The consequences of American socialism: A review of John Kenneth Galbraith’s Economic Development

John Kenneth Galbraith’s 1963 book Economic Development asks the same question Adam Smith asked: where does wealth come from? His answers are very different from Smith’s.

Economic Development was adapted from a series of lectures Galbraith gave in New Delhi, India. While not as well known as his other works, such as The Great Crash or The Affluent Society, it presents a window into the myopia of 1960s American progressivism. Galbraith’s theories of foreign aid and wise central planning were proven disastrously wrong by history. His planner’s mindset remains embedded in US policy to this day, showing just how herculean a task it is to defang the regulatory state.

Galbraith engages with free market arguments but waves them away when making his actual proposals. He makes self-aware comments about the need for college professors to attend conferences and see their specializations promoted by US foreign aid policy. He readily acknowledges “the charms of the bicycle, motor scooter, or transistor radio” for developing countries, and frames his objections as fixing the imperfections of the market. Unfortunately, Galbraith’s policy recommendations reveal an eagerness to erode free market protections and civil liberties for the supposed greater good of benevolent planning.

Unlike most academics, Galbraith saw his proposed policies become reality, and the effects were precisely the opposite of what he predicted. Along with environmental catastrophist Paul Ehrlich, who died recently at 93, Galbraith supported government-imposed abortions as a remedy for what he believed was India’s overpopulation and called explicitly for policies to move contraception decisions out of the hands of “philosophers and prophets” and into the hands of regulators.

This actually happened in 1975 when American policymakers threatened then-Indian Prime Minister Indira Gandhi with the cancellation of World Bank loans unless she began forced sterilizations. An astonishing 6.2 million men were forcibly sterilized that year alone, and more than 2,000 of them died from botched operations. Gandhi’s son Sanjay took the blame in the international press, while the real architects — international foreign aid lenders and their US cheerleaders — kept their reputations intact. The ideological capture of USAID by progressive ideologues and regime change enthusiasts was a fitting postscript to this sordid chapter of foreign aid policy.

Galbraith’s book is most notable for what it leaves out. In his chapter discussing the multifaceted causes of poverty, Galbraith speculates about geography, education, and lack of major industry, but omits any discussion about the rule of law, a critical precondition for a functional capitalist society.

He recommends that his Indian listeners ignore the rampant corruption of the time, which still exists today despite the economic liberalization reforms of 1991. And his discussion of the Soviet Union’s policies avoids any mention of the Stalinist terror or the infamous Holodomor in Ukraine and Kazakhstan, a deliberate consequence of cruel Soviet collectivism.

Although the Holodomor was not widely known outside of the unfairly vilified investigative work of Malcolm Muggeridge and Gareth Jones, Galbraith was surely aware by 1963 that a catastrophic famine had occurred. His brief comments in Economic Development and elsewhere that the Soviet “agriculture problem has not been wholly solved” are completely inadequate and even callous.

Galbraith’s ideas thus represent a window into the creeping respectability of socialism in the 1960s and 1970s and should be repudiated as such. As late as 1988, Galbraith was still trying to find common ground with Soviet collectivism, a lackluster end for a man so committed, at least on paper, to reevaluating his own ideas and understanding the shortcomings of socialist theory.

Defenders of capitalism sympathize with the plight of historically poor communities that Galbraith pointed out in The Affluent Society, and should stand firm against regulatory glut and populist redistribution schemes that cause more problems than they solve. Socialism claims to empower the poor, but forces people to place their trust in regulators rather than their neighbors or local officials. Like the hydra of classical myth, socialism must be opposed every time its ideas regenerate.