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James K. Galbraith teaches at the LBJ School of Public Affairs, The University of Texas at Austin. He is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of a renowned economist, the late John Kenneth Galbraith, he writes occasional commentary for many publications, including Mother Jones, The Texas Observer, The American Prospect, and The Nation. He directs the University of Texas Inequality Project, an informal research group based at the LBJ School, and is President this year of the Association for Evolutionary Economics.
Leo Panitch is the Canada Research Chair in Comparative Political Economy and a distinguished research professor of political science at York University in Toronto. He is the author of many books, the most recent of which include UK Deutscher Memorial Prize winner The Making of Global Capitalism: The Political Economy of American Empire and In and Out of Crisis: The Global Financial Meltdown and Left Alternatives. He is also a co-editor of the Socialist Register, whose 2013 volume is entitled The Question of Strategy.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I'm Paul Jay in Baltimore. And we're continuing our discussion in light of the 80th anniversary of the inauguration of Franklin Delano Roosevelt and what does the New Deal mean for today.Now joining us again, first of all: Leo Panitch is the Canada Research Chair in Comparative Political Economy and a distinguished research professor of political science at York University in Toronto. He's the author of Global Capitalism and the American Empire and The Making of Global Capitalism.And also joining us again, James Galbraith. James K.¬†Galbraith is the Lloyd M. Bentsen Chair in Government and Business Relations at the LBJ School of Public Affairs at the University of Texas at Austin. He's the author of The Predator State and Inequality and Instability: A Study of the World Economy Just Before the Crisis.Thank you both for joining us.So, James, let me start with you. Let's imagine that, I don't know, the conditions for the New Deal, as we talked about in the previous segment, to some extent do get--re-create themselves. At the very least, there is a mass mobilization, there is a radicalization of workers and general population. People are ready to vote for and embrace, at least a majority of people--maybe it's 52¬†or¬†53¬†percent, but enough to elect control of both houses, elect a president that's willing to create this kind of new New Deal or even further than that. But what would it look like? So, in other words, what would you do if you ran Washington, James?JAMES K. GALBRAITH, LBJ SCHOOL OF PUBLIC AFFAIRS, UT AUSTIN: Well, let me start with some fairly modest propositions. What you've proposed is a very all-embracing question, and I would like to approach it in small stages.I think to begin with, compared to where we are now, we need to fundamentally reframe the way we think about core social insurance programs. Right now there is a dialog of assault on those programs. That is to say, they are referred to in a disparaging way as entitlements, and they're treated as part of a financial problem for the government, none of which is in fact the case.The reality is that socially provided insurance--and I'm talking about Social Security, Medicare, Medicaid, unemployment insurance, the core programs that stabilize people's incomes when they're in trouble--are very efficiently provided by the public sector, much more efficiently than by the private sector, because the private sector is in the business of cherry-picking--getting the best cases and screening out the rest, and the public sector doesn't do that. So its costs are much lower, and it can run those programs efficiently and effectively and keep a lot of--keep practically the whole working population from the worst-case outcomes.There's extraordinary actual success, and it needs to be treated as such and preserved, not rolling back those programs, but actually taking opportunities to increase their span as appropriate. That's something, it seems to me, that we ought all to consolidate, to agree on, and to make a core part of a reformed program.Secondly, I think we need to talk about wages. And in particular, the big, lagging piece of the old New Deal framework right now is the minimum wage. Minimum wage was enacted in 1935, and it reached a peak in value in the late 1960s and has largely fallen since then. And I know the president--and there's a debate over this now--the president has offered $9 an hour, his proposal. That's a step in the right direction, but it's much too low. We ought to be talking about a minimum wage on the order of $12 an hour. And this would very greatly change the conditions of work at the low end of the labor force. It would boost people's incomes who work for a living and improve the purchasing power of that population, which would be very good for the small business community that serves them in many ways. So while businesses would lose something in some cases on their payrolls, they would make it back on their revenues. This has actually been tried in other countries, in the U.K. most recently, and it's basically become noncontroversial where it's applied. But it still engages an enormous amount of conservative resistance, and that's something that we ought to tackle, because in fact increasing the minimum wage is a very popular idea, and it's a very popular idea because it's a very sensible idea.Okay, third area where we need to change our thinking has to do with the notion of the role of regulation of the economy. The basic reality of our economy is that very little of it would exist without an underpinning of federal regulation. And we are going to see the effects of cutting back on that as the sequestration process now underway unfolds. We're going to see--for example, we're going to realize that every meat plant in the country has a federal inspector, and if the meat is not inspected, it will not be delivered and it will not be on the shelves. And that kind of thing is going to percolate through into people's consciousness. And it seems to me that a progressive program can take advantage of this moment to teach the importance of having effective autonomous regulation in a whole spectrum, from the mechanical equipment, transportation, air traffic control, and finance. And that strikes me as being a kind of comprehensive learning opportunity that we now have. Okay. So you do those things, and you have, I think, done a great deal to change the climate in the country about how people think about the role of the public sector in relation to the private sector.And then I would say you have to then tackle the strategic problems that you face. In 1933, when Roosevelt became president, we were at the beginning of a period of extraordinary potential because of the arrival of a very cheap, very efficient fuel, namely oil, which was American in origin. It was largely--it was being developed in Texas, for the most part. That period in the world's history has now ended--ended, actually, 40¬†years ago. We're now having to face firmly the consequences of not being at--having a thoroughly reliable, low-cost energy supply. And we need to disillusion ourself of the--disabuse ourself of the idea that we're necessarily going to get this from natural gas. So we need to cope with that change in our circumstances, and that requires thinking through how we live our lives and building institutions that enables us to live them well within that constraint. And also, I say again, that is closely related to the problem of climate change, which we obviously need to deal with, not for our own sakes. I think both Leo and I--and perhaps even you, Paul, although you're very young, will be gone before this becomes a catastrophe, but our children and our grandchildren will be around. And we need to act so as to ensure that they don't face, you know, truly grim scenarios that are out there and that are truly probably the most frightening and, let's say, daunting challenges that we face.So we need to pick up on the problems that we have. And these include unemployment and foreclosures and the debt structure of American households, and in Europe the completely dysfunctional system of European finance and governance--a great many things. But we need to [incompr.] continue with the institutions that the New Deal gave us that continue to function well for us, and then think about the problems that we actually face, rather than allowing ourselves to be detoured and distracted by people raising all kinds of phony issues, including this whole question of the public deficit and the national debt, which is essentially, from an economic point of view, a bit of propaganda inconsequential in the real world.JAY: Right. Okay. A long time since I've been called very young. Anyway, Leo, your vision. So you've got--you just got elected president of the United States. You at least have 52,¬†53¬†percent public support. You control both houses. But you're in today's world, more or less. What would you do?LEO PANITCH, PROF. POLITICAL SCIENCE, YORK UNIVERSITY: I think that what is needed by way of policy in the short-run--I don't disagree with anything that James said. But what is needed immediately is to take Obama at his word in the State of the Union address in terms of the absolute necessity of direct government expenditure on infrastructure building, and not to then address it with the pittance that he put towards that--really can't contribute at all, much, his $50¬†billion towards this.A good way to begin would be to guarantee the bonds of municipal governments, which is where most infrastructure spending is located. This has been proposed by not very radical Stanford lawyers at the Stanford Law School. It would involve some twigging of the Federal Reserve's responsibilities and legislation. But if you were able to carry things through Congress, you would have to have a massive public employment and public infrastructure program. And the way to do that, given the constitutional division of powers in the United States, would be indeed for the federal state to guarantee municipal bonds.Now, let's face it. If Roosevelt had to try to pack the Supreme Court in the face of what he was trying to do, imagine what a president would have to do in the face of the Supreme Court today, in the face of the balance of power inside the American state.So again I want to stress that while these policies are important--and one could offer many more. I mean, for instance, I'd like to see policies that would actually encourage the growth of trade unionism, and in that way would do what the most effective thing that happened after 1945, which was the ability of unions to push up workers' incomes, which was the main way demand was sustained in the boom period after '45, much more than direct government expenditure, although these social service programs were important. I'd like to see all of that, but I don't think we're going to see that--I think one needs to be realistic about this--without changes throughout the American state. And that needs to be put on the agenda.The reason we have the deficit propaganda--and I entirely agree with James that that's what it is--is related to the powerful forces that are behind that propaganda. And, you know, it is related, again, back to the confidence in the banking system, the demand by bondholders that if there's going to be any question of who's going to get paid, it's the bondholders who are going to get paid first. And one needs to remember--and that's why this is also about changing the nature of trade unionism in the Western countries and elsewhere--that some of those bondholders are trade union pension funds, including university teachers' pension funds.So the kinds of changes we need need to begin at the bottom. They need to be directed certainly at policy, but they--as was the case in the New Deal, they need to be directed at changing state institutions. And the current state institutions are not in the game of doing what either James would like or what I would like.JAY: Alright. Well, thank you both for joining us. This is just the beginning of this discussion, not the end, and we will invite both of these gentlemen back soon to carry on this conversation. So, James, Leo, thanks for joining us.GALBRAITH: Thank you.PANITCH: Good to be with you, Paul.JAY: And thank you for joining us on The Real News Network.
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