James K. Galbraith - The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too

PART ONE
Another God That Failed

PART TWO
The Simple Economics of Predators and Prey

PART THREE
Dealing with Predators

T his book got under way right after Hurricane Katrina, the destruction of New Orleans, and the dispersion of several hundred thousand refugees across the American South, including to my hometown of Austin, Texas. It seemed clear immediately that Katrina had been the Chernobyl of the American system. That is, beyond the natural calamity and the human tragedy, it waslike that Soviet reactor meltdown nineteen years beforea disaster that exposed and laid bare the fallacies of an entire governing creed.

But where the Soviet creed was of central planning, ours was its polar opposite, a cult of the free market. And as I charted my way through this book, I came to realize that the relationship between actual policy in the United States and the doctrines of policy is not simple. In uncanny ways, this relationship has come to resemble its counterpart in the old Soviet Union: actual policies were (and are) in no principled way governed by official doctrine. Rather, the doctrine serves as a kind of legitimating mythsomething to be repeated to schoolchildren but hardly taken seriously by those on the inside.

What is the purpose of the myth? It serves here, as it did there, mainly as a device for corralling the opposition, restricting the flow of thought, shrinking the sphere of admissible debate. Just as even a lapsed believer kneels in church, respectable opposition demonstrates fealty to the system by asserting allegiance to the governing myth. This in turn limits the range of presentable ideas, conveniently setting an entire panoply of reasoned discourse beyond the pale of what can be said, at least in public, by reputable people. There is a process of internalization, of self-censorship. Once the rules and boundaries prescribed by the myth are understood, adherence becomes reflexive, and at the end of the day people come to think only what it is permitted to think. They know when they might be going too far.

So the first task of this book is to describe the myth, its logical structure, its popular appeal, and especially the set of rules for policy to which it leads. This task is eased by the existence of a clear historical moment when those rules were crystallized and stated most clearly. That moment occurred in 1981 with the inauguration of Ronald Reagan as President of the United States. The early Reaganites performed an important service to intellectual history by distilling their ideas into four major bodies of economic law: monetarism, supply-side economics (including tax cuts and deregulation), balanced budgets, and free trade. The first part of the book describes these more or less in turn.

A governing myth hides an underlying reality, and any attempt to govern through the myth is bound to be short-lived. So it was with Reagan. But what is the essence of that reality in the American case? If we do not actually live in a world made by Reagan, just as the Soviets did not actually live in a world made by Marx, what is the true nature of our actual existing world?

An evolutionary economist knows where to look for the answer to such a question: at institutions. In the American setting, once one starts to do that, it becomes immediately clear that the fundamental public institutions of American economic life were those created by public action in an earlier generationby Franklin D. Roosevelt in the New Deal and World War II, by Lyndon Johnson in the Great Society, and to a degree by Richard Nixonand that these institutions have, to a large extent, survived to the present day.

But if they have survived, obviously they have not survived undamaged. The catastrophe of Hurricane Katrina pointed to two types of damage. One was an erosion of capability, evinced in this case by the failure by the Army Corps of Engineers to maintain the levees protecting New Orleans to a standard sufficient to withstand a Category Three hurricane, which is all that Katrina actually was by the time it came ashore. This kind of erosion presupposes nothing about intent. It can and does happen simply because of resource constraints, misjudgments, accidents of politics, and history. We see this sort of erosion far and wide in American government, but repairing it is characteristically thought to be mainly a matter of dedication, competence, time, and money.

But Katrina, and especially the aftermath of the disaster, also illustrated a second and more serious sort of rot in the system. This I will call predation: the systematic abuse of public institutions for private profit or, equivalently, the systematic undermining of public protections for the benefit of private clients. The deformation of the Federal Emergency Management Agency into a dumping ground for cronies under the government of George W. BushHeckuva job, Browniecaptured the essence of this phenomenon. But so too does the practice of turning regulatory agencies over to business lobbies, the privatization of national security and the attempted privatization of Social Security, the design of initiatives in Medicare to benefit drug companies, and trade agreements to benefit corporate agriculture at the expense of subsistence farmers in the Third World. In each case, what we see is not, in fact, a principled conservatives drive to minimize the state. It is a predators drive to divert public resources to clients and friends. This seemed to me to have become the reality underlying the myth, and the second part of the book is devoted to sketching it out.

Finally, in a book like this, there always comes the question of what should be done. I chose to restrict myself to three very basic ideas. Having spent much of my career as a policy adviser, admittedly often to quixotic contenders for high public office, I could have written much more in this part. But I chose these three ideas in part because they struck me as being the most despised, the most dangerous, the hardest to get across, and therefore the most important of all the essential points that might be offered here.

The three ideas are, for all that, quite simple.

First, because markets cannot and do not think ahead, the United States needs a capacity to plan. To build such a capacity, we must, first of all, overcome our taboo against planning. Planning is inherently imperfect, but in the absence of planning, disaster is certain.