The New Industrial State

John Kenneth Galbraith wrote the The New Industrial State in 1967, it explored the economics of production and the effect large corporations could have over the state. Galbraith argues the the 'industrial system' is controlled by a technostructure rather than shareholders, he claims that the techno structure does not act to maximise profit but principally to maintain the organisation and ensure its further expansion. By 'industrial system' he means the companies that control two thirds of their output. The key aim of technostructure is to maintain its control over the company, the preference of financing via retained profit rather thank borrowing from banks. 

The New Industrial State asserts that within the industrial sector of modern capitalist societies, the traditional mechanism of supply and demand is succeeded by the planning of large corporations, using things like advertising and vertical integration. The companies of the industrial system facilitate a system of informal price-fixing and price stability to ensure long-term planning is feasible. 

The industrial state has near control of its capital supply, significant control of its labour supply and considerable influence within the state. 

The problems of The New Industrial State are as follows:

1. Inflation

2. Increased role of the state

3. Destruction of profitability

4. Keynesian Military 

Change and the Industrial System
The biggest change to the economy system is the advances in sophisticated technology. The state is perceived to be responsible for maintaining aggregate demand within the economy at a high level in order to minimise unemployment. Before World War Two there was a serious recession.

Industrial systems consists of 500-600 corporations in sectors such as communication, production and distribution. By 'industrial system' Galbraith means companies which control two thirds of their output.

Technology leads to planning, and planning is the central component of the Industrial system. Long term planning is necessary in order for production to exist. There is a clear association between planning and size, without large corporations there would be no technological advanced products.

Advanced technology and specialisation leads to increased bureaucratic planning. Galbraith argues in his book that planning is economically motivated, but is even more technologically motivated. He outlines three factors involved in the strategy of planning to ensure profit:

1. Integration

2. Production

3. Distribution 

Technostructure 
Within the industrial system the decisive unit of decision making is the group not an individual. The replacement of the free market with a planned solution puts action and decision making beyond the reach of an individual. It is no longer realistic for a superior to overrule a group decision. Technostructure is the collective term for all those involved in group decision-making and the organisation they form.

The goals of a technostructure are as follows:

1. Survival - this relies on a secure minimum of earnings, if they are not met there are two threats:

(a) interference from stockholders

(b) in absence of insufficient retained profits the need to appeal to outside sources of investment. 

2. Growth - measured in sales volumes

3. Technical virtuosity 

4. Increased rate of dividends 

The basic need for technostructure is to prevent its revenue source from falling beneath a lower threshold, this require the control of prices. In order to protect the firm from heavy losses large and long term investments, prices, demand and revenue must be guaranteed. 

The purpose of demand management is to ensure that a sufficient quantity of product is bought at a controlled price.

Capital and PowerEconomic goods are made by basic categories of inputs: land, labour, capital and entrepreneurship. Power was shifting from land to capital as capital became the hardest to replace.
Unemployment is the result when insufficient savings are invested and aggregate demand dips below production. The advances of Automation now means that workers are being replaced by machines, and labour and capital suffer as a result. Power rests with the decision makers.

Employment and Unemployment

There is a clear distinction between education and skill, skilled and unskilled blue collar works are becoming redundant. Whereas the technostructure has highly educated individuals; the importance of education is on the rise.

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My notes this week are all a little discombobulated, I've randomly pieced together some pointers from the lecture:

Weber - Bureaucracy - This is the main source of legal power, for example the lawyers make the rules we have to follow.

When capitalism ended there was mass unemployment and the economy collapsed, but this was solved by Keynesianism The 1950's was the era of American Prosperity, the USA adopted Keynesian. Keynes is the great god. He discovered that Marx was wrong because you can add value through marketing, Marx did no predict bureaucracy would take over capitalism.

The critics of 'managed' society 
Far left/far right - American civilization is" bureaucratic technological militaristic nihilism" It includes Heidegger, Sartre, Maoism, Franz Fanon.

Left - Maoism - third world-ism  ecology, feminism, transvaluation  anti globalisation as anti-capitalism, green movement.

Right - Racial disintegration, cultural decadence, economic parasitism, loss of national identity, globalisation as disintegrated, relative and absolute economic decline of the west.

Nihilist's do not believe in anything.
Heidegger believes society is a death machine, and that it is doomed! There is no point or purspose.
A bureaucratic power structure - democracy as a sifting "meritocracy", ruled by a technocratic elite of economic planners, scientists, generals, security experts and propagandists. 

Hayek predicted that Keynesianism was corrupt.
Nietzsche - You're a slave if you're not prepared to die, it is either slavery or death.