The Predator State

The Predator State by James K. GalbraithI read The Predator State by James K. Galbraith from my local library. I hope I'm not quoting here at a length that goes beyond "fair use," but there's lots of good stuff.

The subtitle is "How Conservatives Abandoned the Free Market and Why Liberals Should Too." That seems a little misleading. His argument is that there has never been a "free" market in the US. Chapter Eight spells out how public institutions have mingled with and supported private enterprises, and vice versa.

Taking everything together, we find that the United States is not a "free-market" economy with an underdeveloped or withered state sector. It is, rather, an advanced postindustrial developed country like any other, with a government sector responsible for well over half of economic activity. (page 112)

What he says about college cleared up something that had always nagged at me, but I couldn't put my finger on:

... Higher education is theoretically subject to market tests: students can choose, in principle, among competing institutions. But in fact the product on sale is deeply uniform from one place to the next, and differences in instructional quality, though they undoubtedly exist, are extremely hard to observe reliably. What consumers therefore do is substitute status for quality: they generally rate universities not by the unknown and largely unobservable virtues of their instruction but by their place in an elaborate, and very well-known, national and regional system of rankings. This creates a system of "positional goods"--the value of an education depends not on the learning acquired but on the relative stature of the institution attended. And therefore, once again, the market does not control; the institutions do. ...

Preoccupied as always with the metaphor of market process, economists tend to assess the contribution of extra years of schooling in terms of the acquisition of "skills." ... While some students do acquire skills in college, or so one hopes, the provision of skills is only in a loose sense the mission of American higher education. The job of the professor is only loosely to "produce" a high-performing citizen from the indifferent raw material provided by the country's high schools.

So, what do universities do? First, there is the neglected effect of higher education on employment and labor force participation. Like the health sector, higher education in the US is very labor intensive. It employs a great many people, including large numbers of the intelligentsia, who are thus kept contented and busy. More important than that, it provides activities and diversions for many of those who--if they were in Europe--would spend their late teenage years in the ranks of the jobless young. The American young thus reap the psychological benefits of legitimated idleness and the rituals of accomplishment provided by colleges and universities at this stage of life; as a rule, they emerge feeling vindicated rather than depressed. As a solution for youth unemployment, the American college system has to be counted one of the great triumphs of the human imagination--or perhaps of dumb luck.

A really interesting section shows why economist Thorstein Veblen was a little more on-the-ball than Karl Marx. Veblen wrote The Theory of the Leisure Class in 1899. This is the next thing I need to grab at the library, or attach to one of Melinda's inevitable Amazon orders. $3.50 for the Dover edition, good deal. Anyway, Veblen seems to use the word "barbarian" or "higher barbarians" to mean predatory rich people and/or elites. Here's what Galbraith wrote about Veblen:

In the "higher barbarian culture," Veblen wrote, the "industrial orders" comprise most of the women, servants, slaves, and other chattel, plus the craftspeople and a smattering of engineers. These people are underlings, and they alone perform what in modern societies is called work. Only for them, therefore, is it appropriate to think of wages and salaries as compensation for the drudgery of toil. Those who are higher up in the pecking order take a different view. And while (as Veblen wrote) to an outsider the work of the hunter and that of the herder may seem functionally similar, this is not at all the "barbarian's sense of the matter."

The nonindustrial orders comprise the leisure class: warriors, government, athletes and priests. Captains of industry are an outgrowth of the warrior caste, which explains the organization of much of business along military lines. The leisure classes do not work. Rather, they hold offices. They perform rituals. They enact deeds of honor and valor. For them, income is not compensation for toil and is not valued mainly for the sustenance it makes possible. Income is, rather, a testament by the community to the prestige it accords the predator classes, to the esteem in which they are held. It is a way, in other words, of keeping score.

The leisure class is predatory as a matter of course: predation is what it does. The relation of overlords to underlings is that of predator to prey. The categories of Veblen's economics include prominently the absentee landlords and the vested interests, who live off the work of others by right and tradition, and not by their functional contribution to the productivity of the system.

The ecology of predator-prey relationships is one of mutual interdependence. Predators rely on prey for their sustenance, but they also require and must motivate their assistance. The normal function of the clan, tribe, family unit, or company is not to enrich the owner or master at the expense of the underlings, but to enrich him at the expense of surrounding clans, tribes, families, or companies. In this contest, the underlings naturally must enjoy some benefit both to motivate their cooperation and illustrate the success of the collective enterprise. The success of the enterprise depends in turn on keeping the predators sufficiently in check. If in their compulsion to fight, they lay waste to the environment, then neither they nor their prey will survive.

Thus, contrary to Marx, in Veblen's scheme of things the industrial orders are not driven to the brink of subsistence. On the contrary: the success of the predators depends in part on healthy prey. And to a degree, their prestige also depends on it. Wives and servants are therefore fed and decorated to reflect the stature of their masters; engineers are kept comfortable with "full lunch buckets" so as to keep the industrial machinery running smoothly. Since the lower orders generally understand this, those who are included within the program also realize that their own position could be worse than it is. For this reason, they are not intrinsically revolutionary or inevitably destined to become so.

At one time, Veblen's depiction of economic society was well known in American intellectual circles and among economists, but it was largely forgotten and dropped from memory over the course of the cold war. That era evidently had room for only two grand visions. One was that of Marx, under which the class structure, divided between bourgeois and proletarians, was intrinsically antagonistic and prerevolutionary; in the Marxian dynamic the proletarian would sooner or later face the choice between revolt and starvation. The other was that of Hayek or Friedman, under which each occupation makes a contribution to the welfare of the whole, precisely valued by the market, so that any existing distribution of income is validated, ipso facto, by its productivity. Veblen's vision of an essentially stable order, yet dominated by a predatory and unproductive class, was plainly too subversive for the marketeers, yet it was also too cynical for the Marxists. And so it was effectively squeezed out of existence between them.

Chapter Twelve spells out The Need for Planning, how the dirty word "planning" doesn't just apply to failed, undemocratic, centralized planning of Soviet Russia or Mao's stupid backyard steel foundry plans. It also applies to successful, relatively democratic planning like the US economic mobilization for World War II.

And that's why you and Alan Greenspan should read this book. It's popular, check your library if you don't want to buy it.


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