The Economics of Innocent Fraud - J K Galbraith – 2004 – Pocket Penguin
Second hand bookshops are one of my great delights, something I have obviously passed on to my son. He recently picked up the most exciting ‘slim volume’ I have seen in ages and I have tripped over some fairly exciting tomes among used books. Galbraith, himself, described this book as an extended essay, I would add a meaty essay.
Despite the title, not all of these frauds are regarded as entirely innocent. Some like the ‘myth of two sectors’ and rebadging ‘capitalism’ are cited as intentional efforts to put a positive spin on the excesses of the corporate world. The first ignoring the increasing use of private sector resources in pubic sector activities; the second simply trying to escape the negative connotations of corporate behaviour.
On nomenclature Galbraith does concede the change in the nature of modern corporations, from the absolute control of the owner/founder or main influence to a more anonymous and devolved bureaucratic style, yet even in that reality he perceives a fraud. It might be a small book, but one that draws the reader back again and again.
Sentiment and Applied fraud
Judging from incoming Google search terms there is a great curiosity around the world as to why
The Rudd fraud, which I endorse, solidly links the economic dynamic with social policy. But the question continually raised is; are they doing anything? As the least radical government for a generation the answer is possibly no. We a qualified no, their strong point is sentiment, the feel good factor which serves to drive a society.
Australian media commentators and the ubiquitous TV comedians, are working overtime to burst the Rudd balloon, to expose the essential fraud. Kevin Rudd’s ‘magic’ is language, simple and repetitive. His public words echo his public’s desires and his more harsh private words seem easily accepted as just and proper.
While Rudd drives positive sentiment, in the electorate, with his judicious, respective assurance words the corporate and public sector are powerless to stop much needed reform and regulation. In the end the power people all have the same customers and at the moment Kev owns them.
While the sentiment is riding high, the right words are hammered home, this great fraud seems to be a positive for
2 comments:
An interesting post and a timely reminder of one whose appeal is well worth revisiting ; if not for any other reason than to ask - Why should we defend so strongly a market which has become a system of disproportionate power for the few and because of that imbalance in power fails to equitably rewards the majority for its collective contributors.
Kenneth Galbraith reminds us that all of us are fundamentally philosophers at heart – whether our expertise is science, humanities, economics or common sense – those attributes serve as a tool to more eloquently shape our ideas or arguments to remain rooted in our philosophy on life. I am not sure everything Galbraith advocated was well supported by academia but he certainly correctly identified the societal shift in power to the corporate enterprise. I like his quote “The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”
There is no doubt the real power in the world today resides primarily in the large corporations and Kevin Rudd is not about to supplant that power base here in Australia.
I do think we have a much more equitable active regulatory regime and adherence to corporate social responsibility than most jurisdictions. Certainly there is currently great interest in the Asian economies and our Accounting standards body has seen those standards adopted worldwide with the exception of the US – who is likely to follow suite in the next few years. Recently I examined the reporting of corporate social responsibility for a number of large Australian companies and I can say, with reasonable certainty, they are genuinely making an effort to be better corporate citizens. But as I indicated in my prior postings about the excessive executive pay and the undue concentration of power in the hands of the few there are many more practical measures that can be taken within capitalism without the need to dismantle the whole system as seems to be the only option canvassed by Galbraith. One suggestion I made concerned the creation of two classes of shareholders with “A “class being long term voting shareholders and “B’ nonvoting trading shares. Such a split was likely to achieve the much needed power shift to the actual long term owners of the businesses rather than the current system whose corporate managers are more aligned to short term performance.
In that sense I would agree with Galbrath, that too much power vests with too few and the free market is not free at all.
Best wishes
Thanks Lindsay, perhaps like everything; if it’s free you get what you pay for… I recall your suggestion on share holding divisions. Like many things, including housing, they seem to be a gambling tool now rather than a safe haven.
I must say, reading Kenneth Galbraith, he reminded me of your approach. Where there is fair potential for righteous anger you both tend to give the benefit of doubt or just accept the misguided elements.
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