In a 1930 essay titled “Economic Possibilities for our Grandchildren,” John Maynard Keynes ridiculed economists for having a high opinion of themselves and their work. As the Great Depression engulfed the world, Keynes looked back at historic rates of economic growth, arguing that the real problem people would face in the future was not poverty but the moral quandary of how to live in a society of such abundance and wealth that work would cease to be necessary. The “economic problem,” as he put it, was technical, unimportant in the larger scheme of things. “If economists,” he wrote, “could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!” John Kenneth Galbraith—the Harvard-based economist whose books shaped the public conversation on economic matters for a generation in mid-twentieth-century America—would have agreed.

Today, given the rise of mathematical methods and computer modeling, economics is if anything even more labyrinthine, esoteric and inaccessible to the layman than it was in the days of Keynes and Galbraith. It is also more intellectually and politically ascendant than it was in the 1930s. Its methods now dominate much of the social sciences, having made inroads in law and political science. Its central theme of the superiority of free markets is the gospel of political life. This makes the publication of the Library of America edition of four of Galbraith’s best-known books—American Capitalism; The Great Crash, 1929; The Affluent Society and The New Industrial State—a cause for celebration. (The volume is edited by Galbraith’s son James, also an economist.) Galbraith delighted in puncturing the self-importance of his profession. He was a satirist of economics almost as much as a practitioner of it. He took generally accepted ideas about the economy and turned them upside down. Instead of atomistic individuals and firms, he saw behemoth corporations; instead of the free market, a quasi-planned economy. Other economists believed that consumers were rational, calculating actors, whose demands and tastes were deserving of the utmost deference. Galbraith saw people who were easily manipulated by savvy corporations and slick advertising campaigns, who had no real idea of what they wanted, or why. In many ways, our economic world is quite different from the one Galbraith described at mid-century. But at a time when free-market orthodoxy seems more baroque, smug and dominant than ever, despite the recession caused by the collapse of the real estate bubble, his gleeful skewering of the “conventional wisdom” (a phrase he famously coined) remains a welcome corrective.

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John Kenneth Galbraith was born in 1908, the third child of a farm family in the small Canadian town of Iona Station. He became an economist almost by accident. Shortly before his graduation from Ontario Agricultural College (which he described in later life as “probably the worst college in the English-speaking world”), he stumbled upon an advertisement for a graduate fellowship in agricultural economics at the University of California, Berkeley. He applied and was accepted, and after completing his studies he managed to secure a nontenure-track position at Harvard.

It took some time for Galbraith to become a full professor, but even then he never retreated into academic life. To learn of the sheer variety of his activities—detailed in the chronology in the Library of America volume—is exhausting. He was prolific, writing four dozen books—among them three novels—and more than 1,100 articles. Before he earned tenure, he did a stint at the Office of Price Administration during World War II, creating the system of price controls that prevented inflation during the wartime boom. In the 1940s he was a writer for a new magazine called Fortune, where his articles helped spread popular interpretations of Keynesianism. He participated in the United States Postwar Strategic Bombing Survey, which found that the supposedly accurate air-bombing of Europe had in fact failed to destroy the munitions plants it had targeted. He was closely tied to the Democratic Party of the postwar years, advising Adlai Stevenson and serving as the American ambassador to India under John F. Kennedy, although he ultimately became an outspoken opponent of the war in Vietnam (and steadily moved to the left of the Democratic Party). In the ’70s he was pilloried by the conservative movement: the Heritage Foundation held him up as an example of all that was wrong with liberalism, and Milton Friedman’s PBS series Free to Choose was created as a conservative alternative to a series Galbraith produced for the BBC called The Age of Uncertainty.

When Galbraith was a young man, the field of economics was more diverse and more openly ideological than it is today. It was far less dominated by mathematical techniques (which Galbraith never used), and political debates were a regular part of economics courses. (For example, the conservative Harvard economist Thomas Nixon Carver used to open the floor to socialist speakers for the first half of his spring semester class, and then spend the second half giving his rebuttal to their arguments.) Thorstein Veblen, Karl Marx and Keynes were among Galbraith’s early intellectual influences. For Veblen, consumption was irrational and atavistic, a display of status more than the satisfaction of genuine needs—a skeptical view of consumerism that Galbraith would follow throughout his work. Even though Galbraith rejected Marxism, finding it as doctrinaire as conservative economics, he admitted that Marx was right about enough—the existence of social classes, the centrality of material interests, the recurrence of economic depressions, the concentration of industry—that any thinking person who was not a Marxist had to occasionally wonder: “Might he not be right on other things—including the prospect for capitalism itself?” In the 1930s, as a young professor, Galbraith became persuaded by Keynes’s arguments against laissez-faire and in favor of an expansive role for government. In the postwar years, American Keynesianism became inextricably bound up with military spending. Galbraith would put forward another vision of Keynes, one that stressed a vision of the common good.

Despite the intellectual richness of economics in the early years of the twentieth century, most of Galbraith’s academic elders in his formative years still believed the old truths of Adam Smith, David Ricardo and Alfred Marshall. The economy was composed of millions of atomistic units—individuals and small firms—that interacted in a marketplace in which prices were set by competition. This perfect system ran best without interference from the state. Competition would produce the best rewards for everyone. Even the Social Darwinist certitude that “the millionaires are the product of natural selection” (to quote one of the credo’s chief boosters, the Yale sociologist William Graham Sumner) remained a respected faith in the academy into the early 1930s.

For many in the broader society, this unthinking faith in the virtues of the market was shattered by the Great Depression. But the men who had devoted their lives to expounding the market’s glories—including quite a few on the Harvard economics faculty—did not retreat. Instead, they spent their time denouncing the New Deal, Roosevelt and the “alien” intellectual influences that had seized control of the state. Throughout his career, Galbraith would write with bitter wit about people who clung to their sentimental philosophies about how the world ought to operate, long after reality should have shaken them free. In The Great Crash, 1929, he would quote Mark Twain, who had provided the Wall Street Journal’s “thought of the day” for September 11 of that year: “Don’t part with your illusions; when they are gone you may still exist, but you have ceased to live.” Galbraith sought to provide a vision of the modern economic world without illusions.

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The four books collected in the Library of America volume take as their central target the idea that the economy is composed of rational, calculating individuals, whose personal preferences shape the market and guide it to an optimal outcome for everyone. It is hard to imagine four such books being written today: they were bestselling, lucid, fiercely confident works that argued in various ways against the idea that the American economy operates as a frictionless, benevolent free market.

American Capitalism, published in 1952, begins by comparing the economy to a bee. “It is told,” Galbraith wrote, “that such are the aerodynamics and wing-loading of the bumblebee that, in principle, it cannot fly.” And yet it did, in blissful ignorance of the laws of physics. So, too, the American economy of the ’50s seemed to be thriving “in defiance of the rules” of economic life as laid down by Smith and Ricardo. A massive government, powerful labor unions and gigantic corporations had replaced the competitive economy of yesteryear. The result, though, was not economic collapse but unprecedented prosperity. Skeptics of bigness who urged a return to the small enterprises of the nineteenth century were nostalgic and misguided. The way to respond to concentrated economic power was not by trying to break it up, as had always been the American tendency. Instead of busting the trusts, the way to curb their power was to create institutions—strong labor unions, consumer associations, farmers’ groups— that could match their economic might. Indeed, the federal government at times took on the role of a “countervailing power,” as when it intervened in the labor market to establish a minimum wage.

The Great Crash, 1929, published in 1955, is perhaps the funniest book ever written about economic collapse. It gains its force by telling the story of the run-up to the stock market crash, and showing how businessmen, journalists, political leaders and economists all helped prop up and sustain the widespread faith in Wall Street as an easy source of vast wealth. This made the bubble of the 1920s possible and the crash that followed virtually inevitable. Galbraith scoured newspapers, political pronouncements, the writings of economists and the prospectuses of investment companies for examples of brash and bombastic statements about the stock market boom of the late ’20s. In June 1929, Bernard Baruch told a magazine that “the economic condition of the world seems on the verge of a great forward movement.” On October 15, 1929, Yale economist Irving Fisher famously pronounced, “Stock prices have reached what looks like a permanently high plateau…. I expect to see the stock market a good deal higher than it is today within a few months.”

Even after the stock market descent began on Thursday, October 24, the political and business communities rushed to reassure the public. President Herbert Hoover told the nation, “The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis.” In the papers on Monday, October 28, brokerages bought advertisements filled with soothing words: “We believe that the investor who purchases securities at this time with the discrimination that is always a condition of prudent investing, may do so with utmost confidence.” It was the day, Galbraith notes, “the real disaster began.”

The central theme of The Great Crash is the impotence of people with power when in the grip of ideas that leave them no way of confronting reality. They endorse and protect a consensus that conceals what is objectively true. One of the most caustic passages in the book describes the “no-business meetings” held by Hoover in the wake of the crash, which assembled prestigious businessmen at the White House, to great fanfare from the press. No proposals emerged from Hoover’s meetings. No action was taken. No one intended that anything should be accomplished. And yet by gathering men of wealth and undeniable social importance, Hoover intended to give the impression that something of importance was being done while doing nothing at all. They were, Galbraith wrote, a “practical expression of laissez faire.”


With The Affluent Society, published in 1958, Galbraith directed his mockery at the world of professional economics. He argued that the basic principles of economic thought had been developed in the late eighteenth and early nineteenth centuries, a period when the chief economic problem was producing enough to ensure survival. The old truisms about the destructive force of the state, the paramount importance of production and the surpassing efficiency of the competitive economy were no longer relevant in the mid-twentieth-century United States, where material prosperity had spread far beyond the upper classes. Yet the “conventional wisdom” of economic life, reiterated with what Galbraith described as religious solemnity at Chamber of Commerce meetings and in the pages of prestigious academic journals alike, made it impossible to govern in a reasonable way. The “march of events” had made the old ideas irrelevant, but businessmen and economists clung to them desperately:

The business executive listening to a luncheon address on the immutable virtues of free enterprise is already persuaded, and so are his fellow listeners, and all are secure in their conviction. Indeed, although a display of rapt attention is required, the executive may not feel it necessary to listen. But he does placate the gods by participating in the ritual. Having been present, maintained attention, and having applauded, he can depart feeling that the economic system is a little more secure.

Nor were such rituals only for the unsophisticated. The conventional wisdom existed at least as much in academic life as in the broader world: “Scholars gather in scholarly assemblages to hear in elegant statement what all have heard before. Again, it is not a negligible rite, for its purpose is not to convey knowledge but to beatify learning and the learned.”

Because of the old faith, inherited from the classical economists and refined to a harsh moral code in the Victorian era, that only hard work, private initiative and a relentless emphasis on increasing productivity could lift human society out of poverty, people were irrationally hostile toward the public sector and government—even though in the modern context they might accomplish goals that were far more socially valuable than the exertions of private firms. Private consumption rose to heights of bizarre extravagance—while schools and parks had to beg for money from the state. “Vacuum cleaners to ensure clean houses are praiseworthy and essential in our standard of living,” Galbraith wrote. “Street cleaners to ensure clean streets are an unfortunate expense. Partly as a result, our houses are generally clean and our streets are generally filthy.” He also observed the odd discrepancy in attitudes toward public and private debt—the one, sharply condemned, the other eagerly encouraged.

The idea that a society ought to commit its economy to satisfying consumer wants no longer made sense if the wants themselves were managed by the companies that were selling the goods to satisfy them (Galbraith called this the “dependence effect”). Once, more production had meant less hunger, less misery, less privation. In the modern world, it only meant satisfying the craving for “shiny rumpus rooms, imaginative barbeque pits, expansive television screens and magnificent automobiles.” Smith had believed that material affluence might lead to a world of greater equality and decency and freedom—but in fact people were enslaved by the whims induced by advertisers. In one of the best-known passages in The Affluent Society, Galbraith described an American family going out for a camping trip in a top-of-the-line “mauve and cerise” automobile, cruising along on a badly paved highway, past a countryside whose natural beauty had been blotted out with billboards, dining on a picnic of packaged foods beside a polluted stream. “Just before dozing off on an air mattress, beneath a nylon tent, amid the stench of decaying refuse, they may reflect vaguely on the curious unevenness of their blessings. Is this, indeed, the American genius?”

In The New Industrial State, published in 1967, Galbraith presented a vision of the American economy that systematically turned the axioms of economics upside down. In the mid-twentieth century, Galbraith argued, the internal “planning system” of gigantic corporations largely substituted for the free market. This marked a fundamental change in economic life. In the modern corporation, bureaucrats and managers exercised far more power than stockholders over the companies that the latter nominally owned. Scientific knowledge and technological expertise became more important in economic life than the willingness of entrepreneurs to take economic risks. The ability of corporations to run on their retained earnings meant that management no longer had to worry much about the opinion of investors. As massive corporations controlled the market, they no longer even needed to maximize profits in order to survive. As a result, the American and Soviet economies had more in common with each other than they did with the idealized vision of small, decentralized production still celebrated in economics textbooks. In his earlier work, Galbraith had hoped that labor unions and the state could counter corporate power. In The New Industrial State, he argued that both had been subsumed by the demands of the corporate monolith. The epitome of the modern economy was the bloated military industry, which was able to win government contracts for technologically sophisticated but socially useless bombs manufactured to support a ginned-up arms race with the Soviet Union. Galbraith believed that attempting to shrink these gigantic companies was futile and counterproductive, but he did think that they could be turned to different, more socially accountable ends.

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Of the books collected in this volume, The New Industrial State has aged the least well. For one, the economy’s industrial base has eroded since Galbraith’s day; General Motors, Chrysler and Ford are no longer unassailable giants. These differences go beyond international competition and the problems of the manufacturing sector. Corporations are no longer the stodgy, management-driven enterprises Galbraith depicted. Shareholders are not the sleepy figures they may have been in the mid-twentieth century. The labor peace that Galbraith wrote about has evaporated, and the prospects he saw for a humane capitalism seem dim. Even in his day, there remained, as Galbraith knew, deep pockets of poverty. Today, the gulf between the richest and the poorest has grown wider, with the policies that support such inequalities buttressed, in part, by the intellectual project of modern conservatism, which Galbraith once called “one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” With the headlines dominated by news of recession and austerity, how clear is it that we live in an “affluent society” any longer?

In a way, Galbraith sought to expand on Keynes’s idea that the world of abundance that was unimaginable at the start of the Industrial Revolution demanded the invention of a new economic morality. No longer was it necessary to extol the virtues of hard work in an unthinking way. In the society Galbraith imagined, once the ideology of production for its own sake no longer reigned supreme, a thriving and rich public realm could come into existence, filled with parks, libraries and universities, accompanied by a new vision of the good life. Yet temperamentally and politically Galbraith was a skeptic, not a radical. He always believed that people were led astray by bad ideas, the suggestion being that reason might prevail if only the right leadership were at the helm. His confidence, in many ways, was a reflection of the optimistic, prosperous period in which he wrote. At the same time, Galbraith’s life was punctuated by tragedy: the sudden death of his mother when he was a teenager, his father’s accidental death only months after Galbraith was married and the loss of his second son to leukemia at 7. The books in this volume were all written after these losses, and it may be that some of Galbraith’s doubts about the orderly operation of the economic universe arose from his own acquaintance with the caprice of life.

But while some of the particulars of his vision may seem out of place today, his argument that there is something absurd about a society that can afford tremendous mansions, private jets and elite colleges while cities close firehouses, shut down bus lines and debate whether their crumbling public schools can even stay open five days a week seems as relevant as ever. So does his willingness to poke fun at those who recite platitudes about the market. One of the strengths of this volume is that it includes the introductions written by Galbraith, who died in 2006, for the updated editions of his four classic works. The 1993 edition of American Capitalism reminds the reader of the immense delight Galbraith took in rebelling against economic ideas long held to be sacrosanct: “For me, at least, there has always been a certain pleasure in questioning the sacred tenets.” In the nineteenth century, economists exalted competition as a civilizing force, one that would uplift the weak and glorify the worthy. True believers, therefore, would see Galbraith’s happy farewell to competition as a “treaty” with “the forces of economic evil.” Did this alarm him? Not in the least. “I enjoyed doing this, and I trust that some of this enjoyment is still evident in this book.”