The practising economist cannot help observing that one book dominates the intelligent layman’s view of contemporary economics. That book is J. K. Galbraith’s The Affluent Society. Thanks to Professor Galbraith, it is now ‘radical’ to contend that, since the 1950’s, Western governments have sacrificed balance and stability to growth for its own sake; that growth is to blame for a falling share of Government activity in the national total; and that the relentless pressure of tedious manual labour, the production and advertisement of trivia, inflation, inequality, materialism and most other social evils result from our frantic search for affluence. Galbraith has done for growth what Pound sought to do for usury. And Galbraith blames, not self-interest or political pressures, but outmoded economic theories.footnote

The influence of this attitude, which seems to me to be unsound in its theoretical basis, careless in its empirical analysis and harmful in its political consequences, has been enhanced by the recent paperback republication of Professor Galbraith’s book.footnote1 The British appeal of the work stems partly from residual puritanism, but mainly from a dangerous tendency to replace serious economic analysis by the construction of emotionally-satisfying Aunt Sallies. Thus, instead of a careful study of interlocking directorships, we are offered a mythical Establishment that includes the Duke of Kent but excludes the Secretary of the Transport and General Workers’ Union. The task of the radical is to diagnose the real social inadequacies of welfare capitalism: instead, he lets Galbraith divert him into the rather trivial game of bashing the growthmen and maligning dead economists.

The central argument of the book is that the harsh world of poverty, class rigidity and slow technical change, in which 19th-century economic theory was developed, led its exponents to a pessimistic theory, which claimed that competing businessmen, to avoid bankruptcy, were driven to depress wages to subsistence level. In such an environment, maximum output seemed imperative—despite the ‘uncertain reassurance’ offered to the workers by some neo-classical writers, that under competition it would pay the employer to make over, as wages, the value of the worker’s addition to the product.footnote2 Marshall softened one element of the classical account: he argued that, by accepting an ‘economic’ wage, the worker could always find a job. On the other hand the American ‘social Darwinists’ turned the rigours of that account into virtues, and claimed that Governmental intervention in the economic process impeded the survival of the fittest.

Meanwhile (Galbraith reports) Marx—while accepting the classical theorem that competing capitalists depressed wages to subsistence-level—passionately rejected both the justice and the durability of such a system. Falling wages, Marx claimed, meant falling purchasing power, growing unsold stocks and hence slumps, deepening into ultimate revolution. Galbraith rightly points to the influence of this analysis on non-Marxists (for instance, in their emphasis on the danger, as well as the injustice, of large income inequalities under capitalism). But—and this is the nub—the clamour for equality can, we are told, be stilled by rising output (and hence income). Thus the rich develop a ‘vested interest in output’ and align themselves with the neo-classical economists. That interest is strengthened by the memories of people who were unemployed or bankrupted in the 1930’s and who thus link high output and personal security; and by the ‘illusion’ that affluence and national security are linked in the same way.

Galbraith argues that this emphasis on output, developed to improve the subsistence wage at a time of mass poverty, supported by vested interests and fuzzy memories, is now absurd. By definition, as we grow richer, we satisfy less and less essential wants (for we satisfied the more essential ones first). Today’s wants are particularly unimportant, because the ‘vested interest in output’ is expressed through the creation of wants, a creation of the very people who then profit by fulfilling them. ‘If the individual’s wants are 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’.footnote3 Nor can ‘national security’ justify a race in affluence with the ussr, for that country, despite far lower standards of living, achieved orbital flight before the usa, thus proving that distribution of effort and not size of output is what really matters.

Galbraith sees many dangers in this obsession with output. The manner of want-creation leads to proliferating and unsound hp debts, which would have catastrophic results in a slump.footnote4 Also the economy, run too close to full capacity for the sake of growth, develops bottlenecks and thus inflation. Work is too hard, and lasts too long. Above all, Galbraith argues, the emphasis on the size of output obscures the far more important problem of its composition. Thus the private sector burgeons at the expense of the public sector, heavy machinery at the expense of human skills: to take a British example, bricklayers can be found for Stockbrokers’ Regency, not for new universities.

Galbraith’s remedies are ‘the divorce of production from security’ by raising dole payments when the unemployment level rises; the ‘redress of balance’ by higher taxes and public outlays (attainable only if liberals avoid diversionary arguments about equality, and expand existing taxes in roughly equal proportions); and huge rises in the ‘New Class’ of educated people, who work for enjoyment as well as for money.