Thorstein Veblen's analysis of German intellectualism: institutionalism as a forecasting method

American Journal of Economics and Sociology, The, July, 1995 by Colin Loader, Rick Tilman

I

Introduction

It has long been asserted that certain theoretical and doctrinal similarities exist between the German Historical School and American Institutional Economics.(1) Although there has never been a full systematic comparison of the two schools, it can be documented that at least some kind of intellectual interaction took place between the founder of the institutional school, Thorstein Veblen (1857-1929), and two leading members of the Historical School, Gustav Schmoller (1838-1917), the leader of the second generation of the school, and Werner Sombart (1863-1941), an outspoken member of the rebellious third generation.(2) Sombart and Veblen especially give evidence of having read and admired one another's work.(3) Despite this mutual admiration, serious differences between the work of Veblen and that of the Historical School, particularly Sombart's, are apparent. The explication of the structural relationships of the two men's works is a larger project that is now undertaken. Here a more specific aspect of the relationship, namely Veblen's critical position vis-a-vis Sombart and the German intellectuals during the course of World War One is explored; and the significance it had for his predicting the dangerous authoritarian course of Germany when applying his institutional analysis are explored.

In that period, Veblen wrote two books that analyzed aspects of the German Empire in the modern age. The first, Imperial Germany and the Industrial Revolution (1915), focused on the incomplete modernization process within Germany and its effects on the domestic political system. The second book, An Inquiry into the Nature of Peace (1917), analyzed the impact of the German political system, characterized by the survival of the dynastic state, on the system of world politics. The major theme in this latter work concerned the means by which the dynastic state made war palatable to the masses whose own interests were not served by the war.

II

Veblen's Critique of the German Intellectuals

Veblen was touring in Europe in the summer of 1914, when World War I began. Later, he laid the blame for the war on the German Empire, writing that "Imperial Germany and Imperial Japan are, in the nature of things as things go, bent in effect on a disturbance of the peace, - with a view to advance the cause of their own dominion."(4) He meant by "the nature of things" that these two countries were dynastic states and, therefore, by nature warlike and aggressive, that they were engaged in the "Imperial enterprise." The following summarizes Veblen's position:

Germany is still a dynastic State. That is to say, its national establishment is, in effect, a self-appointed and irresponsible autocracy which holds the nation in usufruct, working through the appropriate bureaucratic organization, and the people is imbued with that spirit of abnegation and devotion that is involved in their enthusiastically supporting a government of that character. Now, it is the nature of a dynastic State to seek dominion, that being the whole of its nature. And a dynastic establishment which enjoys the unqualified usufruct of such resources as are placed at its disposal by the feudalistic loyalty of the German people runs no chance of keeping the peace, except on terms of the unconditional surrender of all those whom it may concern. No solemn engagement and no pious resolution has any weight in the balance against a cultural fatality of this magnitude.(5)

While attributing this aggressive, warlike nature to the dynastic state, Veblen argued that this was not the case with the average citizen. War worked against the latter's interest, because he or she bore the burden without reaping any of the fruits. Therefore, in order for a dynastic state such as Germany to successfully wage war, the common person had to be co-opted by state authority for ends not serving the common good. In Germany, this was done by instilling patriotism in the underlying population that made them malleable in the hands of the ruling elites. Veblen defined patriotism as "a sense of partisan solidarity in respect of prestige" and in the aggregate as "a sense of undivided joint interest in a collective body of prestige." To him it was little more than a form of false consciousness.(6)

Veblen was thus repulsed by what he saw as the enthusiasm of the German people for the war. He declared that this could only be explained by the set of institutions which had become ingrained in Germany through habit, so that they were accepted by the people as embedded in conventional national principles. Law and order meant unquestioning obedience to personal rule of the dynasty. Since true freedom was irreconcilable with this rule, it was dismissed as "license" by those who accepted the principles of the system.(7)

Veblen believed that the intellectuals formed an intermediary force between the rulers and the masses. They had close contact with the ruling class through their role as a service class. And although they were more distant from the people, they were able to "serve as an instrument of publicity and indoctrination in the hands of the discretionary authorities." In this role the intellectuals did not exercise any critical function, displaying the same habitual loyalty that the general populace did. They might seem to have been more emotional at the onset of the war than were the masses, but this was only because they expressed their feelings with a greater facility of language.(8)