progressivism, individualism, and the public ... - Telmarc Group

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The Telmarc Group PROGRESSIVISM, INDIVIDUALISM, AND THE PUBLIC INTELLECTUAL always underscored—was a crucial flaw in their analysis of capitalism. The prior possession of money makes it easier to become an entrepreneur, of course, and successful ones do usually become wealthy. But the historical record shows unmistakably that, in the countries Schumpeter is discussing, entrepreneurs come from all income groups. (He had a deep interest in social classes, a topic he often wrote about.) “Risk bearing is no part of the entrepreneurial function. It is the capitalist who bears the risk. The entrepreneur does so only to the extent to which . . . he is also capitalist, but qua entrepreneur he loses other people’s money.” Having staked out the distinctive role of the Entrepreneur, Schumpeter identifies entrepreneurial Profit as the prime motivator—“the premium put upon successful innovation.” When other participants in the same industry see the new level of Profit, they try to duplicate the Innovation. In turn, the Entrepreneur tries to preserve his high Profit for as long as possible—through further innovation, the use of patents, secret processes, advertising, and “aggression directed against actual and would-be competitors.” Schumpeter recognize the entrepreneur as the key element of capitalism, and suppression of that function would doom capitalism in the long run. What Schumpeter got wrong is that the entrepreneur in today's market must initially come to the table with the idea and the seed capital through their own resources. The venture capitalist did not exist at the time Schumpeter wrote this and thus he is looking at the early 20th century view of financing entity and entrepreneur. The 21st century view is more complex and more reliant on the entrepreneur. Yet if the Government takes actions to suppress any of the functions in the food chain of the entrepreneur it will kill it off and thus all innovation. McCraw details that well. These are forms of what, three years later, Schumpeter famously called “creative destruction” in Capitalism, Socialism and Democracy." Schumpeter was in many ways similar to Hayek. He introduced the concept of Creative Destruction, the process where businesses have natural lifetimes and are replaced by the next best thing. He states 143 : "The opening of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation - if I may use that biological term - that incessantly revolutionizes the economic structures from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism." 143 Schumpeter, Capitalism, p 83. Page 132
The Telmarc Group PROGRESSIVISM, INDIVIDUALISM, AND THE PUBLIC INTELLECTUAL He then goes on to emphasize that this entrepreneurial Creative Destruction require the unimpeded individual who will conceive of the new ideas and take the risks to make it a reality, for the risks are high, massively high, not all entrepreneurs are successful, the entrepreneur being on a par with those few risk takers in human existence who abandon all security and seek both the new opportunity while at the same time being able to lead a band of like minded individuals around whom the entrepreneur will build the new venture. The Progressive and neo-Progressive has no understanding of the entrepreneur. They may at time think they do but all of the Progressive principles are the antithesis of what the entrepreneur needs to survive, and Creative Destruction is essential to capitalism as pruning any dead branch is from growing trees. Otherwise those dead branches become vectors for disease and infestation. Consider the telephone company, protected from 1913 onward by the Government at a monopoly, protected at the direction of the Wilson Administration. Once they became a well settled monopoly they did everything in a rational manner to maximize their monopoly profit. Since it was a monopoly and profits were defines as a percent of capital plant deployed, there became no incentive to deploy highly efficient capital plant, because then the profit would decrease. The Government Planners, in this case, the FCC, mandated perforce of the regulation a halt on Creative Destruction and an institutionalization of old technology. The Internet was not done at Bell Labs, because it would be cheaper, and thus the Creative Destruction came from a band of Department of Defense academics. As for Schumpeter's view of a socialist society he said the following 144 : "By socialist society we shall designate an institutional pattern in which the control over the means of production and over production itself is vested in a central authority - or as we may say - in which, as a matter of principle, the economic affairs of society belong to the public and not to the private sphere. Socialism has been called the intellectual Proteus. 145" 5.5.2 Alan Bloom 5.5.3 Thomas Sowell 144 Schumpeter, Capitalism, p 167. 145 Proteus was the shape changing sea god a son of Poseidon. Thus Schumpeter is calling socialism a shape shifter, an entity which can change its colors and shape to meet the challenge that it may face. Page 133
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