Information Landmine

"The Americans keep telling us how successful their system is. Then they remind us not to stray too far from our hotel at night." - An un-named EU trade representative quoted during international trade talks in Denver, Colorado, 1997.

Thursday, March 29, 2007

Right wing romanticism

I'm reading Joseph Schumpeter's Capitalism, Socialism, and Democracy, which is actually very well written and thus fairly easy going. As befits something that people are always busily trotting out to explain why huge monopolies aren't a problem, why anti-trust cases are unnecessary and why intellectual property policy needs to be so restrictive, it's also quite difficult to get a hold of: well over twenty quid for most copies you'll see.

The thing the book is mostly remembered for is it's promotion of the inventive entrepreneur and of dynamic markets more generally: the point being that classical economic competition in terms of reducing margins is really far less important than competition through innovation, which hits your competitors at the heart of their business rather than nibbling away at the edges (imagine you're selling candles and I've just invented the light-bulb): Creative Destruction is the term, much beloved of conservatives.

What no-one tells you is that the man comes off as a bit of a nutter: Schumpeter's constant romanticising about that better class of men (and he seems to assume they are men) who drive capitalism sometimes makes him seem like a more erudite version of Ayn Rand. Innovation, for Schumpeter, is located squarely in the individual entrepreneur and, more than that, it sometimes seems to be a sort of biological given: there's a better class of person whose higher mental powers allow him to innovate, or some such. Now the debate about nature vs. nurture in human creativity is a big one, and where you stand on it doesn't really matter. What is important is that he doesn't really offer any argument on either side, he just plumps for the idea that some people are more equal than others and leaves it at that.

If all this sounds a bit too fascist, it's should be pointed out that this is a big part of why Schumpeter (having rejected Marx out of hand in the first section) sees socialism succeeding - big business eventually gets so bureaucratized that there's no room left for these thrilling creative types and capitalism thus kills the goose that lays the golden egg. In case I seem too mocking, I actually think there's quite a lot to some of these ideas - not the innovative ubermensch, but the idea that big business kills off creativity. This is why the standard method of innovation in things like biotech seems to consist mainly of big business finding smaller, more dynamic companies to buy up - it seems to be hard for people to innovate within large organisations.

Apart from his romanticism, the big flaw for me seems to be that Schumpeter's doesn't really give much scope to the possibility of harmful innovation, or at least the government shouldn't be regulating it - the market will be better at sorting that sort of thing out than a lot of stuffy judges and bureaucrats seems to be his angle. He, of course, wasn't living in the age of Enron's marvelous new innovations in accountancy, but you'd think that a lot of the more outlandish schemes of the 19th Century American robber barons would have given him pause for thought. Maybe it all just seemed so dashing that he couldn't bring himself to condemn it...


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