Thursday, July 27, 2017

The Future according to Galbraith (1967)

From the October 1967 issue of the Socialist Standard

In the Autumn of 1966 Harvard Professor of Economics J. K. Galbraith gave a much publicised series of lectures on the B.B.C. Home Service. They were part of a book on which he had been working for many years and which he now publishes under the title The New Industrial State. (Hamish Hamilton, 42s.).

In it he describes and explains the rise of the big industrial corporations in America; tells us how they are evolving towards a planned society not foreseen by the supporters of Nineteenth Century capitalism or by socialists; and that where America leads the rest of the world will follow.

Before the era of the big corporations the individual capitalist had to compete with his rivals in a market and at prices neither of which he could control: he also had to fight the trade unions. His sole object was to make as much profit as possible. This, says Galbraith, is still true in the world of the independent retailer, the farmer and the like :
Here prices are not controlled. Here the consumer is sovereign. Here pecuniary motivation is unimpaired, (p. 395)
But according to Galbraith, it is otherwise in the “industrial system”, that is among the “mature corporations” such as General Motors, Standard Oil, Fords, Du Pont, etc. (he names ten of them). Here it is the few big corporations who determine prices and create the market by advertising. They are no longer concerned to show maximum profit because the shareholders, who do want maximum profit, have lost control to the group of technicians, sales executives, engineers, scientists, designers etc. He defines them as all who bring “specialised knowledge, talent, or experience to group decision-making” (p.71) and calls them the “Technostructure”.

The interests and aspirations of the Technostructure lie in their own jobs, their security and prestige, all of which are to be achieved by promoting the technological efficiency and expansion of the corporation to which they belong and by cultivating close relationships with the governmental authorities who regulate and stabilise the general wage and price levels and secure an approximation to full employment. He sees the big corporations possibly merging with the state apparatus. He also sees the trade unions as a declining force.

An essential point in this argument is that the big corporations are able to finance their own expansion out of undistributed profits and have thus freed themselves from dependence on the money market and the banking world through which they formerly raised capital.

He also maintains that (subject to some qualifications), the trend towards control of industrial organisations by the “Technostructure” is in evidence in Russia, and in nationalised industries everywhere.

At the end of the road, unless we are saved by the enlightened intervention of the educationalists and scientists in collaboration with the Technostructure, we shall live our disciplined and liberty-less lives in a world of corporations (private and public) narrowly devoted to the purposes of production, expansion and technological advance.

Much of this ground has been covered before though without the systematic treatment given it by Galbraith. The first name that comes to mind is James Burnham with his The Managerial Revolution published in 1942; but with a surprising indifference. Burnham saw his models of the Managerial state in Germany, Russia and America. For him the 1939 war was “the first formative war of managerial society”. It would be followed, he said, by wars for world domination between the only three possible centres, America, Europe and the Far East. (See Penguin edition 1945 pages 219 & 220). Galbraith sees the Managerial revolution producing the exact opposite, a coming together of the “free world” and the “communist world” because “it will dispose of the notion of inevitable conflict based on irreconcilable difference” (P.391).

Galbraith here makes one of several references to Marx, most of which betray an almost total failure to understand what Marx held to be the nature of capitalism. He charges Marx with not having foreseen this coming convergence: on the contrary Marx did foresee that Russia would become, as it has, a capitalist state. But Marx did not explain that the conflict between capitalist states as being due to their unlikeness but to their likeness. As he wrote in the Communist Manifesto, “The Bourgeoisie finds itself involved in a constant battle . . .  at all times, with the bourgeoisie of foreign countries”. They are in conflict over markets, raw material sources and strategic points.

Russian and American capitalism may indeed find common ground for a time (as they did in the last war) but not for the reason he gives. Then it was the need to resist German and Japanese expansion. Next time it may be the need to contain Chinese expansion.

Galbraith's confusion is the common one of supposing that socialism (or communism) in the Marxian sense means nationalisation or state capitalism. The consequence is that although he has a chapter on “Socialism” and many references to it elsewhere he nowhere even considers the possibility of the human race finding the solution to the problems he raises by going over to a classless social system without wages, prices, profits or production for sale.

The evidence Galbraith gives to support his case is in almost every instance exaggerated, or based on trends which may be reversed or is mere assumption about what may happen.

It is indeed true that a tendency in recent years in this country has been for big companies to rely more on providing capital for expansion out of undistributed profits, instead of raising capital from outside. It is however, partly the result of the method of taxing company profits, which could be altered again. Even so we have such examples as ICI raising £60 million in 1966 by loan stock, and three big companies, English Electric, Associated Electrical Industries and Rolls-Royce, which between them have outstanding loans from banks and acceptance houses of nearly £100 million. They at least have not become self-financing.

Galbraith believes that the propertied class as a whole, though its interest would be served by getting maximum dividends and by curbing the big near-monopolies, will passively allow the Technostructure to thwart it. There are, however, influential groups in political parties and business circles determined to prevent this. In the last resort it will be settled by government action one way or another.

Then there is his belief that the trade unions are declining. He bases this on the fall in the number of industrial workers (blue-collar workers in American terminology) among whom trade unionism has been strong, and that white-collar workers (clerical, technical, administrative etc.) though growing in number are “not within the reach of unions”. With growing affluence, he says, the workers in the corporations are on better terms with their employers and less militant; but at the time of writing 160,000 American workers are on strike against one of his named corporations, Ford, and other motor companies are likely to be involved.

The position of trade unionism among British white-collar workers was examined recently by George Sayers Bain in the British Journal of Industrial Relations (November 1966) and while showing a remarkable growth of white-collar unionism in recent years he reaches a conclusion rather like that of Galbraith, on the ground that so far only a small proportion are organised. But is this conclusive? At one time trade unionism was confined largely to craftsmen and it was argued then that “unskilled” workers were unorganisable.

The non-manual workers affiliated to the TUC, covering civil servants, local government staffs, draughtsmen, supervisory and technical workers, professional, clerical and entertainment workers have increased from 917,000 in 1947 to 1,679,000 in 1966: to which should be added about 300,000 teachers. Why should this trend not continue? On present evidence it will.

In support of his case that it wont continue Galbraith relies heavily on the “affluence" of workers in the industrial countries and on the ability of governments, using Keynesian techniques, to maintain nearly full employment. Millions of workers do not share his optimism on either count, not forgetting the current British unemployment of 600,000, expected to rise substantially this winter; and the “low unemployment" of about three million in USA, commonly regarded as understating the real number. Included in the unemployed in Britain are quite a lot of Galbraith’s ‘Technostructure”. They suddenly found that they were not in control after all.

If the strike of Ford workers knocks a big hole in Galbraith’s belief about trade unions, another event in USA does the same for his belief that the big corporations so dominate the market that they can fix the prices at which they sell their products. One of his ten corporations is Du Pont, the largest chemical company in the world. It was reported in the London Times (9 September) that Du Pont had announced an expected fall of twenty per cent in their profit this year. And the reason? “a sharp decline in the prices of synthetic fibres". So much for the Galbraith theory.

Among Galbraith’s misleading references to Marx are his statement (p.290) that Marx assumed "the progressive immiseration of the working class” and that as revolution was inevitable according to Marx, why was it necessary to advocate it. (p.321).

He overlooks that Mara’s statement about the lot of the worker growing worse was set in relation to the accumulation of capital and “be his payment high or low”. And Marx, who insisted that man makes his own history, never supposed that socialism could be achieved without the conscious act of the organised socialist working class.

Marx would, for example, not have subscribed to Galbraith’s despairing doctrine (p396) that the belief “that he can decide the character of his economic system" is no more than “the vanity of the modern man”.

Modern man does not have to resign himself to Galbraith’s grim new industrial state.
Edgar Hardcastle

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