HCJ Seminar Paper The New Industrial State

John Kenneth Galbraith’s book – ‘The New Industrial State’ was written in 1967 and the general themes of the book surround the issue of product, capitalist societies and of businesses and corporations.

Galbraith writes about how the use of risks within traditional small businesses become less relevant compared to the rise and continuous growth of large corporations in the industrial region. He goes on to state that the advantages the large associations have in securing longer contracts with labourers and suppliers reduce the relevance of risk taken by smaller businesses becomes practically ineffective in their way of gaining supply and demand. He also writes that the influence of politics is another key factor in securing stable situations and conditions which are ideal for the continuous growth and planning in the markets of production.

Despite some sectors of the economy still dominated by small firms, Galbraith argues that long-term planning needed for produce involves advanced technology which includes the theory of risk. One result of this is that competition is no longer a relevant explanation of the industrial sector because the overwhelming power of advertising from larger corporations is more significant and appealing to the produce of the smaller businesses.

He goes on to argue throughout the book that the industrial system is controlled by the structure of the industry rather than the actual share holders of the respective companies. The structure itself is not there to create or increase the profit made but rather to maintain the stability and life of the corporations, and to a further extent to gradually increase its stature over a larger scale, expanding where they see fit.

The main aim of the company’s structure is to keep control over the business and it prefers using profits made to borrowing from banks, so therefore, the money given to share holders is decreased so that the company does not risk losing its own self-funding. Also, the companies of the industrial system use a program of fixing and stabilising prices to make sure that long-term planning is sufficient.
A central theory of the book is the revised sequence, which is chapter 19, the chapter I will be looking to talk about in detail. The main idea of the economy is that markets that are in competitions which one another are, at the end of the day, controlled by their customers and the will of their customers. This is referred to as the ‘Accepted Sequence’ whereas the revised sequence is the opposite in contrast, where companies use advertising to gain control over their customers. So in modern terms, just as an example, a big branch like “Sainsbury’s” would have control over its customers through the power of advertising, whereas smaller businesses would have to rely on their customers’ interests and demands to provide a service suitable enough to survive in the industry.

But, the revised sequence is only relevant to the industrial system, and not the market system. So “Sainsbury’s” would not apply to the revised sequence because the revised sequence is not relevant to the market system where competition in prices remains the sole main part of control for them, and it is seen as a means to gain social power amongst their consumers.
“The consumer is, so to speak, the king...each is a voter who uses his votes to get things done” - Paul Samuelson, Economics.

To me this quote is from Samuelson is a brief explanation of the “Accepted Sequence” that the customers have control and gain control over the company by requesting what they want to see done. To refer to the consumer as a king is overwhelming, however in the industry, companies and businesses must see their consumers as kings because that is who they want to attract and build their corporation with, attracting them, especially within the smaller firms.

However, it could be argued that Galbraith wants the readers to realise that regardless of who controls the companies, whether it be the structure itself or the consumer, the consumer should always be regarded highly in this type of industry because they are the main sources in the term ‘supply and demand’

“The mature corporation has readily at hand the means for controlling the prices at which it sells as well as those at which it buys. Similarly, it has a means for managing what the consumer buys at the prices which it controls.” – Galbraith goes on further to talk about the planning and that the use of technology is the main reason for the planning process. He also states that the time committed to the planning and technology, as well as the decreased effectiveness of the market for products and skills contributes to the long-term planning of the techno structure of the company.

“It is possible that people need to believe that they are un-managed if they are to be managed effectively. We have been taught to set store by our freedom of economic choice; were it recognised that this is subject to management; we might be at pains to assert our independence. Thus we would become les manageable”
In my view, this from Galbraith toward the end of chapter 19, “The Revised Sequence” sums up as a whole both consumers and the industrial system and its competitive nature between both.

Markets within the system compete to attract the most amounts of consumers; however consumers compete to get the best from their chosen or designated market. To me, the companies fight for the economy and use advertising to obtain the most economic profit from their consumers in what we call the Revised Sequence. However, the Accepted sequence is different and responds significantly to the requests and desires of their consumers. Consumers control firms in the accepted sequence, but due to the backlog and power of their economic state, maybe it is the larger companies who have a stronger techno structure to progress and expand.