Galbraith documents growing macroeconomic instability and weakness since the early 70s (low rates of output growth, low productivity growth, weak job creation, low wage job growth, and five recessions between 1970-1992 where there were none in the 60s).
For him, this dismal performance is the consequence of the destruction of Keynesianism in the early 70s. The blunt instrument of high interest rates was used then and has been used since to control inflation and deployed again and again in the name of anti-inflation; due to the dubious ideology of NAIRU which he subjects to sustained attack, the attainment of full employment through low interest rates and progressive public sector expansion has been chucked for state assistance to select technology sectors and sadomonetarism (for example, he outlines the complicated manuvering by which the Fed encouraged commercial lending in the context of the early 90s credit crunch by raising interest rates to ensure high profits for commercial banks then more attracted to high grade bonds and low risk govt securities; Galbraith argues this had little to do with its ostensible purpose of anti-inflation and everything to do with the putative hegemony of the commercial banking system, part owners of the Federal Reserve).
Despite the Greider-like onslaught (are these guys drinking bubbies? though Galbraith may be too sober to have any drinking buddies,see p.270!), Galbraith does note that higher interest rates seem not to have slowed business investment, itself spurred on by macroeconomic instability (p. 309, n 13). At any rate, he surveys institutions elsewhere by which inflation has been fought with better consequence (or so he argues). But I'll leave this fascinating, empirically rich discussion aside.
Galbraith does not consider, even for the purposes of refutation, Marxian explanations (and what were then predictions) of renewed macroeconomic instability and the limits of Keynesian programs. Of course I have Paul Mattick's and Mario Cogoy's work in mind here (the latter is in the International Journal of Political Economy, vol 17, no 2). Or the more contemporary work of Michael John Webber and David Rigby, The Golden Age Illusion and Werner Bonefeld, ed. Global Money, National Politics and the Politics of Money.
Ultimately Galbraith wants to show how the pulling of the Keynesian rug out from beneath the feet of the economy has led to a crisis in the inequality of pay and the stagnation of wages. I'll leave here aside theoretical questions about whether pay is a good focal variable for the study of inequality (Amartya Sen whom Galbraith cites in another context has argued not) or whether there is too much emphasis on the inequality in pay as opposed to the class distribution of income (as we will see, he finds the inequality in pay across industrial sectors more explanatorily fundamental to accentuated inequality than the class dynamics of, say, increased managerial and supervisory power and renumeration; indeed Galbraith argues against the simple story of rising profits and falling wages, which he argues have both been crowded out by rising transfers, like social security, and interest payments, p. 87).
I will also leave aside the question of whether it is appropriate to confine one's study of inequality within national boundaries (since Galbraith wants to bury the marginal productivity theory of income distribution, one wonders why he didn't ask whether it is anything but absurd in the explanation of international wage differences?). And of course there is the question of why economists tend to see the relations of distribution as historically variable but not the relations of production on which they depend. But these are Marxist questions, and Galbraith seems not interested in them.
At the center of Galbraith's book is a powerful, novel idea which he makes every effort to subject to empirical confirmation through the use of carefully explained statistical methods.
First Galbraith sets out to prove the actual existence of clusters of industries organized by the similarity of wage behavior (actually a proxy thereof) within each of them.
He then shows that the clusters that are most similar in terms of "wage" performance can themselves be organized into three broad industrial groupings of knowledge intensive capital goods (K), consumer (C) goods and services (S).
Galbraith then sets out to show that in the conditions of macroeconomic instability attendant upon the collapse of Keynesianism the K sector has benefitted at the expense of the two other sectors. In conditions of instability there is rapid technological obsolescence of capital goods even if there is little investment in new structures (which he attributes to high interest rates). Investment in capital goods remains strong due to rapid technological obsolescence in weak macroeconomic conditions (again Galbraith shies away from Marxian concepts such as moral depreciation) as do productivity gains and employee compensation within the K sector. The advantages remain concentrated in that sector at the expense of society as a whole (Galbraith's most eloquent writing is on p. 166). The theoretical point seems similar to Pasinetti, 1981, p. 222, n.
The C sector finds itself on a treadmill, as Moishe Postone would put it in his brilliant chapter The Dialectics of Labor and Time in his book Time, Labor and Social Domination; profits are swallowed by the rapid depreciation of equipment, and net investment is anemic. Wages remain stagnant overall; the only real job growth seems to be in the super low wage pure services.
More later, including Galbraith's criticism of the hypothesis of skill-intensive technological change.
best, rakesh