Job Creators or Leisure Class?

by Benjamin Studebaker

A lot of people on the right have been exalting the virtues of “job creators”, agitating for policy changes like the lowering of taxes on the wealthy, the relaxing of regulations, and the augmentation of corporate subsidies so as to facilitate their special talents. Today I would like to juxtapose this view with that of Thorstein Veblen’s notion of the leisure class.

First, who on earth was Thorstein Veblen? Veblen was a combination economist and sociologist at the turn of the 20th century. He wrote his most famous works, The Theory of the Leisure Class (found here) and The Theory of Business Enterprise (found here) while working as a professor at the University of Chicago–long before Milton Friedman, Chicago had Thorstein Veblen.

Veblen believed that there are two kinds of work–exploit, evolving from the predatory instincts of stone age hunters, and industry, evolving from the drudgery of gatherers. While exploit was useful to stone age man because it provided meat for the community and defended it from foreign aggression, it has become steadily less directly useful to the community as a whole, yet has maintained a higher level of social respect and difference than industry typically receives. In modern society, the men of exploit are the businessmen, while the men of industry are labourers and engineers. The businessmen are well paid and well respected, while those who do productive work in industry are paid less and respected less. This happens despite the fact that the businessman does no productive work whatsoever.

This bit of Veblen’s thinking is very curious because it runs entirely contrary to what is considered social common sense. For Veblen, because the businessman does not actually labour to produce any physical object of productive value, the businessman is himself not productive. He is, for Veblen, an unnecessary appendage, someone who owes his position entirely to our social structure, which glorifies “the leisure class”–the men who amass tremendous wealth without actually doing any unpleasant, menial manual labour. In addition, all the people involved in retail, advertising, business strategy, all the various things that contribute only to one enterprise’s competition with other enterprises but not to the production of manufactured goods, all these too, are unproductive. For Veblen, these people are all being paid to prey upon other productive enterprises and consume wealth that would be better spent on technology and innovation. To the man who praises “job creators” for their special and unique skills, Veblen would have this to say:

All business sagacity reduces itself in the last analysis to judicious use of sabotage.

By sabotage, Veblen means the use of one’s funds to maximise profits and undermine competitors. While the businessman might argue that the maximisation of profits leads to more hiring and further innovation down the line, Veblen contends that the increased profits will merely be reinvested in the further maximisation of profits, that all money spent on advertising is mere propaganda that misleads the market and causes people to purchase irrationally products of inferior utility or no utility at all–things they do not need.

Veblen would also argue that, quite contrary to Ayn Rand’s suggestion that, were the “job creators” to go on strike, society as we know it would collapse, business could be run with more productive efficiency if the people running it were engineers interested in the product rather than the profit. All the businessmen do, from Veblen’s perspective, is buy the factory and the machines for other people to use, a simple job that can be done by most anyone, and that, indeed, most people would like to do because it is easier and more enjoyable than productive labour. Yet, despite this, businessmen are paid far more than labourers, even though their work is less critical and more enjoyable, simply because of popular social regard for what businessmen do.

Now, personally, I am not in full agreement with Veblen. There certainly is much to be said for how competition pushes people to innovate when they might otherwise become complacent, and a certain level of structural organisation and leadership is needed, both to optimise productivity and because people are wired to need some level of hierarchy. That said, the hero worship of the businessman as a “job creator” is silly. The jobs businessmen have are no different from the jobs labourers have, in that they play a role in the success of the enterprise and consequently the wider economy. The roles are different, but the businessman’s role is not more necessary or better. It may be more pleasant, higher earning, and more enjoyable, and consequently the role the average worker would prefer to have, but that does not make it more essential to the productive process.

We need not all run off to madly embrace Veblen’s hatred of the businessman, but deifying the businessman is every bit as great a folly, and it’s one the political right, on both sides of the Atlantic, finds itself guilty of. People like Paul Ryan argue for tax cuts on the rich that imagine magical powers the rich have to change the economic circumstances that just aren’t realistic, while in Europe, the British government continues to oppose the financial reforms and higher tax rates on the rich being proposed by continental powers and the parties in opposition. All of it is predicated on this notion that “job creators” are somehow special and different from other workers, that they need special incentives to inspire them to do their jobs. To these people, I say this–when the businessmen feel that investment is profitable, they will invest. If they do not invest it is not because their taxes are not low enough, it is because investment is not profitable, and the reason investment is not profitable is the lack of economic demand, which is caused by government spending cuts that are being made in order to keep taxes on businessmen low. It is a self-reinforcing downward spiral, and we must break free of the misconceptions that perpetuate this madness.