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

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.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

8 replies
  1. Rugger9 says:

    Interesting stuff, and something General Smedley Butler, USMC pointed out between the World Wars (“War is a racket…”), as well as pointing out a plot to take out FDR by Big Business.

    It will be worse if Trump pulls it off, since the mob will be involved, and we will try to run things like Batista’s Cuba.

    On a semi-related topic, I would not be surprised to find out that the bad-behaving Trump protesters are largely agent provocateurs hired by Roger Stone who was experienced in this kind of thing all the way back to Nixon’s campaigns.

  2. bevin says:

    Globalisation simply means concluding the project, which dates back to the C18th, of expanding the maritime empire to the point that it controls the entire globe. Its strength is that there is nothing novel about it, it is a very old and substantially founded process, the logical extension of the British empire into the US empire. The same is true of its ideology, old liberalism writ large. It has the advantage, at a time of revolutionary change (for world domination is that) of being, though distasteful, very familiar in its general outline.

    There are two basic problems with it: the first is that it is catastrophic for working people- the evidence of that piles up around us; the second that it implies the submission of those countries outside the charmed circle of imperialism.

    Hence the sudden return of warmongering and the reality of a possible nuclear war: the interests of the working classes are very similar to those of the “rogue” nations which will not submit without being conquered. It is a replay of the old, unavowed but real coincidence of interests which, after 1945, led to the concession by the imperialist states of welfare state legislation to prevent the working people from turning to socialism.
    It is that legislation which the neo-liberals have been dismantling for decades now and are dead set on ending in France and Italy, not coincidentally the countries with the strongest Communist parties in Europe in 1945.
    The neo liberals fear a developing alliance between the domestic victims of globalisation and those countries unprepared to cede hegemony to the United States and its corporations. Hence rumours of war and security panics.

    With regard to the matter of bi-partisanship in Congress and across the political class, this is of less and less importance as the proportion of those involved in either of the political parties diminishes. The proportion of the population which votes, or is allowed to vote or whose votes count is declining to the point that representative democracy no longer provides government with credibility and popular sovereignty has become a myth of some extravagance.
    The constitutional orange has been squeezed until the proverbial pips are squeaking. There is widespread distrust of authority, contempt for the legal system and cynicism about the political process. But, such is the fatal hubris of the ruling class, it has no concept of back pedalling, compromise or restraint. It puts its trust in the sword of police and military power and the new priesthood of propagandists and public relations, newly armed with the informational fruits of total surveillance.

    • Ol' Hippy says:

      Well put. We’re facing the end times of empire and because of the global warming crisis it will happen on an accelerated pace. And because of GW they too will fall, you can’t eat or drink money.

  3. earlofhuntingdon says:

    “Market solutions” to public problems is business jargon for enclosing a part of the declining commons. Inevitably, it privatizes profits and publicizes costs.

    These “solutions” always increase costs, despite the tidal wave of claims that they lower them. Governments run services to provide a needed service; businesses take them over solely to extract profit, not to provide a better, cheaper service. Businesses cut service, often outsourcing it to those they are meant to be serve. They cut jobs. They move revenue streams, profits – and accountability – beyond the reach of the government whose services they are meant to replace. They damage representative government, they damage government’s ability and willingness to respond to the needs of those it is meant to govern.

    When so-called public-private partnerships fail – when privatized schools close, turnpikes go bankrupt, privatized parking rates triple, or when street closures for public purposes require obtaining approvals from an investment banker in Bahrain – government fails. People pay the price.

  4. earlofhuntingdon says:

    Business is run to make a profit. Unregulated businesses will do it in extreme, socially and environmentally damaging ways.

    Government is not run for profit. Neither are charities or schools, public libraries or public colleges and universities. These exist to provide needed services at reasonable costs. Running a public library, for example, as if it were Borders – stocking only the hottest, latest titles to improve lending statistics, but tossing copies of Darwin, Austen, Leon and Bogart into the dustbin – will lead to the same end as Borders. Running a small college with a profusion of vice president administrators, a “chief of staff” for the president, but no dean for the students, will make the college an operating division of business charities founded by long dead robber barons. Operating a health care system as a profit-making industry (whether or not the provider’s nominal tax status is not-for-profit) puts care at risk, and makes (only) profitable treatments abundant, but only for those who can pay. We can do it differently, but asking, “Please, sir, I want some more,” will earn us the same response it earned Oliver Twist.

  5. earlofhuntingdon says:

    And here’s Bill Black on the supposed rule of law. His context is the infamous Trans-Pacific Partnership. If enacted, it would gut state regulation of businesses and substitute kangaroo courts controlled by private businesses. Enough can’t be said about how bad for most Americans it would be to live in a world run by the CEO’s of multinational companies, who are judged by Wall Street and the City largely by whether or not they are “sufficiently predatory.” That is, whether they are “sufficiently” profitable, never mind the cost (or who pays it, so long as it is not members in good standing of Wall Street or the City).

    http://www.nakedcapitalism.com/2016/06/bill-black-the-lie-that-china-wins-if-the-tpp-kangaroo-tribunals-are-stopped.html

    • Rugger9 says:

      Also interesting, since I’d like to see these corporate giants dictate anything to the Russian, Chinese or DPRK governments when their oxen are gored by IP ripoffs. There isn’t enough popcorn for that one

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