Conspicuous consumption

Thorsten Veblen. Now, that's a name not many people know of outside socio-economic academia. For many years I have found Veblen's views remarkably resonant even though the book that he wrote, Theory of the Leisure Class was written in 1899 and, it was about the emerging American middle-class and their habits as consumers.

Veblen coined the phrase conspicuous consumption.
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Whereas neoclassical economics defines humans as rational, utility-seeking people who try to maximize their pleasure, Veblen recast them as completely irrational creatures who chase after social status without much regard to their own happiness.

He used the term emulation to describe these actions. For example, people attempt to mimic the more respected members of their group in order to gain more status for themselves. Now we call this wannabe behaviour. It means the same thing.

As an example from modern-day life, certain brands and stores are considered more high-class than others, and people may shop at them, despite the fact that they cannot afford to do so, and even though cheaper alternatives would ease their financial situation and the goods available may be of equal utility.

Following this line of reasoning, Veblen also concluded that businessmen were simply the latest manifestation of the leisure class.

Veblen noted that businessmen do not produce goods and services, but simply shift them around whilst taking a profit.

He thus argued that the modern businessman is no different from a barbarian, in that he uses prowess and competitive skills to make money from others, and then lives off the spoils of conquests rather than producing things himself.

Doesn't all this sound familiar? Veblen was certainly a visionary.

I highlight Veblen and his theses because I believe that despite the economic turmoil and, even in its aftermath, the basic values that drive modern economies will not change. The classic words uttered by the fictional character of Gordon Gecko (played by Michael Douglas) in the seminal movie, Wall Street, "Greed is good" still underlines all modern economies and, I do mean ALL modern economies.
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The effect of this value system is the benchmarking of what constitutes success. Veblen was like many Taoist sages in identifying happiness as the key indicator. But, this was a cry in the wilderness. Everyone preferred to have money, money, money. This is the Faustian pact that most of us have signed on.

The profit and growth paradigm
If the desire for money is the root cause, then the demand for profits and continuous growth must be its effect.

We put our money in banks expecting an interest yield. We buy shares and equities of publicly listed companies expecting dividend yields but, mainly we look for capital gains. What do you expect fund managers to do? What do you expect corporate bosses to do? There is a desperate need to expand and grow and grow. That is when bad judgments and mistakes are made under great stress.

I have no grand solutions. I only highlight this phenomenon to create awareness of why many of us do the things that we do, sometimes without knowing why we do them. And, maybe it is this spark of awareness that will create a groundswell against the wild chase for money.

If we recall Asian history and, even Athenian history, we will learn that in enlightened societies it is the scholar that is on top of the social hierarchy. Pericles was the scholar-statesman of the Golden Age of Athens. In the old China, it was the scholars who went through rigorous examinations processes that formed the top quartile of Chinese society and, became the ruling class.
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But in this day and age, it is the businessman that tops the social pile. What does that say about the current state of play?