John Kenneth Galbraith, in The Affluent Society, argued that poverty and increased production should not be the central problems of economics. Instead, economics should be concerned with how better to allocate the abundance of products on the market and the income that comes from the sale of those products. Galbraith’s ideas influenced Presidents Kennedy and Johnson in the 1960’s, and his theories remain influential nearly a century later.
In the spring of 1958, John Kenneth Galbraith’s book The Affluent Society was published by Houghton Mifflin
Galbraith originally set out to write a book with the working title “Why People Are Poor,” an inquiry into how poverty could exist in a land of plenty. As he probed deeper, he found that the real problem was with the generally accepted ideas governing the economy, ideas he referred to as “conventional wisdom” (a phrase he likely coined). Realizing this, Galbraith refocused his work to reveal how conventional wisdom explained a world not of the moment but of the past, and, thus, hindered social progress.
At the core of conventional wisdom was an obsession with the production of private consumer goods. Galbraith argued that this wisdom was based on outdated ideas regarding poverty, inequality, and economic insecurity, which were considered normal conditions for the majority of humanity. Production guided by free markets, as advocated by Adam Smith in The Wealth of Nations
Galbraith saw a nation that no longer fit into this “wisdom,” although this wisdom continued to shape policy. The nation was not plagued with mass poverty, but instead was characterized by abundance. Production, for the most part, no longer involved numerous firms competing in free markets to satisfy the needs and wants of consumers. Instead, production was dominated by a relatively small number of large corporations, such as General Motors and General Electric, which were shaping the desires of consumers. Inequality and insecurity were not needed to spur greater productivity, but could be further reduced to lead to even greater prosperity. In Galbraith’s opinion, the economy had changed, but the ideas shaping policy had not.
Galbraith believed that changes in the possibilities available to a nation of such abundance, but not in the ideas governing the economy, created a system leading to undesirable outcomes. The obsession with ever-increasing production was leading to output of diminishing value because the more important needs and wants of consumers were already satisfied. The production of private goods was no longer guided by consumer needs and wants, but was, according to Galbraith, determined by needs and wants instilled in consumers by advertising. Manipulated by advertising, consumers found themselves increasingly in debt after buying goods of diminishing value to them.
Instead of continuing to pursue the single-minded obsession with ever-increasing production, Galbraith saw the need to reorient the economy to meet a broader range of goals. With market competition and increased production came a growing imbalance between an abundance of private goods, such as cars and televisions, and the scarcity of public services, such as parks and education. Society did not need ever-increasing output but needed a change in the goals of production. Increasing the production of consumer goods while diminishing resources for schools, hospitals, and other public services contributed to the nation’s poverty.
As an economist who was usually classified as an institutionalist—an economist who analyzes the role of social institutions and culture in explaining economic behavior—Galbraith also embraced the ideas of John Maynard Keynes
Galbraith’s emphasis on the merits of increased government involvement in the economy put him at odds with those advocating greater use of unfettered markets and less government. Following World War II, conservative economists were arguing for the reduction of some of the government programs instituted during the 1930’s and 1940’s, which had been enacted to deal with the Great Depression and the war. These ideas had been strengthened by, among other works, Friedrich von Hayek’s book The Road to Serfdom
The Affluent Society was met with a mostly favorable response, although there were widely divergent views on the work. Many critics took exception to Galbraith’s argument concerning the diminished importance of production and the persistence of poverty. Other critics were disturbed by Galbraith’s theory that consumers were being manipulated by advertising. While many found Galbraith’s arguments concerning the imbalance between private and public goods convincing, some were troubled by the problem of how to go about balancing the two. Despite these criticisms, the book found a widely receptive audience. In fact, Galbraith’s currency was such that Senator John F. Kennedy asked him to become a member of his advisory team during his presidential campaign of 1960, and he later named Galbraith ambassador to India.
The Affluent Society was published during the post-World War II prosperity of the United States and the rise of the Cold War with the Soviet Union. In the months preceding the book’s arrival, the Soviet Union had made several successful space launches under its Sputnik program, feats that had yet to be duplicated by the United States. Against the backdrop of growing anxiety that misplaced national priorities were causing the United States to become vulnerable, Galbraith’s book found a receptive audience. In addition to The Affluent Society providing for the nation a way to describe itself in the postwar era and also providing memorable phrases such as “conventional wisdom,” the book helped inspire discussion regarding the nation’s priorities. Galbraith’s ideas migrated to the arena of public policy in the 1960’s, as the Kennedy and Johnson administrations expanded the role of government. The ideas presented provided a foundation for the War on Poverty and Great Society programs enacted during that time.
The Affluent Society was the first book in a trilogy outlining Galbraith’s theories and policy prescriptions for the U.S. economy. The other two books, The New Industrial State
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Collins, Robert. More: The Politics of Economic Growth in Postwar America. New York: Oxford University Press, 2000. Explores the evolution of political attitudes regarding postwar economic growth. -
Hession, Charles H. John Kenneth Galbraith and His Critics. New York: New American Library, 1972. Includes a discussion of The Affluent Society, its impact, and reviewers’ comments. -
Parker, Richard. John Kenneth Galbraith: His Life, His Politics, His Economics. New York: Farrar, Straus and Giroux, 2005. A comprehensive biography dealing with the major events in Galbraith’s life and his writings. -
Sobel, Robert. The Great Boom, 1950-2000: How a Generation of Americans Created the World’s Most Prosperous Society. New York: St. Martin’s Press, 2000. A thought-provoking look at the sources of increased affluence following World War II, and the social implications of affluence. -
Stearns, Peter N. Consumerism in World History: The Global Transformation of Desire. 2d ed. New York: Routledge, 2006. Explores the history and the appeal of consumption and consumerism around the world. This edition has been updated to include a chapter on Latin America, discussions of developments in Russia and China since 1990, analyses of government-encouraged consumerism in the face of terrorism, and more.
Inflation and Labor Unrest
Roosevelt Signs the G.I. Bill
Bretton Woods Agreement Encourages Free Trade
Simons Articulates the Chicago School of Public Policy
Diners Club Begins a New Industry
Keep America Beautiful Is Founded
Drucker Examines Managerial Roles
Service Economy Emerges in the United States
Johnson Announces War on Poverty
Kennedy-Johnson Tax Cuts Stimulate the U.S. Economy