A review by Carroll Quigley in The Washington Sunday Star, 25 June 1967,

of a book:

THE NEW INDUSTRIAL STATE,

by John Kenneth Galbraith.

New York: Houghton, Mifflin, 1967

"Galbraith's New Book on Industrial State Has Startling Impact"

By CARROLL QUIGLEY

THE NEW INDUSTRIAL STATE

 By John Kenneth Galbraith. Houghton, Mifflin. 427 pages, $6.95.

   This is an immensely important book.  It should be read, analyzed, and unemotionally discussed, not by economists, but by citizens. The economists, like most academicians, are hampered by their specialist training from seeing their subject in its full social context, and will be particularly offended by this volume, whose lessons, if generally accepted, would destroy economics as a separate intellectual discipline, or, at least, would reduce it back to political economy from which it emerged in the eighteenth century.  But the warnings of this book should be considered by citizens who must pay the price in freedom, comfort, safety, and blood, if the description of our economy and of "the American Way of Life" presented here is true in only a major part.

Two Systems

   According to Galbraith, the American economy consists of two quite different economic systems: "the entrepreneurial economy" of over eleven million enterprises, largely controlled by owners and working in a competitive system to "maximize profits" which will go to these owners; and a mega-economy (which he calls "the industrial economy") of a few hundred super-corporations, which dominate the whole economy and all aspects of our lives and are making the future in which the whole world must live.  The two economic systems are totally different, the competitive one almost helpless in the market which it cannot control, and threatened by government, labor, competitors, and the whims of consumers, while the mega-economy, controlled by a bureaucratic managerial group (Galbraith calls it "the technostructure"), which seeks power, not profits, and has been so successful in creating an autonomous area of such power that it can plan its own prices, production, and expansion, and has either neutralized or allied with the government, the owners, its competitors, and outside financiers, so that it can pass the costs of higher taxes, wages, costs, or even dividends onto the public by simply raising prices.  It seeks profits only to the degree necessary to satisfy the stockholders, pay these needed expenditures, and retains the rest to finance the corporation’s unremitting drive to expand its operations so that all forces capable of threatening its autonomy and freedom of action may be controlled or eliminated.

John Kenneth Galbraith

The Super Corporation

   The two elements of the super-corporation's economic environment which it cannot control are (1) aggregate demand, that is the total purchasing power in the community available to buy its products; and (2) possible shifts in consumers' tastes which might leave its products unwanted.  The first has been reduced by an alliance between the mega-economic technostructure and the government, under which the latter sees to it that its fiscal policies and its own purchases provide a market for the goods the mega-economy produces.  The second is controlled by the mega-economy's expenditure of billions of dollars for the mental conditioning of consumers to the point where a well-financed advertising campaign can create needs, even urgent needs, which were never conceived of before in human history.  To this end we are systematically brain-washed, and our whole way of life is being re-shaped, distorted, and corrupted to provide markets for the meta-structure.

   According to Galbraith, academic economists have been taken over by this system to the point where their theories seek to justify it and, in doing so, conceal from us what is happening.  At the same time, he feels, the alliance of government and the mega-economy is so close that the distinction of public and private is now meaningless, and we should call the resulting union "The New Industrial State," as he does in his title.

Goal is Power

   According to Galbraith, the goal of the super-corporations is power, to be achieved by growth, that is by the corporation's neurotic drive to expand without limit in order to bring under its influence all the elements of its economic /span> and social environment so that these can be controlled in an autonomous system by the technostructure. To explain this urge, which drives the members of the technostructure to longer and longer hours of work, and to deeper and deeper involvement in the rat-race which leads to the top, to ulcers, heart-failure, and to shattered family life, Galbraith examines, somewhat inadequately the motivations of businessmen and firmly rejects the usual economic theory which holds that they are working to increase their monetary incomes.  Instead, be finds their chief motivations in what he calls "identification" and "adaptation."  He does not go sufficiently behind these words to link them with the corporation's drive for power and incessant growth, as he should have, but the implication seems to be that men who have failed to achieve personal identity and are psychically insecure in their personality patterns seek such security by identification with an organization in which they can share in a drive for power which helps to assuage their own inadequacies.

   These are, of course, the same paranoid motivations which were the basis for joining or condoning the Nazi party organizations, although Galbraith, who makes much of the converging social patterns of the Soviet Union and the United States, makes no comparisons with Nazi Germany.  This may be part of his growing verbal caution in the latter part of this volume, in which discretion frequently stops him from drawing the obvious conclusions of his own statements.  To me his description of the American economy as he sees it bas a very disturbing similarity to the impression I received in 1942 on reading Part Two of Franz Neumann's "Behemoth: The Structure and Practice of National Socialism."  An economy driving neurotically for limitless expansion in a search for power and seeking to obtain total control of the factors which can influence its own activities (and which is blurring the distinction between the meta-economy and the government by constant interchange of personal, techniques, and joint or parallel decision-making can hardly fail to lead to disaster, and the parallel should not be overlooked because the relative balance between mental-conditioning and compulsion is quite different in the two systems.  Galbraith, however, stops well short of examining these possibilities.

Change in Tone

   On the contrary, the careful reader of this book will notice a rather drastic change of tone and expression about three-quarters of the way through the volume: the tone becomes more critical, even alarmist, but the wording becomes more circumspect and evasive.  He puts the mega-economy in its social context and shows how, like a cancerous growth (my words, not his) its search for power makes it necessary for it to take over all aspects of life: education, government, social living, our very thoughts and emotional reactions, in a gigantic brain-washing operation which will bring all life under the domination of the mega-economy.

   He is very concerned about its impact on the educational system, where he sees the mega-economy steadily modifying the process of education and educational administration so that these also adopt the mega-economic goals of endless physical expansion, financed by the system in return for educational efforts to shape and condition the young into the narrowly trained, uncritical, materialistic persons which the mega-economy needs for its personnel and its customers. He is equally alarmed at its effect on government and our foreign policy, taking over the one and directing the other toward increasing militarization of policy and all life.

   As in his earlier "Affluent Society," he shows that what the mega-economy wants done (like super-highways or moon-shots) is done, but what the mega-economy is not interested in (like legal, judicial, or tax reform, care of emotionally disturbed children, noise or pollution abatement, primary education or safety in the city streets) is not done. Galbraith implies that the influence of the mega-economy in these matters may well be unconscious, as simply unanticipated consequences of the technostructure's drive for its narrow and specific goals.

   The critical tone of the latter part of this book is in sharp contrast with the earlier and major part of the volume, where be gives the impression that the development of the meta-economy is not only inevitable but also good. He attributes it to advancing technology and shows little real feeling that such technology and the resulting meta-economy with its technostructure are either undesirable or dangerous.  Basing these on growing technology, he assumes that this is inevitable and desirable, and even justifies the technostructure's striving for power on the ground that power in the economy has always rested on whichever factor in the productive process was most difficult to obtain, a condition which allowed those who controlled that supply to use that control as a road to power.  Thus he lists the customary economic factors of production (such as land, labor, capital, know-how, and decides that power in the economy has always gone, in any period, "to the factor which is hardest to obtain or hardest to replace."  Thus power rested with land two centuries ago, shifted to capital, when the need for that factor became acute, a century ago, but now rests with know-how, since that is the factor in shortest supply today.  Thus, the author justifies the dominant role of management, not only within the super-corporation but outside it, as the technostructure steadily extends the area and scope of its power seeking to control all our actions, patterns of living, values, and thoughts, so that the corporation may continue to grow.

Managerial Growth

   In the same way, Galbraith justifies, in his early pages, the growth of the managerial bureaucracy as an anonymous group, for whose decisions no individual can be held responsible and which must be accepted as inevitable natural phenomena, on the ground that the management must function in committee in order to pool the diverse knowledge and varied talents of the many kinds of expertise necessary for modern technological complexities.  I think this is rationalization and suspect that Galbraith does too.o:p>

   In his last seven chapters, Galbraith looks at the future of the "Industrial State” and makes suggestions to reform it. Here his alarm is apparent, but the discussion is both feeble and unrealistic. These last chapters could have been an alarm bell clanging in the night.  Instead, they are a muffled drum, so muffled that neither the message nor the direction of the sound is clear.  We can be saved, he believes, by "the intellectual and scientific estate," which must provide the necessary "political lead."  The first task of these intellectuals will be to break the mega-economy's grasp on education, especially higher education.  He warns that no reliance can be placed by these reforming intellectuals on economists, for the "economic stereotypes -- the productive models that lend themselves to assembly-line instruction -- insist on the approved sequence. . . they will continue to do so."

   Quite so, but what Galbraith ignores is that economists are no better and no worse than any other intellectuals, scientists, and academicians; they are all mostly narrowly educated men-of-good-will trying to make a living, products of the educational system and society whose condition, according to Galbraith, is so bad it must be reformed.  Galbraith should guard himself against the normal human error of believing that the people one knows best are worse than those one knows less well.

   Even Galbraith, with all his broadness and background, is not able to offer a suggested reform nor even to see what is coming.  His reform is old (and I had hoped discredited), that of more socialism (not his word) by trying to balance the mega-economy through increasing the sphere of action of the state.  This is based on his belief that the state is independent of the mega-economy and can stand up against it, two points that his book shows to be untrue. In fact, his vision of the future, which sees the state and the mega-economy merging into symbiosis in which the distinction of public and private is no longer significant, sees this as a process by which the state is taking over the mega-economy. This is naive, for it is clearly a process by which the technostructure is taking over the state by conditioning its major goals, motives, techniques, and personnel.

Thinking on Remedies

   Galbraith's weakness in thinking on remedies and the future rests on two simple facts: he is too weak in history and in the social and psychological roots of our present crisis.  He may distrust the economists, but he remains one of them.  From the beginnings of economic thinking, six generations ago, economists ignored what every entrepreneur knew: that the "factors of production" included not only the "economic factors" of land, labor, capital, management, and the rest, but required two preliminary needs: /span> an acquisitive outlook in the people and domestic tranquility in the land.

   As soon as economics ceased to be "political economy," the economists forgot these two, simply because the industrial system then had them, but, from before 1750 to after 1850, whatever economic thinkers believed, all businessmen and politicians saw the need for these two.  Capitalism and industrialism could not function without the first: that subjective outlook and value-system which include self-discipline, punctuality, future-preference, and infinitely expandable material demand -- what historians call "the acquisitive outlook."  Lack of this outlook has been the chief obstacle in the introduction of modern industrial society into Asia, Africa, and Latin America, despite our efforts, costing billions of dollars, to give these areas the "economic factors" of production.  We have been equally unsuccessful in introducing this outlook to at least one-sixth of our own people, as can be seen in any American urban slum. The British, however, gave it to their own people, largely in 1820-1850, through what they call "Non-Conformist religion." The other neglected, but essential, non-economic factor of production is what we call "law and order," but our wiser ancestors called “domestic tranquility";  it covers personal physical security and safety, respect for property, and non-violent settlement of personal disputes.

Youth's Resentment

   The chief task of Britain, in the eyes of businessmen in 1790-1850, was to obtain these two things. The economists ignore this fact. Today both are vanishing rapidly. On the one hand, the middle-class adolescents are contracting out of the acquisitive outlook, while the slum adolescents, who never had it, are turning our cities into jungles. Both groups show their resentments against Galbraith's "Industrial State" by vandalism, increasing crimes against persons, and vandalism on property. Many others are simply refusing to join the system with neither violence nor animosity, turning away from it to try to make their own non-affluent, non-competitive life outside the “American way of life." In the last few years middle-class young people have shown their rejection of it by decreased enrollments in engineering, exact sciences, and business studies, and, above all, by a 35 percent drop in applications for jobs in industry, at a time when total enrollments and applications to the Peace Corps are rising.

   The future of the Industrial State will not be settled by any superficial reforms by intellectuals in education or society as a whole, and not, I hope, by more socialism, but by many persons dropping out, in every way possible, probably by guerrilla warfare in American cities, and by the increasing numbers who come to believe that all vital reforms occur in peoples' minds and hearts.  That was how it happened to an oppressive system similar to ours, in the Roman Empire about 1,700 years ago.