Louis Hyman writes: In 1967, the celebrated economist and intellectual John Kenneth Galbraith argued in his best-selling book The New Industrial State that “we have an economic system which, whatever its formal ideological billing, is in substantial part a planned economy.” Though postwar American politicians juxtaposed US free markets to the centrally planned economies of the Soviet bloc, Galbraith recognized that the two were more similar than one might have thought. The private planning of corporations, whose budgets were sometimes bigger than those of governments, defined postwar American capitalism, not markets. Markets meant uncertainty, and postwar corporate planners eschewed risk above all else.

After the chaos of depression and war, corporate planners had worked in conjunction with federal policymakers to make a world that promoted stability. None of the top 100 postwar corporations had failed to earn a profit. This profitability was not an accident. Nor was it the result of seizing every lucrative prospect. Rather, it had come from minimizing risk in favor of long-term certainty.

This postwar economy had allowed employees and employers alike to plan for the future, assuring them steady wages and steady profits. Big business had to be big to contain all the functions it would not entrust to the market. Through their own five-year plans, Galbraith argued, corporations “minimize[d] or [got] rid of market influences.” This American planned economy — which had appeared to be the natural future of capitalism in 1967 — began to fall apart only two years later, in 1969, nearly twenty years before the fall of the Soviet Union.

The collapse of this postwar economy came from the overreach of its new corporate form—the conglomerate—whose rise was legitimated by the belief in managerial planning. But its essential moral underpinnings — stability for investment and, especially, stability for work — took more of an effort to dislodge. Yet in the 1970s and 1980s, this effort succeeded as corporations began to embrace risk and markets, undoing the stability of the postwar period. By the 1980s, the risk-taking entrepreneur had displaced the safe company man as the ideal employee. [Continue reading…]