Today’s book has two themes: The Conventional Wisdom, and what to do about it. The CW before Milton Friedman was based on the economics of scarcity, supported by pervasive racism and misogyny. Malthus had predicted permanent immiseration of the poor, based on inevitable population increase with increasing production. David Ricardo had
summarized that prospect in, perhaps, the most quoted passage in economic literature:
Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and perpetuate their race, without either increase or diminution.
This was the iron law of wages.
Ricardo brought his analysis to a close with the unbending observation that
These then are the laws by which wages are regulated, and by which the happiness [a word to be duly noted] of far the greatest part of every community is governed. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.
That is, nothing could in the long run either raise or lower that level, and nothing could or should be done about it.
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.
But now we live in an Affluent Society—we produce enough for everybody in the US, even if some are determined that certain others should not get their share. The question is no longer how to produce enough, but what comes next.
IN ONE SENSE, the main task of this essay has been accomplished. Its concern has been with the thralldom of a myth—the myth that the production of goods, by its overpowering importance and its ineluctable difficulty, is the central problem of our lives.
However, as always, it is sound strategy to deal with the conventional wisdom on its own terms. If it inquires how we escape the present preoccupation with production; or how we escape the race to manufacture more wants for more goods and then yet more wants for yet more goods; or what is to fill the seemingly vast vacuum which abandoning this race would leave in our lives; or what are to be the symbols of happiness if goods cease to be so regarded, then it is well that there be answers.
Let us take Galbraith’s main point at face value, and consider its consequences.
If the production of goods and services is not the center of the economy, what is?
The fundamental truth about scientific progress is that every significant discovery overturns something that “everybody” knew that turned out not to be the case. So it is with the Conventional Wisdom of the 1950s, and with the vicious Friedmanite Libertarianism that replaced it.
Milton Friedman, Apostle of Economic Creationism
Will Bidenomics become the next Conventional Wisdom? Not before it does the country and the world a power of good.
Galbraith’s Answers
The Benthamite test of public policy was "what serves the greatest happiness of the greatest number," and happiness was more or less implicitly identified with productivity. This is still the official test. In modern times, the test has not been very rigorously applied. We have somewhat sensed though we have not recognized the declining importance of goods. Yet, even in its deteriorated form, we cling to this criterion. It is so much simpler than to substitute the other tests—compassion, individual happiness and well-being, the minimization of community or other social tensions—which now become relevant.
Much more than decisions on economic policy are involved. A system of morality is at stake.
Although there is conventional effort to deny it, income and employment rather than goods have become our basic economic concern.
- Bring the level of unemployment compensation much closer to the average weekly wage and extend greatly the period of eligibility
- Guaranteed employment
- Basic income, guaranteed income, negative income tax
- Free advanced education and job training
- Child nutrition at school
- Keynes: Deficit “spending” to end recessions, expanded to increased taxation during booms to rein in inflation and speculation
- The progressive income tax to automatically increase government revenue as the economy grows
- Fully fund local public services—schools, hospitals, slum clearance and urban redevelopment, sanitation, parks, playgrounds, police…with help from the Federal government, and expanded local taxes
- Tax the rich
- Countercyclical taxes and investments
- Investments in mass transportation
- Shorten the work week
- Further measures to end poverty
Galbraith called for an expanded use of local sales taxes, even though they weigh more heavily on the poor. Part of his argument is that the revenue should be particularly directed toward benefits for the poor, particularly in ending systemic racism in housing, education, health care, policing, and more.
We can obviously add much to this list in the very different economic and political situation we find ourselves in now, particularly if the November elections go well enough for us to undo the filibuster and pass comprehensive voting and election protection.
Good News Thursday: FDR had One Frances Perkins, but Joe will have—Wait, I Lost Count
Also, we have Nancy Pelosi as the Frances Perkins of the House, having shepherded through 500+ bills that we can start with in January. She has said that Voting Rights will be job #1, since all else follows from that.
We can do much better than those 500+ bills now, of course.
Conclusions
Poverty is self-perpetuating partly because the poorest communities are poorest in the services which would eliminate it.
We must, indeed, invest more than proportionately in the children of the poor community. It is there that high-quality schools, strong health services, special provision for nutrition and recreation are most needed to compensate for the very low investment which families are able to make in their own offspring.
A society has one higher task than to consider its goals, to reflect on its pursuit of happiness and harmony and its success in expelling pain, tension, sorrow and the ubiquitous curse of ignorance. It must also, so far as this may be possible, ensure its own survival.
There are other, if lesser, problems which our present preoccupation with production leaves unsolved. There remain vast millions of hungry and discontented people in the world. Without the promise of relief from that hunger and privation, disorder is inevitable.
Even when the weapons extravaganza ends, as it must be made to end, the scientific frontier will remain.
The day will not soon come when the problems of either the world or our own policy are solved. Since we do not know the shape of the problems, we do not know the requirements for solution. But one thing is tolerably certain. Whether the problem be that of a burgeoning population and of space in which to live with peace and grace, or whether it be the depletion of the materials which nature has stocked in the earth's crust and which have been drawn upon more heavily in this century than in all previous time together, or whether it be that of occupying minds no longer committed to the stockpiling of consumer goods, the basic demand on America will be on its resources of intelligence and education. The test will be less the effectiveness of our material investment than the effectiveness of our investment in people. We live in a day of grandiose generalization. This one can be made with confidence.
References
The Affluent Society (PDF), by John Kenneth Galbraith, 40th Anniversary Edition
On the Principles of Political Economy and Taxation, by David Ricardo
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