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Thursday, May 26, 2005

John Kenneth Galbraith

Several years ago I had a debate about the need for a minimum wage with my father. I was arguing for it and he against. As he rightly pointed out, capitalism has self correcting mechanisms of supply and demand, which keep things going smoothly. If wages get too low, then it will be harder to find workers for that job and they'll have to raise again. If they get too high then the supply of workers in that field will become excessive and the wages will fall.

I told him that this is all well and good, and mathematically, all of these numbers may work just fine in the larger mechanism of the economy. However, the ups and downs may occasionally carry us into realms which are not fitting to human decency, and it is necessary for us as a people to say that we cannot ethically allow someone to be paid less than x amount for a job, regardless of where the mechanisms of capitalism (which I am generally for) would take us. I told him it was necessary for the government to step in when this natural wave exceeds certain ethical limits. I was just a college kid and hadn't read anything on economics, but it seemed to make sense to me.

Then, yesterday, I hear a report on the economist John Kenneth Galbraith on National Public Radio. During the 1930s hands-off government was seen as the way to keep capitalism at its best, yet, we were in a depression - and a great one at that. From what little I know, he apparently came out with a new economic model suggesting that the excesses of capitalism be clipped at its highs and lows by government spending at the bottom, and taxation at the top, in order to keep the economy from getting too wildly out of control. While my take was more from an ethical social-moral point of view while his speaks to the functionality of the economy, this seemed surprisingly similar to what I had thought.

There were many other interesting things in the report, such as how this theory lead to an economic boom until Reaganomics took over, reverting back to the "hands-off" approach again. I've decided I need to learn more about this economist and his ideas, as I should have by now. I love this quote by him...

"Under capitalism, man exploits man. Under communism, it's just the opposite."

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