JK Galbraith – Yesterday’s Hero

by | Sep 1, 2014

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Born 1908 in Ontario, Canada. Died 2006 in Cambridge, Massachusetts.

You probably worshipped him at college – although you might be a little embarrassed by that nowadays.

“The only function of economic forecasting is to make astrology look respectable.”



Half sociologist, half business theorist…..

And actually, hardly an economist at all. Considering that he was the darling of Harvard for his thoughts on economic development, it seems remarkable that Galbraith had almost no time for the dismal science. Economics, he said, was a great way of employing economists, but that was about as far as it went.

Born into a Canadian farming family, Galbraith studied agricultural economics before branching out into conventional economics. He began as an admirer of John Maynard Keynes, who believed that governments could expand their way out of cyclical crises by boosting private consumption. But he soon moved away from conventional macro theory altogether. Indeed, his eventual view was closer to that of Benjamin Graham, who said that there was no point in trying to analyse trends – rather, the trick was to work with them.




So you could hardly call Galbraith a top-town theorist. Rather, his view on the future of the world economy arose from a bottom-up obsession with the workings of the consumer economy. The 20th century, Galbraith said, had seen a massive shift from the economic principles that had guided the 1800s. The availability of mass media, and most notably advertising, had concentrated all the power in the hands of a few super-corporations that could dictate the politics of the business world. Their position was now unassailable.


Good grief, that sounds a bit 1960s

Indeed it was. Galbraith’s magnum opus, The Affluent Society, was written in 1958 and helped to pave the way for Kennedy’s social inclusion policies in the 1960s. It developed the theory that rampant consumerism, imposed by corporations, was dividing society into the haves and the have-nots – a theme also developed in American Capitalism (1952) and subsequently in The New Industrial Estate (1967). It was exactly what the anti-authoritarian and slightly paranoid students of the Vietnam era were ready to believe.



So was it right that mega-corporations couldn’t stumble?

Hardly. Galbraith failed to anticipate that new media, and especially the internet, would help to democratise share ownership – which would mean that even the largest companies would need to take more care. BP’s recent disgrace over the Macondo oil spill, or GM’s pension overhang, or even IBM’s failure to hold onto its near-monopoly in advanced computer design in the 1990s, coincided with a tightening of regulatory controls that have haunted even the most powerful corporations.

As for Galbraith’s idea that governments would automatically align themselves with the interests of big businesses so that the small man was effectively helpless, try telling that to Lehman Brothers or Enron or Worldcom. The growth of ‘small government’ Republican sentiment in the USA is still more proof that we have moved right away from the situation Galbraith feared.



Despised by the right, disowned by the left

Considering what a highly lauded figure Galbraith was in his day, it’s strange to find that he has so few supporters these days. He was panned by the monetarist Milton Friedman, who accused him of denying the masses any credit for making their own free-market decisions. But even Paul Krugman, the liberal-leaning op-ed economist at the New York Times, dismissed him as a media personality and a “policy entrepreneur” who had failed to produce any economic theories at all. Not a resounding epitaph for a man who so profoundly embodied the spirit of a generation.





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