in the center of the university of texas at austin campus, and booktv has been on location here at the university of texas conducting interviews with some of their professors who are also authors. ..

social security, medicare, the housing finance program, and to essentially divert part of the revenue stream from those programs to private benefit. >> so who would be the predators? >> in the case of the housing finance sector, one could talk about the banks that took it vantage and mortgage originators that a good vantage of the political the supervision of the sector over the last 15 years to write massive amounts of the essential fraudulent mortgages and peddle them to the world investment community. the was a very predatory act which contributed massively to the financial crisis. in the case of the retirement programs to privatize social security one can talk about the

way the drug benefit and medicare was initiated and administered that benefited the pharmaceutical companies far more than i should have this is the kind of thing that i am referring to. >> the subtitle is how can conservatives abandoned a free-market and white liberals should, too let's start with the first half of that help to conservatives and when do they abandon the free-market? >> my public career started in the late 70's and especially the 1980's at the time of the ronald reagan administration i was the democratic staff to a doctor of the joint economic committee, and at that time conservatives were true believers. they had a strong body of ideas which they defended very aggressively and imaginatively and it's a lot of fun to engage in that debate i made a lot of friends from that period and i still have. >> such as? >> they became a friend of mine

and was my counterpart on the joint economic committee has been a good friend for 30 years. in the most recent republican administration i don't think there were any such avatars of big ideas this is an administration that ran the country for the benefit of its own political constituencies and an unabashed we would you don't engage in the same kind of argument over ideas because there was essentially nobody on the other side who was upholding them. stacks of milton friedman even though you may disagree with him politically -- >> it's someone i debated in fact when he reissued his television program free to choose on the first panel i considered him to be a friend and someone who had to respect

because he was advancing his ideas. in that format of debate very much admired. >> so those are the type of ideas from the milton friedman of the world which in your view the conservatives have abandoned. >> absolutely. the abandoned friedman very early. his ideas were not workable. i don't fault them for doing that they never advanced a coherent view of monetary policy >> and white liberals should, too abandon the free-market. what does that mean? >> the rhetoric of free market is something that liberals have learned to give lip service to and have the kind of price of admission to serious policy discussions in the united states, and that little would apply to the administration, to

the obama administration. in the campaign of 2008 if you look good candidate barack obama's website on economic policy there was a paragraph that was kind of to the glory of the free market. and my view is this is something which inhibits liberals and progressives from having a clear idea of what needs to be done now is simply ties their hands behind their backs and allows them to be beaten up by conservatives for not being true believers when in fact for the most part they are not. >> another 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 a graduate studies in cambridge at king's college which was cannes college. i identify quite closely. he was one of the imaginative figures of the 20th century

economics and the person who broke the mold in terms of thinking about how to deal with a cataclysmic event like the great depression. so it's impossible not to be drawn into the orbit into the context of his time. keynesian economics as we see them today have all the answers to the pressing problems i think they don't actually. i think we need a substantially more strategic approach and in particular the message has been folder and watered down so it becomes a question throwing money at the problem at the pump spending aggressively, stimulating. i detest the term stimulus package. i think a was a public relations catastrophe and a very bad choice of framing for an economic strategy. so i think we have to go far beyond that. but still it is better than the alternative. >> what do you mean far beyond?

>> speaking in very practical terms we have to ask what are ever major problems we have a problem of joblessness 14 million who are officially unemployed and another ten or so who wouldn't come to the labour forces people had a vast problem. we have people who the american middle class has been wiped out of its houses largely because of the practice of fraudulent mortgages forced on low-income people in the last decade so we have a problem of foreclosure and essentially impoverishment. we have an energy problem and a climate problem and infrastructure. if you think about those issues you recognize we need to have a strategy that plays out over ten 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 to say both the

conventional conservatives and keynesian. >> where does government spending for all? you mentioned you don't like the term stimulus and throwing money at a problem is not necessarily the solution. >> things will cost money. i don't think we should shy away from public spending but we shouldn't pretend we are going to put 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 the markets won't be there so they won't come in and invest. you need to establish a framework that is going to carry us forward for a substantially longer period of time. >> a fundamental restructuring of the economy? >> sure. the conditions that gave the great boom of the 1950's through the 70's and 80's cannot be reproduced. we have discovered the west texas oil field for example. we have offered in a very different world. we are not the dominant power

that we were in the 1945. >> where does the tech boom fall into your theory? wouldn't it be like discovering the west texas oil field? >> we wish to read a was a very ambivalent event that gave a period of prosperity at the end of the 1990's, tremendous period of enthusiasm and hope whichever be shared, but we are now in what he might call the destructive phase of the creative destruction cycle. what we see is the effect of the adoption of these technologies on all kinds of industries and newspapers and book publishing and retail sales on finance and it has to consequences. it makes things much harder to

control. the financial sector and its credibility is damaged by the ease with which you can slice and dice mortgages for the simple and sell them to the investment community. and it just reduces -- it cuts back on many jobs that were there before. 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, what about limiting executive salaries? do you think the government should have the right toward the ability to limit how much executives make? >> i will take that into parts. first part is banks. i think when you have banks which are near insolvency and where they are threatened to drain the insurance fund's 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

and more conventional job back to the basics in banking but who are not in a sense trying to just enrich themselves. in the case of corporations more broadly it is 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 in many ways to act against the long-term interest of the corporations they run. but that's a problem that has to be managed by the corporations themselves moving away from the stock options packages as the court of the 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 wall street analysts boosting their share of prices of the end of the year so that the ceo gets a big bonus. you want them planning strategically. he won them to be at the position to operate over a five or ten year horizon to be able to think ahead. for that you need someone who will be around for a while not intent upon getting his last $5 million, $10 million. >> james galbraith is the author of the predators state along with seven other books including some textbooks. he is the lloyd bentsen share of government and business relations and professor of government here at the university of texas. at boston former is a character actor of the joint economic committee for the u.s. congress to read some of his books include created on equal the crisis in american pay and unbearable cost greenspan and the economics of empire.

as a public policy example what do you think about how the obama administration interactive with a car companies with gm and chrysler to bail them out as we say in the colloquial? >> they help preserve the company's and transform them and go through the bankruptcy process and i think the was appropriate. but we now have a same approach should of been taken to the large banks. certain ones should have been taken over under the authority that the government has under the insurance corporation's authority basically and

restructured and downsized. that sector is too big and it is not serving any useful purpose now which is a part of the reason we are still in the doldrums. >> what is your relationship to john kenneth galbraith? >> he was my father. >> how many of his ideas to you think they share? if he were around today what would he be saying about the current economic situation the u.s. faces? >> my father's great contribution was an analysis of the american corporation generally and its power in the economy. that power has been greatly weakened through a continuing crisis and my analysis has as its point of departure in important ways my father's view 40 years ago.

spec james galbraith has a new book coming out called inequality of instability a 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 to the university of texas with my graduate students. we did a good deal of work to improve the measurement of inequality in the u.s. economy and the world economy, and we show is there are very strong common trends closely related to the way the world economy is governed financially. the debt crisis coming back to the breakdown of brentonwood stood in the 1980's to 2000 the period of the enormous increases of any quality around the world so we think we demonstrate there's a very close relationship between inequality and financial events and

therefore he essentially the phenomena that led up to the agreed financial rack up in 2007, 2008. >> dr. galbraith if somebody says free trade, what do you think about? >> i think it is an illusion of trade in the modern world is a matter of transnational of work of production managed. there is no such thing as free trade. if there were it would have been disrupted long ago by the emergence of modern china. >> return to the gold standard. >> another illusion. gold is an archaic symbol of monetary stability. there are some people that still hold on to that but it is 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 there is to have a federal reserve that

serves the country and is not the hand made of the largest banks. >> james galbraith thinks for joining us here at the university of texas. >> my pleasure. >> up next booktv interviewed jake, the owner of alabama book smith during our recent visit to birmingham alabama as a part of the city to work examining the culture of eight southeastern cities. >> in these tough economic times how has businessmen? >> i'm almost embarrassed it's been great. we have a unique situation. we are selling a the product, the thing you pay your $29.95 for your book and get your entertainment pleasure from reading it but once you get through the and you have a wonderful book signed by the author to put on your shelf and

hopefully someday it might send your grand kids to college so it is a sad thing if any book store closes whether it is a chain or a big box or one of our fellow independent it is not good. it is a foreboding sign, but there are bookstores are around the country contrary to what many viewers think our business is phenomenal. it's grown every year and we found those bookstores around the country to have a niche that specialize whether it is industries or lesbian and gay or children's or cookbooks if a bookstore like us we specialize in signed copy scanned folks in our neighborhood and in our city and state and region the entire country we have customers in every part of the country and lots of international customers they think of sight copies they

think of us and i assure those bookstores that have found their niche and children's dhaka children's language the of customers around the world. we provide electronic books and sell electronic books on our website. it's really easy. we don't have to do anything. the american booksellers association does all the heavy lifting but it's a minor part of our business. folks literally around the world have become accustomed to the product, the book signed by the author. that book wrote in your copy there are many bookstores around the country who are the very core of their neighborhood or their little part of the story, and that is where folks congregate so i think those two areas of booksell