Galbraith’s Predator State

James Galbraith bats this one out of the park:

Years ago, I realized that the free-market, supply-side crowd, true conservatives who’d ridden high with Reagan, dislike Bush as much as I do. I speak of the hard money, low-tax, Wall Street Journal, deregulate-and-privatize team, the nemeses of my youth, people like Bruce Bartlett, Paul Craig Roberts, the late Jude Wanniski. Suddenly, we were on the same side. Had I gone crazy or had they gone sane?

Whether it was right or wrong, “Reaganomics” had a logic. Each policy would aim at one problem. Tight money would cure inflation. Low taxes would stimulate saving and work effort. Small government would “crowd in” investment. Free trade would make us efficient. Smart people believed this and they had the authority of respected economists like Milton Friedman and Friedrich von Hayek to back them up.

But now those ideas are dead, buried, abandoned. Deregulation brought us miseries in finance, transport, energy and the climate. Free trade agreements dole out favors to big farmers and big pharma. The financial crisis finished off what was left of monetarism, the idea that the Fed should only worry about inflation. And everyone has given up on waiting for low taxes to unleash the creativity of the ultra rich.

Under Bush, oil and gas, drug companies and defense contractors, insurers and usurers control the government of the United States and it does what they want. This is the predator state. The wisdom of free markets? The President gave his own verdict in Houston the other day: “Wall Street got drunk.” True enough, but where were the grownups when the party went wild?

For many years, liberals have lived in fear and thrall of the market mantra. It’s time to get over it, for if true conservatives realize that our problem is a predator state, shouldn’t liberals be out there doing something about it?

Suddenly planning, standards, regulation and progressive taxes don’t seem so bad.

Looks like I will have to buy the book.

UPDATE: Jamie is online at TPM Cafe this week to talk about his book. He wraps this post with an agenda of sorts:

What’s required? Three despised ideas need to be re-thought and re-spoken. The first is planning. Markets cannot foresee the future, only human imagination does that. Corporations, of course, do plan. The question is, can you trust all the planning that needs to be done to the “planning” department of ExxonMobil? No? Then government needs to get back into that game. The job is not for the faint-hearted: there is no perfect plan, and the first thing predators do, of course, is shoot the planners.

A second is standards. In a world where interest rates are set by the central bank and the oil price is set by the Saudis, there’s nothing wrong with guidelines for fair wages and to protect the living standards of the working poor and the middle class. (We already have the minimum wage, after all: it’s just not high enough.) Standards are needed not just in trade agreements, but at home can give a more fair society, and also a more efficient and successful one: you need to be efficient to pay fair wages. Firms, on the other hand, that cannot pay decent wages or meet environmental and safety codes should not be coddled. They should be phased out, and the jobs transferred, in effect, to more productive and efficient firms.

The third idea is interdependence – as a financial fact. America can no longer justify its huge debts and the world role of the dollar through the security leadership we once provided, when people needed it, back in the Cold War. As a substitute, the war on terror is a dud. And the go-it-alone mentality that got us into Iraq is even worse: a path to financial disaster.

We can’t escape debt or deficits, and any attempt to do so by cutting government – the old conservative “solution” – would just lead to depression. So what’s the way out? How can we reconcile the imperative public challenges that face us (in particular) on the environment and energy fronts with the political and social imperative that the economy grow and provide jobs and decent living standards? What we must do, is get to work. We should be doing what needs doing, to change our transport system, our patterns of energy use, and to create and spread the technologies that will bring climate change under control. No other country could do as much, as quickly, as we can. No other country can contribute as much, as we could, to solving these crises. And if we can persuade the world to fund us, we could keep Americans fully employed for a generation or more, in this work.

One comment

  • I am pleased to discover the Progressive Economics Forum and glad to see another generation of Galbraiths contributing to thoughful, responsable and mature consideration of economic issues. It is great to see economics discussed in its full social, political and ecological context, and to see market and monetary theory put in their proper place, more descriptive than prescriptive. I plan to be a regular visitor.

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