The anti-sabotage agenda
Thorstein Veblen has some thoughts about economic populism.
Before I begin: Please donate what you can to support Mahmoud Khalil’s legal defense and his family.
Last month, for Heatmap, I published a deep dive into the looming natural gas turbine shortage. If you’re at all interested in what GE Vernova CEO Scott Strazik says to shareholders, you should read it. (Let me know if you’d like a pdf copy.) I’ve been very pleased by the wide range of people sharing it and how well it’s been received.1 Seems like people love reading market research. Let’s do transformers next.
This is the core argument of my piece:
Taking a closer look at the investment plans of GE Vernova, the U.S.’s leading gas turbine manufacturer, suggests that, even as energy demand ramps up, these delays will persist. Rather than potentially overinvest in the face of rising demand and suffer the consequence of falling prices, GE Vernova and its competitors are committed to capital discipline, lengthening their order book, and defending shareholder value. Their reluctance to invest, while justified in some part by the nature and history of the industry, will threaten policymakers’ push for energy abundance ― to say nothing about economic growth or innovation.
Meanwhile, supply chain shortages will constrain the growth of clean energy generation. Inadequate investment in gas and an insufficient buildout of renewables in the face of unprecedented demand growth ― these are a toxic cocktail for the American energy system. Forget visions of an all-of-the-above energy strategy. How about none of the above?
GE Vernova plans to “expand margins in backlog”—force developers to bid up the price of scarce turbines produced at a constant rate—rather than build new plant to accommodate skyrocketing demand. Strazik was crystal clear about this: “We're not adding new cranes. We're not adding a new building. We're using our existing factory.” He frames his decision to invest in a “sequential” manner as “a chess match for a business that hasn't seen this amount of organic growth.”2 His competitors, Siemens and Mitsubishi, are doing the same. Read the piece and you’ll see why. It’s about profit just as much as it’s about the sector’s history of overcapacity.
Now, I’m no fan of gas. But this story feels so rich to me because it illuminates how policymakers have neglected to set up a functional industrial policy apparatus governing even the sectors we ought to do away with:
But courting a gas turbine crisis should itself give policymakers pause. The fact that our energy system is at a point where neither turbines nor transformers nor transmission is available in sufficient capacity to meet any policymaker’s vision of energy abundance suggests that our leaders must reorient the government’s relationship to industry. During periods of economic uncertainty, capital discipline might appear rational, even profitable. But the power sector’s profits are, through rising energy bills and more frequent climate disasters, revealed to be everyone else’s costs. Between clean energy and fossil fuels — between what Americans need and what private industry can provide — the energy transition is shaping up to be, quite literally, a power struggle.
You can read this story in a Marx-y way: Our energy system is hostage to the profit motive, insofar as Strazik and GE Vernova are prioritizing positive free cash flow and share buybacks. You can read this story in a Keynesian way: A demand shock in the late 2010s subjected the gas turbine sector to severe hysteresis, from which it has not recovered and which continues to constrain present investment decisions. There are some other fun ways to read this story: Drawing indirectly from the work of Nathan Tankus and Isabella Weber, these delays are effectively non-price adjustments that shareholders don’t notice (delays don’t show up in P&L statements) and consumers must tolerate thanks to turbine manufacturers’ market power, which is related to the sector’s capital intensity. (These readings do not map perfectly onto the story, I think, but they’re interesting complements.)
All of these takeaways are correct. They’re all quite serviceable as arguments with which to persuade your friends and your enemies that the relationship between government and industry needs a serious rethink.
But there’s one other thinker whom I was channeling while writing, whose potential takeaways from a story like this carry a different valence: Thorstein Veblen. That progressive economist wouldn’t have much sympathy for the gas turbine manufacturers. He’d describe their actions as “sabotage”—a “conscientious withdrawal of efficiency” through a “businesslike control of the rate and volume of output” in the interests of the manufacturers’ profits and market power rather than for the common good—and he’d be right, of course.
His specific arguments about sabotage lead him toward a consumerist critique of capitalism’s ability to provide for people: Policymakers should both (1) cut the costs of and lower the barriers to producing more necessary stuff and (2) use the state to produce and distribute necessary stuff rather than rely on the private sector. Put another way, eliminating industrial sabotage and producing maximum quantities of the goods people need is a worthy goal that requires state control over production and distribution. His policy program is compelling—but his frustrating refusal to offer a coherent politics for how we’d get there isn’t.
Sabotage and capital discipline
A month before publishing this Heatmap piece, I picked up a copy of Engineers and the Price System, a set of six of Veblen’s essays on the industrial system and its relationship to the profit motive, published in 1921.3 The essays begin with an exploration of the concept of “sabotage,” how capitalists (and workers) withdraw their resources (and labor) to capture greater shares of the profits of their industries, and end with his call for a “Soviet of Engineers” that can manage the economy with an eye toward maximizing its capacity to produce and deliver the quantity of commodities and breadth of infrastructure consistent with the common good and industrial modernity.
Veblen’s definition of “sabotage” provided a ready framing for my gas turbine piece. Provided that “energy abundance” is in our collective interest, and given that industry faces no technological barriers to producing gas turbines, then the turbine manufacturers are committing industrial sabotage: They are engaging in the “conscientious withdrawal of efficiency” through “habitual” unemployment of workers and underemployment of plant.
There’s ample evidence that the turbine manufacturers are looking to preserve their profit margins. Veblen thinks there are two ways to do this: Either they “maintain profitable prices by limiting the output,” or they “maintain profits by lowering the production cost of an increased output.” But he judges that “on the whole the former proved the more attractive; it involved less risk, and it required less acquaintance with the working processes of industry.”
To be sure, GE Vernova is investing in plant efficiencies and productivity improvements to lower the production cost of the output they already produce. But it’s true enough that they are preserving their margins by intentionally limiting the total output they can produce over the longer term. I refer to it as capital discipline—which it is!—but Veblen is characteristically snarkier about it: This is a “running adjustment of sabotage on production.”4
This definition of the word sabotage lends itself well to the larger political-economic project of his essays: Seeing as sabotage by vested business interests prevents everyday people from getting what they need at the lowest possible cost, the economy deserves managers that can displace those vested interests and run the economy in the interests of consumers rather than producers. As with gas turbines, with everything else.
Quantity production
Veblen’s world is that of the World’s Fairs and of World War I—a world of industrial modernity, technological marvels, and global economic mobilization. And, insofar as it might be necessary for the apparent common good to have more of something that our marvelous modern industries can produce at scale and at lower marginal costs, he thinks that any artificial restriction on that output is industrial sabotage.
Veblen’s essays call for maximizing the production of what I’ll call “essential” goods, the kind of stuff where “more” is an obvious social good, not to mention greases the wheels of the rest of the economy.5 These essential goods include stuff like commodities, food, energy, industrial inputs, and machines, plus the transportation infrastructure required to distribute them across the economy. Update it for today and I’m sure Veblen would hone in on the housing shortage, the clean energy shortage, the resilient infrastructure shortage—and, sure, the gas turbine shortage, too. (“Essential goods” is a very broad category, but it makes sense—there’s a lot that we’d all agree we don’t have enough of—and it’s better than Veblen’s vague “inputs.”)
All of these essential goods are subject to what Veblen calls “quantity production,” production via specialized assembly lines and standardized factory production of goods, enabled by rapid technological progress—where the only functional limits to producing bountiful quantities of these essential goods are (1) the ready availability of inputs and (2) the willingness of business owners to run their factories at full capacity. Of course, the second one is the big problem: “What stands in the way of so increasing the ordinary output of goods and services is business as usual.”6
A nation of shoppers
Veblen wants more stuff, and wants more control over how it’s made and distributed.
The first half is easy for him: The “community’s industrial welfare … calls for maximum production.” If we have the means, the inputs and the technology, to unleash the quantity production of some essential good, then we should direct our policy toward that goal. To be sure, this orientation toward our political economy comes with some distrust of organized labor, the demands of which he doesn’t see as always representative of "the “common good.” Both capitalists and labor fight to maximize their share of the economy’s profits—and both would be happy to preserve “business as usual” through sabotage, restricting quantity production, if it would advantages them in this respect.7 What’s important here is that Veblen thinks that everyone is a consumer before they are a producer, that the common good is a function of our unmet needs.
There’s a modernist populism to this kind of thinking: It’s worth policymakers’ time and energy to bring the full might of industrial modernity to bear on people’s inadequate or otherwise precarious standards of living. But Veblen stresses that lower costs might not even call forth greater production in the first place, especially if there’s money to be made from rent-seeking off a shortage of a critical good. The economy will not automatically provide for the common good just because things are cheaper. Rather, the return expectations of developers and financiers work to “derange” quantity production: “The business concerns … are capitalized on their capacity to produce earnings, not on their capacity to produce goods.” The policy solution is nothing short of state control over industrial production and distribution; there is no other way to equitably provide essential goods.
These policy demands are complementary: Industries should produce essential goods at maximum quantities and at the lowest possible costs, but—seeing as the Vested Interests are more interested in sabotaging production in the interests of “business as usual”—that won’t happen until policymakers essentially nationalize the production and distribution of those goods in the interest of the common good. So long as “the Vested Interests are secure in their continued usufruct of the country’s industry, just yet,” their sabotage denies us the economy we deserve.
Isn’t this a compelling line of argument? There’s a progressive modernist ethos to Veblen’s thinking, and it’s populist, to boot: He’s pro industry without being pro Industry, if that makes sense. Personally, I think there’s a lot of runway to this kind of consumer-centered critique of big business. But how does he propose policymakers actually create and execute this kind of industrial policy?
Fintwit as praxis?
Insofar as the industrial system is “an organization of mechanical powers and material resources, rather than of skilled craftsmen and tools,” a system “of an impersonal nature,” it “lends itself to systematic control under the direction of industrial experts, skilled technologists, who may be called ‘production engineers.’” Engineers are the protagonists of Veblen’s analysis because they are the only people who can manage such a delicate societal machine.
I shouldn’t understate the degree to which World War I and “the experience of war administration” seemed to influence Veblen’s thinking here: The United States’ politicians, business community, and engineers at the time all shared the institutional memory of the country’s grasps toward a command economy, to say nothing of the failure of to stabilize consumer prices in the aftermath, the recession during which these essays were published. Reliance on “capable and well-intentioned businessmen” to drive quantity production for the war effort was not a total failure, but its limits were plain to see.
Writing from the Progressive Era, Veblen did not believe that engineers were content with this political situation:
“These technologists have begun to become uneasily ‘class conscious’ and to reflect that they together constitute the indispensable General Staff of the industrial system. Their class consciousness has taken the immediate form of a growing sense of waste and confusion in the management of industry by the financial agents of the absentee owners. They are beginning to take stock of that all-pervading mismanagement of industry that is inseparable from its control for commercial ends. All of which brings home a realization of their own shame and of damage to the common good. So the engineers are beginning to draw together and ask themselves, ‘what about it?’”
Well, what about it? Nothing less than a “General Strike of the technological specialists” to throw off the “dead hand of the Vested Interests,” of course. Veblen has a pretty coherent policy platform here: (1) liquidate the MBAs and corporate financiers who run industry8, (2) give the engineers and the “technological specialists” control over the production process, and (3) deliver a material revolution in living standards through a “competent distribution of goods and services.” This is compelling—Veblen for President, already!9
Veblen recognizes that the engineers themselves still need a coordination mechanism. They’re stuck in their sector-specific silos; they may not know how to coordinate an industrial machine running at maximum capacity and distribute its products in a stable, welfare-maximizing manner: “the technical training that goes to make … a competent industrial expert in any line of specialization, is not of a kind to give him the requisite sure and facile insight into the play of economic forces at large.” Engineers don’t necessarily know economics, and the economics they do know might just be “half-forgotten commonplaces of the old order.”
What engineers, the “indispensable General Staff of the industrial system,” require is the direction of “consulting economists,” a “suitable group of economists and engineers, who will have to be drawn together by self-selection on the basis of a common interest in productive efficiency, economical use of resources, and an equitable distribution of the consumable output.” They must be able to map the productive and consumptive capacity of the economy and its constituent sectors, understand how to make its production and distribution chains more efficient, and coordinate the engineers running the assembly lines. Their job is one of political education, supply chain analysis, and, yes, teamwork. Their “place in the scheme is analogous to the part which legal counsel now plays in the maneuvers of diplomatists and statesmen; and the discretionary personnel of the incoming directorate are to be, in effect, something in the way of industrial statesmen under the new order.” In other words—and I mean this with complete sincerity—Veblen wants leftie fintwit to coordinate the economy.
Insofar as I’m very much part of leftie fintwit—hell, I guess I already do some of this work; count me in!—I can’t help but like this plan. But there are some very obvious problems. Not only does Veblen seek to create a technical elite that smacks of noblesse oblige—the “self-selected, but inclusive, Soviet of technicians … must consistently and effectually take care of the material welfare of the underlying population”—but he has no real political theory of change for how to bring about the general strike of engineers in the first place. Nor does he offer a framework for how his consulting economists should understand and define the “common good” for the purposes of coordinating the economy. Veblen wants to have both technocracy and populism—but his vision delivers neither.10
A politics against sabotage
These six essays offer no strong theory of change and no sense of how to drive the Progressive Era’s social agitations toward a realization of Veblen’s political program beyond arguing that “business as usual” makes no sense and that engineers themselves must be growing unsatisfied. But, as Boston Review editor Simon Torracinta put it, “Veblen’s technocratic faith misrecognized the social forces available to bring about such sea change—despite his attempted proselytizing among engineers at the New School.”11 Veblen’s general strike of engineers never happened. No doubt the New Deal and World War II helped build consensus around Veblen’s thinking—but, where the legacy of the New Deal state is concerned… as leftie fintwit might put it, “it’s so over.”12 Still, his critique of the status quo, reliant as ever on the market, is interesting, compelling, and feels just as discerning a century later.
Veblen sees a teleology for modern industry—
“For the mechanical technology is impersonal and dispassionate, and its end is very simply to serve human needs, without fear or favor or respect of persons, prerogatives, or politics.”
—and he wants his Soviet of Engineers to deliver this vision to the people.
I think a good progressive politics should capture this kind of spirit: “If we can make it, there’s no reason you shouldn’t have it—and, yet, you don’t have it!” It’s not particularly scandalous to argue that technology and industry should serve human needs. This kind of messaging presupposes that industry should be controlled and directed by a state that channels people’s desires in order to deliver the essential goods that people need, and highlights how the “business as usual” status quo departs from that vision, with all sorts of deleterious consequences. This kind of economic populism treats everyday people as consumers with desires, treats the state as a vehicle for realizing them, and identifies the corporate enemies whose sabotage stands in the way of that process. At least to me, this kind of populism sounds coherent and compelling.13
It’s also urgently necessary. Fascist conservatives embrace the language of deregulation and cost-cutting and unshackling production in order to enact an twisted politics of freedom that, should they deliver on it, not only vacates the state’s essential role in delivering better standards of living to people but turns Veblen’s teleology on its head: Their state would use industry and technology to serve human needs with extreme prejudice against certain persons, prerogatives, and politics. The Vested Interests are sabotaging the economy, suppressing our living standards, and feasting on the carcass of the state.
Attempts to craft a policy program that purports to embrace the public benefits of industrial modernity but refuses to resist this dangerous zero-sum populism will end up being co-opted by it. The only kind of progressive populism that can challenge this new status quo is one that takes up the challenge of dislodging the Vested Interests denying us the economy and standards of living we deserve—a positive-sum vision of the economy. There is a difference.
Veblen strings a lucid and relatable explanation of what’s wrong with our economy into a compelling narrative about the standards of living we should be demanding from our state. And, while he doesn’t lay out a sensible strategy for making a politics out of this positive-sum populism, his concept of “sabotage” offers a ready political economy story that could take us quite a way toward one.
I’ve seen socialists and populist conservatives alike sharing it. Jigar Shah, too. Coolest of all, Tyler Norris cited it in his recent testimony on load growth to the House of Representative’s Energy and Commerce committee. Anyway, it seems like people love reading market research. Someone should read shareholder calls about transformers next.
Neither of these quotes made it into the Heatmap piece. But I think this chess framing is so apt.
These short essays are fun to read. Veblen is a conspiratorial little guy, and he’s a sharp critic of the world around him. No wonder he’s so influential otherwise. (I have not yet read Theory of the Leisure Class, his most famous work, although I’ve read a lot about it—it’s hard to avoid if you’re interested in the idea of preference formation. I’ll get to it for real sometime.)
Veblen’s vision of capital discipline notably contrasts with Kalecki’s in “Political Aspects of Full Employment”: The “Vested Interests” of Big Business and Wall Street can’t tolerate running industry at full capacity—not necessarily because doing so gives labor too much bargaining power, but because capitalists simply lose money when they produce at maximum quantity rather than produce for maximum revenue.
Alternatively, you could call these “upstream” goods/inputs. Isabella Weber’s How China Escaped Shock Therapy employs what I think is a similar division between “heavy” sectors (upstream or essential goods, including industrial inputs and products) and “light” sectors (non-essential personal consumption goods).
The Vested Interests are committed, in Veblen’s words, to “the simple plan of ‘sitting tight.’ That plan is intelligible to any layman”: It’s easy to see who benefits from not producing adequate quantities of anything.
Veblen is still more pro-labor than pro-capital. His crucial intervention with respect to the term “sabotage” was to argue that, just as capitalists accuse labor of sabotaging production through strikes, capitalists can sabotage production through capital discipline, too.
Did Veblen really say “kill the MBAs”? I leave this question as an exercise for the reader.
Really, this guy could kill a stump speech:
“The captains [of industry] have always turned the technologists and their knowledge to account … only so far as would serve their own commercial profit, not to the extent of their ability; or to the limit set by material circumstances; or by the needs of this community.”
Readers who know what I do for work have probably noticed by this point that Veblen’s critique seems to bear heavily on an extremely public debate happening right now between left-of-center and progressive policy wonks. I have no plans to name that debate because I—and Veblen, too, probably—think that it’s mostly a fake distinction and not a debate worth having; it’s a discourse machine for producing takes. Trying to integrate it here actually made this piece feel stupider and more contrived. Ignoring it entirely gives me the freedom to review Veblen without recourse to such tedious phrases as “upzoning is necessary but insufficient” for sake of argument. It’s banal!
The biggest problem with this “debate that shall not be named” is that trying to engage conservatives with it—as if its policy recommendations could be achieved in a bipartisan manner—is very explicitly a bad idea. The conservatives, who are also fascists, are proving that they do not actually care about any semblance of governance. We should not play too hard into the idea that the political right could ever be reasonable about this debate’s policy suggestions. Otherwise, this kind of policy work will get co-opted, warped, and spit out by conservatives, who have an actual political movement behind them, rather than ever energizing a political movement of its own.
Quoting Torracinta in full here—he’s talking explicitly about Engineers and the Price System—suggests he shares my judgment of Veblen:
“Veblen’s technocratic faith misrecognized the social forces available to bring about such sea change—despite his attempted proselytizing among engineers at the New School. Nevertheless, given the industrial strategy and state coordination needed for the complete decarbonization that the biosphere urgently requires, his critique might be a better starting point than the ritual genuflections of today’s economists toward the altar of market prices.”
It’s joever?
It’s also a refreshing departure from a “bring manufacturing back” kind of production-centered populism. That’s so joever.
Great piece! I’m curious whether you have read Timothy Mitchell’s Carbon Democracy? Picks up the same Veblen-sabotage point as I recall.