ENGLISH HOMEPAGEFupdated May 21, 2003

Hayabusa Interview with Prof. John Kenneth Galbraith

Prof. John Kenneth Galbraith is one of the big mountains in the history of economics in the United States. He is the author of a number of bestsellers including "The Affluent Society," "The New Industrial States," "Economics and Public Purpose" and "The Age of Uncertainty." In the year 2002, he published a book entitled "The Last Warning to the Japanese Economy." In our interview made in the middle of January this year, he criticized the military and tax policies of the Bush Administration and indicated his view on the U.S. economy and the Japanese economy.

Hayabusa: Firstly, I want to ask you about the American politics and the economy. The Bush Administration has declared a preemptive war against Iraq. And the majority of intellectuals in nearly all industrialized countries are apprehensive that such a unilateral behavior of the Bush Administration will surely lead not to peaceful world order, but to more confusion in the world. How do you think of this unilateralism on the part of the Bush Administration, which utterly disregards the United Nations?

Galbraith: I am not a supporter of President Bush and you would rather be surprised to discover that I was. The policy in the United States has gone beyond political parties and is to a very large extent established by the great corporations. They are very strong in the Administration, they are very strong in the Defense Department and they are very strong in the country. Their view of economics and economic policy is very strongly on the side of what rewards the affluent or the rich since that is the way they work, that is what their careers have been. It is not evil, it's customary. And those are not the policies that serve the greatest problem of the United States at the present time, which is a very serious recession. Maybe one of these days your experts in English will see it called, not a recession, but a depression. And the policies that have been so far proposed by the Administration are not relevant to recession. The rewards go to people were not pressed to spend and not pressed to invest. And that is the major flaw of old fashioned Keynesian economics. I could go on beyond that to some other things, which I have reason they talked about in Japan, but we are at a stage, where orthodox economics is not being pursued.

Hayabusa: Do you think that unilateralism of the Bush Administration is a new type of imperialism, which for example, aims at dominating over the concession of petroleum in the Middle East? Don't you think so?

Galbraith: I belong, as so many of my generation, to the peace-loving community - that you do not venture into wars for any casual reason. And I think it is fair to say, one of the leaders in the objection to the Vietnam War, President Kennedy sent me there because he knew, that quite reliable, I will send him a message against a deeper involvement. He didn't think I was impartial on that subject. And therefore, I am very uneasy to the threat of war as a diplomatic device in the Middle East, or for that matter, even in Korea.

Hayabusa: I see. The Congress, including the Democrats supports a preemptive attack on Iraq. According to opinion polls, the majority of general voters in the United States also seems to support such moves.

Galbraith: I am not quite sure that I heard that. What is the majority show, as you say?

Hayabusa: Probably, more than 50 percent of the nation's people support the war against Iraq. How do you think of this attitude, especially, the attitude of Democrats, the Democratic Party?

Galbraith: That is the manner on which the polls are not to be trusted. There is an ancient commitment going back, maybe, a couple of hundred years in the United States that you rarely behind the President in times of stress and particularly in times of war. And therefore, when the President finds a threat in Iraq, that automatic support emerges and it is a wave, not based on democratic thought, it is a wave based on ancient tradition. And the obligation of those who see the problem is very great.

Hayabusa: Do you support the preemptive attack of the U.S. army against Iraq?

Galbraith: I do not. I would continue negotiations, continue reliance, continue to rely on the United Nations, but I am not in favor of resorting to open warfare including aerial warfare. In World War II, I was in charge of the assessment of the effects of air attacks on Germany and on Japan. And it left me with an enduring sense, first of the random nature of the damage that has done, and second of the human cruelty that is the result of air warfare. I repeat again, much of that education within Japan, where I was a director of the investigation of the effect of the air attacks, including the atomic bombs. And that, ever since, has been an important part of my education.

Hayabusa: If, the Bush Administration increases the expenditure for armaments including the cost of wars against rogue countries, what will happen in the U.S. economy?

Galbraith: Not much. Because, for small countries like Iraq, and small wars, they will be within the budget, or largely so. And the effects of the expenditure will be overwhelmingly away from the American economy. It might even be adverse to the American economy. The central issue is the question of civilization and the attention to people who would otherwise be get killed, and not to see it as an economic problem.

Hayabusa: Like the Vietnam War.

Galbraith: Yes.

Hayabusa: Many young Americans died in the Vietnam War.

Galbraith: That is exactly right. And the experience of World War II, of the Vietnam War was all in the cruelty and damage to civilized values and not the economic effects.

Hayabusa: Civilized value is the most important thing.

Galbraith: That is right. There are times when economics gives way and must give way to deeper human values. And that is particularly true of war.

Hayabusa: One more question about the American economy. A lot of corporate scandals have occurred since autumn 2001, like Enron or Worldcom, etc. What have been the main causes of such corporate scandals?

Galbraith: I could give you a long talk on that because a year ago, I had just completed the first draft of a book called "The Economics of Innocent Fraud" - the things that were wrong with the economy, which were not in accordance with the hopes of good procedure and good law. And one of them was the way in which in the modern corporation in the United States, decisive power has passed to the management, including the right of self-enrichment. And I had that in draft, which was almost ready to go to the press when along came Enron, that came a little before, and along came Worldcom, and all of the other scandals of the great corporations. And I had to turn to my book where I had predicted disaster, to a book with a disaster had already become evident. It took me several months to make that change. The lesson is that you should not write a book that makes predictions that too soon come true. Let me say a word on the book. It is going to be called, it has been called "The Economics of Innocent Fraud," a fraud against dishonesty, against which you don't prosecute. That's what I call innocent fraud, and one day in the future, not too distant, it will also be out in Japan.

Hayabusa: What are the effective solutions to recover the credibility of corporate governance.

Galbraith: We musts see that the modern power in the economy rests not with money, but with corporate organization. We must have a closer view of the rules governing corporate behavior. And this is a problem because corporate behavior is very influential in the state and so you are sometimes, to some degree, asking for solutions that arethe most difficult in democracy.

Hayabusa: I think that there are some changes in the Japanese economy. There are two main causes of the long stagnation of the Japanese economy. One is that both political and business leaders have lost confidence. Another is that the deposits of individuals of over $8 trillion have not been able to be used to activate the economy. What is your view on the present situation of the Japanese economy?

Galbraith: I have just been writing on that. I have had a long association with the Japanese economy, going back to World War II, and to a number of the very greatest Japanese economists, and scholars and I have been in Japan many times. And my view, which I recently expressed in a Japanese article is that Japan is on the verge of a major new step in economics, when we will decide that the tests of economic excellence, the test of economic behavior is not full employment, is not an increasing GDP. The test is whether the production is for the enlightenment and enjoyment of life and that the virtue of simply working is below what should be the human objective. And that as Japan learns to suffer from continuing unemployment, it will increasingly, I hope turn its attention to making life pleasant for those who are unemployed, making life pleasant for those who need help, and make the test of achievement, not simply the production of more physical goods, but the production of a better literary, artistic and interesting life. And I would like to see Japan as a model on that score, which we could also follow in the United States. Japan has suffered and solved the old problem of economics of how you secure production. Now, I want to see Japan concentrate on how you secure the most fruitful rewarding life for the most people.

Hayabusa: But, how, what shall I say, especially the Government and the Bank of Japan can make the people use the money they have. Japanese individuals have a lot of money, but they do not use them.

Galbraith: This is a very good question. But one that has appeared many many times before. In my youth, in my early years in economics came the idea that the government should intervene in the economy to maintain the level of output and the level of unemployment. The whole idea, which have eventually became identified as John Maynard Keynes, who was one of my great teachers. That was the problem of that time. How do you come to grips, how do you resolve the problem that stresses the need for government intervention to keep the economy at a proper level, including the proper level of unemployment. In my first years in economics, long time ago, the question that was asked by everybody - how do you ever persuade people that issue? Now we have to persuade people that the problem is not just the production of physical goods, the problem is making life pleasant and enlightening for the people, and making it agreeable, even to those who don't want to work.

Hayabusa: Persuasion is a very important thing.

Galbraith: That is the discretion one must have. This is a problem, on which the Japanese should take the lead because here is an economy that has solved the basic problems of economics, but is stuck with a society where the production of goods does not employ all the people. And we must think of how we can have the society which all the people enjoy.

Ms.Yamamoto (Correspondent of Asahi-Shinbun to New York): I understood what you said we have to change the measurement of the economy. We don't have to focus on GDP or employment. But, still people needs something to measure to know that the economy is healthy. Japan is suffering from deflationary spiral for a long time. Many corporations and people, consumers are exhausted. How can we stop the deflationary spiral?

Galbraith: This is a very good question and a very difficult one. The first thing we must do is say, production of more physical goods, public or private, is not the goal of the society as it provides unemployment. The goal must be how do we make life more pleasant, more agreeable for the people who was meant to serve. And that range of things, the arts, education, the enjoyments of life are all relevant. And some things are quite simple. If you go to Japan, you hear about people arguing for better post offices. You know here, people are arguing for better opera houses, for better orchestras, for better athletic facilities, or you might hear that a bit. What we must do is find, to have better discussions of the achievements and enjoyments of life and not confine it simply to jobs. Once we do that, we will have a much better economic, happier economic and social policies. I have said that I want Japan to take the lead because it was the first country to solve the problem of employment.

Yamamoto: So, is it a good way to get out of the deflation?

Galbraith: Absolutely. But, we may discover that many of these things go beyond the price system. And the enjoyments that have to be provided by central and local governments, we don't rely on private enterprises to give us schools. That is like relying on private enterprises to give us enjoyments.

Yamamoto: So, in that context of what is the role The Bank of Japan?

Galbraith: The role of The Bank of Japan? To do whatever serves the enjoyments of people. It has to finance music, opera, better restaurants, anything that should be part of these.

Yamamoto: Now, we have a huge debt, non-performing loans in the banking system. So the Japanese Government tries to get rid of non-performing loans right now. Do we have to accelerate getting rid of non-performing loans, or slow down?

Galbraith: I haven't talked about that. But my basic answer would be don't worry, the problem is not the old policy as it's abandoned, but the new policy of enjoyment, I go back to my original purpose, original statement, that is not be satisfied with painting the post office, that is be satisfied when we have a new opera house.

Yamamoto: Now, I want to ask about the American economy. What is your prediction of 2003?

Galbraith: I never make predictions. I leave that to people who do not know. The world of prediction in the United States is inhabited by people who make sophisticated guesses in the use of the word. I don't want to compete in that world.

Yamamoto: But you forecast the bubble economy in the United States in the late 1990s to 2000.

Galbraith: I have abandoned that kind of forecasts.

Yamamoto: After the bubble economy burst, what will happen to the United States?

Galbraith: You will have to be more precise. What do you have particularly in mind?

Yamamoto: I think about the United States followed the Japanese way. Japan is suffering from the so-called 10 year loss.

Galbraith: I will speak more generally. As I said earlier, I am not a supporter of the present Administration of the United States. Even by old fashioned policy which concentrates on employment and GDP, rather than on the quality of life, even in that old fashioned policy, we have an administration which does not do it very well. We have an administration which is unduly confide to what the corporate powerful in their economy, identify with their own interests which is more money, and fewer taxes. And I am not a supporter of that discussion because it is in my view quite out of date. The genious of one part of the American economy is that it seeks end results that are bad even by old fashioned terms, rather than going on to a world where the economic system is designed to maximize the enlightenment and pleasures of the people.

Yamamoto: Isn't it difficult to measure how we are happy or how we enjoy life.

Galbraith: All problems of this sort are very difficult and I go back to what I said before, when I first became associated with Keynesian economics, I encountered only people who said it was impossible. Social policy will always be somewhat against established beliefs.

Hayabusa: Thank you very much.

After the interview, Prof. Galbraith talked about his next book, which subject applies to the United States and Japan, that we must have an economy which is based on the quality of the production in relation to human enjoyments and achievements, and not simply on the production of physical goods. The book will be published sometime in the next year or so. The little book will be published late this year. With his age at present (94 years), the publication of new books are up to some uncertainty he said, "because the range of publication from the graveyard is not great."