We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
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Monday, October 17. 2011
To predict the demise of Capitalism, that is. Adam Smith did, too. So did my favorite economist, Joseph Schumpeter. Each one had different views on how it would end.
Marx foresaw the proletariat rising up and seizing the means of production. We all know how well that worked out.
Adam Smith believed an accumulative class would eventually collapse upon itself. Smith felt accumulation drove the market forward, but also felt accumulation for the sake of accumulation was wrong. He felt eventually, there would be nothing left to accumulate. Somewhat Malthusian in nature, and very unlikely based on his own concepts of markets and value.
Schumpeter went to great lengths explaining exactly why both these great minds were wrong. He felt Marx completely misunderstood the nature of markets. Schumpeter put the innovator, the entrepreneur, at the center of his economic model. It is the driving force of creativity and the desire to improve that keeps Capitalism and markets healthy. The value provided by this group of people helped offset the underlying problems of labor described by Marx.
Capitalism existed as a force for change, not a static system which was essential for Marx's system. Schumpeter was unabashed in his support for, and love of, markets and capitalism. He sought to destroy Marx's arguments, and did so in impressive manner.
Schumpeter also rejected Smith's view of accumulation. While accumulation acts as a driving force within Schumpeter's work, it isn't the primary force. In fact, Schumpeter agreed with Smith that accumulation for the sake of accumulation was misguided. Accumulation should promote progress via the process of "creative destruction" - entrepreneurialism. Those who accumulated for no other reason than the desire to have more represented a oddity in the system. They also represented a threat to the system which allowed them to have what they wanted. Without a process of recirculation of profits and gains, entrepreneurial activity is choked off, and the system withers.
More importantly, it was the government which could close this spigot to growth, in Schumpeter's view. Specifically, he viewed the intellectual elite, the people who believed they knew more than others by the very nature of their education, as a threat.
"Capitalist evolution produces a labor movement which obviously is not the creation of the intellectual group. But it is not surprising that such an opportunity and the intellectual demiurge should find each other. Labor never craved intellectual leadership but intellectuals invaded labor politics. They had an important contribution to make: they verbalized the movement, supplied theories and slogans for it—class war is an excellent example—made it conscious of itself….They naturally radicalized it, eventually imparting a revolutionary bias to the most bourgeois trade-union practices….Having no genuine authority and feeling always in danger of being unceremoniously told to mind his own business,…[the intellectual] must flatter, promise and incite, nurse left wings…appeal to fringe ends. Thus, though intellectuals have not created the labor movement, they have yet worked it up into something that differs substantially from what it would be without them….[This]…explains why public policy grows more and more hostile to capitalist interests. Intellectuals rarely enter professional politics and still more rarely conquer responsible office. But they staff political bureaus, write party pamphlets and speeches, act as secretaries and advisers, make the…politician’s…reputation….In doing these things they…impress their mentality on almost everything that is being done."
Is there any way to disagree with his commentary, in light of recent events? Schumpeter saw the drive of the intellectual to take over the 'cause' of labor and the poor, driving public policy to undermine and destroy the competitive and innovative structure of the economy. The term 'intellectual', for Schumpeter, denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible. Nor are they part of the classes which they are supplying the critique. Their status allows them to stand up for others and act as self-appointed 'leaders'. Schumpeter viewed education as the great advantage of a capitalist society. In pre-capitalist periods, education was a privilege of the few. Under capitalism, more and more people acquire higher education. However, he recognized a corporatist structure (driven by public policy and government interference) develops over time, limiting fulfilling work opportunities. As this couples with an experience of unemployment, discontent increases. The intellectual class is then able to organize protest and develop ideas and movements designed to undermine the market.
The US has, in the last 235 years, been the most innovative nation the world has ever seen because of the risk-taking and adventurous nature of its population. Efforts to alter this drive for progress is coming from a group that ironically utilizes the word "progress" in their description of themselves. They seek to remove the process of incentive. Among the 99%ers is a group who are unhappy with their position in life, no matter how hard they worked to attain it, because they assume they have somehow deprived others of their 'rights'. This element of self-loathing drives Schumpeter's view of the people who work to end capitalism. These people reject the very system which allowed them to achieve a high level of success.
I was lucky to have a wonderful professor, Robert Heilbroner, in grad school. Heilbroner taught the history of economics and disagreed with much of what Schumpeter wrote (Heilbroner was a Socialist until shortly before his death). On the other hand, he readily admitted that Schumpeter was an amazing intellect, a man who created the strongest case for the support and defense of Capitalism and Free Markets. However, he pointed out Schumpeter also sought to warn people of how Capitalism might be undermined. Awareness of the need to fight the incursions of government, promoted by non-professional intellectuals and academics (as well as corporate interests), was essential to keeping free markets alive. The role of the entrepreneur had to be held up as a standard for all, even those without the will or desire to become entrepreneurs.
As we watch Zucotti Park, there are some who may feel Marx's vision is playing out. If they believe this, they are very likely wrong. It may seem like the working classes are taking the reins, as Marx suggested. But as Bastiat once pointed out, sometimes it's what we don't see that is important. What we don't see is the support these people are getting from various intellectual, political and media actors. If we seek to determine the source of the discontent, it may seem to be organically derived from the 99%ers. This is deceiving. It's what is going on behind the scenes that is important. There are a class of people, self-appointed, who are lending their support, however indirect it seems to be, justifying the Schumpeterian view. It may be the 'proletariat' doing the marching and speaking. But were it not for the support and guidance they receive from the press, politicians, and academics, they would soon enough disappear.
One of the most annoying situations you can run into at the office is inertia. The belief that something is done, or happens, just because "that's the way it happens." I've lived my corporate life (for better or worse - usually worse
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I fail to see how these "99ers" are even largely, let alone predominantly, "working" or "lower" class; how do they qualify as a "proletariat"?
I see little more than malcontents who haven't put much effort or thought into becoming content. Their only effort and thought is put into conjuring ever more discontent.
I seriously doubt they have the drive or numbers to become anything serious regardless of how much money backers like Soros put into this. I can't imagine those backers expect any more from them in terms of real actions and deliverables than I do.
So what do these backers want? I'm guessing a diversion to ensure that some other actions are not paid close attention to. No idea what those actions are or might be.
They're not working, but they sure are low-class, and in many cases by choice.
We seem to be seeing here the same movement that created Brazil's favelas: poor who insist on being noticed, because they hold the rest of us responsible for their own bad life choices, and for the predictable results of their own bad political choices.
I only hope that some cities and states succeed in preventing any "occupation". Then the rest of us can move there.
In a sense quite different than Marx's, the proletariat did acquire the means of production. In America (and Canada, Australia, etc) they acquired land and tools and literacy. Right now the proletariat has computers and access to social networking or the means of entertainment. They have access to credentialing.
Marx was a grouchy bastard who lived off others but he wasn't stupid. If he could watch a generation of Americans rise from bad neighborhoods or fall from good ones of their own steam, he might have a new view.
I think the time is ripe for a good analysis of the "intellectual class" in today's capitalistic society. Dostoyevsky painted a good picture of the terrorist-inclined intellectual in the 19th century in The Devils and I think his characterization is prescient.
There seem to be a lot of educated youth who in reality are only half-educated. They can cognize, but completely lack metacognitive awareness. That is, they can think, but they cannot evaluate and judge the correctness/accuracy/goodness/truth of their own thinking. This inability to judge one's own thoughts has now become very dangerous in our society.
I dislike the word "capitalism." It is a Karl Marx word that falsely conflates those with money and those who labor. We all labor, and most everyone has varying degrees of wealth.
I prefer to use "the free market" instead. Competition and reward from the free market, with only enough regulation to keep things on a level playing field, are what created American exceptionalism.
Generally, I agree with you. It's difficult to separate Capitalism with "the free market", however, because Capitalism is an extension of the free market.
You can have a free market system without corporate capitalism, but you will eventually have it developed because the owners will, eventually, seek an 'exit strategy'.
So capitalism is natural.
There is another interesting twist to Capitalism - originally the use of the corporate structure was for businesses which required massive funding. This is why the real growth years for the market were during the Industrial Revolution, from the early 1800's through the early 1900's.
People did not turn to the government for assistance. Rather, they sought to pool resources and reduce risk by aggregating capital and setting up corporations, which were considered a form of "public enterprise".
Without capitalism, the start of steamships, railroads, infrastructure and large business would have been nearly impossible due to the massive upfront capital outlays required.
Over time, the raison d'etre for the stock market became something else - a gambling casino. This occurred as central banking and fiat currencies were introduced. Taking away the market forces and imputing a central control was deemed "necessary" to mute the ups and downs of the market itself. But what we were given was much longer up periods with very steep and dangerous down periods, all driven by non-market forces.
The problem of capitalism isn't capital. It's the basis of capital - money. We've had fiat currency and central banking several times in our nation's history and each time we've had to stop it because of abuses.
I read Heilbroner's "The Worldly Philosophers" many years ago. I just noticed the book still sits on a bookshelf of mine.
Get the updated version. The old one is very good, but he updated it just before his death and made some key changes.