Commentary Magazine

Economics and the Public Purpose, by John Kenneth Galbraith

Orthodox Unconventionality

Economics and the Public Purpose.
by John Kenneth Galbraith.
Houghton Mifflin. 334 pp. $10.00.

Success must be very frustrating for Professor Galbraith. He has now spent a lifetime attacking the “conventional wisdom” of society, criticizing his fellow economists for clinging to outmoded ideas, and advocating a variety of heterodox policies. He has done so with wit, elegance, and passion. But what happens? He ends up not as a prophet in the wilderness but as the pet intellectual of the mass media. His fellow citizens send him abroad to represent their country. His fellow economists elect him as the president of their association. His ideas about changing the balance between private consumption and public investment have become everyday slogans of political discourse.

For someone who appears to pride himself on being unorthodox, who takes so much pleasure in trying to shock his audience, this must be a disconcerting experience. And much of the interest of Galbraith's latest book lies in the stratagems he adopts to meet the challenge of success and acceptance.

The starting point of Galbraith's argument, following on The Affluent Society and The New Industrial State, is that any resemblance between the traditional market model of the economy and reality is coincidental. Far from the consumer calling the tune, decisions are made by the “technostructure” of managers, technocrats, and bureaucrats straddling the worlds of the big corporations and government. This technostructure is primarily interested not in maximizing profits but in maximizing its own security and growth. To this end, it plans its own progress by limiting competition, by manipulating the consumer through advertising, and by harnessing the expenditures and policies of government to its own ends.

Much of this is familiar, if only because it repeats what Galbraith has been writing over the years. How, then, can it be given a gloss of unorthodoxy? The answer is by presenting Galbraith's fellow economists as a band of fuddy-duddies—subscribing to the “neo-classical model” of the economy, worshipers at the shrine of Adam Smith and other false prophets, so deluded by their theories that they cannot see what goes on in the world around them, and consequently indoctrinating their students with at best irrelevant, at worst damaging, notions.

Galbraith's fellow economists can, no doubt, take care of themselves. If his picture of them is a caricature, they are capable of saying so. More serious is the price Galbraith pays for his insistence on distinguishing his own views from the professional consensus (although he does admit that a few converts have gathered around him). This leads him to adopt an inflationary verbal rhetoric of exaggeration: just as in Gresham's law bad money drives out the good, so in Galbraith's case the exaggerated arguments drive out the good ones.

Take, for example, his central argument that in the planning system the power of the producer has replaced the power of the consumer. In a weak form, this argument would command widespread agreement: Galbraith's point that employers and trade unions share a common interest in raising wages and prices, rather than adjusting both to consumer demand as the classic model demands, has been given added point by the inflation of the past year. But he is not satisfied to argue, with the majority of economists, that the traditional model is imperfect. He wants to demonstrate that it is irrelevant. And that involves him in some curious verbal slitherings.

Galbraith's argument demands that the consumer be presented as the passive victim of the planning system. At one point we read that the “admirable vision of the ultimate power of the user cannot be sustained, however, if his tastes and needs fall under the authority of the producer.” But a few lines later this thundering phrase appears in a minor key, and becomes “a measure of authority.” Subsequently, there are further variations still, with producers having “effective power over the users,” “the power to influence the individual consumer,” “the power to manage the individual consumer,” and so on. Later Galbraith concedes that the process of consumer management by producers is imperfect and incomplete. But if it is, and if for “authority” and “power” it is better to read influence and persuasion, what is left of Galbraith's model? Classic economic theory is held up to ridicule by him for holding that the consumer is sovereign. But why, then, should we accept Galbraith's anti-model of producer sovereignty? Why substitute one inadequate model for another?


In any case, Galbraith himself now clearly realizes that this is an incomplete picture. So in this book he introduces and develops a further idea: that alongside the planned system of the technostructure, there exists also a market economy—“the world of the farmer, repairman, retailer, small manufacturer, plumber, television repairman, service-station operator, medical practitioner, artist, actress, photographer, and pornographer.” This fragmented market economy is, in Galbraith's view, where the traditional model of cutthroat competition still applies, with the consumer dictating to the producer. As a result, he argues, the market economy is exploited by the planning system. This exploitation is all the worse for often being self-induced: the farmer and his family, and the others, are so deluded by the work ethic—such slaves to the conventional wisdom of society—that they voluntarily work longer hours for smaller rewards than do those employed in the planning system.

Obviously, there is an implicit contradiction between this theme and Galbraith's insistence, when discussing the planning system, that the consumer is a sort of idiot child. If the consumer is so manipulable by the technostructure, why does he become the conventional figure of the economic textbooks in pursuit of his own self-interest when he deals with a repairman or shopkeeper? Galbraith's answer would seem to be that the big corporations can spend millions brainwashing the public while small firms cannot. To this, though, there is a very simple reply, if one adopts one of Galbraith's own strategies for dealing with inconvenient criticisms and for giving an appearance of bold unorthodoxy: this is that Galbraith himself has been brainwashed by Madison Avenue's claims for its own products—advertising. For one of his most irritating habits is to present himself as the one man who sees the truth behind appearances—who can distinguish (like the Marxists) between false and real consciousness or (like the Freudians) between rationalizations and real motives. If one disagrees with him, one therefore stigmatizes oneself as conventional in thought and conformist in one's views; if one agrees with him, one becomes part of the select band of those who are not deceived by the “socially convenient virtues” and who sees them for what they are—the values propagated by the planning system in order to further its own purposes.

Irritation is compounded by the fact that Galbraith is right to question conventional wisdom, then spoils a good case by his intellectually arrogant assumptions about the motives of other people. Underlying much of his thesis is the belief that most people simply do not know what is good for them, but that Professor Galbraith does. It is just conceivable, after all, that the real power of the technostructure rests not on its ability to control the consumer but on its readiness to adjust its activities to the self-interest of the majority of the public. This does not necessarily make those activities any more admirable: it is still possible to argue, with Galbraith, that too little emphasis is placed on social activities like the arts. But it does make them comprehensible in a way Galbraith's assumptions do not. As he correctly points out, the common interests of managements and unions frequently outweigh their differences; however, he fails to draw from this the appropriate conclusion—that the technostructure now has a constituency measured in millions, and that its power rests on the concordance of its self-interest with that of a very large section of the population. The values of that population may not be Professor Galbraith's (or mine, for that matter); that does not mean that they can be dismissed as artificial or corrupted by advertising.


Altogether there are a number of odd features about Galbraith's line of reasoning. Implicit in his whole argument is the idea that there is some sort of “right” or “appropriate” standard of living—rather like the medieval just wage—beyond which consumers can only be induced to go by persuasion and manipulation. But this is too crucial a point, surely, to be left implicit and unargued. If this is indeed Galbraith's view (and it is difficult to see how it cannot be), then the onus is on him to specify what the right standard of living is. It is clear that he thinks too much is spent on cars and too little on mass transit; but what, in this context, is too much? Again, in referring to innovations which are produced to satisfy the desire of the technostructure to expand rather than real needs, he can do no better than cite plastic grass and genital deodorants—which hardly make a significant dent in the GNP, I should imagine.

More fundamentally still, there is a contradiction at the root of Galbraith's argument. The technostructure, he rightly points out, is concerned to maximize its own satisfactions, not profits. Its members want security for themselves, opportunities to exercise their own expertise, and chances of promotion. Hence, he concludes, the emphasis on economic growth, irrespective of social considerations about pollution and so on. But he fails to notice, oddly enough, that the values he imputes to the technostructure may have a wider appeal. After all, it doesn't need an advertising campaign or any great effort of persuasion to make people value security, opportunities, and promotion prospects. In short, the technostructure may well be delivering the goods—in a general, not specific, way—that most people want.

There remains Galbraith's other indictment of the planning system: that it involves the exploitation of the market economy. Here there is a very real problem in following his argument: its imprecision is such as to make it difficult to discuss in detail. (At one point Galbraith says: “In assessing the public influence of the planning system, there is danger in being too specific. Its greatest source of such power is subjective.” This sort of assertion seems to put Galbraith's thesis beyond rational proof or disproof.) About the only evidence cited by him is that in 1971 average hourly wages in durable-goods manufacture were $3.80, while in services, retail trade, and agriculture the equivalent figures were respectively $2.99, $2.57, and $1.48. All this suggests to me that the workers in these industries were underpaid, perhaps because the unions are weak in these sectors; it does not tell me anything about the income of the owners of small businesses, farms, and so on—or, perhaps more important, about the range of income distribution as among different sectors and different parts of the United States. In any case, since Galbraith includes medical practitioners and pornographers in this category—not conspicuously exploited occupations—it is impossible to know just how wide an application his generalization has.

But, then, Galbraith tends to be contemptuous of those who dare to ask for such precision. In doing so, I am again in danger of stigmatizing myself. For as a footnote points out, “the standard (and highly effective) weapon of the defenders of established belief is to argue that any challenge is deficient in scholarship and therefore intellectually disreputable. . . . Scholars of the most mediocre mind are often the most vehement.” To argue with Galbraith over facts is therefore to label oneself as both conventional and mediocre, and what could be more terrible than that? Still, accepting the risk, I think it worth citing one example of Galbraith's belief that the reiteration of assertions is an adequate substitute for reasoned arguments.

This comes out most clearly in his discussion of the position of women (a new departure for Galbraith; women do not feature in the indices of his two previous books and for once he seems to be following rather than setting fashions). Women, he writes, have become a crypto-servant class: sacrificing their careers on the altar of economic growth. “In few other matters has the economic system been so successful in establishing values and molding resulting behavior,” he concludes. So one would naturally expect that as the planning system has developed, the number of women imprisoned in their own households and occupied in promoting consumption will have increased. In fact, as Galbraith could have discovered by consulting the Brookings Institution's Setting National Priorities: The 1973 Budget—a not altogether inaccessible or obscure publication—precisely the reverse has happened. In 1940 less than 10 per cent of all mothers with children went out to work. In subsequent decades the figure rose steadily, and by 1970 it was above 40 per cent. Yet oddly enough, consumption rose steadily over these decades. Using Galbraith's methods, one is almost tempted to diagnose an inverse relationship between economic growth and the role of women: growth increases as women emancipate themselves from their crypto-servant role.

The same sort of disdain for facts is evident elsewhere in the book. The interests of the techno-structure, Galbraith argues, tend to promote expenditure on defense rather than on social purposes. Again, this is less than self-evident. Expenditure on defense fell from 41.8 per cent of the federal budget in 1950 to 33.0 per cent in 1974 (Setting National Priorities: The 1974 Budget), while expenditure on cash income maintenance rose from 15.2 per cent to 30.3 per cent. These figures are far from conclusive, even though they seem to point in the opposite direction from that assumed by Galbraith's argument. Still, at the very least, they need discussion.


Given the flimsy foundations, it is not surprising that Galbraith's superstructure of proposals for reform is ramshackle. These fall into two categories. First, he proposes more public ownership—both in the planned system of the big corporations (where control has long since passed from the nominal owners of the capital in most cases) and in the market sector (where some form of public monopoly, as in medical care, may be preferable to the chaos of the market). Second, though, he concedes that transferring control from corporation managers to government bureaucracies leaves the technostructure untouched—and, if anything, reinforces its grip on power. So there follow a number of political proposals. Congressmen, for example, should not serve for more than one term, since otherwise they themselves become sucked into the technostructure. Above all, “the all-important question in choosing a President must henceforth be whether the candidate distinguishes the planning from the public interest and is committed to the latter.”

Writing this review from Britain, I find it possible to take a fairly detached view of the proposals for greater state ownership and control. Once, this might have been denounced as socialism; now it is practiced even by conservative governments. While the U.S. government underwrote the Lockheed company, the Tory government in Britain actually took Rolls-Royce into public ownership. But the British experience has not only shown prophecies of catastrophe to be wildly wrong; it has also shown unexpected difficulties. Most people would probably agree that the British National Health Service is vastly preferable to anything found in the United States. But one of the hallmarks of its success has been its ability to provide a reasonable service, while keeping costs down: it absorbs a much smaller proportion of the national income than medical care in the U.S. This suggests a very different conclusion from that drawn by Galbraith, who always quotes medical care as one of his examples of under-spending on social services in the United States. It is not so much the level of spending which—above a certain minimum—determines the quality of the service provided, as the way in which the resources are distributed geographically and used by the professional running it. Even in the British NHS, the medical technostructure plays a large—and distorting—role in determining the distribution and use of resources: so far, at any rate, doctors have managed to prevent anything like political control over the policies of the NHS, though the battle is still being fought.


Here we come to the central weakness of Galbraith's whole thesis: the absence of politics. It is central because it stems directly from his analysis of the problem. If one assumes, as he does, that there is such a thing as the public interest—as distinct from shifting coalitions of self-interest—and that this has been corrupted by the planning system, then Galbraith's search for a philosopher-king-president makes some sort of sense. But if one assumes that the public interest is constantly being redefined in the light of changing ideas (including those of Galbraith) and changing self-interests, then this St. George slaying the dragon of the technostructure looks remarkably like Don Quixote. Who, after all, would be the constituency and supporters of Galbraith's ideal President—if not those poor, deluded consumers? What is the alternative power base—if not the technostructure and its allies, the unions?

Galbraith's ideas are too influential to be treated as nothing more than entertainment. It would be a pity if he continued to take the view that oversimplification is the soul of wit, and that neat generalizations are an adequate substitute for sustained, rigorous argument.

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