Veblen's Theory of Finance Capitalism and Contemporary Corporate America
Cornehls, James V., Journal of Economic Issues
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
--John Kenneth Galbraith
One of the myths of U.S. capitalism is that major economic organizations (corporations) exist principally to develop and produce products and services for the benefit and use of consumers and other businesses. This is how they are alleged to earn their keep. When they do a good job they are supposed to be rewarded by sales and repeat sales to loyal customers, who value both the quality of the goods and the services received. If the businesses fail to do this faithfully, they are expected to lose sales and money. Eventually, if they do not improve, they are supposed to go out of business.
Thorstein Veblen's theories of business enterprise are especially pertinent in the present day economic context for they illuminate what lies behind the current economic debacle in the United States. Allegations of financial mismanagement, corporate book "cooking," and insider trading currently rage in the United States. What was originally proclaimed to be one or two rogue corporations, and their executives, enriching themselves and their friends and minions now has become a flood of reported ill-gotten gains and financial irregularities. The fingers of greed and fraud even point to the nation's CEO and his deputy CEO and possibly to other members of his cabinet, many of whom are former corporate executives (Rich 2002; "Bush Defends" 2002; Mike Allen, "Bush Urges 'New Ethic' for Execs," Arlington Star-Telegram, July 10, 2002, and
"Bush Got Type of Loans He Opposes," Arlington Star-Telegram, July 11, 2002; "Bush's Ghosts" 2002; Parrott 2002; "Cheney Question" 2002; Saporito 2002; Gerth and Stevenson 2002).
The list of major corporations and top executives already having faced or facing allegations of fraud, corruption, and possible indictments or implicated or under investigation is astonishing. It ranges from Enron to Merrill Lynch to Johnson & Johnson. And there is little reason to believe it stops with these corporations. Each week seems to bring yet another revelation of corporate malfeasance. (1)
Many large, modern corporations give the appearance of caring very little about their customers. Their self-serving advertisements, all indirectly subsidized by the public via tax write-offs, proclaim their benevolent contributions to everything from the good life to a better quality of the environment and support for the Special Olympics. Putting a positive spin on the American corporation is itself a separate, major industry, and billions of dollars are spent annually to burnish the corporate image. The top 500 advertising agencies in the United States had total billings of almost $150 billion in 2001 ("Ten Years" 2003).
While a significant number of major corporations acquire reputations for providing poor service or shoddy merchandise, they still often tank among the financial titans of the economy. They continue to reward their top executives with extraordinary salaries and huge overall compensation packages, frequently in the hundreds of millions of dollars, including stock options and stock price appreciation, and often accompanied by sweetheart loans for their directors, while the corporation tailspins downward (Colvin 2002; Mike Allen, "Bush Urges 'New Ethic' for Execs," Arlington Star-Telegram, July 10, 2002, and "Bush Got Type of Loans He Opposes," Arlington Star-Telegram, July 11, 2002). Why do they do this? How do they do this? How can they do this?
Are the seemingly senseless and endless mergers and acquisitions, huge rewards and bonuses for governing boards and CEOs, and financial improprieties and questionable accounting practices central to the main purpose of the corporations which engage in them? Are they isolated instances of excessive rapaciousness on the part of some rogue executives and their underlings? …