The Predator State
Not too many economists make much clarity these days, and the general run of the mill economists that populate the majority of political and business positions seem to be mired in their own illusions and myths about what the economy actually is. James Galbraith stands out in contrast to that group and is able to see through the myths of the "free market" and provide well conceived, simple, and effective solutions to the problems of our current economy. In The Predator State, Galbraith follows in his father's footsteps (whom I had the pleasure of reading and understanding many years ago) with a well structured, well argued, and clearly written examination of the supposed free market.
Galbraith stays within a well-defined focus, examining the myths of the market and solutions in economic terms, which necessarily reach over into other areas. He does not dwell on these other areas, but in his final analysis he provides three lines of insight that indicate where others could expand on the topic, denouncing in effect the "hidden fist" that supports the U.S. economy.
First is a comment on terrorism, stated simply that "the global war on terror is a fraud," and "the solution to the threat of terror is political, diplomatic -and a matter of police work. It is not primarily military." Following that is the comment, "A system based mainly on military power, financed through the dollar reserve system, provides neither comprehensive security nor a compelling case for preserving the reserve system." Finally, as he reaches his final summation, he says, "The existing system has been held together by military power and by a shared perception of threat." The military is certainly part of his analysis, mainly as an element of social structuring and governmental rules and regulations at home that deny the idea of a free market.
In his preface Galbraith outlines the plan he intends to follow and the basic outline of his arguments. The first section of the book "is to describe the myth, its logical structure, its popular appeal, and especially the set of rules for policy to which it leads." After that, the second section examines what he calls predation, "the systematic abuse of public institutions for private profit or equivalently, the systematic undermining of public protection for the benefit of private clients."
He then turns to solutions, offering three that are "the most despised, the most dangerous, the hardest to get across" to a culture steeped in free market mythology. The solutions sound simple (and really are, perhaps that is why they are so despised): a capacity to plan -as counter-witnessed by the events around Katrina; secondly "the setting of wages and the control of the distribution of pay and incomes is a social, and not a market decision;" and thirdly, to "prepare for the day when the unlimited privilege of issuing never-to-be-paid chits to the rest of the world may come to an end."
This leads to my only real disappointment with the book - as with any book that is concerned about rapidly changing current events -that an examination of the really current events, the last three or four months, are not within this discussion. Galbraith however is one of the few economists who seems to have read the situation correctly and knows the possibilities of what might be coming. I then re-read his most current commentary that deals with the Geithner 'plan', posing many questions and providing further logical arguments to the positions presented in the book. 
He does not appear optimistic, indicating that the "happy patterns [bubble, bust, recession, stimulus, recovery] will not be repeated. For the first time since the 1930s, millions of American households are financially ruined. Families that two years ago enjoyed wealth in stocks and in their homes now have neither." His solution emphasizes the planning stage: "What is required are careful, sustained planning, consistent policy, and the recognition now that there are no quick fixes, no easy return to "normal," no going back to a world run by bankers--and no alternative to taking the long view."
Being somewhat more knowledgeable than the average economist Galbraith states at the beginning of The Predator State "the disciplined application of conservative principles to economic policy leads to disaster." From there, he proceeds to deconstruct the free market myth. He starts with the "free" aspect first, showing that the freedom to act is owned by business concerns, for the rest of us, it is the freedom to shop (and thus be satisfied, indeed satiated, such that we do not complain about the state of anything).
Tax cuts take the next hit, reaching the conclusion that "the entire thirty-year history in promoting saving in order to increase investment has been a bust." Inflation comes next, with the argument that neither interest rates nor low employment cut inflation, but the collapse of labor unions and globalization did the trick (with a resulting increase in inequality between haves and have nots.) Balanced budget's are the next myth, wherein "balancing the budget is a mission impossible and a fool's errand."
His last hit is on "free trade" itself. Several subtopics enter this argument but the bottom line appears to be that the consumptive wealth of the U.S. is upheld by its "symbiotic" ties to China, a "marriage of convenience...not the product of comparative advantage, and it did not emerge from free trade."
Upon entering his arguments for predation, the current state of U.S. business, Galbraith looks at several issues. First is the understanding of pay versus wealth. Second is the largesse of the U.S. government sector "responsible for well over half of economic activity. Third is the corporate crisis in which "the market has a tendency to undermine the law." This all leads to the predator state where "nothing is done for the common good" but to obtain "complete control of the apparatus of state" for private gain.
Finally the essays turn to solutions as outlined at the start of the review. Through it all, although simplistically outlined here, Galbraith provides strong arguments, strong evidence, to support his historical interpretations and to support his suggested fixes. Returning to my first comments, with Obama's ongoing charm seeded with "hope," the solutions "depend on the difference between a world ruled by fear and one ruled by hope." Residents of the U.S. and the whole world are waiting to see what actions are taken to support that hope.
Galbraith's writing is strong and provocative. It is something the current crop of political and economic advisors and theorists need to consider and be willing to move beyond the blinders of their free market myths.
 Galbraith, James K. "No Return to Normal - Why the economic crisis, and its solution, are bigger than you think." http://www.washingtonmonthly.com/features/
Jim Miles is a Canadian educator and a regular contributor/columnist of opinion pieces and book reviews for The Palestine Chronicle. Miles' work is also presented globally through other alternative websites and news publications.
Islamic economy is the answer. Today Malaysia's Islamic Bank is the 2nd. biggest bank, infact the Islamic " sukup " of Malaysia is the 2nd. biggest Islamic bond market in the world after Saudi Arabia. ( see report of Malaysia Central Bank - Bank Negara. See also reports on International Islamic banking )Malaysia GDP is forecasted to be in the region of 4%, though modest but in the present financial meltdown, this is commendable.
Islamic Bank is unaffected by the world recession, and in this bad times, Islamic banking proves that it is not just a rival to conventional banking, It is the only alternative to the fair financing of free markets, that it is not oppressive and it is just.
What have we in the USA now ? Tax payers money used to bail out big businesses, failed industries, only to benefit the share holders, and those who smoked cigars, drink champagne and enjoy the caviars in cocktail parties, and those who go on expensive holidays while average Americans are losing homes to foreclosure proceedings, while the capitalists continue to enjoy fat bonuses and ridicolous perks at the expense of public funds.
A decade ago the IMF and the World Bank were stoicly crusading against government intervention in businesses, Indonesia was forced to cut oil and diesel subsidies, South Korea was forced to " give away " the First Bank, Asian markets were forced open and big western businesses came in. Well, well, well.... Why have we now Dear IMF and World Bank. Are both of you not continuing your crusade against government involvement in businesses again ? Why are you now not preaching the same a deacade ago sermons to the USA and Europe ?
Finally by the end of this episode, Islamic economy triumphs over all others.