"There are only two ways of telling the complete truth—anonymously and posthumously."Thomas Sowell

Thursday, May 04, 2006


Excerpt from Alan Reynolds, “Irrelevant Anachronism”
The Intercollegiate Review (Winter 1975)

Galbraith is aware that "collective efforts at market control are numerous and frequently invoke the assistance or initiative of the state," and that "regulatory agencies tend to become the instruments, even the puppets, of the industries they are supposed to regulate." Far from deploring this, however, Galbraith thinks it ought to be universal --that the whole economy ought to run on the model of the Post Office, and that failing firms and individuals ought to be bailed-out, or propped-up, a la Lockheed or Penn Central. Where it isn't already doing so, Galbraith wants the government to: (1) "stabilize prices and production and regulate entry into the business," (2) provide "direct government regulation of prices and production," (3) provide "strong and effective encouragement to trade union organization," (4) use the minimum wage "aggressively," without regard to the survival of small firms, thus "forcing those who patronize the market system to pay the full price for the product" (or do without), (5) protect any remaining small firms from international competition "by official action or a tariff," and (6) provide small firms with “research and technical support, capital and qualified talent.”

True, many will be unemployed as a result of all this-"kept out because they are no longer allowed to offer their services at a lower rate." But they will receive a guaranteed income "as a matter of right" at a level "modestly below what can be earned in the planning system." Might as well be generous with the money (the Fed can always print more), since with such a policy of discouraging work there won't be any goodies around to buy with it.

The whole thing sounds very much like Roosevelt's N.LR.A., Mussolini's syndicates, or the medieval guilds. Galbraith has emerged as the supreme spokesman for the special interests. As producers and workers, we all want our own goods or services to be scarce and, therefore, relatively costly. But a policy of raising incomes generally through contrived scarcity and high prices confuses relative money income with total real income. We can all have more goods and services only if more are produced. Redistributing the existing stock of, say, housing and furniture would not provide any more housing and furniture. And the resulting disincentives to work and save would decrease the flow of future production.

1 comment:

Evanston said...

Thanks Alan, for a great summation. These policies are practiced, as you well know, all over Europe and elsewhere, and the battle over U.S. policy continues. Continued debate in America is due to a poor collective memory of the failure of these policies. Galbraith's ideas are anachronistic here, yes, but irrelevant? Sadly, no.