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15 of 15 people found the following review helpful
5.0 out of 5 stars A classic economic text, deserves a new generation of readers, April 13, 2009
This review is from: The New Industrial State (The James Madison Library in American Politics) (Paperback)
This is a superb book. It is a book, however, that has become dated. Its datedness should not dissuade potential readers. The datedness of "The New Industrial State" has only changed the books relevance and importance. When the book was first published in 1967, it accurately described how the then modern corporation functioned, its power structure, and the motivations of individuals who guided the decision making and development of the corporation.

This book should be understood to be part of a publication trilogy, starting with Galbraith's "Affluent Society," "The Industrial State," and "Economics and the Public Purpose." In my opinion "The Industrial State" is the apex of the series. It is however, the most technical of the three books. The "Affluent Society" being the most accessible.

For economic academia the book was revolutionary, because it radically challenged microeconomic and macroeconomic textbook accounts of markets and market adjustments. Microeconomics was challenged on several fronts. The most important being the motivation of the `power brokers' of the (then) modern corporation, what Galbraith called the "technostructure." The technostructure is a complex and imperfectly defined "collective" of (especially) "technical" and "specialized" staff members at the midrange management level. It was the decision making of the technical and specialized staff members who really determined the development direction of the (then) modern corporation. This is revolutionary because the motivation of these staffers, or technostructure, was not one of profit, but instead "identity" with the group/staff and corporation and (marginal) "adaptation" of the company's goal toward their own.

At a macroeconomic level Galbraith argues that it was not his beloved Keynesian interventionism which stabilized the post-WWII economy, but the massive capital contracts the U.S. government had with industrial capital (e.g. steel, rubber, chemical, etc.), mainly though the Pentagon and NASA. These contracts allowed for industrial companies to build inventories without worrying about sales or the business cycle.

Galbraith argued, the (then) modern corporation is mainly concerned with its own stability and longevity. Stability and longevity required the corporation to become as enormous as possible. The enormity of the corporation's size required "planning" become its primary development activity. The planning goes on (1) between technical and specialized staffers and midrange and upper-management, e.g. human resource planning for internal consistency; (2) for research and development and technological growth; (3) for price stability, marketing, and reliability in demand, establishing external stability and consumer relevance; (4) for balance within the corporation, via collective bargaining with worker unions and predictability of payroll costs; and (5) for contracts with the State.

Small business and entrepreneurial corporations far outnumbered the several 100 enormous corporations. The actual economic and business activity was dominated by the minority big/enormous corporations. This meant the American system was dual in institutional structure. One sector where big business predominated and the dynamics of "planning" ran supreme. The other where small business and the dynamics of the profit motivate ran supreme. This was a situation that businessmen well understand, but that policy economists and politicians failed to appreciate the full relevance and policy implications.

In its fortieth anniversary publication, the institutional structure of the American economy has radically transformed. The technostructure is still necessary, but its power has been greatly, perhaps absolutely, diminished.

Technological shifts and socioeconomic policy shifts have moved history and the world beyond Galbraith's "The New Industrial State." However, the book's importance has not been diminished, but merely shifted. The book's importance is no longer in describing the institutional structure of American capitalism, but understanding from were the now current system evolved.

To draw a Darwinian metaphor, "The New Industrial State" is the missing link between the "just-in-time" production corporation and the entrepreneurial capitalists of Adam Smith (1776) thru Karl Marx (1867). "Just-in-time" production corporations contract significant portions (if not all) of their production from subcontractors. The prevailing role of the "planning" of The New Industrial State has been demoted. The corporation does not have to plan because a subcontractor can almost always be found, the subcontractors planning is only as long as the contract with a Wal-mart, or some other mega-corporation. This institutional shift toward "just-in-time" production does not make the technostructure obsolete, but it does diminish their power role within the corporation.

It will be Galbraith's "The New Industrial State" which will allow us to fully understand the "Post-Industrial State."

The "New Industrial State" should receive a wide and new generation of readers. It is an important book to understand a previous era, and a specific relationship between citizens, workers, business, and the public sector, a type of symbiotic embeddedness between each group. It is also an important book to understand how that specific relationship has be reconfigured, generating a type of disembeddedness between citizens/workers and business/public sector. "The New Industrial State" helps us understand why big moneyed lobbyists have come to dominate Washington, and how it could be, and was, different.
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Initial post: Apr 7, 2015 6:25:05 AM PDT
Good review, but I disagree that JiT production corp is relevant. The technostructure has just grown since the book's publication, leading to and going beyond what we now call 'globalization.' This book just paints a picture of the early days of the corporate machine, and is just as important today as it was then. The modern world is polarized, with corporate planning and financial dominance emanating from the West, and cheap labour and manufacturing capacity supplied by the East. Fundamentally, nothing has changed.
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