Where the Power Lies

THE NEW INDUSTRIAL STATE by John Kenneth Galbraith. 427 pages. Houghton Mifflin. $6.95.

Who really runs the U.S. economy? Not the same kind of people who did a few years ago, says that fashionably sardonic Harvard economist, John Kenneth Galbraith.

The modern corporation has become just too large for any individual to swing much power. The entrepreneur, like the father of a bee, "accomplishes his act of conception at the price of his own extinction." Shareholders cannot even pretend to power because ownership of stock has become so diffuse. Big capitalists and bankers have lost influence because the typical corporation generates its own funds and does not need to borrow so much. The corporation has also become so bafflingly complex that even the chief executive is often little more than a symbol, a cheerleader and a rubber stamp for decisions that eventually work their way up through labyrinthine committees. And there is where the power lies.

Power has shifted from yesterday's mighty individuals to groups of ordinary, anonymous and mostly middle-income specialists who staff the nation's few hundred biggest, richest companies. Galbraith has an ungainly name for the new elite: the technostructure.

This thesis is not wholly new, and thus it might attract less attention if this were not a Galbraith book. He wrote one of the two or three most quoted books on economics in the past decade, The Affluent Society, and he considers that to have been only a prelude to this more comprehensive work. Ever since he broadcast chunks of it in six widely discussed lectures on the BBC late last year (TIME, Jan. 6), it has been awaited by his fans on Capitol Hill and beyond.

The Moribund Market. One of Galbraith's main contentions is that the rise of the technostructure has brought the demise of that cornerstone of capitalism, the free market. As avidly as Eastern Europe's socialists, the U.S.'s industrial organization men embrace the cult of planning, leaving very little to the chancy market. Galbraith argues that they carefully plan production, use aggressive advertising as part of that planning to bamboozle the public into buying, and are sufficiently monopolistic to "establish prices and insure demand." In the fastest-rising industries--defense, space, atomics, electronics and supersonic transport--they have formed a common-law marriage with the Government, which underwrites most of their development costs and buys the bulk of their output. One result is that government purchasing accounts for 20% or 25% of U.S. economic activity--far more than in semisocialist Sweden and close to that in Communist Poland.

This is not all bad to Galbraith, who has the economist's frequent bias in favor of planning and government involvement, and who would like to see more of both applied to such challenges as urban blight and health care. He is also greatly alarmed that the U.S. and other industrial societies are falling into a "comfortable servitude" by overemphasizing the quantity of production at the expense of the quality of life.

In his view, industrial growth often conflicts with esthetic achievement, and pollutes not only the atmosphere but also the human psyche, because consumers and employees surrender to the goals of the organization. He sermonizes that men should convert higher productivity into more leisure instead of more goods; they should work less and enjoy more, concentrate on designing beautiful cities instead of clogging them with more and more cars.

Spoon-Fed & Nose-Led. Galbraith certainly has his points. But many of them are neither original nor entirely valid. He mints a bright aphorism here and there. "Men who believe themselves deeply engaged in private thought are usually doing nothing," he writes. And again: "One should always cherish his critics and protect them where possible from foolish error." But his writing is too often didactic and his logic oversimplified.

He underrates the real power of top managers and bankers (who lent more money last year than ever before), and overlooks the fact that an energetic free market rejects thousands of new products every year, despite all the elaborate plans of groupthinkers. The ornery and unpredictable consumer is not quite as easily spoon-fed or nose-led by Madison Avenue or the technostructure as Galbraith suggests.

Most surprising is Galbraith's disenchantment with industrial growth, which, after all, is not an end but a means. Only by growth can the world's economies produce the chemicals and machines to alleviate hunger, the materials to provide adequate housing for all, and the means by which people can earn more to spend on leisure, culture, travel, medicine--and books by economists.

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