John Kenneth Galbraith

John Kenneth Galbraith (born 1908) was a leading scholar of the American Institutionalist school and arguably the most famous economist in the post World War II world. His views were a stinging indictment of the modern materialistic society that championed personal achievement and material well-being over public interest and needs. In spite of these views, he served as an advisor in both the American and Canadian governments from the 1930s onward.

John Kenneth Galbraith was born on October 15, 1908 in southern Ontario, Canada, on the shores of Lake Erie to a farming family of Scotch ancestry. He studied agricultural economics at the Ontario Agricultural College (then part of the University of Toronto; now, the University of Guelph) and graduated with distinction in 1931. He went on to study agricultural economics at the University of California, receiving his Ph.D. in 1934 after submitting a dissertation on public expenditures in California counties. In this year he also began his long, though frequently interrupted, tenure at Harvard University, where he became an emeritus professor. Galbraith's academic career frequently gave way to public service. He worked in the Department of Agriculture during the New Deal and in the Office of Price Administration and Civilian Supply during World War II, where, according to John S. Gambs, he was "virtually the economic czar of the United States until he left in 1943" From his wartime work emerged a monograph, The Theory of Price Control (1952), which, though not widely influential, contained some of the seminal ideas of his major works.

After the end of the war in Europe, Galbraith worked with the Office of Strategic Services directing research on the effectiveness of the Allies' strategic bombing of Germany. In 1947 he was one of the liberal founders of the Americans for Democratic Action. After working prominently as a speechwriter in the presidential campaigns of Senator Adlai Stevenson, Galbraith went on to chair the Democratic Advisory Council during Dwight D. Eisenhower's Republican administration. In 1956 he visited India where his fascination with the country inspired his later works. He campaigned for President John F. Kennedy, and after Kennedy's victory he was named U.S. ambassador to India in the early 1960s. An outspoken critic of U.S. involvement in Vietnam, he campaigned on behalf of the presidential ambitions of Senators Eugene McCarthy (1968) and George McGovern (1972). Later he worked in the campaigns of Congressman Morris Udall (1976) and Senator Edward Kennedy (1980).

Galbraith's major intellectual contributions lie in the trilogy The Affluent Society (1958), The New Industrial State (1967), and Economics and the Public Purpose (1973). Along the way he published over 20 other books, including two novels, a co-authored book on Indian painting, memoirs, travelogues, political tracts, and several books on economic and intellectual history. He also collaborated on and narrated a Public Broadcasting System television series, "The Age of Uncertainty."

American Capitalism

Other than his main trilogy, and perhaps The Theory of Price Control, Galbraith's American Capitalism: The Concept of Countervailing Power (1952) stands out in importance. The central argument of this book is that the growth of economic power in one economic sector tends to induce countervailing power from those who must bargain with the powerful. Hence, unionized labor and politically organized farmers rose in response to powerful manufacturers. The government is often involved in supporting the rise of this countervailing power and, in Galbraith's view, should be.

With its characteristic emphasis on the reality of economic concentration and on the microeconomics background of stabilization issues, this book solidified Galbraith's position as a continuing spokesperson for the New Deal perspective in economics. Galbraith coupled the new economics of John Maynard Keynes with the New Deal corporatist view, as did other Institutionalists of the time, notably C.E. Ayres and Allan G. Gruchy. With this book Galbraith's interest in power and his strong dissent from the neoclassical synthesis which was maturing at that time were set. The competitive modes so often used in economics textbooks, which had then been resurrected in the neoclassical synthesis which combined neoclassical microeconomics with Keynesian macroeconomics, maintain that good results follow from certain assumptions about the structure of the economy. Galbraith argued that such assumptions are not met in the actual economy, are unlikely to ever be met, and probably should not be met. He recognized power as an essential element of economic life and argued that only by examining the power of corporations, unions, and others could economists address the vital issues of social control and economic policy.

The Affluent Society

The Affluent Society examined the continuing urgency that affluent societies attach to higher consumption and production. The general explanation for this paradox, familiar to students of Veblen, is that obsolete ideas are held over from one historical period to another. These ideas persist not by inertia alone but also because they are convenient to powerful vested interests. The Affluent Society argued that the outmoded mentality of more-is-better impeded the further economic progress that would be possible if contemporary affluence were put to more reasonable use. Advertising and related salesmanship activities create artificially high demand for the commodities produced by private businesses and lead to a concomitant neglect of public sector goods and services that would contribute far more to the quality of life.

Galbraith's breakthrough as a best-selling author came with The Affluent Society. The widespread attention guaranteed some, albeit reluctant, hearing of his dissenting ideas in the economics profession. Indeed, he was eventually honored with the American Economic Association's prestigious presidency over the objections of some of the association's more conservative members. With its emphasis on the role of culture and history in economic life, and especially its review of the debilitating effects of an invidious pecuniary culture which seemingly had no higher social purpose than expanding material welfare, The Affluent Society gave a much needed awakening to the American Institutionalist school of economics. The book also influenced both the Great Society program and the rise of the American "counterculture" in the 1960s.

The New Industrial State

In The New Industrial State Galbraith expanded his analysis of the role of power in economic life. A central concept of the book is the revised sequence. The conventional wisdom in economic thought portrays economic life as a set of competitive markets governed ultimately by the decisions of sovereign consumers. In this original sequence, the control of the production process flows from consumers of commodities to the organizations that produce those commodities. In the revised sequence, this flow is reversed and businesses exercise control over consumers by advertising and related salesmanship activities.

The revised sequence concept applies only to the industrial system—that is, the manufacturing core of the economy in which each industry contains only a handful of very powerful corporations. It does not apply to the market system in the Galbraithian dual economy. In the market system, comprised of the vast majority of business organizations, price competition remains the dominant form of social control. In the industrial system, however, comprised of the 1,000 or so largest corporations, competitive price theory obscures the relation to the price system of these large and powerful corporations. In Galbraith's view, the principal function of market relations in this industrial system is not to constrain the power of the corporate behemoths but to serve as an instrument for the implementation of their power. Moreover, the power of these corporations extends into commercial culture and politics, allowing them to exercise considerable influence upon popular social attitudes and value judgments. That this power is exercised in the shortsighted interest of expanding commodity production and the status of the few is both inconsistent with democracy and a barrier to achieving the quality of life which the new industrial state with its affluence could provide.

The New Industrial State not only provided Galbraith with another best-selling book, it also extended once again the currency of Institutionalist economic thought. The book also filled a very pressing need in the late 1960s. The conventional theory of monopoly power in economic life maintains that the monopolist will attempt to restrict supply in order to maintain price above its competitive level. The social cost of this monopoly power is a decrease in both allocative efficiency and the equity of income distribution. This conventional economic analysis of the role of monopoly power did not adequately address popular concern about the large corporation in the late 1960s. The growing concern focused on the role of the corporation in politics, the damage done to the natural environment by an unmitigated commitment to economic growth, and the perversion of advertising and other pecuniary aspects of culture. The New Industrial State gave a plausible explanation of the power structure involved in generating these problems and thus found a very receptive audience among the rising American counterculture and political activists.

Third Book of the Trilogy

Economics and the Public Purpose, the last work in Galbraith's major trilogy, continued the characteristic insistence on the role of power in economic life and the inability of conventional economic thought to deal adequately with this power. Conventional economic thought, with its competitive model and presumptions of scarcity and consumer sovereignty—what Galbraith called the "imagery of choice"—serves to hide the power structure that actually governs the American economy. This obscurantism prevents economists from coming to grips with this governing structure and its untoward effects on the quality of life. Galbraith employed what he called "the test of anxiety" in this attack on conventional economics. He argued that any system of economic ideas should be evaluated by the test of anxiety—that is, by its ability to relate to popular concern about the economic system and to resolve or allay this anxiety. Galbraith contended that conventional economic thought failed the test of anxiety and again offered his basic model from The New Industrial State as an alternative approach to understanding the contemporary economy.

After the years he served in both the American and Canadian governments, Galbraith returned to scholarly activity, extensive travel, and writing, using Harvard University as his home base. Although "conventional economic wisdom" has remained firmly entrenched, Galbraith continued to kick at some of the props supporting it. In January 1997 Galbraith, delivering a lecture at the University of Toronto, again espoused his views that governments should create jobs by direct intervention in the economy. Although he represented the obscure Institutionalist school of economic thought, he nonetheless continued to convey his message that "there must be, most of all an effective safety net [of] individual and family support for those who live on the lower edges of the system. This is humanely essential. It is also necessary for human freedom. Nothing sets such stern limits on the liberty of the citizen as the total absence of money." Only the future will likely force a resolution of Galbraith's principles. Either the visibility of the Institutionalist perspective will rise or Galbraith's work will experience the neglect common to other scholars of that school. Nonetheless, Galbraith's influence on the structure of the American economy will be felt for decades to come.

Further Reading

The best biographical work on John Kenneth Galbraith is his highly readable memoir, A Life in Our Times (1981). His influence and discussions of his work show up frequently in the Journal of Economic Issues. The book-length secondary literature on Galbraith includes Allan G. Grunchy, Contemporary Economic Thought (1972); Charles H. Hession, John Kenneth Galbraith and His Critics (1972); Myron E. Sharpe, John Kenneth Galbraith and the Lower Economics (1973, 2nd ed., 1974); John S. Gambs, John Kenneth Galbraith (1975); C. Lynn Munro, The Galbraithian Vision (1977); Frederick J. Pratson, Perspectives on Galbraith (1978); and David Reisman, Galbraith and Market Capitalism (1980). □

Galbraith, John Kenneth 1908-2006

BIBLIOGRAPHY

John Kenneth Galbraith was an institutional economist, Harvard professor, advisor to presidents, bureaucrat, ambassador to India, raconteur, caustic wit, and man of letters. His concepts of countervailing power, the affluent society, conventional wisdom, want creation, and the technostructure of the industrial state have become part of the modern vernacular and the battle for the controlling metaphors of economics and politics. Born on a farm in southern Ontario, Canada, he attended Ontario Agricultural College, graduating in 1931. His family and community background are detailed in his memoir, The Scotch (1964). A desire to understand the causes of the Great Depression led him to seek a PhD in agricultural economics at the University of California, Berkeley, graduating in 1934. The influence of Progressive Era economists such as Richard Ely (1854–1943), John R. Commons (1862–1945), and Thorstein Veblen (1857–1929) was in evidence and it created an atmosphere accepting of the New Deal initiatives of President Franklin D. Roosevelt (1882–1945).

Galbraith’s first job involved research in agricultural economics under the tutelage of Harvard professor John D. Black (1883–1960), who was well connected in Washington, D.C. Before beginning, Galbraith served as a summer intern in the Agricultural Adjustment Administration. There he learned the role of power in the economy as he witnessed southern congressmen stopping the payment of agricultural subsidies to tenant farmers (mostly blacks). During World War II (1939–1945), Galbraith was placed in charge of price control and rationing in the Office of Price Administration. The political pressure from business was intense, charges of communism flew, and Galbraith was fired in 1943.

Galbraith’s writing and analysis led to a stint at Fortune magazine from 1943 to 1948. During this time, he also participated in the Strategic Bombing Survey to assess the role of air power in winning the war. The survey concluded that strategic bombing played a minor role and that ground troops were essential in both Germany and Japan. Galbraith later objected to what he called “military Keynesianism”—stimulating the economy via military spending at the expense of social programs.

Upon his controversial return to Harvard, Galbraith wrote American Capitalism (1952), in which he argued that a decentralized private economy excelled in production and innovation. He further maintained that concentration and bigness were inevitable. Countervailing the power of buyers, unions, and government would be more effective in controlling the seller’s power than traditional antitrust.

In his best-selling Affluent Society (1958), Galbraith observed that wealthy economies were no longer typified by scarcity. In fact, corporations maintained themselves by creating demand, rather than merely responding to it, as the “conventional wisdom” had it, producing what he called the “dependence effect.” He observed a “social imbalance” between abundant private consumption goods and inadequate publicly provided goods, such as education, clean air and water, and transportation. His description of “the family which takes its mauve and cerise, air-conditioned, power steered, and power-braked car out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards and posts” (1958, pp. 199–200) has become legendary and still applies today.

The New Industrial State (1967) describes giant corporations that are run and planned by a hired bureaucratic technostructure rather than owners and that strive for survival and independence rather than profit maximization. Advertising, information management, and access to government are key assets. The economy cannot be understood without attention to the use of power in both politics and business. Robert M. Solow contested Galbraith’s argument that giant corporations controlled the economy (1967). But, after subsequent decades of mergers, Galbraith’s concerns seem warranted. Solow also objected to Galbraith’s “revised sequence” of consumption (want creation rather than only prior want fulfillment) by asserting that advertising only serves to cancel other advertising. Galbraith’s concerns drew the label of “sociologist” from Milton Friedman (1912–2006), and along with Galbraith’s argument that public planning must balance the private planning of the corporate technostructure, the label of “socialist.”

Galbraith questioned the monotheistic worship of gross domestic product as the test of a good society and wondered if the same energy (and the discipline of economics itself) might be better directed toward social harmony, aesthetic enjoyment, and leisure. Galbraith remained a social critic until his death in 2006.

SEE ALSO Liberalism; Wage and Price Controls

BIBLIOGRAPHY

PRIMARY WORKS

Galbraith, John Kenneth. 1952. American Capitalism: The Concept of Countervailing Power. Boston: Houghton Mifflin.

Galbraith, John Kenneth. 1958. The Affluent Society. Boston: Houghton Mifflin.

Galbraith, John Kenneth. 1964. The Scotch. Boston: Houghton Mifflin.

Galbraith, John Kenneth. 1967. The New Industrial State Boston: Houghton Mifflin.

Galbraith, John Kenneth. 1983. The Anatomy of Power. Boston: Houghton Mifflin.

SECONDARY SOURCES

Parker, Richard. 2005. John Kenneth Galbraith: His Life, His Politics, His Economics. New York: Farrar, Straus, and Giroux.

Reisman, David. 1980. Galbraith and Market Capitalism. New York: New York University Press.

Sasson, Helen, ed. 1999. Between Friends: Perspectives on John Kenneth Galbraith. Boston: Houghton Mifflin.

Solow, Robert M. 1967. The New Industrial State or Son of Affluence. The Public Interest 9: 100–108.

A. Allan Schmid

GALBRAITH, JOHN KENNETH 1908-

Economist and teacher

Criticizing Materialism

John Kenneth Galbraith made his name in 1958 with the publication of The Affluent Society, a critical look at the "conventional wisdom" that dominated American economic and social life at the time. The book was a rarity, a scholarly work on economics that received main-stream attention and became a best-seller. Its popularity was even more surprising, perhaps, considering its stinging indictment of modern materialist society, which, Galbraith claimed, champions private wealth and productivity over public needs.

Early Life

Galbraith was born to Scottish-Canadians on the shore of Lake Erie near the United States-Canada border. He graduated from an agricultural branch of the University of Toronto and then pursued advanced degrees in economics from the University of California. In 1934 he accepted an offer to teach at Harvard University. For the next ten years he worked at a variety of scholarly positions; he also became involved in government service. In 1941 he was in Washington, D.C., as deputy administrator of the Office of Price Administration, a position which, as John S. Gambs reports, "made him virtually the economic czar of the United States until he left in 1943."

Political Roles

In 1952 Galbraith played an important role in the presidential election as a speechwriter for Democratic candidate Adlai Stevenson, along with literary critic Bernard De Voto and playwright Archibald MacLeish. After Stevenson lost the election to Dwight D. Eisenhower, Galbraith found a role in the Republican administration as the chairman of the Democratic Advisory Council. In the late years of the decade he campaigned actively for John F. Kennedy, and in 1960, after Kennedy's successful presidential bid, he was named U.S. ambassador to India.

Inspired by India

Galbraith had first visited India in 1956, and his fascination with the country partly inspired his most famous work, The Affluent Society. In a desperately poor society such as India's, almost all of the products consumed are urgently needed—food, clothing, and shelter. As a society becomes more prosperous, many unnecessary goods are produced as well, and they must be purchased in order to maintain the country's high level of production and employment. In affluent societies, Galbraith claimed, demand followed production, and people bought products because they were persuaded to do so by advertisers.

Social Imbalance

This commitment to private affluence, Galbraith argued, led to social imbalance: social programs and environmental concerns were ignored, and production of more cars and televisions was viewed as social progress. Only by adopting a new standard of productivity, one that led to real social progress, could balance be achieved. Critics of The Affluent Society argued that Galbraith was attempting to deny a basic American social freedom: free Americans were first and foremost free to buy things. But many of Galbraith's ideas had an impact on the policies of Presidents Kennedy and Lyndon B. Johnson. Urban renewal and conservationism, concepts that were to become part of Johnson's Great Society, were all advocated in The Affluent Society.

Later Work

After the Kennedy years Galbraith returned to scholarly activity. He has traveled and written extensively over the last several decades, using Harvard as his home base. His varied literary output includes several memoirs of his eventful life. Although conventional wisdom has remained firmly entrenched, Galbraith has continued to kick at some of the props supporting it.

Sources:

John Kenneth Galbraith, A Life in Our Times (Boston: Houghton Mifflin, 1981);

John S. Gambs, John Kenneth Galbraith (Boston: Twayne, 1975).

John Kenneth Galbraith , 1908–2006, American economist and public official, b. Ontario, Canada, grad. Univ. of Toronto (B.S., 1931), Univ. of California, Berkeley (M.S., 1933; Ph.D., 1934). After becoming (1937) a U.S. citizen and teaching economics at Harvard (1934–39) and Princeton (1939–40), he entered government service, working (1941–43) in the Office of Price Administration. He was an editor of Fortune magazine from 1943–48, also serving on the U.S. Strategic Bombing Survey (1945) and in other governmental advisory posts before returning (1949) to Harvard. An adviser to Democratic presidents from Franklin D. Roosevelt to Bill Clinton, most prominently to John F. Kennedy , he also was (1961–63) U.S. ambassador to India. He rejoined the Harvard faculty in 1963 (he became a professor emeritus in 1975) and continued his political activities, serving (1967–69) as chairman of Americans for Democratic Action. A Keynesian economist and a celebrated liberal, Galbraith advocated government spending to fight unemployment, supported the use of more of the nation's wealth for public services and less for private consumption, and warned against an unregulated free-market system. An influential thinker and a popularizer of economic thought, he wrote more than 40 books including American Capitalism (1952), The Great Crash 1929 (1955), The Affluent Society (1958, rev. ed. 1985), The Liberal Hour (1960), The New Industrial State (1967, rev. ed. 1971), Economics and the Public Purpose (1973), The Good Society (1997), and The Economics of Innocent Fraud (2004). A witty and urbane man with wide-ranging interests, he also wrote a book on Indian art (1968) and several novels.

Bibliography: See his memoir, The Scotch (1964, repr. 1985); autobiography, A Life in Our Times (1981); Ambassador's Journal (1969); and history, Name-Dropping: From FDR On (1999); J. Goodman, ed., Letters to Kennedy/John Kenneth Galbraith (1998); J. R. and J. B. Stanfield, ed., Interviews with John Kenneth Galbraith (2004); A. D. Williams, ed., The Essential Galbraith (2001); biography by R. Parker (2005); studies by C. H. Hession (1972), M. E. Sharpe (1973), A. D. Williams (1979), D. Reisman (1980), J. R. Stanfield (1996), H. Sasson, ed. (1999), and B. Laperche and D. Uzunidis, ed. (2005).

Galbraith, John Kenneth. See Affluent Society, The.