The New Industrial State by John Kenneth Galbraith

Author:John Kenneth Galbraith
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2015-02-28T16:00:00+00:00

17.

Prices in the Planning System (Continued)

The contradiction between a price theory that condemns the inefficiency of the system and a result that is applauded for its efficiency is, or should be, troublesome. This is the consequence of the orthodox view. The contradiction disappears when prices are viewed in the full context of industrial planning and in full service to the goals of the technostructure.

Specifically, industrial planning requires that prices be under control. Modern technology, we have seen, reduces the reliability of the market. And it increases the commitment of time and capital that are required in production. For this reason prices cannot be left to the vagaries of the unmanaged market.

But this control, naturally enough, is so exercised that it serves the goals of the technostructure. These, we have seen, are first, to minimize the risk of loss and therewith of damage to the autonomy of the technostructure, and secondly, to maximize the growth of the firm with concomitant attention to rising profits. Prices are so managed as to serve these goals. Price competition with its attendant dangers must be prevented. Prices must be low enough to facilitate the recruitment of customers and the expansion of sales and at the same time high enough to provide earnings to finance growth and keep the stockholders content. These prices are readily reconciled with accepted social goals or what society has been persuaded to accept as goals. There is no barrier to identification with these goals by members of the technostructure, as there would be were the goal the unmitigated pursuit of monopoly profit for the benefit of unknown, nonparticipant stockholders.

This is why price control by the mature corporation is combined not with inefficient performance as the traditional theory prescribes but with the generally favorable performance that its exponents concede. And it is also why this control enjoys immunity under law. However socially inimical the control of prices is in principle, the results are not so viewed. The law is helpless in applying penalties to what is, on balance, socially acceptable.

We may look first at the way price control is effected, and how protection against disastrous price failure is ensured, and then at the level that is set.

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