Strategic Sabotage: Empirical Examples?

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Strategic Sabotage: Empirical Examples?

Postby sanha926 » Wed Dec 10, 2008 11:26 am

In my opinion, one of the most fascinating ideas of Veblen is his notion of 'strategic sabotage', whereby business, for the sake of profit, conscientiously withdraws efficiency from the industrial system. I would argue that this idea, which flies in the face of conventional approaches' assumptions that market competition compels capitalists to efficiently 'maximize' productive output, provides a more compelling account the accumulation strategies employed by 'absentee owners in contemporary capitalism'.

But of course trying to convince skeptics of the relevance of strategic sabotage requires empirical examples to back up the argument. One of my favorites is the case of of big oil buying up and running into the ground public transportation networks in US cities in the 1950s.

I came across another, perhaps less incredible but still interesting, empirical example of strategic sabotage in Canadian diamond mining a couple of weeks ago:

http://us.ft.com/ftgateway/superpage.ft ... 1326593330

http://us.ft.com/ftgateway/superpage.ft ... 1333373334

In short, Canadian partners of De Beers are upset that the company has made no efforts to develop their Canadian mining sites, which hold the largest undeveloped diamond deposits in the world. The reason is not for a lack of 'demand', in fact analysts expect there to diamond shortages over the next few years. The real reason? FT puts it best: 'Some shareholders say it is not inconceivable that De Beers, which in an earlier era stockpiled diamonds to prop up the price, is delaying Gahcho Kue to control the entry of so many diamonds on to the market.'

I find such empirical examples fascinating not only because they support the power-centered approach to political economy, but also because they make for excellent story-telling.

Does anyone else have any good empirical examples of 'strategic sabotage'?
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Re: Strategic Sabotage: Empirical Examples?

Postby tdimuzio » Wed Dec 10, 2008 6:05 pm

I agree that Veblen’s conceptualization of sabotage is indeed a useful one for understanding both the origins of the corporation as well as its ongoing practices. However, it might be useful to approach Veblen’s understanding of sabotage in at least two ways: the first we might call ‘sabotage in general’ and the second we might call ‘strategic sabotage’. What I mean by sabotage in general is that for Veblen (and others), sabotage is a constant process of directing and controlling human productivity/efficiency towards profitable ends. All firms must do this in general, thereby limiting the creative potential of humanity. What I mean by ‘strategic sabotage’ are the ways in which specific firms engage in practices of sabotage – so the examples you give of the diamond industry as well as the smashing of public transit in US (not to mention other places!)

As far as another specific example of ‘strategic sabotage’ goes, one of the most interesting to my mind is Enron. Here’s why I find it so interesting. In order to increase their profits, energy traders at Enron induced rolling blackouts and brownouts on the state of California creating the perception of an artificial shortage of energy. When it was finally discovered what the company had done (adding massively to the debt for the state incidentally), the traders grew angry and said the following (I’m paraphrasing): “Look, yes we did this and yes it might have caused some harm. But citizens of California own our stock in the various investment vehicles. Our goal was to boost profits to boost the share price, and in effect help increase the investments of California residents.” In other words, those who had ‘capitalized’ Enron in California were essentially paying for their own sabotage!!! A similar story can be found about rich French citizens, Swiss Banks, Hitler’s financing, and France’s invasion during WWII. The rich ended up – in part – paying for their own occupation!

Sorry - this is getting long. As for the diamond example, you can also point to the fact that these things (despite some industrial uses) are WORTHLESS. There is a whole history of how advertising and marketing firms created the perception that diamonds are valuable, rare and should be used for marital engagements (for more info see ‘the diamonds are a girl’s best friend’ campaign). This goes straight to the heart of the power theory of value. So not only are diamonds in abundance, but their value is completely shaped by the industry and their advertisers.

I’m still trying to get rich off selling beach pebbles, but I don’t have the finance to hire an advertiser to convince people that they are needed and have value.

And thanks to those who got this going off the ground.
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Re: Strategic Sabotage: Empirical Examples?

Postby Scott » Wed Dec 10, 2008 7:26 pm

I think the DeBeers example is excellent. Obviously, in this case, by refusing to produce diamonds, deBeers is certainly not producing profits via production ala mid 19th century.

However, I question the other example:

Big oil destroying innercity transit - I would suggest this is simply a case of eliminating the competition, which is not the same as strategic sabotage, no?

Enron: the smartest boys in the pen, er, room.



Though this is developed of course further by Bichler and Nitzan, I would suggest an example of strategic sabotage occured in the recent invasion of Iraq. Oil was expected to plummet, according to the pundits. We know what did happen to the price of oil, as predicted by Bichler and Nitzan.

Likely the Iraq invasion deserves at least 1 thread of its own, so I wont mention it further here.
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Re: Strategic Sabotage: Empirical Examples?

Postby sanha926 » Wed Dec 10, 2008 7:51 pm

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Re: Strategic Sabotage: Empirical Examples?

Postby dtcochrane » Wed Dec 10, 2008 9:08 pm

In David Noble's book America By Design (1977) he notes several examples of industry leaders buying up patents for the purpose of controlling them, including squelching those that may undermine the profitability.

"In addition to securing patents on its own inventions, the Thomson-Houston company, under the strong leadership of [Charles A.] Coffin and with the solid financial backing of Boston financiers, initiated a policy of either buying out or merging with competitors, with the purpose of both eliminating rivals and securing control over essential patents." (7-8)

"In numerous articles [Edwin J.] Prindle outlined the means of securing patent monopolies to bypass the antitrust laws; methods of securing patents from inventors, and employee-inventors ... [quoting]: Patents are the best and most effective means of controlling competition. They occasionally give absolute command of the market, enabling their owner to name the price without regard to cost of production." (89)

"By the beginning of World War I, a number of companies had arrived at a stalemate with regard to radio development, due to mutual patent interferences. During the war, when the government guaranteed to protect the companies from infringement suits, research in radio proceeded at a rapid pace. The close of the war, however, brought with it a renewed deadlock. 'Ownership of the various patents pertaining to vacuum tubes and circuits by different concerns prevented the manufacture of an improved tube for radio use.'" (93)

[Quoting J. E. Otterson]: "Ability to stop the owner of a fundamental and controlling patent from realizing the full fruits of his patent by the ownership of necessary secondary patents may easily put one in position to trade where money alone may be of little use." (97)

[Quoting Floyd Vaughn]: "It is a common practice, especially of large companies well-financed and equipped with technicians and patent lawyers, to take out every possible patent in their fields and thus block any would-be intruder. If an outsider seeks a patent in this domain, he must found out in some instances about hundreds of patents on kindred ideas and avoid them. Creative minds may be compelled to spend more time in obtaining or avoiding patents than in solving a problem." (98)
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Re: Strategic Sabotage: Empirical Examples?

Postby DanielRose » Thu Dec 11, 2008 2:01 am

I think Sweezy and Baran's work on monopoly capitalism are extremely relavant to this discussion.
In their 1966 work, Sweezy and Baran define the post-war political-economic system as that of monpoly capitalism. The system is founded on one central principle, which is the highly organized and planned contorl over production by giant corporations and governments. The monopoly-capitalist controllers aim essentially to maximize profits on their holding, by eliminating large parts of the economics surplus. This, due to the fact that production in full capacity would cause distribution in lower prices, leading to lower profits and less corporate control over production (this part of the theory is very much "Veblenian"). The elimination of economic surplus is done by specific means- among the means which are discussed in the book is military expenditure, finance and the sales effort (what we would today call advertising and consumerism). The three act both to withdraw resources from productive investment as well as to generate demand and thus positively effect prices.
In their work, Baran and Sweezy seem to merge Veblen's theory of sabotage with some classical Marxist and Neo-Marxist concepts of underconsumption, falling rate of profit and monopoly capitalism. The main strength of their work, I believe, is the emphasis on capital as a form of control over social production, control which is fundementally not "material" but rather social, political, and cultural.

The Monthly Review team (Magdoff, Bellamy-Foster and others) have taken on Sweezy and Baran's theory of monopoly capitalism and attempted to apply it on contemporary Neo-Liberalism. Their effort manifests in the theory of Monopoly-Finance Capitalism, in which finance has come to play a major role in the elimination of economic surplus by profitable means.
A good recent articls on the Monopoly-Finance Capitalism theory:


For further discussion on the concept of economic surplus see Paul Baran's The Political Economy of Growth, 1957.
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Re: Strategic Sabotage: Empirical Examples?

Postby Aaron_Aarons » Thu Dec 11, 2008 4:41 am

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Diamonds and Beach Pebbles

Postby Aaron_Aarons » Thu Dec 11, 2008 7:08 am

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Re: Diamonds and Beach Pebbles

Postby DanielRose » Thu Dec 11, 2008 8:08 am

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Re: Diamonds and Beach Pebbles

Postby Scott » Thu Dec 11, 2008 8:20 am

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