American Affluence and Conventional Wisdom
Asserting that the United States in the twentieth century is an anomaly in world history due to its unprecedented affluence, Galbraith states that economic theory up to this point is based primarily on societies characterized by poverty and is, therefore, inadequate to addressing the economic condition of the United States in the twentieth century. He introduces the concept of conventional wisdom, which refers to the generally accepted ideas within any given society. Galbraith asserts that conventional wisdom is based primarily on tradition and does not accommodate changes in society and so must be viewed with skepticism. He observes that the early economic theorists—the leading figures being Smith, Ricardo, and Malthus—of the previous centuries based their theories in a world economy characterized by poverty. Galbraith then provides an overview of major currents in economic theory since the Industrial Revolution in the mid-nineteenth century. A predominant current of twentieth-century thought—the ‘‘central tradition’’ of economic theory—was the idea that financial crises, such as the depression, are a normal occurrence of economic cycles.
Galbraith traces the major currents of American economic thought in the twentieth century, particularly the influence of Social Darwinism and Marxism. Galbraith argues that the issue of inequality in the distribution of wealth has become less and less of a concern in American conventional wisdom. Focus has moved instead to the benefits of increased production at all levels of society. He points out that since the 1930s economic security, both for the business owner and the worker, has steadily increased, as has overall production. With the decrease in concern for economic inequality and the relative elimination of extremes of economic insecurity, Galbraith argues, production has become the foremost concern in economic thought. He elaborates upon the extent to which conventional wisdom in the United States regards production as the essential measure of economic vitality. However, Galbraith notes that, in fact, this concern with production is irrational and inappropriate to the realities of the economy. He stresses that the conventional wisdom is selective in evaluating various types of production so that private sector production is deemed good for the economy while social services provided by the government are considered bad for the economy.
Galbraith further observes that with the steady increase in wages in the United States, luxury items have come to be considered consumer ‘‘needs,’’ equivalent to the need for food and shelter in less affluent societies. He points out that it is inaccurate to claim that the production of these luxury items is determined by the ‘‘needs’’ of the consumer; rather, it is the extensive...
(The entire section is 1202 words.)