New year, new things to think about
This new year brings some new ventures for me, which also means new ways of thinking about things. One of them is living on my farm as close to off-grid as we can get, which I talked about in a previous post.
The other is that I’ve begun a doctoral research program looking into the intersection of Vikings, Veblen, and the economy. Seems an odd mix, I know, but trust me there are connections. As some of you may know, Thorstein Veblen was (and is) one of the most important economists and thinkers America has ever produced. He was at the height of his powers at the turn of the 20th century, and his work was groundbreaking in, among other things, his critiques of capitalism. He lived during the “Gilded Age” and wrote about business owners and the rise of the corporation. He was far from alone in his belief that the parasitic and exploitative nature of the economic system at the time was unfair and corrupt, but he was not a Marxist, which is important to note.
Veblen was also a first-generation American, born to Norwegian parents who had only emigrated to the U.S. ten years before he was born. He was deeply tied to and interested in his Scandinavian heritage, including Vikings about which he wrote quite a bit — including their economic motivations and prowess when it came to the raids they are famous for. He concluded they were “An Early Experiment in Trusts,” which in 19th century speak means they looked to him like a modern business enterprise in their skill, planning, and execution of their economic ambitions. My interest, as a historian who specializes in Vikings, is just how correct was Veblen about this?
My research thus far also has me thinking about today’s economy and — like many researchers and scholars today — realizing just how prescient Veblen was regarding where we were headed a century ago. In many ways we are living in Veblen’s nightmare, or at the very least that which he tried to warn about. It seems like his crystal ball was crystal clear.
How?
In a nutshell, he warned that the shift from a production economy to a financial economy would have dire consequences. He argued that, as capitalism matured, the growing influence of bankers, stockbrokers, and financiers altered the very structure of the economy. Instead of being driven by industrial production and innovation — you know, actually making stuff that can benefit all of us — the economy became focused on maximizing returns through financial transactions. Veblen saw this as a form of "rent-seeking" behavior, where the focus was on acquiring income through ownership and control of capital rather than through creating things. He also believed that this shift to financial capitalism would lead to some pretty bad outcomes, one of the main ones being that the dominance of finance encourages speculation, instability, and inequality. For him, the economic shift ultimately harmed not only the economy but, importantly, society. The financial sector benefits but doesn’t really contribute much to the rest of us and the real economy.
Veblen also thought that financial capitalism eroded the values of competence and progress that had been central to early capitalism and replaced them with values of greed and unproductive consumption. He was, after all, the guy who first coined the phrase “conspicuous consumption” to describe the flagrant wealth accumulation and gross display of the Gilded Age owner class (think your J.P. Morgans, Rockefellers, and Carnegies).
As fate would have it, he died only two months before the famous stock market crash in 1929 that brought the world into the Great Depression. He saw what was coming, but didn’t live to see it. And since then, well, we can just imagine what he would say about the dot com bubble 25 years ago and the mortgage lending bubble 17 years ago…I’m betting it’s probably something like “I told you so.”
And what would he say about where we’re headed now? My husband and I have been having some chats about this because — as Veblen would say — he used to be part of the problem. Before becoming a Christmas tree farmer, my husband worked as a securities trader for 21 years, smack in the middle of the Wall Street financial economy. He knows full well what playing with numbers, moving money around, and not really making anything tangible looks like. Our conversations have convinced me we are only headed more deeply into the abyss.
I’m not a trained economist, so I’m probably out over my skis here, but it seems weird and scary to me that our economy is not only much more financial now in that Veblenian sense of not production-based, but it is also invisible. By that I mean when was the last time you actually paid your bills or purchased everything using only cash? Or when was the last time you traded something you have for something someone else has? Our entire system is electronic. You almost never see or handle the means of exchange. It reduces our currency and net worth to mere numbers on a screen or piece of paper. Your paycheck? Probably directly deposited into your bank account. Buying groceries? Tap the screen to transfer money from your financial institution to the store. Need to get some money from your savings to make a big purchase? Simply make an online transfer to your checking account. Need to pay for that take-out dinner you just ordered? The restaurant probably uses Square, Venmo, or some other app-based system. Add Crypto currencies to the mix and, well, you get my point.
None of that is real. And it relies entirely on a huge assumption of trust in a system that behind all that moving numbers from one place to another through the ether there exists somewhere the value that is behind it. We all seem to believe (or have to believe) in this digital invisible economy so much that our collective belief is the primary glue holding the whole thing together. And that to me seems like an obvious vulnerability that is not sustainable. But then maybe I’m just hopelessly old school.
For my money (pun intended), the Vikings were more flexible and prepared than we are for any economic eventuality. Their economy was sometimes barter, sometimes weights and measures, and sometimes coin-based. But in every transaction, something was being exchanged, i.e., something you can use or trade later. “Value” was agreed upon; it was not invisible. I’m a bit concerned that if our current system falls apart for whatever reason (another financial bubble, nefarious actors messing with our digital or electric infrastructure, or the big 9.0 earthquake they keep telling us is due in my neck of the woods, etc.) we’ll be knocked squarely back into something like a Viking Age. But maybe that won’t be such a bad thing because goods production and innovation could once again take on the meaning and value that Veblen knew they had for a properly functioning global economy — an economy that works for the good of all of us, not just the ownership class in our current Gilded Age.