by John Kenneth Galbraith, Penguin Books, 1975
[p7] Economic goals are paramount. [...] Economics is progressive as
regards the first type of change--conceptual advances or innovations in
interpretive apparatus are promptly examined, enthusiastically discussed
and, where useful, willingly adopted.
[p8] Unions and large corporations make the dynamics of organization as
important as the authority of the market in telling what will happen.
This, in turn, diminishes the authority of economic judgement.
[p9] Thus does a scientific or pseudo-scientific posture direct
economics away from accommodation to underlying social and institutional
[p11] The Roosevelt economists were largely without economic prestige.
[p12] Though production and employment were the central problems of the
Great Depression, they have not by any available standard of measurement
been so serious since. [...] The primary prescription [put forth by
economists] must hencefroth be for the improvement of what may broadly be
called the quality of life. This should now be the foremost goal.
[p13] And most must agree that the individual should be the end in
himself and not the instrument to of the business firm or public
bureaucracy which was created to serve him.
[p14] It should also be observed that if appropriate attention is not
accorded to public needs, the private sectory itself will suffer in
technical performance. [...] Thus it comes about that the remedy for
unemployment and individual privation depends to a very considerable
degree on the balance between public and private services--or, more
generally, on measures to improve the quality of life.
[p15] Defense expenditures are a large share of all public outlays and
also are protected by special attitudes and a powerful constituency.
[p16] [T]he policy invites a coalition between those who seek tax
reduction for purposes of Keynesian policy and those who simply want lower
taxes and less government. [...] The quality of life will also suffer if the
individual is not an end in himself but an instrument of some purpose that
is not his own. [...] 'There is also a rising realization that there is
something wrong about reducing taxes unless something also is done about
curbing expenditures to avoid the need for big deficits in budgets. ...
This failure to place equal emphasis on expenditure reduction can mean an
danger of continuing big deficits.' 'Important Trends in Our Economy,'
United States Steel Corporation, Annual Report, 1963, p. 38.
[p17] The corporation requires its own typo of man; he must be willing
to subordinate his own goals to those of the organization. And it is
necessary if the organization is to succeed. It is what makes possible
group performance of tasks. And by combining experience, knowledge,
technical skills, and art, such group performance greatly improves on what
an individual can accomplish, popular myth to the contrary. [...] The
behavior and beliefs of a society are, in fact, subject to extensive
management to accord with economic need and convenience. Not even
scientific truth, much as our culture presumes to canonize it, is exepmt.
The tobacco industry has not yet ceased to reveal its discontent with
scientists who, on the basis of rather impressive evidence, aver that
cigarettes are a cause not only of lung cancer but a disconcerting
assortment of other fatal or disabling maladies. The economic well-being
of the industry requires the active and energetic recruitment of new
customers. This need is paramount. So there is no alternative to
impeaching the scientist and their evidence.
[p18] The Eisenhower-Mills contention was, in essence, that defence
budgets and procurements were being influenced not by national need but by
what served the economic interests of suppliers.
[p19] We live surrounded by a systematic appeal to a dream world which
all mature, scientific reality would reject. We, quite literally,
advertise our commitment to immaturity, mendacity and profound
gullibilty. It is the hallmark of the culture. And it is justified as
being economically indispensable.
[p22] If an economist writes a book or even an article in clear
English, he need say nothing. He will be praised for avoiding jargon--and
also for risking the rebuke of his professional colleagues in doing so. [...]
The language of economics is commonly indicted on three different
counts... 1. That the ideas and terminolgy of economics are complex and
artifical and exceedingly confusing to the layman. 2. That economists
are bad writers.... 3. That arcane concepts and obscure language are the
symptoms of a deeper disorder.
[p23] But it would be hard to prove that the working terminology of the
subject [economics] is more pretentious or otherwise oppressive than that
of jurisprudence, gynaecology or advanced poultry husbandry.
[p24] This is not because it is the task of the economist to entertain
or amues. Nothing could be more abhorrent to the Calvinist gloom which
characterizes all scientific attitudes . But humour is an index of a
man's ability to detach himself from his subject and such detachment is of
considerable scentific utility.
[p25] 'People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a conspiracy against
the public, or in some contrivance to raise prices.' Adam Smith, The
Wealth of Nations, Methuen, 1950, p. 130. [...] To this day, in the United
States at least, anyone observing an exchange of words between two
competitors assumes it is costing the public some money.
[p26] After [Thorstein Veblen] made the phrase 'conspicuous
consumption' a part of the language, the real estate market in Newport was
never again the same. [...] 'Conspicuous leisure' made it difficult even for
the daughters of the rich to relax. Their entertainment had thereafter to
be legitimatized by charitable, artistic oreven entellectual purpose or,
at a minimum, sexual relief.
[p27] so it would be difficlut, on the general evidence, to find fault
with the litorary qualifications of the English-writing economists.
[p28] The influence of [Keynes' book 'The General Theory'], combined
with its unintelligibility, does bring up another question. It is whether
clear and unambiguous statement is the best medium for persuasion in
economics. Here, I think, one may have doubts.
[p29] The archiac constructions and terminology put some special strain
on the reader. Accordingly, by the time he has worked his way through,
say, Leviticus, he has vested interest in what he has read... Too much
has gone into understanding it. [...] Difficultly, contradiction and ambiguity
have rendered precisely similar service in economics.
[p30] Yet ambiguity is a tactic which not everyone should try.
Economists will seize upon the ill-expressed ideas of a very great man and
argue over what he had in mind. Others had better not run the risk.
[p31] Professional economists, like members of city gangs, ... holders
of diplomatic passports and, one is told, followers of the intellectually
more demanding criminal pursuits, have the natural desigre of all such
groups to delineate and safeguard the boundary between those who belong
and those who do not.
[p34] Much of [economic writing], and more especially that exchanged in
the upper levels of the pyramid, is not meant to be [relevant to the real
world]. So it may be ignored.
[p35] Footnote 11 The layman may take comfort from the fact that the
most esoteric of this materialis not read by other economists or even by
the editors who publish it. In the economics profession the editorship of
a learned journal not specialized in econometrics or mathematical
statistics is a position of only moderate prestige. It is accepted,
moreover, that the editor must have a certain measure of practical
judgement. This means that he is usually unable to read the moost
prestiguous contributions which, nono the less, he must publish. So it is
the proctice of the editor to associatewith himself a mathematical curate
who passes on this part of the work and whose word he takes. A
certain embarrassed silence covers the arrangement.
[p36] [T]he Keynesian revolution was one of the greate modern
accomplishments in social design.
[p38] Until [The General Theory] appeared, economists, in the classical
(or non-socialist) tradition, had asusmed that the economy, if left to
itself, would find its equilibrium at full employment.
[p39] Keynes writing Roosevelt 'I lay overwhelming emphasis on the
increase of national purchasing power resulting from government
expenditure which is financed by loans.'
[p40] Not often have important new ideas on economics entered a
government by way of its central bank. Nor should anyone be disturbed.
There is not the slightest indication that it will every happen again. [...]
Simon Kiznets and a group of young economists and statisticians at the
University of Pennsylvania, the National Bureau of Economic Research and
the United States Department of Commerce ... developed from earlier
beginnings the now familiar concepts of national income and gross national
product and their components, and made estimates of their amount. [...] As a
result, those who were translating Keynes's ideas into action could now
know not only what needed to be done but how much.
[p41] Paul Samuelson ... has compared the excitement of the young
economists on the arrival of Keynes's book to that of Keats on first
looking into Chapman's Homer. [...] [O]bscurity [of the book] stimulated
abstract debate. [...] Alvin H. Hansen [who had catalysed the discussion] had
an established reputation, and he did change his mind.
[p42] Keynesian policies became central to what was called postwar
planning and designs for preventing the re-emergence of massive
[p44] The Council of Economic Advisers became, in turn, a platform for
expounding the Keynesian view of the economy and it was brought promptly
into use. [...] Those who nuture thoughts of conspiracy and clandestine
plots will be saddened to know that this was a revolution without
[p45] Still, where resisting social change is involved, there are men
who can surmount any handicap. [...] In the fifties a group of graduates of
mature years banded together in an organization called the Veritas
Foundation and financed a volume called Keynes at Harvard.... But then it
damaged this highly plausible proposition by identifying Keynesianism with
socialism, Fabian socialism, Marxism, communism, fascism and also literary
incest, meaning that one Keynesian always reviewed the works of another
[p48] Now, as noted, Keynesian policies are the new orthodoxy.
Economists are everywhere to be seen enjoying theeir new and pleasantly
uncontreversial role. [...] And there is a dangerously high dependence on
[p50] A recurring and not unsubstantiated charge against economics over
the last century has been its employment not as a science but as a
[p51] Except where monopoly or intent to monopolize could be should,
[economic] theory denied the need for any social response to economic
power. It was playing an active--an actively conservative--role in the
[p52] [Say's Law of Markets] defended a miminmal role for the state. [...]
Journalists and politicians and the public at large had sensed what the
theory denied or ignored, namely that where the participants in an
industry were large and few, they wielded great power not explained by the
occasional case of single-firm monopoly.
[p53] I wish to argue that present professional belief...as profoundly
accepted as was once the competitive model or Say's Law, is now similarly
excluding urgent as well as politically disturbing questions from
professional economic vision. [...] The accepted economic models, in the
past, have not necessarily been the ones that illuminated reality. They
have frequently served to divert attenton from questions of great social
urgency which, in the established view, had alarming implications for
political action. In doing this, they and the subject of economics have
served a political function, Economics has been not a science but a
conservatively useful system of belief defending that belief as a
science. And knowing, and indeed agreeing, that this has occurred before,
our minds must be open (or less incautiously closed) to the possibility
that it may happen again. [...] The assumption that economics must now
abandon...what may also be called citizen sovereignty. If this is not
done the discipline will serve, indeed is now serving, not as an
elucidation of social phenomena but as a design for suppresing
inconvenient social conclusions and action.
[p54] There are three plausible views of the individual in economic
society of which two are broadly consistent with the neo-classical model.
In the first view, the individual in economic life is regarded as a
neutral or passive participant in a process for transmitting change.
[p55] The socond view of the individual in economic society is a still
of a process. Though in principle this process is still a neutral
trasmitter of change, including change that originates with the producer,
the ultimate guidance is assumed to come from the individual.
[p56] The third possible view sees the process as one in which the
ultimate accoodation in significant measure is to the producer. The
individual's wants, though superficially they may seem to originate with
him, are ultimately at the behest of the mechanism that supplies them.
[p57] And it also selects and designs products with a view to what can
be so priced and made subject to such persuasion. [...] On occasion the state
will supply related services that support the requisite behaviour of the
indivdual -- its provision of highways as an aspect of the management of
consumer behaviour by the automobile industry is an obvious example.
[p58] For important classes of products and services -- weapons
systems, space probes and travel, a supersonic transport -- decisions are
not taken by the individual citizen and voter and transmitted to the
state. They are taken by the producers of public services, that is, by
the armed services and the weapons firms. It is their goals that,
primarily, are served. The Congress and the public are then persuaded or
commanded to acceptance of these decisions. [...] The extent of the
accomodation of the individual to producer need varies with the power of
the producing organization.
[p60] In the established view economic life remains a process by which
the individual imposes his will on the producer[.]
[p60] Here [in the world of the textbook] the commitment to consumer (and
citizen) sovereignty remains virtually absolute.
[p61] Footnoote 21 One notes also that advertizing has continued to be
a somewhat indigestible lump in conventional micro-economic theory.
[p62] Nor will many resists thet idea that these industries can bring
the state to the support of their attempts to create and manage consumer
wants[.] [...] For if goods are firmly established as the cause of happiness,
the public will be both attentive and responsive to claims on their
[p63] In the accepted economomics...[t]he individual is ultimately and
fundamentally in commmand; he cannot be at war with an economy he controls
for he cannot be at war with himself. [...] When producer sovereignty is
assumed...[t]he plausible consequence of economic development... is not
harmony between the individual and economic institutions but conflict.
[p64] [I]t is a commonplace explanation of tension and discontent that
the individual feels himself in he grip of larg, impersonal forces whose
purposes he sencses to be hostile and in relation to which he feels
[p65] The notion of consumer and citizen sovereignty is otherwise
diverting attention from fundamental problems of the economic and
political system in a fashion that serves to strengthen the very producer
sovereignty that the discipline denies. [...] 1. If the mix of goods being
produced at any given time seems unsatisfactory -- if there are too many
automabiles, too little mass transport, much television, few houses --
consumer sovereignty holds that this reflects the dominant conusmer will.
[p66] 2. The concept of consumer sovereignty acts with marked force to
inhibit questions concerning the cultural achievements of the system. [...]
3. The concept of consumer and citizen sovereignty alows no arganic
likelihood of a a bias in the economy for private as opposed to those
public goods that do not server producer sovereignty.
[p67] 4. Conusmer and citizen sovereignty sanctions the current calims
on resources of the military and associated industrial power. [...] 5.
Consumer sovereignty makes pollution and other environmental disharmony a
diseconomy external to the industry.
[p68] 6. Consumer sovereignty allows no question as to a socially
desirable upper limit to the consumption either in general or of
[p69] 7. Cosunmer sovereignty goes some way to sanctioning income
inequality. [...] 8. Finally, if consumer sovereignty is assumed, there will
be a strong presumption that actions directly or indirectly affecting the
consumer's market behaviour will have a strong and reliable market
[p70] The state as here envisiaged comes close to being the executive
commitee of the large porducing organization -- of the technostructure.
It stabilizes aggregate demand, underwrites or socializes expensive or
risky technology, replects the will of large organization in the mix of
military and non-military public goods, provides such needed public
artifacts as highways for the managemen of specific consumer demand,
supplies qualified manpower, otherwise stabilizes those parameters or
does that planning which the large producing organization cannot do for
itself. [...] if the weapons industry is sovereign in the Congress, can it be
made less sovereign by countering organization which moves its servants
from the Congress? [...] [W]hat is the effect on economics as a discipline,
after years of comfortable coexistence with industrial and associated
public bureaucracy, of making the power of the producer a central
[p79] Also, voluntary measures are highly discriminatory. They favour
the individual or organization which refuses to comply and penalize those
that are cooperative. This also guarantees their breakdown. And there is
nothingto be said for Presidential billingsgate as an enforcement device.
It is much better public practice to lay down fair, firm rules after
careful consultation with all concerned and then, when someone violates
the rules, have resort to law.
[p80] With wage and price controls, interest rates can be reduced
before price stability is brought about by recession.
[p83] The term 'socialism' suffers from ambiguity in part because (at
least until the recent revival) conservatives often stigmatized as
socialst any action by the state they did not happen to like. And
liberals have glossed over unequivocally socialist actions by claiming
them to be necessary for the functioning of free enterprise. [...] Certainly
the least-predicted development under the Nixon Administration was this
great new thrust to socialism. [...] 'If every Communist knew the facts about
capitalism, there wouldn't be any Communists,' a big machinery
manufacturer said in its advertising some years ago
[p84] In an intelligently plural economy, a certain number of
industries should be publicly owned.
[p85] The railroads were similarly marked out by the new American
socialism for its first offensive. [...] The socialist thrust against the
Penn Central was led by the executives of the railroad[.]
[p87] The Lockheed Corporation is also very big -- it is the largest
defence firm and was forty-first mang all industrial corporations in 1969.
As a candidatefor socialism, it has certain peculiarities; there are some
who would insist that it is already publicly owned. Much of its fixed
plant belongs to the Federal Government; it gets most of its working
capital from the goverment; until recently, nearly all of its business
came from the government; its famous cost overruns are fully socialized.
[p88] President Nixon's third socialist front is the socialized SST.
[p90] The Wall Street vehicle of the new socialism is the Securities
Investor Protection Corporation (SIPC), a fund created by the Stock
Exchange which is to be guaranteed by the goverment to the extent of a
thousand million dollars. [...] Since the firms to be rescued are already in
deep trouble, it is the first insurance fund in some time to insure
against accidents that have already accured--to place a policy on barns
which have already burned down. But this is a detail.
[p104] The only thing certain forty-odd years after the 1929 debacle
was that some day, without fail, there would be another such disaster.
[p106] Footnote 3 One of the greatest investment trust promotions of
the twenties was by Goldman, Sachs and Company, isnce become more austere,
under the auspices of Waddil Catchings, the most notable of the
contemporary financial geniuses until the Crash. In 1929 Goldman, Sachs
sold nearly 500 million dolars worth of securities in its investment
trusts. In 1932, the following colloquy took place before a Senate
Committee in Washington:
SENATOR COUZENS: Did Goldman, Sachs and Company organize the Goldman,
Sachs Trading Corporation [one of the investment trusts]?
MR SACHS: Yes, Sir
SENATOR COUZENS: And it sold its stock to the public?
MR SACHS: A portion of it. The firms invested originally in 10 per cent
of the entire issue for the sumo of $10,000,000.
SENATOR COUZENS: And the other 90 per cent was sold to the public?
MR SACHS: Yes, sir.
SENATOR COUZENS: At what price?
MR SACHS: At 104. That is the old stock... the stock was split two for
SENATOR COUZENS: And what is the price of the stock now?
MR SACHS: Approximatelt 1 3/4.
[p107] It was learned, in the very late twenties, although no one had
much thought of it before, that when stocks go down, leverage goes
brutally into reverse.
[p108] The late twenties was a period of Napoleonic mergers. [...] The
basic technique was to issue bonds or preferred stocks with which to buy
the common stocks of the companies being merged.
[p110] The Chase National Bank was shortly to suffer painfully for the
conflicting private operations of its president, the redoubtable Albert H.
Wiggin. In 1929 he borrowed from the bank to sell the stock of the bank
short and subsequently claimed that such operations heightened a man's
interest in his business.
[p121] JAmes J. Walker, then the remarkably indolent Mayor of New York,
offered the only constructive proposal of the day. Addressing an audience
of motion picture exhibitors, he asked them to 'show pictures that will
reinstate courage and hope in the hearts of the people.'
[p125] Writing in 1776 in The Wealth of Nations, Adam Smith concluded
that the building and maintenance of 'public instutitions' and 'public
works' as a function of the state was surpassed in importance only by
provision for common defence and the administration of justice. [...] Since
then the position of the public builder has declined. I would like to
argue that this is unfortunate for, in cosequence, we fail to encourage
good trends in public building and favour bad ones. [...] But public
structures had always been something more. A castle had always been more
than a defence facility, to use the modern term. A palace had always been
more than a shelter. By their magnificence, these structures proclaimed
the power, wealth, ability to confiscate wealth and, on frequent
occasions, the good taste of the occupant.
[p126] And the citizenry which looked on the buildings, often from a
considerable distance, could at least reflect that it was no mean and
miserly authority by which they were exploited. [...] All this makes clear
that where the public building is involved, usefulness is an elusive
concept. The plain functional structure may not be the most useful.
[p127] No investment of the sensible Munich burghers who held Ludwig
[II of Bavaria] to be off his rocker ever paid off so well for so long.
[p128] The extravagance of one period is, on occasion, the eyesore of
the next. [...] In the years of the Great Depression, public buildings ceased
for a time to be things that were needed and enjoyed and became, instead,
a solution to the unemployment problem.
[p129] The second and much more important change occurred in the years
following the Second World War. [...] Public consumption required thet
coercive collection of taxes and was thus morally inferior. The state, in
this view, had personality that was separate and distinct from the people
[p130] The era of false austerity will, I am sure, one day come to a
close. [...] Public consumption is not inferior.
[p132] Wherever travel is for enjoyment or even where enjoyment is an
important by-product of travel, protection of beauty must take precedence
over efficiency. [...] Those who use it can take a little more time in
getting to their destination.
[p135] The decade of the sixties, in the absence of a massively
successful revisionist exercise, will be counted a very dismal period in
American foreign policy. Indeed, next only to the cities, forign policy
will be considered the prime disaster area of the American polity and it
will be accorded much of the blame for the misuse of energies and
resources that caused the trouble in urban ghettos and the alienation and
eruption in the universities.
[p136] In the Cuban missile crisis President Kennedy had to balance the
danger of blowing up the planet against the risk of political attack at
home for appeasing the Communists. This was not an irresponsible choice;
to ignore the domestic opposition was to risk losing initiative or office
to men who wanted an even more dangerous policy. [...] We were in lick but
success in a lottery is no argument for lotteries.
[p137] The Communist world is as relentlessly plural as the
non-Communist world; China and the Soviet Union are much farther from
coordinated action than France and the United States. On the record, too,
the Communist powers are cautious--rather more cautios perhaps than the
government of the United States--about risking disaster in pursuit of an
idea. [...] [T]here has been a considerable accretion of knowledge both about
the insecurity inherent in the weapons race and the unwisdom of leaving
the contest under the control of the armed services and the affiliated
[p139] But first let me list what we have learned from dealing with the
Third World in the last decade. [...] 1. We have learned, first of all, the
limits on our power in this part of the world.
[p140] Thus it has come about that the superpower which seeks to
intervene in the Third World remains the victim of the organizational,
administrative and technical vacuum which, after all, is what tends most
to distinguish this World. [...] 2....Communism and copitalism are concepts
of practical significance only at an advanced stage in industrial
[p141] By the time India, sub-Sahara Africa and mos of Central or South
America areindustrialized to anything approaching present Western European
levels, even greater changes will have accurred in the United States and
the Soviet Union.
[p142] American foreign policy in the fifties and sixties was made by
men to whon a difference between capitalism and Communism was the only
social truth to which they had access. [...] 3...[A]lthough the inner life
and development of the Third World is beyond the reach of the power of a
superpower, and equally beyond its visible self-concern, the effort to
influence that development brings into being a very large civilian and
[p143] [A]n overseas bureaucracy, once in existence, develops a life
and purpose of its own.
[p145] Since Korea we have been learing and relearning the lesson that
strategic air power is ineefective against primitive agriculture or men
moving at night along jungle roads.
[p147] In Galbraith's opinion about what foreign policy should be. Not
distinguishing between good and bad governments, we recognize all. We also
trade with all.
[p149] Not wickedness but the dynamics of big organization is involved.
It is a far greater factor in our foreign policy than we have even begun
[p150] Immediately following the Second Wordl War, I was nominally in
charge of economic policy in Germany and Japan. (I say 'nominally'for our
two proconsuls in the field, General Lucius Clay in Germany and General
dourglas MacArthur in Japan, prevented anyone in Washington from having a
damaging sense of personal power. We often discussed what we would do if
MacArthur completely severed relations. One idea was to cut him off from
[p153] American missions abroad are believed also to be sadly
overstaffed and with people who are neither very responsible nor very
[p156] When no one in the [State] Department knows what to do about a
problem or whether anything can be don, this failure of imagination can
always be covered by dispatching some official of suitable rank to the
[p164] One of the generally amiable idiosyncrasies of man is his
ability to expend a great deal of effort without much inquiry as to why.
[p165] If the distribution of resources between necessaries and
luxuries -- between products for the masses and the more esoteric delights
of the few -- seems wrong, the thing to change is the distribution of
income. An increase of taxes on the incomes of the well-to-do or the
products they consume is the appropriate remedy. [...] Development is and
should be the faithful imitation of the developed.
[p167] And much symbolic modernization [in the poor countries] is a
political stratagem for fooling people into believing sometihng is being
[p168] Thus not only does undifferentiated growth tend to support
higher-income consumption, it may do so partly as the result of saving
from lower-income consumption.
[p169] Thus, althought there may be wide agreement on a policy of
selective economic growth, there can be very little agreement on what
should be selected.
[p170] The goal I am here describing -- I have called it the Popular
Consumption Criterion -- will be seen to resolve the political problems
which arise in connection with other criteria. The attention of those who
tax, plan or otherwise infuence economic resources is kept concentrated on
the needs of the typical consumer.
[p171] By an odd arrangement of things, poor countries, such as India
in the past, have produced luxuries for the affluent lands.
[p172] [P]overty has more to do with determing social and political
behaviour than the ideological differences of the comparitively
[p173] The soundest of political rules is always to mistrust the
political perceptionsof the comfortable. [...] The first and most elementary
effect of poverty is to enforce thevery attitudes and behaviour that make
it self-perpetuating. Similarly the first effect of wealth is to allow
the freedom that permits of the creation of more wealth.
[p175] Neither contraceptive knowledge nor contraceptives are available
and -- a neglected point -- sexual intercourse plays a larger recreational
role in the poor community than in the rich.
[p176] One fact of ecomomic life is common to capitalist, socialist and
Communist societies...It is that any purposeful increase in future
production requires saving from current consumption. [...] But while there
must be savings in all societies if there is to be economic advance, the
difference in the degree of difficulty in getting savings as between the
rich countries and the poor is so great as to be difference in kind.
[p178] And in the poor country there is also the exceptional visibility
of the rich man. This, and his resulting insecurity, may cause him to
invest his savings not in farms, factories and power plants, but in a
numbered account in a Zuerich bank.
[p180] So we come to fairly remarkable result that free enterprise --
the practice of letting the market decide where we invest and what we
produce -- is in part the product of well-being. Planning, by contrast, is
compelled by poverty. [...] Socialism and planning are demanding in the
administrative apparatus that they require. An unplanned economy is
infinitely easier to run than a partially planned one.
[p181] In the poor countries, on the other hand, things are always
bad. [...] [T]he man who is clinging to office and who finds economic
development hard going looks for a scapegoat for his failures -- for some
object of popular antipathy which will engage passions and thus divert
[p183] Worst of all has been military extravagance. The military
alliances of Mr Dulles, as endorsed and carried forward by Mr Rusk, and
the concomitant military expenditure and burden, may well have done more
for the Communists than any support from the Soviet Union. In a just
world both men, one day, would have a small plaque on the Kremlin wall.
[p188] In the Model I or Sub-Sahara countries, the principal barrier to
development is the absence of hwath I shall call a minimum cultural base.
[p191] The far more evident barrier [in Model II, the Latin American
case] is the social structure and the way it tends to subvert economic
incentive and production. The elite, though sizable, depends for its
economic and social position on land ownership, or on a comprador role in
the port or capital cities, or on government employment or sinecure, or on
position in the armed forces.
[p193] Footnote 6 In Latin America no serious observer supposes that
the armed services are seriously important for national defence,
territorial integrity or any other military or foreign policy objective.
Their role is exclusively related to domestic politics and income.
[p196] The barrier in [Model III, The South Asian model] is drastically
bad proportioning of the factors of production. Demographic history,
still imperfectly expalined, has given these countries a large and dense
[p197] The Model III countries are, in some respects, the most
comprehensible in their lack of development. They conform most closely to
the standard explanations of the economists; because of their education
and cultural sophistication, their people tend to speak for all of the
underdeveloped lands. (At any conference on economic development the most
persuasive speaker is usually an Indian.) Their case, in consequence, is
frequently and erroneously generalized to all instances of
[p199] In the Model I countries, if the barrier to progress in the
shortage of traied and educated people, the obvious first step is to widen
the cultural base.
[p200] All discussion of Model I countries must reckon with the
possibility that in limiting cases development will be impossible. [...] The
Republic of Haiti, where social fabric, political structure and living
standards have deteriorated with slight interruption in the century and
half since the French were expelled, is a case in point. Instead of the
technically efficient slavery of the plantations, there is the
incompetence and arbitrary despotism of Dr Duvalier. [...] Whatever the
virtues of national soveregnty, they are not so absolute as to justify the
degradation of a whole people for an indefinite period.
[p201] Inflation is not the operative barrier to economic advance. As
noted, it is the product of much more deeply seated social and political
factors -- in particular, the political power of the non-functional
groups, the low productivity which returns income to political power rather
than economic performance, and the bidding between groups for the product
that is available.
[p202] There can be no effective design for economic development in the
Model II countries which does not disestablish the non-functional
[p203] This solution applies equally whether power derives from
land, other hierarchicial wealth, the Army, the non-functional
bureaucracy or some coalition of these. There can be no a priori
judgement that a particular non-functional group, for example
landlords or the Army, is more regressive than another. Any
non-functional group which governs in its own interest will govern at
the expense of economic incentives.
The inconvenient fact is that the disestablishment of
non-functional groups is a task not of refrom but of revolution. A
country does not redistribute land or eliminate an army by passing a
law. [...] General Douglas MacArthur'sland reforms in Japan and
Korea--one of the more remarkable achievements of an acuupying army
and one that would have provoked fascinating comment in conservative
circles in the United Statets had anyone but MacArthur been
responsible--were peaceful because any protest was futile.
[p204] Where United States policy is concerned, it goes without
saying that not only moral but materail support should be denied to
non-functional ruling groups.
[p206] It is of the highest importance in this model that the
nexus between poverty and the birth-rate should be broken.
[p216] Wall Street, [John J. McCloy, Chairman of the Chase
Manhattan Bank] assured Mr Khrushchev in his question, was without
influence in Washington; if it supported some legislation, that was
the kiss of death. And it was a particular mistake to assume that
anyone in Wall Street or anywhere else wanted the arms race to
[p217] The nub of [Frank Pace's, former Secretary of the Army and
now Chairamn of General Dynamics] question was that General Dynamics
would gladly liquidate its military business, if circumstances only
allowed, as a contribution to the peace of the world. It is possible
that Pace was better on promise than he would have been on
[p218] [Chairman of the Radio Corporation of America, General
David Sarnoff] made it clear at the outset that no disagreement would
be tolerated. He began with a detailed outline of the free American
system of broadcasting. He continued with a warm tribute to its
freedom--and some statistics on the number of stations currently on
the air. This question was punctuated by some pounding of the
Sarnoff breast. No mention was made of commercials. The question was
itself a commercial. The General then depicted the refined and
varied blessings that would accrue were Russia to adopt a similar
system employing a maximum of American programming. When he finihsed
there was silence--a total silence. On this question Khrushchev rose
to the greatest heights of the meeting, perhaps indeed the entire
visit. After a general word or two he said, 'Things have changed in
Minsk since you were a boy.'
[p223] To both Marshall and Eisenhower the alienation over Vietnam
would have seemed an unparalleled disaster to the service they so
loved. No military gain in those jungles could have justified it.
[p227] In fact, for cleaning up the streets, the air the riparian
waters, the old cars that are about to cover the entire landscape,
and to preserve the countryside from further architectural and
commerical abuse, the great and primary need is money. [...] This alas is,
is the nature of unregulated private enterprise. That nature can only
be changed by public refulation of such enterprise and of private
land use. [...] Increasing production and consumtion, and the
single-minded concern for increasing them still more, was what got us
into this mess. To get out we must ask what things are a cause of
more public sorrow than private joy.
[p228] [T]here is no system that elides the environmental problems
of high-level industrialization.
[p240] Finally, I come to one of those cliches which, at least
since the New Testament, literary critics have been plagiarizing from
each other. This one is that [Albert] Speer was the apotheosis of the
technocrat. [...] Speer was not a technician. His technical knowledge,
which was in architecture, had little bearing on his work in
arganizing arms production. And so far from being apoliticl, he
moved brilliantly through the political thickets of the Nazi
hierarchy to accumulate power.
[p259] 'Who strives to save face demonstrates that he has no face
to save.' (Steinbeck's 5th law) [...] Pentagonic perambulation is more
than a dimension. The five-sided mind has one quality like the
figure--no side squarely faces any other.