UnconventionalThe real John Kenneth Galbraith
By Richard Parker
The Boston Globe
Sunday, May 07, 2006
JOHN KENNETH GALBRAITH, the Harvard economist, diplomat, and author of nearly four dozen books, loved words--especially his own, but no less those about him. So it's too bad that he's not here to correct so many of the hundreds of articles about him that have appeared since he died last weekend at the age of 97. As his biographer, I was sorry for him, too, that so many admirers and detractors alike miscast him as the last of a dying breed: "a liberal," "a Keynesian economist," or "an apostle of 'big government.'" That's not who he was at all, at least not as those terms are used today.
Ken Galbraith was far too protean and nuanced for such labels, and those who use them are guilty of what he called "the conventional wisdom"--"the means by which the majority protects itself from thought." Understanding Galbraith doesn't require that we end up agreeing with him. (Quite the contrary: He would have found a million little Galbraiths abhorrently dull.) But it does mean grasping how he thought--and why.
Galbraith was a liberal who admired markets (ever the Scot, he called Adam Smith "Scotland's greatest son"); a Keynesian who cautioned against the dangers and errors of big government, Democratic and Republican alike; and an advocate above all for balance among the powerful institutions--public and private--that shape our world.
Galbraith's core principles sprang from childhood. He was a Scots-Canadian, the descendant of immigrants who'd fled English monarchs, Scottish lairds, and satanic mills. Independence in mind and spirit--and a sharp eye for the privileges and pretensions of the established orders--were to him foremost.
But his times as much as ancestry and family help explain him. A young graduate student in economics when the Great Depression struck, Galbraith was stunned as it swept away his teachers' truths about markets, if left alone, always "getting it right." Bread lines and riots, idled factories and empty fields--these were realities the blackboards had never conveyed.
Galbraith chose in part to become an economist because he believed it his duty, and the job of all social scientists, to discover and explain how power--that elusive juncture of politics, economics, sociology, psychology, and history--worked in human life. He came to believe that societies were most successful when power and its rewards were well distributed, so that no faction or class or interest could dominate.
Understood in this way, the Keynesian New Deal programs of the 1930s were not--as their opponents claimed--radical attempts at concentrating power in government, but, at root, common-sense, strategic experiments to assure a fair and proper new balance of power for the well-being of all. During World War II, Galbraith's service as America's "price czar," managing our domestic economy to prevent bottlenecks and inflation from eroding our capacity to win the war, only deepened his belief that governments and markets must work together for the larger good. To Galbraith there was nothing here "liberal" or "conservative"--simply necessary and clear.
"American Capitalism" (1952), Galbraith's first bestseller, gave us his concept of "countervailing power" as America's proper goal, with big corporations balanced by strong unions, big producers by big retailers (for consumers, better that Wal-Mart face off against Proctor & Gamble than hapless mom-and-pop stores). Government's role was to assure the balance of those forces. Conservatives hated "American Capitalism" because it said that "competition" didn't (and couldn't) govern markets alone; but liberals hated it because it didn't condemn corporations or the market. Galbraith loved being caught in the crossfire.
In "The Affluent Society" (1958) and "The New Industrial State" (1967), Galbraith distilled the goals of countervailing power into his refined idea of "social balance." Markets and government together by the 1950s had brought Americans a historical first--a majoritarian middle class. But the consequent irony--Galbraith thought irony the human condition--was that material needs were no longer pressing. The new challenge was to produce the "public goods" that we needed--the great schools and universities, first-rate healthcare for all, an environment protected not destroyed, the personal freedom not measured by what we owned or made.
This idea put him at odds with the dominant Keynesianism of his time. Beginning in the late 1940s, he'd openly worried about the excessive confidence of his more mathematical colleagues, who foresaw the day when bigger computers and better equations would let economists "macro-manage" stable, full-employment growth far into the distant future. Under President Kennedy, when Walter Heller and the Council of Economic Advisers tried to put mainstream Keynesian policy ideals to work through enormous across-the-board tax cuts--the instrument of their Keynesian dream of perfectly managed growth--Galbraith was their most ferocious critic. Tax cuts were fine, but by themselves, he warned, they would chiefly fuel more private consumption, not investment in public goods.
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Galbraith's quarrel with Heller wasn't simply over "economic" theory. Like Eisenhower, Galbraith was alarmed by the new "military-industrial complex": With the Pentagon consuming half the federal budget, this was radical imbalance within the public sector itself, and would lead to disaster. In 1961, privy to the Kennedy administration's top-secret State and Defense Department cables, Galbraith, then serving as ambassador to India, began warning JFK against the risks posed by intervention in Southeast Asia. Not merely a "foreign misadventure," the danger Galbraith foresaw was of a prolonged military stalemate that would, combined with Heller's tax cuts, risk fueling an inflation and then a recession that, together with the war, would destroy not only the New Frontier, but the Democratic Party and Americans' trust in their government.
By the 1980s, when Ronald Reagan came to office--promising redemption from the failures of liberal and Keynesian overreach that Galbraith had opposed--the new threat to balanced power posed by Reagan's "conservative revolution" was equally alarming. Galbraith predicted in 1980 that the incoming administration's planned adventure in monetarism at the Fed--drawn straight from the playbook of Galbraith's old nemesis, Milton Friedman--would bring not prosperity but a severe recession. It did, forcing Reagan to abandon monetarism, as have all governments since. Galbraith always applauded Alan Greenspan for "monetary Keynesian" activism at the Fed, even when they disagreed on specifics. (Both men thought Friedman mad.)
Supply-side tax cuts coupled with Reagan's military spending, what Galbraith called "Prussian-style big government," would result in government deficits as far as the eye could see--the measure of a radical fiscal imbalance. On the supply-side nostrum that top-end tax cuts would trickle down to produce unparalleled growth, Galbraith the farm boy was colorfully clear: "After feeding oats to the horses, one should not gaze too closely at what trickles down to the sparrows."
As the world he encountered changed, Galbraith's views changed. For many this is a sign of weakness; Galbraith regarded it as his strength. What he did was hold to a few guiding principles, and they (not last week's "conventional wisdom") are what make him still so important.