PKT message, Re: Economist Galbraith blasts corporate greed

I got this from Nick Laird who has his own mailing list.

JKG underscores what most of us probably will agree is one of the manifestations of what is wrong with the economy at large -- the growing disparity in wealth. I will not guess what JKG has to say in his coming book but beyond whatever economic framework we fancy, the roots of the malady, I believe we will find, lie in the belief set that gives foundation to society. The disparity of wealth is not a cause but a manifestation of the philosophical underpinnings, an unconscious influence, by which society lives its day to day existence. If an economy is a manifestation of the values behind a political system, a political system and the powers that sustain it are merely manifestations of the values and habits of the men that comprise it. The needed reform must start from the top. The world lacks true, selfless men that would be its leaders.

Economist Galbraith blasts corporate greed

Takes aim at salaries, obsession with interest rates

http://www.nationalpost.com/financialpost/story.html?id=A579825D-8059-4437-8F37-12474824C998
Steve Maich
Financial Post

Tuesday, September 23, 2003

North America's corporations have put too much power in the hands of management at the expense of shareholders and that has led directly to the spate of corporate scandals of the past few years, according to renowned economist John Kenneth Galbraith.

In an interview with Ivey Business Journal On-Line to be published today, Mr. Galbraith takes North America's corporate leaders to task for fostering an environment in which executives are paid exorbitantly and are unaccountable for their performance.

"This is a manifestation of the new structure of the corporate world, which puts power in the hands of the management not the stockholders or the public," Mr. Galbraith said.

"That endows the people so empowered with the right to pay themselves. And not surprisingly, they have seized upon that right."

The stinging critique is notable because it comes from one of the most prominent economists of the past 50 years.

Mr. Galbraith is a Canadian, born in Ontario in 1908, but he made his name in the United States as an economist, presidential advisor and diplomat.

During the Second World War he was in charge of the U.S. government's system of price controls, which was aimed at taming inflation while the country was funding the war effort.

He was first named to the faculty at Harvard University in 1948 and held a professorship there for 50 years. In the 1940s he also served as an editor of Fortune magazine.

He was named ambassador to India in 1961, by then-U.S. president John F. Kennedy, who was a close personal friend.

Mr. Galbraith will turn 95 in three weeks, but he has remained a prolific writer even in recent years. He has written 23 books, and has another on the way. The new book is called The Economics of Innocent Fraud, and in it he expands on many of the themes discussed in today's interview.

One of those themes is Mr. Galbraith's contention that the traditional distinction between the public and private sectors is now meaningless, especially since private companies have extended their reach into providing public services and infrastructure for profit.

Mr. Galbraith's critics have long dismissed him as a radical left-wing academic but he has remained an influential commentator on a wide range of policy issues.

He has consistently argued for a more equitable distribution of global wealth, and suggests that much of the violence around the world is rooted in the wide gaps between the richest and poorest nations.

The economist saves his most stinging criticism for the administration of George W. Bush, the U.S. President, which he believes has made several missteps in its bid to spur the economy.

He argues that increased spending on initiatives like unemployment insurance and other social programs are more reliable at flowing money through the economy.

By contrast, the policies pursued by the Bush administration, such as tax cuts on dividends, are disproportionately aimed at high-income earners, who are far less likely to spend their tax savings in support of the economy.

"The basic problem of the White House and American policy is the assumption that anything that is good for the corporate elite is good for the country," he said.

And for those expecting that the U.S. Federal Reserve's low-interest-rate policy will be the engine behind consumer spending, Mr. Galbraith has a sobering perspective.

The whole notion that low interest rates spark widespread demand is "one of the fantasies of economic life," Mr. Galbraith said.

"It may have a little effect on the housing industry, but its larger economic effect is one of the great hoaxes and errors of our time."

The online Ivey journal is affiliated with the University of Western Ontario's Ivey School of Business.

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