Posts tagged with: joseph schumpeter

Mike Mulligan and His Steam Shovel, Virginia Lee BurtonCreative destruction can be a painful thing, particularly when you’re the one being destroyed. I’ve been-there done-that, and when things hit, I can’t say that I cared too much about Joseph Schumpeter and his fancy ideas.

Alas, even when we have a firm understanding of the long-term social and economic benefits of such destruction — that whatever pain we’re experiencing is for the “greater good” of humanity — we can’t help but feel unappreciated, devalued, and cast aside. Our work is an expression of ourselves, something we offer to society and (hopefully) believe to be of considerable worth.

Thus, when we experience such rejection, it’s only natural to react bitterly and become cynical, resentful, or fatalistic, allowing our attitudes and behaviors to correspond in turn. We’re tempted to doubt ourselves or doubt others, to sit back or plod forward halfheartedly, to feel entitled, believing that our “service” deserves a place in the economic landscape, regardless of what the economic signals might say.

Yet amidst theese competing emotions, we mustn’t forget that, in addition to concerns about productivity, efficiency, and economic progress, for the Christian, our work is ultimately service to others, and thus, to God. If someone has discovered new and better ways to meet our neighbors’ needs, it should tell us that it’s time to tweak our game and find new ways to contribute, as hard and uncomfortable as that may be. Our work is not a mere means to a paycheck, and neither are we mindless, powerless cogs in some grand machine, manufactured and predestined to spin mindlessly along only to be bypassed by the Next Big Thing and consigned to the city dump.

In her 1939 children’s book, Mike Mulligan and His Steam Shovel, Virginia Lee Burton gets to the heart of all this, tapping into the deep and profound pain of creative destruction, while ultimately pointing the way forward — toward creativity, service, and authentic human flourishing. (more…)

Blog author: dpahman
posted by on Monday, October 14, 2013

Among many other bizarre claims in his most recent article at The American Conservative, Patrick Deneen writes,

Today’s conservatives are liberals — they favor an economy that wreaks “creative destruction,” especially on the mass of “non-winners,” increasingly controlled by a few powerful actors who secure special benefits for themselves and their heirs….

Pace Inigo Montoya, I actually have no idea what Deneen thinks creative destruction means in this context.

Setting aside the question of whether or not it is a bad thing (or accurate, for that matter) to say that “[t]oday’s conservatives are liberals,” I am far more concerned with how Deneen thinks creative destruction is “wreaked” upon “non-winners.” This is further complicated by his implication that creative destruction supports, rather than threatens, “a few powerful actors.” (more…)

Blog author: jcouretas
posted by on Monday, March 25, 2013

In the Wall Street Journal, Acton Research Director Samuel Gregg turns to French political thinker Alexis de Tocqueville to show how democratic systems can be used to strike a Faustian bargain. “Citizens use their votes to prop up the political class, in return for which the state uses its power to try and provide the citizens with perpetual economic security,” Gregg explains. This, of course, speaks to the current catastrophe that is the European welfare state. French workers, for example, “clearly expect the government to protect them from the economic consequences of their curious work habits,” he adds.

Some 180 years ago, Tocqueville predicted in his magnum opus “Democracy in America” that something similar would be one of democracy’s long-term challenges. Though Tocqueville never used the expression “welfare state,” he worried about the potentially corrosive effects of democratically elected governments that tried to use their powers to guarantee economic security for as many people as possible.

Democracy, Tocqueville argued, was capable of breeding its own form of despotism, albeit of the “soft” variety. He spoke of “an immense protective power” that took all responsibility for everyone’s happiness—just so long as this power remained “sole agent and judge of it.” This power, Tocqueville projected, would “resemble parental authority” but would try to keep people “in perpetual childhood” by relieving people “from all the trouble of thinking and all the cares of living.”

But here’s the catch. Many people today forget that Tocqueville wasn’t writing for an American audience. His book was for French readers and therefore, by extension, much of Europe’s 19th-century political elite. What would some of those elites today—such as a career-politician and confirmed statist like Arnaud Montebourg—make of his compatriot’s warnings?

Read “What Tocqueville Knew” in the Wall Street Journal.

And pick up a copy of Gregg’s new book, Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future.

Blog author: jcouretas
posted by on Monday, October 27, 2008

The famous Austrian economist, Joseph Schumpeter, despaired for the future of the free market system. The reason for this despair was that the excess wealth of the system would create educated folks who would turn on the very system that created them. Their education would make them into anti-capitalist ideologues, who would then kill the goose that laid the golden egg. He did not think that those who participated in the creation of such enormous wealth would be in any position to fight back, and this for two reasons: firstly, business people do not tend to be men of letters, so they are unable to mount arguments defending the system; secondly, the job of the business executive is the survival of the company, and thus, he will concentrate on those things required to weather the storm, not be controversial.

The man who is probably the most famous Austrian economist, Ludwig von Mises, despaired for the future of the free market system due to envy. Various sectors of society, academic, non-productive, uneducated, etc., would envy the wealth of the producers in society, and end up by finding means to take away that wealth and give it to the lesser productive people, despite the fact that they did not earn it, and therefore, are not entitled to it.

Our present political situation has a combination of both of these views. Both presidential candidates are in favor of redistribution of wealth, albeit one is more open about it. And very few business people are saying “no!” to any of it with a few exceptions, such as the president of BB&T Bank, who wrote an open letter to Congress asking why his totally solvent bank should be punished for the stupidity of the others.

But there is another culprit in this maelstrom. This culprit is the business person. Why? With tongue-in-cheek apologies to neo-classical (mathematical) economic theory, the purpose of a company is not to make a profit. As John Paul II said in Centesimus Annus, a profit is a sign of the health of a company, and therefore is good and necessary. But anyone who has taken a management course knows that the purpose of the company, aside from producing what the customers want, is to increase the wealth of the stockholders. This is different than making a profit, although profit is an integral part of it. Wealth is different than profit. Profit is a short run measurement of the short run health of the company. Wealth, by its very nature is long run. Profit appears on the financial statements of a company in mere money terms, and the accountants who produce those statements do not even take inflation into account. So a company could have an increase in profit, but not an increase in items sold, merely because they had to raise prices to accommodate the fall in the value of the dollar. But executives today are a slave to the profit line in the financial statements. They have a need to impress their boards and stockholders now by sacrificing the long term growth of the enterprise. (more…)