The Affluent Society (John Kenneth Galbraith)

“To furnish a barren room is one thing. To continue to crowd in furniture until the foundation buckles is quite another. To have failed to solve the problem of producing goods would have been to continue man in his oldest and most grievous misfortune. But to fail to see that we have solved it, and to fail to proceed thence to the next tasks, would be fully as tragic.” These concluding lines to John Kenneth Galbraith’s The Affluent Society offer a glimpse into the insight of his 1958 classic essay.

Many books refer to themselves as essays regardless of the length of writing in question, often in an attempt to confer seriousness. The Affluent Society is unmistakably an essay, making a series of pointed arguments each following from the previous. The advantage of such a writing style is that one can disagree wholeheartedly with the conclusion whilst still being able to agree with many points and learn a great deal; it also makes it possible to spot the exact point at which an argument veers off course, and even where a proposition is inserted in order to reach the desired conclusion. All of these things happened during my reading of Galbraith’s essay.

The Affluent Society introduced the term ‘conventional wisdom’ into the lexicon, and his description of the term is important to anyone who spends time thinking about the social sciences. The enemy of conventional wisdom is not new ideas, but the march of events, says Galbraith. The economic advantage of tariffs before Adam Smith and balancing the budget during a downturn before Keynes were the products of conventional wisdom - objectively wrong ideas that were safer to espouse than not, before events changed conventional wisdom. Economics is built on a foundation of premises that are no longer relevant to a modern society. 19th Century classical economists Malthus and Ricardo were writing in a time where poverty was the default position, and pessimism about a continuation of that state of affairs reigned. The poor would remain at subsistence level, and the challenge was to elevate the trading and land-owning classes. This state of affairs was accepted and weaponised by Marx, but not seriously questioned.

People in the 19th century knew that even after a great harvest, famine could follow in subsequent years. The economic problems of the industrial revolution were then, that of economic security and inequality. The obvious solution to both was increased output. An increase in GNP would be celebrated by liberal and conservative politicians, economists and social workers alike in 1950. Whilst increased output could negate inequality by improving the economic prospects of the poor, economic security was solved by the increased output leading to high levels of employment. Galbraith’s point, is that a major justification for the ever-increasing production of goods is not the utility of the goods themselves, but the employment derived from that production. The problem with production as vehicle for employment is that it can lead to indiscriminate manufacturing planning, and suboptimal outcomes. 

Our celebration of increased GNP makes no distinction between the increased output of education and TV aerials. Related to this critique is Galbraith’s argument that the favouring of private-over-public expenditure stems from a period when food, shelter and clothing were the overriding economic priorities - needs better suited to private provision. By the 1950s Galbraith argued, people needed roads, judges, education and healthcare, all goods better suited to public provision. The obvious counter argument to Galbraith’s criticism of our undiscerning celebration of increased output, is that the market provides for people’s revealed preferences, and human needs are being met. Galbraith stated that we were enjoying ever improving cars to drive on ever deteriorating roads, and that a gap between the quality and quantity of private and public goods was widening. Public spending has increased dramatically since 1958. Whether the allocation is sufficiently balanced is a matter of opinion (and political persuasion); but Galbraith’s argument is less about the split as the consequences of increased overall wealth on that split. 

The point being made is that economic orthodoxy maintains that overall demand for goods is not affected by specific demands being met. We may desire a quantity of water per year, but once that need has been met, we desire something else. One would think that logically, there would reach a point upon which the level of marginal satisfaction from more thingsprogressively decreased. Not so, according to the proponents of ever increased output - the conventional wisdom at the time (and indeed, today). Galbraith’s argument is that firms producing goods are also producing demand for those goods, by advertising. The ‘production of demand’ is a failure of capitalism when we become an affluent society, and when public goods like education are not generating such demand, they will consequently be under funded.

This is a key moment in the essay. Firstly, the idea that people will consume what is fed to them by advertising has led to the most effective criticism of Galbraith’s argument, particularly by FA Hayek and his followers. Experience indicates that he is wrong; New Coke, Google Glass and the Segway failed because people simply didn’t want them, regardless of corporate aspirations to the contrary. Secondly, the argument that our desires would or should be satiated at a certain point must be addressed. The level of individual affluence in 2020 is considerably higher than 1958, yet people still want more goods. The Nobel Laureate and Psychologist Daniel Kahneman coined the term ‘the hedonic treadmill’, the idea that we get used to any standard of living (good or bad) and it becomes emotionally ‘normal’ at any point - and so we will never be satisfied as such. This belies the idea behind Galbraith’s critique of demand by economic departments. Where one can likely reconcile the contradicting notions between infinite demand and diminishing marginal returns on consumption, is with the trade off between more things and more leisure time. This I think, is the crucial missing point. Thirdly, despite most reviews criticising this idea of firms generating their own demand, it is not critical to the final argument. 

Galbraith recommends that there be a large shift to public allocation of resources from private, in order to emphasise socially useful public goods such as education. Another criticism Galbraith makes of the blind faith in growth, is in the undiscerning method of achieving that growth. We are bound he says, by a faith in hard work, and see leisure time as sinful, yet improved technology is at least as good a method of increasing output as the elimination of idle labour. Research and development will take place extensively in some industries but not others, dependent not on the demands of society but on the structure of any given industry (larger corporations will spend more on research and development). Regarding the often fruitful undirected research and investment in pure science, public investment is primarily directed by military priorities and not much else.

De-prioritising increased output could be achieved says Galbraith, by substantially increasing unemployment benefit - thereby lessening the effects of reducing production, from the standpoint of people’s livelihood. He strongly contests the argument that this increase would lead to laziness or moral hazard. Such a policy would also have a stabilising effect on the economy automatically during a downturn. There is a new class emerging he argues, in which the pursuit of money is secondary to having a career that is enjoyable and meaningful, and this class should grow. History has certainly shown the final point to be the case, with meaning taking centre stage in career choice in recent times. 

An overall assessment of the argument is now in order. The emphasis on production at all costs is perhaps folly in an affluent society. The prioritisation of private versus public expenditure, historically looks less of a mistake. If we have technically dazzling dishwashers but filthy streets, a democracy ought to be self-correcting in that regard; indeed, dramatically improved levels of air quality and other environmental improvements in the west since the 1970s are testament to this. It is difficult to maintain the argument that corporations decide consumer choices at will (whilst admitting of course that advertising is effective). Whether our prioritisation of mouthwash or other trivial goods is what ‘should’ happen is of course a matter of individual opinion, and the market itself allows all participants to vote with thier wallets. The only way out of this argument is to see humans as gullible fools falling for all and any marketing schemes ‘industry’ might serve up (and of course, to deny the existence of competition).

Where one might take Galbraith’s valid points and adjust them, is to argue not for decreased production, but for increased time. Most innovation can be measured in saved time, and so mechanisation can simply be seen as a way to maintain the obviously desired increase in output from a consumption standpoint, whilst severing the link between production and economic security of the citizenry. It is a Keynesian form of conventional wisdom that links to production to individual economic security by the linkage of jobs. If all citizens received a Universal Basic Income, or if we transitioned, from being primarily wage earners to primarily owners of capital (for example, owning solar panels to sell back to the grid, or self-driving cars to earn money as taxis while we sleep), there would need to be no such link. I would argue that the logical link in the chain that can and ought to be cut is not to cease output for the sake of employment, but to cease employment for the sake of economic security. For once that cord is cut, we truly could have a class of people able to pursue meaning over money in their work-leisure activities; we truly would have an affluent society.