"The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too"

This is a review of Jamie Galbraith's The Predator State from a forthcoming edition of the Journal of Economic Issues:

Review of the Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, by James K. Galbraith. New York, London, Toronto, Sydney: Free Press, 2008. (Note: review is based on Advance Uncorrected Proofs.):

This is political economy at its best, in the tradition of Veblen’s Theory of the Leisure Class, or J.K. Galbraith’s The New Industrial State. The comparators are chosen carefully, for not only is The Predator State an update, it is equally as deserving of status as a classic. The issues are carefully examined, the prose is delightful, the arguments appear unassailable, and the choir—including this reviewer and presumably most of the readers of this journal—shouts “Amen!”. But will the book be read? Can any book today capture the attention accorded to Veblen a century ago, or to Galbraith, senior, nearly fifty years ago? Still, one must applaud Jamie for trying. This is an amazing effort...

The general theses can be simply stated. First, while conservatives toyed with laissez-faire, they quickly abandoned it in all important areas of policy-making. For them, it now serves as nothing more than an enabling myth, used to hide the true nature of our world. Ironically, only the progressive still takes the call for “market solutions” seriously, and this is the major barrier to formulating sensible policy. Second, the “industrial state” has been replaced by a predator state, a coalition of relentless opponents of the very idea of a “public interest”, whose purpose is to master the state structure in order to empower a high plutocracy with nothing more than vile and rapacious goals. Finally, the “corporate republic” created by the likes of Dick Cheney is highly unstable, a formula for national failure. Progressives must wrest control from the reactionaries before it is too late for restoration of America as the world’s financial anchor, technological leader, and promoter of collective security.

Jamie thus resurrects both the extreme pessimism of Veblen’s notion of predation (by the conspicuously consuming leisure class in Veblen’s day, but by the corporate elite and Cheney’s imperial court today) as well as his only partially defined but optimistic vision of a world dominated by the engineers. As Jamie argues, his father admired Veblen but was most influenced by the New Deal, the mobilization during WWII, and the rise of the modern corporation that cooperated with government and labor to create the planned economy of the postwar period. Hence, Veblen’s opposition of the business enterprise versus the public interest was replaced by countervailing powers that compromised a largely acceptable truce. Jamie insists that his father’s analysis was correct, however, it was already becoming outdated by the early 1970s as the Bretton Woods system fell apart.

The free market reactionaries promised that some combination of monetarism, supply side economics, balanced budgets, and free trade was the solution to America’s woes. The mantra “free markets” provided an easy antidote to “planning” that was said to constrain recovery and growth. As each conservative policy was tried, however, it resulted in obvious and even spectacular failure. In truth, all economies are always and everywhere planned—for the simple reason that planning is the use of today’s resources to meet tomorrow’s needs, something that all societies must do if they are going to survive—so the only question is who is going to do the planning, and to whom are the benefits going to flow? There are still a few true believers (principled conservatives that Jamie compares to noble savages in the political wilderness), but most conservatives realized that there is no conflict between “big government” and “the market” as they abandoned the myth but usurped the “free market” label. All we are left with is the liberal who embraces the myth out of fear of being exposed as a heretic, a socialist, or a fool. Thus, the liberal pines to “make the market work better”, never challenging the view (abandoned by all but the most foolish conservatives) that government is the problem.

Economic freedom is reduced to the freedom to shop, including the freedom to buy elections, and anything that interferes is a threat. “Market” means nothing more than “nonstate”, a negation of use of policy in the public interest. Jamie provides a careful analysis of the frontline battles on many of the most important issues--Social Security, health care, inequality, immigration, security after 9-11, trade and outsourcing, and global warming—showing how “market solutions” are designed to enrich a favored oligarchy through a spoils system administered through the state’s structure. The policy “mistakes” in Iraq or New Orleans or at Bear-Stearns do not result from incompetence—indeed they only appear to be failures because we apply inappropriate measures of success. There is no common good, no public purpose, no shareholder’s interest; we are the prey and governments as well as corporations are run by and for predators. The “failures” enrich the proper beneficiaries even as they “prove” government is no solution.

There is a way out, but it is not easy. Historically, regulation and standards have required acceptance by progressive business—those firms that recognized they would lose in races to the bottom. Today, corporate and public policy alike are run by the most reactionary elements, well-paid rogues that suck capacity. Wherever one finds a sector that still operates reasonably well, one finds remnants of New Deal institutions that support, guarantee, regulate, and leverage private activities, in spheres as diverse as higher education, housing, pensions, healthcare, the military-industrial complex (and the prison-industrial complex). Naturally, even these sectors are endangered as they represent potential riches (witness subprimes, a privatization mess that Wall Street would love to repeat with Social Security). Still, Jamie is hopeful. The ideology of free markets is bankrupt, but the US is not. The path is clear: re-regulation, planning, standards (including wage controls), and coming to grips with the nation’s global responsibilities.

L. Randall Wray University of Missouri—Kansas City The reviewer is Professor of Economics, and Senior Scholar at the Levy Economics Institute.

Comments

[Bill Jefferys]

So, it seems that free marketers are basically just anarchists.

[RW]

"...free marketers are basically just anarchists."

No, anarchists are typically too individualistic to engage in widespread collusion, the problem is as Galbraith describes: The formation of a 'corporate republic' widely controlled by a class of individuals who behave in recognizable and consistent ways; it's more a culture than a conspiracy (although one could interpret it either way if one wished)

[bob mcmanus]

Guillottines

[Bruce Wilder]

bob mcmanus beats me to it.

[Noni Mausa]

I have been writing about this topic in my own amateur way since at least 1992. I found it weird that when the idea was accepted at all, it was as a metaphor.

One thing to remember about predators is this: they are animals. By that, I mean they are driven by appetite and competition, and foresight is not part of their repertoire. Perhaps what I mean is that if one is driven by appetite and competition, without foresight, this defines one as an animal despite whatever human potential may be present.

Expecting foresight from predators is to convert them into farmers or feedlot operators, efficient predators who look ahead in the management of their livestock. We really DON'T want to go there.

Noni

[Gerbal]

"... free marketers are basically just anarchists."

libertarians/free marketers are just anarchists who want police protection from their slaves.

[mrrunangun]

The predator state can serve liberal as well as reactionary predators. It is the availability of the power of the state to the predator rather than the nature of the predator that is the problem. If bob and bruce acquire the power of the state, there may be guillotines for cheney and such as there were in the past when like-minded people acquired the power of the state. Hitler, having acquired the power of the state, demonized and then despoiled and then eliminated a wealthy and unpopular minority and did so to cheers at least in those first two stages. Numerous similar examples come to mind from all colors on the political spectrum in the non-Anglophone world. So far, this has been less of a problem in the Anglophone world because the state is subordinated to the law in English legal systems, courtesy of the Magna Carta and the Glorious Revolution, whereas in the Napoleonic codes still prevalent elsewhere the state is not so subordinated.

[john c. halasz]

Maybe it would be better if we replaced the notion of the state with that of the republic. Alright, that's just a satirical suggestion...

[outsider.com]

Bravo! "The long wave" by David Hackett Fischer explains much in a historical sense. A Darwinian analogy is to put your own DNA through time above all. Social entities exist to grow and rule...they are mandated to do so. They're not in business to lose money and power. The end of the wave is signaled by extravagant benefits to the Elite and a growing discontent from everyone else. Wars of choice and predation are a common symptom of an impending social upheavel. Hopefully we can delay or soften the inevitable readjustment to social oversight.

[Francois]

Whenever the topic of Social Security, health care or income inequality comes up in a blog discussion, there is always posters that will defend the "free market" (non state) ideology and hijack the direction of the debate. They'll go to great length on the path of denialism, ad hominem attacks and gross mis-characterizations to prevent any intelligent and open debate. just look at how the media cover this presidential campaign to have an idea of how bad things have become, the prime example being the infamous Philadelphia debate "moderated" by Glibson and Stupidopoulos

One has to wonder how many slaves the oligarchs that control this country have on their dole. But this would be too simple and easy to detect.

Instead, I suggest they benefit immensely from the labor of the cohort Lenin called "poleznye idioty":

"Lenin, referring to Westerners who denied the existence of Lenin's
police-state terror, called ‘useful idiots.’"

Bruce C. Thornton, from American University of Cal State Fresno:
"Why people who enjoyed freedom and prosperity worked passionately to destroy both is a fascinating question, one still with us today."

Fascinating indeed! However, the results are there, in plain view for everyone with a pair of eyes and an open mind to see. Just look at how much middle-class Americans have been shafted during the last 20-30 years; this is just a foretaste of things to come if the situation is not corrected soon.

When an ideology get to the point of having useful idiots working for free at the service of said ideology, you know you got a long way to go before defeating it. Also, let's not forget that these enemies of the state (how else do you call people that want to reduce the State to a shell of its former self?) are among us. They are not an "outside power" easily designated and labeled as such.

That is why I'm not optimistic, contrary to Pr. Galbraith.

[Competition, Rent, Regulation]

Competition would have to replace rent seeking behavior for the free market to produce results beneficial to consumers. In the absence of robust competition, regulation is the consumers' only hope to moderate rent demands.

[mla]

Wow, I sure hope you guys are wrong.

I tend toward the libertarian camp but certainly am against any sort of exploitation. I just focus on the individual and the freedom of contract. I've never understood how the system would break down if all the participants participated freely.

Now the current system that we have, with all sorts of regulations and taxes and subsidies and government granted monolopolies...certainly this is not laissez-faire in any sense. And that does breed corruption and calls for further regulation.

But even with the problems, I'm still very happy with the system and certainly don't want more government intervention (which really just means my elected neighbors telling me that I can and can not do).

My wife and I together make around 60k/yr. Certainly not rich but comfortable. And I have no interest in income equality (I don't see how you can ever justify that if you believe in freedom of contract -- labor is a good just like any other).

Many commentators have noted that the U.S. real-estate and banking sectors are already some of the most regulated in the world. I say let's get government out of economics entirely. The government is a tool of the people and should be subservient to them.

The scariest thing in the world are the "smart" people who know what's good for you.

[reason]

mrrunangun
Have you ever lived in "non-anglo" countries. If not then I am confirmed in my view that you haven't got a clue what you are talking about. You ought to read up on (for instance) how active the consititutional court in Germany actually is.

[reason]

mla...
Freedom of contract - mmm - how useful that is depends on
1. your bargaining power
2. your information
3. the enforcement process
I suggest you think about that very carefully.

(P.S. I won't complicate things by talking about infrastructure, or externalities or social insurance.)

[Anarcho]

"So, it seems that free marketers are basically just anarchists."

Obviously few people here know much about anarchists! If you look at, say, the works of Bakunin and Kropotkin, or Emma Goldman and Alexander Berkman, or Noam Chomsky or Murray Bookchin, you will discover that genuine anarchists are anti-state socialists.

Their vision of a free society is one in which people work together as equals, not master and (wage) slave. In the workplace, for example, this means co-operatives rather than capitalist hierarchies. In the community, directly democratic popular assemblies. In society as a whole, it means free federations from below upwards.

Sadly, in America the term "anarchist" (like the related one "libertarian") has been appropriated by the right-wing to mean something totally at odds with anarchist thought. Chomsky has discussed this, noting that it is almost purely an American phenomena. While "libertarian" seems to be a lost cause in terms of reclaiming its original meaning, anarchist is not -- there is a growing anarchist movement in America.

If you are interested in what anarchism really stands for, I would suggest An Anarchist FAQ. You may be surprised by what you find there.

[Mike Jones]

Reason is right...

The "freedom of contract" means zilch if you have no bargaining power, no information, and institutions responsible for enforcement are weak. The free market isn't free for these very reasons.

mla, please read up.

[Mike Jones]

Anarcho,

Anarchism, very basically I think, is close to impossible. My view of the initial state is not pretty; I believe man would not function without legal rights guaranteed and enforced by government. Morally, maybe some sort of Aristotelian ethic evolves about government: government performs its function well if government governs; that is, if it is the mean of the vices of foolhardiness and cowardice (anarchism and communism, not respectively... you decide). I'm digress.

Anarchism is about as useful as communism or libertarianism, that is, not useful at all.

[Mike Jones]

Anarcho,

Indeed, and not very sexily, a planned economy is our first-best solution.

Show me a time, on average, when this wasn't associated with more economic prosperity?

[andrew hartman]

one of my favorites among the unhinged is bob herbert of
the new york times. a few weeks ago he moaned about why
the u.s. doesn't work any more: why aren't we creating millions of high paying jobs? if business people are all to
be sent to the guillotine and a "planned economy" somehow
happens, where will the innovation and investment to create such jobs come from? the house democratic caucus? the editorial board of the times? the united auto workers? or will we borrow ideas from abroad, say, the french railway unions? i''m curious. don't tell me new structures will
emerge. where is the specific talent right now?

[joey]

How is any of this relevant now?

[swells]

While I would have to agree about the predatory nature of the current state, I am unclear about one thing. When the state possesses a monopoly on the "legitimate" use of coercion, how is this situation to ever be changed? What magic wand could ever be waved that would keep the levers of power from being manipulated by predators?

The only solution I see as being workable is to enshrine an individual right not to participate in governmental schemes on a scheme by scheme basis. I don't think a perfect solution is possible but that an extension of the concept of checks and balances to the extent of an individual right not to participate is something that could come close and be workable.

This won't please people who are enamoured of the notion of using the coercive power of government to "good" ends but I have yet to hear those folk offer a means whereby those "good" ends won't be perverted to predatory ends.

[evagrius]

"Many commentators have noted that the U.S. real-estate and banking sectors are already some of the most regulated in the world."

Considering the crisis they're facing it must an interesting regulation.

[bakho]

Regulators use Cost/Benefit analysis all the time in the regulatory process. When done properly, there are benefits that go to everyone at the expense of the special interests. Many regulations protect the special interests from themselves (like asbestos regulations).

The problem with the public interests is that it often consists of small cost increments spread among large numbers of people. Special interests get large benefits distributed to a few. It is for a few to organize around a small benefit than many to organize around a much smaller increment, especially in a world filled with many small increments.

[bakho]

I enjoyed the review. I will be sure to read the book.

[ken melvin]

Looking forward to the reading.

[reason]

swells...
I can only suggest you ask yourself, what HAS worked in the past. For a significant time now, the general direction of movement (the last 25 years in the US are an exception) has been towards increasing individual empowerment. Reciprocal accountability is part of the answer. (Credit to David Brin on this). NEVER forget - the perfect is the enemy of the good.

[Organic George]

People who tend to the Libertarian side are usually people who have yet to experience the need for financial assistance or social justice.

It never fails to amaze me that quickly these Libertarian's convert to the "nanny state" when the rug is pulled out from underneath them.

I am grateful that the term "prison industrial complex" has been coined. Here is CA they were going to release all the small time crooks due to our sever budget problems. Instead the PIC was able to convince the Government to send all the non violent criminals to city jail's without much compensation to house and feed them. Talk about your income transfer, you take poor minorities from urban setting and send them to rural areas where white guys are given contracts to feed and house them. Over $30,000.00 for each prisoner, yet there is no money for education in our state which has just enacted big budget cuts. The thought of spending 30 large annually to educate poor minorities is a non starter, but everyone knows that education is the best way to prevent blue collar crime. Prison Industrial Complex is a very tough lobby group that uses fear to enrich themselves.

[joebhed]

"Economic freedom is reduced to the freedom to shop,".

This country has the potential for the greatest economic freedom and economic liberty that any country could ever want or need.

Had FDR acted on the proposal from the Chicago school economists for the Chicago Plan for creating new money, we wouldn't be arguing about the proper role of government in achieving our socio-economic objectives as citizens.
They would be ours for the electing.

Consider the need for monetary reforms, from which we can acheve these goals.

"Sound monetary reform requires the issuance of all money (legal tender) by the State, exclusively; in amounts calculated to stabilize the general price level; without debt obligation to private persons; with all lending to be performed by private legal persons, exclusively; while safeguarding the widespread ownership of private property."

The Libertarians get their increase in private property.
The Anarchists have their ability to pursue cooperation in all things economic, using Credit Unions, without debt.

Those freedoms to the people come from the loss of the irrational right of private bankers to create the nation's money.

A tough fight, but worth it.

[gaius marius]

"So, it seems that free marketers are basically just anarchists."

i think, closer to galbraith's point, the organization of society under a predatory government which seeks to redirect output, constrain rights, maximize regulation and minimize dissent among the many for the purposes of a heavy-handed popular management -- and then funnels the output of those efforts to benefit those very few who command corporate rights and private capital, for whom rights are unlimited and regulation is voided -- does already have a name, but one so stigmatized that few now dare to employ it even where it clearly should be employed.

so who dares to call it fascism? that is largely what galbraith is euphemizing with the term 'predator state', it seems to me. is it not? whether it carries every trapping of the european variant that dominated the 1920s and 30s is rather beside the point -- there are many flavors of ice cream, some more intense than others, but they are all ice cream. perhaps this one still stages elections and carries pretenses regarding personal freedom that, say, mussolini's italy did not; but but then, one could also argue that italian fascism was perhaps somewhat less cynical and exploitative of its population in some respects.

[reason]

joebhed...
Do you have a link for that - it is new to me. Your explaination doesn't make the implementation clear to me.
I don't actually believe such a reform is sufficient, but it none-the-less sounds like a step in the right direction to me.

[Denis Drew]

Hayek’s criticism of central planning that “vital information about an economy is inherently local” and that central planners are too distant to be able to access that information in any nearly useful way can be flip-flopped on “dispersed planners” which is what we may fairly call the Milton Friedmans of the world.

Unfettered local economic actors (those countless hidden hands) are too far distant from the sight of the urgent central needs of society to leave the accomplishment of such goals to their shortsighted hands. Trusting the unfettered free market automatically to bring about the best overall (central?) social outcomes amounts magical thinking […].

Neither local actors nor central planners know enough about each other’s milieu to act efficiently on each other’s behalf, so, we must choose a practical balance to get the best of both worlds – in a word “compromise” between giving all power to one or the other. [This is a very general first thought on the subject – perhaps much more general than I suspect – it may take a couple of weeks to a couple of years to flesh it all out – still sounds like a classic answer to “dispersed planners” enthusiasts.]

[OhNoNotAgain]

"I don't actually believe such a reform is sufficient, but it none-the-less sounds like a step in the right direction to me."

Same here, link please ? I'm currently reading a book on FDR and the WPA, and this would dovetail nicely, although it may also mention it shortly (I'm just at the end of the first 100 days of FDR's term).

Also, what is meant by "without debt obligation to private persons" ? Are we talking about not allowing the government to use debt issuance during hard times as a stimulus ? If so, then how on earth was FDR supposed to get the money to help relieve the suffering of millions of Americans ?

[swells]

Denis Drew, I don't think anyone seriously believes that distributed planning will achieve optimal outcomes. For one thing, the solution space in which a determination of which outcome would be optimal would take place would be beyond vast, so far beyond that it is probably calculationally intractable. Instead, I think what distributed planning adherents are looking at is pretty much exactly what central planners are looking at; i.e., satisficing, pretty good outcomes.

If you think along the lines of a diverse ecology, you will get more of a real flavor of what people who favor distributed planning are after. Diverse enough to be robust and very fault tolerant. What happens when you get too much specialization and too much concentration of "power" in an ecology? Things may go okay for a while but the ability of that ecological system to adapt to change is not necessarily enhanced. Look at climate change and the concentration of power in human hands for an example of what can go wrong with central planning. In a very real sense, humans have been central planning for all the other species and it is far from clear that the outcome will be salutary even if one just considers humans.

[Francois]

Interesting historical take on how we arrived at the situation analyzed by Prof. Galbraith:

http://www.financialsense.com/editorials/engdahl/2008/0116.html

"Federal Reserve monetary policy has been typically misrepresented as a series of ad hoc pragmatic responses to recurring crises in post-war banking and finance. The reality is that it has faithfully followed a coherent hidden thread of policy that was first laid out in 1973 by the spokesman then for America’s most powerful establishment family.

The policy was outlined in a little-noted book titled, ominously enough, “The Second American Revolution.” It was written by John D. Rockefeller III, scion of the powerful Standard Oil and Chase Manhattan Bank empire, and, along with his three brothers—David, Nelson and Laurance—architect of the world arrangement after 1945 known as the American Century.

In his book, Rockefeller declared the establishment’s determination to roll back concessions grudgingly granted by the wealthy and powerful during the Great Depression. Rockefeller issued the call in 1973, long before Jimmy Carter or Margaret Thatcher came to office to implement it. He called for a “deliberate, consistent, long-term policy to decentralize and privatize many government functions…to diffuse power throughout the society.” [Those "Unfettered local economic actors" alluded to by Denis Drew above] The latter was a witting deception as his intent was not to diffuse power, but just the opposite—to concentrate that economic and banking power into the hands of a tight-knit elite. [As long as they could hijack the power of the State to their own benefit -- which the elites have been very successful at. Free Lunch and Perfectly Legal has detailed descriptions of those schemes.]

Privatization of essential and socially useful government functions that had been established often with great social agitation and political pressure during the difficult crises of the 1930’s, was the Rockefeller agenda. In brief, it was the removal of Depression era government regulations on all aspects of economic and social life in America. [My oh My! Doesn't that sound like the Neocon mantra or what?]

Above all, deregulation of Wall Street and financial markets was the goal, along with a radical reduction in the equalizing of wealth, as seen by Rockefeller and friends, inherent in such programs as Social Security. The George W. Bush “tax cuts for the wealthy” were just a continuation of a three decade agenda of the powerful establishment circles.

Hard as it may be to believe, all major US policy from the 1970’s through the misnamed sub-prime crisis today, had a connecting continuous thread. Key Fed and Treasury and other US policymakers always held their “eyes on the Prize.”

The “Prize” was untold financial gains to be won through a rollback of major concessions to the working blue collar and middle income Americans, concessions granted during the Great Depression by powerful establishment circles led by the Rockefeller and Morgan banking groups, to forestall a more radical revolt." [If things continue to deteriorate at their current pace, what kind of radical revolt could we be witnessing?]

[Bruce Wilder]

C,R&R:Competition would have to replace rent seeking behavior for the free market to produce results beneficial to consumers. In the absence of robust competition, regulation is the consumers' only hope to moderate rent demands.

That's a homeopathic distillation of economics into a soup flavored by a shadow of thought and stirred by a blind photographer in place of a cook.

[Reasonable Guy]

The state exists for the purpose of maintaining and wielding power. I would argue for less state rather than more.

How might freedom die? To thunderous applause.

Think very carefully before advocating solutions that make the state more powerful. You might get the government that you deserve for such foolishness.

[Dan D.]

It never ceases to amaze me how the statists can see the myriad of problems caused by the state... and then recommend more state intervention as the prescription. Conservatives abandoned the free market in all but name, there's no question about it. But look where that's gotten us.

Of course if you look at the way the supposed (progressive, not classical) liberals in this country collude with the mild fascism the conservatives have set up (witness the past year and a half, the margins by which freedom-stripping measures are passed in Congress, etc.), it seems unlikely that any liberal call for free markets is any less a sham than the conservatives'.

[methinks]

Francois is lucid, thoughtful, and concise. It takes someone who is foreign-born to write a coherent post.
Only a few people can understand what is usually written, and the writer isn't one of them.

[Noni Mausa]

Dan D. said: It never ceases to amaze me how the statists can see the myriad of problems caused by the state... and then recommend more state intervention as the prescription. Conservatives abandoned the free market in all but name, there's no question about it. But look where that's gotten us.

Let's change this paragraph a bit to try to see what is wrong with it:It never ceases to amaze me how people can see the myriad of problems caused by parents... and then recommend more parental intervention as the prescription. Conservatives abandoned the supporting of families in all but name, there's no question about it. But look where that's gotten us.

It is not states which ruin their citizens, any more than parenthood which ruins families and children.

It is bad states, suborned states, states which, like bad parents, have sold out their duty of care just as the worst parents pimp their children.

To eliminate the institution of statehood because some have been bought and paid for, leaves citizens and their children in a worse spot than before. Another approach is needed.

Noni

[swells]

Noni, I do take your point and the analogy was apposite. However, I would like to ask a question. How can the levers of power be protected from the manipulations of those who would misuse that power to aggregate advantage to themselves and their associates? The benefit of such misuse tends to be highly concentrated in a few hands while the costs tend to be diffused to society as a whole leading to a disparity of motivation. What mechanism could remedy this?

The framers had in mind checks and balances but that seems to have been insufficient in its current form.

[Denis Drew]

Francois,
You are right about hidden hands left completely free will end up being controlled by and for the good of the dominant (strangling) hands.

The TECHNICAL answer to this and to parade of horrible portrayed by Prof. Galbraith is very simple: the "central planners" (meant in the most general sense -- FDR style) have to LEGISLATE checks and balances among the competing interests among the "dispersed planners" (in English: between labor and ownership).

Just two key ingredients can put America solidly on a path to power taken by European labor (without the over protective regulation which has recently led to two-tier protection and without the automatic welfare): sector-wide labor agreements and (an idea I got watching Newt "Grinch-rich" on TV*) mandatory union certification votes and re-certification (what it sounds like) votes every four years or so.

Sector-wide (collective-collective bargaining) substantially ended the race to the bottom around the world and re-certification would keep union chiefs on their toes in a way never before experienced (and silence the most common complaint about workers experience with unions: entrenched and unresponsive bosses) while the sector-wide requirement that non-union firms pay the same as union firms (which chased 88 WalMart big boxes out of Germany) would cover for workers who are really unhappy with their leadership.

The non-technical, REAL hurdle in the way reconstituting the checks and balances on this side of the Atlantic is that American labor is today about as self-aware and practical as a Rent-a-Center customers -- no thought at all about how they could (should!) get a better deal.

Our media is no big help: push, push, push on anything on the liberal social agenda -- forever asleep at the switch on things like 25% of American earners getting lower wages than LBJ's minimum wage earners of 40 years ago ($10/hr in constant dollars) over which span average income doubled. (Going from $200/wk minimum wage to $500/wk would add all of 3.5% to the cost of GDP output -- how much we grow every two years -- how terribly little of two generations of growth have gone to or even been subtracted from most wage earners -- AND NOBODY KNOWS!).

First priority: get American labor aware of what went wrong and the simple one-two of how to right it. Second: get out of our way -- we will take care of it -- we are not helpless if we only knew what wss going on.

[* http://ontodayspage.blogspot.com/2008/05/newt-grinch-rich-
gives-me-double.html ]

[ken melvin]

Part and parcel deregulation is 'tort reform', and 'tis just as catastrophic.

[don]

With the New Deal, state intervention in the market economy was aimed at crisis avoidance and as a means to compensate for dysfunctional consequences of capital accumulation. State administrative intervention both helps and hinders capital realization, reflecting the contradiction of pursuing generalized collective interests while at the same time securing the system based on the privatization of social wealth.

The 50's and 60's saw significant global growth. Following the post-WWII glory years, global capitalism slipped into stagnation in the 70's. In the US, Volcker beat down inflation setting the stage for Reagan/Thatcher (privatization, de-regulation), which lead to a significant re-alignment of labor and capital, to the advantage of the later. Out of this, and with wages beaten down, debt substituted for income in the US, coexisting with the growing dominance of finance in capital realization over that of the 'real' economy of production and consumption.

Some might assume that the pendulum is about to swing back to greater state intervention in an attempt to correct current dysfunctional market consequences. However, should the state become more interventionists, so will the risk of exposing itself to the burden of successfully obtaining progressive outcomes. As the state attempts to manage crisis and to produce rational outcomes, failure to succeed will result in disillusion not only with dysfunctional markets but also with the failure of the state to administer crisis avoidance strategies.

The later is assured as a result of weaken state institutions (itself a result of privatization), the slipping away of the US global economic and political hegemony, the burden of debt in civil society (of individuals and households), in the economy (private) and government (public, including military and Homeland Security outlays), etc., which taken together will likely result in the failure of the state to offer rational solutions - also then being confronted with a deficit of mass loyalty to the political system, resulting in loss of legitimacy.

[mrrunangun]

Reason,

Correct me if I'm wrong, but are not the current German constitutional arrangements much influenced by the postwar occupying powers, i.e. the anglos? The prewar legal arrangements were based on the Code Napoleon.

[reason]

mrrunangun...
It was influenced no doubt by Liberal philosophy and a reaction against totalitarianism, but no it is very much its own thing. I regard that actually as something very positive about the occupying forces at the time, they did adopt a very intelligent non-ideological arms length approach.

[reason]

As regards all these people talking about "state" power as though the state were a totalitarian state, it isn't. The "state" is actually a quite diverse collection of different institutions, and deliberately so. If we all realise that and work on that basis I think the mutual incomprehension can be reduced.

Noni - great comment.

says...

swell says: The framers had in mind checks and balances but that seems to have been insufficient in its current form.

An increase in the level of direct democracy or citizen participation could be an option.

Switzerland's (my home country) system is derived to a large extent from the US one. One key difference is that the supreme power does not reside in a government body, but directly within the people. And it's not empty rhetoric, as binding referenda and initiatives on top priority aspects are commonplace.

It's true that even such a system could be manipulated by those who have enough economic power to mount large campaigns. However effective strategies can be easily set in place to limit such effects.

[robertdfeinman]

Why is it that those who claim there are no solutions to America's current economic problems (and thus we must keep on the same path) fail to look elsewhere.

There are several West European states which have better social services, a high (enough) standard of living, a capitalist system and more responsive governments. The problem isn't "big" government, or capitalism, it is the lack of functional democratic institutions in the US. We have a one party system with two branches. We have elections bought by big business and the media. We have a military sector which is, in effect, the fourth branch of government and consumes 54% of the current federal budget.

The solutions can be found by adapting systems that work elsewhere. The problem is how to wrest power from those benefiting from the current arrangement. Goals are easy to state, implementation plans are hard.

[paine]

"The path is clear: re-regulation, planning, standards (including wage controls), and coming to grips with the nation’s global responsibilities."

re-tame the corporations ????

its like those every so often
noticed
trainer killed by his meal ticket stories

today in funkville
film star
biff the kodiak bear
chewed off the arm and face
of his long time trainer chandler Iffington

Iffington undaunted
even as he lies in the itu
sez
"after i get a new face and right arm
i plan on returning
to wild animal domestication
hell it's the only racket i know

to put a blunt point on this:

trans nat corporations are
kodiak bears bengal tigers etc etc

[paine]

you can't engineer a flawless freedonia
out of any society
largely built and sustained
thru eternal relentless
exploitration devices
like the present day
trans nat corporation

[paine]

"regulation is the consumers' only hope to moderate rent demands"

i hope this line don't labor under
the following fatuous assumption

markets don't generate rents
gubmints do

in fact
rents-r-us
pretty much epitomizes
todays big for profit
corporate sectors

[paine]

mla
needs to be preserved in tact
for the reagan twilight years time capsule

[Francois]

methinks,

If you disagree with something I wrote, that is fine.

But attacking me personally does not bring anything useful to the debate.

[mikx]

Indeed, and not very sexily, a planned economy is our first-best solution.

Show me a time, on average, when this wasn't associated with more economic prosperity?

Is Soviet Union too un-PC example?

[Denis Drew]

robertdfeinman, I repeat:
The TECHNICAL answer to this and to parade of horrible portrayed by Prof. Galbraith is very simple: the "central planners" (meant in the most general sense -- FDR style) have to LEGISLATE checks and balances among the competing interests among the "dispersed planners" (in English: between labor and ownership).

Just two key ingredients can put America solidly on a path to power taken by European labor (without the over protective regulation which has recently led to two-tier protection and without the automatic welfare): sector-wide labor agreements and (an idea I got watching Newt "Grinch-rich" on TV*) mandatory union certification votes and re-certification (what it sounds like) votes every four years or so.

Sector-wide (collective-collective bargaining) substantially ended the race to the bottom around the world and re-certification would keep union chiefs on their toes in a way never before experienced (and silence the most common complaint about workers experience with unions: entrenched and unresponsive bosses) while the sector-wide requirement that non-union firms pay the same as union firms (which chased 88 WalMart big boxes out of Germany) would cover for workers who are really unhappy with their leadership.

The non-technical, REAL hurdle in the way reconstituting the checks and balances on this side of the Atlantic is that American labor is today about as self-aware and practical as a Rent-a-Center customers -- no thought at all about how they could (should!) get a better deal.

Our media is no big help: push, push, push on anything on the liberal social agenda -- forever asleep at the switch on things like 25% of American earners getting lower wages than LBJ's minimum wage earners of 40 years ago ($10/hr in constant dollars) over which span average income doubled. (Going from $200/wk minimum wage to $500/wk would add all of 3.5% to the cost of GDP output -- how much we grow every two years -- how terribly little of two generations of growth have gone to or even been subtracted from most wage earners -- AND NOBODY KNOWS!).

[Real Person from the Real World]

I REALLY liked this review. If I can manage it, I'll get a copy. I always like the senior Galbraith, and never did like Milton Freedman, though I bought the book, "Free to Choose".

[Peter Yellman]

Noni Mausa's re-casting of the anti-statist argument into an analogy in which the state is the parent and the people the children, pretty well encapsulates my greatest fears about liberal, know-it-all interventionists.

[Timothy]

It appears that Mr. Galbraith is picking up right where his famous father left off: at being consistently wrong, that is.

It is not the free market that has caused the current crisis, but socialist, marxist, and "polticially correctist" intervention into the free market--mostly by the appointees of Bill Clinton and the Democrats in Congress during the 90s--all of whom got very rich from their connections with Frannie Mac.

Now these same Congressmen want to punish "greedy" CEOs--but who will punish the Congressmen?

Galbraith, of course, does not seem to be aware of any of this.

[Barkley Rosser]

Actually what is important here is that Jamie Galbraith has grown a full beard, indeed a rather Mephistophelian one. Uh oh.

[Craig Spinks /Augusta]

I'd be interested in reading Timothy's explanation of how Madison Avenue-generated "advertising" might inform the choices of consumers in the free market economy he implies would operate in our country today were the 1990s repealed. Or would he reject out of hand the notion that business might interfere with the operations of a free market?

[headless lucy]

As a highschooler, I read, absorbed, and, a few years later, rejected the libertarian concepts espoused by Ayn Rand in her novels. If it would work with business, it should work with a bunch of 1st graders on a playground. Yet, I still see the adults monitoring the playground every time I pass a school.

[David Lagerman]

For those seeking a link referring to the idea of money being issued only by the state, not by banks (from "jobhead," above,) this is part of Social Credit theory, or Basic Income Guarantee ideas. Search these terms to quickly find good explanations of the essential concept.

[Frank Mo]

So,all the stuff you can buy in a store is not the result of a free market? But planning, really. Do not confuse a free market in goods and services with free market solutions to government social engineering.