Galbraith says `age of slump' not over

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JOHN KENNETH Galbraith, the American economist who wrote the definitive study of the Great Crash of 1929, yesterday ridiculed predictions of an end to the era of boom and bust.

The 90-year-old Harvard professor, who advised an entire generation of Democrat presidents, said the US markets were simply involved in "another exercise in speculative optimism". Speaking at the London School of Economics, Professor Galbraith said that the bubble could be followed by a painful recession.

"When you hear it being said that we've entered a new era of permanent prosperity with prices of financial instruments reflecting that happy fact, you should take cover," he said. "Let us not assume that the age of slump, recession, depression is past. Let us have both the needed warnings against speculative excess and awareness that the ensuing slump can be painful," said Professor Galbraith.

He condemned the failure of the capitalist economies to abolish poverty. "Urban poverty is the most evident and painful of the economic and social legacies from the centuries past," he said. "The answer is rather clear - everybody should be guaranteed a decent basic income. A rich country such as the US can well afford to keep everybody out of poverty."