Monday, May 01, 2006

Galbraith's Neo-Feudalism

[Editorial Note: The following is a fitting remembrance for John Kenneth Galbraith, whom today's New York Times reports as having died on April 29.]

Material progress and individual liberty have once again been made the targets of a crude, sniper attack. In his book, The Affluent Society, John Kenneth Galbraith, Harvard social commentator, has indicated that he views with grave displeasure the “sense of urgency" which is attached to “the craving for more elegant automobiles, more exotic food, more erotic clothing, more elaborate entertainment—indeed for the entire modern range of sensuous, edifying, and lethal desires [sic].” (p. 140.) He has proclaimed that there are things of greater importance, such as more public schools, public parks, public roads, and anything else which “public authority” may deem to be in “relative need.” (pp. 311f.) And he has let it be known that the liberal should cease being “a co-conspirator with the conservative in reducing taxes." (p. 314.)

Were it not for the fact that Mr. Galbraith and his followers will exercise considerable power and influence in the new [Kennedy] Administration, there would be no purpose in discussing the ideas of this man. For as a thinker, Mr. Galbraith is not overly distinguished. His procedure is to combine an immense moral pretentiousness with a rather limited understanding of the teachings of the economists. And though he depicts himself as a daring innovator writing in defiance of an overwhelmingly hostile intellectual environment, his practical position is in essence no different from that of the typical leftist club-woman; nor has it been for quite some time. However, the recent Democratic victory at the polls means that the attempt will be made to implement policies based on the theories of Mr. Galbraith; and, therefore, his ideas bear closer examination.

The thesis of The Affluent Society is a variant of the Marxian dialectic. Our social morals, economic science and political institutions are, in Galbraith’s eyes, the products of an age of scarcity. When men had to contend with cold and hunger, when they had to devote all of their energies to securing their bare, physical survival, production was of paramount importance. It was natural, therefore, that productivity and industriousness should be regarded as virtues, while anything which reduced the supply of goods in the hands of private individuals, such as taxes, should be considered an evil. Thus, Galbraith explains, the businessman and business efficiency were held in high esteem, while the government was viewed with suspicion and forced to bear the burden of proof for the need of every tax dollar; every transfer of resources from private individuals to the government required a specific, affirmative act of the legislature.

Now, however, the underlying economic reality has changed, leaving behind an outmoded political and ideological superstructure which Galbraith calls “the conventional wisdom." For, in America, at least, we have reached an age in which "affluence is rendering the old ideas obsolete . . . ." (p. 143.) In the future, it will be college professors and government officials, not businessmen, to whom the public will grant prestige. (pp 184ff., pp. 194f.) And what is required fiscally is “a system of taxation which automatically makes a pro rata share of increasing income available to public authority for public purposes. The task of public authority, like that of private individuals, will be to distribute this increase in accordance with relative need. Schools and roads will then no longer be at a disadvantage as compared with automobiles and television sets in having to prove absolute justification." (pp. 311f.)

What is Galbraith saying? Stripped of the veneer of pseudo-scientific disinterestedness, he is blatantly arguing for the institution of a modern brand of Prussian feudalism! It is possible that he himself is unaware of this. For he imagines that somewhere, off in the stratosphere as it were, there are private individuals, “public authority," “increasing income," and “relative need." In his eyes, it is a question of mere technical expediency whether “increasing income" is to accrue to private individuals or to “public authority"; in either case, it will be distributed in accordance with “relative need." Affluence now dictates that a pro rata share of “increasing income" accrue to “public authority."

Thus, Galbraith is not for one moment bothered by such mundane questions as to whom does the "increasing income" belong, and whose “relative need" is to determine its distribution? There is simply "increasing income” and “relative need.” The fact that private individuals have produced the goods which constitute the “increasing income" is not considered a valid reason for them to determine its disposal. As was the case with the feudal lords of the pre-capitalist era, “public authority" is to have an unquestioned claim to a regular share of the fruits of others' industry; it will distribute the products of others in accordance with what it, and not they, deems to be in “relative need." And, just as in old Prussia or Czarist Russia, the servants of public authority—the government officials and their intellectual flunkies in the tax supported schools and universities—will have prestige, while the businessman, who supports them, if not considered vulgar, will be regarded as unimportant.

In Galbraith's words: “To the extent that problems of military defense, foreign policy, agricultural administration, public works, education, and social welfare are central to our thoughts, so the generals, foreign service officers, administrators, teachers, and other professional public servants are the popular heroes." (p. 184.)

The chain of reasoning by which Galbraith proceeds from the existence of affluence to advocacy of an irresponsible “public authority" having arbitrary power to spend a pro rata share of the increasing income of the individual is somewhat involved. He begins by citing the law of diminishing marginal utility, according to which the importance an individual attaches to the possession of any given quantity of means of provision diminishes as the total quantity of means of provision at his disposal increases. Thus, according to the law of diminishing marginal utility, a man attaches less importance to the possession of a gallon of water if he has 1000 gallons than he would if he had but ten gallons. Likewise, an individual attaches less importance to $100 if his wealth is $10,000 than he would if his wealth were but $5,000.

Galbraith, in defiance of the most explicit testimony on the part of the leading theorists of marginal utility (see the works of Menger, Böhm-Bawerk, and, Wieser), would have his readers believe that economics as a science has tried to hide the
fact that the marginal utility of wealth in general as well as that that of particular goods diminishes. (Chap. X.) And after overcoming the straw man of an incorrect version of the marginal utility theory, and showing that it must apply to wealth in general as well as to particular goods, he draws two totally unwarranted, conclusions:

(1) He infers from the law of diminishing marginal utility, as applied to wealth in general, that the acquisition of wealth becomes progressively less important as the amount of wealth increases. Here he makes an enormous equivocation between the importance of a concrete amount of wealth as the total amount of wealth increases and the importance of acquiring wealth as its total amount increases. For while the importance of the former diminishes with the increase in the amount of wealth, the importance of the latter does not. The very purpose of acquiring wealth and the source of the importance of so doing consist precisely in the reduction of the marginal utility of wealth. The achievement of a progressively lower marginal utility of wealth is one of the main goals of every rational individual. For the ability to achieve an ever lower marginal utility of wealth is identical with the ability to make an ever greater and more complete provision for the maintenance and enhancement of one’s life and wellbeing. It was the desire to be able to reduce the importance attached to bearskins, animal bones, and caves which brought man out of the depths of savagery; and it was the desire to be able to reduce the importance attached to rags, breadcrusts, and primitive hovels which brought man to modern civilization.

Yes, it is true, bearskins and rags no less than the “more erotic clothing" of modern times afford protection against the cold; it is true, animal bones and breadcrusts no less than the “more exotic food" of our day provide nourishment; it is true, caves and hovels no less than the luxurious American homes with air conditioning and swimming pools offer shelter from the elements. And it is also true that if such a catastrophe should ever occur and people be forced to choose, they would attach greater importance to the means of bare, physical survival than to the qualitative differences which distinguish the products of modern industry from those of primitive toil. But does this mean that man should have stayed in the cave, or have stopped upon reaching the hovel ? And does it mean that he should rest content with what he has today? Are life and productive achievement to give way to a passive stupor, merely because one has a full belly and is no longer at the mercy of wind, rain, and cold?

(2) Galbraith's second inference is that the reduced marginal utility of wealth is an argument for the enlargement of the role of the government in satisfying the wants of consumers. This conclusion in no way follows. For not only are the services of the government fully as much subject to diminishing marginal utility as everything else, a point which he seems to overlook, but they are also always of lower marginal utility than the alternative private goods and services. If people must be forced to pay for them under the threat of a jail term for non-payment of taxes, that is the proof. In fact, however, Galbraith's argument is not based on the law of diminishing marginal utility, but only appears to be.

Not diminishing marginal utility, but the alleged determinism of advertising is the cornerstone of his argument. For the proof he offers of the unimportance of production is the fact that had they not been advertised, there would have been no demand for a great many of the products now being produced. Without advertising and salesmanship to “contrive a sense of want for them, he declares, the marginal utility of such products would have been zero. (p. 160.)

If goods which require advertising and salesmanship satisfy only “contrived” wants, what then is Mr. Galbraith's standard by which goods satisfy legitimate, non-"contrived" wants ? Apparently, his standard is that the buyers must know precisely what they want and precisely from whom to obtain it without the benefit of advertising and salesmanship. “A man who is hungry need never be told of his need for food. If he is inspired by his appetite, he is immune to the influence of Messrs. Batten, Barton, Durstine & Osborne. The latter are effective only with those who are so far removed from physical want that they do not already know what they want. In this state alone men are open to persuasion." (p. 158.)

The absurdity of this standard is immediately evident. If a man is suffering from pneumonia, need he never be told of his need for penicillin? If a man desires to travel, need he never be told of the existence of automobiles, airplanes, railroads, and steamships and from whom they or their services are available? If a man desires artificial light, need he never be told of the existence of electricity and electric lights and where to obtain them? Or if he is hungry, need he never be told of the hundreds of different kinds of food and where to come by them ? Or must men be born with a knowledge of all these things and where to acquire them, before they can be considered to satisfy non-"contrived" wants?

Indeed, advertising and salesmanship do bring about the desire for goods. More than that, they are even responsible for giving to what would otherwise be mere things, the very character of goods. For in order for a thing to become a good, three conditions must be fulfilled. Not only must it satisfy a human need, but also one must, know that it satisfies one's need, and one must have disposal over it. Advertising and salesmanship provide the knowledge that it does satisfy a human need and where to obtain disposal over it. Needs are original with the buyers; advertising and salesmanship transform needs into desires for concrete goods by providing knowledge: knowledge of what things satisfy the various needs and where to obtain them.

Again, it is the doctrine of the determinism of advertising which is the basis for his conclusion that the role of the government in satisfying the wants of consumers must be expanded.

For not only does advertising compel people to buy the products which are advertised, but also, he alleges, it inevitably tends to prejudice the consumer in favor of private goods and services, even in his capacity as a voter. The result is that “ . . public services will have an inherent tendency to lag behind." (pp. 260f.) And it is this which explains why “The family which takes its mauve and cerise, air-conditioned, power-steered, and power-braked automobile out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards, and posts for wires that should long since have been put underground.” And why “They picnic on exquisitely packaged food from a portable icebox by a polluted stream and go on to spend the night at a park which is a menace to public health and morals.” Hopefully, “Just before dozing of on an air mattress, beneath a nylon tent, amid the stench of decaying refuse, they may reflect vaguely on the curious unevenness of their blessings." (p. 253.)

Rarely has such sophistry been employed in an attempt to evade the obvious. Indeed, the material blessings of Americans are uneven, and Galbraith is correct when he says: “The line which divides our area of wealth from our area of poverty is roughly that which divides privately produced and marketed goods and services from publicly rendered services." (p. 251.) But is the reason that advertising causes a voter bias against appropriating funds for government services, or that government
services are provided by individuals using tax revenues, individuals who will make no profit if they are successful, and who will suffer no loss of their own capital if they are unsuccessful? Does the solution lie in devoting still more wealth to an institution inherently unfit to be a producer, the government, or is it not time to ask whether the roads, parks, and sanitation services should not be run on the same principles which have proved so successful in the manufacture of automobiles, food, refrigerators, air mattresses, and nylon tents?

Moreover, is the concept of bias applicable in explaining the voters’ reluctance to appropriate funds for public schools and public parks etc., at the expense of such things as television sets and “erotic clothing?" “The voters" comprise many millions of particular, individual voters. And it is just possible that part of the explanation may lie in the fact that a man prefers his television set to finger-painting materials for someone else's children, or that a woman prefers her new dress to a tree in some park which she herself will rarely or perhaps never visit. Is it a matter of bias for a man to be more concerned with his family's entertainment than with the education of someone else’s children or for a girl to be more concerned with her own appearance than with the appearance of some town’s landscape? It may come as a great shock to Mr. Galbraith: not only are there things of greater importance than “the community’s schools and parks,” but the decision as to what is important to whom is not his to make!

Is there anything at to Galbraith's claim that advertising causes a voter bias in favor of private goods and services, and thus an inherent tendency for public services to lag? The empirical evidence is overwhelmingly against him. Our armed forces, after all, are no longer provided with muskets, but with rockets and hydrogen bombs. And never before has the government had at its disposal so much revenue, both absolutely and relatively, for its various social projects. If anything is true, it is that voters today have a bias against privately produced goods and services and that expenditure for public services, far from having a tendency to lag, has shown a remarkable tendency to increase!

Galbraith's doctrine of the determinism of advertising suffers from a number of other serious shortcomings. For if it were true that advertising determined one to buy, how could the choices consumers make among numerous highly advertised products be explained? How could the fact that people still buy unadvertised products be explained when there are close substitutes which are advertised, as in the case of fresh versus canned vegetables? And how is it possible for Mr. Galbraith to avoid being biased by advertising in the same manner as he alleges the voters to be? By what mysterious means are Mr. Galbraith and “public authority" enabled to rise above the alleged causal forces acting on lesser mortals?

And, finally, even if advertising were deterministic, it must never be forgotten what Mr. Galbraith's alternative is: In the place of the television cartoon and radio voice causing people to prefer private goods and services, he proposes to substitute the tax collector and the whole apparatus of informers, police, jailers and prisons; this will ensure that people will prefer public services. The choice he offers must be made explicit: The alleged determinism of the billboard and poster, or the determinism of the gun and club.

The overwhelming anti-democratic implications of this position cannot be ignored, even if Mr. Galbraith does not pursue them. For what does it mean to. say that the voters are determined (p. 260) while “public authority" and, to be sure, Mr. Galbraith are not? This is nothing but the assertion that he and his friends have the right to make decisions without the consent of the voters, because he and they alone, being exempt from determinism, are in a position to make rational decisions.

Though he has much in common with them, Galbraith is not simply a modern “liberal” or do-gooder. For modern “liberalism” is still characterized by a high degree of secularism, while Galbraith is openly and consistently “anti-materialistic." In spite of this, however, it may appear to the reader of The Affluent Society that Galbraith does base his program on some concept of the individual's happiness on earth, even if reserving to himself the right to lay down wherein that happiness is to be pursued. But this is highly doubtful. For on a number of occasions the mask begins to slip.

The first doubts arise when he advances his arguments on diminishing marginal utility, and then in Chapter XI, when economic activity is compared to the purposeless motion of a squirrel trying to keep abreast of a wheel which is propelled by its own movement. (p. 154, p. 159.) And, earlier in the same chapter, when he compares modern desires for goods to artificially cultivated demons called into being by the goods themselves, and asks if the solution lies with more goods or fewer demons. (p. 153.) This smacks very heavily of the Oriental, mystical view of man. The fact that life requires continuous action to maintain it, that happiness requires continuous progress and improvement, and that no matter how much one has already done, there is still more to do, is looked upon as pointless, and the proposal made that instead, one do nothing.

In Chapter XII, he says something truly remarkable. For there, packed between page upon page of prattle about the importance of more public schools and more public recreational and cultural opportunities, we find that they too appear on the list of “nonessentials,” along with the restaurants, cafes, garages, and movie theaters. This occurs in his discussion of the great allied bombing raid on Hamburg during three nights of July, 1943. “On these three nights of terror their [the inhabitants of Hamburg] standard of living, measured by house-room, furnishings, clothing, food and drink, recreation, schools and social and cultural opportunities, had been reduced to a fraction of what it had been before." (p. 162.) Is this a disaster of the most enormous proportions? Not for Galbraith. For, he concludes: “In reducing, as nothing else could, the consumption of nonessentials and the employment of men in their supply, there is a distinct possibility that the attacks on Hamburg increased Germany's output of war material and thus her military effectiveness." (p. 163.)

Thus, in the last analysis, the only thing really essential, according to Galbraith, is the military effectiveness of the state. Everything else is “nonessential.”

And, finally, in perhaps what is the most amazing slip of all, in his advocacy of the arbitrary spending power of “public authority," Galbraith is on the verge of suggesting that individuals ought to be made to prove their need for things before being allowed to buy them: “But with increasing income, resources do so accrue [automatically] to the private individual. Nor when he buys a new automobile out of increased income is he required to prove need. We may assume that many fewer automobiles would be purchased than at present were it necessary to make a positive case for their purchase. Such a case must be made for schools." (p. 311.)

One must wonder if what Galbraith is really advocating is not simply state power as an end in itself and individual deprivation both as an end in itself and as a means of demonstrating the power of the state. The possible suffering which such a man may inflict on the American people, once having achieved a position of power or influence, is unspeakable. For he seems to combine the mentality of a dictator with a total contempt for the individual.


This article is copyright © 2006, by George Reisman. It originally appeared in Human Events in February of 1961 under the title “Galbraith’s Modern Brand of Feudalism” and was soon thereafter reprinted as a pamphlet under its present title. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site http://www.capitalism.net/ is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

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