The Worldly Philosophers By Robert Louis Heilbroner Summary and Analysis Chapter 8 - The Savage Society of Thorstein Veblen

Summary

As the full effects of the Industrial Revolution spread from Europe to America, the free enterprise atmosphere of the United States became a far different thing from the European practice of laissez faire. The game of making money in the United States was rough and savage, devoid of sportsmanship. The gentleman's rapier gave way to the roughneck's brass knuckles.

In the United States, any man could prove his worth through business success, regardless of his ancestry, and money became the passport for entrance into the upper classes. Men such as William H. Vanderbilt, John D. Rockefeller, Jay Gould, Jim Fisk, and J. P. Morgan dedicated themselves to ruining competitors. They gave no quarter. In their public dealings, these robber barons were guided by J. P. Morgan's sentiment: "I owe the public nothing."

From 1865 through the early part of the twentieth century, dishonesty was a virtue, the investor a gullible fool, and the stock market a private casino which the public financed. A practical demonstration was William Rockefeller and Henry Rogers' purchase of Anaconda Copper Company by paper manipulation and without a cent of personal investment — resulting in a $36,000,000 profit. Official economists viewed this scene unperturbed, their thoughts wrapped up with such terms as enterprise, thrift and accumulation, and consumption. At best, they apologized only slightly and shared the common blindness: They were too close to the scene to judge objectively. What was needed was the disinterested, detached view of an outsider, which was ultimately filled by the most aloof of skeptics, Thorstein Veblen (1857-1929).

Veblen, born of immigrant Norwegians in Wisconsin, grew up in a pioneer Norwegian community in Minnesota. His austere childhood reflected the drab farm life. He grew up remote and aloof, an alienated, enigmatic man whose chief pattern of behavior was nonconformist. At the age of seventeen, Veblen's family sent him to study religion at a pious Lutheran college, where he promptly threw the faculty into an uproar when it came his turn to suggest a way of converting the heathens. He titled his method "A Plea for Cannibalism." To add to his apostate behavior, he converted the niece of the college president to agnosticism and, several years later, married her.

Bad luck tagged Veblen. He found no immediate success in his teaching career. His first job lasted a year, and then the academy closed. He enrolled at Johns Hopkins on the expectation of a scholarship, which never materialized. After transferring to Yale, he received a Ph.D. in 1884. Returning home, he read, loafed, and buried himself in political science, economics, sociology, and anthropology. By normal standards, he was lazy and unassertive. He refused to make his bed, and when the dishes were dirty, he hosed them down. His eccentricity extended to his disdain for the telephone. His isolation continued for seven years until at the age of thirty-four, he yielded to family pressure to resume graduate studies.

His appearance at the office of the economics department of Cornell in 1891 must have shocked the conservative department chairman, for Veblen was wearing corduroy pants and a coonskin cap. Still, his learning impressed the older man, and Veblen received a fellowship. The following year, he accompanied the head of the department when the latter moved to the University of Chicago.

At the age of thirty-five, with a salary of $520 a year, Veblen earned a reputation among his students for refusing to take roll and assigning the grade of "C" to all students, although he upgraded the "C" to an "A" when a student needed to qualify for a scholarship. Veblen felt that there were too many students. The fewer he had, the better. Nevertheless, in spite of his rambling, mumbled lectures, his immense knowledge led to an annual salary of $1000 by 1903.

Veblen possessed an unusual fascination for women; he engaged perpetually in affairs. After he made a trip to Europe with one of his lovers, he was forced out of his job, and his wife divorced him. He went to Stanford and then to the University of Missouri, remarried, and finally retired at the age of seventy. He chose to live alone in a small, western-style cabin, where he could meditate without distraction. There, aloof from society, he died.

Even though Veblen was a failure in his personal life, he established a national reputation in the academic world as the result of two major books and a series of essays. His first book, The Theory of the Leisure Class (1899), appeared when Veblen was forty-two. An overnight success, it is his most famous work, due primarily to the fact that readers took it to be a satire of aristocratic foibles. Actually, the book was much more, for Veblen refused to accept the assumptions underlying classical economic thought. While orthodox American economists accepted European teachings, Veblen dug to the root of the economy to discover the nature of his society.

The Theory of the Leisure Class examines the nature of economics and the meaning of leisure. While established economists explained human actions entirely by self-interest and competition, Veblen probed deeper. He doubted that self-interest held society together or that people preferred leisure over work.

Also, he discovered that there was no leisure class among American Indians, the Ainus of Japan, or Australia's bushmen. Everyone in these cultures worked — not for profit, but because of pride in workmanship and a common concern for their children's welfare.

His study of Polynesians, ancient Icelanders, and the shogunate system of feudal Japan revealed a different kind of society. A leisure class existed in each, but it was not an idle class. Instead, its members worked hard at seizing riches through force or cunning and didn't contribute to the actual production of wealth. What was significant was that they prevailed with the approval of their community.

To Veblen, this fact marked a fundamental change in the attitude of the savage toward work. What had once been a source of pride had become degraded by the transfer of approval to the plundering and predatory ways of the leisure class. Classical economists considered the desire for leisure inherent in human nature, but Veblen maintained that what was inherent in human nature was pride in work. As men plundered, seized booty and women, and received admiration for their prowess, approval transferred from the once-honored way of life to the spirit of plunder — and the leisure class gained respect.

As societies progressed, continued Veblen, the leisure class changed its occupation and refined its methods, but its goal remained the same — the accumulation of goods without productive work, but by seizure. Applying his findings to the United States, Veblen wrote: ". . . by heredity human nature still is, and must indefinitely continue to be, savage human nature." Modern plunder did not exist for booty or women, but for the accumulation of money and its lavish display. The savage displayed numerous wives, the barbarian his conquests of war; in the same vein, modern savages displayed wealth.

So Veblen arrived at a thesis: the leisure class advertises its superiority through conspicuous consumption — enjoying leisure more fully by being able to display it before the public. Thus, the modern

U.S. businessman, by seeking and accumulating money and then displaying it — either subtly or conspicuously — is the modern counterpart of a savage heritage. Furthermore, everyone — the worker, the middle-class citizen, and the capitalist — seeks through conspicuous expenditure and even the waste of money to prove status.

Carrying the theme a step further, Veblen explained why a proletariat revolution, as Marx predicted, had not occurred in the United States. It was simply that workers did not seek to overthrow the upper class, but rather strove to join it themselves. This ambition explained the nation's social stability.

Published in 1904, Veblen's The Theory of Business Enterprise established his concept of business at the turn of the century. The book shocked readers, but it failed to make the splash of his earlier work on the leisure class. This time, there was no mistaking the book as satire; consequently, only economists and scholars read it.

Rejecting earlier theories that the capitalist is the driving force behind economic progress, Veblen charged that the businessperson is the saboteur of business. As he explains, machines dominate society, but machines care nothing for profit. Therefore, business people are no longer needed. Eliminated by the machine, they are replaced by technicians and engineers.

Entrepreneurs, however, as members of the leisure class, are still acutely interested in the accumulation of profit. Their only opportunity of gaining profit is to cause breakdowns in production so that values fluctuate. Being on the inside, businesspeople then make a profit during the resulting confusion. Thus, the entrepreneur cunningly builds up credits, loans, and artificially high capitalizations. Unfortunately, in the process, the efficiency of production remains continually off-balance.

Looking to the future, Veblen predicted the end of the capitalist — not through the action of Marx's proletariat, but by a tougher force: the machine. The recurring business crisis brought about by the entrepreneur would show to all the inability of the system to remain in balance. As the alternative, Veblen hoped for the day when a corps of engineers would take over the running of the economy, along the lines of a huge, well-ordered production machine. And if this didn't come to pass, then eventually the plundering spirit of Big Business would increase until the system gave way to fascism.

Veblen believed that the robber barons were interested in producing profits for themselves rather than in producing goods. An example of artificially high capitalization is the founding of U.S. Steel in 1901.

Against real assets of some $682,000,000, almost twice that amount of stocks and bonds were issued — at a capitalization cost of $150,000,000, all of which was paid for by public investors. So there was justification for Veblen's scorn of the American entrepreneur.

However, he greatly underestimated the ability of American democracy to correct these abuses. None of Veblen's later works received the acclaim of his two earlier books. He remained a skeptic as he probed society's problems, and typical of his thinking is his Imperial Germany. Although the book is so critical of Germany that, at one time, the U.S. government wanted to use it for propaganda, the post office, for a time, barred it from the mails because it was uncomplimentary towards Great Britain and the United States. Veblen's Higher Learning in America (1918) was the strongest criticism ever leveled at the American university system. In the book, Veblen charged that the U.S. centers of learning were being transformed into centers of football and high-powered public relations. While given to extremes, Veblen retained his value by utilizing anthropology and psychology as better tools with which to study society than the impersonal and theoretical laws of economics.

Analysis

Veblen's two major works formed a keen description of the robber barons and their savagery. The phrase "robber barons" comes from the definitive and highly readable The Robber Barons (1934), by Matthew Josephson. Also highly descriptive of these titans of Big Business is Ida M. Tarbell's History of the Standard Oil Company (1903).

Veblen's "savage world" was savage on two counts. First, the practices of the actual business world which he observed were predatory. Second, in his examination into the nature of economy, Veblen concluded that by heredity, human nature itself is savage.

Thorstein Veblen has been largely ignored by many economists; however, it is fair to note at least two facts. In his Theory of the Leisure Class, Veblen coined the term "conspicuous consumption," and he anticipated the rash of current writings on "status symbols," which has proven correct. For example, Americans look down on physical work, compared with office work. Consequently, the executive and the financier enjoy a high prestige. Business executives continue to accumulate money beyond their normal needs. The modern-day status symbol, such as the sable coat, Lear jet, face-lift, or yacht, exemplifies the concept of conspicuous consumption.

As for his second major work, The Theory of Business Enterprise, Veblen foreshadowed "technocracy" — the belief in government by technical experts, with the use of work units of currency to be substituted for money. If alive today, Veblen would undoubtedly observe, with justification, the latest trend in the development and use of computers and robotics, as well as the fact that not only blue collar workers are being dispossessed from their jobs by the machine, but business executives find their positions increasingly threatened by computers.

Glossary

Robber Barons Unscrupulous titans of U.S. finance and industry, including Jay Gould, Jim Fisk, and Cornelius Vanderbilt. The term was derived from the title of a book by Matthew Josephson.

Conspicuous Consumption The use of material goods to flaunt a person's belonging to a moneyed or privileged class.

Technocracy Government run by technical experts, with money replaced by work units of currency.

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