FacebookTwitterGoogle+RedditEmail

The Legacy of Veblen in the Age of Post-Industrial Capitalism

An important book has just been published from a 2012 conference in Istanbul on Thorstein Veblen: Absentee Ownership and its Discontents, edited by Michael Hudson and Ahmet Öncü. It is published by ISLET and is available on Amazon. 

The book contains articles by us, Michael Perelman,  and others, with a forward by William M. Dugger. It is available for $35

The Global Financial Crisis since 2008 has left in its wake the most severe economic downturn since the Great Depression. Governments and entire national economies have been sacrificed to save the financial sector and its major clients. Bailing out banks, bondholders and Wall Street brokerage houses – the institutions whose mismanagement, over-lending and outright fraud led to the crash – has widened economic polarization and caused fiscal strains.

This has led many countries to reconsider the character of macroeconomic management – and behind it, the body of economic and political theory guiding today’s societies. What seemed at first glance to be a systemic policy failure of mainstream economics is coming to be seen as not so much a failure as part of an orchestrated class to protect financial wealth and its allied rentier sectors. Economic policy has passed out of the hands of elected democratic government to central banks and other government agencies controlled by financial planners and the rentier class behind them. Their post-crisis management has enabled these interests to gain control of a large swath of the pubic domain of debtor countries, along with industries and real estate in the creditor nations themselves.

The Communist Manifesto’s classic dictum that “the executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie” no longer seems to be an exaggeration, but it may be updated to describe modern governments above all as committees to subsidize and rescue the banking and financial sector, which has become the manager and central planner of today’s global economy.

The effect is to post-industrialize society, subordinating the forces of industrial veblen-cover-frontcapitalism to an extractive (and increasingly concentrated) financial superstructure consolidating its power by bank loans, bond and stock ownership – turning the rest of society into debtors, renters and buyers of monopolized goods and services.

What remains in dispute is just who comprises the today’s managerial class and where its policy program is leading. The present collection of essays trace how Thorstein Veblen described the way in which the mid-19th century’s industrial capitalism was becoming centered on what today is called the Finance, Insurance and Real Estate (FIRE) sector. Each author in this volume discusses the character of today’s capitalism, and how and why the capitalist class remains politically dominant despite the fact that it repeatedly fails to fulfill the requirements of economic leadership it claims to fulfill. Together, these papers contribute to a better understanding of “capital in the twenty first century,” to use the phrase that has become popular following Thomas Piketty’s best seller.

Veblen made numerous contributions to a diverse set of fields. Not surprisingly, he has been considered by some to be an economist, and by others a sociologist. To others he seemed broadly to be an anthropologist, political or cultural theorist. The authors of the current collection view him as a critic of “the established order of business,” continuing in the tradition of classical political economy to analyze the often dysfunctional modern world that, in his mind, required a restructuring.

Unlike today’s neoclassical economics, classical political economists distinguished between earned and unearned income, that is, the types of income accruing to productive and unproductive labor and investment respectively. The labor theory of value found its counterpart in the “rent theory” of prices. This distinction between intrinsic cost-value and market price (with economic rent reflecting the margin of price over value) provided a basis for analyzing the ownership of wealth and other special privileges to extract income without creating real value by producing goods and services.

The policy conclusion of this classical approach was that material wealth adding to overall well-being could be augmented only by productive investment. By the same token, a subset of unproductive rentier property and financial claims was extractive rather than productive – and hence, was a form of economic overhead, not real wealth. This was the essential theme of classical rent theory, which Veblen continued at a time when the economics mainstream was denying the distinction between rent extractors and industrial investors.

Pursuing the logic of classical rent theory, Veblen investigated the consequences of concentrating ownership in the hands of an evolving capitalist class. He described “absentee ownership” as the “latest stage of capitalism” and “the new order of business” at the outset of the twentieth century. “It may be said, of course, and perhaps truthfully, that the absentee owners of the country’s industrial equipment,” he wrote, “come in for a disproportionate share of the ‘national dividend,’ and that they and their folks habitually consume their share in superfluities; but no urgent moral indignation appears to be aroused by all that.”

This class of absentee owners comprised a new aristocracy. Like their feudal counterparts, they did not directly manage the means of production or other assets, which took on the form mainly of corporate bonds and stock. Real estate investment was largely for speculative purposes to obtain price gains, while the stock market likewise aimed increasingly at making purely financial gains.

For Veblen, absentee ownership as the latest stage of capitalism consisted of three pillars: “the mechanical system of industry, the price system, and the national establishment.” This tripartite social organization was centered on the financial sector, whose major business concern was to create industrial monopolies while gaining control of national politics. Veblen called these monopolists and political deep state the “vested interests.” The credit system was the core of the financial sector, which was employed to gain unearned income on behalf of these vested interests.

The result was bifurcation between the super rich absentee owners and the underlying population, whose survival has increasingly come to depend on credit, i.e., debt on the liabilities side of the balance sheet. In Veblen’s words, capitalism in the form of absentee ownership works in such a way that “the country’s assets should, at a progressively accelerated rate, gravitate into the ownership, or at least into the control, of the banking community at large.”

In view of Veblen’s argument that engineers would play a major or even the most progressive role in society, this book is significant largely because it is the product of an international conference on Veblen’s legacy organized by the Chamber of Electrical Engineers of Turkey in 2014. It is hard to imagine such an attempt by an engineering association in any other country. We therefore are grateful to Chairman Cengiz Göltaş of the 43th Board of Governors of the Chamber of Electrical Engineers of Turkey, and to all other members of the 43th Board for their support of the conference. Our thanks also go to Chairman Hüseyin Yeşil of the 44th Board of Governors and all other members of the 44th Board and Chairman Orhan Örücü of the Center for Continuing Education of the Chamber of Electrical Engineers for their support and interest in our project. And for their continued assistance throughout the project we would like to thank the Chamber members Oylum Yıldır and Emre Metin.

 

Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Joshua Frank
Montana Public Schools Block Pro-LGBTQ Websites
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Glenn Sacks
LA Teachers’ Strike: Student Voices of the Los Angeles Education Revolt  
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
Cesar Chelala
President Donald Trump’s “Magical Realism”
Christopher Brauchli
An Education in Fraud
Paul Bentley
The Death Penalty for Canada’s Foreign Policy?
David Swanson
Top 10 Reasons Not to Love NATO
Louis Proyect
Breaking the Left’s Gay Taboo
Kani Xulam
A Saudi Teen and Freedom’s Shining Moment
Ralph Nader
Bar Barr or Regret this Dictatorial Attorney General
Jessicah Pierre
A Dream Deferred: MLK’s Dream of Economic Justice is Far From Reality
Edward J. Martin
Glossip v. Gross, the Eighth Amendment and the Torture Court of the United States
Chuck Collins
Shutdown Expands the Ranks of the “Underwater Nation”
Paul Edwards
War Whores
Peter Crowley
Outsourcing Still Affects Us: This and AI Worker Displacement Need Not be Inevitable
Alycee Lane
Trump’s Federal Government Shutdown and Unpaid Dishwashers
Martha Rosenberg
New Questions About Ritual Slaughter as Belgium Bans the Practice
Wim Laven
The Annual Whitewashing of Martin Luther King Jr.
Nicky Reid
Panarchy as Full Spectrum Intersectionality
Jill Richardson
Hollywood’s Fat Shaming is Getting Old
Nyla Ali Khan
A Woman’s Wide Sphere of Influence Within Folklore and Social Practices
Richard Klin
Dial Israel: Amos Oz, 1939-2018
David Rovics
Of Triggers and Bullets
David Yearsley
Bass on Top: the Genius of Paul Chambers
FacebookTwitterGoogle+RedditEmail