PEN-L message, public/private

“There is a further and comprehensive fraud that dominates in even the scholarly economic and political thought.

That is the presumption of a market economy separate from the state—in popular _expression_, the private and the public sectors.

It has long been accepted that all economic life is within a structure of restraint. There is regulation and legal restraint and all modern macroeconomics concedes a stabilizing role to the state, even by those who, in urgent escape from reality, accord a masterful and benign role to the central bank. What is concealed in the established reference is the co-option by private enterprise of what are commonly deemed functions of the state. This is hidden by the everyday reference to the public and private sectors, one of our clearest examples of innocent fraud. The fraud is celebrated in the common reference to corporate welfare. The private firm, as it is called, here has an evident public role in creating public demand and compensation for its product or service. However, the conventional and scholarly reference to a public and private sector disguise makes this exceptional. What is called corporate welfare is a detail. Far more important, in fact, is the full-fledged assumption by private industry of public decision and supporting expenditure, the clear case being the weapons industry. Given their control of Congress and the executive branch of the federal government, in particular the Pentagon, the defense firms are a fully effective voice in creating the demand for weaponry, in prescribing the technological development, and in supplying the needed funds—the defense budget. There is no novelty here. This is the military-industrial complex, a characterization that goes safely back to Dwight D. Eisenhower.

Any notion of a separation between the public and a private sector, between industry and government, is here plainly ludicrous. Nonetheless, the reference is ignored in all everyday and most scholarly economic and political _expression_. And what is so ignored is in some measure sanctioned.

I hesitate again here to speak of innocent fraud; it is far from being socially benign.”

John Kenneth Galbraith, 1999, “The Commitment to Innocent Fraud,” Challenge, Vol. 42, Issue 5, Sep/Oct, pp. 16-20.