The Keynesian economist J K Galbraith died yesterday aged 97. Born in Canada, he studied at Ontario Agricultural College and then Berkeley. He served as the United States’ “price czar” in the Office of Price Administration during World War II, then editor of Fortune magazine (1943-1948), before becoming a Professor at Harvard University from 1948 until retirement in 1975. He was the US Ambassador to India from 1961 to 1953.
“Galbraith was considered something of an iconoclast by many economists,” says his Wikipedia profile, “because he valued non-technical political economy as opposed to relying solely on mathematical modeling”, something he shared with many free-marketeers. “The only function of economic forecasting,” he said, “is to make astrology look respectable.”
His masterpiece was The Affulent Society. It was widely critiqued by free-market economists: Professor Murray Rothbard said was “replete with fallacies… dogmatic assertions and time-honored rhetorical devices in place of reasoned argument.” But it proved a best-seller: my Keynesian A-Level econ teacher raved about it, and across in the States it made Galbraith one of the most famous American economists. He understood perfectly the need for economists to write for Joe Public, which, unfortunately, too many in the economics profession ignore.
Galbraith’s conception of the future of manufacturing in his 1967 book The New Industrial State is in sharp contrast to what has actually happened. “High technology and heavy capital use cannot be subordinate to the ebb and flow of market demand,” he said. “They require planning and it is the essence of planning that public behavior be made predictable - that is be subject to control.” The British experiment with nationalised industries failed, while we have seen the example of Michael Dell, whose computer company takes orders from the internet and makes custom-built products tailored to each customer’s choices, using components and manufacturing facilities around the world. It doesn’t produce except according to the ebb and flow of market demand.
He will, perhaps, be best remembered for his infamous praise of the Soviet economy in the 1980s. Writing in The New Yorker, he said: “That the Soviet system has made great material progress in recent years is evident both from the statistics and from the general urban scene… One sees it in the appearance of well-being of the people on the streets…Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.” Separately, he said that that standing on the Berlin Wall: “Looking in either direction it really makes no great difference”. But by this point Reagan and Thatcher were both in power who recognised the failure of the state command-and-control economic ideas followed in post-war period. The Soviet economy collapsed, and Galbraith was out of fashion.
But some of his ideas have carried on. In The Affluent Society, he attacked the idea that continually increasing material production is a sign of economic and societal health, an idea taken up and developed by today’s opponents of economic growth.