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The Theory of Business Enterprises Part 6: Government as an Arm of Business

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The international policies of the US government are organized around the needs of businessmen, according to Thorstein Veblen, in the same way the legal system was organized to protect their interests and not those of the common people.

… [W]ith the sanction of the great body of the people, even including those who have no pecuniary interests to serve in the matter, constitutional government has, in the main, become a department of the business organization and is guided by the advice of the business men. Chapter 8.

He explains that in the US and elsewhere, protecting business interests meant the use of force to enable businessmen to make profits safely in foreign lands. It meant using the military to obtain favorable terms of trade, at least as favorable as those awarded to other nations. Diplomacy, says Veblen, must be backed up by displays of force, especially among the “outlying regions of the earth”, where the uncivilized people live. They like their own ways aren’t used to doing business like the civilized nations. They must be forced to follow the rules. And the outcome is unusually high profits. We now think of this as the bad old age of imperialism.

The problem is that if US businessmen can make extraordinary profits, then so can those of other “civilizing powers”, and therefore armaments are also useful in fending off other nations that want to civilize the barbarians. That leads to massive increases in armaments, what we would call an arms race.

He concludes that as military power increases, it shifts from its role in protecting the interests of businessmen and becomes a driver of national purpose. The initial impetus of militarization was business interests, but Veblen predicts that it will turn into something else:

The objective end of protracted warlike endeavor necessarily shifts from business advantage to dynastic ascendancy and courtly honor.

Military armaments become instruments of national purpose, and businessmen see that as an opportunity for profit. They are equally happy to serve any of the potential warring nations, as long as it’s profitable, “… whereby an equable and comprehensive exhaustion of the several communities … is greatly facilitated.” That sounds a lot like World War I.

Reflections on Chapter 8

The idea that voters routinely elect businessmen to lead government and expect business representatives to play a major role in formulating policy is as true today as it was when Veblen wrote. A number of businessmen hold governorships, including Rick Scott of Florida, Rick Snyder of Michigan, and Bruce Rauner of Illinois. Each of them preaches that government should be run like a business, and that means poisoning the water of Flint to save money, ignoring climate change as Miami sinks, and refusing to negotiate with the legislature at the risk of wrecking the entire state. State legislatures are full of car dealers, funeral home directors and other small businessmen, and they are notoriously responsive to the arguments and cash of the business class including such representative groups as ALEC and the US Chamber of Commerce. There are plenty of these wreckers in Congress as well. Respect for businessmen has reached the Presidency with the the nomination of Trump, who isn’t really a businessman but plays one on TV.

The idea that the role of government is the protection of business interests at home and abroad is still applicable today. There is an unbroken chain of politicians and judges devoted to protecting the interests of businesses at preposterous levels, as in the Lochner case, and efforts to return to that level of harshness towards workers. The Republican party generally stands for cutting taxes on the rich, destroying the regulatory structure and cutting social spending while increasing privatization of government services.

Here’s how the Green Party leader Jill Stein described US foreign policy in an interview by Brad Friedman of Bradblog, posted at Salon.

Or foreign policy. The guys running the show in the Democratic Party are basically the funders, and that’s predatory banks and fossil fuel bandits and war profiteers and the insurance companies, and that’s what we get.

That’s even more true of the Republicans. It sure seems like a good explanation of US overt and covert intrusions in the South and Latin America and many other places around the globe. Veblen shows that this policy has been followed since the late 1800s.

And finally, there are plenty of examples of US companies doing business with our putative enemies, such as Halliburton with Iran and the Koch family with the Nazis.

The neoliberal program is the political project of both parties. There is the economics side and the national security side. The point of the economics stuff is to confuse people about the nature of the economy, and to use that confusion to make maximum profits. The goal of the national security side is to support businesses and to keep US citizens under control. There is bipartisan support for our interventions all over the globe, and for use of military power to control other nations. There is bipartisan support for use of market solutions to social problems instead of direct intervention with strict legislation and enforement. There is bipartisan support for government spying on people, and for use of a wide range of punishments including incarceration, drug tests for aid recipients, and for economic insecurity, hunger and fear of job loss to control the populace and keep the workers disciplined. Veblen describes the way this program looked in his day, and whatever progress has been made on these issues is under assault.

The Origins of Totalitarianism Part 3: Superfluous Capital and Superfluous People

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Previous posts in this series:

The Origins of Totalitarianism Part 1: Introduction.

The Origins of Totalitarianism Part 2: Antisemitism

The Origins of Totalitarianism: Interlude on the Tea Party

In Part 2 of The Origins of Totalitarianism Arendt discusses the history of European Imperialism, primarily focused on England, France and Germany.

“Expansion is everything,” said Cecil Rhodes, and fell into despair, for every night he saw overhead “these stars … these vast worlds which we can never reach. I would annex the planets if I could.” He had discovered the moving principle of the new, the imperialist …); and yet in a flash of wisdom Rhodes recognized at the same moment its inherent insanity and its contradiction to the human condition. Naturally, neither insight nor sadness changed his policies. P. 124, fn omitted.

The driving force of imperialism the search for profits, The people pushing it were the bourgeoisie, the principal capitalists. Until the 1870s, the bourgeoisie were content to leave politics to others, and focus on manufacturing and infrastructure in the home country. Politicians were generally wary of the push into foreign countries.

Beginning in the 1870s as the money invested in foreign lands increased, the risks to the bourgeoisie and their money increased, as nations expropriated their assets or refused to cooperate, or threw them out. The bourgeoisie liked the enormous profits of these investments, but were not interested in taking the risks. They demanded that the nation-state provide the armed forces necessary to protect their profits, and the nation-states complied. Arendt says that this demand for intervention was its assertion of control of the government. She dates the Imperialist period to 1889-1914.

The goal of imperialism was neither assimilation nor integration.

Expansion as a permanent and supreme aim of politics is the central political idea of imperialism. Since it implies neither temporary looting nor the more lasting assimilation of conquest, it is an entirely new concept …. [T]his concept is not really political at all, but has its origin in the realm of business speculation, where expansion meant the permanent broadening of industrial production and economic transactions characteristic of the nineteenth century. production of goods to be used and consumed. P. 125-6.

The goal was to impose a system of capitalist production on the conquered territories for the enrichment of the capitalists. The power behind this drive for expansion was superfluous capital.

Imperialist expansion had been touched off by a curious kind of economic crisis, the overproduction of capital and the emergence of “superfluous” money, the result of oversaving, which could no longer find productive investment within the national borders.

The money was superfluous in the sense that it had no utility within the nation-states. There were no profitable investments that could absorb it, and there was little to purchase with it. The newly rich wanted income from their wealth even though neither the money nor the investments would provide anything of value to the nation-state or its citizens. They invested their money abroad and the nation-state protected their investments at enormous cost to the rest of their citizens. Arendt calls the bourgeoisie parasites.

Superfluous capital is not the only problem with unrestrained capitalism.

Older than the superfluous wealth was another by-product of capitalist production: the human debris that every crisis, following invariably upon each period of industrial growth, eliminated permanently from producing society. Men who had become permanently idle were as superfluous to the community as the owners of superfluous wealth. That they were an actual menace to society had been recognized throughout the nineteenth century and their export had helped to populate the dominions of Canada and Australia as well as the United States. P. 150.

Arendt calls these superfluous people the mob. They are not the same as the nascent working class, but were the people who could not find work at all, whether because of disability or some personal defect or just plain bad luck. The mob included refuse from all social classes. Polanyi refers to this as well. There were the working people, and everyone else. The impoverished and the unemployed able-bodied people were both in this group.

Imperialism provided a partial solution to the problem of superfluous men. They could be pushed into the armies and navies needed to protect the wealth of the rich, and they could be used as supervisors and workers in the mines and factories and on the transport ships carrying the investments of the capitalists and the products of those investments.

The mob of the mid to late 1800s is similar to the “masses” that emerged after WWI.

The relationship between the bourgeois-dominated class society and the masses which emerged from its breakdown is not the same as the relationship between the bourgeoisie and the mob which was a by-product of capitalist production. The masses share with the mob only one characteristic, namely, that both stand outside all social ramifications and normal political representation. The masses do not inherit, as the mob does (albeit in a perverted form) the standards and attitudes of the dominating class, but reflect and somehow pervert the standards and attitudes toward public affairs of all classes. The standards of the mass man were determined not only and not even primarily by the specific class to which he had once belonged, but rather by all-pervasive influences and convictions which were tacitly and inarticulately shared by all classes of society alike. P. 314.

The rich, with their superfluous and restless capital, demand profits with no responsibility to the society from which the wealth sprang. The constant movement of capitalism, generated by that demand, destroys the lives of superfluous people, who have no place in that society, and feel no obligation to it. The nihilism that infected the mob and the masses eventually infected the bourgeoisie, destroying any remaining social values. This destructive combination was fertile ground for the rise of the Nazis.