free enterprise system. it's the greatest in the world but i do think corporations get a powerful but you have to be regulated. i don't agree what would happen. >> host: we're out of time, unfortunate. thanks to c-span. we had a discussion that was a made up of soundbites. thank you very much. >> guest: thank you very much, ralph. got to get back to the second battle of seattle. ..

>> on your screen is the tower of the center of the university of texas at austin campus. and booktv has been on location at the university of texas conducting interviews with some of their professors who are also authors. every sunday during the month of november, we'll be bringing you those interviews at 1:00 pm eastern time as part of our university series. >> up next, james galbraith was interviewed. this discussion is part of booktv's college series. >> the predator state is the name of the book an economist and professor of government in public affairs of the university of texas is the author. professor galbraith what do you mean by the predator states? who are the predators?

>> the predators are attempting to take advantage of the programs that were created for the benefit of the middle class, the programs that, in fact, made the middle class in america, social security, medicare, the housing finance programs and to essentially divert part of the revenue stream from those programs to private benefit. >> so who would be the predators? >> well, in the case of the -- of the housing finance sector, one could talk about the banks that took advantage and mortgage originators that took advantage of the political desupervision of that sector over the last 15 years to write massive amounts of essentially fraudulent mortgages and peddle them to the world investment community. that was a very predatory act which contributed massively to the financial crisis.

to the retirement programs the effort to privatize social security, one can talk about the way the drug benefit and medicare was initiated that benefited the pharmaceutical companies far more than it should have. this is the kind of thing that i'm referring to. >> so the subtitle of this book is "how conservatives abandoned the free market and why liberals should too." let's start with the first half of that. how did conservatives and when did they abandon the free market in your view? >> my public career started in the late '70s and especially in the early 1980s at the time of the reagan administration and i was the democratic staff director of the joint economic community. and at that time conservatives were true believers. they had a strong body of ideas which they grasped imaginatively and i made a lot of friends from that period which i still have. >> such as the.

>> bruce bartlett who was my counterpart on the joint economic committee has been a good friend for 30 years. the recent republican administration i don't think there were any such avatars of big ideas. this was an administration who ran the country for the benefit of basically its own political constituencies and it did so in an bashedly. >> so a milton friedman -- even though you may disagree with him politically. >> yes. a milton friedman is someone i debated, in fact, in 1990 when he reissued his television program "free to choose." i was on the first panel. i considered him to be a friend

and someone whom you had to respect because he was advancing his ideas in the -- you know, in that format of debate that i very much admire. >> those are the types of ideas from the milton friedmans of the world which the hayeks which in your view the conservatives have abandoned. >> the conservatives abandoned his ideas freely. his ideas were unworkable and i don't fault them for doing that but they never advanced a coherent view of monetary policy. >> and why liberals should too abandon the free markets. what does that mean? >> the rhetoric of free markets is something that liberals have learned to give lip service to as a kind of price of admission to serious policy discussion in the united states. and that little barb would apply, for example, particularly

to this administration, to the obama administration. back in the campaign in 2008, if you looked at candidate barack obama's website on economic policy. there was a paragraph there that was kind of to the gloryies of the frequent and it inhibits liberals and progressives from having a clear idea of what needs to be done now. it simply ties their hands behind their back and allows them to be beaten by conservatives for not being true believers when, in fact, the most part they are not. >> so another well-known school of thought when it comes to economics is the keynesian school of economics. do you agree with the general principles of how that works? >> i did my graduate studies on cambridge. i'm a member of keynes college. i identified -- keynes was one

of the great imaginative figures of 20th century economics and a person who really broke the mold in terms of thinking about how to deal with a cataclysmic event like the great depression. it's impossible not to be drawn into that orbit if you read him in the context of his time. do keynesian economics as -- economists as we see him today, have all the answers to our present problems, i don't think we don't actually. i think we need a substantially strategic more approach and keynes' message has been vulgarized and watered down and it becomes a question of us throwing money down, priming the pump, spending aggressively. stimulating, i detest the term stimulus package. i think it was a public relations catastrophe and very bad choice of framing for an economic strategy. but so i think we have to go far beyond that now but still it's

better than the alternative. >> what do you mean far beyond that? >> speaking in very practical terms. we have to ask what are our major problems? we have a huge problem of joblessness. we have 14 million who are officially unemployed and another 10 or so who would come into the labor force if people were hiring. it's a vast problem. we have people who -- the american middle class has been wiped out in its houses largely because of the practice of fraudulent mortgages that were foisted on low-incomed people and we have a problem of foreclosure and the problem of impositivishment and we have a climate problem, we have a decaying structure. if you think about those issues, you recognize we need to have a strategy that plays out over 10 or 15 or 20 years, sets a framework in which the private economy and the public sector can work together.

and that's what i think we need that goes beyond, as i say, both the conventional conservatives and the vulgar keynesians. >> but where does government spending fall in there? you mention that you don't like the term "stimulus" and throwing money at a problem that's not necessarily the solution. >> right. well, things will cost money. i don't think we should shy away from public spending. but we shouldn't pretend that we're going to put some money in the economy and everything will be all right in a couple of years. businesses know when you do that, that in two years' time, when the public money is being withdrawn their markets won't be there. so they won't come in and invest. you need to establish a framework that's going to carry us forward for a substantial long period of time. >> fundamental restructuring of the u.s. economy? >> oh, sure. oh, sure. the conditions that gave us the great boom of the 1950s through the '70s and '80s cannot be reproduced. we haven't just discovered the

texas oil fields. we have to operate in a very different world. we're not the dominant power we were in 1945. >> so where does, for example, the tech boom fall into your theory? i mean, wouldn't that be like discovering the west texas oil fields? >> we only wish. the tech boom is a very ambivalent event. it gave us is period of prosperity at the end of the 1990s and a tremendous period of enthusiasm and hope which everybody shared. but we're now in what you might call the destructive phase of a creative destruction cycle. what we see is the effect of the adoption of these technologies on all kinds of industries, on newspapers, on book publishing, on retail, on finance. and it has two consequences. it makes some of these things

much harder to control. the financial sector -- its credibility is damaged by the ease with which you can slice and dice mortgages, for example, and sell them to the investment community. and it just reduces a -- it cuts back on a great many jobs that were there before and so you have to be thinking very actively about what kind of work people should have and how to create the institutions that give them that work. >> professor galbraith, what about limiting executive salaries. do you think that the government should have the right or the ability to limit how much executives make? >> i'll take that in two parts. the first part is banks. i think when you have banks which are near insolvency and where they are threatened to drain the insurance funds that the taxpayers have put up, the government has every right to replace those managers with

people who are paid considerably less and who will do a better job, more conventional job, perhaps back to basics in banking but who are not in a sense just trying to enrich themselves by whatever means. in the case of corporations more broadly, i think it's a little more difficult. the runaway executive compensation package has done a lot of damage to the great american corporation. it's basically created a class of chief executives who are not linked to the company, and who have a lot of incentive to cut costs aggressively and to -- in many ways act against the long-term interests of the corporations that they run, but that's a problem that has to be managed by corporations themselves. moving away from stock option packages as the core of

executive compensation would do a lot, it seems to me, to help on that. >> why? >> because you don't want companies basically acting as the had maidens of their wall street analysts. boosting their share prices at the end of the year so that the ceo gets a big bonus. you want them planning strategically, you want them to be a position to operate over a five or ten-year horizon to think ahead and you need someone who will be around a while not someone who's intent on getting his last $5 million, $10 million and getting out. >> james k. galbraith is the author of the predator state along with seven other books including some textbooks. he is the lloyd benson chair in government and business relations and professor of government here at the university of texas at austin. former executive director of the joint economic economy for the u.s. congress. some of his books include created unequal: the crisis of un-american pay, bush, greenspan

and the economics empire. as a public policy example, what do you think about how the obama administration interacted with the car companies? with gm and chrysler to help -- to bail them out as we say in the colloquial? >> well, they helped preserve those companies and transformed them. they did go through a bankruptcy process, and i think that was appropriate. but we now have companies that otherwise would have folded up taking down with them vast networks of suppliers and they have a chance now to prove themselves in the marketplace. i think that's sensible, defensible practice. i don't agree that the same approach should have been taken to the large banks. they should have been -- certain ones should have been taken over under the authorities that the government has, under the

deposit insurance corporation's authority basically and restructured and downsized. that sector is too big. it's not serving any useful purpose now which is part of the reason we're still in the doll drums. >> what's your relationship to john kenneth galbraith? >> he's my father. how many ideas do you think you shared? if he were around today -- >> quite a lot. >> if he were around today, what would he be saying about the current economic situation that the u.s. faces? >> my father's great contribution was an analysis of the american corporation, of the corporation generally and its power in the economy. that power has been greatly weakened, the corporation has been through a crisis, a continuing crisis. and i think my analysis has its point of departure in important

ways, my father's view of 40 years ago. >> james k. galbraith has a new book inequality and study of the world economy just before the great crisis. what are we going to learn in this book? >> this is the product of 15 years of research here at the university of texas with my graduate students. we did a great deal of work to improve the measurement of inequality in the u.s. economy, and the world economy. and what we show is that they are very strong common trends that are very closely related to the way the world economy is governed financially. the debt crisis, the -- going back to the breakdown of bretton woods but particularly in the 1980s to 2000's the period of enormous increases of inequality of the world. so we think we demonstrate that there is a very close relationship between inequality

and financial events and, therefore, essentially with the phenomenon that led up to this great financial crackup in 2007 and 2008. >> dr. galbraith, when someone says free trade, what do you think about? >> i think it's an illusion of trade in the modern world -- it is a matter of transnational networks of production. they are managed there is really no such thing as free trade. if there were it would have been disrupted long ago by the emergence of modern china. >> we turn to the gold standard. >> another illusion. gold is an archaic symbol of monetary of world. it's impractical in the modern world. >> and the fed. >> i think we need a functioning federal reserve. i spent much of my career in congress on the oversight of the

federal reserve. the real challenge is there is to have a federal reserve that serves the country, and it is not the hand maiden of the largest banks. >> james galbraith, thank you for joining us at the university of texas. >> my pleasure. >> up next, booktv interviewed jake reiss, the owner of alabama book smith during our recent visit to birmingham, alabama, as part of our city's tour examining the literary culture of eight southeastern cities. >> in these tough economic times, how has business been? >> i'm almost embarrassed. it's been great. we have a unique situation. we're selling the product, the thing, the books. you pay your $24.95 for your book or thereabouts and you get entertainment and pleasure and once you get through then you

have a wonderful warm fuzzy book that's signed by the author to put on your shelf and hopefully it might send your grandkids to college. it's a sad thing whether any store closes, whether it's a chain or our fellow independents. it's not good. it's a foreboding sign but there are bookstores around the country contrary to what many of your viewers think that it thrives. our business is phenomenal. it's grown every year and we found that those bookstores around the country that have a niche, that specialize, whether it's mysteries, or lesbian or gays or children -- or cookbooks, if a bookstore like us, we specialize in signed copies. and folks in our neighborhood, and our city and our state region, the entire country,