Free Market Fraud.
This excellent month I'm called upon for two celebrations--one for the distinguished career of Robert Heilbroner, the most interesting, innovative, and influential of liberal economists, and the other for The Progressive magazine, now ninety years young. I here venture the same theme for both. It is this: Most economists commit what I, in a professionally cautious way, call innocent fraud. It is innocent because most who employ it are without conscious guilt. It is fraud because it is quietly in the service of special interest.
Let's begin with capitalism, a word that has gone largely out of fashion. The approved reference now is to the market system. This shift minimizes--indeed, deletes--the role of wealth in the economic and social system. And it sheds the adverse connotation con·no·ta·tion
1. The act or process of connoting.
a. An idea or meaning suggested by or associated with a word or thing: going back to Marx. Instead of the owners of capital or their attendants in control, we have the admirably impersonal role of market forces. It would be hard to think of a change in terminology more in the interest of those to whom money accords power. They have now a functional anonymity.
But most of the people who use the new designation--economists, in particular--are innocent as to the effect. They see nothing wrong with their bland, descriptive terminology. They pay no attention to the important question: Whether money--wealth--accords a special power. (It does.) Thus the term innocent fraud.
The fraud also conceals a major change in the role of money in the modern economy. Money, we once agreed, gave the owner, the capitalist, the controlling power in the enterprise. So it still does in small businesses. But in all large firms the decisive power now lies with a bureaucracy that controls, but does not own, the requisite capital. This bureaucracy is what the business schools teach their students to navigate, and it is where their graduates go. But bureaucratic bu·reau·crat
1. An official of a bureaucracy.
2. An official who is rigidly devoted to the details of administrative procedure.
bu motivation and power are outside the central subject of economics. We have corporate management, but we do not study its internal dynamics or explain why certain behaviors are rewarded with money and power. These omissions are another manifestation of fraud. Perhaps it is not entirely innocent. It evades Evades is a fictional character from the Philippine telefantasya Etheria, the prequel/sequel to the highly-rated Encantadia series. Evades first appeared in Encantadia with a minor role but his character is expanded in Etheria. the often unpleasant facts of bureaucratic structure, internal competition, personal advancement, and much else.
This innocent or not-so-innocent fraud masks an important factor in the distribution of income: At the highest levels of the corporate bureaucracy, compensation is set by those who receive it. This inescapable fact fits badly into accepted economic theory, so it is put aside. In the textbooks, there is no bureaucratic aspiration aspiration /as·pi·ra·tion/ (as?pi-ra´shun)
1. the drawing of a foreign substance, such as the gastric contents, into the respiratory tract during inhalation.
2. , no reward for bureaucratic achievement, no bureaucratic enhancement by merger and acquisition, and no personally established compensation. Bypassing all of this is not a wholly innocent fraud.
A more comprehensive fraud dominates scholarly economic and political thought. That is the presumption of a market economy separate from the state. Most economists concede a stabilizing role to the state, even those who urgently seek an escape from reality by assigning a masterful and benign role to Alan Greenspan Alan Greenspan
Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. and the central bank. And all but the most doctrinaire doc·tri·naire
A person inflexibly attached to a practice or theory without regard to its practicality.
Of, relating to, or characteristic of a person inflexibly attached to a practice or theory. See Synonyms at dictatorial. accept the need for regulation and legal restraint by the state. But few economists take note of the cooptation by private enterprise of what are commonly deemed to be functions of the state. This is hidden by the everyday reference to the public and private sectors, one of our clearest examples of innocent fraud.
Take the common outcry about corporate welfare. Here the private firm, as it is called, receives a public subsidy for its product or service. But what is called corporate welfare is a minor detail. Far more important is the full-fledged takeover by private industry of public decision-making and government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. .
The clearest case is the weapons industry. Given the industry's command of the Congress and the Pentagon, the Pentagon, the, building accommodating the U.S. Dept. of Defense. Located in Arlington, Va., across the Potomac River from Washington, D.C., the Pentagon is a five-sided building consisting of five concentric pentagons connected to each other by corridors and covering defense firms create the demand for weaponry, prescribe the technological development of our defense system, and supply the needed funds--the defense budget. There is no novelty here. This is the military-industrial complex mil·i·tar·y-in·dus·tri·al complex
The aggregate of a nation's armed forces and the industries that supply their equipment, materials, and armaments.
Noun 1. , a characterization that goes safely back to Dwight D. Eisenhower.
Any notion of a separation between the public and a private sector--between industry and government--is here plainly ludicrous. Nonetheless, the absorption of public functions by the arms industry is ignored in all everyday and most scholarly economic and political expression. And what is so ignored is in some measure sanctioned. I hesitate here to speak of innocent fraud; it is far from being socially benign.
What we must seek in these matters is reasonably evident. It is the use of plain language to express the clear truth. We can then take pleasure from the discomfort the truth so often evokes.
John Kenneth Galbraith Noun 1. John Kenneth Galbraith - United States economist (born in Canada) who served as ambassador to India (born in 1908)
Galbraith, John Galbraith , emeritus e·mer·i·tus
Retired but retaining an honorary title corresponding to that held immediately before retirement: a professor emeritus.
n. pl. professor of economics at Harvard University Harvard University, mainly at Cambridge, Mass., including Harvard College, the oldest American college. Harvard College
Harvard College, originally for men, was founded in 1636 with a grant from the General Court of the Massachusetts Bay Colony. , is the author of "The Affluent Society affluent society, term coined by John Kenneth Galbraith in The Affluent Society (1958) to describe the United States after World War II. An affluent society, as the term was used ironically by Galbraith, is rich in private resources but poor in public ones " and many other works.