THE COLLECTED WORKS OF THORSTEIN VEBLEN: Business Theories, Economic Articles & Essays. Thorstein Veblen
this strategic character. The dispositions which they make are business transactions, "deals," as they are called in the business jargon borrowed from gaming slang. These do not always involve coercion of the opposing interests; it is not always necessary to "put a man in a hole" before he is willing to "come in on" a "deal." It may often be that the several parties whose business interests touch one another will each see his interest in reaching an amicable and speedy arrangement; but the interval that elapses between the time when a given "deal" is seen to be advantageous to one of the parties concerned and the time when the terms are finally arranged is commonly occupied with business manoeuvres on both or all sides, intended to "bring the others to terms." In so playing for position and endeavoring to secure the largest advantage possible, the manager of such a campaign of reorganization not infrequently aims to "freeze out" a rival or to put a rival's industrial enterprise under suspicion of insolvency and "unsound methods," at the same time that he "puts up a bluff" and manages his own concern with a view to a transient effect on the opinions of the business community. Where these endeavors occur, directed to a transient derangement of a rival's business or to a transient, perhaps specious, exhibition of industrial capacity and earning power on the part of one's own concern, they are commonly detrimental to the industrial system at large; they act temporarily to lower the aggregate serviceability of the comprehensive industrial process within which their effects run, and to make the livelihood and the peace of mind of those involved in these industries more precarious than they would be in the absence of such disturbances. If one is to believe any appreciable proportion of what passes current as information on this head, in print and by word of mouth, business men whose work is not simply routine constantly give some attention to manoeuvring of this kind and to the discovery of new opportunities for putting their competitors at a disadvantage. This seems to apply in a peculiar degree, if not chiefly, to those classes of business men whose operations have to do with railways and the class of securities called "industrials." Taking the industrial process as a whole, it is safe to say that at no time is it free from derangements of this character in any of the main branches of modern industry. This chronic state of perturbation is incident to the management of industry by business methods and is unavoidable under existing conditions. So soon as the machine industry had developed to large proportions, it became unavoidable, in the nature of the case, that the business men in whose hands lies the conduct of affairs should play at cross-purposes and endeavor to derange industry. But chronic perturbation is so much a matter of course and prevails with so rare interruptions, that, being the normal state of affairs, it does not attract particular notice.
In current discussion of business, indeed ever since the relation of business men to the industrial system has seriously engaged the attention of economists, the point to which attention has chiefly been directed is the business man's work as an organizer of comprehensive industrial processes. During the later decades of the nineteenth century, particularly, has much interest centred, as there has been much provocation for its doing, on the formation of large industrial consolidations; and the evident good effects of this work in the way of heightened serviceability and economies of production are pointed to as the chief and characteristic end of this work of reorganization. So obvious are these good results and so well and widely has the matter been expounded, theoretically, that it is not only permissible, but it is a point of conscience, to shorten this tale by passing over these good effects as a matter of common notoriety. But there are other features of the case, less obtrusive and less attractive to the theoreticians, which need more detailed attention than they have commonly received.
The circumstances which condition the work of consolidation in industry and which decide whether a given move in the direction of a closer and wider organization of industrial processes will be practicable and will result in economies of production, -- these circumstances are of a mechanical nature. They are facts of the comprehensive machine process. The conditions favorable to industrial consolidation on these grounds are not created by the business men. They are matters of "the state of industrial arts," and are the outcome of the work of those men who are engaged in the industrial employments rather than of those who are occupied with business affairs. The inventors, engineers, experts, or whatever name be applied to the comprehensive class that does the intellectual work involved in the modern machine industry, must prepare the way for the man of pecuniary affairs by making possible and pitting in evidence the economies and other advantages that will follow from a prospective consolidation.
But it is not enough that the business man should see a chance to effect economies of production and to heighten the efficiency of. industry by a new combination. Conditions favorable to consolidation on these grounds must be visible to him before he can make the decisive business arrangements; but these conditions, taken by themselves, do not move him. The motives of the business man are pecuniary motives, inducements in the way of pecuniary gain to him or to the business enterprise with which he is identified. The end of his endeavors is, not simply to effect an industrially advantageous consolidation, but to effect it under such circumstances of ownership as will give him control of large business forces or bring him the largest possible gain. The ulterior end sought is an increase of ownership, not industrial serviceability. His aim is to contrive a consolidation in which he will be at an advantage, and to effect it on the terms most favorable to his own interest.
But it is not commonly evident at the outset what are the most favorable terms that he can get in his dealings with other business men whose interests are touched by the proposed consolidation, or who are ambitious to effect some similar consolidation of the same or of competing industrial elements for their own profit. It rarely happens that the interests of the business men whom the prospective consolidation touches all converge to a coalition on the same basis and under the same management. The consequence is negotiation and delay. It commonly also happens that some of the business men affected see their advantage in staving off the coalition until a time more propitious to their own interest, or until those who have the work of consolidation in hand can be brought to compound with them for the withdrawal of whatever obstruction they are able to offer.20 Such a coalition involves a loss of independent standing, or even a loss of occupation, to many of the business men interested in the deal. If a prospective industrial consolidation is of such scope as to require the concurrence or consent of many business interests, among which no one is very decidedly preponderant in pecuniary strength or in strategic position, a long time will be consumed in the negotiations and strategy necessary to define the terms on which the several business interests will consent to come in and the degree of solidarity and central control to which they will submit.
It is notorious, beyond the need of specific citation, that the great business coalitions and industrial combinations which have characterized the situation of the last few years have commonly been the outcome of a long-drawn struggle, in which the industrial ends, as contrasted with business ends, have not been seriously considered, and in which great shrewdness and tenacity have commonly been shown in the staving off of a settlement for years in the hope of more advantageous terms. The like is true as regards further coalitions, further consolidations of industrial processes which have not been effectcd, but which are known to be feasible and desirable so far as regards the mechanical circumstances of the case. The difficulties in the way are difficulties of ownership, of business interest, not of mechanical feasibility.
These negotiations and much of the strategy that leads up to a business consolidation are of the nature of derangements of industry, after the manner spoken of above. So that business interests and manoeuvres commonly delay consolidations, combinations, correlations of the several plants and processes, for some appreciable time after such measures have become patently advisable on industrial grounds. In the meantime the negotiators are working at cross-purposes and endeavoring to put their rivals in as disadvantageous a light as may be, with the result that there is chronic derangement, duplication, and misdirected growth of the industrial equipment while the strategy is going forward, and expensive maladjustment to he overcome when the negotiations are brought to a close.21
Serviceability, industrial advisability, is not the decisive point. The decisive point is business expediency and business pressure. In the normal course of business touching this matter of industrial consolidation, therefore, the captain