On May 14, 2012, Democratic Perspective welcomed James K. Galbraith, Professor of Economics at the LBJ School of Public Affairs and the Department of Government at the University of Texas. He is now part of the executive committee of the World Economics Association and past Executive Director of the Joint Economic Committee for Congress.
Mr. Galbraith’s books include Balancing Acts: Technology, Finance and the American Future, Created Unequal: The Crisis in American Pay, Inequality and Industrial Change: A Global View, and The Predator State: How Conservatives Abandoned The Free Market and Liberals Should, Too.
We began the interview by asking what he means by “predator state?” He responded, “Social Security and Medicare are a very large part of our economic activity, and a growing part. As a result, these institutions become really fat targets for certain parties that seek to make a lot of money. The predators are those who gather around these institutions; Big PhRMA, corporations, and insurance companies. Anything you cut back, such as benefits from Social Security, increases the opportunity for privatization. Their objective is to make money and we lose the insurance aspect of these programs.”
When asked how the book was received by conservatives, he said, “I got a friendly reception in some conservative circles for that book. At the end of the George W. Bush administration, things were held together by a group of industries and corporate interests. Since then we’ve unfortunately learned that the power of institutions is greater than the power of ideas. Personnel and philosophies stayed the same,” he stated. “Bernanke was not a bad appointment, but he should have been replaced. We need to have personnel capable of taking a fresh look.”
As for his book, Inequality and Instability, Galbraith said, “It’s my take on the reforms in place. They’re clearly not strong enough to have prevented what did happen. The Consumer Protection Bureau is a good idea. The crucial question is: Can we continue going forward with banks and institutions as large as they are? Financial institutions were emboldened and empowered by the way the Obama administration set about protecting them. “
On the proposal by some to increase the minimum wage $8 an hour, Galbraith said, “It would be useful to figure how to restructure the bottom end. Small businesses would get back through customers what it would cost. There would be two effects,” he said. “It would put some businesses under pressure, but it would result in more customers. They would make it up on volume. Unfortunately, businesses tend to only look at the cost side, but not the demand side. It would create a more stable economy by restructuring the service sector,” he concluded.
We followed up by asking about another economic proposal – the so-called Robin Hood tax, which is a tax on financial transactions. Galbraith responded, “It would be rough on high-speed trading, but it would encourage stable, long-term investing. I think restructuring the financial sector and cutting out tax loopholes would be more effective,” he added.
“The transaction tax would be easy to evade,” he said. “The financial sector is much too large. It’s a cost on every business. We need a concerted effort to cut it back down to size. In 2009, I would have taken control over the weakest dinosaurs in the sector. They would have been downsized. More numerous and smaller banks would benefit everyone.”
