Friedman and GalbraithJohn Kenneth Galbraith
(1908-2006)
John Kenneth Galbraith was born in Canada and moved to the United States in the thirties. He earned his Ph.D. in agricultural economics at the University of California at Berkeley. He was one of the chief price controllers during World War II as head of the Price Section of the U.S. government's Office of Price Administration.  In 1943 Galbraith left the government to be on the editorial board of Fortune. In 1949 he became an economics professor at Harvard, where he had been briefly before the war. Galbraith was an adviser to President Kennedy, Kennedy's ambassador to India, and president of Americans for Democratic Action. He was president of the American Economic Association in 1972.

Galbraith is one of the most widely read economists in the United States. One reason is that he writes so well. He turns a clever phrase that often makes those he argues against look foolish. Galbraith's first major book, published in 1952, was American Capitalism: The Concept of Countervailing Power. In it he argued that giant firms had replaced small ones to the point where Smith's perfectly competitive model of capitalism no longer applied to much of the American economy. But not to worry, he argued. The power of large firms could be balanced by the power of large unions, so that consumers were protected by competing centers of power.

Galbraith made his biggest splash with his 1958 book, The Affluent Society. In that volume he contrasted the affluence of the private sector with the poverty of the public sector. Galbraith attacked production that was geared to "conspicuous consumption" that only satisfied a few consumer's "bizarre, frivolous, or even immoral wants." Galbraith wrote: "If the individual's wants are to be urgent, they must be original with himself. They cannot be urgent if they must be contrived for him. And above all, they must not be contrived by the process of production by which they are satisfied.... One cannot defend production as satisfying wants if that production creates the wants."

Galbraith's magnum opus was his 1967 book, The New Industrial State. Galbraith argued that the American economy was dominated by large firms. "The mature corporation," wrote Galbraith, "had readily at hand the means for controlling the prices at which it sells as well as those at which it buys." Galbraith wrote: "Since General Motors produces some half of all the automobiles, its designs do not reflect the current mode, but are the current mode. The proper shape of an automobile, for most people, will be what the automobile makers decree the current shape to be."

  1. The concept of the individual entrepreneur is a quaint myth of the nineteenth century; all truly important economic activity takes place within giant corporations.
  2. The classical economic concept of competitive struggle in the market is an anachronism, because large dominant firms control their environment and are immune to competitive pressure.
  3. The current challenge in production is to manage large capital investments in complex projects such as nuclear power plant or new passenger jets.
  4. Wages and prices are artificial creations of large corporations.
  5. Consumers are passively manipulated by advertising into serving the needs of big corporations, rather than the other way around.
  6. The United States is not really a market economy anymore; it is a planned economy run by large corporations.
  7. Antitrust law is a waste of time and energy which merely serves to enrich attorneys.
  8. The real role of the government in a liberal society is to promote full employment and a stable economy through adjustments in spending and tax rates, and to serve as a balance and "countervailing power" to large corporations.
  9. Government should not just enforce law and order and protect property rights, it must act as a "public conscience" protecting "human rights" (preventing discrimination and exploitation), modeling "social responsibility" (promoting culture and eliminating pollution), and providing "community investment" (schools, transportation, communication, healthcare).
  10. Taxation is the price paid for civilization; taxes pay for necessary investments in community infrastructure, increase equality, promote economic and social stability, and protect future generations.

Galbraith was instrumental in developing President Roosevelt's proposed Second Bill of Rights, and continued to defend government intervention to correct market failures to the end of his life.  Galbraith believed there was an excess accumulation of private wealth at the expense of public needs, and he warned that an unfettered free market system and capitalism without regulation would fail to meet basic social demands, declaring that overproduction of meaningless consumer goods was harming the public sector and depriving Americans of such benefits as clean air, clean streets, good schools, and support for the arts.

 
Selected Works

The Affluent Society. 1958.

American Capitalism. 1952.

The New Industrial State. 1967.