The collapse of conservative economics leaves in place the Keynesian alternative as a practical matter. This much is clear. Consider how, in a moment of deep worry late last fall, the entire government - president and Congress - coalesced around a "stimulus" package. What could be more Keynesian than that?

Meanwhile, as I have argued over at Mother Jones, the Keynesian tools are in use at the moment, Nixon-style. It is an election year. In addition to tax cuts, we saw increased military spending in the second quarter, and sharply lower interest rates since last August, which have pushed the dollar down and exports up. These steps may or may not be enough to keep growth positive through the election - but without them, things would have been much worse. Without them next year, things may deteriorate very fast.

Lower interest rates are linked to the financial crisis. But whether cutting rates was essential to keeping that crisis at bay is doubtful. (Opening the discount window clearly was.) The point is interesting because there is a clear pattern of the Fed cutting rates in the year before an election when Republicans are in power. When the Democrats are in power, they raise interest rates. Does this sound, to you, like there might be a problem of political bias over there?

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Jamie Galbraith is an optimist, or maybe I'm just a pessimist. According to his latest book conservative economics is exhausted, burnt out, finito, kaput. All that is needed is for liberals to recognize this, abandon their lily-livered kowtowing to conservative economics, and start pushing on an open door by advocating a return for grand progressive policy action - i.e. long range policy planning and economic standards with government at the wheel.

That is an audacious strategy, but I beg to differ. I do not disagree with his policy recommendations (the chapters on planning and standards are two of the best), only his premise. Not only is conservative economics alive and well, but progressives have not even begun the job of convincing the world that they have a better understanding of the economy.

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I was an early member of the Post-Autistic movement, the first in Texas, I like to say. A history of it can be found here.

My first appearance in the review was a reply to Bob Solow, who had written a subtle non-defense of economic orthodoxy. That was in 2001.

A year later, I found myself pleading with the PAE crowd, "Can we please move on?" I think we know what the sins of the economists have been. Our task is to do something about it. Endless critique is an exercise in futility, and readers of The Predator State will discover that I don't do more of that than necessary. The early chapters deal, as harshly as possible, with the notion that the "market is freedom," with monetarism, with tax-cut economics, with budget-balancing and with the strange notion that there exists, or could exist, something called free trade.

After that, I move on.

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I find myself nodding in agreement with Tom Palley when he writes "Jamie ... is especially light on the economics profession." Economists enable the predators. Some years ago disaffected graduate students at the Sorbonne coined the term "Post-Autistic Economics." Psychiatrists define autism as "a pervasive developmental disorder of children, characterized by impaired communication, excessive rigidity, and emotional detachment." Sounds like economics to me.

Each year over a million undergraduates enroll in introductory courses in micro and macro economics. The price of a passing grade is submission to a semester's worth of infomercials touting the "free market." College economics instructors are every bit as clever as Madison Avenue. Today the bulk of instruction in economics takes place in the nation's business schools where professors enjoy the inflated salaries accorded those entrusted with the important task of instructing the young in the finer points of predation.

Introductory economics textbooks are dedicated to the proposition that all markets are created equal. No distinctions need be made between worker's labor, lobster, football players, or private jets. How convenient.

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James Galbraith's brilliant critique of Thomas Sowell's bad mouthing of his father is well timed. JKG's "The Affluent Society" should be manadatory reading for anyone trying to plumb the confusion of our current economic slump.Galbraith pointed out that there would come a time when, "It can no longer be assumed that welfare is greater at an all-around higher level of production than at a lower one. The higher level of production has, merely, a higher level of want creation necessitating a higher level of want satisfaction."

Galbraith's assertion that the perfection of modern advertising in creating desire for products we didn't know we needed puts the modern American member of the middle class in the position of the gerbil on the tread wheel: running faster and faster, but making no progress in relation to his neighbors. The end result of this mall driven culture has been an average negative personal savings rate (two years running) for the first time in the history of the United States. Because Americans have relied on the equity extraction from their homes to pay for their lifestyles, the arrival of the housing market crash comes at a particularly inappropriate time. The millions of foreclosures taking place across our land are mute testimony to the end of a cycle. An end that Galbraith feared would collapse the whole house of cards built on "want creation", throwing the modern American off the treadmill.

Most of the time I find myself positioned in the complicated center where the logic is radical but excitement is tempered. Jamie Galbraith usually occupies a space too my left that seems way more fun. That makes it a pleasant opportunity to outflank him regarding the intellectual perpetrators of the corporate predator state.

In my view, Jamie is far too light in his assessment of the intellectuals who fashioned conservative economics, and he is especially light on the economics profession. He writes of these intellectuals becoming his friends, pities them for their current forlorn abandonment, and essentially invokes the nice guy defense to shield them from more trenchant criticism. For a while George W. Bush benefitted from this line, and I have even heard Dick Cheney defended on similar grounds (apparently Cheney has personal charm).

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Let me begin this second round by noting an event in a parallel universe: Thomas Sowell's attack yesterday on Obama in National Review Online. The column is entitled "The Galbraith Effect" and it's not, alas, about my book. Here's how it begins:

"Many years ago, when I was a college student, I took a course from John Kenneth Galbraith. On the first day of class, Professor Galbraith gave a brilliant opening lecture, after which the students gave him a standing ovation. Galbraith kept on giving brilliant opening lectures the whole semester. But, instead of standing ovations, there were now dwindling numbers of students and some of them got up and walked out in the middle of his lectures. Galbraith never got beyond the glittering generalities that marked his first lecture. After a while, the students got tired of not getting any real substance. Senator Barack Obama's campaign this year reminds me very much of that course from Professor Galbraith."

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Let's take the wayback machine to 1992. The Democratic candidate proposes to Put People First (on sale now for 55 cents). Some of the jewels in this crown of commitment are a pledge to increase non-defense "investment" by $50 billion each year of his first term and to "Eliminate 100,000 unnecessary positions in the bureaucracy." Regarding trade, he would:

"- Seek more open markets for American products by negotiating a free trade agreement with Mexico that ensures a more level playing field and protects basic worker rights and environmental standards."

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Like his father who coined the term "conventional wisdom", Jamie Galbraith's notion of the predator state may also become part of the common lexicon. But if it does, I hope it will be talked of as the "American corporate" predator state. That is because it is quintessentially linked to corporations, and it is also a uniquely American phenomenon.

Kleptocratic predator states, like Mugabe's Zimbabwe or Mobutu's Zaire in Africa, are fundamentally different. There is no equivalent in Europe, and none in East Asia where ruling elites have a sense of obligation to the nation even as they often enrich themselves illicitly. Nor too is there an equivalent in Latin America because government there never reached an economic size proportional to that of government in the US.

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The Predator State, like The New Industrial State before it, dislodges a great many economic fairy tales. Galbraith senior outraged the economics profession when he declared the consumer subordinate to the corporation. I wish I'd been a fly on the wall when the political ideologues of the day confronted the argument that "planning" as per the former Soviet Union is different only in degree from the planning of the large, technologically driven transnational corporation. On this reading "the market" is the rhetorical smokescreen behind which powerful economic organizations do their damnedest to get more powerful.

To the millions of thinking people not schooled in academic economics the Galbraithian argument makes perfect sense. The gospel of the market, in contrast, rationalizes letting the rich have their way. In his new book James Galbraith does a wonderful job demolishing the policies that follow from economists' belief that "markets work." The chapters on tax cuts, balanced budgets, and free trade demonstrate the extent to which their advocates rely on faith-based readings of evidence, misleading arguments, and twisted logic. You might think these chapters are aimed at conservatives. But they are not. The economic truisms of an earlier age hamstring the thinking of liberal economists and democratic politicians. Keynes once remarked, "The difficulty lies not so much in developing new ideas as in escaping from old ones."

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James K. Galbraith's The Predator State brings to mind an illustration I saw as a child of a small mammal eating the giant egg of a dinosaur. The viewer knew that the tiny mammals who were condemned to hide from the saurians would one day succeed their colossal rivals and, in the dramatic language of paleontology primers, "rule the earth." In exactly the same way, inasmuch as the comet of reality eventually collides with every lunatic ideology, we know that the dinosaurs of free-market fundamentalism are headed for extinction and will be replaced, later if not sooner, by the mammals of economic commonsense.

What remains to be explained is why the mammals were sidelined by the dinosaurs in the first place. From the late nineteenth century to the 1970s, few economic thinkers took early nineteenth century ideas of the self-regulating free market seriously. And yet, from the 1970s until recently, we have lived through a renaissance of anachronistic early Victorian economic thought that would have brought joy to the heart of Ebeneezer Scrooge. This nostalgic, fundamentalist counter-revolution in economic thought is often attributed to the machinations of CEOs and well-funded right-wing propaganda machines. But this doesn't explain why many in the business elite itself had abandoned the rhetoric of free markets in earlier generations, in the days when Andrew Carnegie dismissed competition as anachronistic and schemes like associationalism entranced corporate executives and tycoons. Why is the economic thought of today more like that of 1840 than that of 1940?

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What is delightful about James Galbraith's The Predator State is that he says things that are, at once, outrageous-- and completely true. Because he shows so little concern for what one "can" and one "cannot" say in a polite capitalist society, one might call him an idealist. But Galbraith is not tilting at windmills; he is simply toppling the conventional wisdom of the past 28 years.

Begin with "the market." When you come down to it, Galbraith explains, "the market" is a fiction. In theory, "it is the broker, the means of detached and dispassionate interaction between parties with opposed interests. . . . Buyers want a low price, sellers wants a high price. The market works out the price that exactly balances these desires, a price that is fair because it is the market price." Even liberals believe in this mythy "market"--a higher intelligence that hovers over transactions ensuring that, as long as you let "the market" work its magic, everything will work out for the best

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James K. Galbraith's The Predator State is in the great tradition of institutional economics stretching from Thorstein Velen to John Kenneth Galbraith. In his latest book, James Galbraith describes the distorted political economy that has recently emerged to displace what his father earlier analyzed in "The New Industrial State." Seeing through the fog of myth, the elder Galbraith demonstrated how the modern corporation planned markets through careful internal organization. Now, the younger Galbraith has shown how that system has metastasized under the George W. Bush administration into a nightmare where much corporate organization has been thrown into chaos. The "countervailing power" of government and labor, described by elder Galbraith in his "American Capitalism," is long dissolved into the mist. Instead, the corporations have increasingly lost their ability to direct and control markets through their own mechanisms. An ascendant predator financial class that can only wring higher profit margins out of the corporations at the expense of long-term planning and market stability has subverted their capacity for economic rationalization. Under Bush, the government has not only allied with key corporations but also merged with them. In order to subvert and suppress markets, of course in the ideologically perverse name of the free market, these corporations rely on government to act as their agent. Reaganism has indeed proved to be "transformational," carried to its logical conclusion by the Bush administration.

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For those who are interested in reviews, The Predator State has so far garnered three: Pedro da Costa in Reuters, Roger Gathman in the Austin American-Statesman, and Randall Wray in the Journal of Economic Issues. Kevin Horrigan of the St Louis Post-Dispatch also devoted a column to it, and Tom Frank gave it a mention in the Wall Street Journal. Last Friday and Saturday, it was the top seller on Amazon under "Economic Policy". All of this is not too bad, for a book published less than a week ago.

Gathman takes note of something important. The book originated, in part, as a challenge from my father, delivered in our last conversation, on Wednesday, April 26, 2006 in his room at Mount Auburn hospital. Dad seemed, at the time, to be recovering (slightly) from a bout of pneumonia, and had the energy to ask what I was working on. I told him of some recent lectures on predation. "You should write a short book on corporate predation," he said. "It will make you the leading economic voice of your generation." And then he added his typically modest, typically paternal touch, "If I could do it, I would put you in the shade."

But of course the ideas for the book had been germinating a long time. I came of age, politically, during the Reagan wars of the early 1980s. I was, then as now, a liberal Keynesian, educated at Kaldor's Cambridge and Tobin's Yale, but not yet thirty and very much on the losing side. By the late 90s, very few people even knew about the economics I was brought up on. I felt a bit like the last survivor of a Papuan tribe.

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Professor James K. Galbraith of the University of Texas at Austin will be joining us to discuss his new book The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too.

Writes Galbraith:

The judicial coup of December 2000 that installed Bush and Cheney brought back some of Reagan's men and his most extreme policies - tax cuts for the wealthy, big increases in military spending, aggressive deregulation. But it didn't bring back the ideas. Instead, it became clear that Bush and Cheney had no real ideas, no larger public justification. They cut taxes to enrich their supporters. For the same reason, they outsourced to Blackwater and Halliburton and pursued military pipe dreams like Missile Defense..... Under Bush and Cheney, oil and gas, drug companies and defense contractors, insurers and usurers control the government of the United States, and it does what they want. This is the predator state.

Having chills yet?

Joining him will be Michael Lind of the New America Foundation, economist Thomas Palley, Susan Feiner, Professor of Economics and Women's and Gender Studies at the University of Southern Maine, journalist and former aide to President Clinton Sidney Blumenthal, economist Max Sawicky and Maggie Mahar, author of Bull! A History of the Boom and Bust, 1982-2004. Discuss with us!