Abstract
Buried under stacks in a bookstore in Michigan, I discovered a 1964 copy of Douglas F. Dowd’s Thorstein Veblen. The book is relevant more than one-half century after its publication. While reading the book, I was reminded how compelling Veblen’s assessment of U.S. military entanglements and financial crises remains. Also, I was impressed by the thoughtful presentation of the young Douglas Dowd, so I wrote the attached review. Given that Professor Dowd passed away in 2017, I am hopeful that there may be interest in revisiting his work as well as the work of Veblen whose insights into the role of credit in financial crises remains informative.
Soren Kierkegaard receives credit for writing “Once you label me, you negate me . . .” The quotation is seemingly impossible to locate in any volume attributed to the author or any of his many pseudonyms. Admirers of Kierkegaard will eagerly profess that the moody Dane penned the provocative phrase. This essay shall not explore this beguiling turn of phrase, but rather will evoke its least inspired interpretation. To introduce Thorstein Veblen as an economist, a sociologist, a political scientist, or even a social critic is to execute an indefensible disservice that narrows and diminishes the breadth of his contribution to our understanding of human economic, political, and social action and interaction in domestic and international affairs.
Like Kierkegaard, Veblen was a writer with a keen appreciation of the challenges of his time. Both men were marginalized and socially isolated, and both men received limited financial reward despite the brilliance and enviable volume of production. Veblen was born in 1857 in rural Minnesota shortly after the untimely death of Kierkegaard in 1855. Veblen’s childhood as the son of a Norwegian immigrant farmer inspired and informed much of what he studied and wrote. He died in August of 1929 only a short period before the stock market crash in October 1929 that he anticipated in his scholarship. The Great Depression that followed greatly impacted the author of the book here reviewed. Douglas F. Dowd was born in 1919, lived through the economic hardship of the 1930s, and served as a pilot in the Pacific theater during the entirety of World War II before attending college and completing his PhD in Economics at Berkeley. He joined the Cornell faculty during the decade of the sixties before returning to California where he taught at various colleges and bookstores, the latter pro bono. Dowd was actively involved in the anti-war movement and joined the 1968 ticket of the Peace & Freedom Party as Vice President for Black Panther Eldridge Cleaver. Dowd’s public opposition to the Vietnam War and challenges to American capitalism, militarism, and foreign policy reportedly warranted a 2,500-page FBI file documenting his dissent (Cypher, 2017). Embracing the acerbic disdain for wastefulness, lost purpose, and missed opportunity in higher education embraced and expressed by the frequent subject of his books, Dowd departed Cornell after informing students that a Cornell education was “boring and wasteful” (Newburger, 2017). And so we see that Douglas F. Dowd is well-suited and well prepared to present, relate, and extend the ideas of Thorstein Veblen. Both men were critical of America, especially American capitalism. Both men wrote to elevate the discourse so the promise of America might yet be realized. In Thorstein Veblen, Douglas F. Dowd presents a sympathetic yet critical assessment of the dark voice that challenged America in the earliest decades of the 20th century.
The book is part of the Great American Thinkers series edited by Arthur W. Brown and Thomas S. Knight of Adelphi University. The series is noteworthy for the diversity of subjects ranging from prominent figures in U.S. political history to psychologists, historians, and philosophers. So it seems fitting that Veblen, whose breadth of analysis draped so many academic disciplines, is included. Presentation of the diversity of Veblen’s contribution requires creative organization. Rather than approach Veblen’s work chronologically, Dowd arranges his chapters thematically with emphasis on six Veblen texts. In the opening chapter, Dowd examines Veblen’s fist book The Theory of the Leisure Class (1899). In the second chapter, Dowd examines Veblen’s assessment and critique of American capitalism as outlined in The Theory of Business Enterprise (1904) and in its companion volume, Absentee Ownership (1923). Chapter 3 explores Veblen’s relationship and approach to economic theory. Chapter 4 evaluates Veblen’s contribution with regard to major events of the 20th century. Chapter 5 assesses the strengths and weaknesses of Veblen’s work. Dowd concludes with two appendices. The first presents quotations from Veblen’s On Higher Learning (1918), and the second is titled Veblenisms. This interesting title is misleading in that it does not refer to the bounty of neologisms conceived and constructed by Veblen but rather reproduces quotations on specific subjects without commentary from Dowd. The decision to present selected quotations from On Higher Learning as an appendix reveals Dowd’s decision to focus the main chapters on Veblen’s examination of economics and the implications for politics.
In the opening chapter, Dowd provides some biographical introduction to Veblen before engaging Veblen’s first and most enduring text, The Theory of the Leisure Class. The emphasis of the discussion centers on three key concepts: the leisure class, conspicuous consumption, and emulation. To contextualize these concepts for the mid-century reader, Dowd suggests that the leisure class can be distinguished by its manipulation of people rather than objects. Initially, this statement is unsatisfying until the nuance of the dichotomy is fully realized. Dowd’s use of the verb manipulate serves separate meanings. In regard to those that manipulate objects, the verb implies purposeful and productive use. In regard to the leisure class, manipulate carries a negative connotation suggestive of selfish disregard for those employed by the leisure class. The language reveals that the leisure class viewed individuals as means to an end similar to how workers use a tool toward an end. The ethical conflict is revealed and the distinction is no longer in question. This sentence is indicative of the thoughtful contributions of Dowd populating the book.
In the second chapter, Dowd reviews Veblen’s examination and assault on American capitalism. Veblen’s appreciation of history and institutional change is central to the analysis. Dowd includes extended quotations along with his commentary on the underlying influence of natural rights in the development of American capitalism. Although an understanding of the origins of natural rights is paramount to analysis of Adam Smith, the emergence of large industrial firms alters the relevance of natural rights as justification of “laissez-faire” capitalism. As industry expanded and became less personal, the capitalist system grew more complicated than the early system featuring the butcher, the baker, and the brewer celebrated by Smith. Accordingly, the system described by Smith in which the small producers compete for survival based on delivering value to consumers was already obsolete in the late 19th century, but this irrelevance did not, according to Veblen, motivate rejection of the underlying role of natural rights and the retention of property rights. Property rights now referred to ownership without regard to involvement in the production process. Here, we see societal evolution in response to technological innovation outpacing the prevailing institutions that determine the rewards. Despite earlier observation of this disparity by social observers like Henry George, institutions are slow to change because the beneficiaries are not inclined to recognize or acknowledge the discrepancy. Those familiar with Veblen will infer that conservatism, the status quo, prevails due to inertia.
Veblen’s work concentrated on the consequences of capitalism. Notably, he concluded that “depression” is the norm rather than the exception, and he identified challenges of labor unrest as the “social problem.” Instrumental in his assessment is the tendency for the concentration of economic power. Concentration of economic power permits the “Captains of Industry” to limit production to achieve profit. As technological innovation increases the capacity to produce with less dependence on labor, business seeks and obtains influence over government. First, business needs to secure the service of government and law enforcement to favor owners over workers. Second, business needs to influence government policy to create demand for the increased production made possible by technological advance. Dowd emphasizes Veblen’s contention that the dominance of business over government explains the promotion of patriotism and militarism mainly to distract society from the unpleasant consequences of capitalism. To this day, business interests are implicated in and associated with U.S. involvement in foreign affairs.
Writing decades prior to Keynes, Veblen presented an explanation of business crises and depression, rather than a comprehensive theory of the business cycle. Dowd notes that the explanation relies on the relationship between technological change, capitalization, prices, and profit expectations. Dowd starts with Veblen’s distinction between “business” and “industry.” “Industry” is involved in production of goods to serve social purpose, whereas the concern of “business” is securing profit. As with Keynes, Veblen recognized that the failure of consumption to absorb increasing levels of production places downward pressure on prices. Declining prices affect profit expectations and capitalization rates of equipment. Unlike Keynes, he did not examine the cause for new investment. The kernels of a business cycle theory were introduced by Veblen fully developed by Keynes.
Dowd provides a thorough introduction to Veblen’s understanding of science and his underlying assumptions, which informed Veblen’s criticism of the prevailing neoclassical approach and the Marxist alternative. Veblen openly acknowledged his debt to Darwin when purporting that change is the unvarying constant. Social existence was constantly changing as underlying social institutions “evolved” unnoticed by all including scientists. To illustrate, Dowd reminds readers that Newton and Einstein observed the same data yet arrived at different theoretical conclusions. The challenge for social science is even greater because “the analysts is part of and shaped by the data.” According to Dowd, “Although he can be objective he cannot be neutral. Objectivity is observed when scientific procedures are followed; but neutrality, . . . , is neither possible or desirable” (p.58). As part of his challenge to neoclassical economics Veblen wrote, “The spiritual attitude of a given generation of economists is therefore in good part a special outgrowth of the ideals and preconceptions current in the world about them” (p. 58). Dowd extends the idea by observing that the “ideals and preconceptions” lead men to appraise a situation as “normal” or “abnormal,” or as holding promise or threat.
Dowd distinguishes the mainstream of economic science that seeks to explain “What is?” from Veblen’s approach that asks, “How did we get here?” and “Where are we going?” The reliance on social relations would seem to reflect an influence from Marx, but Veblen rejected much of Marx and considered him to be a propagandist. In short, the assumption of a rational actor and depiction of a “representative firm” were antithetical to the observation of Veblen. Men were not rational beings able to make lightning fast calculations to maximize utility with regard to an income constraint. And, more importantly perhaps, the “representative firm” is representative of no firm when economic production and control is increasingly concentrated among larger, more powerful firms than the neoclassical model considered in his time. All of these challenges have since been engaged and incorporated into neoclassical theory.
In the fourth chapter, Dowd evaluates the “judgments and predictions” of Veblen against the relevant events of the 20th century. Dowd is writing in the mid-1960s so the reader must imagine that period to appreciate the assessment. Veblen dedicated his later writing to Germany and predicted that Japan would follow the similar path. He considered Germany the “prime disturber of the peace.” Veblen in a sense welcomed the war so the German system could be destroyed. The Armistice, however, left Germany intact. He lamented the “conservation of the archaic trait” because imperial Germany needed to be destroyed. In this regard, it appears that Veblen was prescient.
Veblen argued that a League of Nations would be useless without U.S. involvement, and he anticipated that United States would not participate in an alliance for peace because peace did not serve U.S. business interests. As pacific people, Veblen suggested that the predatory instinct of Americans was satisfied through business dealings rather than war. The Europeans could not escape their feudal history in which war bestowed honor and glory. The Americans had no such history. Nonetheless, Veblen asserted that technological advances would require greater industrial democracy or the result would be stagnation, conspicuous consumption, armaments, and waste. No grasp of historical specifics is necessary to appreciate this prediction. Stagnant economic growth has been a concern for over a generation and the complements abound.
In an appendix to the chapter, Dowd identifies events that Veblen neglected or misread. Dowd is struck that Veblen missed the collapse of colonialism. He then addresses the topic with some detail. Although fascinated with the Russian Revolution, Veblen underestimated the impact of the Soviets. Veblen identified Bolshevism as a revolutionary attempt to extend democracy into industry. Such a challenge to the industrial hegemony would be too threatening to let stand. Accordingly, Veblen expected that the vested interests of the West would make sure that the Soviets failed. Writing in 1964, it was not certain that the Soviet model would fail.
The main body of the text concludes with an assessment of the strengths and weaknesses of Veblen’s contribution. Rather than simply listing the successful predictions of Veblen, Dowd examines whether Veblen was right for the right reasons, which is a higher standard than typically is required by a sympathetic supporter of a scholar. Evidence of Dowd’s elevated criterion is his warning that we must not be fooled by Veblen’s claims of being an impartial observer for he too was part of the system he critiques, and he too was influenced by the very institutions he assailed. Where Veblen succeeds, however, is in helping us acknowledge and unlearn that which we must dismiss before we can realize progress.
Dowd reserves biographical information for this final chapter. Teaching was not a strength of Veblen nor was writing. He notes that Veblen disdained inefficiency and waste, yet his teaching and especially his writing were exemplars of both. Veblen’s writing is cumbersome, repetitive, and can be vague. Given the clarity of his penetrating insights, is it possible that Veblen chose to be less accessible at times? The mumbling teacher and rambling prose may reflect the pessimism inherent in Veblen’s perspective as well as the difficulties he experienced securing and retaining positions despite his prolific production and reputation as scholar. David Riesman is quoted arguing that maybe Veblen concluded that “nobody is listening.”
Dowd observes that where criticism of the neoclassical approach appears to fall short, it is largely because the neoclassical school absorbed Veblen’s criticism. The legacy of reform is clearly a strength. Mainstream economics has not embraced all criticisms. According to Dowd, mainstream economics continues to ignore that changes occur over time, so the focus on the short-run continues to do a disservice to social inquiry because it ignores the impact of technological and institutional change. Fifty years after the publication of Dowd’s book, we know that the work of Douglas North, Ronald Coase, and James M. Buchanan have woven an appreciation of institutions into economic analysis. Moreover, each of these contributions have secured the Nobel Prize.
Veblen believed that power is obtained through ownership and control of wealth. He contended that state power was the expression of the interests of dominant business groups. These “vested interests” did not use coercion to influence government, but rather their authority went unchallenged because it was supported by social institutions. Moreover, the propensity to emulate prevailed. Accordingly, emulation manifested itself in conspicuous consumption and patriotism, which reinforced the values of the “vested interests.” Dowd concludes that Veblen’s theory of the state appears valid. This reviewer is inclined to agree.
Veblen observed that the traditionally broad perspective of economic analysis was in decline with the emergence of emphasis on technique. He recognized the importance of specialization, but he challenged the balance between perspective and technique. Veblen observed the new scholarship of the day emphasized the tools rather than the questions to be answered. Indeed, the tools fundamentally limit the questions to be asked. Attraction to the discipline shifts away from questions of economics toward interest in the tools. The economics profession has continued to attract individuals with more affinity for the tools than the questions. Interestingly, Veblen’s student, Wesley Clair Mitchell, embraced the importance of testing economic theory. Mitchell established and led the National Bureau of Economic Research (NBER). The NBER has served as an integral resource for economic analysis.
Thorstein Veblen was a prolific scholar who recognized the failed potential of America and the shortcomings imposed by American capitalism. Douglas Dowd was similar as a scholar, but deviated from Veblen in that, like Marx, Dowd engaged as a political activist. Dowd’s assessment reflects his interest in politics, especially his interest in American imperialism and the use of power to benefit the few at the cost of the many. The shortcomings of American capitalism remain powerful sources of missed opportunity in the American experiment. Veblen’s identification of the transition from “industry” to “business” reveals the emergence of the dominance of financial concerns in economic affairs. This insight resonates a century later. Revisiting Dowd and Veblen informs our understanding of how the few thrive at the expense of the many and why society seems unable to act.