Galbraith
Author(s): Stefan Kesting
Source: Journal of Post Keynesian Economics, Vol. 28, No. 1 (Autumn, 2005), pp. 3-23
Published by: Taylor & Francis, Ltd.
Stable URL: http://www.jstor.org/stable/4538957
Accessed: 25-03-2017 06:31 UTC
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted
digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about
JSTOR, please contact support@jstor.org.
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
http://about.jstor.org/terms
Taylor & Francis, Ltd. is collaborating with JSTOR to digitize, preserve and extend access to Journal of
Post Keynesian Economics
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
STEFAN KESTING
Abstract: Power has been a neglected topic in economics at least since the
neoclassical paradigm has dominated the profession. John Kenneth Galbraith
is probably the most prominent and successful among his fellow American in-
stitutional economists in this particular field of inquiry. Steven Lukes's useful
framework to distinguish different theoretical approaches to explain power in
the social sciences will be used to evaluate and emphasize Galbraith's particu-
lar theoretical contributions. The paper scrutinizes the elements-countervailing,
corporate, persuasion, conditioned, and contingent-of Galbraith's power
theory and shows how they all can be coherently combined to form an elabo-
rate theoretical framework in the conclusion.
The economics profession has paid scant attention to power at least since
the neoclassical paradigm marginalized all other schools of economic
thought.1 A clear sign of this lack of attention is that Robert Heilbroner
had to lament the absence of an entry on power in The New Palgrave
when he reviewed this authoritative encyclopedia of economics for the
New York Review of Books.2 Contrary to the mainstream, American
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
4 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 5
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
6 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 7
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
Table 1
Lukes's dimensions of power
Key elements First dimension Second dimension Third
Objects of analysis Behavior, Interpretative understanding Evalu
concrete decisions, of intentional action, of in
issues nondecisions, political
potential issues issues
Indicators Overt conflicts Covert conflicts Latent
Field of analysis Express policy preferences Express policy preferences R
revealed in political embodied in subpolitical pol
participation grievances "real in
Source: Clegg (1989, p. 90).
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 9
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
10 JOURNAL OF POST KEYNESIAN ECONOMICS
Table 2
Schema of power forms and dimensions derived from Lukes
Countervailing power
Not by coincidence, the first text that Galbraith chose for the collection
of his essential works is a reprint of his chapter "Countervailing Power"
taken from his book American Capitalism (Galbraith, 1956; 2001). This
was one of Galbraith's first books, and his thesis of countervailing power
stirred up the whole economics profession. The starting point is the em-
pirical observation shared by fellow Keynesian economists (cf. Eichner,
1985; Minsky, 1975) that a typical industry structure consists of three or
four firms, where the largest acts as the price leader followed by two or
three, to a certain degree, smaller rivals. The existence of this market
power allows those firms to exercise power over customers and employ-
ees. In Galbraith's ironic words: "In principle, the American is controlled,
livelihood and soul, by the large corporation; in practice, he or she seems
not to be completely enslaved" (2001, p. 3).
To explain why the American citizen is not in fact enslaved, Galbraith
develops the principle of countervailing power that replaces the prin-
ciple of competition in balancing market power: "In fact, new restraints
on private power did appear to replace competition.... But they ap-
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 11
peared not on the same side of the market but on the opposite s
with competitors but with customers or suppliers" (ibid., p. 5).
His thesis is that "private economic power is held in che
countervailing power of those who are subject to it" (ibid., p. 5). Gal
at first developed this idea as a macro-level principle and seem
believe that countervailing power is not a matter of social constr
but does happen quasi automatically. In Galbraith's original for
tions, it almost sounds as if countervailing power is created by
Smith's proverbial invisible hand:12 "In this way the existence of m
power creates an incentive to the organization of another posi
power that neutralizes it" (ibid., p. 5). He views countervailing p
"a self-generating regulatory force" (ibid., p. 6).
The impression that Galbraith is rejecting social construction and t
of countervailing power as a functional relationship that seem
pear out of nowhere is enforced by his description of the power of
as the countervailing position on the labor market. He downpl
organizing abilities of a famous American labor leader as a rea
the existence of union power, and continues on the same page:
only has the strength of the corporations in these industries made
essary for workers to develop the protection of countervailing p
has provided unions with the opportunity for getting something m
well. If successful, they could share in the fruits of the corpo
market power" (ibid., p. 8). In the part of the text that describes co
ers' cooperatives as countervailing power, Galbraith concedes th
development of countervailing power requires a certain minim
portunity and capacity for organization, corporate or otherwise
p. 13). However, he argues that the function of balancing a pow
tion in the market that was fulfilled by consumers' cooperativ
Scandinavia was approximately as efficiently exercised by chain
in the United States (ibid., p. 14). Hence, a conscious effort to b
an equally strong power base on the opposite side is not necessa
In advancing the macro principle that a strong power position
an incentive structure that attracts the emergence and entry of
countervailing power, Galbraith is aware of the influence of the
macroeconomic conditions. The strength of both power positio
12 Sharpe uses the same metaphor: "In place of the invisible hand of Adam S
he conjured up a new one. It is not true that all effective restraint on private p
disappeared, he advised. A counterpart of competition exists in countervailing
Private economic power is held in check by the countervailing power of thos
subject to it. The first begets the second" (1973, p. 15).
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
12 JOURNAL OF POST KEYNESIAN ECONOMICS
13 In his book The New Industrial State (1967), Galbraith devotes two chapte
organization problems of unions and explains their weakness under current c
14 Charles Hession (1972) provides an overview of critical arguments raised
Schweitzer and others.
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 13
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
14 JOURNAL OF POST KEYNESIAN ECONOMICS
Corporate power
15 Galbraith repeats his belief in The Anatomy of Power that "the resort to
countervailing power is automatic" (1983, p. 73). However, he concedes in a foot
on the following page that "I took an unduly sanguine view of the resulting equ
rium" (ibid., p. 74).
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 15
Persuasion
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
16 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 17
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
18 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 19
Contingent power
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
20 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 21
Values/beliefs
Indirect iirec
conditioning |3/ t\Coeinconditioning
Countervailing
power/persuasion
REFERENCES
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
22 JOURNAL OF POST KEYNESIAN ECONOMICS
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms
THE POWER THEORY OF JOHN KENNETH GALBRAITH 23
Veblen, T. The Theory of Business Enterprise. Clifton, NJ: Augustus M. Kelley, 1975.
[Originally published in 1904.]
. The Theory of the Leisure Class. Harmondsworth, UK: Penguin, 1979.
[Originally published in 1899.]
Weber, M. Economy and Society. Berkeley and Los Angeles: University of California
Press, 1978. [Originally published in 1921.]
This content downloaded from 103.37.49.215 on Sat, 25 Mar 2017 06:31:43 UTC
All use subject to http://about.jstor.org/terms