The Vision of James K. Galbraith

James K. Galbraith is the son of John Kenneth Galbraith, both are incredible and talented economists that have significant voices in the world of economics. Bill Moyer’s Journal has an excellent conversation with him on the state of our current economy. I will attempt to bring some of his ideas to you for your consideration.

The conversation began with talks of fear. The fear we have now in comparison to the fears of 1929 when the stock market crashed. Galbraith sees we have a great advantage over those folk in that we have experienced the New Deal, thus a model and a network that wasn’t in place then: deposit insurance, Social Security, government as lender when needed. We have the resources but we need the resolve to use them.

He is a bit hard on Alan Greenspan and the era of deregulation which created the morass we find ourselves in. All this result in distrust: customers don’t trust banks, banks don’t trust each other bankers don’t trust corporations which lie; “a poisoned well,” in his terms.

The problem is worst in Europe in that they lack the institutions of the New Deal such as a central bank. He sees their problems as systemic and our as policy issues.

He talks about folk like me in retirement and their fears. We who invested in the stock market have taken big hits in our retirement incomes. Yet there is the underpinning of Social Security which supports 40% of retired folk who have no other income. SS is also 50 to 60% of retirement income of our generation.

Galbraith’s solution to today’s problems is spending. The American dollar is still the standard currency of the world and we have great credit and can borrow on very low rates 4.3%. The deficit is high (see Republican administrations) but not crippling. We have to get used to it in order to get the economy moving or stabilizing the economy which makes for spending and more jobs. The other option is do nothing and let the government collapse. We have lenders, especially the Chinese perfectly willing to lend us money.

Galbraith sees that those who took control over the government over the past 30 plus years were not interested in reducing the government as claimed (a conservative principle) but used it for private benefit. For example the desire to privatize Social Security, make Medicare give maximum profit to pharmaceutical companies, trade agrees to promote self interests; a Predator State.  Turning regulations over to those who needed to be regulated failed to maintain the interests of the public. Skewed capitalism.

To fix the system we need to get good regulations back so it rewards the efficient and progressive businesses. Bank regulations should be clear to follow, end offshore tax havens and the like.

Galbraith says we cannot prosper without a private economy nor can we prosper without an effective autonomous government that thinks for itself.

In terms of the world perception of American Galbraith believes that the world has lost confidence in our sense of responsibility in invading Iraq and merely self-serving rather than for mutual security. And they have lost trust in our systems for legality, transparency and security.

For the economy to recover and expand we need a new strategy. The big problems now are environment and energy which could employ many.

Speaking about Obama he says you cannot compare his situation to FDR’s in that the world was ready for major change because of the Great Depression. The people in authority seem to want to continue the policies that have created our crisis. The rich and getting richer and like it. We have to reinstitute control such as the Glass-Steagall separation of commercial and investment banking. It would benefit small banks. He would also lower eligibility of Medicare to 55 which would help workers who hang on to jobs just for medical benefits.

Galbraith has recommended that anyone who wants a job should be able to get a job at $8 per hour or the like, such as the Jobs Corp working with neighborhood conservation and home health care. Keeping folk on the “dole” is more costly than putting them to work and less debilitating to people.

Galbraith sees our country facing a test that will determine our future, creating a responsible government and developing technologies to benefit the world. To make sure the government works for the common good not just special interests.