Tuesday, July 27, 2010

Advice from Ron Johnson: You better hope you're not on the losing side of "Creative Destruction."

Job losses in Wisconsin due to free trade and the global economy produce what Republican Senate candidate Ron Johnson calls "Creative Destruction," a Schumpetarian business model. How will this help Wisconsin is anybody's guess. Wispolitics:

Maybe Ron Johnson can explain "creative destruction" to the former employees of the disappearing paper manufacturing industry here, where "creative" had nothing to do with the availability of slave wages and loose environmental controls. It's also heavily subsidized by the Chinese government. How is that "free" and "fair" trade?

It must be comforting for workers in Wisconsin to know that their next senator off handily believes "There are winners and losers," and that at any moment, they might be losers. That's capitalism. Deal with it.

Schumpeterian? What the hell is that, and who is Joseph Schumpeter? I gathered the following information. Interesting note: From what I understand, Schumpeter borrow the term "creative destruction" from Karl Marx.

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. Nor is this evolutionary character due to a quasi-automatic increase in population and capital … The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.
He popularized the term "creative destruction" in economics. 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 "

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.

He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable. Instead he advocated a minimalist model, much influenced by Max Weber, whereby democracy is the mechanism for competition between leaders, much like a market structure.

Although periodic votes by the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is usually severely limited. Today, Schumpeter has a following outside

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