A century of life's lessons

January 20, 2000

CAMBRIDGE, Mass. -- The economy is thriving, boasts the president. Never been healthier, agrees Alan Greenspan. Buy, buy, buy, urges Wall Street. But in a grand, wood-paneled salon a mere percentage point from Harvard Yard, the guru of modern economics is a bit more temperate.

The next time someone in authority announces that America has entered a new era of prosperity, cautions John Kenneth Galbraith, run for cover. If, he adds, the word "unprecedented" happens to be part of the conversation, take especially deep cover.

At 91, Mr. Galbraith thinks, speaks and writes in rich, eloquent paragraphs. His 31 books are marked by the same balance of self-effacement and self-congratulation that characterizes his conversation. "Galbraithspeak" is what William F. Buckley Jr., a skiing buddy of Mr. Galbraith's in Gstaad, Switzerland, calls this distinctive lingua franca.

Galbraithspeak permeates speeches and correspondence that the economist has authored for presidents from Franklin D. Roosevelt to Lyndon B. Johnson. Among the many titles he claims credit for on the bookshelf in his living room, Mr. Galbraith likes to joke that his personal favorite is "The Speeches of Adlai E. Stevenson."

A farm boy from western Ontario, Mr. Galbraith went to work for Roosevelt in 1936 and demonstrated that at least one economist was not as dismal as the science he practices. Partly because of his uncanny ability to translate Keynesian theory into terminology that even politicians could understand and partly because of his habit of slipping his arch wit into those translations, Mr. Galbraith won the ears of a succession of postwar Democrats.

For Republicans, meanwhile, he was a perpetual thorn in the side: a Harvard professor with a huge audience, a sense of humor and an intolerance for any capitalism that forsakes humanism.

While not in President Clinton's inner circle, Mr. Galbraith is on friendly terms with Mr. Clinton and has visited Arkansas as his guest. Without his two hearing aids, Mr. Galbraith is "quite deaf," and age has caused his 6-foot, 7-inch frame to stoop a bit -- perhaps to a mere 6 foot 6. Yet, Mr. Galbraith and his wife of 62 years, Kitty, travel relentlessly, often to the countries whose welfare he worries about most. Recently, he found himself an honored guest at the 50th-anniversary celebration of Newfoundland.

The dawn of a new century seemed an appropriate moment to check in with America's economic eminence grise.

In sounding a skeptical note about the current economic climate, you're at odds with some leaders, as well as some leading thinkers. Have you appointed yourself chief curmudgeon, or do you think others are turning blind eyes to the dangers of runaway success?

I see people generally happier with economic life than in many years. And there's a reason for that. There's no question that the economy, at the moment, is doing well by the people at large. On the other hand -- and, I remind you, Harry Truman once said he wanted a one-armed economist who didn't always say "on the other hand" -- we have, as we all know, a sort of securities-market speculation: a lot of innocent participation in the stock market. We have far more mutual funds and other stock-market apparatus than we have intelligence to manage it.

Out of this, everyone should be aware of the oldest rule in economics, for which I take credit, which is that when someone says we have entered a new era of permanent prosperity, you should take cover. That has been said many, many times in the last 300 years.

One result of all these people playing around with the market is we have a new class of enormous wealth. How does this affect our economy?

We should always remind ourselves that capitalism, now politely called the market system, has always, basically, been unstable. My old, much-admired colleague, Joseph Schumpeter [the Austrian economist], argued that it was necessary to clean out, periodically, incompetent and reckless bankers, incompetent and reckless corporate executives, incompetent and reckless government officials and other misdirected people involved in the economy. He gave it a name: creative destruction. I hasten to add, Schumpeter was a stalwart conservative.

To the rest of us: If we have a setback -- which, historically speaking, is possible -- it would have an adverse effect on consumer spending, an adverse effect on investment and thus an adverse effect on the economy as a whole. On the other hand, we have a much more secure economy than we had, for example, after the 1929 crash.

How are things different now?

There was no banking insurance, so the crash led directly to a banking crisis. There was no Social Security. And there was no real commitment to helping people in distress, though it must be said that that commitment is still weak.

Granted that economics is known as the dismal science, we hear terms like "crash," "correction" and now "creative destruction." What's the difference?

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