American Capitalism Besieged
By Robert J. Samuelson
WashPost
Monday, March 23, 2009
Schumpeter, one of the 20th century's eminent economists, believed that capitalism sowed the seeds of its own destruction. Its chief virtue was long-term -- the capacity to increase wealth and living standards. But short-term politics would fixate on its flaws -- instability, unemployment, inequality. Capitalist prosperity also created an oppositional class of "intellectuals" who would nurture popular discontents and disparage values (self-enrichment, risk-taking) necessary for economic success.
Almost everything about Schumpeter's diagnosis rings true, with the glaring exception of his conclusion. American capitalism has flourished despite being subjected to repeated restrictions by disgruntled legislators. Consider the transformation. In 1889, there was no antitrust law (1890), no corporate income tax (1909), no Securities and Exchange Commission (1934) and no Environmental Protection Agency (1970).
(More here.)
WashPost
Monday, March 23, 2009
"Can capitalism survive? No. I do not think it can." -- Joseph Schumpeter, 1942The story of American capitalism is, among other things, a love-hate relationship. We go through cycles of self-congratulation, revulsion and revision. Just when the latest onset of revulsion and revision began is unclear. Was it when Lehman Brothers collapsed? Or when General Motors pleaded for federal subsidies? Or now, when AIG's bonuses stir outrage? No matter. Capitalism is under siege, its future unclear.
Schumpeter, one of the 20th century's eminent economists, believed that capitalism sowed the seeds of its own destruction. Its chief virtue was long-term -- the capacity to increase wealth and living standards. But short-term politics would fixate on its flaws -- instability, unemployment, inequality. Capitalist prosperity also created an oppositional class of "intellectuals" who would nurture popular discontents and disparage values (self-enrichment, risk-taking) necessary for economic success.
Almost everything about Schumpeter's diagnosis rings true, with the glaring exception of his conclusion. American capitalism has flourished despite being subjected to repeated restrictions by disgruntled legislators. Consider the transformation. In 1889, there was no antitrust law (1890), no corporate income tax (1909), no Securities and Exchange Commission (1934) and no Environmental Protection Agency (1970).
(More here.)
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1 Comments:
My recollection of Schumpeter’s 1942 book Capitalism, Socialism, and Democracy is that he warned that capitalism was a system of self-destruction. The work included an extensive analysis of Marxism but that was not the main point yet that is association that Republicans want to make (Marxism = Socialism = Obama). The concept of creative destruction is based on allowing companies that have lost their competitive edge to fail. Isn’t that the problem? The Bush White House with Congress’ blessings created TARP. What was the first action taken – PNC bought a smaller bank; Wells Fargo bought Wachovia; etc. That’s not self-destruction … that’s using taxpayer funding to build-up entities so large that “they cannot fail” and become the next Citibank … resulting in the development of effective dominant companies so that smaller companies cannot compete. Now that Exxon owns Mobil, is that too large ? Can any company compete with Microsoft? Look at the mergers in the pharmaceuticals like Merck Schering-Plough … is that good? That’s the problem.
Samuelson is concerned about taxes, laws and regulations, yet that is the problem. Taxes have been reduced – corporate as well as individuals, but worse yet is that hedge fund managers get to classify their income as capital gains instead of ordinary income. Regulations have been manipulated to help business.
There is no easy answer, but Samuelson is wrong to imply that a 1942 vision of economic theory should be a concern today.
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