March 03, 2005

THE STORY OF OUR TIMES IS THE ongoing rise of American conservatism, and to read a biography of John Kenneth Galbraith is a salutary reminder of just how much ground liberalism has surrendered -- and how much conservatism has gained. For a generation after Galbraith's publication of The Affluent Society in 1958, he was an economist, public intellectual, and political activist who influenced presidents as much as the man and woman in the street. He was a household name whose witty one-liners defined a liberal common sense that could challenge the conventional wisdom at home and abroad.

Galbraith has no obvious successor -- the best indicator of the depths of the crisis American liberalism is currently plumbing. Paul Krugman is perhaps the best contemporary example of the economist and public intellectual prepared to get his hands dirty by descending into the bear pit of political debate in the service of the liberal cause, but he hardly defines anything close to a widely held and alternative common sense. Rather, he is the voice railing outside the gilded corridors of the nonsenses that continue within; for all the telling Galbraith-like accuracy of his commentary, Krugman speaks as an outsider rather than as the authentic representative of a dominant current in American thinking.

Richard Parker's majestic biography is as much the story of the rise and fall of an intellectual tradition as it is of one man. It is a work of scholarship that manages to be a page-turner, as Parker brings to life both the man and the decades through which he lived, especially the 1960s. The retelling of how Galbraith understands American capitalism is formidable; at bottom Galbraith has always seen capitalism through the prism of power, in particular how corporations shape the environment in which they operate -- a mismatch between reality and the power-neutral world described by free-market, so-called classical economists that is devastatingly wide but, as Galbraith would say, has been self-interestedly designed to obscure the truth.

Yet while Parker's book is a compelling reaffirmation of Galbraith's stature and the importance of his ideas, it left me curiously unsatisfied in one respect: Although his account of Galbraith's rise to influence through the legacy of the New Deal, the Second World War, and the aftermath is accomplished, on the subsequent marginalization of both Galbraith and the tradition he represents, Parker is much less surefooted. He is perplexed by the rise of a set of economic theorems palpably false and obviously self-serving. Why couldn't rationality and good argument prevail? More on that later.

The languid, 6-foot-8 Galbraith arrived at Harvard in the late summer of 1934, just as daily events were exploding the theories that had purportedly explained how market economies tend to find their natural balance as long as government leaves well enough alone. For Harvard's then-tiny economics department, it was a moment of truth: What was to replace the tried and trusted orthodoxies? Two years later John Maynard Keynes was to publish his General Theory, offering an explanation of how economies could get trapped in depressions because, in essence, the price mechanism had no timely means of linking the decisions of savers and investors with the unexpressed demand for the unemployed to work. The only way to break the logjam was for the government to borrow the idle savings and spend them, thus creating the demand for work -- and thus the readiness of the unemployed to supply it -- that otherwise could not be expressed. It was the elegant justification for what the New Dealers were doing anyway, and for those who thought economics must serve the public interest -- as Galbraith has done throughout his life -- it quickly became the heart of an alternative worldview.

Parker's description of these early debates (as of subsequent economic arguments) -- and Galbraith's visit to Cambridge, England to learn from the master himself, only to find him incapacitated through illness -- is superb. But the radicalism of Keynes' ideas was suborned by classical economists who tried to relocate them within the free-market tradition -- an exercise famously delivered by Sir John Hicks, who, as Parker says, later repudiated what he had written. The damage was done, and Keynes was partially tamed.

But there was another weakness to Keynesian thinking where Galbraith closed the gap, making his enduring contribution to economic thought: Keynes thought that if the economic system could be made to work properly, the behavior of companies was essentially a sideshow. This position had two weaknesses: It cast the study of company behavior -- the theory of the firm -- as a side dish of the main meal, but it also offered a bridgehead to the classical economists, who could continue to claim that whatever the system-wide weaknesses of their ideas, at least they worked at the level of the firm. Galbraith convinced a generation that those ideas were wrong.

Galbraith's two greatest books -- The Affluent Society and The New Industrial State -- are seamlessly linked by his insistence that the clue to the ongoing success of now prodigiously productive capitalism is corporations' need and ability to conjure up new wants to satiate. Value lies primarily in the capacity to create markets and new wants rather than in the sinews of pure manufacture, and so capitalist action moves to the service sector -- in particular, to advertising, marketing, selling, and distribution. The public challenge is to prevent corporate gigantism from trivializing human wants, and to insist that the parallel prosperity of the public realm -- from our parks to our schools -- is no less central to our individual and social well-being.

In one passage Parker treats us to Robert Solow's withering attack on this thesis, but it is Galbraith who has stood the test of time. Indeed, if Democrats had thought hard enough about the implications, they could have foreseen the decline in blue-collar factory work and the accompanying rise in blue- and pink-collar service-sector work that Galbraith's vision portended, with the associated decline in old solidarities and the rise of a new individualism. Indeed, they could have gone a step further. American capitalism would manufacture where it was cheapest (Asia), thus creating a nominal U.S. trade deficit that in effect is with itself. Two-thirds of U.S. merchandise imports are by affiliates of U.S. companies. The large proportion of value added, however, is still created in the United States by the service sector of Galbraith's "technostructure." In short, a new and awesome hegemonic capitalism is being invented in front of our eyes, complete with its own ideology of liberty, supremacy of individual choice, and free markets -- to which today's Republican Party is the happy and uncontested midwife.

Parker sees some of the international context in which American capitalism has developed, but lacks the intellectual ruthlessness to put it center stage. He is too much a creature of a still inward-looking liberalism. American conservatism's rise could never have taken place without the ease with which the United States has shaped the world economy to accommodate the forces Galbraith described, but there has been no liberal intellectual of Galbraith's stature to explain what has been happening and offer a different prospectus. To pursue public purpose at home, American liberals have to insist on different rules applying abroad -- in particular, new constraints on free finance, the sovereignty of the capital markets, and the anything-goes attitude toward corporate governance. We need not just another Galbraith but a revived intellectual liberal tradition. Richard Parker has done us a great service in reminding us what we once had and what we have lost. I hope that in 50 years time another biographer can write an equally powerful book on Galbraith's yet-to-be-identified successor.

Copyright 2005 The American Prospect, Inc.

by Will Hutton, The American Prospect