Tuesday, May 23, 2006

John Kenneth Galbraith

John Kenneth Galbraith died on April 29, aged 97. He was one of the most influential and controversial economists of the 20th century. He was a towering figure in more ways than one, standing six foot eight inches. Many of his phrases — among them "the affluent society", "conventional wisdom" and "countervailing power" — have became part of the language. He had a gift for quotable sayings and once quipped that “under capitalism, man exploits man. Under communism, it's just the opposite.”

Galbraith had an impressive CV. He served in the administrations of four American presidents, all Democrats - FDR, Truman, JFK and Johnson. He taught at Harvard and was president of the American Economic Association. He published almost fifty books and over a thousand articles. He was a member of the Order of Canada and received America’s highest civilian award, the Presidential Medal of Freedom, twice.

Galbraith was born in the isolated town of Iona Station, in South-West Ontario. Iona’s one other dubious claim to fame is as the site of Ontario’s worst mass murder. In April this year Bandido biker Wayne Kellestine and four others killed eight fellow members in what was described as an “internal gang cleansing.’

Galbraith's Scottish father was a teacher and farmer involved in local politics. They lived in an area known as "the Scotch" and Galbraith was brought up in a strict Calvinist community. He graduated from Ontario Agricultural College with a science degree in 1931. He emigrated to California and went on more academic honours at UC Berkeley gaining his Science masters and a PhD in Economics in 1934. That same year he went to work for Harvard as a tutor.

In 1937 he took a year-long fellowship at Cambridge where he fell under the influence of John Maynard Keynes. Keynes had just published his “General Theory of Employment, Interest and Money” a year earlier. The book was the single most influential economic treatise of the 20th Century. It changed the way the world looked at the economy and the role of government in society. Keynes’ general theory showed how ‘aggregate demand’ (the total demand for goods and services in a certain timeframe) caused recessions and advocated interventionist government policies to mitigate their effects.

Galbraith went back to the US in 1938, where he went to work first at Princeton and then for Roosevelt’s New Deal government. He joined the Office of Price Administration in 1941 won a reputation from Roosevelt as America's "price czar” for his efforts in keeping inflation from crippling the war effort. He was successful in keeping prices down but drew a constant battery of industry complaints. "I reached the point that all price fixers reach," he said, "my enemies outnumbered my friends." He quit in 1943.

At the end of the war he carried out research that showed that America’s strategic bombing had no effect in shortening the war. He also served as editor of the prestigious Fortune (home of the Fortune 500 index) between 1943 and 1948.

Galbraith’s war experiences deeply impacted his thinking for the rest of his life. He sought to use the wartime fiscal controls (price controls and anti-inflationary measures) after the war to create a more just society. He strongly believed in central management and criticised the unacceptable gap between "private affluence and public squalor". He supported Keynes who was the driving force of the Bretton Woods Conference in 1944. Delegates from 45 countries gathered in Bretton Woods, New Hampshire to discuss proposals for the creation of new international financial institutions to stabilize exchange rates and boost international trade after the war. The Bretton Woods agreement created two international institutions: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank).

Galbraith saw the widening gap between the richest and the poorest as the key threat to economic stability, and proposed significant investment in infrastructure such as parks, transportation, education and other public amenities. These policies were widely criticized by conservatives and libertarians wary of public expenditures or increased government influence.

Galbraith wrote his groundbreaking book in 1958 “The Affluent society”. Galbraith outlined his view that to become successful, post-World War II America should make large investments in items such as highways and education using funds from general taxation. Although the thesis was not new, his attack on the myth of "consumer sovereignty" went against the prevailing views of mainstream economics and the so-called "American way of life" and earned him criticism and praise in equal measure. According to the New York Times, The Affluent Society was “one of those rare works that forces a nation to re-examine its values”.

JFK and Galbraith were long-term college friends. When Kennedy became president in 1960, he offered Galbraith a senior economic post. Instead Galbraith requested the role of ambassador to India. Galbraith loved India and did much to encourage trade and understanding between the two countries. He became friends with Indian president Jawaharlal Nehru who ruled from independence in 1948 until his death in 1964. Galbraith advised India on economic policy and ensured America took a pro India view in its 1962 border war with China. He kept Kennedy constantly informed with his analysis of America's role in Asia. He was an early opponent of military involvement in Vietnam. "War," Galbraith informed Kennedy, "remains the decisive human failure." This viewpoint caused him to fall out with Kennedy’s successor Lyndon Johnson.

He continued to advise Democrat presidents in Carter and Clinton but he was increasingly seen by these administrations as a maverick. Nonetheless while his role in the Democrats was waning, his overall influence had gained a worldwide appeal. In 1977 he presented a 13 part series called The Age of Uncertainty for the BBC covering the history of economics concentrating on the problems of industrial society and how economics influences political, social and cultural decisions. The TV programme was hugely popular and cemented his reputation internationally.

In retirement, Galbraith continued to write vigorously. His astringent wit and clever phrasing meant often he could brilliantly sum up the most complex social problem. He remained always a supporter of strong government and progressive public expenditure. Most economists, including fellow liberals, did not share his views on production and consumption, and to his personal disappointment he was never regarded among the top-ranked theorists by his peers.

He remained acerbic to the end. Nearly 40 years after writing "The Affluent Society," Mr. Galbraith updated it in 1996 as "The Good Society." In it, he said his earlier concerns had only worsened: that if anything, America had become even more a "democracy of the fortunate."

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