I’m currently rereading James Galbraith’s The Predator State and I must say that it is quite a formidable work. There is one issue that I want to tackle — namely, Galbraith’s treatment of the supply-side arguments of the 1970s and 1980s — but before I go into this the reader might indulge me in some literary criticism. I do not do this for fun but rather to bring out what I think to be the essence of the book given its historical content.
In order to do this I want to compare the book to the work of Galbraith’s father JK Galbraith — an economist who, effectively, I grew up reading in a sense. Generally this would be terribly unfair. But in this case I think it is somewhat justified because James Galbraith explicitly states that he wants to move away from writing technical policy work — which is his forte — and instead write something more general and accessible. Given that his father was the master of this particular genre some comparison can bring out the historical context rather well.
The simplest way to approach this is to pose a question: does James Galbraith succeed in producing an accessible work of economics for the lay-reader? Frankly, I don’t think he does. But this is not due to a poverty of erudition or writing ability — his style is as engaging as his father’s, albeit somewhat different. Rather it is due to the nature of the material James Galbraith is dealing with.
When JK Galbraith wrote his classics such as The Affluent Society he was expounding a vision for an economy in the ascent.In the 1950s and 1960s the structure of the US economy was rather stable and a description of system could be expounded rather simply. A policy platform could also be formulated that the lay reader and the policymaker could understand. What’s more, JK Galbraith’s Keynesian language was the political discourse of the day, so there was no problems of translation.
In contrast, The Predator State deals with a US economy in turmoil. Navigating the path of the US economy from the 1970s through to the present day is an arduous task and requires much context and theory. Particularly difficult for the lay reader would be James Galbraith’s discussion of the federal budget deficit and its relationship to the trade and private sector deficits. The picture James Galbraith presents is one in which global changes induce changes in the function of the federal deficit and other economic institutions.
The exposition, frankly, is too difficult for most professional economists to follow — who require some sort of static model which can be applied to any and all heterogeneous historical material. The public, who require something simpler again, would I imagine be lost completely.
This speaks to a very difficult problem that we face today: namely, that we today completely lack a coherent narrative for economic policy. As James Galbraith says in the book, this has moved macroeconomic policy in the US away from anything resembling rational discussion and toward a discourse based wholly in morality. This is where the Democratic (with a capital ‘D’) tendency to view federal budget deficits as a vice and surpluses as a virtue comes in.
Lost in the sea of chaos and change that the US economy has been tossed to and fro in since the early 1970s, it is to soothing moral lessons that policymakers turn to try to navigate the storm.
What does all this say about the contemporary political and economic scene? On this note I must give a rather pessimistic proclamation: I don’t think the policymakers will ever properly grasp what is going on. Nor do I think will the economic profession. Only a few macroeconomists will be able to figure it out and it will be difficult to have their voices heard because the language they speak — the language of dynamic institutional change — will grate so hard on the language policymakers and economists alike are used to — that is, the language of stable relationships and simple rules — that their discourse will only be heard as so much confusing babble.
This is not to say that all is hopeless. A few well-timed interventions could be the key to navigating the storm. But to expect that economists can convince policymakers of a Grand Vision that might once and for all stabilise the world economy and return it to balanced prosperity is a fantasy that is almost as misleading as the fantasy of stable relationships and simple rules. In this regard I speak to some of my Post-Keynesian colleagues whom I shall not bother to name but whose policy prescriptions have to do with international agreements on remedying trade imbalances.
Anyway, that is quite enough of that. The Predator State is truly an important historical document and it displays the powers of a truly skilled economist who is as comfortable navigating the ever-changing historical seas of our present day as he is understanding the essence and, ultimately, the contradictions of highly theoretical economic doctrines when they are applied to empirical reality. Tomorrow, however, I hope to deal with the more specific point of Galbraith’s characterisation and discussion of the supply-siders.