Prevention of financial crisis -- Galbraith for `hygienic action' by IMF Our Bureau NEW DELHI, Dec. 22 THE International Monetary Fund (IMF) should institute ``hygienic action'' in the face of financial crises on incompetent bankers and incompetent businessmen and take a more kindly attitude towards the people who suffer innocently and whose aggregate demand the economy needs, the renowned American economist Prof. John Kenneth Galbraith, the Paul M. Warburg Professor of Economics Emeritus at Harvard University, has suggested. In an interview to the IMF's quarterly magazine, Finance and Development in its latest issue, he, however, maintained that capital controls could be subordinate to closer global relationships involving intense cooperation and intelligent restraint. Prof. Galbraith quipped that a financial crisis cleans up incompetence in the banking system, in the industrial system and to some extent in government. This is a serious matter in old and new countries alike, but particularly in new countries. Taking exception to the use of the word globalisation which he described as ``a very ugly term'', Prof. Galbraith who is an advisor to the American Heritage Dictionary said ``that we will have closer international relationships in such areas as economics, culture, the arts, travel and communications I strongly hope, because one of the sources of disaster in the century just past was uncontrolled nationalism''. Stating that there are things ``we can do internationally to support wage standards and I am in favour of that'', Prof. Galbraith noted that he is willing to accept some transfer of employment to people who are even more in need of work. He said that he wants to see continued development, for example, of the World Trade Organisation, laying down the common rules on international trade. ``International action through conferences and through institutions such as the IMF, the World Bank and the WTO is an essential part of internationalism that I urge,'' Prof. Galbraith said. Pointing out that the international financial markets do not sufficiently help the poorest countries, Prof. Galbraith said that is where the World Bank is needed. ``One of the great achievements of the last century was the end of colonialism. But the end of colonialism did not bring the end of poverty, nor did it ensure in all cases adequate government'', Prof. Galbraith rued. Asked whether he believes that democracy is essential to development and economic growth, Prof. Galbraith said that ``as a matter of religion, I support democratic government, but I also am aware that democratic government can be a guise for poor government or non-government. We have to look beyond democracy and ask also for competence''. He said that one of the greatest barriers to economic development is the government that does not serve its people and is protected by a commitment to sovereignty. In response to a query about any new book he is writing, Prof. Galbraith, who has to his credit more than 30 books, said the tentative title is `The economics of innocent fraud'. Stating that it is a sombre account of all the things we believe that have no relation to truth, Prof. Galbraith said that he began by pointing out the way ``we have renamed the system _ because capitalism has an unfortunate memory involving Marx on the one hand, and Rockefeller and Carnegie on the other, we have moved to a bland, meaningless reference to the market system''. In his characteristically witty way, Prof. Galbraith told the interviewer that he has also dealt, among many other things, with the fraud that is called work. ``Work is very good if you are poor, but if you are rich, leisure becomes important. The more you enjoy your employment, the more pay you get. This is the line of discussion....and is something to which I have devoted a certain part of my life _ the joy of annoying people,'' he said in his frankly impish style. To a specific query as to whether boom and bust cycle was an inevitable feature of economic system, Prof. Galbraith said the inevitability of business cycle is taken for granted. The basic fact that is important for IMF, he said, is that good times bring into existence, first, incompetent business executives; second wrongful government policies in many cases and third, speculators. Working together they ensure the eventual bust and this is part of the system. Prof. Galbraith, however, noted that ``we are a little more sensible than we once were''. Some time after the South Sea Bubble, he said, there was a wonderful company created to drain the Red Sea and recover the treasure that had been lost there by the Israelites. ``That sort of company probably would not have much success now, although intelligence in these matters comes very, very slowly...but there is the salutary cleansing process,'' Prof. Galbraith said.
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