“John P. Watkins’ new book constructs a coherent historical narrative of the emergence of modern mass consumer capitalism out of late nineteenth-early twentieth century capitalism. It is masterfully written, and hopefully, will be read by many economists and, most importantly, by the next generation.” William Waller, Hobart and William Smith College “In his new book, John P. Watkins has utilized the insights of two of the greatest analysts of the paradoxical nature of American economic develop- ment, Thorstein Veblen and John Maynard Keynes, to interpret the key mo- ments of the last one hundred and fifty years of American capitalism. Thus, this volume will be useful for those teaching or researching U.S. economic history as well as those seeking texts that present an alternative perspective to economic theory.” Janet T. Knoedler, Bucknell University The Origins and Evolution of Consumer Capitalism Consumer capitalism arose with the second industrial revolution, the appli- cation of continuous-mass production to consumer goods during the late nineteenth and early twentieth centuries. This book adopts a Veblenian, Keynesian viewpoint, presenting an evolutionary view of consumption com- bined with the need to increase demand to match increases in production. The book traces the history of consumer capitalism, examining the paradox posed by applying continuous-mass production to produce armaments for dynastic ambitions versus consumer goods for the masses, manifesting it- self in the world wars of the twentieth century. Multiple paradoxes at the heart of the story address booms leading to busts, over-producing countries in Asia relying on over-consuming countries in the West, and the expan- sion of demand depending on increasingly inventive ways of liquefying as- sets, in light of stagnant incomes. The book persuasively argues that these paradoxes result from capitalism’s incessant drive to accumulate capital, fostering conflict, crises, and depression. The latest paradox results from the impact of continuous-mass production on the environment, manifesting itself as the Darwinian dilemma. The dilemma stems from human beings largely winning the struggle for existence and, in the process, possibly mak- ing the earth uninhabitable, at least for humans. John P. Watkins is Professor of Economics at Westminster College, Salt Lake City, Utah, and adjunct Professor of Economics at the University of Utah. He has taught economics for some 40 years, teaching the history of economic thought, macroeconomic theory, economic justice, and ecolog- ical economics. He is past president of the Association for Evolutionary Economics and the Association for Institutional Thought. He is winner of the Bill and Vieve Gore Excellence in Teaching Award, twice recipient of the Manford A. and June Shaw Faculty Publication Award, and voted six times Professor of the Year. His purpose in teaching is to raise the students’ level of confusion, a purpose which he is known to have accomplished with considerable success. Economics as Social Theory Series edited by Tony Lawson, University of Cambridge Social Theory is experiencing something of a revival within economics. Critical analyses of the particular nature of the subject matter of social stud- ies and of the types of method, categories, and modes of explanation that can legitimately be endorsed for the scientific study of social objects are re- emerging. Economists are again addressing such issues as the relationship between agency and structure, between economy and the rest of society, and between the enquirer and the object of enquiry. There is a renewed interest in elaborating basic categories such as causation, competition, culture, dis- crimination, evolution, money, need, order, organization, power probability, process, rationality, technology, time, truth, uncertainty, and value. The objective of this series is to facilitate this revival further. In contemporary economics, the label “theory” has been appropriated by a group that confines itself to a largely asocial, ahistorical, mathematical “modelling.” Economics as Social Theory thus reclaims the “theory” label, offering a platform for alterna- tive rigorous, but broader and more critical conceptions of theorizing. 47. Markets Perspectives from economic and social theory William A. Jackson 48. Keynes against Capitalism His economic case for liberal socialism James Crotty 49. The Nature of Social Reality Issues in social ontology Tony Lawson 50. The Evolutionary Origins of Markets How evolution, psychology and biology have shaped the economy Rojhat Avsar For more information about this series, please visit: https://www.routledge. com/Economics-as-Social-Theory/book-series/EAST The Origins and Evolution of Consumer Capitalism A Veblenian-Keynesian Perspective John P. Watkins Designed cover image: © Getty Images First published 2023 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2023 John P. Watkins The right of John P. Watkins to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-138-33545-5 (hbk) ISBN: 978-1-138-33546-2 (pbk) ISBN: 978-0-429-44376-3 (ebk) DOI: 10.4324/9780429443763 Typeset in Times New Roman by codeMantra Dedicated to Sandra and Katie and to my readers struggling to understand and resolve the paradoxes posed by our current civilization. Contents List of figures xi List of tables xiii Preface xv Acknowledgments xix 1 The Origins and Paradoxes of Consumer Capitalism 1 2 Toward an Evolutionary Theory of Consumer Capitalism: Thorstein Veblen and John Maynard Keynes 18 3 Continuous-Mass Production and the Rise of the Modern Corporation 39 4 How to Absorb the Output? Consumerism versus Militarism: Veblen, Hobson, and Polanyi 55 5 Keynes and The Great Depression: “Poverty in the Midst of Plenty” 77 6 The Myopic Consumer and the Rational Economist: The Institutional Pattern of Consumption and Theories of Consumer Choice 98 7 The Liquefication of Everything: Corporate Power and the Evolution of Consumer Credit 113 8 America’s Perpetual Trade Deficit 138 9 The Great Financial Crisis—A Test of Two Models: Minsky’s Financial Instability Hypothesis and the Dynamic Stochastic General Equilibrium Model 154