Competitiveness - ‘corporate graffiti’ invades economic theory

Even a casual observer of the practice and science of management will not fail to notice how a continuous flow of new concepts are born, become fashionable and then disappear from management jargon. A recent article in Financial Times (Ref. 1, p. 10) suggests the term ‘corporate graffiti’ - or ‘management graffiti’ - to describe the unthinking use of buzz-words. Management language is ‘opaque, ugly, and cliché-ridden’, FT claims. ‘Management graffiti’ is intended as the catch-phrase to end all catch-phrases.

Clearly these ‘corporate graffiti’ are important not only to the world of business but also to the rest of society - largely due to the influence wielded by the people who employ them. Michael Porter, himself a contributor to corporate graffiti, has issued a warning to managers against paying too much attention to the fads - against what he calls single-issue management. Luckily, most management graffiti live and die without ever leaving the spheres of management. Exceptionally, however, the term competitiveness has taken the leap from management theory to the field of economics and public policy. Does this mean that public policy theory is starting to be subject to the same fads as management theory? Apparently, some mainstream economists are of this opinion. However - although most of the time ill-defined - the term competitiveness seems to fill a need in public discourse. Does the need for such a concept reflect a new situation in the world economy? Do we need the term competitiveness in order to come to grips with increasing globalization (another graffiti term), or is this a new term for a set of problems which have been around for a long time?

In this chapter I shall argue that, although often misused and mostly ill-defined, the term competitiveness properly used does describe an important feature in the world economy. This concept scratches the surface of important issues which are central for understanding the distribution of wealth, both nationally and globally. In spite of its fairly recent appearance on the scene, the term competitiveness in my view addresses issues which have been central in public policy at least during the last 500 years, albeit under different headings.

This chapter looks at the Dutch Republic from the vantage point of the economists of the period. These pre-Smithian economists are normally grouped together in the history of economic thought under the decidedly derogatory label of ‘mercantilists’. Under its standard Whig conception, any idea in the history of economic thought – as identified almost a century ago by English historical economist Ashley – instead of being judged by its relevance in a given context, is either hailed as a surprising early anticipation of a healthy neoclassical economic principle or as an example of hopelessly ill-conceived theories (Ashley 1920: II, 381).

I would argue that as a tool in order to understand the rise and fall of the Dutch Republic, mercantilism had some clear analytical advantages over neoclassical economics. Not only was the mercantilist or pre-Ricardian economists’ toolbox much larger than today’s, the pre-Ricardian system already included a large number of economic factors which the profession presently attempts to re-introduce to mainstream economics. Examples of what gradually was left out of economics starting with Adam Smith are innovations – part of English economics from Francis Bacon (1561–1626) until and including James Steuart's important work (1767) – technology, increasing returns, institutions, geography, synergies, path dependency, that economic activities are qualitatively different as carriers of economic growth, the idea that economic policy should be context-specific, and the whole fundamental question of why economic development is by nature so uneven. With the English classical economists economic theory gradually lost its previous understanding of the vicissitudes of technology and production, and came to concentrate upon trade and prices. The contemporary mercantilists are therefore likely to provide a much richer analysis of the Dutch Republic than what is found in the works of the later classical economists.

Mercantilism can productively be seen both as state- and nation-building (Schmoller 1897/1976) and as a strategy of industrial import substitution (Perrotta 1993), which at the time was seen as two sides of the same coin.1 To the laggard countries of Europe, the Dutch Republic provided important inspiration on both these accounts. That inspiration did not come from Dutch policies, but by asking what policies would have to be created in order to achieve the same results as those observed in the Dutch productive system, but under very different circumstances and conditions; in very different contexts.

‘And the land was not able to bear them, that they may dwell together …’

Genesis XIII, 6.

(quote used by Alfred Marshall, Principles of Economics, London, 1890, in order to emphasize the role of Diminishing Returns as a fundamental factor in human history.)

‘I apprehend (the elimination of Diminishing Returns) to be not only an error, but the most serious one, to be found in the whole field of political economy. The question is more important and fundamental than any other; it involves the whole subject of the causes of poverty;.. .a nd unless this matter be thoroughly understood, it is to no purpose proceeding any further in our inquiry.’

John Stuart Mill, Principles of Political Economy, 1848.

This chapter explores the impact of Diminishing Returns on world poverty and sustainable growth. Diminishing Returns is an economic factor which not only heavily influences the behaviour of costs, wages and standard of living in any resource-based economy - particularly in Third World economies - but, I shall argue, this factor is the key to understanding the concept of sustainability. This chapter argues that the strong warning from John Stuart Mill quoted above is as valid today as it was almost 150 years ago. Mill's warning has, however, been largely ignored, almost completely so in the period following World War II.

Part one of the chapter traces how Diminishing Returns disappeared from economic theory as neo-classical economics and general equilibrium analysis took over from other, less abstract, economic paradigms. Part two discusses the impact of Diminishing Returns vs increasing returns if they were to be reintroduced in international trade theory. Part three describes how ‘The Triple Curse’ of Diminishing Returns, perfect competition and price volatility combine and mutually reinforce each other in maintaining vicious circles of poverty and unsustainable growth. Part four describes how a few resource-rich nations - Australia and Canada taken as examples - managed to escape the ‘Triple Curse’ which threatens all resource-based economies. The concluding part discusses the need for a wide-ranging overhaul of the World Economic Order, an overhaul which once again incorporates the lock-in effects created by Diminishing Returns in resource-based economies.

These volumes represent the second and last installment of my collected papers and chapters on economics. The first installment – The Visionary Realism of German Economics. From the Thirty Years’ War to the Cold War – was published in 2019, also then kindly collected and edited by Prof. Rainer Kattel of the Institute for Innovation and Public Purpose, University College London.

¡Viva el tercer extremismo! was once the only text in a mail I received from a Latin American friend: ‘long live the third extremism’. My friend and I are both what you can call children of the Cold War, born at its start in the late 1940s and spending many formative and active years under its reign until 1989. His point was that my form of extremism, instead of becoming a rigid ideology, was a rather extreme attention to historical facts and the tools and mechanisms they revealed. Indeed, I was very pleased when I found that an influential German economist, Gustav Schmoller, had referred to communism and what was to become neoliberalism as ‘twins of an ahistorical rationalism’1. My ‘extremism’ was intended to be the opposite, hopefully a ‘historical rationalism’, which by necessity had to be more complex than the simplistic solutions of the ‘ahistorical twins’ which dominated the Cold War view.

With time, I found that several approaches qualified as not belonging to any of the ‘ahistorical twins’ that dominated Cold War economics. I came to think of these as ‘reality economics’, but a philosophical discussion started within the group around ‘reality’ and we decided to adopt the term The Other Canon of Economics: the study of the economy as a real object, not defined in terms of the adoption of core assumptions and techniques. The end of this introduction provides a comparison between standard economics and The Other Canon, listing many economists who have provided input to The Other Canon. A family tree of The Other Canon is found here http://othercanon .org /family -tree/

The beginning of the Cold War brought a massive theoretical contradiction to the surface. We could call it Marshall vs. Samuelson. On June 5, 1947, US secretary of state George Marshall presented what was originally called ‘The European Recovery Plan’, later the ‘Marshall Plan’.

The aim of this chapter is to give a brief overview of the historical arguments that have been used to argue for industrial policy in its widest sense, that is, that what a nation (or region) specializes in producing may be of key importance to the wealth and welfare of its inhabitants. Historically it has been generally agreed that symmetrical trade – trade in similar goods between nations at similar levels of technological development – has tended to be beneficial to both trading partners. In these cases, employing Ricardian trade theory has not been detrimental to the trading partners. This chapter explains the situations when Ricardian trade theory is not beneficial to one of the trading partners, and – at the same time – the economic mechanisms which have been identified as making industrial policy desirable. That manufacturing matters has, in various forms, been presented as a main reason for industrial policy, at least since England's import-substitution policies during the 1400s: adding value to English wool by spinning it into woollen cloth and garments. This was mainly achieved by raising export duties on raw wool, making English wool cheaper for domestic manufacturers than for foreign ones. However, the reasons why manufacturing matters have varied. And that understanding has gone from intuitive inferences to scientific evidence. This chapter will historically present this process and the most common arguments for industrial policy over time.

New Perspectives on Cold War Economic Theory: Adam Smith, David Ricardo and Paul Samuelson Revisited

INITIALLY it is of some importance to gain a broader perspective of what has developed into ‘general truths’ of the neoclassical economics during the Cold War.

The fact that David Ricardo's theory of comparative advantage in international trade dates back to 1817 conveys an impression that this principle has been ruling economic theory since then. It is also assumed that David Ricardo merely solidified the free-trade principles of Adam Smith. However, the following quote from the young Adam Smith shows how far away his principles were from the logic of comparative advantage and neo-liberalism:

Introduction

For a long time, economic development in Central and Eastern European (CEE) countries has been seen by most analysts in both academic and policy circles as a largely positive if not a very positive story. For example, at the end of 2005, Business Week ran a cover story titled ‘Central Europe – Rise of a Powerhouse’. It has become commonplace to argue that the success of CEE development is mainly due to neo-liberal economic policies (liberalized markets, balanced public budget, price stability, low tax burden and strongly market-oriented reforms in all socio-economic sectors) pursued by these countries since the early 1990s. In other words, CEE countries have been poster countries for Washington Consensus policies. Indeed, as we show below, during the entire decade of the 1990s, industrial restructuring and embryonic innovation policies in CEE were largely dominated by Washington Consensus thinking. We aim to show that, first, these policies have been a double-edged sword: on the one hand enabling fast and furious industrial restructuring while, on the other hand, locking CEE economies into economic activities with low value added/productivity growth and thus undermining future sustainable growth. However, the impact of accession into the European Union (EU) has been equally pivotal for industrial restructuring and innovation policy making in CEE countries in the 2000s and this process can be summed up as a strong Europeanization of innovation policy in CEE. We aim to show, second, that Europeanization has been largely a double-edged sword for CEE countries. Since joining the EU in 2004 or 2007, and already during the accession process, there is a strong change in innovation policies in many CEE countries towards a much more active role of the state. In this change there is a clear and strong role of EU's structural funding, particularly the negotiations and planning that comes with it. However, these changes come with specific problems: first, there is an over-emphasis in emerging CEE innovation policies on a linear under-standing of innovation (from lab to market) that is based on the assumption that there is a growing demand from industry for R&D (which is not the case because of the structural changes that took place in the 1990s via the Washington Consensus policies); and, second, increasing usage of independent implementation agencies in an already weak administrative capacity environment lacking policy skills for networking and long-term planning.

The Millennium Development Goals (MDGs) are noble goals for a world sorely in need of urgent action to solve pressing social problems. They rest, however, upon completely new principles whose long-term effects are neither well thought through nor well understood. In this chapter, I shall attempt to explain why the MDGs do not represent good social policy in the long run.

One novelty of the MDG approach lies in the emphasis on foreign financing of domestic social and redistribution policies rather than on domestic financing by the developing countries themselves. Disaster relief, which used to be of a temporary nature, now finds a more permanent form in the MDGs. In countries where more than 50 per cent of the government budget is financed by foreign aid, huge additional resource transfers are being planned. This raises the question of the extent to which this approach will put a large number of nations permanently ‘on the dole’, a system similar to ‘welfare colonialism’, which will be discussed at the end of the chapter.

The pursuit of the MDGs may appear as if the United Nations institutions have abandoned the effort to treat the causes of poverty and have instead concentrated on attacking its symptoms. In this chapter, I shall argue that palliative economics has, to a considerable extent, taken the place of development economics. Indeed, the balance between development economics (radically changing the productive structures of poor countries) and palliative economics (easing the pains of economic misery) is key to avoiding long-term negative effects.

How we used to deal with problems of development

In less than one generation, a stark contrast has emerged between the type of economic understanding underlying the Marshall Plan, on the one hand, and the type of economic theory behind today's multilateral development discourse and the Washington institutions, on the other. The Marshall Plan grew out of recognition of the flaws of its precursor, the Morgenthau Plan.

There are few works of world literature that may be unproblematically categorized as subaltern writing. As the voice of peoples marginalized by the grand narratives of world history, including that of colonization, they exist as ephemeral entries (often via translations) in critical discourses on subaltern theory and practice. As autonomous, self-defining texts representative of that voice the examples are few. This is true as well of plantation Indian history (the general backdrop of this study) where once again the texts, often orally transmitted, exist only as fragmentary narratives. A proper intertextual framing of subaltern works is therefore impossible. However, there are a few challenging and defiantly exclusive subaltern texts in the critical bibliography of the field, and these may be mentioned: poems and prose works by Trinidadian and Guyanese Indians such as David Dabydeen, Kumar Mahabir and Rooplall Monar, plays by the Mauritian Patois French writer Dev Virahsawmy and the poems of the Suriname Bhojpuri writer Jit Narain.1 This is an incomplete and partial list that needs correction. In these limited citations, the one work that stands out is Dev Virahsawmy’s dramatic re-rendering of Shakespeare’s The Tempest as Toufann (‘Tempest’). But even as one concedes the power and originality of Virahsawmy’s challenging work, there is nothing in the Indian plantation subaltern literary archive remotely comparable to Subramani’s monumental novels Ḍaukā Purān and Fījī Māṁ (hereafter the latter without diacritical marks and given as Fiji Maa). As already noted, they are works of such exceptional power and originality that they require not only critical analysis but also critical exposure. This chapter is aimed at filling that need with reference to the first of the two novels by Subramani written in the Fiji Hindi demotic.

Subramani’s Ḍaukā Purān (‘The Subaltern Tale’ as I have translated the title) is a rich, indeed seminal, text through which we can talk about subaltern voice and speech. Many books and essays have been written about plantation and post-plantation Fiji history, but there is no work that explores life worlds through which an alternative, subaltern, narrative could be theorized.

Based on the economics of Joseph Schumpeter, National Innovation Systems have since the early 1990s emerged as a holistic and socioculturally embedded alternative approach to explaining economic growth. The idea that systemic relationships exist between different sectors of the economy that influence the production and implemen-tation of new knowledge, and thus economic development is, however, much older than current research indicates. We will argue the Neapolitan mercantilist Antonio Serra coherently presented the kernel of a national innovation system already in his 1613 Breve trattato, including two of its key elements: increasing returns and synergies. The problems of establishing the institutions conducive to economic growth faced by mercantilists at the end of the Renaissance are shared today by policy-makers in the developing world, and it can therefore prove to be fruitful, if not necessary, to explore the historical roots of this early innovation system approach. Indeed, Serra's work has been brought back to light on several occasions in the past centuries, each time as a source of guidance in an era of economic turmoil: first on the eve of Italian unification, then at the dawn of German industrialization. Following the failure of the Cancun meetings in 2003 to reach a trade agreement between North and South, such turmoil is over us again as it becomes increasingly clear that the reigning economic dogma has failed to deliver on its political promises. We argue that, in the economic profession's inevitable search for new means and methods, Serra's message is again relevant.

Introduction—Mercantilism as a National System of Innovation

It has frequently been noted that static, barter-centered mainstream economics, as a collection of theoretical variants orbiting the neoclassical paradigm, is presently under siege by a wider, more dynamic and socially embedded alternative that focuses on production and innovation as mechanisms of economic growth (Broda 1996: 235; Magnusson and Ottosson 1997: 1–9; North 2001: 491). As a subset of the neo-Schumpeterian alter-native, the innovation system approach—broadly conceived as the existence of institutional synergies fuelling innovative activity and economic growth—has become widely diffused in the past few years, recently, with the Globelics network meeting in Rio de Janeiro late 2003, also entering seriously into the discourse on Third World development.

The aim of this chapter is to show that the dynamics of Schumpeterian economics, in addition to explain the creation of wealth, also implicitly contain the elements of a theory of relative poverty. It is argued that the German tradition of economics, of which Schumpeter is a part, has always encompassed the necessary elements of a theory of uneven growth. List, Marx, and Schumpeter have all emphasized different aspects of this uneven growth. This contrasts sharply with the Anglo-Saxon tradition which, particularly since the 1890s, has produced theories of growth and trade which imply an even, converging distribution of world activity and income.

The organization of the chapter is as follows: Section 1 contrasts Anglo-Saxon and German economic traditions from the point of view of theories of uneven growth vs. theories of even growth. Section 2 raises the question of the relationship between technical change and underdevelopment, and identifies two key mechanisms which create uneven distribution of the gains from technical change. The two are (I) the consequences of the extremely uneven advance of the ‘technological frontier’ and (II) Classical and Collusive spreads of technological gains. Section 3 shows how these mechanisms work to create three cases of ‘Schumpeterian underdevelopment’ in the Caribbean. In Section 4 it is claimed that the factors identified in Section 2 may create conflicting interests between the two parts that every individual plays in economic life, that of producer and that of consumer. It is claimed that these are identical only under the assumptions of neo-classical economics and in special cases of what is labelled symmetrical trade. Finally, in Section 5, the policy conclusions of these findings are discussed. It is showed how the conflicting interests of man-the-consumer and man-the-producer, produced by classical and collusive spreads of technical change, were central to the creation of US industrial policy in the early nineteenth century.

Anglo-Saxon vs. German economics: Theories of even vs. theories of uneven growth

Friedrich List, Karl Marx and Joseph Alois Schumpeter are the German economists who have had a major influence on economic policy outside the German-speaking area. The theories of Marx and Schumpeter are deeply rooted in the traditions of the German Historical School of Economics, and although Friedrich List antedates what is generally seen as the starting point of the older historical school, his approach is clearly that of a ‘proto-historical school’.

Introduction: Lost Theoretical Insights from US Secretary of State George Marshall

Seventy-five years ago, on 5 June 1947, US secretary of state George Marshall gave a speech at Harvard University announcing what was to be called the Marshall Plan. The Marshall Plan was probably the most successful development plan in human history, re-industrializing and industrializing countries from Norway and Sweden in the North to Greece and Turkey in the South-East. At about the same time, a similar process based on the same principles re-industrialized and industrialized East Asia, spreading from Japan in the North-East towards the South-West. In this way a cordon sanitaire of wealthy countries was created around the communist world, stemming the communist tide that was rising at the time of Marshall's speech. One country to benefit from the Marshall-type ideology was South Korea, a country that in 1950 was poorer (GDP per capita estimated at $ 770) than Somalia (GDP per capita estimated at $ 1057; Maddison 2003), which today is an example of a failed state (see Figure 20.1 below).

Although sometimes it is misunderstood as a scheme for giving away huge sums of money rather than a re-industrialization scheme, the Marshall Plan is well known. What is less known is that the relatively short speech contained three key theoretical insights with strong relevance in today's situation.

The first insight is the link between a certain type of productive structure and what George Marshall calls ‘modern civilization’, what in a more politically correct and neutral language today could be called ‘development and democracy’ (italics added):

There is a phase of this matter which is both interesting and serious. The farmer has always produced the foodstuffs to exchange with the city dweller for the other necessities of life. This division of labor is the basis of modern civilization. At the present time it is threatened with breakdown. The town and city industries are not producing adequate goods to exchange with the food-producing farmer. During the formation of the European nation-states, it was common knowledge that democracies and ‘civilization’ were both products of certain economic structures associated with ‘city activities’ (chapter 13).

This chapter attempts to flag the profound changes that underwent economic practice and economic theory during the Cold War—from 1947 to 1991—as being at the roots of the present inequality crisis. Two aspects are raised. As regards the worsening inequality between nations it is argued that a key distinction between economic activities—at the core of the 1947 Marshall Plan—was increasingly marginalized as the tools of neo-classical economics carried the profession toward higher levels of abstraction.

As regards the worsening inequality within nations it is argued that a) the system of wage-setting changed from a virtual ratchet wheel effect, making wages practically irreversible without a devaluation, to a system of ‘internal devaluations’ (whether or not recognized by that name) and b) the distinction between financial capital and production capital—which had been there since the Bible and the Quran via Medieval church fathers and persisted in Continental European economics from Marx to Schumpeter—gradually disappeared, leading to the present financialization of economic life.

During the Cold War we find that a very successful economic practice—starting with the 1947 Marshall Plan—dominated economic policy up until and including the theoretical foundation for the Maastricht Treaty and the European Single Market: Paulo Cecchini's 1988 book The European Challenge 1992. The Benefits of a Single Market.

This period from the 1947 Marshall Plan to the Cecchini report 41 years later represents an important continuity. The insights from the Marshall Plan about the importance of a manufacturing industry were built into the original foundations of the European Union, and—in that same spirit—Cecchini argued in 1988 that almost all of the benefits from the Single Market would be the result of the increasing returns to scale mostly found in the manufacturing sector. However, the practice of the European Union after Maastricht slowly changed to represent almost the opposite of Cecchini's vision.

Simultaneously—but completely separately from what happened in economic policy—at the start of the Cold War Paul Samuelson brought David Ricardo's trade theory into the core of economics with two articles in The Economic Journal in 1948 and 1949.

At the end of 2005 the process of European integration seems to have reached a serious crisis. The rejection of the European Constitution by the French and Dutch voters indicates a strong distrust of the way the integration is proceeding. A survey conducted for the Polish Rzeczpospolita newspaper found widespread admiration for the achievements of winning freedom of speech and leading the country into NATO and the EU, but 85 per cent of those polled blamed the Solidarity movement for setting in motion the liberalization that has put many Poles out of work. What went wrong? Why do workers not only in the old EU but also in the new member states (NMS) feel betrayed? The fact that this change of mood surfaces after merely a year has passed since the euphoric celebrations of the enlargement of the Union makes it even more surprising. The aim of this chapter is a preliminary exploration of factors rather than a complete analysis.

As a starting point I would argue that the EU Lisbon Strategy – the European Union economic strategy launched in 2000 – represents a healthy theoretical shift towards a dual emphasis on innovations as the basic engine of economic growth and on social cohesion in order to mitigate the uneven economic growth that necessarily follows in a dynamically innovative society. Europe left behind the neoclassically based standard textbook economics (STE) in favour of Schumpeterian evolutionary economics (Rodrigues 2003). As I see it, this shift, however, carried with it several problems; of theoretical, contextual and didactical nature.

First of all a problem of theoretical mismatch occurred. Jacques Delors's 1993 white paper on ‘Growth, Competitiveness and Employment’ envisioning an innovation-based Europe had been critically received by mainstream economists. Learning from this experience, the Lisbon process was carried through cautiously, avoiding the ministries of finance that had sunk the Delors paper, and this saved it from falling into the same trap. A victory of these tactics, however, may have backlashed, creating problems for the long-run strategy. Coupling innovation and social cohesion makes eminent sense: In an STE framework, however, both these concepts are exogenous elements, and above all, they do not belong together. In STE the market is supposed to create economic harmony, and the losers in the game are an object of concern for social workers, not for economists.

This chapter argues that the crisis in the Baltic countries can be properly understood only in the context of the dramatic de-industrialization and structural change that took place in these countries, and other Eastern European economies, following the fall of the Berlin Wall. It is argued that with the Eastern enlargement, climaxing in 2004 with formally admitting Eastern European economies into the Union, the European Union gradually abandoned its previous strategy of symmetrical integration – based on principles surviving from the post–World War II era, inspired by Friedrich List – integrating the region's economies into a structurally asymmetrical relationship that has common elements with colonialism. Once the real-estate bubbles collapsed, this underlying structural weakness became evident, causing wage collapse and outward migration. We show that the Eastern enlargement – along with financial architecture of the euro zone – also undermined the success of previous waves of enlargements, particularly that of Spain. In the Baltic countries the effect of the crisis was, as could be expected, a massive redistribution of income: wages as a percentage of GDP (the share of ‘the 99 per cent’) plummeted by some 6 percentage points while profits and rents (the share of ‘the one per cent’) rose correspondingly. We also discuss whether the Estonian case actually deserves to be called an ‘internal devaluation’, and indicate that what apparently dampened the crisis were not local policy initiatives but forces external to the region. The chapter also presents two different scenarios from the crisis in the 1930s – the US and the German ones – and asks if this crisis is likely to follow the US or the German pattern of income distribution. It is argued that the pattern likely to be followed is the German rather than the US one, which in the present context is likely to produce a long crisis and at worst make EU wage reductions permanent.

Introduction

This chapter is a third incarnation of our discussion of the European enlargement processes.1 In 2004 we published a paper titled ‘The Qualitative Shift in European Integration: Towards Permanent Wage Pressures and a “Latin-Americanization” of Europe?’.

After Ireland, Norway was the country that lost the largest part of its population through migration to America, and one of the Norwegian areas that lost the most was the inland region of Valdres, where the family of US economist Thorstein Veblen (1857–1929) came from. Most Norwegians have some family or relation who left for America, and I am no exception. I grew up with stories about the United States and what to me seemed like an exotic tribe: the Norwegian-Americans (norskamerikanerne).

I later found it fascinating that one of these Norwegian-Americans was an important economist, but I found reading Veblen challenging. Eventually, however, I was able to make the words of a 1920 reviewer of Veblen my own:

Reading Veblen in the 1970s, the capitalism he described was as unfamiliar as Marx's ‘army of the unemployed’. Veblen's idea that business could represent some modern version of piracy sounded just as strange as when he proposed that one of the tools of business was sabotage. But in today's context, when money is made in a financial casino which feeds on shrinking national economies, as Greece has experienced, when Enron had its regulated electricity prices increased in California after having created an artificial blackout, and when close to half of Spanish youth is unemployed, these concepts again make eminent sense. Veblen's is a type of economics which comes alive in times of crisis. Contexts are therefore indispensable in order to understand him and his work.

Context 1: Valdres, Norway and European Idealism at the Time of Veblen

‘Veblen the Norwegian’ is well covered in the next three chapters of the book from where this chapter is taken. This chapter provides some additional comments relating specifically to Veblen's Valdres and to his ideals from a Norwegian and European perspective.

Appendix: Glossary of Fiji Hindi and Fijian Words