Soc (2010) 47:240–245
DOI 10.1007/s12115-010-9318-2
PROFILE
War and Economic Crisis: What Would Veblen Say?
Sidney Plotkin
Published online: 1 April 2010
# Springer Science+Business Media, LLC 2010
Abstract The nation’s recent experience with war and
economic crisis would hardlyshock Thorstein Veblen.
America’s most original radical voice, Veblen has much to
teach us about the common predatory origins of war and
finance and the tragic consequences of their pursuit. This
brief survey of the contemporary relevance of Veblen’s
observations about war and economic collapse emphasizes
the political foundation of his critical theory. Though
widely regarded as an economic thinker, Veblen’s critique
of modern business enterprise and its alliance with
government rests on an essentially political dissection of
what he termed barbaric exploit, the ancient root of war,
power politics, the state, and latter day financial conquest.
For Veblen, barbarism did not end with the coming of
liberal democracy, rule of law or capitalism; its habits of
exploit, waste and destruction go marching on.
Keywords Veblen . War . Exploit . Barbarism . Conflict .
The state . Politics . Financial crisis . Credit
Americans are misled into war; their government sponsors
torture and sweeping domestic surveillance. The US
economy, riding high on inflated real estate and stock
prices, collapses into financial crisis, to which that same
government responds with trillions in business bailouts.
Millions of ordinary workers stand by, their jobs, retirement
funds, and homes lost. What would Veblen say? It would be
wise to proceed cautiously. But a good bet is that he would
shrug his sad shoulders, lamenting, with no hint of surprise,
that we have learned nothing. But then how much could we
learn? Veblen surely doubted American capacities for
enlightenment. As he once observed: “The common man
does not know himself as such, at least not yet…the
S. Plotkin (*)
Department of Political Science, Vassar College,
Box 260, 124 Raymond Ave.,
Poughkeepsie, NY 12604, USA
e-mail: plotkin@vassar.edu
American tradition stands in the way.” (Veblen 1919, 174)
Enduring patriotic habits, coupled with inveterate belief in
the fabrications of finance and real estate, leave us
perpetually vulnerable to the political and economic
flimflam that spawns disaster. We are shocked by surprises
that should not surprise, by crises that are eminently
predictable, by repetitions of pathological behavior that
leave us endlessly perplexed. How could we be so gullible?
Lincoln said, “you cannot fool all the people all the time.”
But, Veblen added, “Where the people in question are
sedulously fooling themselves all the time the politicians
can come near achieving that same result.” (Veblen 1977
[1923], 34)
Thorstein Veblen remains America’s most original, and
perhaps least heralded, radical voice. As he assessed the
United States during its transition from agrarian into
industrial empire few subjects drew more of his attention
than matters of war and economic crisis. He devoted
theoretical attention to each; work that bears continued
study as a guide to our own perilous times. Veblen saw
these seemingly disparate phenomena as sharing a common
barbaric ancestry. What he has to say about war’s cultural
underpinnings is thus directly relevant to his critique of the
business system, including its penchant for financial crisis.
Capitalism, or the system of modern business enterprise and
finance, is an evolutionary development of ancient practices
of conquest and predation. It is a formidable change no
doubt, but one in form more than content. The adventurers
of finance seek conquest through mobilization and manip-
ulation of credit, not armies. But much coercion is involved
throughout, just as the material destructiveness of economic
panics all too closely resembles the battlefield’s waste and
chaos. It makes sense then to begin our recall of Veblen by
examining his ideas about exploit, war and the state; these
institutions offer the purer case of our enduring barbaric
legacies. Though most social scientists do not regard
Veblen as a political thinker, he in fact sets the foundation
for his wider critical theory, including his political economy
Soc (2010) 47:240–245
of financial crisis, in the overtly political realm of war and
conflict.
Many scholars have commented that Veblen’s ideas
about politics and the state are uninteresting and trivial.
The argument goes that because he reduced government to
a sounding board of business interests, he said little that
was new or subtle about the richness and depth of
democratic politics. Such views have a grain of truth,
but they are misleading, incomplete. In truth, Veblen
defined the modern state not in terms of its compliance
with corporate pressure, but in terms of its capacity to
threaten use of force. It is, he said, an “enterprise of
intimidation.” (Veblen 1977 [1923], 23) The state was, for
him, above all an institution of power, not an economic
institution, and it is not always or necessarily even
obedient to economic forces. It is precisely his caustic
view of the warfare state that makes Veblen’s work
chillingly relevant to America’s recent past. A brief look
at his thoughts on the state will show how the orthodox
view falls short of the mark. For that view fails to see how
the category of the state emerges within the larger whole
of his work and how it is related to his thinking about
power politics. In other words, Veblen’s famous hostility
to politics must be distinguished from his belief in the
centrality of political motives and habits to the onset and
evolution of barbaric institutions, including the later
development of capitalism itself.
To highlight this point, consider the conventional
wisdom of political science. For many, if not most
contemporary political scientists, the discipline is a study
of, among other things, power and conflict, where conflict
is widely thought to be an eradicable feature of human life,
and its most characteristically political expression the
struggle for power. Of course, Veblen challenged the idea
that human aggression and conflict were natural. He could
not have been more opposed to Hobbes on this point.
(Veblen 1964, 76-98) But he certainly argued that the
transformation of savagery into barbarism brought humans
into a predatory era, one whose main organizing habit of
mind is the distinctively political one of “judging facts and
events from the standpoint of the fight…when the common
sense appreciation of men and things has come to be an
appreciation with a view to combat.” (Veblen 1979 [1989],
12) In this contentious moment, humans arrive at their
“exaltation of the strong hand.” Barbarians award their
wreaths of honor and trophies of distinction to men capable
of feats of “exploit.” Even the wealth they seize, women
slaves first of all, finds a motive in “the power” such wealth
confers. (Veblen 1979 [1989], 21)
Even more important, consider what “exploit” means to
Veblen. It is not simply a successful act of physical
aggression against another. It is something considerably
subtler and more political than that. Exploit involves for
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the subjective attitude of the exploiter a “conversion to his
own ends of energies previously directed to some other
end by another agent.” (Veblen 1979 [1989], 8) It consists
of re-directing and controlling the purposes, goals and
wills of others. This is, in essence, exploit as political
domination, the control of another’s capacity to exercise
purpose and will. It is a violation of the other’s freedom.
For Veblen, predatory or barbaric culture really begins
with the effort “to overcome and reduce to subservience
those alien forces that assert themselves refractorily in the
environment.” At its heart an act of political domination,
predation means reducing “alien” others to “subservi-
ence.” If politics is indeed about conflict, the human fight
begins with struggles to impose or to elude exploit. For
Veblen, in short, politics begins not with human nature,
but with barbarism.
Tribal and clan warfare, imperial conquest, and feudal
order kept barbarism in command as the predominant
cultural arrangement for centuries. So Veblen was careful to
write about these pre-modern phenomena in ways that
conspicuously avoided the concept of state. He introduced
the state into his work gradually, almost as if it were an act
of intellectual resistance to avoid government, postponing
confrontation with the master political institution until
history or social evolution demanded its consideration.
The state is virtually invisible in Theory of the Leisure
Class, appearing for the first time in a late and seemingly
dry chapter of The Theory of Business Enterprise that
examines “business principles in law and politics.” But
there is a surprise lurking in this otherwise reductionist
view of government as business tool.
After reviewing how business interests in military
spending accelerated international arms racing, Veblen
offered a crucial qualification. At some point militarization
becomes something more than and different from an
imperial tool of corporate power. Militarization assumes a
life of its own: the aggressive state “comes to make use of
business interests as a means” to its own power “rather than
as an end.” Now “the objective end of warlike endeavor
necessarily shifts from business advantage” to the ancient
barbaric interests in “dynastic ascendancy and courtly
honor.” The business state reverts back to its historic,
predatory, political character. War preparations induce state
officials to abandon fealty to capital. Government “takes on
a dynastic complexion and breeds the temperaments, ideals,
and institutional habits proper to a system of dynastic
politics.” (Veblen 1904 [1978], 300, ital. added) Now, in
Business Enterprise, Veblen does not offer grounds for his
argument. That emerges in a series of later studies more or
less coterminous with World War I: The Instinct of
Workmanship (1914), Imperial Germany and the Industrial
Revolution (1915), An Inquiry Into The Nature of Peace
(1917), and lastly, Absentee Ownership (1923).
242
It is sensible to suggest as some have that Veblen’s turn
to the state in the war years reflected his anxiety about
contemporary events. But a careful look at these later works
also suggests specifically intellectual and theoretical rea-
sons for the turn. In Instinct of Workmanship, for example,
Veblen introduces the state not as a means of exploring
warfare. It emerges in a reflection on the coming of the
handicraft era and the beginnings of capitalism. He links
the early modern state with the decline of feudalism, the
rise of absolute monarchs, and their princely competition
for power on the European continent and beyond. Monar-
chical interests in power drove military preparation and
spending. These, in turn, spurred capital investment in
technology, wider markets, and administrative means to
raise revenues to pay for it all. Capitalism had a belligerent,
political spur. In effect, Royal warfare states propelled forces
of economic development, urban expansion and administra-
tive rationalization that culminated in an increasingly power-
ful and competitive European state system, one whose roots
lay in “the feudal establishments of the Middle Ages; which,
in turn, are of a predatory origin and of an irresponsible
character.” (Veblen 1914 [1990], ch. 6; Veblen 1917, 9)
The resulting system of states—“the Concert of Powers”—
became nothing short of a war-making machine. “A modern
nation,” as Veblen saw it, “constitutes a State only in respect of
or with ulterior bearing on the question of international peace
or war.” (Veblen 1917, 4, n.1) Hence whatever their other
institutional differences—and Veblen certainly believed that
in some respects the differences mattered a lot—the early
20th century Dynastic and Democratic states were nonethe-
less “divergent variants” off a common feudal ancestor. In
matters of war and peace, central preoccupations of any
modern state worth the name, the various forms of modern
government reflect enduring “characteristics of the ancient
regime.” These include claims to “sovereignty” under which
the citizen remains, even in the ostensibly democratic states,
to some extent a ‘subject’ who owes a ‘duty’ “to the
constituted authorities in one respect or another.” All such
states, regardless of form, expect and demand political
loyalty, which underpins governmental “rights in coercively
controlling and directing the actions of the citizen, or
subject,” especially in matters concerning the “common
defense.” Beyond demands for loyalty, such states encourage
virulent forms of patriotism and nationalism, militantly
“partisan solidarities” that glorify the nation and mobilize
the popular will to fight.
This is ominously and detrimentally true for the
democracies too, which otherwise lay claim to abiding by
principles of peace, transparency, reason, accountability and
truth. But as demands of war threat take precedence,
domestic politics in democracy bends to over-weaning
pressures of national security. Because foreign policy is
unavoidably “an enterprise in chicane and coercion,” the
Soc (2010) 47:240–245
democratic warfare state necessarily emulates its dynastic,
aggressive brothers. So it too is “necessarily furtive;” its
foreign policy “runs forever on sharp practice, carefully
withholds ‘information that might be useful to the enemy,’
and habitually gives out information with intent to
deceive.” War’s shadow falls over democracy, “with the
result that the authorities of the democratic commonwealths
habitually go about their work under a cover of reticence
tempered with prevarication.” (Veblen 1977 [1923], 29)
Fraud is married to force. Skills of dissimulation and deceit
inevitably bleed into habits of democratic statesmanship.
Brutality is tolerated and so are lies. The consequence is felt
in the characters of those democracy deems fit to rule. They
will be people comfortable operating on what Richard
Cheney calls ‘the dark side.” Or, as Veblen noted, “By
selective elimination of artless persons the personnel of
official life come to be made up, in the main of, such
persons as will feel at home in the resulting spiritual
twilight of official life, by native gift or by sedulous
training.” (Veblen 1977 [1923], 30) As the norms—or
rather normlessness—of real politic - infuse the ruling
circles of ostensible democracy, “the practical outcome has
been a comprehensive defeat of democratic institutions” by
imperatives of the international system. But war is not
alone in contaminating democracy, for Veblen. There is also
the fact of the current financial order and its penchant for
crisis and collapse.
Veblen is surely better known as an economic theorist
than as a political thinker. Yet his thinking about modern
finance is informed by his quite political sense of American
culture, especially the deep imprint of the American
Country Town. There are few better ways to appreciate
Veblen’s prescience as guide to our contemporary economic
follies than to see how he traces the outlines of America’s
speculative habits in the irrationalities of country town
political economy. The country town is “one of the great
American institutions,” he proclaimed, “perhaps the great-
est, in the sense that it has had and continues to have a
greater part than any other in shaping public sentiment and
giving character to American culture.” (Veblen 1977
[1923], 142) And that sentiment and character more than
anything else favor the fast buck and sharp practice of the
real estate deal. The “country town” was, after all, an
enterprise in real estate, a system of economic manipu-
lation, predation and exploit, “designed to get something
for nothing from the unwary, of whom it is believed by
experienced persons that ‘there is one born every minute.’”
(Veblen 1977 [1923], 143)
Nothing was more important to this proclivity to self-
exploitation than the population’s ever resilient faith in
rising land values, a faith boosted throughout the heartland
by municipal leaders - public and private - bent on “lifting”
local land values ever “farther off the level” of the land’s
Soc (2010) 47:240–245
use value. (Veblen 1977 [1923], 142–143) Intimately bound
up with the land business, local retailers and bankers
actively courted and manipulated the regional farm trade,
encouraging farmers to take on more land and more debt.
Veblen’s nineteenth century salesmen made promises all too
familiar to America’s 21st century home buyers: assume
more debt, how can you lose? Real estate defies gravity; it
always goes up. And when it does, debts loads recede.
Promises of something for nothing become for the local
land business something akin to the subterfuge regularly
practiced by diplomats on the international stage. As in the
world of international intrigue, so in the local land business:
Suppressio veri, suggestio falsi: suppress the truth, suggest
the false. Dissimulation is the way to win.
Above all, though, Veblen’s critique of rural land
speculation was an inspired insight into the power of
intangible paper values to compel belief among all social
strata. It not only snookered farmers into assuming too
much debt. It mystified the municipal boosters themselves,
the men of local power, who, persuaded of an eternal
expansion of values, were as unprepared for collapse as the
poorest farmer. In effect, Veblen saw in the scheming, self-
deceptive logic of the rural land business a cultural template
for the more grandiose and destructive self-deceptions
perpetuated by the higher “captains of solvency” on Wall
Street. Leaders of high finance were no more interested in
the nation’s plants and factories than country town boosters
were interested in agronomy. Theirs was an adventure in
fabrication: the creation and elaboration of abstract,
pecuniary values, perpetuated through careful management
and cultivation of economic illusion—the system of
modern credit finance. Of course the country town rested
on a real economic foundation of agriculture, just as finance
drew its material sustenance from modern industry. But in
each instance, economic elites and their political allies
subordinate material facts to inflated pecuniary forces.
Veblen’s assessment of relations between modern cor-
porate finance and crisis tendencies in the real economy is
more than apt preparation for understanding the last 2 years
of American economic life. His analysis begins with the
premise that the corporation is a distinctly pecuniary or
financial institution. As Alfred Sloan said decades ago
about GM: the company is about making money, not cars.
Its chief reason for being is to control and sell stock, paper
claims to ownership, whose value rises with a promise of
rising sales and prices. The decisive means to this end is the
corporations’ oligopolistic control of industrial assets,
resources and labor. Market power permits big companies
to regulate, curtail or “sabotage” production, allowing them
to fetch prices at whatever levels the traffic will bear, all the
while pumping up market demand with an increasingly
scientific salesmanship that pounces on every human
243
frailty, vanity or need. For Veblen, it is this larger corporate
power to control industry and manipulate demand that
sustains investment bankers in the belief that companies’
will indefinitely be able to raise prices, increase profits, and
thus to assume more debt.
In all this, government’s role is substantial. It enables
the larger financial logic to play itself out, for “in a
community… addicted to business principles” any “re-
medial measures…are bound to be of a businesslike
nature; designed in all reason to safeguard the accom-
plished facts of absentee ownership.” (Veblen 1977
[1923], 424) In other words, if finance thrives on a fabric
of illusions, the illusions command belief because at
bottom they rest on factual realities of economic and
political power that legitimate and authenticate such
illusions. What is truly remarkable for Veblen is how
these power realities foster elite willingness to believe
deeply in the prevailing financial metaphysics. The
manipulators are themselves manipulated. As a result,
two profoundly serious gaps emerge in the framework of
high corporate finance.
First, because the logic of finance looms above the
material realities of industry, accounting loses its anchorage
in the fact of tangible assets. It becomes an increasingly
obscure and versatile exercise in defining what is to count
as credit or debit, profit or loss, asset or liability. In ways
that chillingly anticipate the futures of Enron, Arthur
Anderson, Standard and Poor’s, Fannie Mae, and Lehman
Brothers, Veblen emphasizes the “flexuous character of the
elements of wealth engaged,” for “the working capital
involved in these transactions is accordingly of a peculiarly
elusive character.” (Veblen 1904 [1978], 164, 163) As the
higher economic activity proceeds on planes of refined
abstractness, a boisterous, self-renewing and dangerous
self-confidence builds upon itself. The self-destructive
dynamics of country town land speculation are immediately
replicated, with all its’ attendant booming and busting.
Meanwhile, for comparable reasons, inflation of values not
only distances the economy of finance from the economy of
industry; it induces belief in credit instruments and money-
values as “somehow more real and substantial than the any
of the material facts in this transitory world.” (AO, 88) And
underlying it all is the gossamer fact of popular and elite
credulity, confidence in “the tone of the market,” and “on
the indeterminable, largely instinctive, shifting movement
of public sentiment and apprehension,” Alan Greenspan’s
“irrational exuberance.” In essence, then, for the modern
financially anchored economy, “the magnitude of the
business capital and its mutations from day to day are in
great measure a question of folk psychology rather than of
material fact…It is after all a confidence game…and is to
be played according to rules governing games of that
244
psychological nature.” (Veblen 1978 [1904], 149; Veblen
1977 [1923], 384)
So long as levels of confidence rise, bankers and
corporations will extend credit well beyond industrial need or
the mass ability to pay. Always tending toward excess, the
volume of outstanding credit fluctuates constantly, moment-to-
moment, seemingly inexhaustible - until it is exhausted by the
inevitable crisis in faith. And for Veblen, let it be emphasized,
the crisis is not, as Marx would have it, a crisis in the
production system, based on a decline in the rate of profit or
surplus value. It is preeminently a crisis in market prices and
values that spawns sudden loss of faith. It is a crisis of the
pecuniary spirit. So when crisis hits, as we recently witnessed
it in the depressing years of 2007-2008, the pecuniary
shrinkage is all. Failure begins with a denial of expectations,
sudden disappointment in the weakness of one or another of
the great financial institutions, Fannie Mae, for example, or
Lehman Brothers, or one of their allied corporations, e.g., GM
or Chrysler. (Veblen 1978 [1904], 205) The situation truly
becomes a crisis, a threat to the ongoing functioning of the
system, precisely because the financial system lacks a
capacity to generate an internal response adequate to its
failure. On this crucial score, Veblen offers his most poignant
observations about the going economic design.
The modern business corporations, investment banks
included, are institutions designed for prosperity, not adversity.
They have “no provision for a shrinkage of assets, and but a
slight and doubtful provision for a shrinkage of earnings.”
Baldly put, the modern economic giants are “not designed to
carry on in a falling market.” (Veblen 1977 [1923], 93) For the
captains of solvency, who believe that “gain is normal,” a
decline in invested values is “an untoward accident,” an
experience alien “to the normal course of business,” an
exogenous intervention, something outside the expected range
of experience. The fact that money values can precipitously
decline “apparently exceeds the business man’s practical
powers of comprehension.” (Veblen 1978 [1904], 207)
Nonetheless, crisis puts the investment bankers into
action, speedily reallocating assets and liabilities to their
own advantage, a process likely to be aided “by a well-
advised and discreetly weighted extension of credit by
government to certain sections of the business community.”
(Veblen 1978 [1904], 207) This substantial government
stimulus will continue well beyond the immediate crisis
phase of contraction, helping to absorb the vast surplus
investment capital that mounts up under the pressure of
curtailed production. “Private waste is no doubt large,”
observed Veblen, but more is required in the way of
“effectual waste.” Thus “armaments, public edifices, court-
ly and diplomatic establishments,” among other govern-
ment programs, along with sale of an enlarged public debt,
all help to counter the system’s tendencies toward stagna-
Soc (2010) 47:240–245
tion. Such government action is essential if the bankers’
“malady of the affections” is to be palliated, their
confidence restored for new rounds of self-destructive
credit expansion. (Veblen 1978 [1904], 237)
And paradoxically, the very potential for collective
action by the financial and government controllers of credit
itself adds its own weight to the potential for crisis.
Warning of what today’s economists call “moral hazard, ”
Veblen argues that the very tendency among leaders and led
alike to believe in the system’s regulatory powers, lodged in
institutions like the FED and the Treasury, escalates risk by
supporting excessive private faith in the system’s ability to
manage an explosion of values. Thus the likelihood of
failure increases “the more capable the apparatus for
stabilizing credit” appears to be. (Veblen 1977 [1923], 96)
The effect of it all is to leave the underlying population and
their economic fate in the hands of the irresponsible masters of
credit. So while the forms and techniques of exploit have
changed dramatically since the bloody days of warlord and
prince, today’s captains of solvency remain “the effectual
spokesmen and type-form” of those earlier “kept classes.”
They remain what the kept classes have always been: “the
legitimate channel by which the community’s surplus product
is drained off and consumed to the greater spiritual comfort of
all parties concerned.” (Veblen 1977 [1923], 114) In the lower
ranks of workaday society, such “spiritual comfort” is regularly
manifest in the greater forbearance of working people. The
“underlying population” is prepared to suffer much so that the
higher magic of the credit system can run its due course. What
was true of “the country town” remains true for our
contemporary national system: the business community “has
got the upper hand,” while today’s workers and consumers, like
their forerunners among the 19th century farmers, “have shown
themselves good losers; they have in the main gracefully
accepted the turn of things and have continued to count on
meeting with better luck or making a shrewder play next time.”
(Veblen 1977 [1923], 140–141) But then we Americans do
not understand ourselves, or our material interests, very well:
our “American tradition stands in the way.”
Further Reading
Diggins, J. P. 1999. Theorist of the leisure class. Princeton: Princeton
University.
Knoedler, J. K., Prasch, R. E., & Chaplain, D. P. (Eds.). 2007.
Thorstein Veblen and the revival of free market capitalism.
Cheltenham: Edward Elgar.
Tilman, R. 1992. Thorstein Veblen and his critics, 1891-1963.
Princeton: Princeton University.
Veblen, T. 1917. An inquiry into the nature of peace and the terms of
its perpetuation. New York: MacMillan (NOP).
Veblen, T. 1919. The vested interests and the common man. New
York: Viking (VICM).
Soc (2010) 47:240–245 245

Veblen, T. 1954 [1915]. Imperial Germany and the industrial Veblen, T. 1990 [1914]. The instinct of workmanship and the state of
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Veblen, T. 1964. The instinct of workmanship and the irksomeness of Murphey. New Brunswick: Transaction. IOW.
labor. In L. Ardzrooni (Ed.), Essays in our changing order. New
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Veblen, T. 1977 [1923]. Absentee ownership, business enterprise in
recent times: The case of America. With a new introduction by
Marion J. Levy, Jr. New Brunswick: Transaction. AO.
Veblen, T. 1978 [1904]. The theory of business enterprise. With a new Sidney Plotkin is Professor of Political Science at Vassar College and
introduction by Douglas Dowd. New Brunswick: Transaction. TBE. President of the International Thorstein Veblen Association. His book,
Veblen, T. 1979 [1899]. The theory of the leisure class. Introduction The Political Ideas of Thorstein Veblen, co-authored with Rick
by Robert Lekachman. New York: Penguin. TLC. Tilman, will be published by Yale University Press in 2011.
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