The J K Galbraith Question: The Tyranny of Private Consumption

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Yves here. Having worked a lot with the Japanese, I have to beg to differ with Murphy’s contention, following John Kenneth Galbraith, that advanced economies generate high levels of private consumption. The Japanese are only not Calvinist (as in seeing wealth as a sign of moral superiority) they are if anything anti-Calvinist. The Japanese have their own version of what Australians call the “tall poppy” syndrome, that anyone who tries to stand out too much, such as with showy consumption, will be cut down. Entrepreneurs are revered for creating employment, not for getting rich.

I worked closely with a top Japanese billionaire, rich enough that he should have been in the Forbes 400. He would shop for bargains and on one trip to the US, was pleased with snagging some dressy pants for $15. He and his brothers-in-law would stay in nice hotels but in standard rooms. His big personal consumption items (aside from having inherited a large house, his father had been the closest thing Japan had to Joe Kennedy, a politically influential stock trader) were traveling regularly to Europe to see opera and collecting Goyas.

He and his brothers so did not carry themselves like rich men that at one point during a deal, the oldest brother in law recognized they were not being taken seriously about the need to structure the deal to minimize taxes. He walked up to a white board and wrote “$100,000,000”.

He said:

It is May. This year so far, we have $100 million in portfolio income on our US company. You can see why we are eager to minimize the tax.”

Everyone in the room, ex the other Sumitomo Bank employees, were trying to work out what they must have in Treasury bonds to generate that much income. And yes, they did have ginormous holdings.

Now in fairness, having also seen what was in 1989 a $5 million apartment in Tokyo of a board member, even lavish apartments were tiny by American standards (this one was at the very most 900 square feet, and probably more like 800). You can’t buy a lot of stuff if you have no place to put it. Even with the population of Japan falling, land scarcity and hence generally small homes, are no doubt still a real constraint. Comments from reader who are more current are welcome.

By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future

John Kenneth (Ken) Galbraith, the Canadian-American economist, was one of the most eloquent critics of modern capitalism.

Writing in The Affluent Society (1958), he observed something that remains as true today as it was then: advanced economies were awash with private consumption – cars, gadgets, advertising, status goods – while public services, schools, transport, and communities were starved of investment.

He called this imbalance the central contradiction of affluence: societies rich enough to provide comfort for all chose instead to tolerate inequality and neglect.

Galbraith skewered the idea that markets automatically meet needs. They meet wants that can pay. And, worse still, they manufacture wants through advertising, turning insecurity into desire. Meanwhile, genuine social needs — health, education, clean air, public spaces — languish because they are not profitable.

This paradox leads directly to what might be called the Galbraith Question: if affluence produces private luxury alongside public squalor, what does that say about the values and survival of our society?

The Tyranny of Private cConsumption

Galbraith pointed out that in post-war America, consumer goods multiplied while public schools were overcrowded, roads crumbled, and parks decayed. This was no accident. Markets prioritise what individuals with purchasing power demand, not what societies collectively need. The result was a distorted pattern of growth: glitzy suburbs and shiny appliances alongside underfunded services.

Today, the imbalance is worse. Billionaires build private rockets while hospitals cannot afford basic equipment. Luxury flats sit empty while homelessness rises. Markets pump out smartphones while public broadband lags. Galbraith’s warning has become prophecy.

The Manufactured Wants of Advertising

Galbraith also identified the “dependence effect”: the idea that in modern capitalism, demand is not spontaneous but manufactured. Advertising does not simply inform; it persuades, manipulates, and creates dissatisfaction. We are told endlessly that our lives are incomplete without the latest product.

This endless stimulation of private wants diverts resources into trivia, while real needs, such as poverty reduction, social housing, and climate resilience, are neglected. The system thrives on making us feel perpetually inadequate. Squalor is not an accident; it is the shadow cast by a system that profits from dissatisfaction.

The Neglect of Public Goods

Markets undervalue what cannot be bought and sold. Clean streets, safe communities, universal healthcare, cultural life — these do not appear on corporate balance sheets. They require public investment. But under the sway of market dogma, governments have been told to cut, privatise, and outsource.

The result is precisely what Galbraith warned of: gleaming shopping malls surrounded by potholes; private gyms for the rich while public parks decay; high-end medicine for those who pay while basic care is rationed for everyone else. Public squalor becomes the backdrop to private plenty.

The Political Economy of Neglect

Why does this persist? Because those with wealth have no need for public provision. They buy private healthcare, private schooling, and private security. For them, public services are not vital but irrelevant — even threatening, since they require taxation.

Meanwhile, the majority are told that taxes are theft and public spending is a waste. Political elites, funded by the wealthy, reinforce the message. The outcome is a politics that systematically undervalues collective goods while lavishing subsidies on private capital.

Galbraith’s Challenge Today

If Galbraith’s critique was relevant in 1958, it is doubly urgent now. Climate breakdown demands massive collective investment in energy, transport, and housing. Ageing societies demand investment in care. Inequality demands redistributive taxation. Yet we are told, relentlessly, that “the money is not there.” Meanwhile, the yachts of the wealthy grow ever larger.

The Galbraith Question stares us in the face: how can a civilisation survive if it allows its collective foundations to crumble while indulging the endless whims of private consumption?

Answering Galbraith

To answer the Galbraith Question, we must reverse the imbalance he described, requiring that we:

1. Rebuild public goods, requiring investment in housing, health, education, infrastructure, and culture as the true basis of prosperity.

2. Tax private excess. Wealth, inheritance, and speculative gains must be taxed to fund collective provision.

3. Challenge advertising. We must regulate the industries that profit from manufacturing insecurity and demand.

4. Redefine prosperity. We must measure success not by consumption of status goods but by the quality of public life.

Inference

Galbraith’s insight was devastatingly simple: private affluence and public squalor are two sides of the same coin. Markets feed the first and neglect the second. If we allow that imbalance to persist, society itself becomes fragile — glittering on the surface but rotten underneath.

The Galbraith Question is not about economics alone. It is about what kind of civilisation we want. Do we want one in which the rich wall themselves off in private luxury while the public realm collapses? Or one in which prosperity is measured by the strength of our shared institutions and the dignity of our common life? That question has, above all else, dominated my economic thinking ever since I first framed it about half a century ago, as a sixth former when I first read The Affluent Society.

Galbraith’s answer was clear. Unless we choose the latter, affluence will prove not the mark of progress but the seed of decline.