J.K. Galbraith on America
By Kevin
Dr. Galbraith does not think highly of the Bush administration. In fact, in this article an unrestrainted J.K. Galbraith concludes that our "economic problem" is mostly--not all--Bush's fault. In fact, he tells us that Bush wants economic stagnation and that "[p]ossibly, this is intentional," as a means to self-enrichment and to justify a tax reduction.
I find it helpful when writers have clear opinions about political and economic phenomena, even when I interpret those phenomena differently. However, I find it frustrating when these clear opinions are so well thought-out that the writer doesn't see a need to share with us the data that ground his beliefs.
Such is Dr. Galbraith's essay.
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For instance, we learn that America is not prosperous, that the national infrastructure is going to hell, that the current administration doesn't want to increase real wages of the middle class. We find out:
As things are going, quite soon, federal taxes will fall mainly on payrolls and on current consumption. Such taxes are paid mostly by the middle class, by the working class and by the poor...Every public service will fall between the hammer of tax cuts and the anvil of deficits in state, local, and federal budgets. The streets will be dirtier, as also the air, and the water. Emergency rooms will back up even more than they have; more doctors will refuse public patients. More fire houses and swimming pools and libraries will be closed. Public universities will cost more; the public schools will lose the middle class.
How is it that many private businesses manage to raise productivity and cut costs when revenue decreases, but public businesses manage only manage to cut output?
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Dr. Galbraith still sees every national macroeconomy as something that must, fundamentally, be poked, prodded and cared for by politicians and technical economic experts. He doesn't seem to have a distinction between a government that sets and enforces the rules of the game, and one that changes the rules to game the outcome.
But if we ignore his dislike for current policymakers, we find that I can occassionally agree with him:
the basic reality is that the boom of the 1990s created conditions that were highly abnormal, and therefore the path of recovery is likely to be abnormal as wellI was ready to rejoice with my new friend until he insisted that the recovery would be "– abnormally weak and abnormally fragile."
I thought it would have been pertinent to mention that the recession itself was abnormally weak--the unemployment rate maxed out at 6.3% in June of 2003, and was only at or above 6% for 7 months, and is now at 1995-1996 levels--but Dr. Galbraith doesn't see the need...
After all, he had just finished telling us that low-interest rates spurred high consumption and debt during the downturn. I guess that calculating the benefits of such an environment were left as a reader exercise, while the costs required emphasis.
There are several more points I found interesting.
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Dr. Galbraith considers the trade deficit a large problem with no positive solution. Besides, Bush doesn't care about the trade deficit.
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Bush likes cheap labor and cheap oil; current economic policies just happen to mean growth until the election and stagnation afterward.
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The occupation of Iraq is a miserable failure.
The provision of security, infrastructure and civil administration was not adequately prepared for.For a mind like Dr. Galbraith's, the adaptable, adjust-on-the-fly method of military occupation doesn't make sense. To him a country just can't function without detailed plans and policies.
Even worse, in Dr. Galbraith's view, the economic transition from Baathist tyranny to market-based society is tantamount to "shock therapy"; he even claims that the Iraqi economy is "unregulated", even though the CPA & central government own and operate the major source of national income--the entire oil industry from oil wells to refining to oil exports to gas stations.
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Did I mention that Dr. Galbraith thinks America is building an empire? (I don't disagree). First Afghanistan, now Iraq. In case you didn't know it, that's really expensive--so expensive that he thinks Europe might very well pass America as that global economic leader.
By contrast, investments made at home accumulate and yield a return for centuries into the future. Although Europe faces formidable problems of economic governance, it is not too difficult to foresee a day when this difference in current behavior will give Europe an economic advantage over the United States..Recall that France still has a 35 hour work week, that Germany insists on protecting manufacturing, and that the proposed EU constitution doesn't so much as set basic rules to enrich and sustain, but actually issues detailed instructions on how to act.
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It does not concern Dr. Galbraith to examine the aggregate opportunity cost of not having invaded Iraq and/or Afghanistan. For him, the only alternative to empire is investment at home. I cannot accept this.
He doesn't integrate empire into a wider war on terror, and has no concept that unopposed terror might have imposed costs on the US that would have been much greater than those of empire.
Hence, I suggest the following non-testable formula:
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Cost(Invasion of Iraq and Afghanistan)
It's just a suggestion; use your own variables, and change around the signs based on personal beliefs and desires. I understand subjective opportunity costs cannot be aggregated like this. But if you insist on talking about the costs of empire, you must use the same metric to guage the costs of the absence of empire.
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