The New Industrial State

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The New Industrial State is a 1967 book by John Kenneth Galbraith. In it, Galbraith asserts that within the industrial sectors of modern capitalist societies, the traditional mechanism of supply and demand is supplanted by the planning of large corporations, using techniques such as advertising and, where necessary, vertical integration. Galbraith argues that this is made necessary by the long-term planning required for production processes involving advanced technology (and that these same technological challenges were answered with similar types of planning in Soviet societies). One of the results of this is, according to Galbraith, that perfect competition as generally understood in classical economic theory is no longer a useful explanation of the industrial sector (although it is still useful in sectors of the economy that are still dominated by small firms). Galbraith also asserts that the traditional notions of risk most closely associated with small enterprise become less relevant to large industrial enterprises and conglomerates. Risk is diminished, Galbraith says, by advantages large enterprises have in securing longer term supplier and labor contracts, and the use of financial instruments such as commodity futures to mitigate volatility in raw materials prices. Political influence of large industrial concerns in Governmental economic and labor policy is cited as another factor that tends to create the stable market conditions that are necessary for corporations' long-term planning of production.

The New Industrial State covers much of the same ground as Galbraith's 1958 work, The Affluent Society but substantially expands and extends those ideas.