Galbraith on predatory capitalism

As a teaser for the PEF’s new John Kenneth Galbraith Prize, to be inaugurated at this year’s Canadian Economics Association meetings by his son James Galbraith, here is a short piece the latter did for The Nation last April, as one of several contributors on the theme, “taming global capitalism anew”:

Taming Predatory Capitalism

JAMES K. GALBRAITH

In 1899 Thorstein Veblen described predation as a phase in the evolution of culture, “attained only when the predatory attitude has become the habitual and accredited spiritual attitude…when the fight has become the dominant note in the current theory of life.” After an entire century’s struggle to escape from this phase, we’ve suffered a relapse. The predators are everywhere unleashed; and the institutions built to contain them, from the United Nations to the AFL-CIO to the SEC, are everywhere under siege. Predation has again become the defining feature of economic life. Our first problem is to grasp this reality in full.

Postwar prosperity was built on a vast cut in the cost of security and the achievement of peace in Europe and much of Asia. The American role in the cold war system was to provide security; for this the dollar’s role as anchor of the world trading system was our reward. But now, with Iraq, we are seen worldwide as the leading predator state, promoting war as a solution rather than as the ultimate economic and human horror. For this, many would like to see our privileges revoked.

Corporate and financial fraud and political corruption form the second great domain of predatory capitalism. DeLay, Frist and Abramoff are the names in the news, but the tone is set by the leadership–Cheney of Halliburton and Bush of Harken Energy–a large predator and a small scavenger, specialists in cronyism and expert in nothing else. When predation becomes the dominant business and political form, the foundation of capitalism crumbles. Markets lose legitimacy, investors fly to safety in bonds, and authentic innovation and shared growth both become unattainable. The solution must be not just a change of parties but a new political class, including a new media not under corrupt control.

Then there is the predatory attack on unions and labor, in which many economists are complicit. This is far advanced in America and most visible today in Europe, as reflected by the doctrine of flexible labor markets, which claims that the conquest of unemployment requires cutting the pay of the working poor. But there is no history of unemployment ever being conquered this way–certainly not in the United States of the 1940s, 1960s or 1990s. Modern Europe also affords counterexamples of equalizing growth, from Norway and Denmark to recent gains in Spain, as well as object lessons, most recently in France, of the catastrophe of designed exclusion.

The way forward is a program for growth and justice built on the needs of the working population and the middle class. To begin with, in the United States there must be a powerful demolition of the old political order: We need elections where all votes are cast and counted. The campaign against voter repression is the essential civil rights struggle of our time, even though most progressives don’t seem to realize it yet. Prevailing will require fundamental reform such as the introduction of nationwide vote-by-mail (the Oregon system). Without that, and also many relentless prosecutions, nothing else will be achieved.

The economic commitment, in turn, must be to full employment here, to egalitarian growth in Europe and Japan, and to a worldwide development strategy favoring civil infrastructure and the poor. Public capital investment, stronger unions and a high minimum wage should frame the domestic agenda. Overseas, crackdowns on tax havens and the arms trade, a stabilizing financial system and an end to the debt peonage of poor countries should be among the priorities of a new structure.

The truths are that egalitarian growth is efficient, that speculation must be regulated, that crime starts at the top and that peace is the primary public good. These truths are poison to predators and are the reason predators have fostered and subsidized an entire cynical intellectual movement devoted to “free” markets made up of a class of professor-courtiers now everywhere in view. Taming predatory capitalism could start with breaking this econo-corporate analytical axis, and reviving the concept of countervailing power, first formulated by John Kenneth Galbraith in 1952.

James K. Galbraith, chair of the board of Economists for Peace and Security, teaches at the University of Texas and is senior scholar with the Levy Economics Institute.