Schumpeter’s Demise

Accurate as far as it goes,

This belief that New Deal liberalism is obsolete is combined with a belief that good policy-making is inconsistent with democratic institutions—that you need to rely on policy experts operating in good faith in the best interests of the country, without elbows being joggled by cranky neo-populists or nutty movement conservtives. And those experts, who can be found at the highest reaches of successful corporations should be brought into government, because they understand how this new global economy works. These leaders need to be brought into partnership with the US government, and hard-headed, realistic policy crafted, so that the US can continue to be the dominant world power.

but I think the whole story is a little deeper.

Schumpeter’s most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. While he is sympathetic to Marx’s theory that capitalism will collapse and will be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase “creative destruction”, and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways.

Schumpeter’s theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism’s collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where “liberal capitalism” was evolving into democratic socialism because of the growth of workers’ self-management, industrial democracy and regulatory institutions.[12] Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism’s demise. The term “intellectuals” denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is, however, limited, and this lack, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.

In some respects I think we are working with a variation of the theme, given the code words of various politicians over the last couple of decades.

OWS to some extent is the social response to the economics and the political response to those economics, which may very well be an economic policy of saving capitalism at the expense of all other systems, including political. The American public in general fits Shrumpeter’s assessment of the majority to a t. The 3rd Way paper seems to re-enforce this observation, and as such it may very well be the “progressive” response to the “conservative” policy positions.

Personally, I haven’t reached any solid conclusions on the matter, nor am I capable at this point of taking on everyone from Adam Smith forward in a debate on the end of capitalism. All I am really positive of is their is a lack of any global capitalist vision which incorporates all the variables which we are dealing with.

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