James K. Galbraith Critiques Mainstream Economics and US Policy Shifts

James K. Galbraith, a heterodox economist and professor at the University of Texas, explains in an interview that the dominant neoclassical, equilibrium-focused approach has produced harmful US policies for decades. He disputes the narrative that the Federal Reserve’s interest-rate hikes curbed inflation, pointing instead to pandemic-related supply disruptions, rising oil prices, and modest household spending of relief funds.

Galbraith criticizes recent policy attempts—such as Biden’s infrastructure law, the CHIPS Act, and the Inflation Reduction Act—arguing that the United States lacks the technical and institutional capacity to rebuild a manufacturing base that has shifted toward services. He warns that tariffs and efforts to limit China’s tech sector could fracture the global semiconductor supply chain, likening such decoupling to the collapse of Soviet-era industrial networks.

Additionally, he highlights the paradox of US financial dominance: sanctions erode confidence in Treasury bonds, prompting rivals to develop alternative payment systems. Galbraith concludes that the country should redirect resources from obsolete military projects toward social reforms that address wealth inequality and demographic challenges.