Kenneth Galbraith has been at the center of the American economy since before the First World War. In this, his new book, he offers a distillation of these years in both the public and the private sectors, the academy and the government, and explains where we are and how we got there.

Galbraith argues that inherent in our economic system is a continuing divergence between reality and "conventional wisdom," or as he puts it self-serving belief and contrived nonsense, or "fraud." He contends that we observe the current state of the nation in a cloud of myth, believing that stockholders and owners run our corporate world. In reality, it is the management of giant corporations that controls not only the private sector, but also the public sector, too, from politicians, to the Federal Reserve Bank, to the Pentagon.

In a work filled with provocative ideas that come from his years as an astute observer, Galbraith looks at today's economy and America's military actions in Iraq and sees that the gap between myth and reality has never been wider.

Fraud within the American Economy:

• The myth of stockholder ownership
• The myth of a market economy
• The myth of the Federal Reserve System
• The myth of two sectors; public and private
• The myth that war is justifiable

The primary aspect of the "fraud" of the American economy that Galbraith (emeritus, economics, Harvard U.) criticizes is the false pretense of shareholder control over corporations, when in fact all real power has shifted to corporate managers. Contradicting conventional wisdom, or "approved belief" in his words, he denies the distinction between the private and public sectors, describing how the managerial class has unprecedented power in the economy's public sector, including major influence over important policies of war or peace. In the end, the continuing references to an impersonal market are "a not wholly innocent fraud."
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"This brief treatise is a well-written, logical argument about the state of the economy."

John Kenneth Galbraith has long been at the center of American economics, in key positions of responsibility during the New Deal, World War II, and since, guiding policy and debate. His trenchant new book distills this lifetime of experience in the public and private sectors; it is a scathing critique of matters as they stand today.

Sounding the alarm about the increasing gap between reality and "conventional wisdom" — a phrase he coined — Galbraith tells, along with much else, how we have reached a point where the private sector has unprecedented control over the public sector. We have given ourselves over to self-serving belief and "contrived nonsense" or, more simply, fraud. This has come at the expense of the economy, effective government, and the business world.

Particularly noted is the central power of the corporation and the shift in authority from shareholders and board members to management. In an intense exercise of fraud, the pretense of shareholder power is still maintained, even with the immediate participants. In fact, because of the scale and complexity of the modern corporation, decisive power must go to management. From management and its own inevitable self-interest, power extends deeply into government — the so-called public sector. This is particularly and dangerously the case in such matters as military policy, the environment, and, needless to say, taxation. Nevertheless, there remains the firm reference to the public sector.

How can fraud be innocent? In his inimitable style, Galbraith offers the answer. His taut, wry, and severe comment is essential reading for everyone who cares about America's future. This book is especially relevant in an election year, but it deeply concerns the much longer future.

Galbraith looks at today's economy and America's military actions in Iraq and contends that we observe the current state of the nation in a cloud of myth, believing that stockholders and owners run our corporate world.

c o n t e n t s

Introduction and a Personal Note ix

i. The Nature of Innocent Fraud 1

ii. The Renaming of the System 3

iii. The Economics of Accommodation 11

iv. The Specious World of Work 17

v. The Corporation as Bureaucracy 23

vi. The Corporate Power 29

vii. The Myth of the Two Sectors 33

viii. The World of Finance 39

ix. The Elegant Escape from Reality 43

x. The End to Corporate Innocence 49

xi. Foreign and Military Policy 53

xii. The Last Word 57