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THE BOTTOM LINE

The Affluent Society revisited

Washington

I AM re-reading The Affluent Society with pleasure and profit.

Written by Harvard economist John Kenneth Galbraith and published in 1958, The Affluent Society survives as one of the most influential books of the last half of the 20th century. Prof Galbraith foretold that private prosperity would lead to a larger public sector. But this has also left problems that linger today.

Prof Galbraith - who died in 2006 - was rare among economists in that he had a distinctive writing style that was, at once, authoritative (even when he was later proved wrong), arrogant and charming.

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Humanity, he argued, was at a historic inflection point. For centuries, "poverty was the all-pervasive fact of the world". People constantly contended with "hunger, sickness and cold". Even after good harvests, everyone knew that famine "would strike again".

By the 1950s, this was no longer true in the United States and some European countries, Prof Galbraith wrote. Just the opposite: "The ordinary individual has access to amenities - foods, entertainment, personal transportation and plumbing - in which not even the rich rejoiced a century ago."

Of course, Prof Galbraith wasn't the only one to notice this. In his 1952 book The Big Change, historian Frederick Lewis Allen reported that from 1900 to 1950 car ownership jumped from 13,000 to 44 million, and life expectancy rose from 49 years to 68. In The Great Leap, published in 1966, John Brooks indicated that from 1940 to 1960, the share of homes without bathtubs and showers had dropped from about 40 per cent to about 12 per cent.

Air travel, television, interstate highways, credit cards, air conditioning and suburbanisation all flourished during these decades.

What Prof Galbraith brought to the table were ideas about how the economic system worked and how it might be improved. He argued that the social usefulness of private spending was reaching its limits. True, it was important to maintain production; this held unemployment down. But to do so, companies artificially stimulated demand for products and services of decreasing value.

The "direct link between production and wants is provided by the institutions of modern advertising and salesmanship," he wrote. "Their central function is to create desires - to bring into being wants that previously did not exist."

Meanwhile, the public sector - aside from defence - was starved for funds, Prof Galbraith contended. Schools, hospitals, local roads and police and other public services were all shortchanged.

The solution, he said, was to expand the public sector. This would provide useful services and help stabilise the economy, because the supply of public services would be less erratic than either consumer or business spending, underpinned by debt. (A half-century before the 2008-09 financial crisis, Prof Galbraith identified private-sector debt as a major economic threat.)

ALL IS NOT WELL

To a large extent, Prof Galbraith's vision has triumphed. Federal spending - excluding the military - has soared since 1950. We have a large welfare state; social regulation, led by the environment, is pervasive. And yet, all is not well.

The premise of The Affluent Society was that the economy would remain robust forever. Our important needs could be satisfied; the crucial decision was deciding what we needed. The Affluent Society barely mentions foreign competition. In the 1950s and early 1960s, it was inconceivable to most Americans that other countries could pose a threat to US economic dominance.

Prof Galbraith shared this optimism, believing that mega-companies of the order of General Motors, IBM and AT&T guaranteed US superiority. He generally disparaged the role of entrepreneurs in founding new industries and technologies.

Likewise, Prof Galbraith's theory of consumption, though it seems plausible and probably describes some behaviour, collides with most everyday observation. Advertising does not foist products on most consumers that they would not otherwise want. People don't have to be convinced to fly, to use the Internet, or to go to a good restaurant. Advertising determines mostly which brands people buy.

Economic stabilisation has also proved more difficult than Prof Galbraith assumed. The Great Recession of 2007-09 was proof of that, if nothing else. Most economists failed to forecast it.

Still, Prof Galbraith's achievement - providing a coherent and literate view of the whole economy - is no mean feat. Unfortunately, the affluent society is not as affluent as he and others expected. This explains many of our problems, because it confronts us with choices that we'd rather avoid. THE WASHINGTON POST WRITERS GROUP