Veblen and the Origin of the Catching-Up Hypothesis
James M. Cypher

Having anchored his concept of catching-up in technology and the standard neoclassical growth categories of structural change of the Arthur Lewis type (shifting from low productivity subsistence agriculture to industry), Solow-style capital deepening and Keynesian demand growth, Abramovitz introduced the vague modifying concept of sufficiently developed “social capabilities.” This is a very faint attempt to acknowledge the entropic pull of ceremonial institutional arrangements in 1) the labor process, 2) rentier corporate structures, 3) ‘rapacious’ state policies, 4) land tenure arrangements, and 5) predatory financial operations, that are pervasive structural features in most economically “backward” nations. Throughout Imperial Germany Veblen’s analysis is primarily on the (partial) dissolution of these extant retarding structural features of ‘derangement’ (and their ideological counterparts—such as the inducement of “an animus of enthusiastic subservience” in the underlying population) rather than on technology per se as an implicitly exogenous and autonomous force or factor (Veblen, 1915: 81).

While Veblen’s focus on the retarding impact of ceremonial institutions has received too little attention, his emphasis on the importance of the technological arts has engendered controversy, misunderstanding and charges of both ‘reductionism’ and ‘technological determinism.’ The introduction of new combinations in production is invariably resisted by those vested industrial interests whose capital will be made obsolete by the new combinations. Thus, more often than not, improvements in technical efficiency are ‘sabotaged’ since society is run, in Veblen’s view, as a business proposition. Nonetheless, (taking the longer view) notable changes in the industrial system occurred—none more quickly than in the German case in the new era of Monopoly Capitalism. Using an evolutionary methodology, Veblen sought to reveal the dynamic factors of this new era of “exacting articulations” wherein “[t]he mechanical industry with its technology of physics and chemistry, stands at the apex of the industrial system” (Veblen, 1923: 253, 272). Emphasizing distinctions to the preceding “provincial” era of “the technology of mechanics” of the early and mid-19th century, and that of the world of farming and simple handicraft production that dominated in Adam Smith’s era, Veblen found that:

The number and interplay of technological factors engaged in any major operation in industry today are related to the corresponding facts of the middle 19th century somewhat as the mathematical cube is related to the square; and the increase and multiplication of these technological factors is going forward incontinently, at a constantly accelerated rate (Veblen, 1923: 271).

Veblen’s focus was on what he termed the “technician”—a proxy for scientists, engineers and those who worked in applied sciences as experts or innovators with little to no formal training. The technicians had “grown great as a factor in productive industry…to be one of the major institutions in modern life (Veblen, 1923: 255). The technician (along with engineers and experts) had become “the paramount factor in technology” all constituting “a new factor of production” (Veblen, 1923: 256). Veblen frequently referred to improvements in ‘industrial efficiency’ and to ‘the new state of the industrial arts,’ and particularly to the highly constrained technological system beholden to what he termed [t] received system of institutions which governs human thought (Veblen, 1923: 280-281):

The technological system is an organization of intelligence, a structure of intangibles and imponderables, in the nature of habits and thoughts. It resides in the habits of thought of the community and comes to a head in the habits of thoughts of the technicians. …But the habits of thought of the community run, in the main, on conventional, sentimental, religious, and magical lines, and are governed by the logic native to that order of realities (Veblen, 1923: 280).

To use a more contemporary vocabulary, Veblen’s interpretation of ‘technology’ has a great deal to do with what is now termed a National Innovation System. In practice, for ‘developing nations,’ the institutional challenge is immense: building a deep and diverse cadre of ‘technicians’ requires a proficient university system, a sustained technological policy on the part of the State and a coherent industrial policy based on deep horizontal embeddedness between the State and industrialists as has occurred in the cases of Korea, Taiwan and to a lesser degree in Brazil (Chibber, 2003: 13-84; Evans, 1995; Kolhi, 2004: 1-220; Viotti, 2002). Most, if not all, of these elements were noted by Veblen in his careful study of Germany’s catching-up process. Yet, these elements must be embedded in an evolving and unique institutional—they are not to be understood as a “scheme” or “recipe” for catching up.