John Kenneth (J. K.) Galbraith (1908-2006)
Influential Canadian-born American economist (pictured right) who attacked the power of big business and pursued
wisdom, even if few people realized what it was.
“In economics, the majority is always wrong”, he said.
The Great Crash, 1929
The Wall Street stock market crash in 1929 was primarily caused by:
- “the speculative orgy that preceded it”.
- an irresponsible desire to make money.
The predictors of disaster in Wall Street kept quiet, because speaking out would have ruined many speculators
and led to the “ultimate horror” of government intervention.
So there will be another crash one day (as in 2008 during the global banking crisis).
Key quote on
The sense of responsibility in the financial community for the community as a whole is not small. It is nearly
The Affluent Society
The affluent society (based upon free market capitalism and the acquisition of wealth) is the
“conventional wisdom” (that Galbraith defines as “acceptable ideas”).
But free market capitalism (without government economic intervention) is inadequate for these reasons:
1. It led to the Great
Depression of the 1930’s
Huge unemployment was caused by low government spending.
2. It widens the gap between
rich and poor
The “theory of social balance” states that a capitalist economy produces an overabundance
of goods produced by businesses and a meagre supply of public services like schools.
This leads to Galbraith’s famous dictum “private opulence, public squalor”.
Government policies to control prices and incomes are necessary to reduce inflation
which hits government employees the hardest.
3. Big businesses are too
powerful and create demand for their products (e.g. through advertising)
This is illustrated by the “dependence effect” - how increases in
people’s spending follow increases in production in an ever-upward spiral because of:
- the great social value given to material acquisition.
Key quotes on wealth and
In an atmosphere of private opulence and public squalor, the private goods have full sway. Schools do not
compete with television and the movies.
To refuse to consider how we use our wealth is to fail to see why some people remain permanently poor
(Introduction to second edition, 1969).
Key quotes on change and
It is a far, far better thing to have a firm anchor in nonsense than to put out on the troubled seas of thought
(attacking the safety of ignorance).
Obsolescence has occurred because what is convenient has become sacrosanct.
The New Industrial State
The world is dominated by large corporations each run by a “technostructure” (dedicated
management specialists working in groups) that is driven by technological change and the interests of the
corporation, not society.
The technostructure and other employees are motivated by:
- pecuniary rewards (money).
- adaptation (of the organization’s goals by employees to achieve their own).
- identification (where the goals of employees and the organization are the same).
- compulsion (the organization forcing people to accept its goals).
Key quotes on business ethics and
Individuals have souls; corporations are notably soulless.
For any organization...the goal or objective that has a natural pre-eminence is the organization’s own survival.
This, plausibly, is true of the technostructure.
Economics and the Public Purpose
Big businesses are necessary for economic prosperity and so good public services but they must be controlled by
the “countervailing power” of the government and an informed electorate, if people’s welfare
is to be achieved,
Galbraith first used the term countervailing power in his book, American Capitalism
Social progress also depends on not only prosperity but also
- balance between life and work.
Key quotes on power, economics and
Left to themselves, economic forces do not work out for the best except perhaps for the most powerful.
One cannot have a socially excellent economic system without having an economic system.
The Culture of Contentment
The affluent majority strongly protect and morally justify their privileged position in a “culture of
contentment”. They oppose:
- income redistribution from rich to poor and high taxes
- government spending (except in areas of self-interest like defence, health and
Organizations also suffer from contentment, because managers refuse to get out of their comfort
zone and challenge what their organization is doing.
The “trickle-down theory” wrongly assumes that helping the rich will help the poor.
Key quotes on wealth and
Nothing in the age of contentment ...so contributes to social tranquillity as some screams of anguish from the
The only effective design for diminishing the income inequality inherent in capitalism is the progressive income
The present age of contentment will come to an end only when and if the adverse developments that it fosters
challenge the sense of comfortable well-being.