Economist John Kenneth Galbraith’s new book isn’t a bombshell like some of the other political books coming out this year. In its pages you won’t find zealous accusations about the present administration or revelations about its inner workings. In fact, you won’t even find Bush mentioned by name.
But “The Economics of Innocent Fraud” is an important book at an important time. If there was ever a moment when we needed calm wisdom and insight, it’s now. With the nation facing war, economic recession and corporate scandals of mind-boggling proportions — while multi-million dollar public relation campaigns blur the line between truth and falsity — Americans could surely use someone with integrity to step in and tell us what the hell is going on.
Galbraith stands today as one of the most respected economists in American history. Author of the landmark books “The Affluent Society,” “The New Industrial State” and “American Capitalism,” Galbraith has also served two presidents (Franklin D. Roosevelt and John F. Kennedy) and taught at Harvard for over six decades.
Emerging from retirement to write this book, Galbraith, at age 95, has more authority than just about anyone else you’d care to name. And what he has to say about our world today is troubling.
The central premise of the book is that a series of false beliefs (“frauds”) have long been perpetuated among the American people about how our society operates. These beliefs have nothing to do with reality, yet they persist because they benefit the most advantaged members of society.
But Galbraith doesn’t believe this deception is entirely by malice. He reasons that most of those who benefit from these frauds are “innocent.” They have merely adopted a version of the truth that is most convenient for them, which he maintains is simply human nature.
The biggest fraud in America today and “our most cherished escape from reality,” Galbraith writes, is our reliance on the Federal Reserve System to solve problems like recessions and unemployment. Though subtle interest rate adjustments by the Fed are the approved way to deal with such problems, Galbraith argues that they have no discernible effect.
Neither consumers nor businesses change their purchasing or borrowing habits based on interest rates, he writes, and employers certainly don’t base hiring decisions on actions by the Federal Reserve.
Galbraith declares that the idea that good can come from decisions made by the Federal Reserve “belongs not to the real world but to that of hope and imagination.” He adds that Chairman Alan Greenspan is a “figure of no small theatrical talent” in that he has convinced the public otherwise.
Another fraud, Galbraith claims, is that the word “work” is used to describe two very different things. First there is the enjoyable, prestigious, well-paying work of the favored classes. And then there is the disagreeable, boring, tiring work performed by those at the bottom of our economy.
The most enjoyable jobs have the best pay, yet they are usually performed by people who don’t really need the money. By contrast, he writes, those with the most unpleasant jobs receive the smallest rewards, even though they have greater need.
Yet this apparently illogical state of affairs is completely accepted as normal in American life, according to Galbraith. He adds that a similar fallacy surrounds the idea of unemployment – when a lower class person does not work, he is considered a moral failure, but a rich person in the same situation is often “hailed” and respected.
The most disturbing assertion Galbraith makes in this book concerns the influence that corporations have on Pentagon decisions. The fundamental fact of American life in the 21st century, according to Galbraith, is that we live in a corporate system whose deepest foundations lie in corporate executives’ lust for unrestrained power and self-enrichment.
Most citizens, he writes, think that U.S. weapons purchases are logically debated and analyzed before decisions are made. This is utterly untrue, because the arms industry itself controls military spending, Galbraith claims. Corporations have invaded the Pentagon and have become its “primary influence” on “foreign policy, military commitment, and ultimately, military action. War.”
Galbraith contends that the weapons industries actually endorse international hostilities because of the enormous profits they stand to gain, and that they “accord legitimacy and even heroic virtue to devastation and death” simply because it’s good business.
If anything, Galbraith’s writing style has become more slyly allusive over the years, with oblique phrases like “pecuniary interest” standing in for what could simply be called “greed.” And the prose is still marked by his customary dry, infinitely subtle wit. For example, the way he says that corporate criminals should be thrown in jail is: “Management behavior can also be improved by thoughtful contemplation of the wholly real possibility of less than agreeable incarceration.”
The Free Press contacted Galbraith’s office at Harvard University last week to query him on his views on matters that were not addressed in the book.
Galbraith pronounced the country still firmly in recession as of last week, noting “painfully high” unemployment and restrained economic indexes.
The most reliable ways to improve this situation, he said, are tax reform and welfare support. Instead of interest rate adjustments and the Bush tax cuts, both of which he claims have not helped the recession, Galbraith advises shifting tax burdens onto the rich and increasing expenditure on unemployment compensation and other supports for the poor.
He reasons that supporting the poor will help the economy because low-income citizens are far more likely than the rich to spend the money they receive.
Asked for examples of countries that he considers to have the best economic systems, Galbraith replied that the test of any economic system is how it treats its neediest citizens. Switzerland, Germany, Austria, France and the Scandinavian countries all place well by this criterion, he said.
For the 2004 presidential election, Galbraith supports John Kerry, whom he has known for years. “The party was wise in its choice,” he said.
Brian O’Keefe can be contacted at [email protected]