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Galbraith’s Affluent Society Revisited

April 26, 2010

It’s hard to believe that J.K. Galbraith’s Affluent Society was written over 50 years ago.  Yes, he has periodically re-issued it, with some updates.  His analyses and observations have largely remained the same, only becoming more prescient to observers who stop to reflect on his words in the context of the current economic situation.

I was struck by his observation on whether U.S. consumption would recover after a significant recession.  His point was that consumption in the U.S. is largely driven by marketing, rather than by need.  In the U.S., as closets in new homes have expanded to entire rooms – “walk-ins,” temporary storage has continued to proliferate as Americans accumulate more “stuff” than they have room for, and the new industry of storage consultants and clutter coaches is thriving, will consumer spending recover to its previous levels.  Add the need to reduce debt, un- and under-employment, a growing environmental consciousness, and the prospects are that spending will NOT recover to the levels recently experienced, at least not in the near term.  That may be just as well, as private over-consumption seems to be diminishing our quality of life, rather than improving it.

Galbraith questions our society’s unrelenting focus on private production as the only avenue to prosperity.  The actual production lost in the Great Depression wasn’t missed by society as much as the loss of spending power by millions of out-of-work Americans.  

Yet, as Galbraith observes, there are many public spending needs.  As a consequence to our public reluctance to invest in the public sector via our aversion to new taxes, we are increasingly experiencing a country rich in private goods, but poor in public ones:  “beautiful cars driving on poor roads, well-dressed kids in the crumbling public schools, neighborhoods with beautiful homes but polluted parks.” 

Galbraith introduces the idea of social balance, asserting that public spending should increase to match the increases in private spending.  This investment in public spending has generally lagged, as it involves regulations, bureaucracy and funding via new taxes.  One wonders if the recent trend of state and local governments leasing items such as toll bridges and roads, and parking facilities to private consortiums will improve the situation, although the funding will be disintermediated from the large pool of public taxation to the smaller pool of actual users.  Actual users may wind up paying more for previously public sector privileges than they paid through taxes, and non-users will pay less.

How widespread will this practice become?  What will it mean?  How may these trends play out?  What are your thoughts on patterns of private consumption and the value of private production?

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