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Mike Berry: The Affluent Society Revisited.

Mike Berry

The Affluent Society Revisited

Oxford University Press, Oxford, 2013, vi+204 pp., $82.50.

J.K. Galbraith was a prominent figure in political economy for more than half a century--from the 1950's to his death in 2006. One can imagine him saying, with a veneer of characteristically self-effacing wit, 'my contributions have not been entirely negligible'. He advised Presidents and senior politicians from the Democrat side of US Politics. He was a renowned public intellectual, featuring regularly in the serious press and in the media, including his own TV series on economic ideas in historical context. He wrote over 40 books, many of which were on the bestseller lists. Of these, The Affluent Society is the most widely celebrated, having been an absolute blockbuster when it first appeared in 1958 (and probably not surpassed in this respect until Thomas Piketty's remarkable smash-hit this year).

It is appropriate and timely to look back at JKG's famous work and to reflect on the lessons learned, the subsequent experiences and the equivalent political economic challenges today. Mike Berry does so with clarity and panache. For readers who are unfamiliar with Galbraith's ideas, he presents a helpful introduction to the main themes of The Affluent Society, usually as paraphrase but sometimes laced with key quotations. He is eager, however, to get on with his own interpretation of the relevance of Galbraith's main contributions. And he is by no means consistently laudatary. On page 83, for example we read: 'Looking back from today's vantage point, one would have to say that in many respects Galbraith misread the signs concerning the declining importance of production and growth'. And on page 95: 'Developments over the past few decades have generally undermined the predictions of Galbraith and Keynes on the declining urgency of consumer wants'. Overall, though, it is a empathetic assessment of Galbraith's work, not only in The Affluent Society but also in a range of his other publications up to The Good Society that Berry describes as his last major work (albeit not the very last, that being a slim, seriously witty volume on The Economics of Innocent Fraud which Galbraith wrote just two years before he died).

The Affluent Society Revisited is organised around about a dozen themes. First and foremost are reflections on the power of ideas, assessing what Galbraith famously labelled 'the conventional wisdom' (i.e. not wise at all, just conventional). Then there is a return visit to 'the central tradition' of economic thought, from Smith to Keynes, in which the principal economic problem is identified as achieving economic growth without recessionary interruptions. It was his challenge to this traditional focus of economics that led Galbraith to adopt the title The Affluent Society--as a means of signalling, in effect, 'mission accomplished, but now quite different challenges ahead'.

Berry then directs our attention to inequality, which has been a subsidiary or subordinate theme in economics. Of this Galbraith wrote 'few things are more evident in modern social history than the decline of interest in inequality as an economic issue' (quoted on p.31). I don't think, however, that he personally thought economic inequality to be of 'declining significance ... as an issue worthy of attention' (p.50) As Berry elsewhere notes, JKG always advocated pro-poor policies, and did so particularly prominently in The Good Society. Indeed, I think that he would have warmly welcomed Piketty's recent tour de force on inequality--notwithstanding the strong reservations about Piketty's approach that have been expressed by Galbraith's son, James K. Galbraith (discussed in Chris Sheil's article earlier in this issue of JAPE).

Subsequent chapters in Berry's book draw out other prominent and celebrated Galbraithian themes--economic security, the ambiguities of production, the driving force of consumerism, the causes of inflation, the significance of debt, the theory of social balance, policies for economic reform, the importance of engaging with economic power and the question of morality in economic affairs. There is a wealth of interesting material here, both revisiting Galbraith's penetrating insights and assessing how well they have stood the test of time.

Two examples of his most widely celebrated propositions must suffice. One concerns the importance of advertising-fuelled consumerism. Berry argues that both technological and socio-economic changes have offset Galbraith's 'dependence effect'--the proposition that 'consumers wants are themselves both passively and deliberately the fruits of the process by which they are satisfied' (The Affluent Society, Ch.12). On Berry's reasoning, consumer spending is not strongly subject to the effect of diminishing returns in the current era because (a) the Internet expands consumer's expenditure options and therefore their power; while (b) the growth of service industries provides ever-expanding opportunities for novel forms of personal expenditure. Maybe but, as Berry is himself quick to concede (on p. 96), studies on 'the economics of happiness' show that diminishing returns to consumers' well-being actually remains a strong tendency.

The other example concerns the problem of 'social imbalance'--between private wealth and public squalor. It is de rigeur to cite Galbraith's famous description, quoted on p. 127, of the 'mauve and cerise, air-conditioned automobile' driving through littered and ugly streets, conveying its occupants to a picnic by a polluted stream in a park that is 'a menace to public health and morals'. The imbalance between private wealth and public squalor is deeply embedded in the nature of capitalism, comparable in this respect to the underlying tendency towards economic inequality. During the period of the long boom and even into the 1980s, it looked like the private-public imbalance might be redressed by substantial public investment in economic and social infrastructure, but the bias remains. Indeed, it has been sharply exacerbated since then by the influence of neoliberalism on public policies, particularly privatisation. Berry's conclusion on this point has a distinctly Galbraithian air:
   As we gaze at the increasingly run-down state of our public
   infrastructure, the strain on basis services in education and
   health, the potential costs associated with climate change, the
   fragility of our financial system, and the increasing hopelessness
   of a generation of the unemployable and homeless, we might well
   ponder the alternative path taken since Galbraith and other
   liberals extolled the necessity and basic integrity of an empowered
   public sector (p. 139).

By modern standards, the concerns that Galbraith enumerated in The Affluent Society look a little light on environmental issues relating to economy-ecology interactions and sustainability. The problem of instability in a finance-dominated and speculation-fuelled economy is also accorded less prominence than the post-GFC political economic conditions now require. Indeed, these are matters to which Galbraith paid more attention in his later life. His evolutionary view of economic affairs was well suited to that flexibility of focus; and his institutional economic perspective focussed attention directly on the powerful institutions that would need to mend their ways. For sheer breadth of perspective and depth of humanitarian concern, the Galbraithian tradition is hard to surpass. Long may it continue to inspire.

Mainstream economists have usually either ignored Galbraith or derided him for his radical observations and elegant prose, but that is all the more reason for considering his alternatives to the 'conventional wisdom'.

Mike Berry's retrospective on JKG's most famous book and its challenging propositions should be warmly welcomed. For people familiar with the original work, it combines a brisk walk down memory lane with a thought-provoking stroll back to the present. For newcomers to the field, it is a fine illustration of how political economy must engage with social concerns and matters of power and ethics.
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Author:Stilwell, Frank
Publication:Journal of Australian Political Economy
Article Type:Book review
Date:Jun 22, 2014
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