Economics: Galbraith's choice of targets in his latest essay seem quaint and removed from current debate.
Legendary Harvard economist John Kenneth Galbraith forfeited the loyalty of the Irish economics profession many years ago when he opened his popular television series, The Age of Uncertainty, with the gratuitous remark that Ireland, uniquely among nations, had produced no great economists.
Galbraith's forte has been the ability to dissect the role of interest groups in shaping the US economy, to challenge Panglossian views of the process of economic growth, and to communicate in lucid prose to a wide public his concern about the untrammeled pursuit of self-interest.
Here he offers an elegant but brief essay on the gap between myth and reality in the way the modern economy is often portrayed. Ever the literary stylist, Galbraith proposes another novel phrase, "innocent fraud", to add to those he has introduced in the past, such as "conventional wisdom", "countervailing power" and "the affluent society", the last being the title of his best-known and most influential book, published in 1958 and a manifesto for a generation of moderately left-leaning critics of the capitalist system.
The "innocent frauds" of which Galbraith complains are myths that have been deliberately insinuated into the conventional wisdom by powerful interest groups. The central myth is of an economy where consumers' needs are met by owner-controlled firms, with trustworthy accounting practices. The reality, for Galbraith, is quite different: a system of deceitful management-controlled bureaucratic corporations manipulating consumer and government choices.
The critique largely echoes Galbraith's most famous books of a half-century ago, including American Capitalism and The New Industrial State. The continuing relevance of many of the observations that he made then cannot be denied, indeed many now represent the conventional wisdom though the particular choice of targets in this volume seems somewhat quaint and removed from current debate.
For instance, with inflation at historic lows and the US Federal Reserve celebrating the most successful of its nine decades, it seems anachronistic for Galbraith to re-emphasise his long-held dismissal of central banking as irrelevant. Even if the powers of the Fed's Chairman Alan Greenspan are often overstated, it is going too far to belittle that gentleman as an ineffective publicist "of no slight theatrical talent".
Again, one of Galbraith's themes is the paradox whereby those who enjoy their work are generally among the best-paid. But the typical defence of overpaid executives, that they are merely earning the rewards of an effective incentive system, is left unchallenged, indeed unmentioned, thereby weakening the force of the argument. Bemusement rather than passion seems to drive Galbraith here and through large parts of the essay. Retail megachain Wal-Mart is portrayed, not angrily as the sweatshop employer of Barbara Ehrenreich's Nickel-and-Dimed, but, in a tone of nostalgia, as the nemesis of the small retailer.
Galbraith paints with a broad brush, yet leaves large areas of the canvas untouched. The environment is barely mentioned, and we do not learn where Galbraith stands on globalisation. Surely JFK's ambassador in India has a view here? Does he share the penetrating analysis of Joe Stiglitz, his successor as radical guru economist par excellence, as set out for example in Globalization and its Discontents, of globalisation as a beneficial process but one calling for improved international governance informed by a sense of justice?
Galbraith complains about deliberate misnaming: the "capitalist system" euphemised as the "market economy". I am not convinced that the latter term is a meaningless designation; for example, it is absurd to suggest that the former Soviet Union operated with a market economy. And when it comes to misnaming, is Galbraith not also at fault in his use of the term "fraud" in confusing what are merely emergent myths with deliberate deceit? My guess is that this term will not take. Besides, who really believed these myths? Apparently Galbraith himself fell for the myth of crystalline transparency in corporate accounts. It is astounding to find him stating that, in reading hundreds of corporate financial statements, it had never crossed his mind that "some were a disguise for quiet larceny". Surely the scourge of the military-industrial complex could not be as naïve as the dot.com bubble day-trader? His near contemporary and neighbour in Cambridge, Charles Kindleberger, author of Manias, Panics, and Crashes, who died last year, could have put him right.
At 96, no author should feel obliged to keep up with the professional literature, and Galbraith shows little sign of doing so. There are no footnotes, and the two books cited appeared in 1899 and 1932. Yet if he had, he might have discovered that the rough edges, the distortions and the injustices of modern society that he identified a half-century ago are no longer ignored, whether by supporters or opponents of his perspective, but are indeed the bread-and-butter of economic research today. The myths he challenges are no longer conventional wisdom, though they do remain a rallying ground for ideologues.
The Economics of Innocent Fraud: Truth for Our Time By J.K. Galbraith Penguin, 78pp. £10
Patrick Honohan's Financial Sector Policy and the Poor will be published by the World Bank this month