James K. GalbraithRecensioni

Okay, I tried. There are no charts and graphs, but the text is still too dry to read for extended periods. I have to admit that I skimmed a lot of what was written - interesting in parts, but snooze-worthy in others.

Galbraith's book "The Predator State" didn't make a great audio book. It's got depth and details, and you really need to take the time to pause and understand what he's presenting, i.e., to put the book down and think about his statements. Otherwise, it's just background noise, and you find you're not really absorbing what he's talking about. If the subject grabs you, I suggest you pick up the print (or e-book) version, and put some time aside to absorb it. As an audio book, unless you've got an excellent background in free market economics, it's too challenging.

This book was a dangerous but small dose of self-affirmation. I'm even more convinced now of the folly of the Eurozone (the common currency, not the Union necessarily), the corruption of the ECB and IMF (and the ineptitude of their leaders), and the criminality of their attacks on Greek sovereignty on behalf of creditors.

Many of the principles Graeber outlines in Debt are live in color here in Galbraith's insider account of the crisis, including the fact that markets can only be sustained when the state, which formed the market in the first place, is stronger than the market and its participants. The Eurozone does not meet this essential criterion and is therefore destined to change materially - smaller, weaker financial sector; unified tax system that facilitates flows from surplus to deficit areas; a strong central bank focused on prosperity rather than servitude to the financial sector, etc. In short, its leaders will, in Galbraith's words, come to understand "that the goal of economic policy cannot be to satisfy the gods of the bond market. It is to provide economic opportunity-full employment, education, health care, and decent pensions-to the people," or it will continue to collapse.

This book really annoyed me, and I loved it. I have long understood the Chicago School of Econ to be utterly bankrupt of ideas about the real world, and while I felt that Galbraith made strawmen out of other complex ideas with which he disagrees, I fundamentally agree with the arguments here.

The book is an easy read and should be read by anyone that cares about the present and future state of the US economy.

A world-class lesson in counterproductivity

James K. Galbraith is a self-described dissident in economics, banished to the University of Texas at Austin. This is somewhat ironic considering his father was the iconic establishment economist of his era. The younger Galbraith is highly respected around the world, just not so much in the USA. It reminds me of Noam Chomsky, who is similarly held in the highest esteem everywhere but at home.

Galbraith was in Athens for the Greek elections that brought Syriza to power. He was an unpaid advisor to the new government all through its negotiations with the Eurozone, the European Bank and the IMF. This book is a collection of his articles, e-mails, speeches and other communications to various players in the State Department, the European Union and the Greek government – from that precise time. It is a blow by blow description of how Europe went wrong and how that path would damage both Greece and the EU. And it’s not over.

Galbraith quickly realized that Europe was not out to save Greece, but to cripple it permanently. They apparently thought this would keep it subservient and prevent it ever rattling their gilded cages again. It was obvious to him that the path of least resistance for Greece was not austerity. Shrinking the GDP, increasing unemployment and loading up on new debt was not the way to reduce debt and restore stability and prosperity. But that is exactly the path demanded Merkel, Schauble and the rest of the Germans, the leading economic power at the table. They even required Greece to run a huge surplus, which is as self-defeating a policy (in a time of 25% unemployment) as could be imagined, Galbraith says.

One thing I had not read before was Galbraith’s ideas if Grexit came to pass. He recommended a 1:1 valuation for the New Drachma at the start, and stamping the 19 billion in paper euros stored at the Bank of Greece to provide cash in the country. This would have had the effect of relaxing the need to hoard euros, while giving the country time to order new currency notes and reprogram ATMs to accept them.

Galbraith dissects the final Brussels memorandum itself in no uncertain terms, showing how each paragraph is a lie, a cynical, hypocritical and misleading contradiction of what would actually happen, and a shameful crippling of a fellow Eurozone country. Like everything he writes, it is clear, cogent, accessible and depressing. This whole affair was handled the precise opposite of the way it should have been. The book documents it realtime.

David Wineberg

Highly technical study of economic theories. Some interesting stuff about real world issues which cause instability in the marketplace and world economy.

The End of Normal served as a refresher of my Economics study in Groningen University (1989-1993). Keynes theories of balance between investments and savings, risks of inflation, the trade-off between raising taxes and international competitive advantages, all are challenged in this book by James K. Galbraith, son of Kenneth Galbraith, one of the established economists I had to study then. When the financial crises of 2008-2013 hit, both the United States and Europe faced huge problems.
Would it be possible to return to normal, re-establish economic growth like we were used to? Could austerity, like promoted in the Eurozone help? Or would stimulus work better, like the employment or medical aid programs in the US have better results? To what extend can greed and low morale of individuals cause the entire financial industry to be shaken, and countries get to the point of becoming technically bankrupt (Greece, Iceland)? Can you trust the way economics are explained in newspapers?
Galbraith argues that the 1970s already ended the age of easy growth. Changed energy supply chains and pricing mechanisms, an evolving role of the United States facing China becoming more powerful. Inequality between countries grew in the past decades. The technological progress, wars not being a driver for economic growth anymore, and the conclusion that the economy as a whole isn't stimulated by New Deal-like programs. While in the US stimulus and automatic stabilization had their role in putting a break on the shrinking economy, these weren't instruments to bring us back to high growth and full employment. Unstable economic conditions are the new normal. Efficiency and fragility are two aspects of the same system. Governments and corporations have their instruments, ranging from the money press to refound ethics. No silver bullets or light reading here. Galbraith provides a clear analysis of the role politicians, Fed chairmen, international institutions, and economic systems play in the economies.

Staggering Indictment

In year five after the financial crisis, when the economic models said everything would be back to normal, James Galbraith examines the sorry state – of economics. The concept of normal is actually recent. It was only developed in the 1950s. The Kennedy Administration was the first to give it credence. And that’s when the rot set in.

The theory of growth implies there is a natural upward curve, and while events might skew it, we always return to the normal path and keep growing from there. This was of course based on the experience of the post war era, and like all such theories, extrapolates from the present as if it were valid for all time. It’s absurd to the point where economists (Galbraith calls them crackpots) backcast to other times. This has led to the startling conclusion that FDR’s New Deal (where he employed millions to pull the USA out of the Depression) not only didn’t help at all, it actually prevented the return to normal. We would have been much farther ahead without it, according to the model and the economists who believe in it.

Galbraith dissects the models and dismisses them all. They include only the factors economists want. None of them accounts for the complexity of life in our economy. In the ever changing mix of history and circumstances, that cannot work, even in theory. Yet succeeding governments continue to use these disproven models and continue to make useless predictions based on them. In emergencies like the financial crisis, Galbraith says they are worse than useless; they are counterproductive.

For starters, the models fail to account for the financial sector, fail to account for fraud, (the biggest component of the crisis) and fail to account for technology. Galbraith says “There is no mechanism in mainstream theory for understanding how financial events affect the economy, except momentarily… Rather it is built on the foundation of equilibrium.” He then destroys the concept of equilibrium on the fairly astounding grounds that it contravenes the second law of thermodynamics. According to economist Georgescu-Roegen (backwater), entropy is always increasing, heat flows from hotter to colder, time moves forward and never back, and economies can't be in a state of equilibrium forever. But that’s precisely the model Alan Greenspan lived by. He’s the one who encouraged homeowners to buy adjustable rate mortgages, and invest their pension contributions in the stockmarket, where efficient markets would safeguard their life savings. Galbraith calls Greenspan the crackpot-in-chief. This is all very similar to another book I reviewed, GDP: A Brief but Affectionate History, in which economists take incomplete and incorrect figures at face value, to make invalid forecasts, based on a concept most of them do not understand.

There are three schools of economists, Galbraith says. The freshwater and the saltwater argue constantly about whose model is right. Yet not one of them predicted the financial collapse of 2009. It was the third group, which he calls backwater, where several economists pointed and warned correctly and precisely, to no effect or recognition whatsoever.

Galbraith dismisses all the gloom and doom Tea Party talk of US debt and deficits. He says bankruptcy is impossible, because the USA is in the privileged position of always being able to pay with cash. He says the country has a unique product, the dollar, which is in demand all over the world. In fact, the country must run a deficit in order to fill the demand for dollar denominated treasury bills and bonds. The country is fortunate to have product in such demand, that costs absolutely nothing to produce, and is usually not even produced – it is just an entry in an electronic account. Profit margin – 100%. So here again, there is no return to “normal,” deficit or not.

He sees four obstacles preventing a return to the post-war pattern of growth:
-energy markets are high cost and uncertain
- the world economy is no longer under the control of Washington because of the impotence of the US military
-radical labor-saving technology makes employment uncertain and less rewarding
-the financial sector is no longer behind growth. It is out for its own leverage and profit without getting its hands dirty in real ventures.
None of these factors existed when the models were drawn up, and none of the models take them into account.

He ends with a visit to the fall of the USSR: crackpot economic theories fed by bad data and erroneous assumptions. He sees it all over Washington today.

This is powerful, controversial, and divisive stuff. Far more than Piketty, The End of Normal deserves to be the most talked about economics book of the year.

David Wineberg

Galbraith opens his book by making the case for a number of conservative shibboleths (free markets, tax cuts, and even balanced budgets) as belonging to the realm of mythology, rather than reality-based policy. Some of his discussion in this section raises questions that don't get answered until later in the book.

He goes on to examine the rise of inequality in the American economy and the development of what he calls the Predator State: a coalition of interests that want to maximize short-term profit at the long-term expense of widespread prosperity. This section gives useful perspective on many big issues on Capitol Hill.

The final section is a discussion of solutions; as such, it is a starting point rather than a source of detailed policies. Galbraith points out a number of policy mechanisms that could be used to better make the American economy serve the American people. This section is full of useful seeds, but it will require more work to develop it into detailed proposals.

Overall, a well-worthwhile chance to get perspective on the contentious policy debates in American politics, and a good book to bring out when someone asks if liberals have any "new ideas".

Galbraith presents a convincing argument and historical narrative of how policy makers have gradually come to recognize the bankruptcy of traditional tenets of economic conservativism, while still paying lip service to the idea of the "free market." Definitely worth reading -- at very least you'll get a better perspective on US economic history from the 60s on.

My only pseudo-criticism is that I wish the idea of the "predator state" had been both introduced earlier and developed further. There needed to be just a bit more political economy on how conservatives have cynically manipulated the economy and governmental regulation thereof to enrich themselves and their fellow elites. This has been done very well elsewhere (see Naomi Klein's Disaster Capitalism) so perhaps Galbraith felt less of a need to go into great depth on this topic.

I have almost no background in economics, and little understanding of it. My interest in it has increased with my interest in politics. To understand it better, I've tried finding someone knowledgeable that I trust, and the first economist who served this purpose for me is Paul Krugman, economist and columnist in the New York Times.

I also like the work of James K. Galbraith's brother, Peter Galbraith, whose book The End of Iraq is excellent. So I was prepared to take a chance on James Galbraith's The Predator State, which is supposed to be written for the layperson.

Now I've read it, and have to admit there's a lot in it I don't understand. He also turns a lot of conventional wisdom (at least as I perceive it) on its head, saying, for example, that deficits aren't all bad. I better understand it when he says free markets are a myth - it seems to me they are always acted upon by a variety of forces that mean they do not have perfect freedom.

Galbraith explains how we got to the predator state, in which the interests of a narrow band of rampant capitalists with no checks on their power have taken over government for their benefit during the Bush administration. He does, however, think it is possible to take back the state (and he does say that there are many business people for whom the predator capitalists are anathema). His discussions of the predator state also interest me because it provides someone with a legitimate academic background whose discussion supports much of what was said in Naomi Klein's The Shock Doctrine.

Galbraith thinks the way out of the current economic mess is a planned economy in which spending to create environmental jobs is more important than paying down the deficit.

Sadly, I can't explain well what he says, but did find his arguments pretty convincing. This is a book that I want the next President to take with him to the White House, and so I am encouraged to see that, on a web site Economists for Obama, Galbraith is listed as an economic adviser to Barack Obama.

Read it for yourself in order to get an idea of how we got to where we are and how we can get out of the current mess.

For Jule
Best,
James Galbraith