Thorstein Veblen is most known for his book The Theory of the Leisure Class, but his 1923 book, Absentee Ownership and Business Enterprise in Recent Times, written towards the end of his life, is more relevant today. It explains how America, which was founded as a nation of small farmers and independent businessmen (in desire, if not in actuality), became a nation with power centralized in the federal government and a relatively small number of wealthy corporations, organizations, and individuals (keep in mind that this book was written almost 100 years ago when these trends were still nascent). In what follows I will excerpt some of my highlights from this book along with my brief commentary.
On the conflict between owners and consumers.
[T]he business interests of these absentee owners no longer coincide in any passable degree with the material interests of the underlying population, whose livelihood is bound up with the due working of this industrial system, at large and in detail. The material interest of the underlying population is best served by a maximum output at a low cost, while the business interests of the industry's owners may best be served by a moderate output at an enhanced price.
Veblen foresaw the rise of lawfare before most others. He also understood that it meant a shift from equality under the law to might makes right.
Litigation as conducted according to the rules and precedents which govern the "due process" has in recent times become too costly to be carried to a conclusion by any litigant who is not an absentee owner of large means. This will hold true in America perhaps in a more conclusive fashion than in any other civilised nation. In effect, due process of law as it concerns property has become an appliance for the regulation of relations between absentee owners.
On the inevitable rise of the "deep state".
In internal affairs, on the other hand, it is loosely presumed that the statesmen will be actuated by principles of equity and fair dealing and will be occupied with a humane pursuit of the common good. But the more fully the commonwealth has come to realise its status as a Nation, the more does its external politics (war and diplomacy) take precedence of its domestic concerns. The exigencies of external politics are paramount, and the conduct of internal affairs therefore are, in effect, required to conform to the needs of the nation's external policies. And the administration of external politics, being in the nature of an enterprise in chicane and coercion, is necessarily furtive, runs forever on sharp practice, carefully withholds "information that might be useful to the enemy," and habitually gives out information with intent to deceive.... So it has also come about, under the stress of national strategy and political business enterprise, that any effectual distinction between honest politics and corrupt politics is an elusive difference of degree, not a difference in kind.
Veblen is skeptical of the benefits of America's early industrial policy, I think he is wrong in this, since similar policies have been adopted by Germany, Japan, Taiwan, South Korea, and China with similar success.
America has by nature been endowed with unexampled resources, which have hitherto enabled this people to find an easy livelihood in spite of their costly and vexatious tariffs and their equally thriftless land policy. At the same time this people has been subject to a somewhat special course of habituation, due to the peculiar position in which their resources have placed them. They have from the outset been engaged among themselves on a competitive pursuit of unearned gain to be got from taking over these resources and holding them out or trading in them. So that, by steady habituation, cupidity and sharp practice have been embedded in the common sense of this people as civic virtues of the first order, under the decent camouflage of thrift and self-help.
Craft is deprioritized as absentee ownership increases.
Until the machine processes had made serious inroads in the standard industries, and until things had consequently begun to shift to the new scale, the business man in industry continued, in the typical case, to be personally concerned with the work in hand; and until this change took effect, therefore, the employer-owner answered quite reasonably to the character which Adam Smith assigned him, as a master workman who owned certain industrial appliances which he made use of with the help of hired workmen. But from this time on he became, in the typical case, an absentee manager with a funded interest in the works as a going business concern. The visible relation between the owner and the works shifted from a personal footing of workmanship to an impersonal footing of absentee ownership resting on an investment of funds. Under the new dispensation the owner's guiding interest centered on the earnings of the concern rather than on the workmen and their work.
Rapidly rising asset prices incentivize rent-seeking behavior. We see this now as well in many areas, housing and crypto being the two most obvious.
[M]any a fortune, great or small, was amassed during [the mid 1800s] by the simple expedient of "sitting tight" while the market values of agricultural and urban lands, timber lands, and lands underlaid with mineral deposits, were gradually being bidden up by the increasing volume of industrial uses and the increasingly urgent needs of an ever larger underlying population. The new values which so were added to the country's riches were created by the advancing state of the industrial arts, but the new wealth which so came into being was added to the possessions of those absentee owners who were seized and possessed of these tangible properties.
Business is now about marketing. This trend has only accelerated as fewer and fewer businesses make things in the USA, and those that remain are often ones that are too low value to offshore (e.g. paper products) or of national security importance and so subsidized either implicitly or explicitly (agriculture, defense industry, semiconductors).
The competitive system has been dying at the top.... In great part this decay of the old-fashioned competitive system has consisted in a substitution of competitive selling in the place of that competitive production of goods that is always presumed to be the chief and most serviceable feature of the competitive system. That is to say, it has been a substitution of salesmanship in the place of workmanship; as would be due to happen so soon as business came to take precedence of industry, salesmanship being a matter of business, not of industry; and business being a matter of salesmanship, not of workmanship.
The rise of financialization. Again, Veblen was one of the first to see this trend, which today is more relevant than ever, but which really began taking off with the rise of conglomerates, mergers and acquisitions specialists, and corporate financial engineering.
[T]he corporation is always a business concern, not an industrial appliance. It is a means of making money, not of making goods. The production of goods or services, wherever that sort of thing is included among the corporation's affairs, is incidental to the making of money and is carried only so far as will yield the largest net gain in terms of money[.]
American government cannot defend itself against large corporate interests.
[Farmers'] self-help and cupidity have left them at the mercy of any organisation that is capable of mass action and a steady purpose. So they have, in the economic respect—and incidentally in the civil and political respect—fallen under the dominion of those massive business interests that move obscurely in the background of the market and buy and sell and dispose of the farm products and their farmers' votes and opinions very much on their own terms and at their ease.
Increasing concentration leaves little room for small, independent producers. (Many consumer goods brands in modern America are resellers of white label goods from China).
Grocers, hardware dealers, meat-markets, druggists, shoe-shops, are more and more extensively falling into the position of local distributors for jobbing houses and manufacturers. They increasingly handle "package goods" bearing the brand of some (ostensible) maker, whose chief connection with the goods is that of advertiser of the copyright brand which appears on the label.
Here Veblen argues that more money is spent trying to find and produce gold than has ever been recovered from its production. This is a remarkable claim, and I am not sure whether it is true or not.
The total value of the gold produced, one year with another, is also doubtless appreciably less than the total of the work and equipment expended on its discovery and production during the same period.
Profits do not guarantee sustainable or rational exploitation of natural resources.
It is doubtless within the mark to say that this enterprise of the lumbermen during the period since the middle of the nineteenth century has destroyed very appreciably more timber than it has utilised, although some practice of economy has come into the business toward the close of the period, and more particularly since the beginning of the present century.