Economics & the Public Purpose Mass Market Paperback – 1975
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Most Helpful Customer Reviews on Amazon.com (beta)
JKG wrote this in the Affluent Society : "Nothing counts so heavily against a man as to be found attacking the values of the public at large and seeking to substitute his own. Technically, his crime is arrogance. Actually, it is ignorance of the rules. In any case, he is automatically removed from the game." I'm not sure if he was 'seeking to substitute his own' ideas, but he gave an option for emancipation - to free oneselve from persuasive grasp of big business. So I guess Economics and the Public Purpose broke the rules by enlightening the readship to this option, and it is now destined to be left in the care of a few university libraries and the occasional footnote.
Tragic. It's a really good book.
He wrote in the Foreword to this 1973 book, "This book is in descent, the last in the line, from two earlier volumes---'The Affluent Society' and 'The New Industrial State.' There are also some genes, though not many, from ... 'American Capitalism.' ... The earlier volumes were centrally concerned with the world of the great corporations... There is also the world of the farmer, repairman, retailer, small manufacturer... This book seeks to bring them fully into the scene... This (book also) gives the first elements of the international scene."
He begins with the observation that not only does General Motors exist to serve the public, but "General Motors also serves itself." (Pg. 3) He asserts that no innovation of importance originates with the individual farmer. "Were it not for the government and farm equipment and chemical firms, agriculture would be technologically stagnant." (Pg. 48)
He notes that the market system is subordinate to the planning system, which supplies power, fuel, machinery, transportation, communications, etc. He then contrasts the "relatively secure and favorable income for participants in the planning system" versus a "less secure and less favorable return for those in the market system." (Pg. 50) He suggests that the growth in acquisitions of one firm by another is motivated less by monetary rewards, than by the "prestige" of "not a greater rate of return but a greater size." (Pg. 101)
The technostructure thus favors a policy that keeps prices under control, and then serves its affirmative interest in the growth of the firm. (Pg. 115) Galbraith invents the term "Bureaucratic Symbiosis" for the tendency of public and private organizations to "find and pursue a common purpose." (Pg. 139) He asserts that the small businessman and farmer are "extremely vulnerable to adversity emanating from the planning system." (Pg. 177)
He concludes that "the economy must be managed"; but not one economy, but two: "one that is subject to the market and one that is planned by its constituent firms." (Pg. 214) He proposes that conversion of "the fully mature corporations... into public corporations." (Pg. 261)
Not as innovative or thought-provoking as the earlier three volumes, this book nevertheless represents an important continuation in the development of Galbraith's thought.
For strangers to Galbraith's views, it is necessary to understand that he was first and foremost a student of what was, rather than idealized systems. Hence, many of his critics, faced with a dualistic world view, will accuse him of favoring a command economy, on the grounds that he was critical of the pretensions of capitalist economies. I hope readers will immediately see the error of this way of thinking: a clear-sighted analysis of a system that embraces the whole of a society's transactions cannot possibly be reduced to a dualistic judgment.
Second, Galbraith was an institutionalist. While orthodox schools of economics tend to emphasize the inherent, automatic nature of all economic transactions regardless of the nature of the agents, institutionalists such as T. Veblen, J. Commons, C. Ayres, and Galbraith identify the economic agents--viz., institutions in the society--as the decisive factor. Galbraith frequently aroused a lot of ire by pointing out the shortcomings of a social science (economics) being dominated by political demagogues, although he preferred to say this using dry wit.
In this book, he unites several concepts into an explanatory system. One of these is the concept of the "convenient social virtue," the tendency of people to profusely admire traits in other people they are not prepared to compensate; hence, the admiration of workers whose sense of duty and self-sacrifice transcends any rational economic explanation. He applies this analysis to women, who remain an undercompensated cadre of the workforce. Another concept is that of "the market system" as distinct from the "planning system"; usually economists and demagogues speak of the public sector [bad] versus the private sector [good], as if there were nothing but kinship between the multinational corporation and the corner espresso cart.
Galbraith explains that, while the giant industrial firm has very different needs and wants from small shops, it is likely to be very closely aligned to the needs and wants of those holding political power. Hence, the boundary between public and private sectors is less meaningful than that between the planning and the market systems. While the market system is admired, it is also punished with far greater danger and with "self-exploitation" by desperate proprietors.
The illusion that we live in an economy that is a free market, with an adversarial relationship to the state, is a dangerous one. First, it leads to people assuming that problems of waste and unemployment will solve themselves once an obvious regulatory obstacle is removed. In reality, we live in a planned economy ridden by systems of price controls and monopoly, and that planning is designed to serve industrial management. Assuming the opposite, of course, will only make such problems worse.
Second, it is dangerous because we overlook the influence of the planning system on the basic purpose of the state. The insistence of economist-demagogues is that the state is miraculously devoted to the toiling masses, and intent on expropriating the creative fountainhead, John Galt and Henry Reardon. Militarism is assumed to be therefore a rational response to a genuine foreign threat; whereas if the influence is understood to be symmetric, or even understood to flow the other direction, then one will expect militarism to serve the planning system and one will be skeptical of it.
There's a lot more in this book, and I believe it deserves a far better review than I've supplied. But I hope this gives a taste of the issues that Galbraith addresses.
Galbraith comments, "the imagery of choice ... means that this choosing - this decision to purchase this product, reject that - is what, when aggregated, controls the economic system. And if choice by the public is the source of power, the organisations that comprise the economic system cannot have power. They are merely instruments in the ultimate service of that choice." So if the consumer has the power, she, not the firm, is to blame for the firm's products or results (e.g. pollution). In theory, the market uses power for the public good; in fact, large corporations use this power for their own purposes.
He sums up, "economics ... also serves the controlling economic interest." Mainstream economics is a system of ideas that diverts all attacks into channels that are safely futile
In analysing the US economy, Galbraith oddly distinguishes what he calls the `planning system' from the market system. The `planning system' is composed of the thousand giant firms that run the show. The market system is composed of the roughly twelve millions of small businesses.
What does the US economic system produce? "Unequal development, inequality, frivolous and erratic innovation, environmental assault, indifference to personality, power over the state, inflation, failure in inter-industry coordination are part of the system." He shows how mergers usually produce worse performance, higher rewards for executives and job losses for the workers. "On no conclusion is this book more clear: left to themselves, economic forces do not work out for the best except perhaps for the powerful."
Galbraith says that the public must take power away from the corporations and use it to plan the economy. He urges us to take responsibility for our society.