Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.
John Maynard Keynes (1883-1946)
Leon Trotsky has been fingered as a major influence on the Labour leader Jeremy Corbyn, while others go for Karl Marx. No one yet, as far as I am aware, has put forward a Norwegian-American academic to whom English was a second language and who died more than 80 years ago. Yet recent remarks by the opposition leader on the subject of transport suggest that, consciously or not, he may have fallen under the influence of this most idiosyncratic of economists.
Thorstein Veblen is best remembered today as the author of the 1899 opus The Theory of the Leisure Class. Then teaching at Chicago University, Veblen introduced the world to notions that have since become commonplace, such as the ‘conspicuous consumption’ and conspicuous leisureliness practised by society’s top dogs to highlight their elite status. (These days the consumption may remain conspicuous but Veblen could not have foreseen that members of the 21st-century elite would prefer to underline their superiority with displays of Stakhanovite labour rather than with shows of elegant idleness.)
More pertinent, however, in the Corbyn context may be a lesser-known work The Theory of Business Enterprise, published in 1904.
I’ll let the excellent Robert Heilbroner take up the tale:
Every economist from the days of Adam Smith had made the capitalist the driving figure in the economic tableau; whether for better or worse, he was assumed to be the central generator of economic progress. But with Veblen all this was turned topsy-turvy. The businessman was still the central figure, but no longer the motor force. Now he was portrayed as the saboteur of the system! The Worldly Philosophers (Penguin edition, 2000)
Left to its own devices, and managed by the ‘engineers’, whom Veblen saw as the technical personnel who made things work, the economy would tick over very nicely, supplying goods and services. But, Heilbroner notes, ‘If the machine functioned well and fitted together smoothly, where would there be a place for a man whose only aim was profit?’
He goes on:
[T]he businessman achieved his end, not by working within the framework of the social machine but by conspiring against it! His function was not to help make goods, but to cause breakdown in the regular flow of output so that values would fluctuate and he could capitalise on the confusion to reap a profit. And so, on top of the machinelike dependence of the actual production apparatus in the world, the businessman built a superstructure of credit, loans, and make-believe capitalisations. Below, society turned over in its mechanical routine; above, the structure of finance swayed and shifted. And as the financial counterpart to the real world teetered, opportunities for profit constantly appeared, disappeared, and re-appeared. But the price of this profit seeking was high; it was the constant disturbing, undoing, even conscious misdirecting of the efforts of society to provision itself.
More than a century later, here is Mr Corbyn on the railways:
Jeremy Corbyn has repeated his call for Britain’s railways to be nationalised, as commuters face a hike in train ticket prices. The Labour leader laid out his plans to ‘rebuild and transform’ the country’s transport system, pledging to lower train fares by as much as ten per cent. (Daily Mirror 16 August 2016)
A ten per cent cut in rail fares would cost a vast sum of money. Where would it come from? Looking at the question through Veblen’s eyes, the answer would present itself immediately – from shrugging off that useless, parasitic superstructure comprising the private railway companies complete with their shareholders, lobbyists, consultants and – as Christian Wolmar exposed some years ago – the hundreds of people employed in ‘blame attribution’ departments, trying to pass the buck (and the fines) for poor performance elsewhere (to Network Rail, another train company and so on).
Put Veblen’s ‘engineers’ back in charge, as they had been during the British Rail years, save money, cut fares and enjoy a more reliable service.
The immediate objection to this take on our rail woes is that, pace Veblen, viewing private companies as parasites (or even predators, as Ed Miliband labelled the less savoury of their number) is the worst sort of callow fifth-form Bolshevism, in which shareholders (George Orwell’s ‘coupon clippers’) effortlessly live on the backs of the workers – and the rail passenger. In reality, private companies and their backers are investors rather than parasites. Were the railways to be returned to public ownership, money for new rolling stock, lines, stations and the rest would need to come from public funds, through the sale of gilt-edged stock.
And those gilts would have to pay a dividend, just as do the shares in the private rail companies. Mr Corbyn would find that the points had been switched and that the gravy train carrying all that money that he had earmarked for fare reductions had been diverted to a very different destination.
Yet wasn’t Veblen on to something? Heilbroner, to be honest, thinks probably not. Veblen’s views, he says, were formed during the era of the capitalist robber barons – Gould, Vanderbilt, Rockefeller and so on – whose often violent antics could well be seen as the pursuit of profit through the disruption of the productive process. But that era passed, and with it any validity Veblen’s notion may have had.
Well possibly. I would say that the ‘superstructure of credit, loans, and make-believe capitalisations’ is alive and well and visible whenever corporate skulduggery or even outright fraud is uncovered. Show me a firm with a modest asset base supporting a rickety tower of different share classes, complex bond issues and ‘mezzanine financing’, and I will show you a firm where all is very far from as it ought to be.
Private rail companies are not in that category, obviously. Yet does not private rail, in the broadest sense, including its workforce, display Veblen-esque tendencies? Is not disruption part of the process – the cancellations, delays, security alerts, obsession with fare dodging, apologies, ‘overrunning engineering works’ and those shows of force by the British Transport Police, the railway companies’ very own constabulary, that are a sure sign of major trouble on the line?
Regardless, there is something almost grimly satisfying for the oppressed commuter in imagining that behind the atrocious train service are the machinations of men ‘whose only aim was profit’. Should enough people believe it, they may even vote Labour.