John Kenneth Albraith Private Affluence and Public Poverty

Albraith Theories

The Affluent Society was published in 1958 (one year after the launching of the first Russian sputnik). It had a dual theme: private affluence and public poverty.

Regarding private affluence, Galbraith argued that economics was born into a poor world where wants were authentic to the sovereign consumer and growth and allocation still eminently relevant concerns. Now, however, that basic needs for food, clothing and shelter have been so extensively met, the consumer has become satiated with opulence and confused as to what frivolous trinkets he wants next; and is in this state vulnerable to the artificial insemination of tastes and preferences by means of advertising and salesmanship. Such tastes and preferences are deliberately manufactured via an appeal to the basest of instincts, aspirations and insecurities. They are nonetheless treated by economists as if they originated within the individual consumer; and in this way economists play into the hands of the powerful by unintentionally disguising the replacement of buyer by seller sovereignty. The recognition of this 'revised sequence', of course, calls into question the acceptability of the GNP as an index of felicity, and its rate of growth as an index of social progress.

Regarding public poverty, Galbraith asserted that vital public services (roads, schools, museums, low-cost housing, slum clearance, the police) are today starved of revenue because of factors such as the traditional (if irrational) view that only the private sector is productive of wealth, the truce on inequality (for many reformers who favour a welfare state are nonetheless reluctant to see it financed out of progressive taxation in a way which marries provision of service to redistribution of current income), and the absence of consumer credit and sales promotion in the State sector. Yet it is precisely these services that are increasingly in demand in a rich society where households want clean streets once they have a roof over their heads and where firms want not simply physical inputs but schooled manpower as well. Galbraithian socialism is evidently lame duck socialism, for it stresses that the private sector simply cannot satisfy needs which are today increasingly acute and insists that the alternative to full social provision is no provision at all. Galbraithian socialism postulates that social balance is in a rich society of greater urgency than economic growth, and identifies, as an important reason for this greater urgency, an unambiguous propensity on the part of balance to favour the lower-income groups: thus unemployment benefits help to combat insecurity (whereas it would be highly inflationary to seek the maximum rate of economic growth in order to create jobs for even the most marginal worker, quite apart from the blatant absurdity of having then to engineer artificial wants so as to be able to sell the goods that that worker will produce), and training and retraining schemes help to combat poverty (whereas economic growth by itself does nothing to integrate those unfortunates left outside the mainstream of activity).

Galbraith's theory of private affluence and public poverty is a controversial one, and the following comments may perhaps be made.

Galbraith is being somewhat arrogant in assuming that consumers increasingly choose to purchase baubles and trinkets yielding them ex propaganda and want creation zero-marginal utility (it is, to be fair, not the gold-plated mousetrap or the toaster that prints an inspirational message on each piece of toast that enjoys the most significant income-elasticity in real existing affluent societies, but rather commodities such as consumer durables and complements to leisure towards which it is less difficult to be tolerant); that consumers genuinely do not know what they want (for there must always be a presumption in a democratic society that citizens who are deemed able to vote intelligently for their political leaders are also capable of choosing their own brand of toothpaste); and that consumers actually allow themselves to be manipulated by persuaders (although the latter would naturally be foolish not to try) into buying some frivolous new product bearing no relation to existing ways of life and developed purely because of the fact that innovation in its own right yields job-satisfaction to the boffin on a salary and contributes to the growth of his organisation. Given that persuasion is not a free good but has a price, the firm will probably not market new commodities at random, but rather will first conduct intensive research into what most people potentially most want; and it will in any case direct its appeal not towards economic man in isolation but towards social man in general (whereas Galbraith, in contrast to Veblen, underestimates the extent to which status-anxiety, invidious comparison, peer-group pressures, and the rat-race all inhere in the very process of social interaction itself and are exploited rather than inculcated by the forces of advertising and salesmanship).

Next, Galbraith neglects the possible failure of want-creation not simply in his account of consumer preferences but also in his account of corporate behaviour. Specifically, he assumes that corporations do not compete with one another for larger shares in a given market (that they do not, in other words, ever seek to invade each other's territory); and that they actively create wants purely so as to boost total demand for the product as a whole (and for consumption itself, as opposed to savings or leisure), while fraternally keeping their percentage of aggregate sales constant. Yet, if producers have different cost-relations, then it is difficult to see why an efficient firm would or should willingly pass up the opportunity to increase its profits or expand its sales (utilising techniques of price or non-price competition) simply out of courtesy to a less-efficient rival in the industry. Such a strategy (orientated as it is towards mutual security) would serve the firm's protective but not its affirmative purpose; and the very frequency with which market-shares in the real world do alter reinforces the suspicion that a go-ahead organisation will be reluctant to constrain its own growth rate by that of the market for the good as a whole.

Finally, Galbraith never resolves the problem that it is easiest to transfer resources from the private to the social sector at a time when the former is growing rather than stagnating; and that a rapidly-growing GNP may be the precondition (particularly in terms of popular acceptance) for a healthy welfare state. Besides that, the distinction between the two sectors is at least in part an artificial one in Galbraith's model; for many goods and services in the private sector are in strict logic worthy of the approbation particularly of a cultural elitist such as Galbraith (the case of private hospitals, fringe theatres and publishing houses), while many in the social sector are in truth rather organs of social division than architects of social equality (the case of university education, which demonstrably favours the children of the suburb more than it upgrades those of the ghetto). More generally, the very concept of social balance implies a unique point; and since a unique point may be passed as well by the public tortoise as by the private hare, many readers will no doubt regret that Galbraith never suggests when and where a mixed economy is at last properly mixed. Such a point would, of course, be easier for him, as a believer in technological determinism and the residual supplier argument, to specify, than it would be for the social philosopher who assigns a greater importance to values and believes that the welfare state must be consciously chosen rather than being imposed willy nilly upon an advanced industrial society.