The culture of contentment
By John Kenneth Galbraith
Sinclair Stevenson (Britain), 1992. $39.95
Reviewed by Scott Wasley
Veteran economist John Kenneth Galbraith deals with the attitudes and political power of the large "class" of the affluent and politically dominant in the USA. His analysis is, in many ways, relevant to recent Australian experience of supply-
side economics and economic rationalism.
A long-standing liberal democrat, Galbraith eschews explicitly Marxist analysis. Nevertheless, his arguments parallel Marxism in several respects: the culture of contentment is practised by a broad class which could be described as hegemonically dominant; the state functions in accordance with the desires of this group; and there is an exploited, alienated underclass which is functional for the interests of the hegemonic class.
Galbraith regards past concessions to this underclass, such as welfare spending, as managerial solutions to the cruelest failures of capitalism, rather than as fundamentally egalitarian extensions. Especially in recessionary times, functioning in accordance with the needs and wishes of the dominant, contented class, and managing the needs of the underclass, while also managing national debt and stimulating the national economy, are more than can be achieved. In response, the needs and rights of the underclass are systematically ignored, repressed and under-
funded; the rhetoric and axiomatic dictates of supply-side economics and laissez faire now rule.
Unfortunately, little of the supply-side program has worked — productive capital and social infrastructure have been run down, the banking and finance sector has been imperilled, and reluctance to tax the rich has led to high external debt. The financially resilient and protected "rentier class" has maintained its affluence, while the underclass has stagnated and now faces the threat of impoverishment.
In this state of affairs, Galbraith sees a potential for future social and economic strife which has two most likely resolutions. Either regulate macro-economic settings by fiscal, rather than monetary, policy, and use progressive tax policies to affect greater distributive equity, and legislate against destructive mergers, takeovers and speculation — or the masses may well revolt. Galbraith urges a neo-Keynesian, reform to capitalism, in order to defuse this implicit threat to the system.
'Convenient beliefs'
The book is a little short on details about these solutions.
Nevertheless, many of his criticisms seem valid. They are especially welcome given the virtually unchallenged economic rationalism which has constituted recent public policy and dominated "debate" in the media.
The culture of contentment favours immediate well-being and defers, or denies, the future costs of present action. A number of "convenient beliefs" are used to justify actions which are immediately desirable to the powerful.
The state is seen as a burden, except where military spending, support for financial institutions and similar costs are concerned. Welfare, low-cost housing, the needs of urban slums and so on are seen as burdens. Above all, tax is a bad thing. These are views that accord with the competitive individualistic values of the new right in Australia, both Liberal and Labor.
The contented class demands those policies which have been dominant of late: a commitment to short-term action, avoidance of redistributive taxes and a destructive faith in deregulation, markets and growth. Within the contented class, there are dissenters (academics, journalists), but they speak from within the environment of contentment — the poor are not actively represented either in elections or in policy making.
Impoverishment
The poor are functional, even essential, to the well-being of the fortunate. This "functional underclass" includes urban slum-dwellers, rural immigrant labourers and those on deprived small farms. They do the work which is distasteful, occasional, dull, alienating and poorly paid. In the past, such labour has tended to be upwardly mobile over time (within, say, a generation or two). Especially for migrants from poorer nations, the tendency has been to accept current inequities because their future prospects (or those of their children at least) are bright, relative to past privations.
With the current downturn, upward mobility is curtailed. Worse, even the relative stability of present industrial employment, however exploitative, is also diminishing. Thus, the "underclass has become a semi-permanent rather than generational phenomenon". Despite the likelihood of unrest associated with urban unemployment and squalor (the LA riots!), the contented resist the tax and macro-economic policies which might ameliorate these conditions.
There are many resonances with Australia here, too. We have regularly imported labour, particularly to the "blue-
collar" area so threatened today by recession and the pursuit of global free markets. As in the USA, while agribusiness prospers, many smaller farms face financial extinction. Urban inequities also abound, and although we do not yet have the open
slums of US cities, great differentials exist between recession as experienced in suburban Elizabeth, for example, and the affluent suburbs.
More explicit comparisons with recent Australian experience lie in the public policies formulated to accord with the culture of contentment. The aim of these policies has been to facilitate growth and stability. Growth is taken as a rational means to achieve the desirable ends of overall social and economic stability. The subsumption of ends to means has been further extended by the reliance on macro-economic policy, specifically monetary policy.
However, as growth has occurred only intermittently, and tax levels have been reduced, a large and continuing budget deficit has occurred, resulting in great pressure on housing, health, education and other necessary social infrastructure spending. Because economic downturn and unemployment are unevenly distributed through classes and regions, not all can gain access to these social basics. Failure to obtain these necessary social goods initiates a poverty ratchet. These observations are as true for Australia as they are for North America.
Devastating effects
Many of the devastating effects of deregulation and laissez faire in the USA are paralleled in Australia. Corporate mergers and debt-for-equity buy-outs have not only "rationalised" large chunks of the work force (cf the recent Qantas-Australian merger), but have also placed great burdens of debt on the companies involved. The booms in share and property prices through speculative investment have had adverse implications for home owners, savings and loan societies (cf building societies in Victoria and SA) and the construction industry.
With debt mounting, and the spectacular profits realised on share markets in the short term, interest repayments have taken precedence over investment in research and development, and in productive infrastructure. All of this took place under the auspices of deregulation, monetary policy and the market.
Galbraith concludes that we have "a democracy of the contented and the comfortable" — a situation which can be altered only by: (1) widespread economic disaster, (2) military misadventure, (3) eruption of an angry underclass, or (4) preventive state action. The latter would take the shape of regulating against recession or inflation via the public budget, rather than monetary policy, and by redistributive tax policy. This also seems to be Australia's most obvious solution, unless somehow the economy "turns around". Upturn in response to industry reform and macro-economic settings remains Australia's and the USA's fondest hope.
Nevertheless, Keating has made at least a rhetorical reversion in part to questions of equity as the failure of '80s policy has become apparent. Vague questionings of economic rationalism appear now in the pages of newspapers which once promoted it slavishly.
Galbraith's exposure of the irrationality of deregulation and monetarism is an opening shot in what will probably become a war of attrition.
The early casualties have been localised — particular classes of workers, particular industry sectors, particular regions. Attempts to trade out of difficulty in accordance with economic rationalist agendas threaten to exacerbate these unacceptable consequences; at the very least, we will externalise the losses, by exploiting the resources, economies and workers of nations which are poor and vulnerable relative to ourselves.
This is a game in which many will lose: particularly those labour-intensive industries which are vulnerable without tariff protection; those whose wages and social infrastructure are under pressure; and those who are dependent on commodity prices, which are supremely vulnerable to the logic of the market and competition.