Thursday, August 04, 2011

Galbraith: why economists won't discuss fraud

A startling quote from James K. Galbraith:
"you cannot get – not at a meeting sponsored by the International Monetary Fund, not from the participants at the Institute for New Economic Thinking – is any serious discussion of contract law and fraud. I’ve tried, repeatedly. No one will deny, in response to the question, the role that fraud played in the financial debacle. How could they? But they won’t discuss it either."
He explores why, looking at this in a Keynesian framework. It goes a long way towards explaining why economists have paid so little attention to tax havens.

And he has some frightening things to say, along the way:
"The corruption and collapse of the rule of law, in the financial sphere, is basically irreparable."
or
"we are at the end of the illusion of a market place in the financial sphere."
and
"what we’re dealing with here and what we need to recognize is not an interruption to a long process of economic growth, a recession or some shock to aggregate demand. It is an incurable disease at the heart of the system."
Strong stuff. He has some policy prescriptions, and rounds it off with these stirring words:
"I will not pretend, as Keynes did, that nothing stands in the way but a few old gentlemen in frock coats who require only to be bowled over like nine pins and might enjoy it if they were.

We should take on this challenge simply as a matter of conscience. We are not contestants for power. It is for us a matter of professional responsibility and civic duty.

My friend Bill Black, who has some experience in this area, likes to say, in the words of William of Orange, that it is not necessary to hope in order to persevere."
Quite so.

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