I have argued that with industrial development — with advanced technology, high organization, large and rigid commitments of capital — power tends to pass to the producing organization — to the modern large corporation. Not the consumer but General Motors tends to be the source of the original decision on the modern automobile. If the consumer is reluctant he is persuaded — to a point at least.
That was John Kenneth Galbraith in a 1969 congressional testimony. “The Military Budget and National Economic Priorities.” Hearings before the subcommittee on economy in government of the Joint Economic Committee. Galbraith truly believed that large corporations of the 1950s and 60s were the only ones with enough capital to build high technology, and as a result could force any products onto doleful consumers through advertising and no competitors would ever supplant them. His vision was that large corporations, especially in the military, should merge their functions with government bureaucracies.
Dierdre McCloskey once said that Karl Marx asked all the most important questions of the 19th century, but got all the answers wrong. I think John Kenneth Galbraith takes that mantle for the 20th century. He really did ask all the right questions of industrial business, it’s just he was wrong about most of it.
That conclusion is clear from the modern point of view. I just had Steve Blank and Pete Newell on the podcast discussing how product development isn’t this big technical enterprise that gets thrust on the consumer, but rather how product development needs tight interaction with the customer. Far from excluding tinkerers and small businesses, technology has democratized the development process with the open source revolution, microservices, low-code/no-code, and the proliferation of software tooling. Cryptocurrency is the next big wave in that vein that throws Galbraith’s views out the window.
Yet 50 years ago, Galbraith and those like him were the ones who had high intellectual status, and policy makers followed their direction. (Especially in India, Galbraith helped create a ruinous system of price controls and licensing.) But we live with the legacy of those decisions. We have a DoD built upon those industrial era myths. If DoD doesn’t throw away these notions of extensive bureaucratic planning, it will continue falling further behind the commercial economy without any hope of catching back up.
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