Galbraith, Harrington, Heilbroner: Economics and Dissent in an Age of Optimism

by Loren J. Okroi

Overview

In a remarkably lucid and flowing style, Loren Okroi analyzes the ideas of three leading reformer-critics in the United States and places their main arguments in the context of the economic, social, and political history of postwar America. In so doing, he provides not only a skillful introduction to American social thought since the 1950s but also a wide-ranging examination of the contemporary failures of American liberal ideology. As he explicates the works of these three men—all of whom moved easily between the academic world and the arenas of politics, government, or journalism—it becomes clear that present policy debates have not even begun to resolve the dilemmas their writings have exposed.

Millions of readers know J. K. Galbraith, the renowned Harvard economist and social theorist who developed the concept of the "New Industrial State"; Michael Harrington, the de facto leader of the American socialist movement who revealed the existence of the "other America"; and Robert Heilbroner, the incisive economic thinker who questioned the naive optimism of Americans even before it significantly eroded in the mid-1970s. In this book they emerge as individuals, as thinkers, and as part of a larger picture of American efforts to reconcile democratic values and humane social goals with modern corporate capitalism.

The study begins with a portrait of the U.S. economy and society at the end of the Civil War and discusses the momentous changes brought about by the rapid industrialization that followed. The central portion revolves around Galbraith, Harrington, and Heilbroner and explores their contributions to the intellectual and political discourse on key issues confronting America in the decades after 1945: the evolutionary trajectory of managerial capitalism; the persistence of poverty and class divisions; the expansion of the welfare state and the public sector in general; and the assault on welfare capitalism by the New Right in the 1980s. The concluding chapter examines the causes and consequences of the fervent adherence of Americans to liberal ideology, the origins and philosophical bases of that set of beliefs, and its future prospects.

Originally published in 1988.

The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Product Details

ISBN-13:	9780691636153
Publisher:	Princeton University Press
Publication date:	04/19/2016
Series:	Princeton Legacy Library , #895
Pages:	292
Product dimensions:	7.10(w) x 10.10(h) x 1.10(d)

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Galbraith Harrington Heilbroner

Economics and Dissent in an Age of Optimism

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By Loren J. Okroi

PRINCETON UNIVERSITY PRESS

Copyright © 1988 Princeton University Press
All rights reserved.
ISBN: 978-0-691-07771-0

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CHAPTER 1

The Great Transformation: American Economic Thought, 1865–1945

A modern novelist once wrote that history is like grass growing: one cannot see it happening. Whatever might be the general validity of this proposition, it is certainly true when applied to virtually all mid-nineteenth-century observers of American economic development. When Abraham Lincoln called upon his countrymen to save the Union from the illiberal philosophy and institutions of a patriarchal, elitist Southern society, he was asking a nation composed of numerous farmers, many small-town dwellers and small businessmen, and some self-employed professionals to join in a crusade that he believed would, among other things, ensure the growth of a liberal, essentially small-scale, and virtually classless market society.

"By some it is assumed," Lincoln told a farmers' organization the year before he was elected president, "that labor is available only in connection with capital — that nobody labors, unless somebody else, owning capital, somehow, by the use of that capital, induces him to do it." But this theory was, he said, false. Indeed, he made it clear that he agreed with those who proposed that "labor is prior to, and independent of, capital; that, in fact, capital is the fruit of labor, and could never have existed if labor had not first existed — that labor can exist without capital, but that capital could never have existed without labor," and that "labor is the superior — greatly the superior — of capital." "There is, and probably always will be, a relation between labor and capital," he admitted. "A few men own capital," Lincoln acknowledged, and thus were able to hire — and in the South even buy — others to work for them. But he went on to emphasize, undoubtedly with some exaggeration, what his audience already knew: namely, that "A large majority belong to neither class — neither work for others, nor have others working for them." In America, he proudly pointed out, "Men, with their families — wives, sons and daughters — work for themselves, on their farms, in their houses and in their shops, taking the whole product to themselves, and asking no favors of capital on the one hand, nor of hirelings or slaves on the other." And, while "a considerable number of persons mingle their own labor with capital," he argued that "this is only a mixed, and not a distinct class." America, in others words, was not like, and would not become like, Europe. Just as importantly, for Lincoln as for the vast majority of Americans, expectations involved a rather straightforward extrapolation of past economic and social trends into the indefinite future.

Lincoln and other Americans expected to see the continued push of westward expansion and its concomitant agricultural development, the growth of some old, and many new, small towns and even some large cities, and the erection of a number of small- to medium-sized factories, mainly on their outlying fringes, to offer employment to a few hundred, or perhaps a few thousand, of their inhabitants. None of this, they believed, would involve any substantial change in American institutions or ideology. Things would change in quantity, of course, but not in kind. Lincoln therefore saw no reason to question the relevance of classical liberal economic, social, and political philosophy to the postwar America he expected to see after the South was defeated, and his death in 1865 guaranteed that he would never have to face the searching reexamination of his simple liberal faith that would almost certainly have been necessary for such a sensitive man had he lived another twenty-five years. In fact, the grass had already been growing under Lincoln's feet for at least a score of years, but he cannot be blamed for not noticing it. And, even if he had, the natural tendency would have been to interpret the new phenomena through the liberal ideological lens that had shaped Americans' perceptions of their society and its development as it had since the early eighteenth century, and therefore to find refuge in the only philosophy he knew.

What neither Lincoln nor his contemporaries could foresee was the rapid emergence of an industrial and urban society to replace the commercial and rural society whose way of life they were fighting to protect. Instead of maintaining the decentralized structure and balanced growth of small towns, family farms, and factories coexisting in a relatively harmonious, mutually symbiotic relationship between vast rural expanses and small, isolated islands of economic development, America in the fourth quarter of the nineteenth century was rocked by the explosive growth of huge industrial complexes within great, sprawling, interconnected urban centers that increasingly dotted the land. The newly expanded rail system forged an iron grid whose nodes and linkages would remake the face of the nation. Between 1865 and 1900 the United States moved from the position of a second-rate industrial power to that of the greatest economic juggernaut on earth, and the economic, social, and political consequences as well as the perplexing social problems and political issues that arose during that era are still with us today.

Lincoln's America had by no means been the idyllic land enshrined in popular mythology; nonetheless, it was a nation that believed it knew itself and where it stood. In a freely competitive, decentralized market society — the kind that had previously existed in the minds of Americans and to a considerable degree in reality — the ultimate source of legitimacy in the social and economic sphere was largely the market itself. Did it not allocate land, labor, capital, and goods and also determine wages and prices in an entirely impersonal, yet efficient manner, unfailingly rewarding the clever, thrifty, and industrious, damning the dull, imprudent, and slothful, and thus objectively determining the status and function of all who participated in its workings? And, although it was not always adhered to, did not the policy of free trade among nations make optimum use of those resources and capacities unique to each nation, thus maximizing the benefits to all mankind and so reproducing on a global scale the salutary effects of the free market? The answers to these questions seemed obvious to Americans in 1865.

To be sure, the system had flaws. There were periodic slowdowns of production and financial crises; but these were minor and even necessary setbacks. They were, in fact, an essential part of the remarkable, self-adjusting mechanism that provided employment and opportunity. The workings of the market, like the more general laws governing the universe, were simple and immutable: men naturally sought their own self-interest and, by so doing, furthered the interests and well-being of all. Prominent economists, sociologists, and writers of the immediate post-Civil War period heartily endorsed this view, and they proclaimed the universal benefits of economic growth and the perfect balance of market forces.

But this balance of forces seemed to be increasingly precarious as the nation moved toward the twentieth century. The clockwork mechanism of Adam Smith was still used as the model of the American economy by business, the public, and the vast majority of the intelligentsia, but its explanatory power was becoming far less impressive for many observers of the American scene. And for good reason.

What happened was that the decades of the 1880s and 1890s witnessed a fundamental transformation of the economic system Americans had come to know, as new technologies, rapid economic growth, industrial concentration, and the resulting economic and social disruptions and dislocations seemed to threaten the very fabric of American society. New urban metropolises drew in from surrounding agricultural regions large numbers of displaced persons needed to run the machinery of the expanding factory system, while many of those left on farms gradually lost control of their lands (close to 40 percent no longer owned their own farms by the 1880s) and their economic destinies. The new America was urban by the 1890s — not in a quantitative sense, but in the sense that urban institutions, especially the large corporation, had by this time come to be the decisive and representative institutions of American civilization. As the situation worsened for farmers, as work environments and living conditions deteriorated for large numbers of urban inhabitants, and as economic depressions (caused by rapid technological change, industrial overproduction, great maldistributions of wealth, the end of huge investments in railroad construction, and the ripple effects of European economic downturns) grew more severe, the nation was convulsed by social tensions, industrial violence, and seemingly by the very kind of class conflict that Lincoln believed the nation would permanently avoid.

A well-known scholar has noted that American farmers and workers never challenged the social order in a fundamental way, and in retrospect this is clearly true. But in the last two decades of the nineteenth century this was not so obvious. Farmers, squeezed by tight money and by the economic power of distant manufacturers, bankers, and businessmen, were often forced into desperate financial straits. Disoriented by their loss of political influence, they eventually sought redress through a mass political movement that shook the American party system and for a while seemed on the verge of gaining national power. As one historian has written of these disgruntled agriculturalists, "they saw the coming society and they did not like it." Urban workers evidently were also displeased, since between 1881 and 1900 there were 2,378 strikes, which involved more than 6 million of them and which began to give the National Guard its long-enduring (and largely well-deserved) reputation for repression, bias, and ruthlessness. Great armories sprang up across the land as government prepared to deal with the social unrest that seemed to have become a permanent part of American life.

Given these developments, it would be astonishing if one were not to find rumblings in the intellectual community to parallel the explosive forces let loose in the society at large. Indeed, the social, economic, and political implications of rapid industrialization and urbanization were profound, and intellectuals predictably began to grapple with them. Perhaps the most central of these issues was the problem of power.

Economic power in a free market system theoretically did not exist, since any single producer's influence on the market was, relative to that of numerous other producers, infinitesimally small. Also, although some people were undoubtedly much better off and more influential than others, it had been the common (though, in reality, not entirely justified) belief that anyone could, through diligence, frugality, and hard work attain equal or even greater status. But as enterprises and the scale of production grew steadily larger and the concentrated industrial power of a relatively few individual companies began to exert a palpable force on the entire market structure, making it far less plausible that average citizens could themselves become capitalists, Americans were presented with an obvious dilemma. If economic activity was no longer regulated by an impersonal market mechanism, but was instead dominated by a relatively few identifiable groups and organizations, the following questions arose: How did they obtain this power? By what right did they exercise it? If the market was no longer "free," how could one justify the results it produced, especially if some of them were widely judged to be undesirable?

The intellectual reaction to the turmoil engulfing the new Age of Industry was varied. Social Darwinists such as William Graham Sumner saw the newly emerging society in positive terms, as a beneficent, evolutionary cultural form, while reformists such as Edward Bellamy in his portrait of the new urban masses in Looking Backward and Lester Ward in his expose of the misapplication of Darwinian principles to human society were dismayed by the social ills they saw in abundance around them. But of particular interest are those theorists who focused their attention on the economic changes of this era, and their impact on the structure of American capitalism. Several of them comprise what has been called the "New School" of political economy, whose members included John Bates Clark, Richard Ely, and Simon Patten — men who questioned in varying degrees many of the fundamental assumptions of laissez-faire capitalism and advocated increased state intervention in the economy. Indeed, the American Economic Association, founded in 1885 by young, reform-minded economists, included a call for such reforms in a statement proclaiming the principles on which the organization was established. Although these men espoused no unified program, each of them proposed new ways of perceiving a rapidly changing America and put forth new ideas for remedying the economic and social problems these changes entailed, ideas that ranged from moderate, ameliorative measures to radical, Utopian schemes for a planned economy.

No, this burst of unorthodox thinking was not a freak event. In fact, it eventually gave rise to a new current of economic thought whose founder was a Norwegian immigrant's son from rural Minnesota, a strange man named Thorstein Veblen. One of John Bates Clark's students, Veblen went beyond the New School in a literally radical sense: he did not stop (or even begin) with moral condemnations or reformist proposals, attempting instead to locate and analyze the very roots of America's social and economic condition at the turn of the century.

The flaunting of wealth and the seemingly rapacious behavior exhibited by American businessmen and the upper class suggested to Veblen a link between their psychology and that of the "big men" and plunderers of primitive cultures with their unending quest for wealth, power, and prestige. This explained why the economic institutions of modern America seemed to contradict Max Weber's association of capitalism with rational modes of thought. The forces underlying institutional behavior were thus not necessarily rational desires: they were most often irrational drives that were little understood, while the institutions themselves were merely more highly developed forms of archaic roles and practices that had modern structures superimposed on them through an evolutionary process of accretion. Thus, the American economy was not a maximally efficient, rational machine that produced an abundance of socially useful goods and diffused power widely throughout society; it was instead, Veblen believed, an unstable, contradictory mixture of rational industrial organization and massive economic waste, and an arena of competition for power among rival groups and interests.

His conclusions aside, the important point to note is that Veblen rejected many of the basic axioms of classical economics and eschewed its narrow technical analysis of static economic relationships, concentrating instead on broader issues concerning the structure, dynamics, and historical evolution of economic institutions themselves. Those scholars who, following his lead, investigated economic behavior within the context of entire social systems and habitually ignored disciplinary boundaries in an effort to obtain a holistic view of the modern American economy became known as "institutionalists," and their advent is significant. Whenever a substantial proportion of thinkers in any field become so disenchanted with the explanatory power of a prevailing theory that they seek alternative theories and methodologies, it is a sign of the disintegration of a dominant theoretical framework. It was in the institutionalist tradition that John R. Commons examined the legal structure of capitalism, the role of tradition in economic affairs, and the nature of exchange relationships. In the same tradition, Wesley Clair Mitchell urged a more rational and comprehensive collection of economic statistics, evincing an institutionalist concern for ascertaining the practical workings and actual aggregate outputs of the economy, as distinct from what classical theory might predict.

(Continues...)

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Excerpted from Galbraith Harrington Heilbroner by Loren J. Okroi. Copyright © 1988 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

• FrontMatter, pg. i
• Contents, pg. vii
• Acknowledgments, pg. ix
• Introduction. Ideas, Institutions, and Intellectuals, pg. xi
• Chapter 1. The Great Transformation: American Economic Thought, 1865-1945, pg. 1
• Chapter 2. The New Capitalism, pg. 29
• Chapter 3. The Industrial State, pg. 59
• Chapter 4. Galbraith and American Capitalism, pg. 83
• Chapter 5. The New Poverty, pg. 111
• Chapter 6. The Great Society, pg. 128
• Chapter 7. Harrington and American Socialism, pg. 156
• Chapter 8. The New Pessimism, pg. 179
• Chapter 9. The New Right, pg. 203
• Chapter 10. Heilbroner and Corporate Society, pg. 218
• Chapter 11. Economics, Power, Justice: American Liberalism and Democracy, pg. 241
• Select Bibliography, pg. 263
• Index, pg. 271