THE COLLECTED WORKS OF THORSTEIN VEBLEN: Business Theories, Economic Articles & Essays. Thorstein Veblen
of business management.
Work that is, on the whole, useless or detrimental to the community at large may be as gainful to the business man and to the workmen whom he employs as work that contributes substantially to the aggregate livelihood. This seems to be peculiarly true of the bolder flights of business enterprise. In so far as its results are not detrimental to human life at large, such unproductive work directed to securing an income may seem to be an idle matter in which the rest of the community has no substantial interests. Such is not the case. In so far as the gains of these unproductive occupations are of a substantial character, they come out of the aggregate product of the other occupations in which the various classes of the community engage. The aggregate profits of the business, whatever its character, are drawn from the aggregate output of goods and services; and whatever goes to the maintenance of the profits of those who contribute nothing substantial to the output is, of course, deducted from the income of the others, whose work tells substantially.
There are, therefore, limits to the growth of the industrially parasitic lines of business just spoken of. A disproportionate growth of parasitic industries, such as most advertising and much of the other efforts that go into competitive selling, as well as warlike expenditure and other industries directed to turning out goods for conspicuously wasteful consumption, would lower the effective vitality of the community to such a degree as to jeopardize its chances of advance or even its life. The limits which the circumstances of life impose in this respect are of a selective character, in the last resort. A persistent excess of parasitic and wasteful efforts over productive industry must bring on a decline. But owing to the very high productive efficiency of the modern mechanical industry, the margin available for wasteful occupations and wasteful expenditures is very great. The requirements of the aggregate livelihood are so far short of the possible output of goods by modern methods as to leave a very wide margin for waste and parasitic income. So that instances of such a decline, due to industrial exhaustion, drawn from the history of any earlier phase of economic life, carry no well-defined lesson as to what a modern industrial community may allow itself in this respect.
While it is in the nature of things unavoidable that the management of industry by modern business methods should involve a large misdirection of effort and a very large waste of goods and services, it is also true that the aims and ideals to which this manner of economic life gives effect act forcibly to offset all this incidental futility. These pecuniary aims and ideals have a very great effect, for instance, in making men work hard and unremittingly, so that on this ground alone the business system probably compensates for any wastes involved in its working. There seems, therefore, to be no tenable ground for thinking that the working of the modern business system involves a curtailment of the community's livelihood. It makes up for its wastefulness by the added strain which it throws upon those engaged in the productive work.
Business Principles
The physical basis of modern business traffic is the machine process, as described in Chapter II. It is essentially a modern fact, - late and yet in its early stages of growth, especially as regards its wider sweep in the organization of the industrial system. The spiritual ground of business enterprise, on the other hand, is given by the institution of ownership. "Business principles" are corollaries under the main proposition of ownership; they are principles of property, - pecuniary principles. These principles are of older date than the machine industry, although their full development belongs within the machine era. As the machine process conditions the growth and scope of industry, and as its discipline inculcates habits of thought suitable to the industrial technology, so the exigencies of ownership condition the growth and aims of business, and the discipline of ownership and its management inculcates views and principles (habits of thought) suitable to the work of business traffic.
The discipline of the machine process enforces a standardization of conduct and of knowledge in terms of quantitative precision, and inculcates a habit of apprehending and explaining facts in terms of material cause and effect. It involves a valuation of facts, things, relations, and even personal capacity, in terms of force. Its metaphysics is materialism and its point of view is that of causal sequence.38 Such a habit of mind conduces to industrial efficiency, and the wide prevalence of such a habit is indispensable to a high degree of industrial efficiency under modern conditions. This habit of mind prevails most widely and with least faltering in those communities that have achieved great things in the machine industry, being both a cause and an effect of the machine process.
Other norms of standardization, more or less alien to this one, and other grounds for the valuation of facts, have prevailed elsewhere, as well as in the earlier phases of the Western culture. Much of this older standardization still stands over, in varying degrees of vigor or decay, in that current scheme of knowledge and conduct that now characterizes the Western culture. Many of these ancient norms of thought which have come down from the discipline of remote and relatively primitive phases of the cultural past are still strong in the affections of men, although most of them have lost greatly in their power of constraint. They no longer bind men's convictions as they once did. They are losing their axiomatic character. They are no longer self-evident or self-legitimating to modern common sense, as they once were to the common sense of an earlier time.
These ancient norms differ from the modern norms given by the machine in that they rest on conventional, ultimately sentimental grounds; they are of a putative nature. Such are, e.g., the principles of (primitive) blood relationship, clan solidarity, paternal descent, Levitical cleanness, divine guidance, allegiance, nationality. In their time and under the circumstances which favored their growth these were, all and several, powerful factors in controlling human conduct and shaping the course of events. In their time each of these institutional norms served as a definitive ground of authentication for such facts as fell under its particular scope, and the scope of each was very wide in the day of its best vigor. As time has brought change of circumstances, the facts of life have gradually escaped from the constraint of these ancient principles; so that the dominion which they now hold over the life of civilized men is relatively slight and shifty.
It is among these transmitted institutional habits of thought that the ownership of property belongs. It rests on the like general basis of use and wont. The binding relation of property to its owner is of a conventional, putative character. But while these other conventional norms cited above are in their decline, this younger one of the inherited institutions stands forth without apology and shows no apprehension of being crowded into the background of sentimental reminiscence.
In absolute terms the institution of ownership is ancient, no doubt; but it is young compared with blood-relationship, the state, or the immortal gods. Especially is it true that its fuller development is relatively late. Not until a comparatively late date in West European history has ownership come to be emancipated from all restrictions of a non-pecuniary character and to stand in a wholly impersonal position, without admixture of personal responsibility or class prerogative.39 Freedom and inviolability of contract has not until recently been the unbroken rule. Indeed, it has not even yet been accepted without qualification and extended to all items owned. There still are impediments in the way of certain transfers and certain contracts, and there are exemptions in favor of property held by certain privileged persons, and especially by certain sacred corporations. This applies particularly to the more backward peoples; but nowhere is the "cash nexus" free from all admixture of alien elements. Ownership is not all-pervading and all-dominant, but it pervades and dominates the affairs of civilized peoples more freely and widely than any other single ground of action, and more than it has ever done before. The range and number of relations and duties that are habitually disposed of on a pecuniary footing are greater than in the past, and a pecuniary settlement is final to a degree unknown in the past. The pecuniary norm has invaded the domain of the older institutions, such as blood-relationship, citizenship, or the church, so that obligations belonging under the one or the other of these may now be assessed and fulfilled in terms of a money payment, although the notion