John Kenneth Galbraith Biography

John Kenneth Galbraith BiographyArchibald Galbraith, a Canadian schoolteacher, once climbed onto a platform atop asteaming pile of macrocosmure to address a group of Liberal party voters before the coming Ontarioelections.Before I begin, he said, I must apologize for speaking from the Tory platform.Later on, his teenage son, John Kenneth, would congratulate him on the dig, to which heArchibald would respond, It was good. But it didnt change whole votes. (Arthur Scheslinger,1984, p. 7) So, from an early age, John Kenneth Galbraith was between the world of politics andpragmatism.John Kenneth Galbraith was born in 1908. His fathers involvement in politics had a threatening impact on the young John Kenneth, politicizing him at an early age. He originallystudied Agricultural Economics at the Ontario Agricultural College, but would eventually saythat he took his first real economics course at UC Berkeley, and that the economics instructionin Canada was very poor (Dunn, 2002, p. 350). A s a alumna student at UC Berkeley, hecontinued his study of agricultural economics and worked as a research assistant for a very zany of age(predicate) man by the name of Edwin Voorhies (Kreisler, 1986). He stated that it was his study ofagricultural economics that left him with a strong feeling that affectionate science should be tested byits usefulness, an idea inspired by Veblens dichotomy between exoteric knowledge (knowledgethat is valuable and applicable) and esoteric knowledge (knowledge that has no practicableapplication, but because of that, is considered more(prenominal) prestigious). Galbraith believed that affablesciences should be exoteric, not esoteric. In his book Economics and The Public Purpose,Galbraith develops this idea further, saying, The ultimate test of a situated of economic ideas iswhether it illuminates the anxietes of the time (Galbraith, 1973, p.198).In the 1930s, while Galbraith was studying to receive his Ph. D, it was clear thateconomic theory was not addressing the anxietes of the time. Economists were struggling toexplain how unintroduce(p) markets had led the fall in States to economic ruin. One in four the Statesnswere jobless. Production had all but ground to a halt. Obviously, there were egregious errors inthe accepted dogma, which stated that free markets left to their own devices would bring aboutefficiency and wagement. Galbraith said that his method of coming to an understanding was tofor yearsstart with Alfred Marshall, see the world as it is, and pay back the requisitemodifications (Dunn, 2002, p. 351). Upon graduating, Galbraith traveled to Washington D.C.and took a position assisting with the implementation of the Agricultural Adjustment Act, beforetaking a position as a four-in-hand at Harvard. At Harvard, he made speeches supporting the reelection of Roosevelt, cementing his initial ties with the Democratic party. Not long after, he was offereda fellowship at Cambridge, where the discussions c enrolle d roughly Keynes, who had just published his General Theory of Employment, Money, and Interest (Dunn, 2002, pp. 350-355).Galbraith returned from England to his tutor position at Harvard a con quicked Keynesian.He spent a few more years tutoring at Harvard (where he met John F. Kennedy) and then took ajob as resident economist for the the Statesn Farm Bureau Federation in Washington. Galbraithsobservation of the farm industry solidified his belief in the advocator of government to moveindustries forward. In 1930, farm households accounted for a quarter of the population, whereas right away they account for only 1% of the population and yet on the whole, they now produce morethan they did in 1930. This is due to strong government support of the market-gardening industry. Thatnational planning could transform a weak, disorganized, and poverty prone sector of theeconomy into Americas most(prenominal) spectacular productive success carry on his political concerns(Arthur Schlesinger, 1984, p. 8). Galbraith became head of the Office of Price Administration in1941 during World War II, and at the akin time began his long c atomic number 18er as a ghost economizer, penningspeeches for Samuel Rosenman and Robert Sherwood (Arthur Schlesinger, 1984, p. 8).Galbraith then became editor of Fortune magazine, where he worked directly for HarryLuce, founder of Time Inc., whom he called one of the most ruthless editors I take a shit ever known,or anyone has ever known (Kreisler, 1986). Galbraith has credited Luce with dramaticallyimproving his writing via ruthless editing. Galbraith credited Fortune with giving him amarvelous invention to the corporate mind, because the focus of the magazine at the timewas the anatomy of the free corporations (Dunn, 2002, p. 353). The decision making processesof major corporations would be a recurring phenomenon that he would write about in legion(predicate) ofhis publications.Galbraith returned to Academia in 1948, having spent five yea rs as editor of Fortune. Hewas nominated to a position inform economics at Harvard. However, members of Harvardsboard of overseers regarded him as a dangerous Keynesian, and as a result, took the step, about unprecedented in modern times, of blocking the employment (Dunn, 2002, p. 353).However, Galbraith had many political allies, and among them was Harvards president, JamesB. Conant. Conant was such a fan of Galbraith that he threatened to resign unless the board ofoverseers backed down. Eventually they did, and Galbraith became a tenure professor atHarvard. It was then that he began work on his first major bestseller, American Capitalism TheConcept of Countervailing Power.Galbraith begins his discussion of capitalism in America by pointing out the following(a)conundrum Mainstream economic theory asserts that in the case of monopoly, prices will rise,business will screw consumers, fail to innovate, and as a result, the economy will be in badshape. He then business lines the wo rk of Joan Robinson in developing the idea of monopolistic andoligopolistic competition, noting that oligopolistic industries behave in the same way asmonopolies would, and through informal agreements can have the exact same effect. Then, usingthe actual data collected by the American government, he shows that the majority of industries be in situation oligopolistic. But he goes even further than that, saying that almost all industries willeventually become oligopolistic for the following reasons At the birth of an industry,competetion is needful and possible, as no firms have clear and noteworthy advantages yet. Butover time, it will become increasingly difficult to enter the industry because of the barriers toentry created by high capital requirements and increasing returns to scale. At the same time thatincreasing returns to scale start to set in (as they inevitably do), existing firms will too gain theadvantage of experience and prior organization. The convergence of these factors leads, in mostcases, to an industry with a few power players and a larger but still relatively small number ofhangers-on, who exist by filling niches that arent worth the time of the large firms.Galbraith poses a pass in American Capitalism, and before getting to that promontory, itis important to get a sense of the context in which he asks it. After World War II, America wasexperiencing incredible prosperity. But underlying this prosperity was the fear of depression. TheGreat Depression was still fresh in the collective consciousness, and the average mans assent thatcapitalism would bring about efficiency and full employment was shaken. And yet, as the yearsafter the war progressed, things were stable and employment was plentiful. It is also important tonote that the era of non-depression Keynesianism was beginning, and much(prenominal) to the chagrin of thebusiness community, government was becoming a much more participatory force in markets.The business community was reacting violently against this expansion of government, claimingthat it was a complete disaster, wasteful to the very extreme and bound to cripple growth. Thestate of the American economy in the 1950s then was that of big government, near-ubiquitousmonopoly or oligopoly, and an underlying fear of depression. Yet, by almost any measure, theeconomy was a success.The task, according to Galbraith, was that, in principle, the economy pleased noone in practice it satisfied most. Social inefficiency government spending, unrationalizedpower monopoly and oligopoly, intrusive government regulation, and depression were allmatters for deep concern. But neither liberal nor conservatives, neither the rich nor all but thevery poor, found the consequences intolerable (Galbraith, 1954, p. 85). What fascinatedGalbraith was how an economy which was so flawed in theory could work so well in practice.The question he asked was Why are things sowellgood? Thus, he states that his aim inAmerican Capitali sm is to examine in turn the mint that have kept social inefficiency,private power, government intervention, and unemployment from ruining us in the recentpresent (Galbraith, 1954, p. 85).The first answer that he gives is that oligopoly is much more conducive to techonologicalinnovation than classical competetion. There is no more pleasant fiction than that technicalchange is the product of the matchless ingenuity of the small man forced by competition toemploy his wits to better his neighbor. Unhappily, it is a fiction, he says. Technicaldevelopment has long since become the preserve of the scientist and engineer (Galbraith, 1954,p.86). His list is that due to the costliness of development, it can only be undertaken by afirm with considerable resources. In highly competitive industries, no one firm has considerableresources. Moreover, because innovations can easily be imitated, it is not economical for a smallcompetitive firm to bear the research and development costs for an inb uilt industry.Galbraith then turns his keen eye to the idea of inefficiency. He deals with this issue byasserting that Americas relative opulence shields us and is moreover a cause of suchinefficiency. At the time that the classical economists were writing, an opulent economy had yetto be observed. For Malthus and Ricardo, inefficiency was, indeed, an evil thing. It deniedbread to the hungry and clothing to the naked (Galbraith, 1954, p.102). The accepted power ofGalbraiths insight is his ability to point out the obvious. He criticizes his fellow economists forbringing the mentality of the nineteenth century, with all its poverty and degradation, to theopulent twentieth century. Galbraith finds this error both amusing and absurd, saying, He themainstream economist worries far too much about partially monopolized pricesfor tobacco, liquor, automobiles, and soap, in a land which is already suffering from nicotine inebriation andalcoholism, which is nutritionally gorged with sugar, w hich is filling its hospitals and cemeterieswith those who have been maimed or murdered on its highways, and which is dangerouslyneurotic about body odors (Galbraith, 1954, p.102). His point is that these inefficiencies are infact a sign of the wealth of America. They are the symptom of a wealthy economy, and thus weought not to worry so much about them. He also discredits the idea of intrusive government,noting that, alarm over pending action by government on economic matters, which frequentlyreaches almost pathological proportions when the decision is pending, almost invariablyevaporates completely once the action is taken. One of the profound sources of Americanstrength has been the margin of error provided by our well-being (Galbraith, 1954, p.106).But the most significant reason that monopoly has failed to capsize the Americaneconomy, according to Galbraith is the exercise of what he calls countervailing power. Theassumption always made by economists, when they would consider t he case of markets, was thatthe check on an various(prenominal) firms power wold come from the supply side of the industry.Galbraith disagrees. He admits that the earth of monopoly power in a competitive marketdoes in fact encourage the entry of more producers to appropriate some of that power forthemselves. In other words, he says. Competition was regarded and is a self-generatingregulatory force (Galbraith, 1954, p. 112).But in a market that is not competitive, the incentive for some economic agent toapproptiate that power still exists. But it need not come from the supply side. That power is, inpractice, usually appropriated by strong buyers or coalitions of buyers, who can sometimes takeeven more than their share. Because of the tendency of power to be organized in response toexisting power, countervailing power is also a self-generating force (Galbraith, 1954, p. 113).According to Galbraith, it is the large retailers who, by way of their absolute power overmanufacturers, barg ain for the consumer and value the consumer from the high monopolyprices that would otherwise result. Likewise, the considerable market power of large firms ischecked by trade unions for a simple reason, there is something to be bargained for Galbraithnotes that trade unions are most powerful in the least competitive industries. This is because thesurplus that a company derives from monopoly power acts as an incentive to unions. In the verycompetitive industries, producers and workers are operating at bare minimum profit and theincentives to organization insignificant.These are the basic ideas laid out in American Capitalism. The book in many ways laysthe framework and tone for the books he would publish in the sixties and seventies. But whileAmerican Capitalism was Galbraiths first major bestseller, it was The sozzled Society thatskyrocketed him to fame. The Affluent Society builds on many of the concepts introduced in hisfirst book, but with several key differences. Though Galbr aith could not suppress his urge tosocial commentary, The Affluent Society is a much more prescriptive book, growing out of hischapter on technical development in American Capitalism. To his original synopsis he adds asignificantly moral component. The Affluent Society concerns itself with the policies that oughtto be undertaken once the basic needs of the people have been met. Galbraiths main debate isthat our ratio of private good (cars, televisions, automobiles) to public goods (schools, roads) isinequitable and ridiculous. The premise of his argument is that once our basic desires such asfood, clothing, and shelter have been satisfied, large corporations employ advertising to concoctnew demand for products. The traditional economic and utilitarian argument for goods quagoods falls on its face if consumer demand is not sovereign. What is really necessary is the useof societys productive resources in the public realm in juxtaposition with growth in the privaterealm. He calls this idea social balance, saying, the problem of social balance is ubiquitous,and frequently it is obtrusive. As noted, an increase in the consumption of automobiles requires afacilitating supply of streets, highways, traffic control, and parking spaces (Galbraith, 1958, p.193). He also confronts the existence of poverty in an affluent society as being the result ofoutdated nineteenth century attitudes. A poor society, he says, had to enforce the dominate thatsomeone who did not work could not eat. An affluent society has no similar excuse for suchrigor (Galbraith, 1958, p. 251). But he admits that, nothing requires such a society to becompassionate. But it no longer has a high philosophical justification for its callousness(Galbraith, 1958, p. 251).In the 50s, America was in the midst of the cold war and attempts at engineering a bettersociety were very suspect. Galbraith throughout The Affluent Society understands the inherentand ideological ambition to big government and social pol icy, but he is adamant in stating,that cities residents should have a nontoxic supply of air suggests no revolutionary flirtation with socialism (Galbraith, 1958, p. 191).In fact, Galbraith eventually finds socialism and central planning to be in many wayssimilar to the kind of capitalism that developed in America in the latter half of the 20th century.9In The New Industral State, Galbraith focuses his effort on understanding what he calls thetechnostructure. In an era when the element of intellectual labor is so overwhelming, themanagement or even management team of a powerful corporation doesnt actually make most ofthe decisions. The decisions are instead made collectively by teams of experts. Galbraith coinsthe term technostructure as, embracing all who bring specialized knowledge, talent orexperience to group decision-making. This, he says, not the management, is the guidingintelligence, the brain, of the enterprise (Galbraith, 1967, p.71).Many of Galbraiths ideas resonate to this day. Unfortunately, most do not. It would betempting to end this essay optimistically, expounding poetically on the way Galbraiths ideascontinue to influence national policy. In reality, although he was a well-respected and powerfulman, many of his ideas continue to be ignored by mainstream economists and politicians. seldomdoes one hear a contemporary economist talk about countervailing power, or reference thetechnostructure. While as a society we owe much to Galbraith and his ideas, the discipline ofeconomics has for all intents and purposes laid his practical ideas by the wayside. But whether ornot his continued influence on economics is felt by the mainstream, his contribution to thediscipline stiff poignant and accessible for those who choose to seek it out on their own.Galbraiths main contribution to economic thought was his tackling of the problem ofpower. He was convinced that the most glaring, most significant, and most ignored problem inthe field of economics was the effect of power on economic activity. savvy whyGalbraith was so affixed by this idea of power is actually quite simple he was surrounded by it.Through his political work, Galbraith knew not only Kennedy, but several other presidents andall the most powerful officials in the democratic party. Through his work at Fortune he becameacquainted with the heads of the largest and most powerful corporations in the world. He saw,10clearly, the extent to which the decisions of these men (and the technostructures supportingthem) affected the direction and performance of the economy of the whole. Given that he was an clear-sighted man, for him to ignore the influence of power on economies, in order to advance a seriesof aesthetically pleasing models and equations, would have been not only unthinkable butdishonest. Galbraith wanted badly to be useful, to change votes, as his father would have said.To him, sitting in a room concocting theories did not qualify as usefulness. He longed to be inthe thick of policy-making. Later in life, he wanted badly to avoid what he called Belmont Syndrome1 Thus, his struggle to be germane(predicate) was not only ideological but moral.John Kenneth Galbraith died peacefully at home in 2006. He left behind not only an big body of economic work, but two novels. His first novel, The Triumph, written in 1969,was about U.S. foreign policy disasters in Latin America. His second novel, A advanceProfessor, written in 1990, was about an eccentric Harvard professor, and lampooned the eliteinstitution. He lived ninety-seven years, almost all of them (excepting the first few) werepreoccupied with upending the conventional wisdom. He remains one of the most famous andcontroversial economists of the twentieth century, and a fine novelist.