Posted by Vishva News Reporter on October 18, 2008


John Kenneth Galbraith, OC (October 15, 1908–April 29, 2006) was an influential Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism and progressivism. His books on economic topics were bestsellers in the 1950s and the 1960s including "1929 Great Depression"

Galbraith, like Keynes before him, identified:
 the instability of
modern capitalism
in terms of the drive
accumulate excessive wealth
the fragile nature of the financial system.

As Galbraith remarked,
stock market bubbles exhibit
"seemingly imaginative,
currently lucrative,
and eventually disastrous innovation
in financial structures"

Galbraith argued that
an unfettered,
competitive capitalist system,
 operating on pure free-market principles,
was inherently cyclical and unstable,
robust regulation and active government.

You can learn about John Galbraith's
life and wisdom
his contribution to this world by
going to the next page after reading this page....
PVAF's mandate is to empower humanity to create wealth with which to create life prosperity by removing all life poverties with KNOWLEDGE THROUGH EDUCATION.....

However, at PVAF, the study of vED which is the all-encompassing knowledge of creation and life recommends under aARth shaasTR:

"THAT this creation and use of wealth and life prosperity should be done by creating wealth under the power of polity meaning under political organization governed by a form of constitution which empowers enforcement of civil order in which the whole body of the people govern for the good of all and that constitutes a fusion of kingly powers and democracy.

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These  include "greed-based  seemingly imaginative, currently lucrative,
and eventually disastrous innovation
in financial structures"
as per John Galbraith.

In light of the lessons being taught and learned through the current global financial crisis, PVAF, as part of its knowledge-sharing mandate for
A HAPPY TOMORROW THAN TODAY, will publish, in the next few days, starting with today's article, some fundamental insights on this 2008 financial crisis which is setting up a tremendous potential for global 1929 like DEPRESSION 2.0.

PVAF invites you to contribute to this knowledge sharing through your comments which you can post by clicking
POST A COMMENT button in the header of all news items and/or emailing your sharing for posting by clicking here


Please click on the next line to educate yourself through a news article about the prophetic historical and future economic and financial wisdom of John Galbraith in his book "1929 Great Depression"....and you will feel that this whole mess was avoidable......


john kENNETH Galbraith saw this coming........

On the 100th anniversary of his birth, the late, great economist's warnings resonate more than ever....

 The GuardianOctober 15 2008: Stephen Dunn: Article history

One hundred years ago today, one of the intellectual titans of the 20th century was born. Had the warnings issued by JK Galbraith up until his death two years ago been better heeded by the policymakers of today, it seems unlikely we would find ourselves so deep in the economic mire.

A lifelong liberal who advised successive Democratic presidents and presidential candidates, Galbraith ceaselessly warned of the dangers of financial excess. In his extensive writings - most famously The Great Crash 1929 - Galbraith described the common events that precede and accompany particular financial crises, events that are conveniently forgotten by politicians, regulators and their advisers in the good times, when financial deregulation takes grip.

Galbraith, like Keynes before him, identified the instability of modern capitalism in terms of the drive to accumulate excessive wealth and the fragile nature of the financial system. As Galbraith remarked, all stockmarket bubbles exhibit "seemingly imaginative, currently lucrative, and eventually disastrous innovation in financial structures". Galbraith argued that an unfettered, competitive capitalist system, operating on pure free-market principles, was inherently cyclical and unstable, requiring robust regulation and active government.

Starting with the tulip bulb mania in the 1630s, bubble after speculative bubble has been erased from the popular memory: the South Sea bubble in the early 1700s; the Mississippi bubble, which caused a stockmarket crash in 18th-century France; the Florida real-estate bubble in the 1920s; the stockmarket crash of 1929; the stockmarket crash of 1987; the Nikkei bubble, which began in 1991; and the Nasdaq bubble of 2000.

These episodes share a theme: a perceived fundamental change in the economy arouses euphoria and heightened expectations of return, leading to excess, fraud and collapse.

This pattern underpinned the folly of sub-prime lending. The expansion in business activity feeds entrepreneurial and speculative behaviour in the financial sectors. It drives monetary innovation and the new forms of financing structures that are contrived to allow firms to participate in the boom.

Heightened expectations stimulate a credit boom, with the banking system keen to cash in on the new situation. As Galbraith remarked in his book, Money: "The banks, needless to say, provided the money that financed the speculation that in each case preceded the crash."

Galbraith, far left, as US ambassador to India, 1961

John Galbraith, far left, as US ambassador to India, 1961 with John F. Kennedy, USA President, Lyndon Johnson USA Vice President and Jawaharlal Nehru, Prime Minister of India

As Galbraith and Keynes before him warned, such speculation inevitably leads to euphoria or overtrading in which rising asset prices encourage speculative excess. As debt accumulates, soon it can only be serviced by the issue of new liabilities. As long as the financial markets are booming, it is possible to sustain low levels of cash inflow by issuing new stocks and securities to finance current liabilities. But when the hangover comes it hits hard.

When the financial markets slow their expansion, organisations that have covered their future liabilities through issuing more debt are forced to sell assets to meet their liabilities. These "distress" sales cause asset prices to fall, at which point the financial markets, and businesses with exposure to those markets, collapse. The next phase, in which investors try to get their money back out of the markets, naturally gives way to one of "panic". This is the essence of The Great Crash.

At this stage, prices freefall and asset markets break down. As Galbraith highlighted, both bank failures and the fear of bank failures have the same effect. Both are "forces of compelling power to induce deflation - to contract consumer spending, investment spending and therewith sales, output, employment and prices".

The flurry of action by governments and central banks around the world in recent days suggests that Galbraith's works have finally been pored over by politicians. The experience of the 1930s must be avoided. This financial crisis must be met with programmes designed to maintain demand and avoid another Great Depression. On the 100th anniversary of Galbraith's birth, his words matter more than ever.

• Stephen Dunn's The Economics of John Kenneth Galbraith will be published by Cambridge University Press next year


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John Kenneth Galbraith

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John Kenneth Galbraith
Western economists
20th century economists
(Institutional economics)
Full name John Kenneth Galbraith
Birth October 15, 1908
Iona Station, Ontario, Canada
Death April 29, 2006 (aged 97)
Cambridge, Massachusetts
School/tradition Institutional economics
Main interests Economics, Political economy
Notable ideas Keynesian economics, institutional economics

John Kenneth Galbraith, OC (October 15, 1908–April 29, 2006) was an influential Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism and progressivism. His books on economic topics were bestsellers in the 1950s and the 1960s.

Galbraith was a prolific author who produced four dozen books and over a thousand articles on various subjects. Among his most famous works was a popular trilogy on economics, American Capitalism (1952), The Affluent Society (1958), and The New Industrial State (1967). He taught at Harvard University for many years. Galbraith was active in politics, serving in the administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy and Lyndon B. Johnson; and among other roles served as United States Ambassador to India under Kennedy.

He was one of a few two-time recipients of the Presidential Medal of Freedom. He received one from President Truman in 1946 and another from President Bill Clinton in 2000.[1] He was also awarded the Order of Canada in 1997[2] and, in 2001, the Padma Vibhushan, India's second highest civilian award, for his contributions to strengthening ties between India and the United States.[3]



[edit] Life

[edit] Early life and teaching

Galbraith was born to Canadians of Scottish descent, Bruce Alexander Galbraith and Sarah Catherine Kendall, in Iona Station, Ontario, Canada, and was raised in Dunwich Township, Ontario. He went to school at Sugar-Salem High School. His father was a farmer and school teacher and mother a political activist. He was sent to boarding school Appleby College of nearby Oakville, Ontario for the final two years of high school. Both his parents were supporters of the United Farmers of Ontario in the 1920s. After initially studying agriculture, Galbraith graduated from the Ontario Agricultural College (then affiliated with the University of Toronto, and now the University of Guelph) with a B.Sc degree in 1931, and then received an M.Sc (1933) and Ph.D in Agricultural Economics (1934) from the University of California, Berkeley. In 1934, he also became a tutor at Harvard University. In 1937, he became a United States citizen. In the same year, he took a year-long fellowship at Cambridge University, England, where he became influenced by John Maynard Keynes, then lived in Berlin for several months in 1938, attending an international economic conference and developing his ideas. Galbraith was a very tall man, growing to a reported height of 6'9" [206 cm].

Galbraith taught intermittently at Harvard in the period 1934 to 1939.[4] From 1939 to 1940, he taught at Princeton University. From 1943 until 1948, he served as editor of Fortune magazine. In 1949, he was appointed professor of economics at Harvard.

[edit] World War II and Price Administration

During World War II, Galbraith, charged with keeping inflation from crippling the war effort, served as deputy head of the Office of Price Administration. Although little appreciated at the time, the actual power he wielded in this position was so great that he joked later that the rest of his career had been downhill. At the end of the war, he was asked to be one of the leaders of the Strategic Bombing Surveys of both Europe and Japan. These reports concluded the costs outweighed the anticipated benefits and did not shorten the war in the case of Germany. However, they found that the war against Japan had proved beyond question the success of bombing and went on to call for additional funding and the creation of an independent American Air Force (AAF). After the war, he became an adviser to post-war administrations in Germany and Japan.

[edit] Political posts under Kennedy

Galbraith, far left, as US ambassador to India, 1961
Galbraith, far left, as US ambassador to India, 1961

During his time as an adviser to President John F. Kennedy, Galbraith was appointed as United States Ambassador to India from 1961 to 1963. His rapport with President Kennedy was such that he regularly bypassed the State Department and sent his diplomatic cables directly to the President.[5] In India, he became an intimate of Prime Minister Jawaharlal Nehru, and extensively advised the Indian government on economic matters; he harshly criticised Louis Mountbatten, the last Viceroy of British rule, for Mountbatten's passive role in the Partition of India in 1947 and the bloody partition of the Punjab and Bengal. While in India, he helped establish one of the first computer science departments, at the Indian Institute of Technology in Kanpur, Uttar Pradesh. Even after leaving office, Galbraith remained a friend and supporter of India and even hosted a lunch for Indian students at Harvard every year on graduation day.

Because of his recommendation, First Lady of the United States Jacqueline Bouvier Kennedy undertook her diplomatic missions in India and Pakistan.

[edit] Family

Galbraith married Catherine Merriam Atwater on September 17, 1937, whom he met while she was a Radcliffe student. They resided in Cambridge, Massachusetts, and had a summer home in Newfane, Vermont. They had four sons: J. Alan Galbraith is a partner in the prominent Washington D.C. law firm Williams & Connolly; Douglas Galbraith died in childhood of leukemia; Peter W. Galbraith has been a US diplomat who served as Ambassador to Croatia and is a widely published commentator on American foreign policy - particularly in the Balkans and the Middle East; James K. Galbraith is a prominent progressive economist at the University of Texas Lyndon B. Johnson School of Public Affairs. The Galbraiths also have ten grandchildren. [3]

[edit] Later life and recognition

Galbraith was one of the last living former advisers to President Franklin Roosevelt.

In 1972 he served as president of the American Economic Association.[6]

In 1997 he was made an Officer of the Order of Canada[7] and in 2000 he was awarded his second U. S. Presidential Medal of Freedom. Also in 2000, he was awarded the Leontief Prize for his outstanding contribution to economic theory by the Global Development and Environment Institute.

He was awarded an honorary doctorate from the Memorial University of Newfoundland at the fall convocation of 1999.[8]

On April 29, 2006, Galbraith died at Mount Auburn Hospital in Cambridge, Massachusetts of natural causes, after a two-week stay in the hospital.

[edit] Works

Although he was a president of the American Economic Association, Galbraith was considered an iconoclast by many economists. This is because he rejected the technical analyses and mathematical models of neoclassical economics as being divorced from reality. Rather, following Thorstein Veblen, he believed that economic activity could not be distilled into inviolable laws, but rather was a complex product of the cultural and political milieu in which it occurs. In particular, he believed that important factors such as advertising, the separation between corporate ownership and management, oligopoly, and the influence of government and military spending had been largely neglected by most economists because they are not amenable to axiomatic descriptions. In this sense, he worked as much in political economy as in classical economics.

His work included several best selling works throughout the fifties and sixties. After his retirement, he remained in the public consciousness by continuing to write new books and revise his old works as well as presenting a major series on economics for BBC television in 1977.[9] However, from the Nixon presidency onwards, he was regarded as something of an anachronism, as the public discourse centered more and more around the pro-market, small-government, anti-regulation and low-tax orthodoxies which came to prominence in the 1980s. In addition to his books, he wrote hundreds of essays and a number of novels. Among his novels, A Tenured Professor in particular achieved critical acclaim.

[edit] Economics books

In American Capitalism: The Concept of Countervailing Power, published in 1952, Galbraith outlined how the American economy in the future would be managed by a triumvirate of big business, big labor, and an activist government. Galbraith termed the reaction of lobby groups and unions "countervailing power." He contrasted this arrangement with the previous pre-depression era where big business had relatively free rein over the economy.

His 1954 bestseller The Great Crash, 1929 describes the famous Wall Street melt down of stock prices and how markets progressively become decoupled from reality in a speculative boom. The book is also a platform for Galbraith's keen insights, and humour, into human behaviour when wealth is threatened. It has never been out of print.

In his most famous work, The Affluent Society (1958), which also became a bestseller, Galbraith outlined his view that to become successful, post-World War II America should make large investments in items such as highways and education using funds from general taxation.

Galbraith also critiqued the assumption that continually increasing material production is a sign of economic and societal health. Because of this Galbraith is sometimes considered one of the first post-materialists. In this book, he popularized the phrase "conventional wisdom".(Galbraith, 1958 The Affluent Society: Chapter 2 "The Concept of Conventional Wisdom")

Galbraith worked on the book while in Switzerland, and had originally titled it Why The Poor Are Poor but changed it to The Affluent Society at his wife's suggestion.[10]

The Affluent Society contributed (likely to a significant degree, given that Galbraith had the ear of President Kennedy [11]) to the "war on poverty," the government spending policy first brought on by the administrations of Kennedy and Johnson.

In The New Industrial State (1967), Galbraith argues that very few industries in the United States fit the model of perfect competition. A third related work was Economics and the Public Purpose (1973), in which he expanded on these themes by discussing, among other issues, the subservient role of women in the unrewarded management of ever-greater consumption, and the role of the technostructure in the large firm in influencing perceptions of sound economic policy aims.

In A Short History of Financial Euphoria (1990), He traces speculative bubbles through several centuries, and argues that they are inherent in the economic system because of "mass psychology" and the "vested interest in error that accompanies speculative euphoria." Also, financial memory is "notoriously short": what currently seems to be a "new financial instrument" is inevitably nothing of the sort. Galbraith cautions: "The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version." Crucial to his analysis is the assertion that the common factor in boom and bust is the creation of debt to finance speculation, which "becomes dangerously out of scale in relation to the underlying means of payment".

Galbraith was a fine writer, and was widely regarded as an influential and serious economist. Many of Galbraith's best known works raised controversies, particularly with his antagonism toward libertarians and those of the Austrian schools (see Criticism).

He was an important figure in 20th century institutional economics, and provides perhaps the exemplar institutionalist perspective on Economic Power[12].

Galbraith cherished The New Industrial State and The Affluent Society as his two best.[13] Economist and friend of Galbraith Michael Sharpe visited Galbraith in 2004, on which occasion Galbraith gifted him with a copy of what would be Galbraith's last book, The Economics of Innocent Fraud. Galbraith confided in Sharpe that "[t]his is my best book", an assertion Galbraith delivered "a little mischievously." [14]

[edit] Some of Galbraith's Ideas

In The Affluent Society Galbraith asserts that classical economic theory was true for the eras before the present, which were times of "poverty"; now, however, we have moved from an age of poverty to an age of "affluence," and for such an age, a completely new economic theory is needed.

Galbraith's main argument is that as society becomes relatively more affluent, so private business must "create" consumer wants through advertising, and while this generates artificial affluence through the production of commercial goods and services, the public sector becomes neglected as a result. He points out that while many Americans were able to purchase luxury items, their parks were polluted and their children attended poorly maintained schools. He argues that markets alone will underprovide (or fail to provide at all) for many public goods, whereas private goods are typically 'overprovided' due to the process of advertising creating an artificial demand above the individual's basic needs.

Galbraith proposed curbing the consumption of certain products through greater use of consumption taxes, arguing that this could be more efficient than other forms of taxation, such as labour or land taxes.

Galbraith's major proposal was a program he called "investment in men" — a large-scale publicly-funded education program aimed at empowering ordinary citizens. Galbraith wished to entrust citizens with the future of the American republic.

[edit] Criticism of Galbraith's Work

Galbraith's work, in general, and The Affluent Society, in particular, have drawn sharp criticism from free-market supporters at the time of its publication. Monetarist Milton Friedman in "Friedman on Galbraith, and on curing the British disease" views Galbraith as a 20th century version of the early 19th century Tory radical of Great Britain. He asserts that Galbraith believes in the superiority of aristocracy and in its paternalistic authority, that consumers should not be allowed choice and that all should be determined by those with "higher minds":

"Many reformers -- Galbraith is not alone in this -- have as their basic objection to a free market that it frustrates them in achieving their reforms, because it enables people to have what they want, not what the reformers want. Hence every reformer has a strong tendency to be averse to a free market."

Galbraith's views on government intervention were somewhat more complex than this simple characterization, however, as Richard Parker demonstrates in his biography of Galbraith John Kenneth Galbraith: His Life, His Economics, His Politics. Galbraith's primary purpose in Capitalism: The Concept of Countervailing Power, (1952) was, ironically, to show that big business was now necessary to the American economy to maintain the technological progress that drives economic growth. However, Galbraith saw the necessity of "countervailing power," not only including government regulation and oversight, but also collective bargaining, and the suasion that large retailers and distributors could bring to bear on large producers and suppliers. In The New Industrial State, (1967) Galbraith argued that the dominant American corporations had created a technostructure that closely controlled both consumer demand and market growth through advertising and marketing. While Galbraith defended government intervention, Parker notes that he also believed that government and big business worked together to maintain stability.[15]

Paul Krugman, the influential Princeton University professor and New York Times op-ed columnist, has denigrated Galbraith's stature as an economist. In Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations, he calls Galbraith a "policy entrepreneur" — an economist who writes for solely the public, as opposed to one who writes for other professors, and who therefore makes unwarranted diagnoses and offers over-simplistic answers to complex economic problems. He asserts that Galbraith was never taken seriously by fellow academics, who view him as more of a "media personality." For example, Galbraith's work The New Industrial State is not considered to be "real economic theory", and Economics in Perspective is "remarkably ill-informed".[16]

[edit] Memoirs

The Scotch (published in the UK under two alternative titles as Made to Last and The Non-potable Scotch: A Memoir of the Clansmen in Canada)[17] (illustrated by Samuel H. Bryant), Galbraith's account of his boyhood environment in southern Ontario, was written in 1963.

Galbraith's 1981 memoir, A Life in Our Times[18] stimulated discussion of his thought, his life and times after his retirement from academic life. In 2004, the publication of an authorised biography, John Kenneth Galbraith: His Life, His Politics, His Economics[19] by friend and fellow progressive economist Richard Parker, renewed interest in his career and ideas.


[edit] External links

Diplomatic posts
Preceded by
Ellsworth Bunker
United States Ambassador to India
1961 – 1963
Succeeded by
Chester Bowles
v • d • e
Schools of economic thought
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