Galbraith on Galbraith and the new industrial state

Perhaps telegraphing some of his coming remarks in Halifax when he joins the Progressive Economics Forum for the inauguration of the John Kenneth Galbraith Prize in Economics, James Galbraith reflects on his father’s The New Industrial State. If you find yourself in Halifax on June 3, noon, please join us at Dalhousie’s McCain Building, Room 2017 (note this is a different room that previously posted) for James’s lecture. We will try to get audio or a transcript posted here some time after the event.

The New Industrial State

James K Galbraith

… The New Industrial State’s purpose was not to catalyze a political movement but to describe the economy as it was, to deflate faith in the omnipotent and benevolent market and to foster understanding of a world dominated by large industrial firms, by the planning system and the “technostructure”. That required an economics of organizations rather than an economics of markets. As my father put it, someone studying the architecture of New York on the fixed assumption that all walls are load bearing would have trouble passing to the skyscrapers from the brownstones.

The great corporation of the 1960s controlled the technical developments in its field through its research labs and engineering departments; it attempted to control its customers through market research, design and advertising. It existed in a stabilizing web of larger relationships: unions, regulation, trade barriers, the Iron Curtain (or more precisely the Bamboo Curtain) and the Bretton Woods international monetary system. My father thought this more permanent than it was, and possibly he believed it to be more influential than it was. At one point, pushing the envelope, I heard him describe a process of convergence between the denizens of the great corporations and the products they sold. This was evident, he said, in his wartime experience as a price-fixer, with the producers of steel I-beams and hard coal. “On the other hand,” he said, “the oil men were rather smooth. And in the International Business Machines of that day, one could even begin to discern the rudiments of artificial intelligence.”

There was, also, Dad’s famously unpopular view of the ascendance of the managers over the shareholders. To think otherwise, he wrote, “one must imagine that a man of vigorous, lusty, and reassuringly heterosexual inclination eschews the lovely and available women by whom he is intimately surrounded, in order to maximize the opportunities of other men whose existence he only knows through hearsay.”

Of course, the great American planning system of 1967 did not endure. The destruction of Bretton Woods, the rise of OPEC, the Japanese challenge in steel and autos and later the rise of China all destabilized its operating environment. Reaganomics demolished regulation and the countervailing power of unions and simultaneously re-empowered Wall Street, putting the great corporation in a squeeze between the high cost of capital and the low cost of imports. Deindustrialization and globalization followed. Then the technology sector broke away from the large integrated corporations, giving us an independently-capitalized information economy and bringing on convergence between software geeks and tycoons. And then, finally, we saw in Enron, Worldcom, Tyco, and many others the emergence of the CEO as a predator class, looting and subverting the great firm and the technostructure from within.

John Kenneth Galbraith did not foresee these developments in 1967 but the framework of The New Industrial State – the economics of organization – remains the portal through which one must pass if one is to understand them. One cannot grasp the world of corporate raiders, of the information technology bubble, of control fraud, of the bizarre symbiosis that presently exists between post-capitalist America and post-communist China, nor especially of the big government, big corporation, Beltway-boom Republicanism of George Bush, through an optic of free and competitive markets.

The ideas of The New Industrial State – an economics of organization, information, control and power – are on the other hand exactly what we need. And so, I submit, this book is a book for our season, as well as its own. I am proud of the role I played in bringing it back. I want to thank Sean Wilentz and Peter Dougherty of Princeton University Press for everything they’ve done to produce this fine new edition, including the elegant company of Senator Goldwater’s manifesto. And I want to salute the memory of my father – truly a man for all seasons – on what is, within two days, the first anniversary of his passing.

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