This is the second of a series of discussions with people who have made a significant contribution to the world of business. Their innovative ideas have had a profound impact on economic theories and practices of their country, and at the same time have transcended national significance and influenced the world economy. This interview is with John Kenneth Galbraith.

He has variously been called a reformer, a rebel and a renegade of modern-day economics. Yet, John Kenneth Galbraith is one of the most influential economists of the 20th century and, at the age of 92, continues to challenge conventional thinking.

Contrary to economists who believe that economic growth benefits all of society, Galbraith sees growth and income distributed in an uneven and unfair manner. Both governments and individuals should do more, in his opinion, to help those who have not reaped the benefits of economic prosperity, including many who live in poverty in North American cities. A proud liberal and staunch defender of the welfare state, Galbraith believes that governments must protect and support education, health care and the social safety net.

Born in 1908 in Iona Station, Ontario, Galbraith has been an American citizen since 1937. After earning a Ph.D. in agricultural economics from the University of California at Berkeley, Galbraith taught at Berkeley before moving to Harvard University on a permanent basis in 1948. Retired since 1975, he has received 45 honourary degrees from institutions around the world.

Galbraith has also been very active on the political front as an advisor and speechwriter for Franklin Roosevelt, Adlai Stevenson, Eugene McCarthy and George McGovern. He knew and advised all the Kennedys from Joe Sr. to Ted and was a speechwriter for John F. Kennedy, who appointed him U.S. ambassador to India during his administration.

Professor Galbraith offers his thoughts on a range of political and economic topics.

CIR: Recently, a reader wrote to the editor of a Toronto daily newspaper, "I see Canadians collectively aspiring to the worst qualities of the United States, as they rush to trade compassion for the unbridled greed of globalization." I was wondering if you think Canada is a kinder, gentler nation than the United States, and do you think that North Americans are losing their compassion and becoming greedier?

Galbraith: I don't think this comes primarily from the United States, although it is a participant. This has been a trend of all the advanced industrial countries, including Japan, Western Europe and, not least of all, Canada. To attribute this to the United States is part of the global tendency to assign all disagreement to Washington or New York. No, this is much larger than the United States, and the person who wrote that letter perhaps hadn't heard of the European Union.

CIR: Conventional wisdom, the phrase you coined....

Galbraith: The phrase I invented, I want you to know. I had a series of references to what this effect would be, and I was trying them out on some friends here at Harvard--when I got to the phrase conventional wisdom, one of my colleagues, Professor Carl Kaysem, now at MIT, said, "Stop, you are never going to get better than that." So, I have to attribute part of the credit to him.

CIR: I agree with what you've said about that phrase; you should have taken out a patent. Conventional wisdom has it that your book The Affluent Society has given rise to the neoliberalism we see in Tony Blair and Bill Clinton. Can you comment on this?

Galbraith: There is something to that. Both Tony Blair and Bill Clinton are the central core of the capitalistic economy; the pursuit of personal and corporate gain. This is a motivation which they accept, including also, a bow to the very large middle income community that lives under that system. This is most clearly the case with Tony Blair, where he has divorced himself to some extent from the old-fashioned labour attitudes and accepts the concessions to middle-class Britain. And so, of course, does Clinton, we take for granted that this is also going on in the United States. Our unions, however, are never so philosophically and economically directed as those of Britain.

CIR: There has been a lot of talk about our current economy being a new type of economy; a new era of sustainable growth; a new paradigm. Do you think there is any truth to this idea?

Galbraith: No. I think there is a long-term trend that enlarges the private sector and I don't deny the role of technology in that. It's not confined to technology, though. We have also had a huge expansion in the entertainment industry and a very considerable expansion in all journalistic and literary activity. I certainly concede the role of technology, but I come now to my important point, which I emphasize. Most of the references to a new society, a new era, are from people who are heavily involved in the stock market and want to justify to themselves and to others the notion that their stock market gains are forever. I have said many times, and I say it again to you, that when you hear somebody in the financial world say this is a new era, by all means take cover.

CIR: If this is not a unique type of economy, is this era reminiscent of any other time in history?

Galbraith: Oh, sure. I have written extensively about this history, beginning in 1637 with the tulip mania in Holland, when all somber, sober Dutchmen became involved with a new era dominated by the tulip bulb. We've had a recurrence of this, to a greater or lesser extent, approximately every 30 to 50 years since, including in the beginning of the next century the wonderful word of gold in Louisiana, which hasn't yet been found, except in the offices of some of the state officials and governors. About every 30-year interval in the last century we focused on waterways, railroads, so forth, paper currency, and then of course in 1929....

CIR: Do you think there is a parallel between now and then?

Galbraith: I have long been somewhat fascinated and concerned with this history. A book that I wrote on the 1929 crash called The Great Crash was published in 1955 and sells more copies today than all my other books combined. Every time somebody says this is a new era, somebody else says you should read Galbraith. It's the best self-sustaining advertisement any writer ever had, at least since the King James Version of the Bible.

CIR: Does it appear to be an illusion or a reality that North American business cycles have been tamed? Several prominent economists have voiced this opinion lately.

Galbraith: This has almost always been said in an authoritative way in every boom period. It appeals strongly to those who want to believe that the boom will last forever and their wealth will last forever.

CIR: You mentioned the European Union. Professor Stanley Hoffman of Harvard has grudgingly described Europe as a "sort of incipient state." I'm wondering what you think the greatest challenges and opportunities are for North America in dealing with this "sort of incipient state" of Europe?

Galbraith: At a rather mature age, I have vivid memories of two wars--the worst happenings of my lifetime--and therefore I depart from some of my Liberal friends who are concerned about what they call globalization. I lived at a time when the clash of patriotism, the clash of nationalism killed millions of people, and I see the closer knitting of the countries of the world--European countries, United States with Europe, United States with Japan--as being one of the favourable circumstances of my lifetime. It has problems; there's no question about that. But I come back to the great comment of Dr. Samuel Johnson, that patriotism can be the last refuge of a scoundrel. Although Johnson said "is," I say "can be."

CIR: With increasing globalization and a closer knitting of countries, as you put it, do you think we are doing enough for debt relief for the poorest nations of the world?

Galbraith: Well, this is a very important question; the most important question. Let me say parenthetically that I don't approve of the word globalization. It is a mild insult to the English language. It has a nasty, artificial sound. I am an advisor to one of the local dictionaries and when that word comes up I always veto it.

There is nothing new on that problem in consequence of the tendency to closer world relationships. This is, as it long has been, a matter on the conscience of well-fed people, well-housed, comfortable people who manage to close their minds to the much less satisfactory situation of a great many people who suffer hunger and deprivation just as they would if they were subject to it. We should be aware of an important human tendency. When something is bad enough, you don't try to remedy it; you close your mind to it. We close our minds to the terrible suffering in Africa from disease and hunger. We close our minds to the whole problem of nuclear devastation, and to some extent we close our minds to our own mortality. The strongest phrase that one should attribute to the English language is, "too unpleasant to think about."

CIR: I want to follow up on that. Professor Amartya Sen, in his address to this year's Harvard Commencement, lamented the fact that during these times of great economic prosperity we aren't doing enough to create greater equality through distribution of wealth, and he suggests that institutional change and addressing issues such as the United Nations would be of some assistance in this regard.

Galbraith: I completely agree with professor Sen, except there is a larger problem here that we don't talk about. One of the great developments after World War II was decolonization; the return of sovereignty to people. But that returned sovereignty to a considerable number of totally incompetent governments that were at a level of disorganization and corruption which had the effect of being no government at all. And as Canada and the United States have long recognized, nothing is more important for social and economic stability and gain than effective government. We take that for granted. And that is something that is lacking in much of Africa and some of Asia, for example.

While I agree with professor Sen on the importance of the United Nations--and I consider myself a good supporter of the UN--one must go on from that to the question of whether there are cases when sovereignty must be suspended, when sovereignty is something that is the source of extreme suffering.

CIR: In the book Name-Dropping, one of your new books, you say that "Gunnar Myrdal, the late great Swedish economist and political philosopher, surveyed the world a number of years ago to see which country was the best governed, allowing always for differences growing out of ethnic differences, geography and economic situation. His choice was Canada, so one can not doubt it would be now, and with special mention for Lester Pearson and Pierre Trudeau." Do you think that Canada is the best-governed, or among the best-governed countries?

Galbraith: In the book I was quoting Myrdal, a great friend of mine, but considering Canada's breadth and depth and linguistic diversity, I was certainly impressed by Myrdal's choice and I have quoted it many times. And being a former Canadian I have a certain pride in any Canadian achievement.

CIR: You give a special mention to Pearson and Trudeau. Any thoughts on more recent leaders?

Galbraith: I wrote a piece for a prominent Canadian magazine saying that many Americans would consider recent developments in the near abolition of the Conservative party nationally as a model for the United States, but I quickly withdrew that suggestion.

CIR: You have said that free enterprise leads to monopoly. Do you think that Bill Gates and the development of Microsoft is an example of free enterprise leading to monopoly?

Galbraith: No, I don't. I argue in the New Industrial State that there is a strong thrust in many industries to a structure of controlled prices and controlled costs, which are the natural attribute of market power, and possibly what the ancient even call monopoly. But I don't think there is any special case in Microsoft. Bill Gates perhaps had a similar advantage, in this respect, to the advantage John D. Rockefeller had with Standard Oil in the last century. Rockefeller was ahead of anybody else in seeing the prospects for petroleum. There is always an advantage to being a little bit ahead. Henry Ford is another example.

CIR: Demographically we are looking at a looming pension problem as the baby boomers start to retire and live longer than before, imposing a financial burden on pension plans and the next generation. Do you see a solution to the problem facing Social Security or the Canada Pension Plan?

Galbraith: I don't see the problem. The problem is something that in Canada and notably in the United States comes from people who are comfortable and can be frightened by any possibility of an increase in their social responsibility. Given the wealth of the countries at the present time, there is nothing in the social structure prospectively that can't be afforded.

If you are making a speech to a certain type of affluent group, you need something to frighten them, and this is what you use. This is what you say.

CIR: As well as public pensions, education, health care and the social safety net have traditionally been a primary responsibility of the government. However, governments, certainly in Canada and I believe in the United States, are backing away from these responsibilities due to factors such as financial pressures or political philosophy. Do you think governments should be spending more on these areas?

Galbraith: Absolutely. I certainly think we should spend more. I don't think they are backing away here in the U.S. on education. As between Gore and Bush there is an extensive and even monotonous discussion on improving education, along with health care and much else. So, we are certainly not backing away in the public oratory, not for a moment.

I would like to see some disconnection of the relationship of education to economic well-being, though. I think that we should emphasize more than we do the importance of education for the fulfilment of life and its enjoyments, and talk less about the importance of education for holding a job. I have found education to be enjoyment; I have always wanted to suffer even the modest life of a Harvard professor.

This interview with John Kenneth Galbraith was conducted with the assistance of Bernie McGarva, a partner with Aird and Berlis in Toronto.