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Friday, May 04, 2007

James Galbraith: The New Industrial State

Jamie Galbraith discusses his father's book, The New Industrial State, and its usefulness for understanding the economy we have today:

The New Industrial State, by James K Galbraith, commentary, UK Guardian:

On Tuesday I joined a panel at the New York Public Library to discuss the new edition of my father's 1967 book, The New Industrial State...

The New Industrial State was ... the major work of the most famous, most influential, and best-connected American economist of all time - a man whose importance approached and whose readership exceeded that of John Maynard Keynes.

Today the ... New Industrial State, which sought to decode the new era, faded from view; it has been out of fashion for decades and, what is worse, out of print.

The New Industrial State's purpose was not to catalyze a political movement but to describe the economy as it was, to deflate faith in the omnipotent and benevolent market and to foster understanding of a world dominated by large industrial firms, by the planning system and the "technostructure". That required an economics of organizations rather than an economics of markets...

The great corporation of the 1960s controlled the technical developments in its field through its research labs and engineering departments; it attempted to control its customers through market research, design and advertising. It existed in a stabilizing web of larger relationships: unions, regulation, trade barriers, the Iron Curtain (or more precisely the Bamboo Curtain) and the Bretton Woods international monetary system. ...

There was, also, Dad's famously unpopular view of the ascendance of the managers over the shareholders. To think otherwise, he wrote, "one must imagine that a man of vigorous, lusty, and reassuringly heterosexual inclination eschews the lovely and available women by whom he is intimately surrounded, in order to maximize the opportunities of other men whose existence he only knows through hearsay."

Of course, the great American planning system of 1967 did not endure. The destruction of Bretton Woods, the rise of OPEC, the Japanese challenge in steel and autos and later the rise of China all destabilized its operating environment. Reaganomics demolished regulation and the countervailing power of unions and simultaneously re-empowered Wall Street, putting the great corporation in a squeeze between the high cost of capital and the low cost of imports. Deindustrialization and globalization followed. Then the technology sector broke away from ... corporations, giving us an independently-capitalized information economy and bringing on convergence between software geeks and tycoons. And then, finally, we saw in Enron, Worldcom, Tyco, and many others the emergence of the CEO as a predator class, looting and subverting the great firm and the technostructure from within.

John Kenneth Galbraith did not foresee these developments in 1967 but the framework of The New Industrial State - the economics of organization - remains the portal through which one must pass if one is to understand them. One cannot grasp the world of corporate raiders, of the information technology bubble, of control fraud, of the bizarre symbiosis that presently exists between post-capitalist America and post-communist China, nor especially of the big government, big corporation, Beltway-boom Republicanism of George Bush, through an optic of free and competitive markets.

The ideas of The New Industrial State - an economics of organization, information, control and power - are on the other hand exactly what we need. And so, I submit, this book is a book for our season, as well as its own. I am proud of the role I played in bringing it back. ...

    Posted by on Friday, May 4, 2007 at 05:58 PM in Economics, Market Failure | Permalink  TrackBack (0)  Comments (8)

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