible for US price controls during the Second World War. He contrasts the success of this with the inflation that took place after the First World War, when the Fed was in charge. 'Historians never mention inflation as they did after World War One. But if - and I think this is the basic rule of all public service - if you succeed your work is forgotten.' Then came the rapier thrust: 'One of the most important things we did in those years was to set aside all reliance on central bank policy.' There will be more about the excessive reliance placed by governments and economists on central banks in the new book. 'But it will not be without admira tion for Alan Greenspan. We've never seen anything like his theatrical skills.' And European central banks? 'I've never been a close student of monetary policy in Europe, apart from the inescapable history of the Bank of England.' We returned to the present day. 'This is a very disagreeable time, and its burden is falling as usual on those least able to carry it. You pick up the newspaper any time, and on the financial pages you'll read of the constructive action some company or other is taking: in a commendable step it has just laid off 10 per cent of its workforce. There is no reflection on the discomfort that might follow from being so assigned to leisure, or what it might do if their children are going to college.' Galbraith has always written beautifully - a source of admiration and sometimes acute envy among fellow economists - and still speaks in measured, rounded sentences, choosing his words carefully, sometimes going back to substitute le mot juste. 'Being so assigned to leisure' is a classic Galbraithian use of irony, and reminded me of his book, The Affluent Society. 'Things are bad enough,' he said, 'so that I haven't noticed any great revival of interest in that book. Perhaps I should have a new edition with a new title. It could be "The Depressed Economy", and it would face the fact that only a reduced colony of booklovers could afford to buy it.' Which brought us to Galbraith's masterpiece The Great Crash, 1929. Surely there had been a revival of interest in that? 'The Great Crash has been in print since the mid-Fifties, and it still outsells all of my other books' (he has published 30). 'It has a wonderful, built-in salesmanship: any time anyone complains as to what he or she is suffering in the stock market there is someone who always says, "If you think that is bad, why don't you read Galbraith on 1929"?' This reminds him of when he used to peruse bookshops to see how his latest was doing. He noticed that one title was never on sale in the old La Guardia airport in New York. 'One night the woman in charge asked me what I was looking for. I was a little ashamed, but came out with the title, The Great Crash. She never hesitated: "That certainly is not a book you could sell at an airport".' Galbraith is one of the diminishing band who knew John Maynard Keynes - 'one of the great figures in our life, and certainly in mine. One of the unwritten paragraphs in his life is advice I had from him on economic action in World War Two.' Galbraith said one of his achievements at Harvard, 'with others, of course' was bringing Keynes to the US. Public servants used to come from Washington to join the discussions. 'There was some seminar on the General Theory almost every day. It was also helped by Joseph Schumpeter, who was by far the most articulate critic [of Keynes].' Galbraith recalls how his wife, who was working on a doctorate on comparative literature, became fed up with the way no day ended and few began 'without seminars with someone or some group on Keynes. She concluded she must read the General Theory. In the introduction Keynes explains there are some matters he hasn't thought through. She closed the book and decided she would wait until he had finished the job.' After discussing Keynes, Galbraith, the great professional, turned to ask me: 'You got enough?' I did not wish to tire the great man, and nodded. 'I conclude with the most compelling footnote on The Affluent Society,' he added. 'Just before it had been published I had been persuaded by the Carnegie Corporation to tour Latin America. While we were on this journey The Affluent Society was published and went to the top of the best-seller lists... When we reached Montevideo (Uruguay) the news had even come to them. My sponsors were impressed, and telephoned my publisher in Boston for more information. On the line, two similar words got mixed up. A large picture appeared on the front page of the major daily. The caption was, "JK Galbraith, Leading American Communist". It was just after the McCarthy period. That paper never got back to Washington.' Galbraith has advised many presidents, including Roosevelt and Kennedy. He was ambassador to India under JFK, and jokes: 'First he would call me up to ask what to do. Then to tell me what he was doing. Then he would not call me at all.' Even the mightiest are sometimes ignored. | ||||||||
