The Consequences of Peace: Veblen on Proper Policy to Support Capitalist Economic Relations

By Henry, John F.; Bell-Kelton, Stephanie | Journal of Economic Issues, June 2007 | Go to article overview

The Consequences of Peace: Veblen on Proper Policy to Support Capitalist Economic Relations


Henry, John F., Bell-Kelton, Stephanie, Journal of Economic Issues


Thorstein Veblen generally shied from directly professing policy recommendations. His concerns lay mainly in the development of theory that would assist in the understanding of the workings of a capitalist economy. But, Veblen clearly understood that while it was possible for the government to reinforce capitalist relations through "proper" policy, that "improper" policies might threaten the durability of those relations. In Veblenian terms, "proper" policies are dictated by the underlying property relations of capitalism that require: (1) a segmented (or class) society in which productive equipment is controlled by a minority; (2) a property-less laboring majority that must sell labor power to those who control property; and (3) an economic process that has monetary gain as its objective.

As such, capitalism is a "predatory" economy. To support it, "the community must be of a predatory habit of life ... that is to say, the men, who constitute the inchoate leisure class in these cases, must be habituated to the infliction of injury by force and stratagem" (Veblen [1899] 1922, 7-8). Capitalism differs from the predatory economies on which it is founded in that it is a pecuniary economy. In addition to aggressiveness--a feature of all predatory economies (Veblen [1914] 1964, 156)--capitalism is characterized as "invidious, personal, emulative, looking to differential values in respect of personal force or competitive success, looking to gradations in respect of comparative potency, validity, authenticity, propriety, reputability, decency" (177). It is an accumulating economy where the "incentive to accumulate" is not the satisfaction of physical comfort, but a "race for reputability on the basis of invidious comparison...." (Veblen [1899] 1922, 32).

The purpose of this paper is to draw out the kinds of policies that Veblen deemed "proper" (1) in order to promote the predation on which a successful capitalism rests, where "the preservation of the present pecuniary law and order, with all its incidents of ownership and investment," is not unduly challenged by the underlying population (Veblen 1917, 366).

Veblen on Proper Policy

Initially, one would expect that the body responsible for implementing policy (government or the state), would be motivated by its collective understanding of the purpose of proper policy formation: they would be responsible for the preservation of the extant economic order. Thus:

   Representative government means, chiefly, representation of
   business interests. The government commonly works in the interest
   of the business men with a fairly consistent singleness of purpose.

   ... (M)odern politics is business politics.... This is true both of
   foreign and domestic policy. Legislation, police surveillance, the
   administration of justice, the military and diplomatic service, all
   are chiefly concerned with business relations, pecuniary interests,
   and they have little more than an incidental bearing on other human
   interests. (Veblen [1904] 1965, 286, 269)

   Absentee ownership ... is the foundation of law and order ... (to)
   which the Elder Statesmen are committed by native bent and by the
   duties of office. This applies to both the economic and the
   political order, in all these civilized nations, where the
   security of property rights has become virtually the sole
   concern of the constituted authorities. (Veblen [1920] 1954,
   466).

As business principles, based on the constant search for monetary profit, conflict with industrial principles under a regime of absentee ownership (or oligopoly), one eventually sees a call for reform. Unemployment, resulting from the sabotage of production, and falling real wages, resulting from cost-reducing/price-increasing measures of managers, create conditions that generate ferment. But reform has its limits:

   In the long run, so soon as the privation and chronic
   derangement which follows from this application of business
   principles has grown unduly irksome and becomes intolerable,
   there is due to come a sentimental revulsion and a muttering
   protest that "something will have to be done about it" . … 

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