Monday, December 5, 2011

Schumpeter's "creative destruction"!

Several centuries ago, capitalism germinated out of the decomposing European feudalism that preceded it.
Because capitalism became so prolific in its unprecedented capacity for creating wealth, it was simultaneously destructive of the pokey old way of doing things in the feudal world.
Creative destruction is not just an operative dynamism of capitalism's beginnings; it is a working principle by which wealth-generating capitalist enterprises compete with each other. Just as any team on an athletic field strives to build up its own score while destroying the opponent's defenses, so does the successful capitalist enterprise hone its productivity and efficiency in order to build its own market share, while at the same time destroying its competitors' efforts to do the same thing...

while expanding more, more, and more, until what began as free-market entrepreneurial wealth creation has morphed into monopolistic constriction that stifles new enterprise.

Ironically, the creative dynamism of capitalism's modus operandi is the very same thing that ultimately sets the stage for its own obsolescence and...demise.
Will Capitalism, in the long run, work itself out of a job, and gobble up fledgling entrepreneurs to the point of snuffing out the very entrepreneurial spirit that give birth to it? Might capitalism shoot itself in the foot, and maybe even, by its own "creative destruction," someday destroys itself?

Suffocate itself with layers and layers of derivatives and credit default swaps? Maybe, or maybe not. We shall see, perhaps in our generation.

Joseph A. Schumpeter, a Moravian/American economist of the 20th century, very cleverly coined a phrase, "creative destruction," to identify this fatalistic tendency of capitalism. Here are a few quotes that I pondered from his 1942 book, Can Capitalism Survive?, which is part of a larger treatise, Capitalism, Socialism, and Democracy.

~"It is true that the facts of industrial concentration do not quite live up to the ideas the public is being taught to entertain about it."

~"The capitalist process pushes into the background all those institutions, the institutions of property and free contracting in particular, that expressed the needs and ways of the truly 'private' economic activity."

~"The capitalist process, by substituting a mere parcel of shares for the walls of and the machines of a factory, takes the life out of the idea of property. It loosens the grip that once was so strong--the grip in the sense of the legal right and the actual ability to do as one pleases with one's own."

~"Unlike any othe type of society, capitalism inevitably, and by virtue of the very logic of its civilization, creates, educates and subsidizes a vested interest in social unrest."

Tonight, Monday night, I was considering these points from Joseph Schumpeter's seventy-years-ago observation, and how he thought that capitalism's ruthless opportunism might ultimately become its demise. Then the ravenic trepidations of another writer, one who had lived a century before Joseph Schumpeter, crossed my mind, and...

"while I nodded, nearly napping,
suddenly there came a tapping,
as of someone gently rapping,
rapping at my chamber door..."

quoth the Capital, More, more, more!

How much more is there?

CR, with new novel, Smoke, in progress

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