“Can Capitalism Survive?” Ch. 1 – The Rate of Increase of Total Output by Joseph Schumpeter (1942)

Sorry to give away the ending before even getting started…

“Can Capitalism Survive?” Ch. 1 – The Rate of Increase of Total Output by Joseph Schumpeter (1942)

  • Capitalism already has 2 strikes against it with a lot of people with respect to economics & cultural results
    • In fact, it’s a breach of etiquette not to condemn it
    • You have to point out its inadequacies & sympathize with anti-capitalist interests
      • You’ll look foolish, anti-social & immoral otherwise
      • Christianity had similar fervent detractors at the beginning
  • 1st test of economic performance is total output
    • Total of all commodities & services in 1 year, quarter or month
    • Measuring variations within commodities & services
    • In the US, it’s possible to measure this back to the time of the Civil War
      • 1870-1930 – about 3.7% growth rate… What does that mean?
      • Since durable equipment increases faster than consumption, investment is greater than consumption
        • Consumption was probably about 1.7% & Investment around 2.0%
    • If that rate continued beyond 1928…
      • 1929-1939 – Capitalism took a tumble (depression_
      • Severity of the depression shaves that down to 2.0%, including labor legislation & government’s approach to private enterprise
        • Policies are inconsistent with respect to viability of private enterprise system & the recovery was slow & poor
        • Change in social views because of the Depression caused such a quick adoption of new government policies
    • If available capital continued from 1928 on at that same 2.0% clip, within 50 years, it would have increased by 2.7x
      • Also would have increased real income per capita, increased consumption, even including population increases, that would be doubled
  • Re. Distribution of total monetary income
    • Until 1910s, many economists believe Capitalism necessarily caused the rich to get richer & the poor to get poorer
      • Not true – structure of income levels hasn’t changed since Industrialization in the 1800s
    • If laissez-faire is allowed, there’d be no evidence to suggest that things would change significantly from the case was in 1928
    • If allowed to continue unfettered, all cases of what we call “poverty” would be eliminated
    • Actual increase in income is demonstrably provable
      • May not be able to account for “voluntary leisure” that would be factored into measures
      • New commodities are often omitted or improperly accounted for in indices measuring growth & inflation
      • Progress is difficult to measure because of these reasons
      • Technological efficiency progress is hard enough to measure but how do we measure dignity, pleasure, etc.?
        • Often economists are forced to use satisfaction of wants which is the true output of Capitalist production
  • Back to the 2.0% growth in Capital
    • Relative shares of national income have been stable over the last 100 years only if we measure it in terms of nominal money
      • But it favors the poor in real terms due to mass production making things cheaper
      • Rich people now favor hand-made things – more expensive because prices are a function of wages
  • It’s easy to prove by looking at wage throughout time & what they are able to buy, & efficiency of good & services, as well as growth in what’s available to buy
    • Making things once only available to the rich is evidence of technological efficiency & real wage growth
  • Analyzing long waves of economic activity will reveal the nature & mechanism of Capitalism
    • Each change is a form of Industrialization due to technological mechanization, electrification, chemical synthesis, railroads, cars, electrical appliances, new input supply sources, etc.
  • Economic downturns occur when innovations cause older, obsolete parts of the economy to die off
    • Falling prices, interest rates, employment, etc. are the consequences of innovation
      • These disturbances, losses & unemployment almost always come from production efficiency & rising wages – Capitalism – raising living standards, albeit via vicissitudes in an economy
        • Pre-fabricated homes are good example of this
  • Appraisal of an economic order needs more than output analysis – needs to look at secondary effects – politics, culture, mentality
  • Struggle for social legislation ignores the fact that previous economics success due to Capitalism & what social legislation attempts to develop & generalize were already being provided by Capitalism without any external help
    • Look at output & social class movement throughout time until 1928 without significant government interference in Capitalistic process
    • Look out for the unemployed is different to causing unemployment
  • Why is Unemployment such a small part of J.S.’s argument?
    • Can never be completely eliminated & there’s no tendency for it to rise in long-term – only in wartime
    • It’s on a cyclical series
      • Postwar periods correct the trend
      • Even Depression-era Unemployment can be separated from war & attributed to Capitalistic mechanisms
    • Prosperity phases are followed by downturns historically & cannot determine anything in the future
    • Mostly war, trade disruptions, wage policies, institutional changes, fiscal policies intensified the Depression
      • These cause Capitalism to be less efficient
    • Not to say Unemployment isn’t a problem but Socialism claims to eliminated it altogether
    • Unemployment is bad but not helping the unemployed without hampering the economy & causes human degradation
      • Capitalism is said not only to cause this but unwilling to alleviate the problem
    • It can alleviate it long-term if left alone – instead of government measures that try to solve problems that aren’t problems
    • What was the temporary downside of early stages is being misrepresented as the system altogether
    • Unemployment is increased by anti-Capitalist policies & public opinion seems to be driving them
      • Also applies to healthcare, education, etc.
    • The system allows the cost, qualities, availability & scope of them to grow but is being destroyed by anti-Capitalism

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