The First and Second Reich: the Taming of an Industrial-policy Advocate

Retired Harvard University economist John Kenneth Gaibraith developed an illustrious career arguing that the public sector should be expanded and that the private sector—especially dominant large firms that make up the “new industrial state”—should be more tightly controlled by government (Galbraith 1967). With wit and a writing style that remains the envy ofnovelists, Galbraith has argued for four decades that an “affluent [capitalistic] society” would be beset with problems ofa dominant business sector and upper income class, an anemic public infrastructure, and an impoverished underclass unless a caring and enlightened electorate used the power of their votes to do what was right (Galbraith 1958). Doing what was right generally meant making government a “countervailing power,” or an offsetting social force, to the large and growing multinational corporations (Galbraith 1952). Itmeant fine tuning the economy with macroeconomic fiscal and monetary controls, even national planning that would supplant corporate planning; increasing tax rates on the rich; and expanding government expenditures on a variety of social programs. By the early 1970s, much of Galbraith’s social agenda had been tried.’ However, by the late 1970s and early 1980s, much of the