Tuesday, February 12, 2019

757: Can Capitalism survive....?

"Can Capitalism survive? No. I do not think it can.” 
With this statement opens Schumpeter’s prologue to a section of his 1942 book, "Capitalism, Socialism and Democracy" pg 61.
According to Schumpeter capitalism is essentially static. I guess that the idea is like this: a product is produced at certain costs,
part of which is materials and wages. Then it is sold to cover these costs and so on. There is no profit in this cycle.
It is like a stationary engine, it runs but there is no movement. Then, where does profit come from? From innovation and for innovation you need entrepreneurship.
Schumpeter  writes "... the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention 
or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, 
by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on." (pg. 132
Related to entrepreneurship Schumpeter used the term" Creative Destruction" With creative destruction  he means a process
of continuous innovation, where successful applications of new techniques destroy the old.
Schumpeter holds technical innovation for the only real source of economic growth. 
Successful innovation provides temporary market power, which affects the profits and market shares of companies based on previous techniques. 
In a never-ending process of rise and fall, old companies are destroyed by new ones. 
Since Schumpeter believes that technical innovation is the only way in which prosperity can increase, 
he sees nothing in measures that un-targeted money is pumped into the economy to promote growth, which a government for instance can do by lowering income taxes.
Thus capitalism is a continuous process of economic growth and stagnation, growth and stagnation. And where will this lead to?
While he agrees with Karl Marx that capitalism will collapse and be replaced by socialism, Schumpeter predicts a different way this will come about. 
While Marx predicted that capitalism would be overthrown by a violent proletarian revolution, which actually occurred in the least capitalist countries, 
Schumpeter believed that capitalism would gradually weaken by itself and eventually collapse. 
I guess one day you have may asked yourself the question: "Does economic growth go on forever, will that be the future?"

In the paragraph "The Obsolescence of the Entrepreneurial Function" Schumpeter asks himself the same question:
"...let us glance at that possibility, assuming, still more unrealistically, that methods of production have reached a state of perfection which does not admit of further improvement."
"... though entrepreneurs do not per se  form a social class, the bourgeois class absorbs them and their families and connections,"
Eventually it seems to lead to some kind of classless society and Schumpeter concludes:
"This result may not in every respect be to the taste of Marxian socialists, still less to the taste of socialists of a more popular (Marx would have said, vulgar) description. 
But so far as prognosis goes, it does not differ from theirs." (pg.134)
That was 1942. It is now 2019. Was Schumpeter right about the future of capitalism?
Thank you for your attention again ...:-)
The floor is yours....

The Discussion
[13:17] Gemma (gemma.cleanslate): so far
[13:17] .: Beertje :. (beertje.beaumont): thank you Herman
[13:17] Ciska Riverstone: thank you herman
[13:17] herman Bergson: You think so Gemma?
[13:17] Particle Physicist Bejiita (bejiita.imako): but capitalism has still not collapsed and we still live in a world of overconsumption fed by limitless advertising
[13:17] Particle Physicist Bejiita (bejiita.imako): BUY BUY BUY!
[13:18] herman Bergson: Yes and the buying is generated by innovations....the ever next even bette model of this or that
[13:18] herman Bergson: So, why do you thing Schumpeter was right in his prognosis, Gemma
[13:19] Particle Physicist Bejiita (bejiita.imako): still much is still versions of recent stuff not to large jumps
[13:19] Gemma (gemma.cleanslate): well
[13:19] Gemma (gemma.cleanslate): looking at what happened in all cbusiness so far
[13:19] Particle Physicist Bejiita (bejiita.imako): but indeed i feel no need to upgrade stuff until either its worn out or well there is some REALLY big improvement that i feel i need
[13:20] Gemma (gemma.cleanslate): private industry thrives
[13:20] Gemma (gemma.cleanslate): with ups and downs in many forms
[13:20] Particle Physicist Bejiita (bejiita.imako): ah
[13:20] Gemma (gemma.cleanslate): large companies
[13:20] Gemma (gemma.cleanslate): small business
[13:20] Gemma (gemma.cleanslate): entrepreneurs
[13:20] Gemma (gemma.cleanslate): etc
[13:20] Gemma (gemma.cleanslate): if
[13:21] Gemma (gemma.cleanslate): the government does not overcontrol
[13:21] herman Bergson: Yes indeed....but Schumpeter's idea was that economic growth is driven by innovations
[13:21] Gemma (gemma.cleanslate): that part i agree with
[13:21] herman Bergson: and I think that still is the case
[13:21] Particle Physicist Bejiita (bejiita.imako): and that i agree with
[13:22] Particle Physicist Bejiita (bejiita.imako): we can tak as example, although this laptop is a few years old it still perform just as good and so i don't feel a need to get a new machine
[13:22] herman Bergson: Besides that classes aren't joined into one egalitarian  mass, I'd say
[13:22] CB Axel: Yes, but is what we have now really capitalism? If the government bails out failing businesses, is that how capitalism is supposed to work?
[13:22] Gemma (gemma.cleanslate): the classless society i cant see
[13:22] herman Bergson: Indeed CB.....
[13:22] Gemma (gemma.cleanslate): no cb
[13:22] Gemma (gemma.cleanslate): not usually
[13:22] herman Bergson: at the moment it looks like a mix of Keynes, Schumpeter
[13:23] Gemma (gemma.cleanslate): unless the whole system might fail
[13:23] CB Axel: We can't have a classless society if our governments keep propping up failing businesses in order to allow the rich to continue being rich.
[13:23] herman Bergson: No...neither can I Gemma.....richer get richer and the poor stay poor
[13:23] Gemma (gemma.cleanslate) GIGGLES!!
[13:23] Gemma (gemma.cleanslate): ...LOL...
[13:23] Gemma (gemma.cleanslate): would like more taxes
[13:23] Gemma (gemma.cleanslate): the amount they pay and can hide is outrageous
[13:23] Particle Physicist Bejiita (bejiita.imako): we need a new Robin Hood
[13:23] herman Bergson: Yes....
[13:24] CB Axel: I would just like to see the rich pay the taxes they owe.
[13:24] Gemma (gemma.cleanslate): yes
[13:24] Particle Physicist Bejiita (bejiita.imako): ah
[13:24] herman Bergson: besides that I find the possibility of accumulation so much wealth by just one individual troublesome
[13:24] Particle Physicist Bejiita (bejiita.imako): share a little
[13:24] Nasty Calamity is online.
[13:24] Gemma (gemma.cleanslate): oh but some do
[13:24] Particle Physicist Bejiita (bejiita.imako): thats true and that is good
[13:25] Particle Physicist Bejiita (bejiita.imako): but some just hide it in tax paradises
[13:25] Particle Physicist Bejiita (bejiita.imako): and let it sit there
[13:25] Particle Physicist Bejiita (bejiita.imako): growing but not used
[13:25] Gemma (gemma.cleanslate): :-)
[13:25] herman Bergson: I read somewhere recently that 26 individuals own as  much  as 50% of the rest of the world
[13:25] Gemma (gemma.cleanslate): yes
[13:26] Gemma (gemma.cleanslate): read something like that too
[13:26] herman Bergson: But this wealth also means power
[13:26] Particle Physicist Bejiita (bejiita.imako): I use to call it the Scrooge McDuck syndrome where these money piles is as his huge vault
[13:27] herman Bergson: Capitalism is still alive and kicking I would say
[13:27] Gemma (gemma.cleanslate): think so
[13:27] Particle Physicist Bejiita (bejiita.imako): indeed
[13:27] Particle Physicist Bejiita (bejiita.imako): for good and evil
[13:27] Ciska Riverstone: wealth in that classes is power without responsibility. somewhere between we created a tool that makes it possible for some to act  irresponsible and still gain money
[13:27] CB Axel: Maybe instead of asking "can capitalism survive" we should ask "should capitalism survive."
[13:27] herman Bergson: I guess Schumpeter was right in assuming that innovation is the driving force in economies
[13:27] Ciska Riverstone: and thats the real problem
[13:28] herman Bergson: Indeed CB...a much better question
[13:28] Ciska Riverstone: corporations laws need an update
[13:28] herman Bergson: It brings us back to what we are.....ethical beings
[13:28] Ciska Riverstone: because those allow that distinction
[13:29] .: Beertje :. (beertje.beaumont): do we NEED all these innovations?
[13:29] herman Bergson: This is indeed a good point Ciska
[13:29] Particle Physicist Bejiita (bejiita.imako): hmm
[13:29] herman Bergson: the extreme wealthy individuals can really manipulate whole countries....and they are not elected nor represent others than themselves
[13:30] Ciska Riverstone: and they can even define what their bosses are "worth"
[13:30] herman Bergson: I find that a serious problem of the present situation
[13:30] Ciska Riverstone: thats just delusional
[13:30] Ciska Riverstone: if someone wants to make the superbig money  he should be directly self responsible
[13:30] Ciska Riverstone: if he does not want to be
[13:31] Ciska Riverstone: in corporations the wages of the highest rankin person need to be coupled with the lowest ranking person
[13:31] Ciska Riverstone: if the highest ranking person wants a raise of 1 %  the lowest ranking persons need the same raise
[13:31] herman Bergson: Once they were....nowadays it is out of control
[13:31] Gemma (gemma.cleanslate): not sure how that would work
[13:32] Ciska Riverstone: if a person does not want that - they can have a company that is no corporation
[13:32] Ciska Riverstone: and take on all the risk
[13:32] Ciska Riverstone: including the responsibility
[13:32] Ciska Riverstone: and make their own free income there
[13:33] Gemma (gemma.cleanslate): I don't know
[13:33] herman Bergson: We have an interesting lawsuit going on here...
[13:33] Ciska Riverstone: the point is - if a corporation makes money its not due to "some " bosses who get money for shutting down jobs
[13:33] Ciska Riverstone: but due to everyone involved who actually doing the job
[13:33] herman Bergson: in which 4 department heads of a huge accountancy firm are held responsible.....
[13:34] herman Bergson: tax fraude and so on....
[13:34] herman Bergson: It is amazing to read how such people talk...
[13:34] herman Bergson: One said...."How dare treat me as a criminal....I was the top second accountant of Europe!"
[13:35] Gemma (gemma.cleanslate): that type of situation is like  Wells Fargo bank here
[13:35] Gemma (gemma.cleanslate): same issue
[13:35] herman Bergson: So because of his wealth and position he regarded himself above the law
[13:35] Gemma (gemma.cleanslate): lots of cheating of clients and customers in many ways
[13:35] Gemma (gemma.cleanslate): and they still advertise as a wonderful help to people
[13:36] CB Axel: That sounds familiar, Herman
[13:36] Gemma (gemma.cleanslate) GIGGLES!!
[13:36] Gemma (gemma.cleanslate): ...LOL...
[13:36] Gemma (gemma.cleanslate): sure does
[13:36] Particle Physicist Bejiita (bejiita.imako): its their so called "status" just because they have money they think they are some kind of elite that can behave how they want agains "lower standing people"
[13:36] CB Axel:
[13:36] Gemma (gemma.cleanslate): afraid so
[13:36] herman Bergson: indeed Bejiita....
[13:37] CB Axel: It's just like back when Leona Helmsley said that taxes are for the "little people."
[13:37] Gemma (gemma.cleanslate) GIGGLES!!
[13:37] Gemma (gemma.cleanslate): ...LOL...
[13:37] Gemma (gemma.cleanslate): yes i do remember that
[13:37] CB Axel: Well, they're still getting away with that.
[13:37] herman Bergson: For the time being we may conclude that Schumpeter had good insights, but his predictions about capitalism still havent come true...:-)
[13:37] Ciska Riverstone: of course - corporations do not pay those
[13:38] Gemma (gemma.cleanslate): and it looks like she was right too
[13:38] Particle Physicist Bejiita (bejiita.imako): hmm
[13:38] Gemma (gemma.cleanslate): correct
[13:38] Ciska Riverstone: they might on the longer run herman
[13:38] Ciska Riverstone: there are corporations which already understand that
[13:38] Gemma (gemma.cleanslate): so many societal changes since his life time
[13:38] herman Bergson: That could be true Ciska, but this is a world of many nations.....
[13:38] Ciska Riverstone: they work more like smaller governments
[13:39] Ciska Riverstone: Sinek has a great talk on that
[13:39] Ciska Riverstone: (tedtalk that is)
[13:39] herman Bergson: which still lag behind in Capitalism....like Russia and China....
[13:39] herman Bergson: and  many African countries
[13:40] herman Bergson: They first all want a piece of the cake before everyone is willing to revise capitalism and comsumptionism
[13:40] herman Bergson: consumptism (?)
[13:40] herman Bergson: consumerism?
[13:40] .: Beertje :. (beertje.beaumont): :)
[13:40] Gemma (gemma.cleanslate): consumption
[13:40] Ciska Riverstone: not sure if the africans won't surprise us in how they do it....
[13:40] Ciska Riverstone: (on the long run)
[13:41] Gemma (gemma.cleanslate): some  countries there yes!
[13:41] CB Axel: Until the people who actually do the work of a company and produce the goods being sold are respected, nothing is going to change.
[13:42] Gemma (gemma.cleanslate): in some companies they are tho
[13:42] herman Bergson: Yes CB...since the early 60s companies have lost the insight that they also fulfill a social task in society
[13:43] Ciska Riverstone: (ah no its not a ted talk https://www.youtube.com/watch?v=RyTQ5-SQYTo )
[13:43] herman Bergson: Now the only goal is profit maximization
[13:43] Particle Physicist Bejiita (bejiita.imako): sadly yes
[13:43] CB Axel: Why do they barely get paid a living wage when the bankers and accountants, who do nothing but move other people's money around, get paid millions?
[13:43] Particle Physicist Bejiita (bejiita.imako): its crazy
[13:44] Ciska Riverstone: evaluation does no longer work
[13:44] CB Axel: I'm not against maximizing profits, but what do those profits go to?
[13:44] Particle Physicist Bejiita (bejiita.imako): to their tax free money piles
[13:44] herman Bergson: stock holders
[13:44] Gemma (gemma.cleanslate): to investors
[13:44] Gemma (gemma.cleanslate): yes
[13:44] herman Bergson: bonusses
[13:44] CB Axel: Some goes to research and development, but if your boss and the stockholders can afford gold plated toilets there's something wrong.
[13:44] herman Bergson: to make more money with that money
[13:44] Particle Physicist Bejiita (bejiita.imako): ah
[13:45] herman Bergson: Well, we still have a lot to do in this capitalist world :-))
[13:46] herman Bergson: But let's skip it a week!
[13:46] Wisdomseeker (lissena) is offline.
[13:46] Gemma (gemma.cleanslate): enjoy!!!!
[13:46] herman Bergson: Don't forget...NEXT WEEK NO CLASS
[13:46] Ciska Riverstone: have fun
[13:46] herman Bergson: But yet I'll think of you :-)
[13:46] .: Beertje :. (beertje.beaumont): Schier here he comes:)
[13:46] Gemma (gemma.cleanslate): hope all our weather is good
[13:46] Particle Physicist Bejiita (bejiita.imako): aaa have a good time over there
[13:46] herman Bergson: Prospects look good Gemma :-)
[13:46] Particle Physicist Bejiita (bejiita.imako):
[13:46] CB Axel: So, we meet again on 12 Feb?
[13:46] Gemma (gemma.cleanslate): great
[13:47] Particle Physicist Bejiita (bejiita.imako): and no polar temperatures i hope there
[13:47] herman Bergson: So thank you all again....for your attention and debate
[13:47] herman Bergson: Class dismissed
[13:47] CB Axel: Thank you, Herman.
[13:47] Particle Physicist Bejiita (bejiita.imako): cu then
[13:47] .: Beertje :. (beertje.beaumont): thank you Herman
[13:47] Particle Physicist Bejiita (bejiita.imako): when ur back
[13:47] Ciska Riverstone: thank you herman
[13:47] Gemma (gemma.cleanslate): ok
[13:47] Ciska Riverstone: have a good week everyone
[13:47] Gemma (gemma.cleanslate): off to the fishing contest
[13:47] Particle Physicist Bejiita (bejiita.imako): bye for now
[13:47] CB Axel: Bye
[13:47] herman Bergson: Good luck Gemma :-)
[13:47] Gemma (gemma.cleanslate): you too
[13:47] Ciska Riverstone: good fish gemma

[13:47] bergfrau Apfelbaum: happy holiday Herman:-)

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