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Yves here. Drawing from extensive experience with Japanese culture, I find myself at odds with Murphy’s assertion, inspired by John Kenneth Galbraith, that advanced economies inherently drive high private consumption. Unlike Calvinist perspectives that equate wealth with moral superiority, the Japanese culture exhibits an anti-Calvinist attitude. They possess a version of what Australians term the “tall poppy syndrome,” wherein individuals who excessively flaunt wealth or consumption are often criticized or “cut down.” In Japan, entrepreneurs earn respect for their ability to create jobs rather than accumulate personal wealth.
During my close interactions with a top-tier Japanese billionaire—wealthy enough to rank among the Forbes 400—I observed intriguing behaviors. He took pride in finding dress pants at just $15 during a trip to the U.S. While he and his brothers-in-law would opt for standard rooms in nice hotels, his significant pleasures included attending operas in Europe and collecting works by Goya. Despite their immense wealth, the family’s modest demeanor was notable. At one point during a business deal, the eldest brother-in-law felt their financial situation was not being taken seriously. To address this, he walked over to a whiteboard and wrote down “$100,000,000.”
He stated:
“It is May. So far this year, we have generated $100 million in portfolio income from our U.S. company. This illustrates our motivation to minimize taxes.”
This revelation prompted everyone present, with the exception of other employees from Sumitomo Bank, to question what it would take to generate such income from Treasury bonds. Indeed, they maintained substantial holdings.
In fairness, even the luxurious apartments of board members—like one priced at $5 million in 1989—were rather small by American standards. This particular unit measured a maximum of 900 square feet, likely closer to 800. In Japan, where land scarcity persists, particularly amid a declining population, spacious living quarters remain a challenge. Readers with more up-to-date insights are encouraged to share their thoughts.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and Director of Tax Research LLP. Originally published at Funding the Future
John Kenneth (Ken) Galbraith, the renowned Canadian-American economist, was a profound critic of modern capitalism.
In his book The Affluent Society (1958), he identified a persistent dilemma: advanced economies overflow with private consumption—cars, gadgets, advertising, and status symbols—while essential public services such as education, transportation, and community initiatives suffer from neglect.
Galbraith termed this disparity the central contradiction of affluence: societies wealthy enough to offer comfort for all nonetheless permit inequality and deprivation to thrive.
He criticized the notion that markets instinctively fulfill societal needs, asserting that they only cater to profitable wants. Alarmingly, they also fabricate desires through advertising, thereby converting insecurity into insatiable cravings. As a result, critical social needs—healthcare, education, clean environments, and public spaces—remain unaddressed due to their lack of profitability.
This paradox gives rise to what we might call the Galbraith Question: If affluence leads to private luxury and public deprivation, what does this reveal about our societal values and viability?
The Tyranny of Private Consumption
Galbraith highlighted that in post-war America, while consumer goods proliferated, public schools became overcrowded, roadways deteriorated, and parks fell into disrepair. This imbalance was no coincidence. Markets prioritize individual demands over collective societal needs. Consequently, we witnessed a skewed growth pattern: flashy suburban developments and modern conveniences juxtaposed with underfunded public services.
Today, this imbalance is even more pronounced. Billionaires launch private rockets while hospitals struggle to secure basic medical equipment. Luxury apartments remain vacant as homelessness rises. Markets churn out smartphones, yet public broadband services lag. Galbraith’s cautionary warnings have manifested into dire realities.
The Manufactured Wants of Advertising
Galbraith also introduced the concept of the “dependence effect,” suggesting that in contemporary capitalism, demand is not organic but artificially created. Advertising goes beyond mere information; it seeks to persuade, manipulate, and generate feelings of inadequacy. We are inundated with messages that imply our lives are incomplete without the latest commercial offerings.
This relentless cultivation of private desires redirects resources away from vital issues—like poverty alleviation, affordable housing, and climate change adaptation. The economic system thrives on our persistent feelings of inadequacy. Public neglect isn’t merely an oversight; it casts a shadow over a system that profits from our dissatisfaction.
The Neglect of Public Goods
Markets fail to recognize and value what cannot be traded. Concepts such as clean neighborhoods, safe communities, universal healthcare, and cultural experiences do not appear on any corporate balance sheet. They depend on public funding. However, the prevailing market ideology has pressured governments to reduce support, privatize essential services, and outsource provisions.
The consequences align perfectly with Galbraith’s warnings: luxurious shopping centers situated amid crumbling roads; exclusive gyms for the affluent while public parks deteriorate; premium healthcare for those who can afford it while basic medical services are rationed for the less fortunate. Public neglect serves as the backdrop to private opulence.
The Political Economy of Neglect
Why does this situation endure? The wealthy have little need for public services. They can afford private healthcare, education, and security. For them, public offerings seem unnecessary—if not intrusive, as they are sustained by taxation.
Conversely, the general populace is continuously told that taxes are a form of theft and that public spending is a drain. Political elites, backed financially by the wealthy, perpetuate this narrative. Consequently, we witness a political landscape that habitually undervalues public goods while generously providing subsidies to private capital.
Galbraith’s Challenge Today
If Galbraith’s critique held merit in 1958, it has become even more urgent today. The climate crisis necessitates substantial collective investments in energy, transportation, and housing. An aging population demands comprehensive care solutions. Inequality calls for progressive taxation. Yet, we are incessantly told that “the money isn’t available,” all while the wealth of the affluent continues to expand.
The Galbraith Question challenges us incessantly: how can a society endure if it permits the erosion of its foundational structures while indulging in the endless desires of private consumption?
Answering Galbraith
To effectively address the Galbraith Question, we must redress the imbalance he identified, advocating for:
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Reinvesting in public goods, necessitating funding for housing, healthcare, education, infrastructure, and cultural initiatives as the true foundation of prosperity.
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Taxing private excess. Wealth, inheritances, and speculative profits must be taxed to sustain collective amenities.
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Regulating advertising. The industries that profit from fostering insecurity and demand should face stringent regulation.
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Redefining prosperity. Success should be
measured not by the acquisition of luxury items but by the enhancement of public well-being.
Inference
Galbraith’s insight was profoundly straightforward: private affluence and public squalor are interconnected phenomena. Markets nurture the former while overlooking the latter. If we allow this disparity to continue, societal stability itself is compromised—shimmering externally, yet rotting internally.
The Galbraith Question transcends economic discourse. It defines the kind of civilization we aspire to create. Should we pursue a society where the wealthy isolate themselves in indulgent luxury while public infrastructure deteriorates? Or should we champion a community where prosperity is gauged by the resilience of our shared institutions and the respect afforded to our collective lives? This question has profoundly shaped my economic perspectives ever since I first encountered it half a century ago, while exploring The Affluent Society.
Galbraith’s conclusion was unambiguous: unless we choose the latter path, affluence may signify not advancement, but the roots of decline.
