James Kenneth GALBRAITH
PhD, Member of the International Committee of the Free Economic Society of Russia, professor of Lyndon Johnson School of Public Relations, University of Texas, USA
The theory of convergence so far as I understand it held that the effective management of an industrial state in an era of advanced and advancing technologies required and would foster essentially similar organizations and social formations under both capitalism and socialism, through trade unions and the welfare state in the West and gradual decentralization and democratization in the East.
As a matter of naive prediction the theory has not done well. But naive predictive power is not, contrary to Milton Friedman, the sole or even the best criterion for judging a theory. If it were, no one would read Marx. The right question is rather, does the theory have analytical power? And if so, how can that power illuminate our present world?
The unpredicted dissolution of the USSR set the stage for a gigantic indirect test of convergence theory, insofar as it posed the question, can an industrial economy be organized and run on radical free-market principles and without an effective regulatory state? And the answer came back clearly: no, it cannot.
Meanwhile in the United States a somewhat more subtle but no less interesting test unfolded. Here the question was: what happens to an industrial state when the countervailing power of unions is crushed, when the welfare state is cut back and when finance becomes dominant? And the answer is that the essential economic and social unity of the country fractures, giving rise to such bizarre historical phenomena as Donald Trump.
The authors of convergence theory assumed, perhaps with a certain unself-conscious presumption, that its favorable and positive manifestations would play out in the then-existing arena of great power competition, and that the US and the USSR would jointly experience the co-evolution and co-development of the Galbraithian systems of industrial corporations constrained by countervailing power. Neither superpower obliged them. But the story does not end there.
If we look at the world today, we find at least four countries whose industrial systems still largely conform to the convergence or Galbraithian model, and that in each case bear the direct imprint of his influence. They are:
- Germany, the industrial export powerhouse of Europe, the model still, despite neoliberal reforms in some areas and an ordo-liberal ideology, of industrial co-determination and stable, long-term relationships between industry, labor, finance and the state. It was my father who in 1946 drafted the “Speech of Hope” that started western Germany on this course, of self-governing social democracy.
- Japan, where my father influenced the framing of the military administration and the postwar economy, where he had an enormous readership cognizant of his relevance, and where his close friend, Shigeto Tsuru, was for decades a leading economic thinker.
- Korea, where I learned recently of his influence on the pro-democracy reformers of the 1970s and 1980s, and
- most interestingly because coming from the other side of the ideological divide, China, where the work of a young German scholar, Isabella Weber, has documented the close study of his practice in wartime price administration by Mao-era planners, and where, when I arrived to serve as Chief Technical Adviser for Macroeconomic Reform in the early 1990s, I found the planning officials in full and familiar possession of unauthorized, internal translations of his works.
The conclusion is that even though convergence theory did not bring the US and USSR into stable and successful alignment, the principles of the theory were rooted in a sound analysis of the underlying technical conditions and social requirements. And those who took advantage of that insight or developed it from their own resources and experiences – who took a middle path between unregulated capitalism and rigid central planning and resisted both financial hegemony and ideological capture – those countries have reaped the harvest of industrial and technological leadership worldwide, while at the same time having developed the capacity and resilience that the challenge of the Covid-19 pandemic requires.