The Economic Contributions of John Kenneth Galbraith

The Economic Contributions
of John Kenneth Galbraith
STEPHEN P. DUNN & STEVEN PRESSMAN
Department of Health, London, UK, Monmouth University,
West Long Branch, NJ, USA
[This 49-page article published in April 2005 is available on the Internet, https://www.bib.uab.es/socials/exposicions/galbraith/docs/dunn.pdf.]

ABSTRACT Galbraith’s principal theoretical contribution is foreshadowed in American
capitalism and unfolds more clearly into view in his trilogy The Affluent Society, The New
Industrial State and Economics and the Public Purpose. His thesis is that the economic
ideas that once explained a world of poverty have not adjusted to a world of affluence
dominated by the modern corporation. His main themes are the concentration of
economic power in the large corporation and the social and environmental imbalance
that results from the large corporation. Galbraith attempts to tease out the implications
of the uneven development of modern affluence and outlines an emancipatory case for
social change.

1. Introduction

The economic contributions of John Kenneth Galbraith can be viewed both nega-
tively and positively. On the negative side Galbraith appears as a gadfly, highly
critical of traditional approaches to understanding the way the economy works
and the economic policies that are pursued. He has criticized economic theory
for ignoring and obscuring the economic power accumulated by large corpor-
ations. He has criticized politicians who align themselves with the objectives of
the large corporation instead of acting in the public interest. In addition, he has
censured his fellow economists as ‘idiot savants’ who perform sophisticated
mathematical analysis but who do not seek to understand the real world.
These critical efforts have sought to ‘emancipate belief’ by urging the public
to question the prevailing structure of economic knowledge and to challenge the
conventional wisdom. In Economics and the Public Purpose Galbraith (1973a,
Chapter 22) argues that the emancipation of belief is required in order to challenge
the hegemony of accepted beliefs, which exclude the possibility of all contrary
thought and prevent a proper understanding of how the economy works. Galbraith
argues that the power and prestige of large firms is sustained through the
conventional wisdom and that this leads to economic analysis that is neither
socially relevant nor useful. Accordingly, he has criticized the various conven-
tional wisdoms that permeate social thought. His goal here has been to increase
the receptiveness to other ideas about how the economy operates and the policy
agenda that is required once people have a proper understanding of how the
economy really works.

More constructively, Galbraith has sought to examine power and its economic relations and to analyze and understand the actual evolution and workings of economies. An understanding of power is crucial for understanding the firm, as the firm is an institution that seeks to control and supersede the market in order to expand the influence of its bureaucratic apparatus, what Galbraith labels ‘the technostructure’. A proper understanding of the nature of the firm
results in an analysis of how power is exercised in society as well the economic
consequences that stem from such power. This analysis also yields a rich
examination of the factors leading to rising poverty (for those without power)
amid more general affluence, the degradation of the environment and an expansive
and imperialistic military–industrial complex with its interest in perpetuating the
arms race. Similarly, an understanding of power is necessary for understanding
how economic and social policy can counter the power of firms and work to
improve economic performance and the lives of those disenfranchised by the
modern mode of production.

Galbraith also highlights the power that ideas have in facilitating social
change. He seems to have accepted Keynes’ (1964) contention that ‘the ideas of
economists and political philosophers . . . are more powerful than is commonly
understood’ (p. 383). However, Galbraith also went further than Keynes,
arguing that increasingly outmoded economic ideas misinform social policy in a
way that supports the corporate power structure, to the detriment of wider
society (see Reisman, 1990). In their refusal to yield to the onslaught of circum-
stance, economic ideas can be socially damaging. Wrong ideas about the firm
sustain the prestige of the large corporation and its personnel as well as the
increasingly frivolous and unnecessary goods that they produce and promote
(Galbraith, 1958a). Wrong ideas about the relationship between the firm and
market obfuscate the proper regulatory response (Galbraith, 1967b, 1973a).
They make it easier for large firms to resist government regulation and shield
firms pursing practices that may be environmentally unsound and detrimental to
national security (Galbraith, 1973a, 2004). And wrong ideas about how
the economy works makes it hard to enact effective policies for supporting the
public interest rather than corporate interests. It is thus necessary to oppose
these ideas and point out their flaws.

In what follows this paper highlights the role that economic power plays in
the economics of John Kenneth Galbraith. It focuses on the three main areas
where Galbraith has elucidated the ramifications of the concentration of economic
power. First, the large firm has acquired economic power, thereby emancipating it
from the vagaries of the market and, thus, giving it increased control over the
market. Second, the large firm has acquired power over the consumer, over
workers and over other firms. This has led to pockets of poverty amidst affluence
as well as leading to other social problems. Finally, when the goals of society are
identified with the industrial system, the interests of the modern corporation
dominate the government and public opinion. This results in the pursuit of
economic policies that serve the interests of the powerful. To recognize this is
to begin to open the door for government policies that will operate in the public
interest. The paper begins, however, by considering Galbraith himself.