Veblen’s Critique of Capitalism

Ø     Perspective was influenced by agrarian populist roots in Midwest and by Darwinian theory of evolution. 

·     “…the decisions of the railroads, middlemen and financiers, at a remove from the farmers and workers, dictated the economic fortunes of the actual producers.” (60)

·     Unlike classical economists’ emphasis on Newtonian physics to explain market system, Veblen argued that the nature of work evolved from, for example, the shop floor owner to “Captains of Industry.” This in turn changed the motives behind production from utilitarian ones to pecuniary ones. (63-64) 

Ø     His notion of the Leisure Class was drawn from early Feudal social structures in which institution of private property created conflict over possession of goods. 

·     Higher status given to “those engaged in predatory pursuits” (warriors, hunters, rapacious capitalists) as opposed to those doing menial work (gathering, housework, blue collar worker).

·     Acquisition of material goods (property) “confers honor” as it reflects class status.

·     The more ruthless (Donald Trump; the Survivors) becomes the more revered. 

                     “…to acquire property, in order to retain one’s good name.” (65)

Ø     Conspicuous Consumption : You must not just be wealthy, you must flaunt it.

·        Note: Thomas Malthus (1820) believed these extravagant expenditures were necessary to maintain demand for goods à a glut might occur as demand for goods fell short of supply.

·        Poll of women: “…half of respondents [said they] participated in status buying.” (67) 

Ø     “Keeping up with the Jones” (Pecuniary Emulation) 

·        contradicts rational and utilitarian choice embedded in consumer theory of M.E. 

“…consumer decisions are driven by the need to fit in with our peers.” (68)

·     yet this strongest of economic motives is understandable: 1) humans are naturally emulative and 2) pecuniary emulation is essential to make one’s way in a capitalist (i.e., class) society. 

For example: “…the businessperson who arrived at an important meeting in a polyester suit, wearing coke-bottle eyeglasses…” (69) 

Ø     Veblen’s challenge to Marginal Productivity Theory of M.E. 

“…many economists considered high incomes … the hard-earned fruits of [robber barons’] intense and stressful labors.” (69) (Recall Rev. Jerry Falwell who argued that great wealth was also a sign of “God’s blessing.”) 

·   Veblen seems clearly distinguishing between the concepts of Exchange Value and Use Value. CEOs concerned with “fattening their wallets” regardless of consumer needs, while “industrial pursuits” undertaken by the actual worker were concerned with increasing utility or usefulness of goods. (70) 

“…Nike has spent more to hire Michael Jordon … than it has paid to its entire Indonesian workforce...” (71) 

·   As merchant/craftsperson gives way to “captains of industry and finance”, “industry and business gradually split apart”. (71)

Ø     Industrial Sabotage 

·        Examples: Rockefeller’s Southern Improvement Company, Henry Ford’s standardization on assembly line undermined craftsmanship, resulting economies of scale from mergers led to scuttling production to raise prices (“conscientious withdrawal of efficiency” [75]), Microsoft’s predatory use of Windows O/S, Enron’s triggering Cal. Electricity crisis (‘phantom congestion’ [75]). 

“Having removed most of the relevant competition (early 20^th c.) by merging with them, U.S. Steel was able to curb costs by slowing its pace of innovation to a crawl.” (75) 

“…modern production technologies were so productive that they could allow humankind to produce sufficient goods and services to alleviate all poverty and human want. However, Veblen believed that modern business practices subverted these possibilities by prizing profit over production and thus keeping industrial plants operating inefficiently, i.e., below full capacity.” (76)