"Bush, Greed, God's Millionaires"

John Kenneth Galbraith, TomPaine.com

Unsettling times call for comfort from those experienced in coping with

challenges. Throughout World War II, John Kenneth Galbraith helped Franklin

D. Roosevelt run the economy. Now 95, this venerable veteran of troubled

times, former presidential advisor and speech-writer, ambassador and

longtime Harvard professor, shared his thoughts on the economy and more with

TomPaine.com's Sharon Basco.
TomPaine.com: Professor Galbraith, does the current economic situation have

parallels in any other era, or is the misery of a bad economic situation

unique unto itself?



John Kenneth Galbraith: No it's not unique. The basic characteristic of the

modern economy goes from boom to recession. And we had a period of rather

wild boom and speculation, and now as in the normal course of events, we're

having a recession. And the recession is made worse by somewhat perverse

economic policy. I say somewhat perverse; quite perverse.



TP.c: What perversion are you referring to? The Bush administration's tax

cuts?



Galbraith: I wouldn't attribute it to George Bush any more than I would to

the established view of the industrial community, of the corporate elite,

which urges action -- as we all do -- for their own financial benefit. As,

for example, in the proposal to cut taxes on dividends. That is a benefit

for people who don't need the money and may not spend.



And then we will have partly as a result of the war, a substantial budget

deficit, and that will lead to pressure to control social spending, help for

the poor. And they are the people who are reliable spenders. If you have no

money and get some money you're a favorable force on the economy because you

have to spend it. So we have a policy which is bad for -- excepting

recession -- for the speculation that leads to it and a policy that is bad,

or at least inadequate, for doing anything about it. We rely on the Federal

Reserve, but it has had years of demonstration as to how little effect it

has.



TP.com: Why would a president lead an economy down this path unless he had

great faith in a supply-side, trickle-down approach?



Galbraith: Well I would respond with two observations. First, I don't

believe that President Bush has economic judgment of any great depth, and

second, he relies on what one would call the corporate elite, which

automatically and reliably comes in for any action which seems to be in its

own interest, which seems to support earnings and dividends, and not the

reliable expenditure of the masses of the people and the poor. We have

economy there, and a liberal policy of tax-cutting for the rich.



TP.c: When you speak of rich corporate types wanting even more money, it

brings to mind the greed you described in a book you wrote almost 50 years

ago, The Great Crash: 1929. Have we seen all this before? Is there anything

new about today's greed?



Galbraith: I would have to made a personal apology because you ask me a

question about a book that is just going to press. I will even give you the

title. It's called The Economics of Innocent Fraud, and there is a

misguidance -- perhaps I shouldn't say fraud -- in the way that the great

corporations respond to their power that they now have. They have replaced

the old-fashioned capitalists as the influence in the modern economy.



We see one effect of the corporate management in the way in which they have,

on occasion, rewarded themselves. They have used their power for their own

extreme enrichment, the so-called corporate scandals. But they have also

been strongly in support of a policy which is good for corporate earnings --

as you would expect -- and they have been on the general side of

conservative social policy, where money gets reliably spent.



I don't attribute that to George Bush. I attribute it to the larger

community which has come into power with him.



TP.c: I think some of us puzzle over why it is that the very greedy CEO's

aren't concerned about the long run, about the harm they're wreaking on

their organizations?



Galbraith: They're not doing anything illegal. They're taking advantage of a

power that corporate management endows them with. And this is a very great

power that is passed from stockholders, shareholders to management. And that

is an opportunity that exists -- I think it's fair to say that most

corporate managements are respectful of it, do not carry it to excess,

although they're likely to be fairly generous -- and that some have carried

it to excess and provided in these last year or two for a great deal of

newspaper comment. And the invention -- which I must say I never expected --

an invention of the word "corporate scandal" which is now in common use.



TP.c: How do you see the proposed tax cuts playing out in years to come?



Galbraith: It will reward basically people who already have a very good flow

of income. And will not greatly increase their spending, certainly for

consumer's goods, and maybe not for any useful investment, times being bad.

And it will lead to pressure for economy, along with the war debt, that is

the result of the large public deficits. So that, on the whole, it will lead

to a policy which doesn't have any regenerative, any good effect, and has

some possibility of making things worse.



I would like to be optimistic, that's my basic tendency in life, always to

assume the best will happen. But I don't think anybody, given the present

situation of the economy, can be wholly optimistic about the future of the

economy.



TP.c: Do you see the Bush policies creating economic problems that will last

a long time? Could a new economic approach, or let's say a different

administration, improve the economic picture in a few years?



Galbraith: Oh sure. I'm not that pessimistic. There's always the possibility

that we will have a situation, an economic situation which all but forces a

turn-around. That's a possibility we must keep in mind.



Could I conclude with something that I've encountered in the last few days

from my own history. It was the day after Pearl Harbor, when we had a

situation in Washington that could have been crucifying as regards our entry

and our participation in the war. It became evident that the Japanese were

going south, and we would have no more natural rubber from the southern part

of the continent. And the responsibility came to me, because I was in charge

of both price control and rationing, to do what needed to be done.



And with the support of the governors of the various states, who gave us

some help from the highway patrol, I put into effect -- we put into effect,

I should say, but I was the person responsible, and it was done from our

house in Washington -- a rigorous prohibition of the sale of rubber tires

except for a few absolutely essential people, which included doctors. It

included people with a key role in the defense program -- there were perhaps

half a dozen altogether. And that, I say, was on a Sunday night. On Monday,

it was big news. And on Tuesday I got the message of my life from Franklin

D. Roosevelt. It commented on the action and said: "What congenital idiot

thought that you could say that ministers of the gospel were not essential?"

Franklin D. Roosevelt.



TP.c: So did you make an exception for ministers of the gospel?



Galbraith: Early the next morning!



TP.c: Well, speaking of presidents who claim a close partnership with God,

is it possible that Bush's economic policies will work?



Galbraith: I don't think so. If you're poor or in the middle-income brackets

and you get more money, you will most likely spend it. And those who are

very rich -- in the multiple thousands and millions brackets --getting more

money are not reliable spenders. They don't have a sense of urgency. They've

already satisfied their basic aspirations and wants.



TP.c: Thank you, Professor Galbraith.



Galbraith: It was a great pleasure.