Wednesday, October 17, 2012

Review: The Affluent Society, by John Kenneth Galbraith

Boston: Houghton Mifflin, 1958, pp. 368.

John Kenneth Galbraith's starting point in The Affluent Society is the observation that historically the great economic problem was that of adequate production, a fact enshrined in the mainstream of economic thought (by way of Smith, Malthus, Ricardo, Mill and Marshall, and Marx, Veblen and Keynes for that matter), and by the Social Darwinism that found such a warm reception in the United States (where Herbert Spencer became hugely influential). Accordingly, the tendency was toward stressing the maximum output of essentials of life--food, clothing, shelter, fuel--through the most efficient possible use of the available resources prioritized. As it happened, the items in question lent themselves toward private, individual production and consumption, while proponents of this ideal venerated the free operation of a competitive market as a device for forcing capitalists and employers to make the utmost effort in getting production up and price down. The result was, not incidentally, a tendency to value the private sector, and denigrate the public sector (at least, where goods besides physical security are concerned), a pattern which extended to the view of increased private consumption as a gain to prosperity, and increased public consumption a reduction in it. There was also the attitude that society had little choice but to tolerate poverty, while a dim view was taken of waste and of idleness, esteeming thrift and stigmatizing unemployment.1

However, Galbraith contends that by the twentieth century the advanced industrial countries of the Western world had largely solved the production problem, the central issue no longer securing an adequate supply of life's essentials--society now "affluent" in that respect. In making his case Galbraith points to the many ways in which these societies had deeply changed since the Industrial Revolution. The truly poor (those who do not get enough to eat, etc.) had been transformed from the vast majority into a minority. An increased share of production was devoted to satisfying not indisputable physical needs (to a great extent, satiated), but the artificial wants manufactured by consumer culture's unprecedented use of techniques like planned obsolescence and advertising.

This was all as people worked less, the 70-hour week giving way to the 40-hour week, while child labor became a thing of the past, and the retirement of the elderly became routine (all of these, indicators of the reduced urgency of the demand for labor and its products). Additionally, rather than the failure of supply the failure of demand, as seen in the Great Depression, came to be construed as the great threat to prosperity, while the continued stress on the maximization of production has been motivated less by the desirability of more goods than of production's role in maintaining full employment. Galbraith even contended that the expansion of production, and with it, general well-being, had gone a long way to diminishing the political charge of the issue of inequality.

In place of the traditional problems of poverty there were now the side effects of an economy of private affluence. The maintenance of full employment as the norm meant inflationary pressure, while consumer culture brought with it a tendency toward oppressive and unsustainable debt accumulaton. At the same time the advent of such private prosperity meant an imbalance with the comparative poverty of the public sector, the lag in the provisioning of public goods such as educational, health and policing services, urban planning, and the protection of the natural environment raising new issues, not least the handicapping of the private sector's operation. The remediable failures of the education system, for instance, undermine scientific R & D efforts. Likewise, the failures of city planning have an adverse effect on the quantity and quality of the housing stock available to home buyers.

The solution of the old problems, and their replacement by new unsolved problems (by making the public sector affluent as the private sector had become, to the benefit of both), went largely unrecognized because of the tendency of the "conventional wisdom" (a term Galbraith coined in this book) to lag behind circumstance.2 Nonetheless, Galbraith was confident that change was possible, even likely, and certainly his argument did find an audience at the time. The idea that there could be life beyond flat-out GDP maximization in fact became a commonplace in social science, social comment and futurological speculation during the years that followed, William Appleman Williams, Gunther Stent and Alvin Toffler, among many, many others, all featuring it prominently in their work. Since then, ideas such as "sustainable" growth have gained currency in certain circles, as have broader measures of wealth, like the General Progress Indicator.

However, it seems that we are further than ever from embracing the thinking Galbraith presented, American society regarding itself as far from affluent in the way he suggests (even though per-capita GDP has more than doubled since then). The prioritization of sheer GDP growth as the sole test of economic performance, the identification of the private sector with goods and the public sector with costs, the Victorian severity toward the poor and underemployed, all remain the predominant assumptions over a half century later.

One has to wonder why, given that there seems a great deal of merit to his argument. Certainly one part of the explanation seems to be Galbraith's underestimation of the extent to which the "good life" would continue to be perceived in terms of more private consumption, and on a related note, the intensely private way in which Americans think about their problems, individual and collective (to which C. Wright Mills, stronger on this score, often pointed). Galbraith also had a tendency to underestimate the power of vested interests to affect public policy, and how the shift in the terms of economic debate in the neoliberal revolution (made possible by a combination of economic crisis in the early 1970s and a politics of cultural backlash) would permit new circumstances to reinforce the conventional wisdom he criticized, leaving the mainstream less open to newer thinking.

At least in part because of neoliberal policies like the lowering of trade barriers, financial deregulation, and the weakening of organized labor and worker protections, the last four decades have been marked by much lower rates of economic growth, as well as intensified international economic competition, recurrent financial crises, higher unemployment, and greater inequality. Americans may have remained privately "affluent"--but the vast majority did not get much more affluent by even the most conventional measures, and they felt less secure in what they did have. If anything, given that their personal budgets were often pressed by inflation sufficient to wipe out the additions to purchasing power represented by rises in their income, the increasingly expensive post-secondary education increasingly seen as a requirement for remunerative employment, the exploding costs of health care, and the mounting private debt loads to which all these added, they had reason to feel less affluent than before.

Meanwhile, the reality of public poverty grew only more pronounced under the same circumstances, as slower growth rates, rising dependency ratios (putting pressure on benefits for the retired or elderly as they had been traditionally constituted), and the public portion of the growing tab for educational and health care spending (and the shift away from progressive taxation even as the distribution of wealth became more unequal) squeezed government budgets, making bigger deficits and mounting government debt the long-term trend. And the neoliberal context made all the difference as to how this was perceived.

It is conceivable that under other circumstances the redress of the public sector's problems may have been seen as part of a broader project of reviving overall prosperity. The growing numbers of retirees might have been viewed as relieving the pressure of job creation and inflation, for instance. Expanded public programs in the areas of education and health care might have been seen as a way of relieving those burdens on the individual consumer. And so on and so forth. However, it became the conventional wisdom that the thing to do was not to improve public services, but to turn them into for-profit private services (a drive given greater urgency by the construing of those larger numbers of retirees as a fiscal disaster in the making). And while, despite all the cutbacks, the proportion of government budgets devoted to transfer payments remained large, there is no doubt that the response of individuals was increasingly to substitute private goods for public ones; to respond to the inadequacies of the public education system by paying more out of pocket to send one's children to private school, for instance.3

This transfer of formerly public burdens to the private individual did that much more to make what could have appeared like private affluence instead appear as private scarcity, and make the prioritization of expanded private consumption (especially with the idea of expanding public consumption delegitimized) appear the solution--with old-fashioned GDP growth the means.4 And of course, the broader social inequality attending the process by which the lives of wage and salary-earners became so strained meant that much more need for a convenient solvent for the resulting tensions, the obvious candidate for which was, again, GDP growth (rhetorically, at any rate).

In retrospect it seems Alain Touraine who, far more than any counterpart of his in the English-speaking world (Galbraith included), was prescient in contending that post-industrial society would be the most growth-driven and GDP-obsessed in history, with the post-2008 economic shock doing surprisingly little to shake up the mainstream's embrace of neoliberalism. Nonetheless, the case for moving beyond the "conventional wisdom" he described, for thinking of public as well as private affluence, and looking beyond the narrow definition of growth so dear to economic orthodoxy, has only grown stronger with the passage of the decades.

1. One irony of this view, not fully recognized in Galbraith's writing, is the role of public support in creating private prosperity even in the eras of Smith and Ricardo and Mill, much of the public preferring to stick with simplistic Horatio Alger and Edisonade images of how fortunes are made, corporate giants born and Third World poverty turned into industrialized affluence. It remains an irony of American political life that those who are most inclined to evoke the Founding Fathers are those most inclined to neglect the lessons of Alexander Hamilton's "Report on Manufactures"; those most inclined to speak of American economic exceptionalism, those least inclined to forget that there was such a thing as an "American School" of economic thought, and the role it played in building the American economy.
2. Among Galbraith's specific, practical suggestions was a delinking of work and income through a more generous, but also more carefully managed, program of unemployment insurance so that less-than-full-employment became an acceptable norm politically, relieving inflationary pressure. He also suggested a sales tax on private consumption for the funding of improved public services. More broadly, he argued for the elimination of toil (unpleasant work performed wholly for pay as it renders no other satisfaction), making all workers part of the "New Class" (in which people have not just jobs, but professions and careers, accessible through education).
3. An even more dramatic example may be the response to the problems of American cities - rather than making them more habitable through sounder urban planning, improved public transport, the redress of poverty and the like, the typical course has been relocation to suburbs and exurbs, which bring associated expenses like greater car ownership, longer commutes, and the private security bills of gated communities.
4. Under the circumstances, such an idea as using a sales tax to divert dollars spent on private consumption into the funding of better public services - as Galbraith proposes - could only have been anathema.

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