Thursday, 26 July 2007

public versus private; capitalism versus socialism

"In the affluent society no useful distinction can be made between luxuries and necessaries." J.K. Galbraith (the Globe and Mail's thought of the day)

J.K. Galbraith (1908-2006), it turns out, was a Canadian-American economist. I hadn't heard of him before, and when I read this quotation it grated on me. So I did a little reading about his ideas(1). I found that I quite agreed with most of what I read. Our consumerist culture means that the private sectors are getting richer and richer and the public sectors struggle to run. Sometimes I think of this when I compare Ant's and my workplace. Our school buildings are quite spacious and well maintained, but no business, and certainly not a world class bank, would ever consider working in such a dingy environment. Ant has described to me the desk chair he has--an executive chair with a little hanger attachment on the back for his suit jacket and I think about how I asked to beg to get a new desk chair and was allowed to choose one of value up to £30. Or how the whole staff was without printing facilities for a week last term because we were out of printer toner. No business would ever allow that to happen. There's a huge gap between the public and the private sectors.

Galbraith said that in a capitalist, or affluent, country the luxuries are well marketed by the private sector and the necessities are "underprovided" by the public sector. We have more and more money to buy luxuries but our hospitals are not the cleanest and underfunded. Most parents can buy their kids an expensive games console, but the schools struggle with their operating budget. I have heard some people say that the way to fix this is to run the government (or the school system, or healthcare) like a business. Instead it seems to me (and based on Galbraith's ideas) that we need to become a little less capitalist and start investing in improving public goods and necessities.

I'm not sure what today's quote from the Globe and Mail is supposed to say, then. There is still a distinction between the luxuries and the necessities, although perhaps people no longer seek to provide for their needs while limiting their pursuit of their wants. Here's a different Galbraith quote to chew on instead.

"Let's begin with capitalism, a word that has gone largely out of fashion. The approved reference now is to the market system. This shift minimizes — indeed, deletes — the role of wealth in the economic and social system. And it sheds the adverse connotation going back to Marx. Instead of the owners of capital or their attendants in control, we have the admirably impersonal role of market forces. It would be hard to think of a change in terminology more in the interest of those to whom money accords power. They have now a functional anonymity."(2)


(1) Here's an excerpt from the Wiki article.
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 an age of poverty to 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 this generates artificial affluence through the production of commercial goods and services, the "public sector" becomes neglected as a result. He points 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 underprovide (or fail to provide at all) for many public goods, whereas private goods are typically "overprovided" due to the process of advertising creating an artificial demand above the individual's basic needs.

Galbraith proposed curbing the consumption of certain products through greater use of consumption taxes, arguing that this could be more efficient than other forms of taxation, such as labour 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.

(2) "Free Market Fraud", The Progressive, January 1999

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