Interview: Professor JK Galbraith - Economist

"For his influence and his fame Galbraith never won a Nobel prize – perhaps because he writes too clearly and too elegantly in a field where impenetrability has a habit of being confused with genius. Even John Maynard Keynes, at whose knee Galbraith went to the English Cambridge to study in the 1930s, has not been spared his pupil's tongue. Galbraith once criticized the "unique unreadability" of the General Theory, noting acidly that "as Messiahs go, Keynes was deeply dependent on his prophets". But for all his historical perspective, Galbraith is reluctant to rank this crisis in comparison with other watersheds of American capitalism: the depredations of the robber barons and the ensuing anti-trust legislation, the stock market crash of 1929 and the excesses of the 1980s (in retrospect a trailer perhaps of the even greater follies of the 1990s).
We can't say how serious this is yet, and anyone who makes such a prediction is suspect," he says, eschewing the giant soundbite dangling in front of him. "I can only say I hadn't expected to see this problem on anything like the magnitude of the last few months – the separation of ownership from management, the monopolization of control by irresponsible personal money-makers." Time and again as we talk, the author of American Capitalism and of The New Industrial State, the chronicler of The Affluent Society, returns to the same two points. His first is that the large modern corporation, as manipulated by what he calls the "financial craftsmen" at Enron and elsewhere, has grown so complex that it is now almost beyond monitoring.
Second, and consequently, these new entities "have grown out of effective control by the owners, the stockholders, into nearly absolute control by the management and the individuals recruited by management". And in the process, he insists, this latter group has "set its own compensation, either in the form of salaries which can get to fantastic levels, or of stock options".
Such was their power that until they carried their behavior to extremes and the companies collapsed, "there was almost no criticism from the shareholders – the owners". Galbraith detects something of the conspiracy of silence he recounted so memorably in his book The Great Crash: 1929, first published in 1955 but as readable today as it was then. "They remained very quiet," he wrote of the financial luminaries of that era. "The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. To speak out against madness may be to ruin those who have succumbed to it. So the wise on Wall Street are nearly always silent. The foolish have the field to themselves and none rebukes them." "