ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work

<< ADVERTISING IN TODAY’S SOCIETY:Psychological tricks

ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom >>

Business Ethics MGT610

LESSON 41

John Kenneth Galbraith (October 15, 1908April 29, 2006) was an influential Canadian-

American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-

century American liberalism and progressivism. His books on economic topics were bestsellers

in the 1950s and 1960s.

Galbraith was a prolific author who produced four dozen books and over a thousand articles on

various subjects. Among his most famous works was a popular trilogy on economics, American

Capitalism (1952), The Affluent Society (1958), and The New Industrial State (1967). He taught

at Harvard University for many years. Galbraith was active in politics, serving in the

administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy and Lyndon B.

Johnson; and among other roles served as U.S. ambassador to India under Kennedy.

He was one of a few two-time recipients of the Presidential Medal of Freedom. He received

one from President Truman in 1946 and another from President Bill Clinton in 2000[1]. He was

also awarded the Padma Vibhushan, India's second highest civilian award, for his contributions

to strengthening ties between India and the United States. Some of Galbraith's Ideas

In The Affluent Society Galbraith asserts that classical economic theory was true for the eras

before the present, which were times of "poverty"; now, however, we have moved from a state

of poverty into an age of "affluence," and for such an age, a completely new economic theory is

needed.

Galbraith's main argument is that as society becomes relatively more affluent, so private

business must "create" consumer wants through advertising, and while it generates artificial

affluence through the production of commercial goods and services, the "public sector"

becomes neglected as a result. He pointed out that while many Americans were able to

purchase luxury items, their parks were polluted and their children attended poorly maintained

schools. He argues that markets alone will under provide (or fail to provide at all) for many

public goods, whereas private goods are typically 'overprovided' due to the process of

advertising creating artificial demand above individual's basic needs.

He proposed curbing the consumption of certain products through greater use of consumption

taxes, arguing this could be more efficient than other forms of taxes such as labor or land taxes.

Galbraith's major proposal was a program he called "investment in men" - a large-scale

publicly-funded education program aimed at empowering ordinary citizens. Galbraith wished

to entrust citizens with the future of the American republic.

100

Business Ethics MGT610

Criticism of Galbraith's Work

Galbraith's work and The Affluent Society in particular drew sharp criticism from free-market

supporters at the time of its publication.

Milton Friedman in "Friedman on Galbraith, and on curing the British disease" views Galbraith

as a 20th-century version of the early 19th-century Tory radical of Great Britain. He asserts that

Galbraith believes in the superiority of aristocracy and in its paternalistic authority, that

consumers should not be allowed choice and that all should be determined by those with

"higher minds":

"Many reformers -- Galbraith is not alone in this -- have as their basic objection to a free

market that it frustrates them in achieving their reforms, because it enables people to have

what they want, not what the reformers want. Hence every reformer has a strong tendency to be

averse to a free market."

Galbraith versus Hayek

Two of the great economists of the 20th century were John Kenneth Galbraith and Friedrich

Hayek. They held very different views about advertising, which to a large extent reflected their

views about the capitalist system more broadly.

John Kenneth Galbraith's most famous book was The Affluent Society, which was published in

1958. In it, he argued that corporations use advertising to create demand for products that

people otherwise do not want or need. The market system should not be applauded, he

believed, for satisfying desires that it has itself created. Galbraith was skeptical that economic

growth was leading to higher levels of well-being, because people's aspirations were being

made to keep pace with their increased material prosperity. He worried that as advertising and

salesmanship artificially enhanced the desire for private goods, public spending on such items

as better schools and better parks suffered. The end result, according to Galbraith, was "private

opulence and public squalor." Galbraith policy recommendation was clear: Increase the size of

government.

Friedrich Hayek's most famous book was The Road to Serfdom, published in 1944. It argued

that an extensive government role in the economy inevitably means a sacrifice of personal

freedoms. Hayek also wrote a well-known critique of Galbraith in 1961, addressing in

particular Galbraith's view of advertising. Hayek observed that advertising was merely one

example of a broader phenomenon: Many preferences are created by the social environment.

Literature, art, and music are all acquired tastes. A person's demand for hearing a Mozart

concerto may have been created in a music appreciation class, but this fact does not make the

desire less legitimate or the music professor a sinister influence. Hayek concluded, "It is

because each individual producer thinks that the consumers can be persuaded to like his

products that he endeavors to influence them. But though this effort is part of the influences

which shape consumers' taste, no producer can in any real sense `determine' them."

Although these two economists disagreed about the roles of advertising, markets, and

government, they did have one thing in common: great acclaim. In 1974, Hayek won the Nobel

prize in economics. In 2000, President Clinton awarded Galbraith the National Medal of

Freedom. And even though their most famous works were written many decades ago, they are

still well worth reading today.

101

Table of Contents: