Thayer Watkins

John Kenneth Galbraith

I. Early Life:

Galbraith was born in 1908 in the Scottish farming community of Iona Station, Ontario, Canada on the north shore of Lake Erie. This community was divided along ethnic lines into the English townspeople and the Scot farmers. The English were generally conservatives and the Scots liberal. His father was a teacher who turned to farming later in life. His father maintained an interest in politics and was a leading orator and liberal in his community. Galbraith said, "My father thought we were obliged because of our enormous size to alter the world to our specifications." Galbraith grew to be six foot, eight inches tall.

II. Education

After high school Galbraith went to the College of Agriculture at Guelph, Ontario. In 1930 he received a scholarship to study for his Ph.D. at the University of California in Berkeley. He fell in love with the cultural and intellectual climate of Berkeley. In his third year at Berkeley he was sent to the University of California at Davis to teach economics and agricultural economics. He was the sole staff. In 1934 he received his doctorate for a dissertation in agricultural economics and he was offered an instructorship at Harvard. He hoped to stay in California, but he thought the Harvard offer would enable him to get a better deal. But instead Cal congratulated him and let him go.

III. Professional Career

Harvard was a very exciting place in economics in the 1930's. Keynesian economics was being elaborated by Alvin Hansen and others. He spent 1936 in England at the University of Cambridge where he met and became friends with members of the Kennedy family. His interests in economics broadened.

In 1938 he collaborated on a study entitled Modern Compeition and Business Policy. This became the basis for some of his later work. In 1939 he taught briefly at Princeton, but went into government. In 1941 President Roosevelt appointed him Deputy Administrator of the Office of Price Administration (OPA).

His staff grew to 16 thousand employees. In 1943 resigned from the OPA and tried to join the Army. He was rejected because of his height and joined the staff of Fortune magazine, where, according to Galbraith, he learned how to write. In 1951 he published a book, The Theory of Price Control, which was generally ignored by economists. He vowed never again to write for an audience that was limited to economists.

In 1952 Galbraith published American Capitalism. In this book Galbraith contended that American society was suffering from a sickness; a sickness that had its roots in the discrepancy between the ideology of competition and the realities of large scale economic enterprises. Galbraith introduced the concept of countervailing power as an antidote to that sickness. The existence of concentrations of power, such as in unions, is not detrimental if they are a counterbalance to another concentration of power. This point, made more rigorous, has been incorporated into standard economy theory under the title of the theory of the second best.

Galbraith's The New Industrial State is probably his most important work. In it he argues that the enormous amount of capital required to create a major corporation demands that there be a high degree of certainty about the demand for the product, the supply of labor, the extent of competition in its markets, the regulatory and tax policies and any other factor in its environment. Large corporations try to enhance and stabilize the demand for their products by advertising heavily. They try to maintain stability in the matters of public policy by lobbying government and establishing working relationships with politicians and bureaucrats. In labor matters large corporations find it is convenient to deal with large labor unions which are predictable. The net result is that there has developed a symbiotic relationship between Big Business, Big Government and Big Labor. This is the New Industrial State.