There are those who lift your spirits, and those who keep you on your toes. Professor John Kenneth Galbraith has lifted the spirits of several generations of politicians, officials, economists, students and general readers around the world. He has also kept them on their toes.

Galbraith is due to celebrate his 96th birthday this coming Friday. When I had lunch with him and his wife of 67 years, Catherine, in their house just outside the Harvard campus last week, it was a perfect day, autumn was beginning and the great man was in fighting form, despite still being in a wheelchair after a recent illness. He was also struggling with various deaf-aids, but the spirit was, as always, indomitable.

I was carrying a copy of his latest book The Economics of Innocent Fraud , in which he attacks politicians and the media for colluding 'in the myths of a benign "market" that big business always knows best, that minimal intervention stimulates the economy, that obscene pay gaps and unrestrained self-enrichment are an inevitable by-product of the system'.

It is, as he remarked, his 'smallest book, but has taken the longest amount of time'. He had been working on it when we last met two years ago, but he rewrote in between stays in hospital, after the fall-out from the Enron crisis proved a dramatic illustration of his thesis that there is nothing that unfettered chief executives will not do to feather their own nests.

Before signing my copy, Galbraith drew my attention to the illustration on the cover. 'This is the roughest thing I've ever had on a book of mine - an executive briefcase scattering bombs!' In a world where US foreign policy in Iraq has been dictated by Dick Cheney, Donald Rumsfeld and others with strong corporate links, Galbraith, who has campaigned about the power of large corporations since The Affluent Society (1958) and The New Industrial State (1967), is, as it were, sticking to his guns.

My own association with Galbraith is a long one. The Affluent Society contained a powerful Keynesian attack on the classical economists who held that unemployment was something about which governments could do little. Galbraith, following Keynes, writes like a dream, and reading The Affluent Society was one of the factors that led a number of my generation to study economics. It is not for nothing that another great influence, the Nobel prize-winning Amartya Sen, describes Galbraith as 'the most widely read economist in the world'.

Alas, later in our conversation, Galbraith went on to lament 'this is the only government in 30 or 40 years with no one in authority who has ever heard of John Maynard Keynes'. But we are jumping ahead. As Catherine Galbraith offered a glass of sherry, the professor boomed: 'I'm still partly crippled, but alcohol is still remedial.'

Then, before I could ask a question, he sailed in. 'Let's start with a few problems I have. Is Blair in trouble?' I said he ought to be, but it might be wishful thinking on my part, and reminded him of Lord Hailsham's dictum that the British political system is an 'elective dictatorship'.

Galbraith continued: 'It's a strange political calculation of his to stay for so long in support of George Bush. Why did he do that?' I said his bafflement was shared by many here.

The wise professor, who has advised both FD Roosevelt and JF Kennedy in his time, went on to express very strong views: 'It is not a good design for relations with the US because the active voices in this country on international policy are all in conflict with Bush.' What the 'special relationship' needed was 'a certain deeper association and alliance with someone who is responsibly critical. For whatever reason, that has not been the case in Britain'.

In Galbraith's view the French were more in tune with reality. 'Politics must take account not only of the position of the government but also of the forces behind it, and Blair does not have the support of the articulate in the US.'

He added: 'And that is the group which has always thought well of a certain allied relationship with Britain.' He paused. 'There was a better decision by Winston Churchill!'

At this stage I tried to move the conversation back to The Economics of Innocent Fraud and get him to say something about Conrad Black, his fellow Canadian, with whom I recalled he had not been too enamoured on a previous occasion. But he would not be moved.

'Why has Britain been so tolerant of George Bush and his gang?' He smiled, adding, 'I always interview the reporter.'

I did my best to answer this. He then said that perhaps it was partly because 'a lot of things important to the US do not have the same repercussions in Britain'.

Warming to his theme, he said: 'This is a crude government, and its crude misdirection of power in minor things has more direct impact domestically than abroad.' Such as?

'One of the worst things - unimaginable in Britain - is the open character of legislation for the rich, particularly on taxation; and the open resistance to support for the poor.'

But that was not all. 'When income tax reductions,' he pauses and revises 'reductions' to 'slashes', 'were put into effect they were combined with this warning: "Let's not open the way for a softer policy for the poor and the unemployed" - a softer policy that in Keynesian terms might have been a more im portant factor in alleviating the recession.'

Many people enter their 'anecdotage' at ages much younger than Galbraith's. Although he was happy to reminisce, he kept returning to the gravity of the present US and world scene.

'We are seeing the disintegration of the American economic and wider world role, which could well continue after this election. I am talking about the passage of power to the Rumsfelds of the economic and political structure.'

In his new book, Galbraith points out that in the fiscal year 2003 'close to half the total of US government discretionary expenditure [outlay not mandated for particular use, such as social security or service of the public debt] was used for military purposes - for defence, as more favourably it is called'.

In one sense, as he acknowledges, little has changed since President Eisenhower warned in the 1950s of a 'military industrial complex'. As Galbraith says, 'a large, vital and expanding part of what is called the public sector is for all practical effect in the private sector... much [arms expenditure] is at the initiative and with the authority of the arms industry and its political voice - the private sector.

Galbraith gave a dire warning of what would happen if Bush was re-elected. 'Under the thrust of power of present forces, including the money-making powers, there's going to be a continuing and disastrous [American] decline. The Rumsfelds and the Cheneys will still be there, and anyone with a grasp of world history should be here to report it.' He smiled and said: 'Why don't you do that?'

The great man feels passionately. 'In all my 90-odd years, I've never had such a clear view of the future,' adding with a twinkle in his eye, 'with still, of course, the possibility of being wrong.' But only the possibility. 'I have a feeling that not since the end of World War Two have we had such a time when the role of wisdom, action and misunderstanding in the US has such worldwide consequences.'

He says he is now working on a new book. With that he was assisted into a chair (made in Newcastle, England) that hoisted him up the stairs, as if on a domestic funicular railway, for his afternoon nap.

As he disappeared from sight he called out: 'There's just one more thing.' His nurse brought down a car bumper sticker, with a picture of George Bush. The slogan was: 'Some things were never meant to be recycled.'