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Last Updated: Sunday, 30 April 2006, 15:32 GMT 16:32 UK
The legacy of JK Galbraith
Analysis
By Toby Poston
BBC News business reporter

J.K. Galbraith
Professor Galbraith's views upset many other economists

"The only function of economic forecasting is to make astrology look respectable."

Responsible for many such quotations, it is not surprising that John Kenneth Galbraith was one of the most popular and well-read economists of the 20th Century.

It is also clear how the Canadian-born Harvard professor earned a reputation as an outspoken critic of many of the most ingrained assumptions of fellow economists.

He was not a great man for numbers or complex mathematical theories and models, but more of a social economist, whose accessible and prolific writing did much to popularise the subject.

"He was arguably one of the most famous economists outside of his profession for the way he was able to communicate complex ideas in a compelling way to non-economists," says the London Business School's Dominic Swords.

"His lasting legacy will be to appreciate the economic system as a complex interaction of people and organisations whose actions cannot simply be understood through highly rational and mathematical models of the economy."

Many of Professor Galbraith's phrases - "affluent society", "conventional wisdom" and "countervailing power" - have become part of common language.

Popular interest

His views helped define the political and economic strategies of America's Democratic Party for decades and he was a revered lecturer to generations of Harvard students.

Galbraith with John F Kennedy
His friend John F Kennedy made Galbraith US Ambassador to India

But many of today's leading economists feel his ideas have been largely discredited and he has never been regarded as one of the great economic theorists.

"He was an economic commentator who fostered popular interest in the subject," says Madsen Pirie, president of the free-trade supporting think-tank, the Adam Smith Institute.

"But I don't regard him as someone who made a major contribution to the theoretical understanding of economic systems."

Perhaps this was because Professor Galbraith spent a lot of his time arguing that some key economic theories were not working so smoothly in real life.

In his early work he invented the idea of "countervailing power", in which he saw the American economy being managed by a balancing triumvirate of big corporations, trade unions and government.

Quest for wealth

One of his most famous works was the 1958 best-seller "The Affluent Society".

In it he argued that America's quest for wealth creation was fine at creating giant companies and encouraging consumer demand for products they did not need, but was doing so at the expense of many people's social welfare and was creating a land of haves and have-nots.

FAMOUS GALBRAITH QUOTES
"Economics is extremely useful as a form of employment for economists"
"It is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled sea of thought"
"Under capitalism man exploits man. Under communism, it's just the opposite"
"If all else fails, immortality can always be assured by spectacular error"

Some have credited the book with contributing to the "war on poverty" spending policies adopted by the administrations of Presidents Kennedy and Johnson.

In the late 1960s, his work "The New Industrial State" said that large companies had grown to dominate the American economy to such an extent that big firms like General Motors had total control of their markets.

"Since General Motors produces some half of all the automobiles, its designs do not reflect the current mode, but are the current mode," he wrote.

The path of history has not been too kind to this particular theory, seeing as many of the corporate giants he was referring to, including General Motors, are now gone, or in decline - victims of the market forces he suggested they were in control of.

"He is one of those unfortunate people who lived long enough to see many of his ideas discredited," says Doug McWilliams of the Centre for Economics and Business Research.

Remarkable anticipation

Professor Galbraith struck a chord for many of those people who feared the consequences from unfettered capitalism and saw ordinary people as powerless against big corporations.

A copy of JK Galbraith's "The Affluent Society"
The Affluent Society was the summation of his liberal views

"But the truth is that we have seen how consumers can make or break big companies," says Mr Pirie.

But other parts of Professor Galbraith's work show remarkable anticipation of future events.

In the 1950s he was one of the first economists to question the way natural resources were being squandered by rampant consumerism.

His arguments that this obsession with new and unnecessary products was damaging the real quality of life has similarities with one of the most fashionable debates in economics today - Why do richer societies not always feel better off?

And finally, his 1990 book "A Short History of Financial Euphoria" described the irrational factors that had helped create financial bubbles through the centuries.

The architects of the dot-com boom and bust that followed it a few years later clearly had not read it.




BBC NEWS: VIDEO AND AUDIO
A look back at JK Galbraith's life



SEE ALSO:
Liberal thinker JK Galbraith dies
30 Apr 06 |  Americas
Obituary: John Kenneth Galbraith
30 Apr 06 |  Americas


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