The revelations of corporate deception that have disillusioned investors and left Wall Street reeling come as little surprise to economist John Kenneth Galbraith.

The man who predicted nearly half a century ago that an American prosperity boom would usher in a rise in executive wrongdoing sees more cases as an inevitability that not even better regulation can halt completely.

"This is the crisis of the modern corporate economy," Galbraith, who wrote the best-selling book The Great Crash 1929 in 1954, said in an interview with Reuters this week.

As he spoke, accounting scandals and fears about the economic damage they could wreak had crushed major stock market indexes to multiyear lows despite soothing rhetoric from President George W. Bush and other administration officials.

"As long as we have the power of management and the vital communities associated therewith, including auditing and the government, we are in risk of recurrent cases like Enron or WorldCom," Galbraith said.

The tainted executives, many of whom have invoked their constitutional right to stay mum on Capitol Hill, he dubbed "Fifth Amendment capitalists" - a play on the "Fifth Amendment Communists" during the McCarthy era of the 1950s.

Just as booms seduce some corporate leaders into bending the rules, business-cycle downturns reveal the rule-breakers, Galbraith wrote half a century ago of the 1929 crash.

"Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors. One of the uses of depression is the exposure of what auditors fail to find," he wrote in The Great Crash.

The Canadian-born author of such works as The Affluent Society is frail now at 93.

The summer heat wave has weighed on his health and he conducts interviews by a window-mounted air-conditioning unit, attended by his soft-spoken wife, Catherine, and a nurse.

But Galbraith's mind remains honed to a razor edge - as does his dislike of the mighty American corporation.

"By its nature, it has a very complex task and, as a result, power, authority, passes irrevocably to management. Stockholders are given a few polite words to imply that they're still important. They're not," he said, adding that executives were dangerously permitted to set their own compensation.

Galbraith's world is far removed from the hushed hallways of the corporate suite. He lives behind the Harvard University campus on a tree-lined street in a rangy, oak-panelled, book-filled house built in 1904 by a banker who, ironically, went under in the stock market panic of 1907.

The house has much character but no pretension - the very opposite of executive opulence.

In the Great Crash, Galbraith wrote that, as regulators grow old, they can often become "senile", or "an arm of the industry they are regulating". He also noted that the young Securities and Exchange Commission was very aggressive when created in the 1930s to tackle that era's corporate bad guys.

Asked if the SEC had fallen prey to the perils of advanced regulator age, he said: "There are persuasive arguments to that... I have no doubt that there's a role for strong regulatory action that identifies fraud and error, but I don't think that that will be a full solution."

While he said that the corporate culture made the current run of scandal inevitable, Galbraith refused to go over to the "dark side" of his profession and predict the possible impact on financial markets or the economy.

"There's a certain parallel in all periods of boom and associated optimism leading on to insanity and recession leading on to a cautious pessimism and those are standard features which nobody wants really to recognise," he said.

"Whatever else human beings, business, the economy can control, the swings - of optimism to pessimism, from conservative finance to reckless speculation - have a life of their own. And an untold life nobody can quite predict."

He waved a long-fingered hand at a binder on a table next to him. This is the first draft of his new book, The Economics of Innocent Fraud, which argues that a large part of economics and economic policy is controlled by what the public wants to believe rather than reality.

The book needed some revision, he said with a wry smile, since it has been "overtaken by events".

"One of the 'innocent frauds' with which I deal is the assumption that there is a certain economic expertise which allows you to know when is the recession coming or, more often, when it ends... And the most elegant expression of the notion that there's some control over the business cycle is that of the Federal Reserve and Alan Greenspan," he said.

Galbraith quipped that at least the solemn discussion by Fed policy-makers of shifts in interest rates and their conviction that these changes can affect inflation and growth "show that economics can also have its role in theatre".

Although he considers prediction impossible, his book reveals some clear parallels between the 1929 speculative orgy and the technology bubble 70 years later and a number of echoes of the 1930s in the aftermath of the tech market's plunge.

Those then-as-now echoes include the emergence of corporate deceptions both large and small and a recession that began with a build-up of inventories and a downturn in manufacturing with other sectors following a downward path later.

"These are all factors, but nobody can assess the ultimate effects of them all. And anybody that says (they can) should be treated with refined, polite neglect," he said.

One of the most interesting of those parallels in The Great Crash are so-called "incantations" by politicians, economists and authority figures when stocks were plunging.

"When the market fell, many Wall Street citizens immediately sensed the real danger, which was that income and employment - prosperity in general - would be adversely affected. This had to be prevented. Preventative incantation required that as many important people as possible repeat as firmly as they could that it wouldn't happen. This they did," Galbraith wrote.

Referring to the Bush team's attempts to soothe markets in the past couple of weeks - many of which perversely triggered mini-meltdowns - Galbraith joked: "They have no talent for new error. They have a talent for old-fashioned error."

The adviser to former presidents such as John F. Kennedy and Franklin D. Roosevelt is clearly not a Bush supporter. He called the Bush tax cut package last year an "economically adverse" alternative to a programme aimed more squarely at the poor, who Galbraith said are more likely to spend than someone earning $500,000 a year.

Nor did he hold out much hope that Bush's plans for a corporate crackdown can render business permanently honest.

"There are possibilities in regulation. There are possibilities in the development of a managerial ethic. But there always will remain the possibility of... powerful misuse of position."