The Affluent Society Book Summary – John Kenneth Galbraith

The Affluent Society Book Summary:

The Affluent Society is prescient book written in 1958 exploring the role of increased wealth and privatisation would have on the economy. It’s surprisingly a more applicable read now as the forces described in the book have played out. A must read for anyone interested in Economics or the underlying forces of society.

 

The Origins of Economic Ideas:

The ideas of Economics by which the people of the Western part of the world interpret their existence, and in measure guide their behaviour, were not forged in a world of wealth.

These ideas were the product of a world in which poverty had always been man’s normal lot and any other state was in degree unimaginable. This poverty was not the elegant torture of the spirit which comes from contemplating another man’s more spacious possessions.

 

The Problem with Wealth:

Wealth is not without its advantages and the case to the contrary, although it has often been made, has never proved widely persuasive. But, beyond doubt, wealth is the relentless enemy of understanding.

The poor man has always a precise view of his problem and its remedy: he hasn’t enough and he needs more. The rich man can assume or imagine a much greater variety of ills and he will be correspondingly less certain of their remedy. Also, until he learns to live with his wealth, he will have a well-observed tendency to put it to the wrong purposes or otherwise to make himself foolish.

 

Social Phenomena, Economics and Acceptability:

Economic and social phenomena are more illusive than physical phenomena, and because they yield few hard tests of what exists and what does not, they afford to the individual a luxury not given by physical phenomena. Within a considerable range, he is permitted to believe what he pleases. He may hold whatever view of this world he finds most agreeable or otherwise to his taste.

As a consequence, in the interpretation of all social life, there is a persistent and never-ending competition between what is right and what is merely acceptable. In this competition, while a strategic advantage lies with what exists, all tactical advantage is with the acceptable. Audiences of all kinds most applaud what they like best.

And in social comment, the test of audience approval, far more than  the test of truth, comes to influence comment. The speaker or writer who addresses his audience with the proclaimed intent of telling the hard, shocking facts invariably goes on to expound what the audience most wants to hear.

Just as truth ultimately serves to create a consensus, so in the short run does acceptability. Ideas come to be organised around what the community as a whole or particular audiences find acceptable.

As the laboratory worker devotes himself to discovering scientific verities, so the ghost writer and the public relations man concern themselves with identifying the acceptable. If their clients are rewarded with applause, these artisans are deemed qualified in their craft. If not, they have failed.

 

Vested interest in understanding and Conventional Wisdom:

For a vested interest in understanding is more preciously guarded than any other treasure. It is why men react, not infrequently with something akin to religious passion, to the defence of what they have so laboriously learned.

In some measure, the articulation of the conventional wisdom is like a religious rite. It is an act of affirmation like reading aloud from the Scriptures or going to church. 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 convictions.

The enemy of the conventional wisdom is not ideas but the march of events. As I have noted, the conventional wisdom accommodates itself not to the world that it is meant to interpret, but to the audience’s view of the world. Since the latter remains with the comfortable and the familiar, while the world moves on, the conventional wisdom is always in danger of obsolescence.

 

The virtues of stable thought:

Every society must be protected from a too facile flow of thought. In the field of social comment, a great stream of intellectual  novelties, if all were taken seriously, would be disastrous. Men would be swayed to this action or that; economic and political life would be erratic and rudderless. In the Communist countries, stability of ideas and social purpose is achieved by formal adherence to an officially proclaimed doctrine. Deviation is stigmatised as “incorrect.”

In our society, a similar stability is enforced far more informally by the conventional wisdom. Ideas need to be tested by their ability, in combination with events, to overcome inertia and resistance. This inertia and resistance the conventional wisdom provides.

 

We are Ruled by Ideas:

Keynes, in his most famous observation, noted that we are ruled by ideas and by very little else. In the immediate sense, this is true.

And he was right in attributing importance to ideas as opposed to the simple influence of pecuniary vested interest. But the rule of ideas is only powerful in a world that does not change. Ideas are inherently conservative. They yield not to the attack of other ideas but, as I may note once more, to the massive onslaught of circumstance with which they cannot contend.

 

Wealth and the Rise of Security:

With increasing well-being, all people become aware, sooner or later, that they have something to protect. In the very early stages of the evolution of a business concern, the entrepreneur is not much concerned with security. He has little equity to conserve. Only later do he or his descendants begin to talk about their responsibilities to their stockholders.

The specter that for long haunted the economist was the monopoly seeking extortionate gains at the public expense. This dominated his thoughts. The less dramatic figure, the businessman seeking protection from the vicissitudes of the competitive economy, was much less in his mind. That is unfortunate, for the development of the modern business enterprise can be understood only as a comprehensive effort to reduce risk. It is not going too far to say that it can be understood in no other terms.

It was inevitable that farmers and workers in general would be the last to concern themselves with security. Before a man will try to protect himself from sudden changes in his economic fortune, he must have some fortune to protect. Businessmen were the first to develop a stake in economic society. They were the first, as a result, to become concerned with means, explicit or unrecognised, for sale guarding that stake.

One cannot stress too strongly, however, that if economic security is to be considered finished business, or largely finished business, depression and inflation must be prevented.

 

Preoccupation with Productivity:

The ancient preoccupations of economic life – with equality, security and productivity-have now narrowed down to a preoccupation with productivity and production.

In the world of Ricardo, goods were scarce. They were also closely related, if not to the survival, at least to the elemental comforts of man. They fed him, covered him when he was out of doors and kept him warm when he was within. It is not surprising that the production by which these goods were obtained was central to men’s thoughts.

Now goods are comparatively abundant. Although there is much malnutrition in the world, more die in the United States of too much food than of too little. No one seriously suggests that all the steel going into our automobiles is of prime urgency. Their size, in fact, is now deplored. For many women and some men, clothing has ceased to be related to protection from exposure and has become, like plumage, almost exclusively erotic. Yet production remains central to our thoughts. There is no tendency to take it, like sun and water, for granted; on the contrary, it continues to measure the quality and progress of our civilisation.

 

The fetishisation of Private Goods:

While public services have been subject to these negative attitudes, private goods have had no such attention. On the contrary, their virtues have been extolled by the massed drums of modern advertising.

They have been pictured as the ultimate wealth of the community. Clearly the competition between public and private services, apart from any question of the satisfactions they render, is an unequal one. The social consequences of this discrimination – this tendency to accord a superior prestige to private goods and an inferior role to public production -are considerable and even grave.

 

The propositions in the Theory of consumer demand:

The theory of consumer demand, as is now widely accepted, is based on two broad propositions, neither of them quite explicit but both extremely important for the present value system of economists.

The first is that the urgency of wants does not diminish appreciably as more of them are satisfied or, to put the matter more precisely, to the extent that this happens, it is not demonstrable and not a matter of any interest to economists or for economic policy. When man has satisfied his physical needs, then psychologically grounded desires take over. These can never be satisfied or, in any case, no progress can be proved. The concept of satiation has very little standing in economics. It is held to be neither useful nor scientific to speculate on the comparative cravings of the stomach and the mind.

The second proposition is that wants originate in the personality of the consumer or, in any case, that they are given data for the economist. The latter’s task is merely to seek their satisfaction. He has no need to inquire how these wants are formed. His function is sufficiently fulfilled by maximising the goods that supply the wants.

 

If desires are shaped they can’t be urgent:

And in unraveling the complex, we should always be careful not to overlook the obvious. The fact that wants can be synthesised by advertising, catalysed by salesmanship, and shaped by the discreet manipulations of the persuaders shows that they are not very urgent.

A man who is hungry need never be told of his need for food. If he is inspired by his appetite, he is immune to the influence of Messrs. Batten, Barton, Durstine & Osborn. The latter are effective only with those who are so far removed from physical want that they do not already know what they want. In this state alone, men are open to persuasion.

 

If wants are manufactured then there utility is zero:

It means that since the demand for this part would not exist, were it not contrived, its utility or urgency, ex contrivance, is zero. If we regard this production as marginal, we may say that the marginal utility of present aggregate output, ex advertising and salesmanship, is zero. Clearly the attitudes and values which make production the central achievement of our society have some exceptionally twisted roots.

 

The dependence on production:

After becoming committed to production for reasons of economic security. Not the goods but the employment provided by their production was the thing by which we set ultimate store. Now we find our concern for goods further undermined. It does not arise in spontaneous consumer need. Rather, the dependence effect means that it grows out of the process of production itself. If production is to increase, the wants must be effectively contrived.

No one questions the superior position of the businessman in American society. But no one should doubt that it depends on the continuing preoccupation with production.

As we expand debt in the process of want creation, we come necessarily to depend on this expansion. An interruption in the increase in debt means an actual reduction in demand for goods. Debt, in turn, can be expanded by measures which, in the nature of the case, cannot be indefinitely continued.

 

Society doesn’t miss goods not produced but the unemployed miss the income not earned:

When men are unemployed, society does not miss the goods they do not produce. The loss here is marginal. But the men who are without work do miss the income they no longer earn. Here the effect is not marginal. It involves all or a large share of the men’s earnings and hence all or a large share of what they are able to buy. 

High and stable production is the broad foundation of the economic security of virtually every other of farmers, white collar workers and both large businessmen and small. A recession in demand and production remains the major uncovered risk of the modern large corporation.?

 

Social Balance:

It will be convenient to have a term which suggests a satisfactory relationship between the supply of privately produced goods and services and those of the state, and we may call it Social Balance.

The problem of social balance is ubiquitous, and frequently it is obtrusive. As noted, an increase in the consumption of automobiles requires a facilitating supply of streets, highways, traffic control and parking space. The protective services of the police and the highway patrols must also be available, as must those of the hospitals. Although the need for balance here is extraordinarily clear, our use of privately produced vehicles has, on occasion, got far out of line with the supply of the related public services. That result has been hideous road congestion, a human massacre of impressive proportions and chronic colitis in the cities.

Presumably a community can be as well rewarded by buying better schools or better parks as by buying more expensive automobiles. By concentrating on the latter rather than the former, it is failing to maximise its satisfactions. As with schools in the community, so with public services over the country at large. It is scarcely sensible that we should satisfy our wants in private goods with reckless abundance, while in the case of public goods, on the evidence of the eye, we practice extreme self-denial.

 

The secondary effects of wealth:

The more goods people procure, the more packages they discard and the more trash that must be carried away. If the appropriate sanitation services are not provided, the counterpart of increasing opulence will be deepening filth.

The greater the wealth, the thicker will be the dirt. This indubitably describes a tendency of our time. As more goods are produced and owned, the greater are the opportunities for fraud and the more property that must be protected. If the provision of public law enforcement services does not keep pace, the counterpart of increased well-being will, we may be certain, be increased crime.

 

Asymmetry in advertising towards private goods:

In such a world, one could with some reason defend the doctrine that the consumer, as a voter, makes an independent choice between public and private consumer goods. But given the dependence effect wants are created by the process by which they are satisfied-the  consumer makes no such choice.

He or she is subject to the forces of advertising and emulation by which production creates its own demand. Advertising operates exclusively, and emulation mainly, on behalf of privately produced goods and services. Automobile demand which is expensively synthesised will inevitably have a much larger claim on income than parks or public health or even roads where no such influence operates.

The engines of mass communication, in their highest state of development, assail the eyes and ears of the community on behalf of more beverages but not of more schools. Even in the conventional wisdom it will scarcely be contended that this leads to an equal choice between the two.

 

What is purpose of education?

Would be barbarous to suggest that the only claim to be made on behalf of education is the increased production of goods. It has its independent and, one must suppose, its higher justification. A horse almost certainly appreciates a comfortable stable, a secure supply of oats, a measure of recreation, and conceivably the pleasure of being esteemed at least as highly as any other horse in the stable.

The non-theological quality which most distinguishes men from horses is the desire, in addition to these attributes of material and psychic well-being, to know, understand and reason. One may hope that investment in the things that differentiate man from his animals requires no further justification.

 

What happens when goals become obsolete?

A concern for new goals, once the old ones become suspect, is not only the next order of philosophical inquiry but the inevitable one.

Social philosophy, far more than nature, abhors a vacuum. Men must see a purpose in their efforts. This purpose can be nonsensical and, as we have seen, if it is elaborately nonsensical, that is all to the good. Men can labor to make sense out of single steps toward the goal without ever pausing to reflect that the goal itself is ludicrous.

But they must not question the goal. For to do so is to initiate a search for one that serves better.