Critical Text about “The Dependence Effect” by John K. Galbraith

Summary

In this text,  Galbraith criticizes the neoclassical theories about product demand and the consumer sovereignty in the market. His basic goal is to fight against those affirmations based on “conventional wisdom” and all the mistakes developed because of them. He insists that a new world with new realities needs new ideas and theories that must adjust to the world they are living in because, in two hundred years, society and its economy vary radically.

The neoclassical economical theories affirm that the costumer is the entity that rules the market because it is he and his wants the ones that create the demand of a product. Galbraith denies this, arguing that it is not the consumer who spontaneously creates his wants: it is the same entity of production the one that creates the wants and later sells and satisfies them. For Galbraith it is impossible to defend production as an entity that satisfies wants when that same production is creating the wants that will later satisfy. The production is not really satisfying anything because if it had not created the want in the first place, it would not be satisfying it. The consumer, by himself, never had the urgency of the want that he is satisfying.

Galbraith argues his theory of “the production as a creator of wants” supporting on two economists: John Maynard Keynes and James Duesenberry.  The first one says that emulation plays a very important role on want creation: “One man’s consumption becomes his neighbor’s wish”[1], this means that the same process that satisfies one’s want, creates this same want on another person; so the more that a want is satisfied, the more that it grows. Duesenberry goes a little bit farther than this: he states that the basic social goal of modern society is the constant development of a higher standard of living.  This means that, because of this “high standard of living” that society takes almost as if it were part of its moral structure, man is evaluated by the products he possesses and because of the constant production of newer and higher standard commodities; man needs to buy more to maintain his prestige. Although Duesenberry does go a little bit far, his argument implies that production satisfies and creates the costumer’s wants.

But more active than the emulation, as a link between production and wants, is the modern advertising and salesmanship. For Galbraith, it is impossible that these two can be reconciled with the consumer created wants because their basic function is precisely to create the wants. Every new consumer product has to be introduced into the market with an advertising campaign that is apt to provoke an interest on the consumer. And the outlay of these campaigns is incredibly high; producers spend absurd amounts of money on advertising, so “Is a new breakfast cereal or detergent so much wanted if so much must be spent to compel in the consumer the sense of want?”[2] This shows perfectly why it is ridiculous to keep on following the conventional wisdom’s affirmations: if producers spend billions advertising a product, if they have salesmen pressuring the equation and then comes the emulation factor that affects the product from the outside, then it is easily seen that those products are not as urgent as they seem to appear because if they were, they wouldn’t need so many help to find a consumer; “A man who is hungry need never be told of his need for food”[3]. Advertisement for food is not needed when a man is dying of hunger; it is only needed for those products (Marx’s “commodities”) that are far away from being really natural, urgent and that man does not even know that he wants them.

The point to which Galbraith arrives to is that welfare is not greater in a society with a higher level of production than in another with a lower one. This is because the higher the level of production gets, it produces a higher level of want creation which requires a higher level of want satisfaction, and this is called by Galbraith “the Dependence Effect”; wants depend directly from the process of production that intends to satisfy it.

Main Ideas

Galbraith’s main idea is to open society’s mind to possible theories different from the ones that have been dominating the economical scene since the XIX century. He is against the closed minds that prefer “to have a firm anchor in nonsense than to put out on the troubled seas of thought”[4]. He is said to be the first to use the term “conventional wisdom”, which refers to ideas or theories that are generally accepted as true by experts or by people in general but that have not been explained meticulously. He is against it because he says that it blocks the possibility of new ideas or theories to be accepted.  He thinks that there are very important factors in the economy that have been passed over without taking care of them thanks to this “conventional wisdom”. One of those important economical factors is the Dependence Effect.

Economists have not worried about the moral arguments that affect the consumer’s wants and their satisfaction. They think only of the numbers and how these numbers affect other numbers. But, for Galbraith, this effect not only has a sociologically moral result; it also affects the way one must perceive economy. If the production of goods satisfies the wants that the consumption of these goods create or that are created by the advertising of the good, this means that production generates the creation of new wants that stimulate the need for more production. The consumer society is the one that has, almost unconsciously, to spend and spend more, making the production go up and up, but not necessarily generating any welfare. This shows the incredible importance that this matter has not only on sociology but also on the subject that concerns Galbraith: economy.

Sociological concepts

This text is very closely related to a series of concepts that are all strongly linked with each other: consumerism, media-saturation, collective identity and popular culture.

Once a fully functional capitalism has been established, this meaning that the work ethic is already inside society’s mind and the production levels go higher and higher, it comes a time when production is high but nobody buys as much as it is produced, so economy needs (for its own good) to create a “consumer ethic” that will make the worker spend the money that he earns, buying the products that he himself helps to make. This ethic or culture of consuming is called “consumerism”. But because he really does not have the urgency (in Galbraith’s words, he has not developed the independent want) to buy what the producer offers, the latter has the obligation to make the consumer want what he is selling to him.

This is when the media-saturation comes in handy. The producer needs to convince the consumer that he not only wants, but needs the product that he is selling (he needs to create the consumer’s want), so the advertising, salesmanship, design and public relationship agencies start to emerge. The producer needs a little (very big) push to be able to sell his product and that is what the mass media does: it induces the costumer into wanting a product that he really does not need. This can be done in a lot of different ways but, in my opinion, the two most important are Keynes’s “emulation” and Duesenberry’s “high standard of living”. These two combining into another important concept: “popular culture”.

This ceases to be a simple hypnosis to make the consumer buy a product, it deeply influences society. The incredible psychological power that mass media has over people (everywhere and every moment there is advertising information going consciously or unconsciously into society’s mind) does not stop in selling a product, but it also develops a new life-style, new values and ideologies that conform the said “popular culture”.

Man does not think by his own anymore; man does not decide what he wants to be or have; he is nothing more than a puppet of the popular culture society. A society based on consumerism, ruled by the mass media that tells what to wear, where to go, what to eat, what music to hear, how to act and who to be. Individual identity has been almost completely erased from the face of the earth, leaving space for the “sacred” postmodern collective identity, a huge mass of people that think with one only brain: television.

Influences

From the economical point of view, probably is John Maynard Keynes the strongest influence on the text. Only saying that it was this man the “founder” of the Keynesian school in which Galbraith supported a lot of his ideas.

From the classic sociologists I would think that is in Marx in who one can find more connections with this text.  Marx’s study on commodities has a lot of points in common with Galbraith’s theory of want creation. Both of them criticize the way that society has developed a taste for consuming the unnecessary. They see it from different perspectives: Galbraith studies how the “unnecessary” products (commodities) become necessary; and Marx explains how commodities develop an absurd economic system and shows alternatives to this. Also they both show an urge for change. Maybe not for the same change, because they live two different times and situations, but in both cases it is possible to see a direct criticism to the central structure of the society that they live in: Marx criticizes all capitalism and society’s need to move on, break from the present standards looking for a better tomorrow; Galbraith criticizes the closed mind that does not let new ideas and new possibilities of future to arrive, he searches for a radical switch in society’s way of perceiving life; looking to open people’s minds to different points of view that were not taken care of before.

In the matter of opposition, Galbraith directly and constantly disagrees with David Ricardo and the neoclassical economical theories that have closed society to the “conventional wisdom”. The fundamental fight that Galbraith starts with this text is precisely the fight against the consumer’s demand sovereignty theories that are still inside the people’s heads and that do not let them think with a clear mind what is happening in the economical world of today. He opposes Ricardo’s theory with his Dependence effect that shows that in the world of today it is ridiculous to really believe that the consumer thinks by his own and makes the important decisions that mark an economy; today the producer and the media are the ones that have the power (not only over the economy) but also over the client and his possibility of deciding for himself.

Opinions and Conclusion

I think I could say that I agree with all of Galbraith’s statements in this text. For one side, I believe that it is of incredible importance to break with all the society’s scruples that close their minds to an illogical and anachronistic way of seeing the economical system and the way that the mass media controls their minds and their decisions. An open society is a society that looks for solutions to the problems it has; if it closes to what it already thinks it knows it will stay in a bubble of illusions that will have to explode some day.

In what concerns to his “Dependence Effect” theory and the consequences that it brings to society, I think that it is horrible having to live in a world where everything and everybody gets close to you for a reason. There is no pure and innocent human relation anymore; everything is based on selling to you whatever they have in their pockets at any cost, only for the blind ambition of gaining more and more affluence. Nobody thinks about anybody anymore. Tobacco, liqueur, fast-food companies do not think about the costumer’s wellbeing; acquiring more money is far more important than killing fellow men with the product that subliminally they are stuffing in their mouths; drug companies do not care that their products do not heal anything; car companies do not care that your old car still works perfectly. They do not think about the costumer, that is actually the last thing on their minds; they only think about themselves. We are living in a society where everybody only thinks about his own wellbeing, but ironically he does not even think for himself: it is a collective identity that makes us put our foot on top of our neighbor to get whatever we want. A change is needed; man cannot keep on living based on conventional wisdom, and even less still when that conventional wisdom comes from a television, a magazine or a radio station.

 

April 2009.


[1] GALBRAITH, J.K. “The Dependence Effect” in Holt D. B. and Schor J.D. (eds.)  “The Consumer Society Reader”, The New Press, New York, 2000, p.21.

[2] Ídem, page 22.

[3] Ídem, page 23.

[4] Ídem. Page 25.

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