Tuesday, April 25, 2006

The ‘Man From Mars’ and His View of Business Enterprise

Integral to Veblen’s rejection of conventional economics was his claim that it was basically the ideological expression of the dominant capitalist values. Veblen regarded this as understandable in that the point of view of economists has always been in large part the point of view of the enlightened common sense of their time.

However, this didn’t inhibit Veblen from criticizing those whom he admired yet judged to be unscientific apologists for the existing capitalist system, such as Alfred Marshall and the social-Darwinist Herbert Spencer. In Veblenian language, the essential problem of capitalism was not only that it was rooted in the relatively ephemeral instincts of predatory businessmen, but that the habits and institutions that were an outgrowth of this self-regarding propensity operated (most profoundly in his own era) to the detriment of technological progress, and therefore the community as a whole, even though it seemed to be flourishing rather than wilting.

In the Marxian theory of capitalism technological development is motivated and controlled by capital accumulation process. The engineers and technicians in this model are basically agents of the capitalist. But the crucial difference between Veblen and Marx is the distinction Veblen makes between business and industry—the realm of pecuniary values on the one hand and material production on the other.

In Veblen’s account, the engineers and technicians are the ones working with the funding and doing the creative work, while the capitalists are more like “absentee owners”, whose relation to industry is mostly destructive, and is only non-destructive when it is permissive. In this model, the absentee owners operate exclusively in the realm of business. What follows is that the absentee owners play a negative role in the development of the “industrial arts.”

Nonetheless, the industrial arts develop, unavoidably so (BE p. 34). Veblen called this development the “machine process,” which gives rise to large-scale production and, subsequently, corporate organizations, advertisers, securities markets, loan-writers, joint-stock companies, and eventually monopolies. Veblen was very doubtful of any “successful business ventures from which the monopoly element was wholly absent” (BE p. 54).

This later stage in capitalism (n.b. Veblen wouldn’t use the language of dialectical teleology) developed from an earlier stage where the economy was centered around trading but not necessarily for pecuniary gain. The machine process was still in its infancy, having not yet extended the sprawling standardization of that was so prominent in his era and our own. He considered the classical era to have been “stagnant” in the sense that it hadn’t been corrupted by the standardizing aims and practices of the business enterprise.

Once the economy was in the hands the business class as such, their survival operated on the gain in profit, which was reached by the distortions of the economy. It was in the interest of the business class to create distortions, create “large and frequent” shortages, and create needs, in order to gain profit (BE p. 29).

Thus once the industrial arts begun developing, it was easy to understand the plight of industry. Capitalism in its earlier form was concerned with serviceability value, that is, the conditions under which a product was considered useful. With the whole entourage of businessmen, advertisers and underwriters comes the concept of vendibility value.

The value created by the advertisers especially has only in unintentional cases any actual utility for the buyer; it only serves to increase the cost of production. “Its ubiquitous presence” in the realm of business enterprise is a “cost incurred with a view to vendibility, not with a view to serviceability of the goods for human use.” (BE p. 59)

All this marks a decisive change from the small-scale production and the individual owner-entrepreneur of early capitalism, which Veblen considered to be the beginning of “the decay at the top.” The center of attention of businessmen shifts progressively from the production of useful goods and services to the sale and manipulation of corporate securities which in turn represent essentially the capitalized earning power of the underlying firms. It is in this context that the effects of continuous technological advancements must be assessed.

As Veblen saw it, the primary effect of this was a continuous lowering of production costs. With new more efficient technologies, the result would be a steady undermining of existing capital, which would cause an incessant depressing effect on business enterprise in general. Here we may discern a basic similarity in the theories of Veblen and Marx: in the final analysis, both believed that the fate of capitalism would depend on the course and outcomes of the struggle between capital and labor.

But the tension Marx saw was found in the realm of class interest and labor-exploitation having been created by the capitalist class, whereas Veblen saw the tension as having been conditioned by the machine process itself. Industry and its instrumental values leads technicians and engineers to join institutions like trade unions; finance and pecuniary gain leads businessmen to oppose them. The opposition grows. However, Veblen did not purport that the machine process would inevitably lead to a socialist revolution, unlike Marx, since not only the workers but the business class would defend their interests too.

However, Marx offered a positive theory of action, whereas Veblen worked incessantly to curb any action taken under the guise of his theories. Various solutions were proffered to amend the Veblenian problem, all of which, in Veblen’s eyes, failed to do any justice. Educational institutions could not solve the plight of industry since it only existed to further the ideology of the business class. Neither could a free press solve the problem since it reinforces the consumer and cultural ideas under the guise of distributing information .

Using national politics as a way of replacing old leadership with new leadership was seen as futile since it could not address fundamental issues. Lastly, militaristic-imperialist adventures which were the solutions the Japanese and German governments used would keep the existing technology but simply devolve the institutions to earlier, more primitive, eras.

It is important to note that Veblen was not interested in policymaking, but rather mere observing and predicting. He did not want his observations to be taken by policymakers as gospel truths; he thought of himself not as a Marxist per se; not as a technocrat or technological-determinist, nor even a postmodernist. He was, as various writers saw it, something of a man from mars.

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