20201118 Source of funds, source of wealth and unexplained wealth.

It is relation to the development of what he calls “The Leisure Classes”, a term that would later be encapsulated in the pithy expression “the idle rich,” that Veblen makes some of his most startling comments.

“In the sequence of cultural evolution the emergence of a leisure class coincides with the beginning of ownership. This is necessarily the case, for these two institutions result from the same set of economic forces.” In short, it is the accumulation of stuff that encourages idleness. But the “in short” version can be misleading: “A habitual neglect of work does not constitute a leisure class; neither does the mechanical fact of use and consumption constitute ownership. The present inquiry, therefore, is not concerned with the beginning of indolence, nor with the beginning of the appropriation of useful articles to individual consumption. The point in question is the origin and nature of a conventional leisure class on the one hand and the beginnings of individual ownership as a conventional right or equitable claim on the other hand.”

So, he is not, in principle, against the accumulation of wealth so long as those who have it don’t exercise the enjoyment of that wealth to the exclusion of everything else – like work. And it is also clear that he is not arguing that the “have nots” should sit around and do nothing productive. His argument appears to be that everyone should work, regardless of their economic status. Is that a hint towards e.g. Maoism?

He does draw a distinction between those for whom the pursuit of wealth as an end in itself (in which he appears to segregate commerce from industry) and those who work in the hope of obtaining things: “It is of course not to be overlooked that in a community where nearly all goods are private property the necessity of earning a livelihood is a powerful and ever present incentive for the poorer members of the community. The need of subsistence and of an increase of physical comfort may for a time be the dominant motive of acquisition for those classes who are habitually employed at manual labour, whose subsistence is on a precarious footing, who possess little and ordinarily accumulate little; but it will appear in the course of the discussion that even in the case of these impecunious classes the predominance of the motive of physical want is not so decided as has sometimes been assumed.”

What, then, of this latter group: those who work but don’t necessarily work with a primary purpose of “physical want.” That appears to tie in, at least to a degree, with Maslow’s Hierarchy of Needs which was published almost half-a century, several revolutions and two world wars later. Is Veblen arguing for the view that labour is a laudable end in itself, that the labour more than the result is the reward? In that, is he again suggesting a broadly Marxist approach?

It is significant that there is broad support across the political spectrum for one aspect of Marx’s view: that there must be some equitable accrual of the profits from production to those who provide their labour compared to those who – in Marxist terms – appropriate the excess of value over the labourer’s wages. Of course Marx was sceptical of the value of capital and the means of production beyond that of manual labour. Marx also paid no attention to those who acquired skills, which cost them the opportunity to earn sooner, and therefore expected to increase their earning capacity once they joined the workforce proper.

And so back to the accumulation of visible wealth in the form of persons:

Personal service holds a peculiar place in the economic development. During the stage of quasi-peaceable industry, and especially during the earlier development of industry within the limits of this general stage, the utility of their services seems commonly to be the dominant motive to the acquisition of property in persons. Servants are valued for their services. But the dominance of this motive is not due to a decline in the absolute importance of the other two utilities possessed by servants. It is rather that the altered circumstance of life accentuate the utility of servants for this last-named purpose. Women and other slaves are highly valued, both as an evidence of wealth and as a means of accumulating wealth. Together with cattle, if the tribe is a pastoral one, they are the usual form of investment for a profit.

To such an extent may female slavery give its character to the economic life under the quasi-peaceable culture that the women even comes to serve as a unit of value among peoples occupying this cultural stage–as for instance in Homeric times. Where this is the case there need be little question but that the basis of the industrial system is chattel slavery and that the women are commonly slaves. The great, pervading human relation in such a system is that of master and servant. The accepted evidence of wealth is the possession of many women, and presently also of other slaves engaged in attendance on their master’s person and in producing goods for him.

A division of labour presently sets in, whereby personal service and attendance on the master becomes the special office of a portion of the servants, while those who are wholly employed in industrial occupations proper are removed more and more from all immediate relation to the person of their owner. At the same time those servants whose office is personal service, including domestic duties, come gradually to be exempted from productive industry carried on for gain.

This process of progressive exemption from the common run of industrial employment will commonly begin with the exemption of the wife, or the chief wife. After the community has advanced to settled habits of life, wife-capture from hostile tribes becomes impracticable as a customary source of supply. Where this cultural advance has been achieved, the chief wife is ordinarily of gentle blood, and the fact of her being so will hasten her exemption from vulgar employment. The manner in which the concept of gentle blood originates, as well as the place which it occupies in the development of marriage, cannot be discussed in this place.

For the purpose in hand it will be sufficient to say that gentle blood is blood which has been ennobled by protracted contact with accumulated wealth or unbroken prerogative. The women with these antecedents is preferred in marriage, both for the sake of a resulting alliance with her powerful relatives and because a superior worth is felt to inhere in blood which has been associated with many goods and great power. She will still be her husband’s chattel, as she was her father’s chattel before her purchase, but she is at the same time of her father’s gentle blood; and hence there is a moral incongruity in her occupying herself with the debasing employments of her fellow-servants. However completely she may be subject to her master, and however inferior to the male members of the social stratum in which her birth has placed her, the principle that gentility is transmissible will act to place her above the common slave; and so soon as this principle has acquired a prescriptive authority it will act to invest her in some measure with that prerogative of leisure which is the chief mark of gentility. Furthered by this principle of transmissible gentility the wife’s exemption gains in scope, if the wealth of her owner permits it, until it includes exemption from debasing menial service as well as from handicraft.

As the industrial development goes on and property becomes massed in relatively fewer hands, the conventional standard of wealth of the upper class rises. The same tendency to exemption from handicraft, and in the course of time from menial domestic employments, will then assert itself as regards the other wives, if such there are, and also as regards other servants in immediate attendance upon the person of their master. The exemption comes more tardily the remoter the relation in which the servant stands to the person of the master.

If the pecuniary situation of the master permits it, the development of a special class of personal or body servants is also furthered by the very grave importance which comes to attach to this personal service. The master’s person, being the embodiment of worth and honour, is of the most serious consequence. Both for his reputable standing in the community and for his self-respect, it is a matter of moment that he should have at his call efficient specialised servants, whose attendance upon his person is not diverted from this their chief office by any by-occupation.

These specialised servants are useful more for show than for service actually performed.

In so far as they are not kept for exhibition simply, they afford gratification to their master chiefly in allowing scope to his propensity for dominance. It is true, the care of the continually increasing household apparatus may require added labour; but since the apparatus is commonly increased in order to serve as a means of good repute rather than as a means of comfort, this qualification is not of great weight.

All these lines of utility are better served by a larger number of more highly specialised servants. There results, therefore, a constantly increasing differentiation and multiplication of domestic and body servants, along with a concomitant progressive exemption of such servants from productive labour. By virtue of their serving as evidence of ability to pay, the office of such domestics regularly tends to include continually fewer duties, and their service tends in the end to become nominal only. This is especially true of those servants who are in most immediate and obvious attendance upon their master. So that the utility of these comes to consist, in great part, in their conspicuous exemption from productive labour and in the evidence which this exemption affords of their master’s wealth and power.

Writing almost a century after banning of the importation of slaves into the USA, Veblen was no doubt aware that there was still active oppression of Negroes in the USA – and the continuation of various forms of servitude. But it was for the wife-as-servant that Veblen saved special comment – creating the concept that would later become known as “the ladies who lunch.”

He said “there arises a subsidiary or derivative leisure class, whose office is the performance of a vicarious leisure for the behoof of the reputability of the primary or legitimate leisure class. This vicarious leisure class is distinguished from the leisure class proper by a characteristic feature of its habitual mode of life. The leisure of the master class is, at least ostensibly, an indulgence of a proclivity for the avoidance of labour and is presumed to enhance the master’s own well-being and fullness of life; but the leisure of the servant class exempt from productive labour is in some sort a performance exacted from them, and is not normally or primarily directed to their own comfort.”

It is into this mix that we find the reason that Velben is relevant to financial crime. He drew attention to the matter of conspicuous consumption, a term which he used and may have coined.