John Kenneth Galbraith is perhaps Canada's most well-known intellectual export, known for both his regular puncturing of established orthodox economic wisdom and the wit with which his attacks are delivered.
The publication of his books The Affluent Society, The New Industrial State, and Economics and the Public Purpose virtually established a Galbraithian school of thought in the United States. Many of Galbraith's ideas on the workings of the corporate sector were incorporated into the post-Keynesian theory that was emerging on both sides of the Atlantic in the 1960s and the 1970s.
Galbraith has published widely and spoken frequently on the problems facing developing countries, often emphasizing the inappropriateness of unthinkingly transferring technologies and development strategies produced in the West to the far more different terrain of the Third World. In this interview, we discuss with Professor Galbraith some of the major difficulties facing Third World societies.
Dr. John Newark, Assistant Professor of Economics and Chair of the Centre for Economics, Industrial Relations, and Organizational Studies at Athabasca University spoke with John Kenneth Galbraith in late 1990.
Galbraith discusses the errors in our thinking
about economic development.
Aurora: You have written that, "The tendency of the rich country is to increasing income and the tendency of the poor country is to an equilibrium of poverty." Do you still believe that to be true?
Galbraith: Yes, broadly speaking, this is still true of the poorest of the poor countries. It is certainly true of most of Africa, which has been the great disappointment in the post-Colonial world, and it still is true of a large part of the population of India, Pakistan, and elsewhere in Asia.
Aurora: Do you think that Latin America, which did experience relatively high rates of growth in the fifties, sixties, and seventies, may be returning to such a state of stagnation in the early 1990s?
Galbraith: Well, Latin America is a mixed situation. The poverty of Argentina, Brazil, even Mexico is not comparable with what one encounters in Africa or much of Asia. But, yes, there is no question that the high rates of growth to which you refer are a thing of the past and to some extent were associated, of course, with a very high level of international borrowing.
Aurora: What have been the major forces determining this equilibrium of poverty?
Galbraith: In the first place I identify this with primitive agriculture, and two factors have been at work there. One is, of course, population growth. If you were a poor farmer in India, Pakistan, or in much of Africa, you would want as many sons as possible as your social security. They would keep you out of the hot sun and give you some form of subsistence in your old age. So, you have pressure for population growth that is, itself, the result of the extreme economic insecurity. This is something, which hasn't been sufficiently emphasized.
Secondly, in some African countries, there has been a deeply misguided effort to keep farm and food prices low in order to benefit an urban proletariat. Whatever advantages this has had in the short run, it has had disastrous effects in the longer run. One has to divide the problem between urban (with some industrial life), and agriculture, with its equilibrium of poverty.
Aurora: Agricultural economists have certainly spent some time looking at the problems of food production, the problems of small scale agriculture, but would you say that this stands out as one of the major policy failures?
Galbraith: Well, there have been differences. In some parts of India, particularly in the Punjab and generally in the northwest, there have been substantial agricultural successes. The so-called grain revolution carried India into a measure of food self-sufficiency. But in the poor countries as a whole, over much of Africa and Asia and over some of Central America, agricultural development has been extremely disappointing.
Aurora: One of the stories that emerges from the history of development planning is that there has been such apparently limited learning from policy mistakes, or even successes for that matter. Do you have any thoughts on that?
Galbraith: I think one of the major errors in the whole discussion of economic development has been the tendency to look at the United States or Canada and say this has worked here, and therefore it must work in the poor countries. And we have sought in consequence to transfer from the developed western countries or in the case of the Soviet Union to Mozambique and Ethiopia, the principles and practices of a rather highly developed system.
We forget that in our own path to economic development, we have had a very different set of priorities. We saw the need in the early stages to concentrate on education, on individual farm holdings, and on transportation, and this, in some substantial measure, has been forgotten in the desire to transfer developed structures and developed industry to the poor countries.
Aurora: Which has been of greater importance, bad advice based on a poor understanding of development processes or reasonable advice ignored when the advice doesn't appear to be in the interests of more powerful political groups in society?
Galbraith: I would attribute something to bad advice, but I would attribute a good deal to other factors, namely illiteracy, political instability, and bad land systems. The later, of course, is particularly important in Central and South America.
Aurora: You have argued that one of the major difficulties in stimulating development is the accommodation to poverty which is developed in many less developed countries. Could you explain what you mean by accommodation?
Galbraith: The accommodation of poverty is the debilitating influence of poverty which destroys initiative, destroys energy, destroys the search for something better and, therefore, becomes self-perpetuating. No one knows exactly how important that is, but from my own observations, my own sense of the situation, it is something which one must accept.
Aurora: What factors tend to be key in breaking that accommodation?
Galbraith: I would be quite clear that in all these countries, one has had an emphasis on cultural factors, particularly on education, and the result is an educated and disciplined labour force. Further, there has been stable government, though not always of the most benign sort. Thirdly, it may be that there are some traditional factors in the culture. Those are the three things that I would emphasize.
Aurora: A reasonable conclusion, I think, to draw from your focus on the equilibrium of poverty is that meaningful change must come from the outside. Is that true?
Galbraith: Absolutely. And one of the significant changes is the longer run prospect for urbanization and the drawing of people from agriculture into industry with a higher productive potential.
But that is something which I would not emphasize at the expense of the other factors that I've mentioned, namely, emphasis on political stability, education, and cultural investment. One must always have in mind one simple fact—there is no literate population in the world that is poor, and there is no illiterate population that is anything but poor.
Aurora: Migration is very important in the history of the West. Would you not agree that the opportunities for migration tend to be much poorer in the Third World countries today? There are no new continents to discover.
Galbraith: I quite agree that in the last century or the early part of this century, the individual solution for poverty was to move from the poor countries to the rich countries, and I don't think that process is coming completely to an end. It is still true that in the highly industrialized countries the second and third generation of a labour force don't take very kindly to repetitive, systematized industrial labour. And therefore, one has a steady demand for workers from the worst privations of agriculture in other countries. That is what brings a very large number of Yugoslavs to Germany and Northern Africans to France. It brings very, very large numbers of Mexicans and West Indians to the United States. That process, I think, will continue.
Aurora: I'd like to ask you about three areas of interaction between a poor society and the world economy. These are trade, aid, and capital flows. Concerning trade, a conservative, for example, might agree with the notion of accommodation and proceed to argue that free trade brings a range of new opportunities to a poor country, which acts as a major engine of growth. Do you share this optimistic view of the importance of trade in raising incomes and breaking accommodation?
Galbraith: That is, like so many orthodox views, greatly oversimplified. At a certain stage—that which has been reached by the countries of the Pacific Basin—that is certainly true. But trade opportunity does very, very little for most of the countries of Africa or Central America or Asia.
Aurora: Why?
Galbraith: This is subsistence agriculture, which produces very little available surplus. These people are beyond the reach of international markets.
Aurora: Has aid made a difference?
Galbraith: Oh, yes. This is not universal, but I've been a strong supporter of specific aid programs, which encourage grain hybrids, agriculture, and better soil and water management. These have been very successful, particularly in countries such as India and Pakistan.
Aid has also helped create in the more advanced Third World countries the basic infrastructure of electrical generation and transmission, communications, other things of that sort. The aid program, of course, in its various manifestations, has been substantially important for education and for scientific engineering development.
Aurora: At a time when debts are high and rising in
many less developed countries, do you think aid weariness is setting in?
Galbraith: I'm not sure. One factor that is of overriding importance is the transfer of the United States from a surplus producing country to a deficit country. This has certainly had a serious effect on the whole aid morale.
Ill-considered lending in Latin America has also had a bad effect. We have a heavy burden to bear from the wonders of recycling of petroleum revenues of 15 years ago, which was so much praised at the time and which left the Latin American countries with a heavy debt, much of which did not initially finance anything very useful.
Aurora: The debt crisis in the 1980s has been accompanied by stagnation, falling standards of living, and capital outflows from Third World countries to developing countries. Overall, is development possible or likely in many countries given the existing levels of debt?
Galbraith: The Argentine, Brazilian, Mexican, and Peruvian debts, for example, are not going to be paid. We've been postponing the day of reckoning by lending those countries money with which to pay interest and urging them to cut their standard of living. This cannot go on. We would be in a much, much better position to have a severe write down of those debts.
Aurora: The debt-related riots in Venezuela showed that the bottom line, the limits to which that kind of adjustment can be pushed, has probably been reached. What is going to happen next?
Galbraith: Venezuela is in many respects the strongest economy in South America. The Venezuelans were being asked to make sacrifices in their standard of living, which would not be acceptable in Canada or the United States. The alternative is to write down and write off the debt, to protect the standard of living and protect democratic government.
Aurora: Do you hold out much hope for success in either reducing the debt burden or increasing capital flows to try and facilitate growing out of debt?
Galbraith: Growing out of debt is a bit of financial flim-flam, and nobody should take that seriously. It is something that financial magnates invent in order to disguise the problem from the public. The only solution is to bite the bullet.
Aurora: Do you hold out any prospects for success? The Japanese and the French have floated some plans that move slightly in that direction.
Galbraith: Oh, I think we've moved a little bit in that direction, but one should not minimize the extreme rigidity of the developed financial mind.
Aurora: What actions, at a minimum, must the West take to begin to lift the brake that debt has placed on development?
Galbraith: I would declare that they write down the debt in the order of 50 to 75 per cent. And if that puts one or another of the international banks in trouble, which I doubt, then they should forego dividends for a while. That's one of the penalties for making mistakes. And if they're in real trouble, they'll always be bailed out by the federal reserve and the federal government.
Aurora: The argument of increasing capital flows in the short run, as you suggested, tends to push off the day of reckoning to the future by just adding to outstanding debt. If that's what we're doing now, what are the implications of continuing that policy for the next five or ten years?
Galbraith: The implications are stagnation in those countries, falling living standards, and a threat to democratic government. There is no doubt as to what the implications are.
Aurora: Economists have been quick to take credit for the acceleration of growth in the Third World during the postwar era. Now they frequently appear content to blame the current difficulties on "inappropriate" policies and excessive government interference. In the long run, have development economists earned their keep?
Galbraith: My answer has to be favourable because I started the first courses in economic development at Harvard in the very late 1940s. I think this interest has been productive and a range of things have been very useful. I saw them first-hand in India, for example, the help of grain hybrids, fertilizer, and industrial infrastructure.
But the dark side has been an insufficient emphasis on education, cultural investment, and on the absolute importance of stable government. Another negative tendency has been for both the Soviet Union and ourselves to think that we should be concerned primarily with moving developed industrial structures rather than concerning ourselves with the basic needs of agriculture.
And finally, based on the experience of the developed countries, there's the feeling that specific preference should be given to urban society over that of agriculture. I've had occasion to talk about that the last couple of years before the United Nations, and I regard it of particular importance.
Kenneth Galbraith died April 29, 2006 at the age of 97.
CBC: Remembering John Kenneth Galbraith
http://archives.cbc.ca/economy_business/business/clips/11154/
Conversation with John Kenneth Galbraith in 1986, at U of C Berkeley.
See the Biography of John Kenneth Galbraith by visiting the Online List of Biographies of Economists
Canadian Encyclopedia:
John Kenneth Galbraith
Updated: March 2011
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Galbraith, John Kenneth. (1990). John Newark. Aurora Online: