John Kenneth Galbraith Dies at Age 97

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http://news.yahoo.com/s/nm/20060430/wl_canada_nm/canada_galbraith_col_4

The profound and lasting effect of John Kenneth Galbraith on United states politics and economics simply cannot be underestimated. I would go so far as to say that he has had more of an effect on domestic policy than any other person in the last 50 or 60 years.

While he was born in Canada, he got US Citizenship in the 1930's, when he taught at Harvard. While in England, he became influenced highly by John Maynard Keynes.

Due to his macroeconomic expertise, he was basically put in charge of the American economy during WWII by having his sole goal to control inflation.

His book, "The Affluent Society," which was published in the 50's, was one of the first progressive economic plans put on paper, and was widely read and acclaimed. In that time, the US was a dominant world power, with cars and other material advances and wealths that pointed to the power of capitalism.

Galbraith, however, said tht the increasing material wealth of the US was not a good indicator of how the country was doing - the public sector and infrastructure were broke, and the wealth was merely adding to, better demonstrating and actually perpetuating the income disparities in the US. Individual wealth was being amassed, but schools and roads, etc., were being ignored.

His main point of the book, to me, was that poverty was considered a universal truth in the world and in the country. He had an idea, however, that poverty could be ended because our society had gotten to a point where it could eliminate poverty and scarcity.

Previously, he had been the guy who foresaw that the ruling powers in the US economy would be "big business," "big labor" and government. He's the one who foresaw the changes in the US system that was moving away from laissez faire and more towards the Keynesian model of government intervention - the government pumping money into the economy to increase employment. It is not coincidental that he had the ear of FDR.

He had the ear of FDR and Truman. He had the ear of Kennedy, as well. He really had Johnson by the balls, too, and was crucial in the programs that constituted the "Great Society" and the "War on Poverty."

We now know that we've had the War on Poverty for decades, and we've stil got poor, and the same complaints about "rich get richer and poor get poorer."
We have a system now where the education is more broken now than ever.
We have issues with the breakdown of infrastructure.
We have problems with service-based employment and outsourcing.
We also have issues where the corporate giants of the 1950's that he cited as examples of supreme control over the economy (like General Motors) declined as a result of the market forces that he claimed didn't and couldn't exist.

One of the problems with Galbraith, in my humble opinion, is that he was rightfully described as an iconoclast. He had his ideas, and an economics degree to back him up. But Galbraith was not the mathematician with the numbers and models to back up his thinking. He was more intuitive, and sometimes counter-intuition is more accurate.

Having lived as long as he did, he got to see his ideas become discredited. The idea of big businesses running the show is not the case. The way many of you look at Microsoft now is exactly the same thing that was said about Standard Oil in the early 20th Century and about GM in the 50's. Galbraith was discredited on that part. Yes, consumers do have a choice, and when companies don't give them what they want, they look elsewhere, like looking to Japan for cars in the 70's and 80's.

The War on Poverty obviously didn't work.

But he was still an important advisor in the Clinton Administration. He wrote a book called "The Short History of Financial Euphoria" in 1990. he wrote of an "irrational exuberance" in financial markets every 20 years or so, because roughly every 20 years, a crop of new investors comes through to flood the markets on the basis of new get-rich-quick schemes. When the inevitable market crash occurs, the public will not blame themselves for their lack of foreward vision, but will find one or more scapegoats to blame. he covered 3 centuries, and wrote about things as late as the 80's manias for mergers and acquisitions and the S&L scandal. He found that things like excitement over reality (snake oil), new finance instruments (like stock and the Enron financial planning) and extreme debt without means of repayment all linked these.

It's strange that Clinton was listening to him during the dot.com boom/bubble/"period of irrational exuberance." It's also interesting that high debt without real means of repayment is a highly Keynesian thing.

Some of his thinking has shown to be true. his solutions, however, all seem to require a change of societal mindset, as opposed to balance-sheet governmental programs.

He is up there with Keynes, Smith, Marx and Friedman in his impact on economics. An amazing man whom I immensely respected, even though he was often wrong.

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