Muddling Towards the Next Crisis: James Kenneth Galbraith
in conversation
with The Straddler
“Since the 1980s, the American business cycle has been based on financial and credit bubbles, and therefore on the enrichment, through the capital markets, of a very small number of people in a very few places. Truly we have become a 'trickle-down economy'—as we were not before. A rising tide may lift all boats, but recent business cycles have been more like waves, whereby certain sectors and areas ride the peaks before crashing to the shore. This is a sign, surely, not of the social evil of inequality per se but of the instability of bubble economies, closely associated with inequality of income, wealth, and power, for which we now pay a fearsome price.”
—James Kenneth Galbraith, Inequality and Instability
'On Sunday, August 26th, The Straddler met with James Kenneth Galbraith at his Townshend, Vermont home.
We had previously spoken with Galbraith for the springsummer2010 issue, using his 2008 volume, The Predator State, as our point of departure. In that book, Galbraith argued that over the past thirty years there had been a transition from the sort of economy described by his father, John Kenneth Galbraith, in The New Industrial State (1965)—where conglomerates run by technocratic, mid-century organization men (the “technostructure”) were the primary driving force—to one in which large corporations had primarily come to serve the individuals who ran them (i.e., the “CEO class”).
Galbraith’s most recent book, Inequality and Instability, seeks both to provide a method by which to reliably measure inequality in the U.S. and across the world, and to point up very concrete reasons for concern about increasing inequality. Rather than focusing on questions of “comparative welfare analysis” using provocative statistical measures whose utility is limited (for example, CEO-to-janitor pay ratios or median income stagnation over time), Galbraith and his team bring a new method to the question by applying a consistent statistical measure to a more comprehensive set of world economic data.
Galbraith’s inquiry results in several interesting claims, foremost among them that the fundamental deleterious effect of income inequality is economic instability. But this instability is not a result of inequality; rather, inequality is a symptom of the shaky and, in the end, unsustainable foundations of an economy lurching from crash to crash as it maintains its reliance on credit-fueled stock or asset bubbles that provide massive rewards to select few and always changing sectors (finance being the one constant) in which select few highly remunerative jobs exist.'>>>
http://thestraddler.com/201310/piece2.php