January 21st 2006

  Buy Issue 2723

Articles from this issue:

COVER STORY: B.A. Santamaria: the making of a political warrior

EDITORIAL: Unbalanced economy: the problems ahead

CANBERRA OBSERVED: The Coalition - a rocky road ahead for 2006

NATIONAL SECURITY: How Australia should fight terrorism

POLITICAL ISSUES: Muddled thinking in green politics and ecology

MEDICAL SCIENCE: D-I-Y abortion drug RU-486 endangers women's lives

CULTURE AND CIVILISATION: Western elites lack moral courage

The struggle against forgetting (letter)

Living standards and the labour market (letter)

A slogan for RU-486? (letter)

CINEMA: Paradise Now - Portrait of deranged killer as hero

CINEMA: C.S. Lewis tale brilliantly translated to big screen

BOOKS: JOHN KENNETH GALBRAITH: His Life, His Politics, His Economics, by Richard Parker

Books promotion page

JOHN KENNETH GALBRAITH: His Life, His Politics, His Economics, by Richard Parker

by Colin Teese

News Weekly, January 21, 2006
Chronicles of a dissenting economist

JOHN KENNETH GALBRAITH: His Life, His Politics, His Economics.
by Richard Parker.
New York: Farrar, Straus and Giroux
832 pages, Hardcover RRP: $A65.00

Richard Parker has written what will probably stand as an accurate and balanced account of the life and times (so far) of the world-famous American economist, John Kenneth Galbraith.

One says "so far", because Galbraith is now 97, and while he is now inactive in public life and writing, he seems to have retained his health.

Chronicling Galbraith's life and times is no easy task, but Mr Parker - an economics graduate of Oxford University, and currently a senior fellow of the Shorenstein Center at Harvard's Kennedy School of Government - has tackled it manfully.

That he has been so comprehensively successful is testimony as much to Richard Parker's considerable skills as a commentator on economics and politics as to his capacity for painstaking research.

By definition, biographies are intended to cover the life of the subject, though they will, of necessity, tend to emphasise those aspects of the subject's life upon which his or her public reputation rests most securely.

Wisely, in the view of this reviewer, Parker has chosen to deviate from this well-traversed formula. Alternatively, perhaps he had no choice because his subject is a man in respect of whom almost all aspects of his life have been in the public domain since before World War II.

The title of Parker's biography is apposite, embracing as it does Galbraith's life, politics and economics.

Presumably, Parker's is an authorised work, although it is unclear, at least to this reviewer, just how much close personal contact there was between biographer and subject during the process of researching the book. In any event, it appears that the author - while holding to strict objectivity - makes no attempt to conceal his admiration for the man and for many of his opinions on public policy.

Beautifully written and painstakingly researched, the book nevertheless presents the reader with a significant challenge: some 674 pages of tightly-packed text in small print and a further 112 pages of notes.

Galbraith's books - most notably, American Capitalism: the concept of countervailing power (1952), The Great Crash, 1929 (1954), The Affluent Society (1958), The New Industrial State (1967) and The Age of Uncertainty (1977) - are examined in detail.

Not only are their arguments dissected, but, no less important, the points made against Galbraith's central propositions by his most significant opponents are given due weight.

It would be thought by many that Galbraith - controversial figure as he tended to be - was better known for his books and observations on economics. Yet Parker's biography has chosen to concern itself as much with the politics of Galbraith as with his economics.

No doubt the subject would vigorously deny that economic and political issues can or should be considered separately. Indeed, it has been a consistent thread running through Galbraith's thinking and writing that public policy deliberations must merge political and economic considerations before any worthwhile sense can be made of them.

Parker wisely begins by relating Galbraith's family background and early life as a kind of introduction to his politics and economics.

Perhaps, initially, the ordinary reader might suspect that the author was dwelling too long, and describing in too much detail, Galbraith's upbringing and early life. Yet, as one reads on, it becomes obvious that the subject's upbringing and background are inextricably bound up with the larger whole.

F.D. Roosevelt's New Deal

In fact, Parker's account of Galbraith's early life turns out to be among the most fascinating parts of the book.

Galbraith was born into a prosperous family of Canadian farmers, originally of Scottish descent. The family were not actively involved in party politics, but, like all farmers, took a lively interest in the political process.

Of necessity, the young Galbraith was closely involved in animal husbandry at a practical level, but it seemed he never intended to settle on the land. At 18, he enrolled in the Ontario Agricultural College and graduated after four years of study, well versed in the theory and practice of animal husbandry and farming, but not much else.

No doubt his family envisaged a career in teaching, but the young Galbraith had grander ideas.

Newly graduated in 1931, and thinking about what he might do in perhaps the toughest economic and employment climate in the 20th century, Galbraith managed to obtain a research grant to study agricultural economics at the University of California.

Now firmly committed to the study of economics, he enrolled for all the most demanding subjects. At the time, Berkeley had some of the best teachers available, and many of them promoted a more progressive brand of economics than was available in the older, more prestigious East Coast universities. It was at Berkeley that the young Galbraith was undoubtedly helped to cement into place his own progressive brand of economics.

By the mid-1930s, Galbraith - an awkward young man, almost seven feet tall, hailing from the plains of Iona Station, Ontario, and recently graduated in agricultural economics - had attached himself to the values of the New Deal politics and economics of Franklin D. Roosevelt's early presidency.

Galbraith later recalled that Berkeley introduced him to communism. Many of Berkeley's most talented students and academics were active communists at the time. Galbraith was tempted to join them. Yet, even then, he relates, he recognised that the system could not and should not survive. It turned out to be an incredibly perceptive judgment.

Agricultural economics

In possession of a newly-minted doctorate, Galbraith left Berkeley in 1934. Although his postgraduate study focused on public finance, he had retained his connection with agriculture. Throughout his final year at Berkeley he was teaching agricultural economics at the university's agricultural college.

Galbraith's study of economics at Berkeley confirmed what he had already learned about agriculture from casual observation. And it was a lesson many economists still refuse to accept. Certainly, we here in Australia have not learned the lesson.

What Galbraith came to understand was that farming was fundamentally different from other forms of economic activity. Even if you accepted prevailing economic orthodoxy of the way markets operated - and Galbraith did not then, and still does not - markets for farm products do not operate according to orthodox theory.

Farmers, large numbers of them producing undifferentiated products, would always be facing organised buyers capable of manipulating prices down to ruinously low levels. It was necessary for the farm sector to be shielded from this inevitability by government action of one sort or another.

Seventy years later Galbraith still holds to the same view.

The curious thing is that orthodox economic opinion once again denies Galbraith's fundamental proposition; yet those in political power in the US - who in all other respects oppose what Galbraith stands for - continue to provide support for farmers in ways which accord with Galbraith's ideas. Their counterparts in Europe do the same for European farmers - also in the face of concerted opposition from most of the economics profession.

Australia is almost totally alone in the misguided view that its farmers should be required to face subsidised competition without support.

Parker makes very clear in his discussion of Galbraith's important books why his subject holds a different view of economics from the profession's mainstream. Essentially, Galbraith believes that mainstream economics opinion rests upon a delusion. It assumes, in the face of all the evidence to the contrary, that the operation of market forces can or should be the decisive factor in shaping economic life. Providing that governments keep their hands off the levers of economic power, the market will supposedly deliver the best, fairest and most enduring economic outcomes.

Galbraith totally rejected this thesis from the beginning of his life as a scholar. As an untenured academic at Harvard, he was producing articles which, for the first time, calculated the amount of the total cost of goods which was outlayed on advertising and marketing. His point was that this expenditure, which amounted to between 20 and 30 per cent of the selling prices of goods, had as its purpose the corruption of the operation of the market. Given that business persisted with this activity, then presumably it was successful in that purpose.

Galbraith's second proposition, no less telling, was developed in his 1967 book, The New Industrial State. Here, Galbraith challenged the idea behind classical economics: that is, that the US economy met the requirements for a classical market economy. Those requirements presumed many small manufacturers facing many small buyers with none on either side able to influence price.

Large-scale manufacturing

Galbraith maintained that mere observation disproved the entire theory. Buyers were being served by a few large manufacturers who could, and would, have the capacity to influence price.

He added that not merely was this a fact, but it was highly desirable. Large-scale manufacture, organised in exactly that way, made it possible for consumers to be supplied with the best products at the lowest price - provided only that manufacturers were prevented from exercising their market power to influence price. This could be achieved by appropriate regulation over monopoly power.

From that point on Galbraith developed his ideas further in American Capitalism. Capitalism, he believed would work to the extent it became a collaborative effort between capital, labour and government.

Galbraith had been a disciple of the famous English economist, John Maynard Keynes, in the late 1930s and supported, in particular, the interventionist brand of capitalism he promoted.

Yet, after World War II, he became skeptical of whether Keynesianism could be used to promote objectives such as full or near-full employment.

Full employment, Galbraith believed, could only be achieved by the pursuit of the right economic policies - in particular, his idea of "collaborative capitalism". For this to work, government intervention was needed for the simple reason that neither business nor unions could be trusted to allow enlightenment to triumph over greed.

World War II

During the war, Galbraith for a time ran an agency entrusted with price and wage control. It was judged, even at the time by the business community, to have been successful yet undesirable. Although Galbraith has never explicitly said so, there remains the impression that he believes that some measure of control over prices and wages is necessary if capitalism is to deliver the best economic outcomes. Without that, it becomes impossible to contain potential inflationary pressures without harm to one or another part of society.

Much of Robert Parker's biography is concerned with Galbraith's political ideas and influence. Space does not allow a reviewer to do this part of the book full justice. But it is possible to say that, for a couple of decades after World War II, Galbraith had an enormous influence on both the political and economic policy-making in the US.

Galbraith was by any measure "left-leaning". He dominated left thinking within the Democratic Party. He was a true political progressive, so much so that many who supported his economic ideas did not always endorse his political views. He believed in accommodation with the Soviet Union right through the Cold War period. He steadfastly opposed the Vietnam War.

Despite all of this, he exercised a powerful political and economic influence over the thinking of President John F. Kennedy with whom he enjoyed a longstanding and close personal friendship. Even after President Kennedy appointed him Ambassador to India, Galbraith continued to be a close and respected advisor to the President.

Parker not only details the political and economic advice Galbraith tendered to President Kennedy, but also discusses in some detail many of the progressive ideas held by the President himself.

In all of this discussion, one important consideration is introduced in passing. It becomes clear that - in partnership with his Attorney-General and brother, Robert - President Kennedy had the intention, in the period immediately before his death, to declare war on organised crime in the US in a way that has perhaps never been contemplated before or since.

At precisely the moment all of this was about to take place, the President was assassinated - officially by a deranged person with no defined political motive. This assassin, before he could talk, was then himself killed by a man significantly connected with organised crime.

Whatever official investigations may have decided, the present reviewer, having taken into account all of the detail in Parker's book, is less inclined than he once was to accept the official versions of what was behind the President's assassination.

By inclination, this reviewer has always found Galbraith's economics the more interesting part of his life - and that is without for one moment wanting to deny Galbraith's proposition that public policy deliberations must take into account both economics and politics.

Parker's biography has resisted the temptation to confine his attentions to Galbraith's economics, and his book is the better for it. As a consequence, his study has done greater justice to all aspects of his subject's life than has this reviewer.

Parker's book leaves us with the impression of a man who, like the rest of us, has his faults. As seems to be the case with many tall, awkward men, he could sometimes appear, and probably was, imperious, even arrogant; but he wrote and spoke compellingly about what he believed in.

In addition, he was able, for 20 or so years from the middle of the last century, to be one of the most powerful political and economic influences in the most powerful democracy on earth without ever holding political office.

It is not surprising that Galbraith's has been a life worth chronicling.

Perhaps it can best be summed up by reproducing two quotes from chapter 22 of Robert Parker' book:

"Many reformers - Galbraith is among them - have as their basic objection to the free market that it frustrates them in achieving their reforms, because it enables people to have what they want, not what the reformers want. Hence every reformer has a strong tendency to be adverse to a free market." - Milton Friedman (Nobel prize-winning economist and leading champion of free-market capitalism).

And Galbraith's rejoinder? "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is the search for a superior moral justification for selfishness." - John Kenneth Galbraith.

  • Colin Teese is a former deputy secretary of the Department of Trade.

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