The Centenary of the Worlds Wisest and Wittiest Economist

“The only function of economic forecasting is to make astrology look respectable,” one of the many wise and witty sayings of John Kenneth Galbraith whose centenary we celebrate this month. I still have my dog eared penguins of his classic texts - for the first time I had found a readable economist! When probably the greatest Canadian died in April 2006 the Chancellor of the Exchequer was quick to pay tribute, he "was a brilliant economist and writer and a great friend of the United Kingdom, and his books will be widely read in generations to come."

Gordon Brown is now discovering as Galbraith put it that, “politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable”. In retrospect it’s a pity Brown did not read Galbraith’s work more assiduously. At least it would have enriched his economic vocabulary with phrases like "the conventional wisdom", “countervailing power”, the "technostructure" and the "affluent society" instead of just stating it’s the right thing to do he would have been able to explain why.

He was born on October 15th 1908 on the north shore of Lake Erie, in Iona Station, Ontario, the only place where to be a ‘scotch’ is not to be a drink. His 1964 book, the Scotch, explains that the southern Ontario farmland was occupied by Scots driven from the Highlands by the clearances and therefore sworn enemies of the Tories. A trait he carried throughout his life as he said, “the modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness”.

Galbraith is remarkably ‘quotable’ when asked if Galbraith’s work would last. Amartya Sen, economist and Nobel laureate, said read The Affluent Society it showed a “great insight,” which “has become so much a part of our understanding of contemporary capitalism that we forget where it began. It’s like reading Hamlet and deciding it’s full of quotations. You realize where they came from”.

As he wrote in the Affluent Society, "People are the common denominator of progress. So... no improvement is possible with unimproved people, and advance is certain when people are liberated and educated. It would be wrong to dismiss the importance of roads, railroads, power plants, mills, and the other familiar furniture of economic development.... But we are coming to realize... that there is a certain sterility in economic monuments that stand alone in a sea of illiteracy. Conquest of illiteracy comes first".

Of course “conventional wisdom” has kept him out of fashion for twenty years but now as he said “the enemy of the conventional wisdom is not ideas but the march of events” and his book the Great Crash 1929 is a best seller again. It is not too late for us to learn from him, “the salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself” or “the process by which banks create money is so simple that the mind is repelled”.

His great works like American Capitalism, the Affluent Society and the New Industrial State; show a far from dismal science. He criticised economic theory for ignoring and obscuring the economic power of large corporations. He criticised politicians who aligned themselves with the objectives of the large corporation instead of acting in the public interest. He also censured his fellow economists as ‘idiot savants’ who perform sophisticated mathematical analysis but make no attempt to understand the real world.

"The emancipation of belief," he wrote, "is the most formidable of the tasks of reform, the one on which all else depends." His weapons in leading that struggle did not always please his fellow economists; they included irony, satire, and laughter as he said “the conventional view serves to protect us from the painful job of thinking”.

Galbraith stood out from his profession like much of academic thinking economics has spent decades insulating itself behind impenetrable language, building abstraction upon abstraction using equations and models to build worlds of perfect competition and rational actors.

“It is my guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure”, he said and “it is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled sea of thought.”

Galbraith made it his life long quest to expose business's capacity for self-deception; “When you see reference to a new paradigm you should always, under all circumstances, take cover. Because ever since the great tulipmania in 1637, speculation has always been covered by a new paradigm. There was never a paradigm so new and so wonderful as the one that covered John Law and the South Sea Bubble — until the day of disaster”. As he said, “faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof”.

When interviewed about his last short monograph, the Economics of Innocent Fraud (1999) he said, “It deals with all of the things we do, in an innocent way, to cover up the truth. I begin with the renaming of the system. It used to be capitalism. But that evokes Marx and Rockefeller. So now we speak of the market system. That is a nice bland expression, which forgets those off-color references. Then I write about work. We talk of the enormous virtues of work, but it turns out that that is mostly for the poor. If you're rich enough or if you're a college professor, the virtue lies in leisure and the use you make of your leisure time. Next, I go on to the stock market, where I show, I think without a doubt, that what is called "financial genius" is merely a rising market. That whole effort has given me a good deal of pleasure”.

The vindication of the final uncovering of that fraud would undoubtedly bring Galbraith pleasure just as surely as it brings misery to millions. Although I still remember how he bought me pleasure when he was cavorting with Bette Midler on the Michael Parkinson show.

As he pointed out, "In all life one should comfort the afflicted, but verily, also, one should afflict the comfortable, and especially when they are comfortably, contentedly, even happily wrong".