29 MARCH 1974, Page 16

Spring Books (1)

Joan Robinson on Galbraith, women and economic sense

Professor Galbraith has cast himself for the role, among economists, of the child who remarked that the Emperor had no clothes. He proceeds by making observations that any unprejudiced reader immediately accepts as obvious while those who are prejudiced in favour of orthodoxy are shocked and distressed.

.The orthodox teaching of economics, which still survives from the late nineteenth century. is .primarily the presumption in favour of latssez-faire — that is, of the harmful effect of government interference with the operation of private enterprise. To support this doctrine, private enterprise must be depicted as producing beneficial results. While consumers spend their incomes according to their tastes and preferences, producers compete with each other to supply what is preferred at prices that cover no more than necessary costs of production, so that the free play of market forces establishes the sovereignty of the consumer and ensures that scarce means are allocated between alternative uses in such a way as to maximise satisfaction. The modern refinements of this theory conceal certain logical flaws in its basis under an elaborate and would-be impressive structure of mathematical propositions. Galbraith is not concerned with logical apparatus but with the general message that orthodox teaching emits to the public.* The great slump, the Keynesian revolution and the accepted need for government control over the level of economic activity made a large breach in the case for laissez-faire, but orthodox teaching managed to seal it up. Postulate that the authorities, by means of fiscal and monetary policy, can increase or reduce total demand so as to maintain near full employment with stable prices, then the market still dictates to competitive producers what the content of output is to be. The government itself is only an obedient agent of the sovereign consumer.

Of course, a professional economist will always save his conscience with reservations and exceptions, or even with the excuse that 'pure theory' was never intended to be relevant to the world we live in, but Galbraith's account of the picture which orthodoxy presents to the public is by no means exaggerated. The picture is not convincing. "That the comparative development in housing and space travel is a manifestation of consumer will cannot be believed" (page 27). Yet the orthodox economic doctrine continues to be propagated and those who question it (including Galbraith himself) are treated with scorn and indignation by the professional establishment. Orthodoxy commands support not because it is convincing but because it has a useful function in the system which it pretends to describe. The glorification of the market is *Economics and the Public Purpose John Kenneth Galbraith (Andre Deutsch 0.25) made to appear sound and respectable. Those who protest against selling poison in attractive wrappers or fouling water and air in the cause of profit are made to appear as softheaded cranks.

According to economic doctrine, more is always better than less. This applies above all to what is called consumption — but 'consumption' in economic jargon means only purchasing goods. The more we spend on goods, the higher our standard of life and the greater our 'welfare.' The identification of purchases with consumption and consumption with satisfaction, or 'utility,' helps to support the general atmosphere of enthusiasm for spending money on goods and for earning money to spend, which provides industry with markets in which to sell and with recruits to employ. Academic economics alone could not have so much influence in shaping social attitudes. It is backed up by a pervasive morality which Galbraith christens the "convenient social virtue."

Beyond a certain point the possession and consumption of goods becomes burdensome unless the tasks associated therewith can be delegated. Thus the consumption of increasingly elaborate or exotic food is only rewarding if there is someone to prepare it. Otherwise, for all but the eccentric, the time so required soon outweighs whatever pleasure is derived from eating it. Increasingly spacious and elaborate housing requires increasingly burdensome maintenance and administration. So also with dress, vehicles, the lawn, sporting facilities and other consumer artifacts. If there are people to whom responsibility for administration can be delegated and who, in turn, can recruit and direct the requisite servant labor force, consumption has no limits. Otherwise the limits on consumption are severe.

With the development of industrial employment, the class of domestic servants has almost disappeared and the burden of ad ministering the consumption of goods after they have been purchased is taken over bY women.

The convenient social virtue ascribes merit to anY pattern of behaviour, however uncomfortable or unnatural for the individual involved, that serves the comfort or well-being of, or is otherwise adcvoantageous. for, the more powerful members of the minurlity

Virtue places women at the service of a high standard of life.

With higher income the volume and diversity af consumption increase and therewith the number and complexity of the tasks of household management. The distribution of time between the various tasks associated with the household,‘ children's education and entertainment, clothing. social life and other forms of consumption becomes

an increasingly complex and demanding affair. ,

In consequence, and paradoxically, the menla' role of the woman becomes more arduous the higher the family income, save for the small fraction who still have paid servants. The wife of the somewhat senior automobile executive need not la! intellectually alert or entertaining, although she Is required to be conventionally decorative on ac„casions of public ceremony. But she must cook an'-' serve her husband's meals when he is at home: direct household procurement and maintenance, provide family transport, and, if required, act as charwoman, janitor and gardener. Competence here is not remarked; it is assumed. If she discharges, these duties well, she is accepted as a goo° homemaker, a good helpmate, a good manager, a good wife — in short, a virtuous woman.

Evidently the American way of life (and we are not far behind) is a regime, not of consumer's sovereignty over production but 0f producer's sovereignty over consumption.

In USA about one thousand large corporations produce approximately half the total value of goods and services not provided bY the state, while the other half is provided bY around twelve million small businesses and farms. Galbraith concedes, perhaps too readily, that orthodox economics may apply 111 the sphere of small businesses, which he calls the market system, while it is totally without application to the sphere of the great corporations, which he calls the planning system. Any large organisation, carrying ont complicated activities requiring the coin' bination of many types of specialised expertise, has to be run by a bureaucracy, and anY bureaucracy is concerned first and foremost to protect its own interests. What are the interests in whose service business is conducted? The technostructure of a great col' poration is interested in making profits and avoiding losses but this is not primarily for the benefit of the shareholders who are the legal owners of the business. It is rather ? means of keeping them from exercising their nominal rights. The basic strategy by which the technostructure protects its decision-making process from owners or creditors consists in ensuring a certain minima° (though not necessarily a low) level of earnings. Nothing else is so important. Given some basic level of earnings, stockholders are quiescent. They become aroused, either individually or collectivelY, only when earnings are poor or there are losses and dividends omitted.

It is true that individuals who rise to the top of the hierarchy of management usually bull° up personal fortunes but this is mainly lit: cidental to the success of the business. only top management but every member 9' the technostructure has a personal interest Ill the success of the business, which secures the, livelihood of his family and his prospects 01 promotion. The dominating aim of a corporation, however large it may be, is always to gr°W larger. This aim is supported by the memberS of the technostructure of the business, Wh° have a direct personal interest in its growth.

The sales figures of a new product, gadget or Pe, are a datum even if their contribution to earnings less clear; and those responsible are known. Ind"' growth often rewards directly those who are re.,5: ponsible for it. The unit, however small, that ei•t pands its sales therewith expands its employnrn., and the claim of those responsible to the promoticw: pay and perquisites that go with the larger oPera, non. The engineer who sees some hitherto Lin ciLisclosed opportunity for product development will uave his responsibilities, and therewith his position and pay, enhanced by that development. The marketing man who successfully persuades the PUblic to buy some abnormally improbable artifact raill, in consequence, be in charge of the resulting rger marketing operation. He promotes himself alOng with the product. The possibility of such self-reward is widely diffused through the technostructure. Many of its members having a direct setake in growth, it is not surprising that the whole

clrPus of the technostructure is deeply committed tO growth.

There is a more direct relation between succ.ess and growth, which does not depend on individual ambition. No business, small or !arge, would consider it prudent to distribute its whole net profit, whether to the wife of the Proprietor, the shareholders or in the form of higher salaries to the technostructure. Success in making profits leads to retention of Profits, and retained profits promote investroent. The concept of "economies of scale" is very largely a superstition of the economists. The largest businesses are certainly not the Most efficient, by any reasonable criterion, theY are those which have made the greatest Profits in the past. Left wing critics complain of Galbraith for not asserting that the aim of 'capital' is to exploit labour and maximise profits, but this is demanding a shibboleth rather than a difference of substance. The relations of the technostructure of a corporation to the labour force which it he'llPloys is no longer a simple class conflict. rOwer to control prices permits the corporation to accede to wage demands and pass on the cost to the public. Indeed, the support of the trade unions is a useful adjunct to the Power of business to resist what small efforts have been made to defend the interests of consumers or resist the destruction of amenities.

It is of no use to turn to the state as the guardian of the public interest, for the state is closely linked to the great corporations: The obvious core of this relationship is the large expenditure by the government for its products. This pays for the products of those corporations, most notably the large, specialized weapons firms, that exist by selling to the state. And it pays also for the technical development that sustains the cycle of innovation and obsolescence and thus the continuity of the demand. This same expenditure also contributes to a secure flow of purchasing power in the economic system as a whole and on terms highly favourable to the planning system.

The state educational system supplies industry, commerce and finance with qualified manpower to employ; the influence of advertisement assures that the means of communication with a wider public keeps up a continuous barrage of propaganda to glorify the system and conceal its defects.

So what is to be done? Galbraith believes that the public influence of the planning system requires a public belief in the importance of the things that it does. If public opinion (particularly amongst women) could be enlightened as to the true nature of the system, public opinion could take command. The government subsidies now paid for research and investment in ever-new horror weapons could be devoted to cleaning up the cities and the countryside while a fiercely progressive tax system gradually established a more reasonable distribution of income and opportunity throughout society. Why should not the personnel of the technostructures be just as happy and prosperous in promoting a decent life for the population as they now are in destroying it?

Professor Galbraith has great faith in the power of reason, and since there does not seem to be anything else to have faith in, we must be thankful for that.

Joan Robinson was Professor of Economics at the University of Cambridge from 1965 to 1971