Sunday, February 14, 2010

The Affluent Economist Redux?

At the very end of this right-wing essay on John Kenneth Galbraith, a Tea-Bagger emerges to bash the POTUS (44). If this is (fair & balanced) polemicism, so be it.

[x City Journal]
The Galbraith Revival
By Theodore Dalrymple

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A Canadian university recently asked me to deliver its annual John Kenneth Galbraith Lecture, named for the economist who for much of my youth was the most famous member of his profession in the world. His books sold by the million and were available everywhere in cheap paperback editions; titles such as American Capitalism and The Affluent Society were known to almost all educated people. A teacher at Princeton, Cambridge, and Harvard, he was the editor for a time of Fortune and the American ambassador to India. He was also the first economist to be widely known on television, not least through his sparring with William F. Buckley, Jr. (a close personal friend). His omnipresence as the voice of economics was both the result and the cause of a whole climate of opinion.

As is commonly the way, a reaction set in. Galbraith, who lived from 1908 to 2006, grew not only old, but old hat. His Keynesianism appeared outmoded in an era of unprecedented growth and prosperity apparently brought about by adherence to economic theories very different from his. No one believed any longer that demand management—the governmental regulation and, if necessary, provision of the demand for goods and services within the whole economy—was the way to combine prosperity with social justice. Rather, the market’s invisible hand and unconscious wisdom would lead us into the sunny uplands of expanding wealth and diminishing poverty.

But recently, there has been a reaction to the reaction. No sooner had Lehman Brothers collapsed than the printing presses started to roll out copies of Galbraith’s book on the debacle of 1929, The Great Crash. In fact, it couldn’t be printed fast enough, paperback books being affordable even in times of crisis. Galbraith was the hero of a recent PBS documentary extolling the value of big government. And demand management à la Galbraith is now back with a vengeance, of course. If the improvidently indebted but now impecunious private citizen won’t spend and thereby expand economic activity, the improvidently indebted but infinitely expandable government will do it for him.

At the beginning of a lecture named for a past notable, it is customary to extol him, even if the lecturer cannot entirely subscribe to the ideas of that notable; and this, it seems to me, is a civilized custom. Few people (save out-and-out monsters, of whom there are few) are entirely without saving graces, and, a fortiori, this applies to those who achieve eminence in a respectable field. It is surely an excellent moral exercise to dwell, at least for a time, on the sterling qualities of those with whom we disagree.

What, then, did I find to praise in Galbraith? In the first place, his personal example, which is encouraging for someone like me who has entered the later stages of his life. Galbraith wrote The Economics of Innocent Fraud when he was 96. That was the last of the approximately 50 books that he wrote, and he wrote them clearly, never giving the impression of wanting to be thought clever because of the difficulty of what he had to say. He did not believe that understanding economic reality required arcane mathematical formulas. His explanations of many economic phenomena came richly laced with commonsense psychology, which is to say that he did not lose sight of the fact that economics is, at base, a humanity. He repeatedly stated that one or two simple principles were not sufficient to understand the shifting nature of reality, which required flexibility of mind rather than rigid adherence to abstractions.

In particular, Galbraith did not believe in the simpleminded classical economic model in which a large number of individual actors compete with perfect autonomy in a marketplace, succeeding or failing according to their ability to satisfy customers’ wishes. This model, said Galbraith, broke down because of the sheer complexity of modern economic existence, in which markets are often rigged or regulated. If the classical model was ever right, that time is long past.

Further, Galbraith pointed out (though it was not a new insight, as he acknowledged) that large corporations’ managers developed interests of their own and, furthermore, that their powers often came to exceed those of the stockholders who actually owned the corporations. Not maximal profit to the stockholders, but maximal advantage to themselves, was the managers’ goal; in fact, the managers were bureaucrats, not entrepreneurs. The classical model was thus defunct as a reflection of reality. And perhaps more important to Galbraith was that the moral and economic superiority of private over public enterprise collapsed, for both were run by bureaucracies. Indeed, the moral relation of the two spheres was reversed: whereas the interests of the private bureaucrats were sectional, the interests of the public ones were general or universal—or at least the same as those of the less privileged, who needed protection from the cold winds of competition.

Galbraith’s observations obviously have some strength. Before the collapse of so many financial institutions, I might have written that his comparison of business with government foundered on the fact that in business, profit and loss imposed certain disciplining limits on the inefficiency of bureaucrats. But the sight of so many executives escaping with personal fortunes from the institutions that their bad decisions ruined somewhat reduces the force of this objection.

There remains, however, an astonishingly gaping absence in Galbraith’s worldview. While he is perfectly able to see the defects of businessmen—their inclination to megalomania, greed, hypocrisy, and special pleading—he is quite unable to see the same traits in government bureaucrats. It is as if he has read, and taken to heart, the work of Sinclair Lewis, but never even skimmed the work of Kafka.

For example, the chapter entitled “The Bureaucratic Syndrome” in his book The Culture of Contentment refers only to bureaucracy in corporations (and in the one government department he despises, the military). Galbraith appears to believe in the absurd idea that bureaucrats administer tax revenues to produce socially desirable ends without friction, waste, or mistake. It is clearly beyond the range of his thought that government action can, even with the best intentions, produce harmful effects. For Galbraith, a dollar spent on, say, public education results in a dollar’s worth of educated person, virtually without deduction. Troubling evidence to the contrary—for example, the fact that Britain spends nearly $100,000 per child on public education, and yet a fifth of the population is unable to read with facility or do simple arithmetic—does not figure in his work; he always writes as if all would be well if only $200,000 were spent.

He should have known better. In his 1981 autobiography, A Life in Our Times, he recalls the way academics flocked to Washington at the beginning of the New Deal. “Word had... reached the university that a nearly unlimited number of jobs were open for economists at unbelievably high pay in the federal government,” he writes. “All the new agencies needed this talent. Students who had been resisting for years the completion of theses and the resulting unemployment now finished them up in weeks. Some did not even stop to do that. So a new gold rush began.” One might think that this would have opened his eyes to the vested interests of bureaucracy—to the possibility that large government programs might operate more for the interest of the apparatchiks than for that of the alleged beneficiaries. But it never did.

Nor did it change his ideas about the politics of taxation. Over and again in his work, Galbraith alludes with disdain to the resistance that the affluent mount to tax increases, insisting that they do so only out of self-interest and indifference to the fate of the poor. In The Good Society, for example, he writes that “the comfortably affluent resist public action for the poor because of the threat of increased taxes.” It is true, of course, that the well-to-do resist tax increases in large part because they do not want to give up what they have; practically no one likes to be deprived of what he has. But in light of the “gold rush” described above by Galbraith, is it not at least equally likely that those who propose tax increases do so in order to increase their own power and emoluments?

Galbraith’s epistemology is, in fact, neo-Marxian. Just as Marx famously wrote that “it is not the consciousness of men that determines their being but, on the contrary, their social being that determines their consciousness,” Galbraith explains resistance to higher taxation thus: “It is the nature of privileged position that it develops its own political justification and often the economic and social doctrine that serves it best.” In other words, men—except for Marx and Galbraith—believe what it is in their interest to believe. It is hardly surprising that Galbraith always writes as if what he says is revealed truth and counterarguments are the desperate, last-ditch efforts of the self-interested and corrupt.

Galbraith never solved, or even appeared to notice, the mystery of how he himself could see through self-interest and arrive at disinterested truth. In general, his self-knowledge was severely limited. In the introduction to Journey to Poland and Yugoslavia (1958), he writes that “the publishing industry is sustained by authors who are busily plagiarizing themselves.” Yet few authors of nonfiction are more repetitive than Galbraith, down to the very locutions he uses and the anecdotes he tells. To have read three books by Galbraith is to have read ten times as many. He is like the Bellman in Lewis Carroll’s The Hunting of the Snark, using repetition as independent confirmation of the truth of what he says.

There is, of course, a deep psychological tension in Galbraith. He always talks about the rich as though he were not one of them; but the impoverished rarely spend their winters at Gstaad, Switzerland, as he did. He accepts that enrichment can be licit, no doubt thinking primarily of his own; but his enrichment came about by advocating in best-selling books the governmental expropriation of the riches of others. This enabled him to maintain his image of himself as one of the moral elect, one of those generous souls among the rich whom he describes in The Good Society, patrons of the poor—who themselves “are largely without political voice except as they are supported and represented by the considerable number in the more fortunate brackets who feel and express concern.”

Here we reach the heart of the matter. Galbraith’s thinking about social and economic matters was always de haut en bas; his solutions emerged from the Olympian heights of his own ratiocination, to be applied to the clueless multitudes below. (No doubt his own great height, over 6 foot 8, accustomed him to looking down on people.) His literary style is symptomatic of his attitude, a true case of the style being the man himself. Hundreds of times, he uses question-begging locutions that intimidate with their orotund grandeur. I open a book of his at random and find the following: “The controlling fact is”; “This trade-off is present in all accepted thought”; “Nor should one wish otherwise”; “It has now been adequately urged”; “This is not a matter of choice; it is the modern imperative”; “It would, of course, be a serious error”; “This has long been recognized”; “All of this is to be welcomed”; “The lesson is clear”; “The solution is not difficult; it has the advantage of inevitability.”

The cumulative effect is to intimidate those who believe themselves not well enough informed to contradict so high an authority. We are far from the realm of Jane Austen’s light and ironic “It is a truth universally acknowledged.” When J. K. Galbraith enunciates a truth universally acknowledged, he does not want us to smile inwardly; he wants us to fear not being included in le tout Paris of correct, generous, and humane thought. What fool does not wish to be on the side of the inevitable? Who does not want to recognize what has so long been recognized? Who dares to deny that what the Paul M. Warburg Professor of Economics says three times is true?

Galbraith’s egotism and condescension toward most of the human race is evident in his admiration for Franklin D. Roosevelt—or rather, in the grounds for that admiration. Here he is in the preface to Name-Dropping, a singularly uninformative book of reminiscences of the great whom he met: “I turn now to Franklin Roosevelt, the first and in many ways the greatest of those I encountered over a lifetime. And the one, more than incidentally, who accorded me the most responsibility.” I think you would have to have a pretty tough carapace of self-regard not to recognize the absurdity of this, or to have the gall to commit it to print.

At another point, Galbraith writes that Roosevelt saw the United States “as a vast estate extended out from his family home at Hyde Park, New York. For this he had responsibility, and particularly for the citizens and workers thereon.” A tree-planting program that Roosevelt initiated in the Plains states, for instance, was “the reaction of a great landlord, an obvious step to improve appearance and property values, a benign action for the tenantry.” Galbraith meant this as praise, which is not surprising, because his own attitude toward the country was similar. The people were sheep, and government, with Galbraith as advisor, was the shepherd.

The great responsibility that Roosevelt gave Galbraith during the war was fixing the prices of products for the whole of the United States, and I think Galbraith regretted that this highly rational system of allocation according to need (as determined by him) eventually came to an end, for it was clearly, in his opinion, superior to the chaos of pricing by supply and demand. “Having stopped the sale of all new tires,” he writes, “we had now to find some way of selling them again but only to the necessary and needful.” The technocrat, Galbraith, comes to the aid of society, helping it define and achieve its ends. But I don’t think he ever recognized that total war, in which most of national life is subordinated to a single, easily defined end—namely, defeating a powerful enemy—is not a normal state of affairs. On the contrary, he thinks that societies should always have a single goal and that it is the function of government to direct them to that goal.

Galbraith’s belief in the capacity of experts to direct everybody better than they could direct themselves was no doubt what made him sympathetic to, or at least uncritical of, Communism. He was always disparaging about the danger of Communism—for example, arguing that it posed no real threat to the Third World because Marx had believed that it would come first to advanced industrial societies. I do not think that the people of Cambodia or Ethiopia, where Communism was responsible for the deaths of millions, would have taken his doctrinal literalism kindly.

In the preface to Journey to Poland and Yugoslavia, the first of Galbraith’s books about his travels in the Communist world, he argues that “far more problems in economic behavior are common to capitalist and socialist or Communist countries than we commonly allow ourselves to suppose.” In a lecture printed as an appendix, he explains why the differences between the two systems are not great: in a typical capitalist country, “the industrial corporation is now headed by a professional executive who has made his way up through the managerial hierarchy in a manner not greatly different from the way an energetic and ambitious man makes his way up through the civil service.” A man who has devoted his life to the study of economics—and occupies one of the most prestigious chairs in the subject in the world—does not appear to understand that the existence of thousands of corporations, as well as the possibility of starting new ones, introduces a significant difference from a situation in which there is a single employer under very tight political control.

The main function of what Galbraith writes is to minimize the horrors of Communism, upon which he has hardly a word. Indeed, strict political control never intrudes much on his consciousness when he is in the Communist world. “I have generally avoided quoting by name my Polish... sources in this account,” he writes. “This is not because I have any great fear of compromising them. Many people... take no small pride in speaking plainly and do so without evident restraint.”

Other priceless observations follow. Noticing the drabness with which people are dressed, Galbraith remarks that it “may be the problem of socialism. Planners can provide for everything but color, and they cannot allow for that because so much of it is associated with idiocy great and small. In any case, the people of Poland have more liberty than variety.” One of the great advantages of Galbraith-style planning is the elimination of “idiocy great and small,” of the kind that people are apt to embrace when they have the choice. The solution: eliminate choice. You can have any color you like, so long as it’s chosen by the philosopher-king.

Fifteen years later, in 1973, Galbraith went to China—in the slipstream of President Nixon, as it were—and wrote A China Passage. This was in the middle of the Cultural Revolution, in which perhaps a million people died and tens of millions were horribly persecuted, and only a few years after the greatest man-made famine in human history. Nevertheless, Galbraith quotes the Sinologist John K. Fairbanks, who wrote as if he had learned his style directly from Galbraith himself: “The big generalizations are all agreed upon: There has been a tremendous betterment of the material life and morale of the common people.”

In light of the appalling suffering of the Cultural Revolution, Galbraith’s remarks often seem extremely callous. Time and again, he offers vignettes of the Cultural Revolution like this one: “The workers were rather proud of having confined their fighting to the morning.... Sadly some windows did get broken.” Thus Galbraith discusses the greatest episode of deliberate cultural vandalism of modern history, accompanied as it was by human cruelty on a gargantuan scale.

Sometimes he sounds like a mouthpiece of Maoist propaganda, accepting its categories uncritically. In the 1920s and 30s, sheeplike Western travelers in Stalinist Russia had accepted its category of “kulak,” or rich peasant, to describe a peasant who owned a pig or a cow and was therefore a class enemy deserving the supreme penalty. Similarly, Galbraith can write about a factory that “had been partially disrupted until the People’s Liberation Army moved in to restore order. The union I gather to have been one of the reactionary elements that... aroused the antipathy of the Red Guards. It was disestablished.” This use of the phrase “reactionary elements” betrays a startling lack of awareness that visitors to the Communist world had been gulled before. Nor was Galbraith interested in who the Red Guards were or what they actually did. The fate of individual people was far beneath his notice, which explains why his anecdotes are so rarely interesting, let alone illuminating. His is a humanitarianism without a human face.

Later, Galbraith tells a story about how the Chinese farmed areas of low fertility: “We were told how one production brigade had transported soil for many miles to make one peculiarly rocky spread slightly productive.” According to Galbraith, the decline in agriculture in New England would not have taken place if politicians rather than market forces had been in charge. The moral of the story for Galbraith? “The market can be ruthless as politicians cannot.” That market relations can sometimes exact a human price is no doubt true; but to have lived through the first three-quarters of the twentieth century, and to suggest that there is any cruelty and depravity of which politicians are not capable, requires a capacity for incomprehension amounting almost to genius.

Let it not be said, however, that Galbraith was entirely uncritical of China during the Cultural Revolution. “At the close of almost every meeting one is asked for ‘your criticisms’ of the institution or the New China,” he recounts. “I’ve found one that is true, irrefutable and well-received. ‘You are smoking far too many cigarettes.’” Millions of people beaten, tortured, and humiliated, the remains of a millennial civilization wantonly smashed, and Galbraith bravely takes up the antismoking cause!

Of course, it would have been rude to criticize those who looked after Galbraith and his modest wants. “I have a bedroom, sitting room, bathroom and air conditioning,” he discovers when he arrives at the Nanking Hotel. “But that,” he adds with touching simplicity and modesty, “is sufficient”; until, that is, he arrives in Paris, having suffered such deprivation in Nanking. “I was two days at the Ritz with no grievous sense of social guilt, no insuperable problem of culture shock,” he writes.

Galbraith has come back into fashion: not only his ideas, which imply the need for a huge and expanding class of redemptory politicians and bureaucrats to save people from a fate that would be wretched without them, but his aristocratic assumption of unchallengeable moral superiority, written in his prose as it appears to be written on President Obama’s face. How delightful to be so generous, so very right all the time, and yet make a fortune and stay at the Ritz! Ω

[Theodore Dalrymple — the pen name of Anthony Daniels, a former prison doctor and psychiatrist who trained as a doctor at Birmingham Medical School, then practiced in Zimbabwe and Tanzania before returning to Birmingham where he was a prison doctor — is a contributing editor of City Journal and the Dietrich Weismann Fellow at the Manhattan Institute. His most recent book is Not with a Bang but a Whimper (2008).]

Copyright © 2010 The Manhattan Institute

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That Was The Year That Was: 1979

In today's NY Fishwrap, The Flatster (Thomas L. Friedman, author of The World Is Flat in 2005) described the three-headed monster that was born in 1979:

...Saudi Arabia Wahabi-fied itself, Ronald Reagan glorified the Afghan mujahedeen, and the Europeans hailed the Khomeini revolution in Iran as a “liberation” event.

Woe to us in our national hubris. If this is a (fair & balanced lament, so be it.

[x Wall Street Fishwrap]
The Radical Legacy of 1979
By Edward P. Djerejian

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If ever one year in recent times was a catalyst for change in the broader Middle East and Muslim world, it was 1979. One ray of bright light in that year of darkness was the signing of the historic Camp David peace treaty between Israel and Egypt. Conversely, three events had dire consequences with which we live today.

First, there was the overthrow of the shah of Iran by the Ayatollah Khomeini. Second, there was the takeover of the Grand Mosque in Mecca, Saudi Arabia, by a group of Islamic extremists. And third, there was the Soviet invasion of Afghanistan.

Each event fostered the forces of radicalization with implications far beyond the region's borders.

• Iran becomes a theocracy. Khomeini's revolution in the early months of 1979 established the wilayat al-faqih, or rule by a Muslim cleric who became the Supreme Leader. He, in effect, formed a theocratic system in Iran, a predominantly Shiite country, and declared the new regime to be "God's government," warning that subsequent disobedience was a "revolt against God."

Ayatollah Khomenei called for Islamic revolutions throughout the region. When the deposed shah was admitted into the United States for medical treatment, Iranian students took over the U.S. embassy in Tehran, beginning the 444 day hostage ordeal. Khomeini set Iran on an adversarial course with America that continues to this day.

As a result of U.S.-led military action, two of Iran's enemies have been overthrown—the Taliban regime in Afghanistan and Saddam Hussein's regime in Iraq. Iran has been expanding its influence in the region. It is the most important patron of Hezbollah in Lebanon, and it supports Hamas, thereby extending its reach into the Levant and the Arab-Israeli conflict. And, of course, Iran is the focus of international inquiry for its nuclear ambitions.

• Saudi Arabia embraces the Wahhabis. On Nov. 20, 1979, a group of Islamic extremists attacked the Grand Mosque in Mecca, the holiest site in Islam, and held it for two weeks. The extremists included Saudis and Egyptians who were disenchanted with the Saudi regime. They proclaimed that the "Mahdi," the "Guided One," had come to restore righteousness and redeem the world and form a just Islamic society.

The leader of the dissidents was a tribal preacher who opposed the conservative Saudi leadership as impious and in the hands of the West, especially the U.S. The seizure of the Grand Mosque was a blow to the Saudi regime's legitimacy, and to its role as guardian of Islam's holy places. It was only after a bitter armed confrontation and assistance from France's elite Gendarmerie special forces unit that the Saudis were able to defeat these radicals.

In response to this crisis, the Saudi leadership perceived it to be in their interest to bolster their Islamic credentials by binding the regime even closer to the ultraconservative Wahhabis in the kingdom. The Saudi government upped its financial support for the spread of Wahhabi doctrine on a global scale, including assistance to some madrassas, such as those in Pakistan, that teach an extreme view of Islam and have trained militants that later swelled the ranks of al Qaeda and other Islamic extremist groups.

In recent years, however, and as a result of acts of violence and terrorism directed against targets in the kingdom, the Saudi government has begun to crack down on Islamic terrorist groups inside the country and on its borders—as evidenced by recent military actions against groups based in Yemen.

• The Soviets invade Afghanistan. In late December 1979, the Soviet Union invaded this mountainous, undeveloped nation, in order to maintain a pro-Soviet regime on their border in Central Asia. The invasion mobilized a whole generation of Muslims, and turned Afghanistan into a flashpoint in U.S.-Soviet relations.

I was the head of the political section of the U.S. embassy in Moscow at the time. I accompanied our ambassador, Thomas Watson Jr., who had been asked to come to the Soviet foreign ministry by Foreign Minister Gromyko's deputy. He told us "that the Soviet government wanted the United States to be the first to be informed of the Soviet Union's response to the Afghanistan government's request for humanitarian assistance."

We of course already had clear and timely information about the Soviet military action. Ambassador Watson turned to me and asked, rhetorically, "Is the translation correct" and I replied, "Unfortunately, it is."

Watson glared at the deputy minister and asked in no uncertain terms, "Is this what you want me to report to my president [Jimmy Carter]? Do you understand the consequences of your military action on the relations between our two countries?" The startled man had no answer, and we got up and stormed out of the room.

The consequences were great. Under the Carter and Reagan administrations, a major effort was made to make the Soviets stand down. The U.S. supported the Afghans and the mujahedeen in a way that facilitated the Soviet defeat—a defeat that was a major factor in the demise of the Soviet Union.

There were other unintended consequences. Our support of the mujahedeen, followed by our virtual abandonment of Afghanistan after the Soviet retreat, helped create a radical fringe of Islamist fighters and radicals, including Osama bin Laden and al Qaeda.

Last year we celebrated the great historic achievements marked by the 20th anniversary of the fall of the Berlin Wall and the subsequent unification of Germany. But we should also remember that events in the broader Middle East of 30 years ago have left, in sharp contrast, a bitter and dangerous legacy. Ω

[Edward Djerejian is the author of Danger and Opportunity—An American Ambassador's Journey Through the Middle East (2008.) A former ambassador to Syria and to Israel, he is the founding director of the Baker Institute for Public Policy at Rice University. Djerejian holds a bachelor of science and an honorary doctorate in humanities from Georgetown University, and a doctor of laws, honoris causa, from Middlebury College.]

Copyright © 2010 Dow Jones & Company, Inc.

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