The Finance Curse. Nicholas Shaxson

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СКАЧАТЬ he hated Christianity or because he had a prejudice against Norwegians. His oddball, sardonic wit surely didn’t help, nor did his open contempt for economists and other academics. He clashed repeatedly with university authorities but also relished scholarly cut and thrust, calling himself “a disturber of the intellectual peace” and “a wanderer in the intellectual no-man’s land.”¹

      It wasn’t all solitude, though. He was later ejected from the University of Chicago for marital infidelities with colleagues and students. As one story goes, the dean summoned Veblen into his office in 1905 for a chat.

      DEAN: We have a problem with the faculty wives.

      VEBLEN: Oh yes, I know. They’re terrible. I’ve had them all.²

      Veblen’s womanizing prowess wasn’t due to his looks. Longish hair was plastered down on either side of a center part; bushy eyebrows and a roughly cut mustache and beard suggested he hadn’t tried very hard to discard his Norwegian peasant-farmer upbringing. One lover apparently described him as a chimpanzee. Others remembered a weird domestic charisma. “Lounging about in his loose dressing gown and looking not nearly as anemic and fragile as in his street clothes, he reminded one, with his drooping moustaches and Nordic features, of nothing so much as a hospitable Viking taking his ease at his own fireside,” a visitor recalled. “At such times, he was at his best, doling out curious information, throwing off a little malicious gossip which, in view of his seclusiveness, he must have picked miraculously out of the air, mixing picturesque slang with brilliant phrases of his own coinage, solicitously watching out for his guests’ comfort.”³

      This charisma extended to the realm of ideas and gained him a following that has endured more than a century after his death. He vivisected capitalism, impaling Victorian and neoclassical economists, who regarded humanity as a set of identical, perfectly informed, “utility-maximizing” individuals and firms pursuing their own self-interest, to be treated as data inputs for their mathematical sausage-making machines. In these economists’ hands, he acidly observed, a human became “a lightning calculator of pleasures and pains, who oscillates like a homogenous globule of desire of happiness under the impulse of stimuli.” Such economists, he jeered, would take “a gang of Aleutian Islanders, slashing about in the wrack and surf with rakes and magical incantations for the capture of shellfish,” and shovel them all into equations about rent, wages, and interest. Bring back history, he lamented. Bring back politics. Bring back real life. He had a point then, and he would still have a point today.⁴

      Veblen’s best-known book, The Theory of the Leisure Class, published in 1899, is a vicious exposé of a world where productive workers toiled long hours and parasitic elites fed off the fruits of their labors. The wealthy also engaged in “conspicuous consumption” and “conspicuous leisure”—wasteful activities to show others they were so rich they didn’t need to work. Plutocrats always wanted more wealth and power, he noted, and, worse, their petulance and excesses generally provoked not anger but reverence! The oppressed masses didn’t try to overthrow their social betters; they wanted to copy them. (The popularity of shows like Keeping Up with the Kardashians might be the modern equivalent.) Twentieth-century man, he concluded, wasn’t that far removed from his barbarian ancestors.

      Veblen’s next big book, The Theory of Business Enterprise, published in 1904, got less attention but was more radical and more important.⁵ In it, he contrasted industry and the “machine process”—the productive engineers and entrepreneurs who rolled their sleeves up and made useful stuff—with what he called the “business” of making profits. Above the foundation of production rose a financial superstructure of credit, loans, ownership, bets, and markets to be controlled and milked. While Marx had focused on tensions between workers and factory owners, Veblen concentrated on a different but related struggle: between wealth creators and wealth extractors. Makers versus takers; producers versus predators. If it helps, picture a group of old men in top hats, manipulating a Rube Goldberg–like contraption of spindly pipework perched on top of the economy, hoovering up coins and notes and IOUs from the pockets of the workers and consumers toiling away underneath.⁶

      Generations of economic thinkers had known about this distinction at least as far back as the publication of Adam Smith’s The Wealth of Nations in 1776.⁷ The main problem, though, was that people disagreed about who the wealth creators were. A conservative tradition holds that they are the rich, the owners of money and capital, who build the factories, then get taxed by government, which redistributes their wealth to the poor and to the recipients of handouts. It’s a view that had long been promoted by the likes of John C. Calhoun, a former US vice president and secretary of war who had been a leading defender of slavers and plantation owners. Calhoun, the “Marx of the Master Class,” did everything he could to try to safeguard “the rights of the radical rich,” as the historian Nancy MacLean puts it: the rights of wealthy elites against “oppression” by democracy and by the “tyranny” of majority voting.⁸ Calhoun’s modern equivalent would be today’s billionaire classes, who lobby, finance think tanks and political candidates, and even create media empires so as to skew and rig the laws of the land in their favor. In their view of history, it’s the poor and disadvantaged who are the leeches, preying on the capitalists.

      But Veblen was having none of it. He compared the rich wealth extractor to a self-satisfied toad who “has found his appointed place along some frequented run where many flies and spiders pass and repass,” and he then went a whole step further, into more controversial terrain. Many businessmen get rich, Veblen went on, not just through extraction, like the lazy toad catching passing flies, but through active sabotage—or, as he put it in his spiky language, “the conscientious withdrawing of efficiency.” These players, he said, interrupt the regular flow of outputs, shaking the tree so they can more easily make off with the fruit.⁹

      Nonsense, the critics sneered. Who’d do such a rotten, foolish thing?

      Lots of people, it turns out. Veblen had brutally exposed one of capitalism’s great open secrets. Here it is: big capitalists don’t like efficient competition, and they don’t like free markets. They say they do, but genuine competition drives down prices and drives up wages—and so reduces profits. What they really like are markets rigged in their favor and against workers, consumers, and taxpayers. That’s where the big money is. Instead of competing against each other they conspire against consumers: “It became a competition not within the business but between the business as a whole and the rest of the community.” This conflict is at the heart of the finance curse.

      The Theory of Business Enterprise came out in the wake of what was then, and may still be, the most impressive feat of investigative journalism in world history. This was an exposé of John D. Rockefeller’s Standard Oil monopoly by the journalist Ida Tarbell, who uncovered a conspiracy and cartel the likes of which the world had never seen. Rockefeller, she revealed, was a master of Veblenite sabotage, rigging markets in the production and distribution of oil and its refined products, buying or elbowing out rivals in a ruthless and sometimes violent quest to build an America-wide monopoly. Her articles, serialized in McClure’s magazine from 1902 to 1904, opened with a picture of rugged young men carving out new frontier towns in the Pennsylvania oil fields.

      Life ran swift and ruddy and joyous in these men. They were still young, most of them under forty, and they looked forward with all the eagerness of the young who have just learned their powers, to years of struggle and development. They would make their towns the most beautiful in the world. But suddenly, at the very heyday of this confidence, a big hand reached out from nobody knew where, to steal their conquest and throttle their future. The suddenness and the blackness of the assault on their business stirred to the bottom their manhood and their sense of fair play.¹⁰

      In one Rockefeller operation a hundred ruffians descended on Hancock, a town in Delaware County, New York, in 1892 to prevent a competing pipe from being СКАЧАТЬ