'John Kenneth Galbraith': The Presidents' Man

February 27, 2005

OPTIMISTIC superstition with regard to all things economic is a typically American folly, as vigorous and unrepentant today as it was in 1929. We shower high honors on any author who can repackage the comforting idea that the free market is a democratic expression of the popular will; we pay an army of lecturers to persuade us that each new corporate cost-cutting initiative is an unprecedented victory for the little guy; and we support an entire cable news channel that limns the wonders of the New York Stock Exchange and the Nasdaq.

Wherever this superstitious mind is at work, there you will also find John Kenneth Galbraith deplored and reviled. I ran across his name repeatedly while researching a book on the origins of the new economy, that fevered epilogue to the last century. Tom Peters, to take just one example, assailed Galbraith as the patron saint of the large, vertically integrated corporation, a form of organization that Peters characterized as a ''hubristic exercise'' in defying market forces.

Peters wasn't alone. Galbraith infuriated the faithful for a large part of the 20th century. The conclusions he drew when working on the United States Strategic Bombing Survey in the closing days of World War II -- specifically, that the massive aerial bombardment of Germany was without significant military effect -- caused terrific problems for officials who wanted the study to prove that bombing had won the war. Testifying before a Senate committee in 1955 on the nature of stock market bubbles, Galbraith incurred the wrath of investors everywhere; they'd noticed that the market fell while he spoke and naturally concluded cause and effect.

None of this was a matter of chance. Galbraith's formal subject may have been economics, but his work can just as well be read as a long meditation on business's genius for self-deception, its consistent preference for flattering theory over troublesome reality. Galbraith is, after all, the originator of the familiar term ''conventional wisdom'' and his book on the bull market of the 1920's, ''The Great Crash, 1929,'' emphasized the role of ''incantation'' and ''mass escape into make-believe'' in that great orgy of speculation.

The tension between theory and reality runs throughout Richard Parker's ''John Kenneth Galbraith: His Life, His Politics, His Economics.'' It defines as well Galbraith's relationship to his profession, which like so many other academic fields spent much of the 20th century insulating itself behind an impenetrable language -- in the case of economics, a language of equations and models and perfectly rational actors. Galbraith went in the opposite direction, becoming a public intellectual who spent his life advising politicians, honing his famously aphoristic style, even working as a journalist. His economics, as Parker, a senior fellow of the Shorenstein Center at Harvard's Kennedy School of Government, explains, ''integrated politics, power, ideology and historical circumstance to explain the actually lived economic world.'' Reality is messy. Or, as Galbraith himself put it with his typical pithiness: ''Specialization is the parent not only of boredom but also of irrelevance and error.''

Thus Parker's book is both a biography and a treatise on the misinterpretations and disastrous mistakes -- the mystery of stagflation, the bubble of the 90's, Vietnam -- that theoretical rigidity and deference to experts have brought over the last hundred years. It is also, thanks to Galbraith's longevity, his work in so many administrations and his battles with so many other economic thinkers, a fine one-volume history of economic thought in the 20th century. First came the smashup of classical economic theory during the Depression, when steadily worsening conditions exposed the free-market faith in naturally occurring equilibrium for the superstition that it was. (The leading lights of the Harvard economics department, where Galbraith was then a lowly instructor, were slow to catch on. ''These orthodox men believed in markets with a faith bordering on religion,'' Parker writes, in 1934 opposing the early recovery efforts of the Roosevelt administration, ''not on 'political' but on 'scientific' grounds.''

Free-market orthodoxy was soon brushed aside by the theories of John Maynard Keynes, whose American disciples -- Galbraith prominent among them -- saw a central role for government in managing the economy, thus furnishing theoretical justification to remedies long advocated by liberal reformers. Keynesianism conquered the corporate mind as well, and the nation heeded the advice of a new set of experts who promised to deliver growth and prosperity, mainly through military spending. So complete was its triumph that even Milton Friedman, still the standard-bearer of economic conservatism today, was moved to say in 1965, ''We're all Keynesians now.'' In the 70's, though, free-market orthodoxy returned, this time as an insurgent out of the University of Chicago, armed with an idea called rational expectations, whose ''sheer theoretical beauty and rigorous internal consistency'' had soon captured economics departments nationwide. Committed partisan though he was, Galbraith retained his critical edge, pointing out even during the Keynesian heyday that our affluence concealed a certain absurdity as well as a dangerous militarism.

To this story of clashing ideas Parker adds farmer uprisings and student revolts, along with the minutiae of World War II price controls. I will confess that I was initially skeptical about the book's 820 pages of dense type, but every detail is justified and every digression fascinating. If the book has a failing, it is that Galbraith's dry, Anglified wit and his big Keynesian ideas seem to shrink when placed alongside his amazing doings.

After all, John Kenneth Galbraith was not merely another Harvard professor. He was born in a remote corner of Ontario in 1908, when it was often the farmers who were the radicals and the Harvard professors who were the guardians of the status quo. Galbraith's father, in fact, was active in one of the left-wing rebellions that used periodically to sweep North American farm country. The son commenced the career that would eventually make him famous for his urbanity by studying animal husbandry at a little-known ag college in his home province. From there it was on to Berkeley, where he acquired a Ph.D. in agricultural economics -- an exciting and important subject at the time, given the agrarian reforms on which the New Deal had embarked -- and Harvard, where he landed an instructorship in 1934. He knew presidents from Roosevelt to Clinton. With John F. Kennedy he was particularly close, advising him again and again to avoid entanglement in Vietnam. Through it all he served as the urbane face of liberalism, commenting constantly on television and producing a long, admirable list of books and articles.

What astonishes the contemporary reader is, first of all, that a genuine, independent intellectual like Galbraith was permitted to serve in government, let alone become the confidant of presidents. Facile anti-intellectualism is the order of the day now, as even Democrats race to embrace the free-market logic of the Chicagoans. The ''New Industrial State'' that the great liberal economist described in 1967 is now Public Enemy No. 1 of financiers and rebel C.E.O.'s determined to, as Tom Peters put it in 1992, blast ''the violent winds of the marketplace into every nook and cranny in the firm.''

Yet reading Parker's comprehensive account of the 20th century's economic battles, I can't help thinking that this ought to be Galbraith's moment. An old-school scoffer like Galbraith would remind us that all our elected officials have done with their heady incantations of the virtues of privatizing Social Security and the glories of deregulation is resurrect the superstitions of our orthodox ancestors, and trade in our affluent society for a faith-based 19th-century model in which the affluence accrues only to the top.

Copyright 2005 The New York Times Company

by Thomas Frank, The New York Times Sunday Book Review