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1-Page Summary of The Affluent Society
The New Opportunities of “the Affluent Society”
Galbraith believes that wealth is the enemy of understanding. The poor easily grasp their own problems, but the rich don’t comprehend the lot of the poor. Throughout history, most nations suffered poverty. But in recent decades, the United States and Europe have become exceptionally affluent. Yet people still guide their lives with ideas from a world in which scarcity was normal. Thus they do many things that no longer make sense to them or others around them because they’re stuck in old ways of thinking about life. To escape those ideas, more prosperous people need to understand why these concepts are so limiting and then work hard to break free from such outdated notions as quickly as possible so that society can move forward into a new era where new challenges await us all and we must be ready for them by having fresh perspectives on what’s coming next in terms of technology and progress—the “affluent society.”
“Conventional Wisdom”
To take advantage of the possibilities presented by today’s environment, people need to understand how events are connected with ideas that individuals use to interpret them. One way to do this is through conventional wisdom, which means that once an idea becomes conventional wisdom it remains stable and predictable.
At any given time, there’s a conventional wisdom that forms. It only makes sense to scholars and experts. Only they can truly understand it. People who master the conventional wisdom are honored for their knowledge of it. Public officials and business leaders must explain it to others in order to persuade them about what they believe is true or right about the world around them. The enemy of conventional wisdom is something called events or “the march of events” (i.e., when things happen that make people think differently).
Changing Economic Theories
Economics is rooted in pessimism. Earlier economists believed that the masses would never have much money, and they based their theories on that fact. Adam Smith was generally optimistic, but David Ricardo and Thomas Malthus were pessimistic about the future of economics. Ricardo said that if agricultural production goes up, then the population will increase to eat all of the extra food. Wages will always be just barely above subsistence level because people need just enough to survive. The economy can’t do anything about poverty because unemployment is an alternative to low wages; there’s no way around it.
Three factors are central to economics: productivity, inequality and insecurity. Competition is important for increasing productivity because it forces people to work hard so they can stay competitive. Therefore, anything that reduces the risk of unemployment or other social safety nets is a threat to the system. Insecurity is also key because competition pits workers against each other in an environment of uncertainty about their future employment status.
Yet, real competition is never as absolute as it seems in economic models. There are many factors that shape the nature of competition: custom, monopolies, unions and legislation all influence how companies compete with each other. The modern corporation’s risk to shareholders and executives is also less than what appears on paper. Large corporations almost never fail and they’re often rescued by government when they do get into trouble. Galbraith makes a clear case for why this happens—it’s simply a way for executives to protect their interests without actually doing anything useful for society or the economy at large.
