The Essential Galbraith - Free PDF
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t h e e s s e n t i a l Galbraith k John Kenneth Galbraith selected and edited by Andrea D. Williams A Mariner Original houghton mifflin company boston • new york 2001 books by john kenneth galbraith [a partial listing] American Capitalism: The Concept ofCountervailing Power The Great Crash,1929 The Affluent Society The Scotch The New Industrial State The Triumph Ambassador’s Journal Economics,Peace and Laughter Economics and the Public Purpose Money: Whence It Came,Where It Went The Age ofUncertainty Annals ofan Abiding Liberal A Life in Our Times The Anatomy ofPower A View from the Stands Economics in Perspective: A Critical History A Tenured Professor The Culture ofContentment A Journey Through Economic Time: A Firsthand View A Short History ofFinancial Euphoria The Good Society: The Humane Agenda Name-Dropping: From F.D.R.On The Essential Galbraith contents Preface vii Introduction ix Countervailing Power 1 fromAmerican Capitalism The Concept ofthe Conventional Wisdom 18 fromThe Affluent Society The Myth ofConsumer Sovereignty 31 fromThe Affluent Society The Case for Social Balance 40 fromThe Affluent Society The Imperatives ofTechnology 55 fromThe New Industrial State The Technostructure 66 fromThe New Industrial State The General Theory ofMotivation 79 fromThe New Industrial State Economics and the Quality ofLife 90 fromEconomics,Peace and Laughter vi C0ntents The Proper Purpose ofEconomic Development 109 fromEconomics,Peace and Laughter The Valid Image ofthe Modern Economy 118 fromAnnals ofan Abiding Liberal Power and the Useful Economist 134 fromAnnals ofan Abiding Liberal The Founding Faith:Adam Smith’sWealth ofNations 153 fromAnnals ofan Abiding Liberal The Massive Dissent ofKarl Marx 169 fromThe Age ofUncertainty Who Was Thorstein Veblen? 200 fromAnnals ofan Abiding Liberal The Mandarin Revolution 224 fromThe Age ofUncertainty How Keynes Came to America 236 fromEconomics,Peace and Laughter The Speculative Episode 249 fromA Short History ofFinancial Euphoria In Goldman,Sachs We Trust 255 fromThe Great Crash,1929 The Crash 275 fromThe Great Crash,1929 Things Become More Serious 292 fromThe Great Crash,1929 The Unfinished Business ofthe Century 307 Speech given at the London School ofEconomics,1999 Sources 315 preface Isendthisbooktopressandontomyreaderswithoneslightsense ofconcern.ItisthatsomeonewillaskwhodecidedthatthiswasThe EssentialGalbraith.Theauthorwillbeaplausiblesuspect.Infact,it wasassociates,mypublisherandthewiderprofessionalandreading publicwhowereresponsible.Theselectionhereisofwritingthatis thought to have had some durable impact on economic and other scholarly thought or on the world at large. Thus, as later noted, the piece on Countervailing Power, an ex- cerpt from American Capitalism, is still in print after nearly fifty years. The balance of power between buyer and seller therein de- scribed was considered a major modification of the traditional competitive supply-and-demand construct to which all who have studiedeconomicswereexposed.Itisperhapsameasureoftheen- duringnatureoftheterm“theConventionalWisdom,”asdefinedin the second essay, that one rarely gets through a newspaper today without encountering it. Though I try, however unsuccessfully, to conveyanaspectofmodesty,Iamalwayspleasedtohaveaddedthis phrase to the language. The Affluent Society, from which several chapters are here in- cluded,wasthemostwidelypublishedeconomicvolumeofitstime. AfterhisnominationforPresidentin1960,oneofthefirstquestions asked of John F. Kennedy was whether, if elected, he would be guidedbytheideasexpressedbyhisknownsupporterinthatbook. He responded favorably but also with a certain note ofambiguity. Later in this collection come three pieces from The Great Crash, viii Preface 1929, which was published in 1955,just after the twenty-fifth anni- versaryofthatcatastrophicevent.Itwasabestselleratthetime;soit has remained to this day. Even now, as we are launched in a new century,thereisinevitableuneaseaboutthefutureof theeconomy andtherewiththestockmarket,soaknowledgeof whathappened in 1929 is,indeed,still essential. Thereareotheressaysherewhichweresimilarlyselectedandthus selectedthemselves.Thereaderwill,Ithink,havenotroubleaccept- ingtheirrelevanceeithertohistoryortothepresentday,andIhave added some headnotes to suggest my view of their particular sig- nificance then and now. I end with a paper given at the London SchoolofEconomicsin1999ontheunfinishedbusinessofthemil- lennium; this had the largest circulation both here in the United States and around the world ofany lecture I have ever given. John Kenneth Galbraith March 2001 introduction If,asProfessorGalbraithsaysinthepreface,othersareresponsible forthecontentsofthisbook,itisofprimaryinteresttoinquirewhy hehimself eschewsthecredit.Ithasbeenwidelybelievedthatheis not a man for whom modesty is a familiar virtue,so why does he find it necessary now to step back into the shadows? The answer seemstolieinthefactthatwhathasbeenconsideredvanitycould bebetterviewedasadeepsenseofsecurity.Heissecureinhisbasic beliefsandsecurethathisreaders,forwhomhehasthedeepestre- spect,will be able to discern them.He is not given to self-analysis, andso,whileheclearlyunderstandswhatistheEssentialGalbraith, he prefers that others define it. Itshouldfirstbenotedthatinthepagesthatfollow,readerswill findJohnKennethGalbraiththeeconomistandthewriter,withlit- tletraceofthediplomat,thearthistorian,thenovelist,thebookre- viewer,thetheatercriticoreven,exceptinthelastessay,thelecturer. Thisishighlyappropriate,becauseeconomicshas,infact,beenhis chosenfieldandwritinghisobviouslyinnatetalent.Hehasalways believedthateconomicsshouldbestudiednotintheabstractorasa mathematicalconstructbutasitaffectsthelivesofmenandwomen everyday.Heisnotafraidtooverturnoratleastreexaminestrongly heldbeliefsofearliergenerations,realizingthatastechnology,com- munications and business change,so too must the economist’s in- terpretation of them. He has brought to the subject a new way of lookingattheroleofthegreatcorporationsastheyfacedthecoun- tervailing power of trade unions and consumer coalitions. He has x Introduction identified those who are the guiding intelligence of the corporate world,namingthemthetechnostructure,andhasunderminedbe- liefinwhathecallsthemythofconsumersovereignty.Abetterbal- ancebetweenpublicandprivateexpenditureshasbeenarecurring theme in his writing, with its reminder that the affluence of our contemporarysocietyshouldbemadetoextendtothepoorestand mostdefenselessof ourcitizens.Theusesof powerandthepersis- tence of financial euphoria in our public marketplace have consis- tentlyattractedhisinterest,ashavetheproblemsof thedeveloping countries,notablyIndia.Aboveall,theconstantthreadthroughhis work is his concern with how economics affects the quality of our daily lives and how it will change that ofsucceeding generations. These are some of the essentials of the Essential Galbraith, but there are more.There is his continuing fondness for certain of his economic predecessors—for the gift for language and the basic structurethatAdamSmithgavetopoliticaleconomy,fortheirrev- erenceanduniqueperceptionofThorsteinVeblen,fortheprofound effectJohnMaynardKeynesandhisGeneralTheoryofEmployment Interest and Money had and continue to have on the economic world. Finally,there is a writing style that illuminates and enhances all thatissaid:sardonichumor,felicitousphrasing,reasonedargument inreasonablewordsor,ashewouldsay,clarityofthoughtreflected in clarity ofprose. SohowcantheEssentialGalbraithbedefined?Heisacommitted liberal,acompassionateoptimist,acautiousbutfirmiconoclastand a writer whose words can change the way the world looks at its problems. And none ofthat would he ever write about himself. Andrea D. Williams March 2001 Countervailing Power [fromAmerican Capitalism] This is a chapter from one of my first books, the generously titled AmericanCapitalism,whichcameoutin1952,barelyintothesecond halfofthelastcentury.Then,andforwelloverahundredyearsbefore, a near-sacred doctrine in the economic textbooks had been the beneficent regulatory role of competition. It was the competition of many sellers that protected the consumer and also the individually powerlesswageearnerfromthefulleconomiceffectsofmonopoly.The preservation of competition through the antitrust laws—the fabled ShermanActinparticular—wasavitalelementofpublicpolicygoing back to the latter part of the nineteenth century.Now,as I argued in American Capitalism, a new process was at work: trade unions, a countering organizational force, were the obvious response to the greater power of the big corporations. Similarly, but less evidently, whentherewasoneexpressionofeconomicpower—suchasthelarge producerof consumerstaples—anotheronedevelopedintheformof thesellerof thosestaples—theA&Porthelatter-dayWal-Mart.The numerous and technically competitive farmers found their best eco- nomic recourse in purchasing cooperatives when dealing with those whoboughtandbargainedfortheirproduct.Thustheanswertomo- nopolywaslessandlesstheruleoflawandmoreandmorethecoercion of countering bargaining power.Not exceptionally,perhaps,I carried thisideasomewhattotheextreme,butitdidinvolveanimpressiveat- tack on established belief. Asubstantialnumberof economistsgreetedmythesiswithinterest
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