“Can Capitalism Survive?” Ch. 3 – Process of Creative Destruction by Joseph Schumpeter (1942)

But why not?

“Can Capitalism Survive?” Ch. 3 – Process of Creative Destruction by Joseph Schumpeter (1942)

  • Monopolistic & Oligarchic Competition can be used in 2 ways to be made to show Capitalism isn’t the way for maximum production performance
    • Some might say it’s always been that way but we’re only just now seeing it & it’s been expanding despite bourgeois sabotage
      • Need proof it has nothing to do with private enterprise & strong enough to overcome its resistance
    • Others say it once tended to favor max production but monopolies killed competition & it’s in decline
      • Uses imaginary golden age of Perfect Competition & somehow it turned monopolistic
      • Rate of output increase has not decreased since the 1890s – no trend change
      • Modern standard of life for masses as increased alongside production growth
      • With workers’ work hours used to buy (instead of money), prices have been steadily falling
      • Firms working under free enterprise but with large companies account for progress in competitive sector
  • Economists & writers have good formal theories but no conclusions about capitalist reality
    • Capitalism is in an evolutionary process – even Marx saw that
    • It is by nature a form or method of economic charge & is never stationary
      • It occurs in a changing social & natural environment & they may condition independent change but they aren’t the prime movers
      • Not population increase, capital or small changes in monetary systems
    • Main impulse driving motion comes from new consumer goods, new methods of production, transportation, markets, industrial organization of Capitalism
    • Content of a laborer’s budget went through qualitative changes (revolutions) due to changes:
      • In agricultural productivity due to advances in plows, crop-rotation, mechanization
      • In iron & steel changes from charcoal furnaces to modern ones
      • In transportation – mail-coach to airplane
        • New markets have opened up domestic & foreign – organizational development of the craft shop & factory has revolutionized the economic structure many times destroying the old & creating a new one
  • Creative Destruction is an essential fact of Capitalism – it is what it is & what businesses run on
    1. Process where each element takes lots of time in revealing its true feature & ultimate goals – performance can only be judged over decades & centuries
      • A system running at maximum capacity at all times may be inferior long-run that does so at no given time because performance may be obsolete altogether
    2. With this organic process, analysis in any part of it may clarify details of mechanism but inconclusive beyond that
      • Each piece of business strategy is significant only with respect to its process & situation in its role in creative destruction & can’t be understood irrespective of it
  • Economists who look at oligopolistic behavior in an industry, observing behavior looking for highest prices make hypotheses outside of Creative Destruction outside of past/future of a situation & only see maximum profit – not out of past history
    • They only look at how Capitalism administers existing structures, not how it’s creating or destroying structures
  • Economists (1940s) are just seeing beyond price competition – now quality & sales effort
    • Reality differs from texts books – new technology, new input sources, new products, new types of organization – cost or quantitative advantages given – changing the whole basis of firm operation
    • Disciplines before it attacks – still in competition but new methods, if effective, chase out old ones
  • Competition by service & “atmosphere” & by not price leads to stagnation or permanent equilibrium
    • New-comers upset everything but not providing new things, just by choking old firms’ business – prices may rise
    • New supply might come in & rise price, not drop, sales drop, not rise
      • Very rare & but not characteristic of Capitalism – transient
      • Innovation in how sales are made will shake things up

Author: knowit68

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