BALANCING ACTS by James K. Galbraith


Technology, Finance and the America
Email this review


Galbraith (Economics/U. of Texas; and former executive director of the Joint Economic Committee of Congress) weighs in with a neomercantilist solution to America's trade and budget deficits. Here, in a volume that is in many ways a compendium of the very latest in liberal interventionist policy analysis, Galbraith (son of John Kenneth Galbraith) touches all the bases--incomes policy, tax policy, infrastructure concerns, Third World debt relief, etc. The heart of his analysis turns on what he sees as the central role that capital goods play in our economy. To restore America's competitiveness, he argues, government policies must be designed to enhance our comparative advantage in capital goods that embody high technology and scarce skills. A sort of mercantilism is implied in the notion that exported capital goods earn high monopoly profits (as opposed to the normal profits obtained through the manufacture of consumer goods) that benefit our entire economy. In order to maintain America's high living standards, the government must adopt policies that encourage investment in risky capital goods manufacturing. These policies include the depreciation of the dollar (especially against the currencies of our Latin American trading partners) and lower interest rates that can be achieved only if the federal budget deficit and inflationary expectations are substantially reduced. In order to achieve these goals, Galbraith advocates that the federal government administer a "tax shock" and perhaps later "inflation shocks." Latin American debt relief would enable those countries to purchase exports from our newly expanding capital goods sector. Galbraith is appropriately cautious about the more egregious forms of government intervention, such as industrial policy nostrums and wage/price controls. He nevertheless manifests an unflagging belief in the usefulness of federal economic intervention, making this--despite its lackluster prose--a thought-provoking, non-Reaganomic analysis.

Pub Date: March 2nd, 1989
ISBN: 465-00584-5
Publisher: Basic
Review Posted Online: