great WSJ Europe Article on Joseph Schumpeter’s view of our fiscal crisis
Schumpeter’s Moment
Capitalism remains the foundation for economic growth and freedom.
By CARL SCHRAMM From today’s Wall Street Journal Europe.
read the whole article HERE
Excerpts:
We need to remember that Schumpeter embraced capitalism not as a reaction or as the second-best solution to the unproductive reality of utopian economic planning. Rather, he saw capitalism as the foundation of two complementary forces. The first was economic expansion. The second was its role in protecting individual freedom.
For Schumpeter, to sacrifice one was to imperil the other. More starkly, he would remind us in no uncertain terms that, whatever our present doubts, the only way freedom is secure for any individual is within a growing economy. In other words, political freedom depends on economic expansion.
From Schumpeter’s vantage point, capitalism’s very success allows rich societies to use government to relax the impersonal rules that govern markets, creating new rules that buffer citizens from the rigors of risk-taking and failure. In that sense, government invents for itself the task of mediating market outcomes. Schumpeter had seen the dangers of this play out in Bismarck’s conception of Prussia’s welfare state. In the face of the Marxist threat, the elite secured its position by causing government to dispense social benefits. Political entrenchment, not charity, had motivated Bismarck. When distorted in such a way, free-market capitalism is seen to suppress — rather than to encourage — social and economic mobility.
So what about the ultimate Schumpeterian challenge: Can capitalism be saved? France’s President Nicolas Sarkozy in October 2008 proposed a brilliant formulation. He said: “The financial crisis is not the crisis of capitalism. It is the crisis of a system that has distanced itself from the most fundamental values of capitalism, which betrayed the spirit of capitalism.”
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