THE COLLECTED WORKS OF THORSTEIN VEBLEN: Business Theories, Economic Articles & Essays. Thorstein Veblen
of industry works against, as well as for, a new and more efficient organization. He inhibits as well as furthers the higher organization of industry.22 Broadly, it may be said that industrial consolidations and the working arrangements made for the more economical utilization of resources and mechanical contrivances are allowed to go into effect only after they are long overdue.
In current economic theory the business man is spoken of under the name of "entrepreneur" or "undertaker," and his function is held to be the coordinating of industrial processes with a view to economics of production and heightened serviceability. The soundness of this view need not be questioned. It has a great sentimental value and is useful in many ways. There is also a modicum of truth in it as an account of facts. In common with other men, the business man is moved by ideals of serviceability and an aspiration to make the way of life easier for his fellows. Like other men, he has something of the instinct of workmanship. No doubt such aspirations move the great business man less urgently than many others, who are, on that account, less successful in business affairs. Motives of this kind detract from business efficiency, and an undue yielding to them on the part of business men is to be deprecated as an infirmity. Still, throughout men's dealing with one another and with the interests of the community there runs a sense of equity, fair dealing, and workmanlike integrity; and in an uncertain degree this bent discountenances gain that is got at an undue cost to others, or without rendering some colorable equivalent. Business men are also, in a measure, guided by the ambition to effect a creditable improvement in the industrial processes which their business traffic touches. These sentimental factors in business exercise something of a constraint, varying greatly from one person to another, but not measurable in its aggregate results. The careers of most of the illustrious business men show the presence of some salutary constraint of this kind. Not infrequently an excessive sensitiveness of this kind leads to a withdrawal from business, or from certain forms of business which may appeal to a vivid fancy as peculiarly dishonest or peculiarly detrimental to the community.23 Such grounds of action, and perhaps others equally genial and equally unbusinesslike, would probably be discovered by a detailed scrutiny of any large business deal. Probably in many cases the business strategist, infected with this human infirmity, reaches an agreement with his rivals and his neighbors in the industrial system without exacting the last concession that a ruthless business strategy might entitle him to. The result is, probably, a speedier conclusion and a smoother working of the large coalitions than would follow from the unmitigated sway of business principles.24
But the sentiment which in this way acts in constraint of business traffic proceeds on such grounds of equity and fair dealing as are afforded by current business ethics; it acts within the range of business principles, not in contravention of them; it acts as a conventional restraint upon pecuniary advantage, not in abrogation of it. This code of business ethics consists, after all, of mitigations of the maxim, Caveat emptor. It touches primarily the dealings of man with man, and only less directly and less searchingly inculcates temperance and circumspection as regards the ulterior interests of the community at large. Where this moral need of a balance between the services rendered the community and the gain derived from a given business transaction asserts itself at all, the balance is commonly sought to be maintained in some sort of pecuniary terms; but pecuniary terms afford only a very inadequate measure of serviceability to the community.
Great and many are the items of service to be set down to the business man's account in connection with the organization of the industrial system, but when all is said, it is still to be kept in mind that his work in the correlation of industrial processes is chiefly of a permissive kind. His furtherance of industry is at the second remove, and is chiefly of a negative character. In his capacity as business man he does not go creatively into the work of perfecting mechanical processes and turning the means at hand to new or larger uses. That is the work of the men who have in hand the devising and oversight of mechanical processes. The men in industry must first create the mechanical possibility of such new and more efficient methods and correlations, before the business man sees the chance, makes the necessary business arrangements, and gives general directions that the contemplated industrial advance shall go into effect. The period between the time of earliest practicability and the effectual completion of a given consolidation in industry marks the interval by which the business man retards the advance of industry. Against this are to be offset the cases, comparatively slight and infrequent, where the business men in control push the advance of industry into new fields and prompt the men concerned with the mechanics of the case to experiment and exploration in new fields of mechanical process.
When the recital is made, therefore, of how the large consolidations take place at the initiative of the business men who are in control, it should be added that the fact of their being in control precludes industrial correlations from taking place except by their advice and consent. The industrial system is organized on business principles and for pecuniary ends. The business man is at the centre; he holds the discretion and he exercises it freely, and his choice falls out now On one side, now on the other. The retardation as well as the advance is to be set down to his account.
As regards the economies in cost of production effected by these consolidations, there is a further characteristic feature to be noted, a feature of some significance for any theory of modern business. In great measure the saving effected is a saving of the costs of business management and of the competitive costs of marketing products and services, rather than a saving in the prime costs of production. The heightened facility and efficiency of the new and larger business combinations primarily affect the expenses of office work and sales, and it is in great part only indirectly that this curtailment and consolidation of business management has an effect upon the methods and aims of industry proper. It touches the pecuniary processes immediately, and the mechanical processes indirectly and in an uncertain degree. It is of the nature of a partial neutralization of the wastes due to the presence of pecuniary motives and business management, - for the business management involves waste wherever a greater number of men or transactions are involved than are necessary to the effective direction of the mechanical processes employed. The amount of "business" that has to be transacted per unit of product is much greater where the various related industrial processes are managed in severalty than where several of them are brought under one business management. A pecuniary discretion has to be exercised at every point of contact or transition, where the process or its product touches or passes the boundary between different spheres of ownership. Business transactions have to do with ownership and changes of ownership. The greater the parcelment in point of ownership, the greater the amount of business work that has to be done in connection with a given output of goods or services, and the slower, less facile, and less accurate on the whole, is the work. This applies both to the work of bargain and contract, wherein pecuniary initiative and discretion are chiefly exercised, and to the routine work of accounting, and of gathering and applying information and misinformation.
The standardization of industrial processes, products, services, and consumers, spoken of in an earlier chapter, very materially facilitates the business man's work in reorganizing business enterprises on a larger scale; particularly does this standardization serve his ends by permitting a uniform routine in accounting, invoices, contracts, etc., and so admitting a large central accounting system, with homogeneous ramifications, such as will give a competent conspectus of the pecuniary situation of the enterprise at any given time.
The great, at the present stage of development perhaps the greatest, opportunity for saving by consolidation, in the common run of cases, is afforded by the ubiquitous and in a sense excessive presence of business enterprise in the economic system. It is in doing away with unnecessary business transactions and industrially futile manoeuvring on the part of independent firms that the promoter of combinations finds his most telling opportunity. So that it is scarcely an over-statement to say that probably the largest, assuredly the securest and most unquestionable, service rendered by the great modern captains of industry is this curtailment of the business to be done, this sweeping retirement of business men as a class from the service and the definitive cancelment of opportunities for private enterprise.
So