Commentary on Political Economy

Friday 1 July 2011

Excerpts from Martin Wolf Exchange

SCHUMPETER AND KEYNES: Money, Crisis, Growth   by Joseph Belbruno

 “…if our central control authorities could manage to establish a total level of production consistent with full employment, classical (economic) theory would continue to apply (normally) thereafter…” (General Theory, quoting from Italian translation).

Keynes was aware of capitalist “business” cycles. He knew that they came and went. The emphasis of his “general theory” is CLEARLY on “employment” (it comes first in the title, before Interest and Money). The entire aim of his work is “how to deal with the CRISIS” and the ‘crisis’ is POLITICALLY mainly one dependent on “employment” because it is the lack of employment that will pose the greatest dangers to the stability of the capitalist order. The General Theory is written in the 1930s when the entire capitalist system is on the verge of collapse and Roosevelt’s New Deal is only in its infancy.

Basing himself on the POLITICAL LEADERSHIP shown by President Roosevelt, Keynes sees that an attack on the level of employment will not be sufficient to drive down nominal wages BEFORE the profitability of investments can generate sufficient effective demand to drive the level of employment and consumption back to “equilibrium”.

The ESSENTIAL “missing link” needed to avoid a catastrophic “deflationary spiral” of lower “output and employment” is a NEW SOURCE of “effective demand” capable of supplanting the investment that is NOT coming from “private” capitalists. In other words, for Keynes the inability or unwillingness of individual capitalists TO INVEST, that is, TO COMMIT ‘MONEY’ to the employment of social resources in view of their LACK OF FAITH in ‘MONEY’ as “a bridge between the present and the future” – as a guarantee of ‘profitability’, of higher ‘value’ that can be REALISED in “the market” – this INABILITY or unwillingness to invest must be MATCHED by a “collective capitalist”, an institution that is able to supply the missing “effective demand”, to supplant the capitalists’ “ANIMAL SPIRITS” so as to guarantee full employment and, with this, the POLITICAL STABILITY of the capitalist system. For Keynes, what is true and rational for the INDIVIDUAL capitalist is NOT true for the CLASS of capitalists “AS A WHOLE”!

“The right dichotomy is, I suggest, between the Theory of the Individual Industry or Firm and of the rewards and the distribution between different uses of a given quantity of resources on the one hand, and the Theory of Output and Employment as a whole on the other hand. So long as we limit ourselves to the study of the individual industry or firm on the assumption that the aggregate quantity of employed resources is constant, and, provisionally, that the conditions of other industries or firms are unchanged, it is true that we are not concerned with the significant characteristics of money. But as soon as we pass to the problem of what determines output and employment as a whole, we require the complete theory of a Monetary Economy,” (GT, Ch.21).

It is VITAL to note that what is missing in Keynes is a theoretical framework, or a political strategy, to re-start capitalist “GROWTH”, a strategy to BRING BACK the capitalist system away from the “politicization” that State involvement in production INEVITABLY brings about and BACK to the COMMAND of “private” capitalists who will then RE-START the system toward “profitability” and “economic growth”. Essentially, Keynes’s theory provides a politico-economic STRATEGY for the State, “the collective capitalist” to keep the system alive, to buy “social peace” UNTIL full employment is achieved. AT THAT POINT, the capitalist economy will be able to reach A NEW EQUILIBRIUM, similar to that envisaged by neoclassical theory, but THIS TIME with a much larger role for the State in “guaranteeing” a politically acceptable level of employment and, with it, social peace and the stability and SURVIVAL of the capitalist economy. What the “collective capitalist”, the State, MUST bring about is A NEW FAITH IN MONEY – the State must RESTORE the ability of capitalists to believe that their present MONETARY investments will bring about the “valourisation” of capital in the workplace AND THAT “LATER”, “IN THE FUTURE” the ‘VALUE’ of the goods pro-duced by means of the “living labour” of workers in the workplace will be able to be REALISED through “sales” in the “market”.

THAT IS WHY Keynes is able to make right there one of the few italicized comments in the entire General Theory (!), "For the importance of money essentially flows from its being a link between the present and the future," (GT, Ch.21).

FAR from being a “MERE PROMISE”, far from being “MERE FIAT MONEY”, Keynes here CORRECTLY and with GREAT INSIGHT identifies the CENTRALITY of MONEY in the political pro-ject of DOMINATION and COMMAND by capital over workers!! MONEY EMBODIES "VALUE" - indeed it is the SUPREME "institutional ex-pression" of "value"! Far from being mere “hot air”, “a trick”, “pure credit”, “fiat money”, "a promise", Keynes identifies money-as-capital as THE EMBODIMENT OF WEALTH-AS-CAPITAL, as the OWNERSHIP OF THE MEANS OF PRODUCTION AND AS ‘VALUE’ TO SUBJUGATE THE LIVING LABOUR OF WORKERS in the process of pro-duction!!

Again, Keynes can perceive the CHASM that the wage relation with its ANTAGONISM provides between the PRESENT ‘valourisation’ of capital in the process of production and the FUTURE ‘realisation’ of the pro-duced goods in “the marketplace”. Keynes can see quite easily THE CRISIS that this represents.

WHAT IS MISSING in Keynes’s work is the outline of a strategy for the capitalist system TO RE-ESTABLISH or RE-CAST its COMMAND over living labour “by means” of money-as-capital NOT JUST to survive politically but also to generate “profitability” and “growth”, economic EXPANSION over new populations of workers, over new “markets” and territories…. IN THE FUTURE!

And this is PRECISELY the problem that Schumpeter tackles in “Business Cycles”. (Indeed, it is the Gordian Knot that Martin Wolf is trying to cut!) It is THE REASON WHY Schumpeter is a FAR GREATER “political” theoretician than Keynes in that HE ALONE poses the problem for capital of….HOW TO ‘BRIDGE THE CHASM’ (remember, “pro-ject”) between the PRESENT “CRISIS” and…”FUTURE GROWTH”!! And it is to Schumpeter’s “pro-ject” that we will turn in the near….future.


(or “The Politico-Economic Consequences of Mr. Keynes”)

The topic of “financial repression” calls for a brief reflection on the ‘tendency’ of “Keynesian theory” with regard to the role of State intervention in the capitalist economy that we discussed below. I do this to alert pro-“Keynesian” commentators to the “tendency” in their stance against “speculators” and “casino capitalism” toward State authoritarianism if this ‘stance’ is not accompanied by a ‘critical’ approach to the analysis of capitalism.

The “Keynesian” call for the State (“the collective capitalist”) to REGULATE ‘Finanzkapital’ against the deleterious excesses of its congenital search for “paper gains” -  that is to say the search for ways “to realize profits” without having to go through the “antagonistic” process of “valourisation” in the workplace - shows us unequivocally that (as one contributor to this forum [‘Equivocation’] pointed out recently) what lies at the heart of this ‘reformist’ call has genuinely ‘authoritarian tendencies’ against which we must guard.

(Indeed, in the Comments to a Martin Wolf Column, one particular wit has just called for “the liquidation of the City of London” and, behind a cascade of “Keynesian” verbiage, EVEN started to invoke “the Sovereign”[!!], by which he surely meant ‘the State’, taking up direct investments to maintain “aggregate demand”. This is stuff we had not heard since Hobbes’s ‘Leviathan’ or since the days of mediaeval “statolatrists” like Pufendorf!!)

When Keynes called for the intervention of the State to supply the “effective demand” that “individual capitalists” were not willing to provide because of insufficient ‘profitability’ (in Keynes’s terms, lower “marginal efficiency of capital”), he quite explicitly argued that the ESSENTIAL REASON for this “falling rate of profit” was the “DOWNWARD RIGIDITY OF NOMINAL WAGES” which Keynes, with characteristic sociological insight, could see had now become an ineluctable institutional REALITY of advanced industrial capitalist economies in the light of the growing political cohesion and antagonism of working classes in those countries.

The higher levels of “unemployment” resulting from the unwillingness of “individual” capitalists TO INVEST ‘MONEY’ or TO HOARD it regardless of how low interest rates fell – which Keynes called “the liquidity trap” -  led Keynes to call for the DIRECT INTERVENTION of the State in the process of production of “output” so as to maintain a ‘politically acceptable’ level of employment and to maintain ‘social peace’ and, with it, the survival of the capitalist system.

Keynes could already predict that this ‘tendency’ could only worsen….”in the long run”. His famous maxim that “in the long run we are all dead”, together with his “irrationalist” references to “animal spirits” and the long-term decline of “the marginal efficiency of capital” and his insistence on “uncertainty”, ALL THESE were CLEAR SIGNS that Keynes saw ever greater State intervention in the capitalist economy as an inevitable “tendency”. Similarly, Keynes’s famous conception of money as “A LINK BETWEEN PRESENT AND FUTURE” evinces inconfutably the FEARS that Keynes held for…the FUTURE of capitalist society – or of “society in general”, given that a bourgeois thinker like him could not envisage any OTHER form of “society”!

Yes, because WHAT IS State direct intervention in the capitalist economy if not the APPROPRIATION of the future!? WHAT IS IT if not a political ‘pro-ject’ (a “throwing over” the hiatus or chasm that exists in capitalist investment between present and future) to guarantee by sheer political force (!!) the survival of capitalism and the wage relation!!? What is it if not “THE VISIBLE HAND” replacing “THE INVISIBLE HAND”?

Such were the fears Keynes held for the future of capitalism that he actually did envisage a time when the rate of interest (and therefore the rate of profit and “the marginal efficiency of capital”) would fall to zero and, consequently, ‘money’ would become entirely dispensable, a mere cipher denoting no ‘value’ whatsoever and in fact serving ‘no purpose’ whatsoever!! In other words, Keynes could already predict the ABOLITION OF ‘MONEY’ AS A LINK (pro-jectio, “throwing over”) BETWEEN PRESENT AND FUTURE!!!

(With the German Idealist philosopher Fichte we could call Keynes’s ‘pro-ject’ to abolish money as his “pro-jectio per hiatus irrationalem” because, like religion where ‘faith’ provides the ‘bridge’ between the world and God, Keynes wished to ‘bridge’ or ‘link’ the ‘irrational hiatus’ [chasm] between the present of bourgeois society and its future… without the help of ‘money’!)

The obvious difficulty with this “tendency” - which has been b o r n e out by the facts as capitalist States have taken over a rising share of the capitalist economy – is that its historical realization has brought with it a growing ‘bureaucratisation’ of everyday life in capitalist societies. Bluntly put, it is possible to say that the “the control of GROWTH” by the capitalist State that Keynes correctly theorized has inevitably resulted in a corresponding “growth of CONTROL” by ever more ‘authoritarian’ capitalist States!! (I hope to cover this in greater detail soon.)

THIS is the danger of “the authoritarian tendency” in our title that all those “reformists” (Keynesian or socialist) run when they call (as did George Soros recently) for a greater correspondence between the investments of ‘Finanzkapital’ and “the r e a l economy”, “real value” or “productive investments”….and so on. The tragedy in all this, of course, is that “Keynesians” wish to preserve “use value” AND “exchange value”, they want “capital”….without “the capitalist”!

(Indeed, in the Comments to a Martin Wolf Column, one particular wit has just called for “the liquidation of the City of London” and, behind a cascade of “Keynesian” verbiage, EVEN started to invoke “the Sovereign”[!!], by which he surely meant ‘the State’, taking up direct investments to maintain “aggregate demand”. This is stuff we had not heard since Hobbes’s ‘Leviathan’ or since the days of mediaeval “statolaters” like Pufendorf!!)

“Keynesians”:…. beware what you wish for!


There is one final observation that I wished to make on this theme. There is a widespread tendency, common above all among ‘economists’, to REDUCE the notion of ‘crisis’, including those arising from speculative capital flows, to a simple TECHNICAL problem. This tendency was particularly evident during ‘the great moderation’.

As we saw below, in mature capitalist societies like those that prevail now, EVEN the process of ‘innovation’ described by Schumpeter as the source of ‘crisis’ and ‘business cycles’ has been entirely subsumed or ‘taken over’ or ‘internalised’ within the structure of the capitalist corporation or organization. And we saw that, indeed, the control over ‘innovation’ has itself become a FORCE pushing toward ‘monopoly’. It follows therefore that the role of the “entrepreneur” is necessarily diminished to that of mere ‘manager’.

If we concede then that ‘innovation’, the process of research and development has been absorbed within the ‘bureaucratic’ structures of advanced capitalism – put differently, if the “entrepreneurial Spirit” has been ‘integrated’ within the ‘Technique’ of ‘corporate management’ –  IT BECOMES ABSOLUTELY CLEAR then that the ORIGIN of ‘crises’ in a capitalist economy can be found ONLY in the social antagonism WITHIN the structure and function of TECHNICAL or ‘bureaucratic’ State control of the ‘wage relation’.

It is entirely clear from our analysis that the SEVERITY of ‘crises’ in a capitalist society can be ‘gauged’, can be measured broadly by the extent to which the State-form itself needs to intervene POLITICALLY in the broad economy BOTH in terms of direct control of production  AND in terms of regulation of economic activity. It is at this precise point that Schumpeter’s “entrepreneurial Spirit” has to give way to Max Weber’s “leadership Spirit” (leitender Geist).

To express this account in the conceptual terms discussed above, the severity of a capitalist crisis can be gauged by the extent to which the POLITICAL control of capitalist enterprise actually EXPANDS, on one side, AND, on the other side, the extent to which the TECHNICAL control recedes or contracts.

Put in very blunt terms, a capitalist ‘crisis’ is the more ‘systemic’ or dangerous the more it becomes ‘politicised’ in that it requires direct intervention by the State in areas that ‘in normal times’ could be MANAGED ‘technically’, by TECHNOCRATS.

This all-important conclusion leads us to a development that has PREPOTENTLY and dramatically come to the fore of international attention where the essential tool of political COMMAND of the ‘wage relation’ takes place – and that is THE POLITICAL CONTROL OF MONEY, including the control of capital flows.

THIS leads us DIRECTLY to the present ‘trans-formation’ of the role played by CENTRAL BANKS in the capitalist system. MORE SPECIFICALLY, it leads us to an examination of the central role that the European Central Bank has been FORCED to play in the current eurozone ‘crisis’. And this is what I hope to do in a future forum.


ULYSSES AND THE SIRENS: Technocracy as Repression

Odysseus was curious as to what the Sirens sounded like, so, on Circe's advice, to avoid being lured onto their island by their irresistible singing and perish, he had all his sailors plug their ears with beeswax and tie him to the mast. He ordered his men to leave him tied to the mast, no matter how much he would beg. When he heard their beautiful song, he ordered the sailors to untie him but they bound him tighter until they passed past the island.

We saw earlier how with Keynes it is the antagonism of workers expressed institutionally as “the downward rigidity of nominal wages” that occasions a “crisis” of investment in which the inability of wages to adjust to a level sufficiently low to entice investors out of the “liquidity trap” leads to stagnation or recession. Two things ensue: the State must intervene to provide the “effective demand” that is missing in order to restore a politically acceptable level of employment; and also the liquidity provided by the State will result in a rise in inflation that will serve to reduce the gap between asset-linked loans and the ability of indebted businesses and consumers to repay them (see General Theory, Ch.21. For the financial repercussions of State ‘stabilisation’ after the New Deal, see above all Hyman Minsky’s “Finance and Stability: The limits of capitalism”, May 1993. Minsky is particularly explicit about the “socialisation of debt” such as has occurred in the latest “crisis”).

The consequent massive expansion of the role of the State in the capitalist economy, if on one hand it leads to “the control of growth”, at the same time it engenders “the growth of control” by the State-as-collective-capitalist over most areas of social life. The old “night-watchman State” or “liberal state” is thus turned into a State-Plan, a vast bureaucratic network with ever-greater control over the entire network of social life. The “invisible hand” of the ‘self-regulating market’ is replaced by the very “visible hand” of growing State intervention in the economy. THIS is what I have called “the society of capital”.

The consequent process of “bureaucratisation” is aided also by the simultaneous process of “concentration” of capitalist enterprise that rises as a direct result of  “crisis” as firms seek to “rationalise” their operations and achieve economies of scale. These outcomes “exist” in Keynes. The Cambridge economist “registers” their necessity and theorises the politico-economic strategy that the new State-Plan needs to deploy to ensure that “the crisis” does not metastatise into a deadly deflationary cancer that will threaten the very survival of capitalism. (As we will see when we deal with Schumpeter, however, Keynes DOES NOT specify a strategy or develop a theory that can LEAD OUT of the “crisis” and FORWARD into a new cycle of “growth”.)

But by their very nature these twin processes of “bureaucratisation” and “rationalisation”  cannot signify  m o r e  than just an attempt “to administer”  the economy and society, they rarely achieve “more” than just  “manage” the antagonism that led to “crisis”. It turns out that  a l l   the intervention of the State-Plan manages to achieve is to push the antagonism to a HIGHER level, one that requires direct POLITICAL MEDIATION by the highest elected officials in parliamentary democracies. (I read in this sense Romano Prodi’s latest Opinion on the FT concerning the EU’s failed decision-making process over fiscal policy.)

This analysis allows us HERE AND NOW to assess directly and correctly the intention and effectiveness of the State in dealing with the present “crisis”. For it is obvious now that to the extent that the State seeks TO REPRESS “finance capital” and to force it to pay for “the crisis” through inflation, to that extent the State acknowledges its POLITICAL INABILITY to suppress the antagonism of workers and to transfer definitively the costs of “the crisis” on to workers in terms of “austerity” and “deflation”.

By the same token, we find that those “institutions” that have been established by the State-Plan with the express purpose of being “independent” of politics, to avoid the “political cycle” and therefore to act “technocratically” ARE FAILING MISERABLY to come to terms with the new level of antagonism that “the crisis” has unleashed!

Like Ulysses ordering his sailors to tie him to the mast so as to avoid the Sirens’ fatally alluring voices, the “independent” European Central Bank was established by the State-Plan as a “technocratic” institution apt to remove monetary policy – an essential tool of  “political mediation” of  “crisis” in Keynesian theory – from the “political pressures” that the economic cycle would inevitably apply on the “correct, disciplined (scientific-technocratic) conduct” of this policy, and also to assure the command  of  the State and capital over workers against the “temptation” of political leaders “to accommodate” monetary policy to assist with the creation of employment and the “depreciation” of debt obligations. In short, it was an attempt to present as LAW what was always pure and simple POLITICS.

If, as a result of “the crisis”, the so-called “technical independence” of central banks (Fed and ECB) is weakened, then this will be an important signal that worker antagonism is gaining ground. But if the opposite occurs, the ensuing rigidity of central-bank policies will only lead to a further “rigidity” of the present State regime. In both cases “the room to manoeuvre” that Max Weber spoke about (in ‘Parlament und Regierung’) will have been greatly reduced for the capitalist class.

KEYNES AND SCHUMPETER: Cycle, Crisis, Growth (Part II)

"Grasshoppers" and "ants. Consumers and workers. Investors and Savers. The dichotomy between Investments and Savings is what "the rate of profit", reflected ultimately in the rate of interest, is what links the two. As Carol Wilcox reminded us with her "fallacy of composition", Keynes could see that what is reasonable for the individual capitalist firm is not reasonable for the capitalist class "as a whole" because while the individual capitalist wishes to depress the wages of 'his' workers, 'he' wants to raise the wages of all other workers. This engenders a deflationary spiral of lower wages, lower prices and lower output and employment that ONLY the "collective capitalist" (the State) can stop and reverse.

Once the State has re-established the identity between Investments and Savings, Keynes concludes that Say's Law (or "the laws of classical economics") function normally. Equilibrium is reached and the Law of Value according to which "output" is properly distributed to each factor of production - profit, interest, rent and wages - can finally operate in accordance with economic theory.

The ESSENTIAL point here is that Keynes could see "Equilibrium" and, unlike the classical political economists (Smith, Ricardo, Say), HE COULD SEE "crisis". CRISIS was the "inequality" of Investments and Savings brought about by the "DOWNWARD RIGIDITY" of nominal wages - that is to say, by the antagonistic "resistance" or "composition" of workers AS A CLASS to the lowering of wages and conditions.

TO COME OUT of the "crisis" required the intervention of the State so as to bring the economy BACK to full OUTPUT and FULL EMPLOYMENT. Keynes could certainly SEE "crisis" in capitalism. And he could see GROWTH intended as "expansion of OUTPUT". What Keynes could NOT see was GROWTH AS DEVELOPMENT - in other words, Keynes could not see that "Crisis" could bring about NOT JUST "growth" as "full employment".

RATHER, as SCHUMPETER discovered (!), capitalism could overcome "Crisis" THROUGH GROWTH-AS-DEVELOPMENT.....through GROWTH-AS-INNOVATION!!

WHEREAS in Keynes capitalism was always prone to STAGNATION (as we saw earlier), and "technological innovation" was seen as an "exogenous factor", as a factor EXTERNAL to capitalist relations of production -  IN SCHUMPETER "growth-as-innovation" is an ENDOGENOUS FACTOR, a factor INTERNAL to capitalism. For Schumpeter "Innovation" is THE VERY ESSENCE of capitalism! (For all this, see Business Cycles.)

For Keynes, “technology”is purely a “scientific”, “neutral” process, a process completely independent of the social relations of production, a process standing OUTSIDE the wage relation and INDEPENDENT OF and AUTONOMOUS FROM the process of production. The neo-classical economic theory to which Keynes subscribed for its notion of “general equilibrium” NEVER STRAYED from the concept of an “INDEPENDENT PRODUCTION FUNCTION” under which the “economic system” GREW” from one “equilibrium” to the next in the quantitative terms of OUTPUT.

BUT, as Schumpeter discovered, in this neo-classical concept of “output” and “growth” THERE IS “crisis” but THERE IS NO “DEVELOPMENT”, there is “EXPANSION” but there is NO “INNOVATION”. In Keynes there is “control of Growth” but no “LEADERSHIP-as- development”, there is “growth of CONTROL” but no ‘Active domination of the productive process”, “active LEADERSHIP” through Innovation. There is a “bureaucratic” STATE-PLAN to come out of the “Crisis” but there is no understanding of how the process of production itself, the Rationalisation of Technology can serve as POLITICAL LEADERSHIP, as DOMINATION.

Keynes sees the NEGATIVE aspect of working-class antagonism in the “rigidity” of wages. But Schumpeter sees the “resistance” to Innovation! He sees the workers’ antagonism to “new technologies” that are UNDEMOCRATIC, AUTHORITARIAN forms of COMMAND over “living labour”!! (Cf. Business Cycles.)

THAT is WHY for Keynes the “collective capitalist”, the State can intervene to provide the “aggregate demand” that individual capitalists cannot supply. Keynes can see how the “rigidity” of the wage relation can be MASTERED by the State to bring about “full employment” and “higher output” or “GROWTH”. But Keynes – the “bureaucratic” Treasury official, Cambridge don, close to “aristocratic” circles - NEVER poses himself the problem of whether a “crisis” can be answered not just with “aggregate demand” or “growth of output” BUT RATHER with a “technological trans-formation” of the antagonism of the wage relation through the ENTREPRENEURIAL “revolutionary” or, in the words of Schumpeter, “creative destructive” transformational POWER OF INNOVATION!

THIS is the POWER of Schumpeter’s “ENTREPRENEURIAL SPIRIT” or “Unternehmergeist”! Schumpeter accepts the theoretical usefulness of neo-classical “equilibrium” analysis because of its “metaphysical” qualities of justification or apology for capitalist “market” relations of production arising out of the “FREE market”, out of “FREE exchange” in a “SELF-REGULATING MARKET” in which the participants “FREELY EXCHANGE” their original “ENDOWMENTS” – as in Walras’s system (not for nothing Schumpeter considered Walras the greatest economist).

But neo-classical equilibrium, Say’s Law and the LAW of Value can ONLY result in a “circular flow” (Theory of Econ. Devlpmnt.) – a STERILE “circularity” that ultimately will tend to the STAGNATION of “pure competition”. Indeed, for Schumpeter the “EC-CENTRICITY” of capitalism, its “CENTRI-FUGAL” quality IS NOT “exogenous”  - IT IS THE VERY NATURE OF CAPITALISM!! For Schumpeter, “Crisis” is not just a temporary “dis-equilibrium”, an “anomalous” IM-BALANCE in the system – NO! For Schumpeter “Crisis” is the NATURE of the capitalist economy, its very HEART AND SOUL, its empirical, visible “actu-ality” -  and, as we will see, the antagonism of workers is its MOTOR.

TO MOVE OUT (!!) of ….this “CIRCLE” (!!), the capitalist MUST TRANS-FORM the means of production! Capitalism must USE THE ‘CRISIS’ brought about by the antagonism of workers – MUST DOMINATE the ‘crisis’ – by introducing NEW PRODUCTIVE TECHNIQUES, through the process of “Research AND DEVELOPMENT” to bring about MORE than “quantitative Growth of OUTPUT”.

Schumpeter seeks to “hide” the political force of this concept behind its purely “consumerist” effects (consumers are “passive”, in Bus.Cycl.). He hides the political antagonism of the wage relation behind the POSITIVE responses of the ‘Unternehmegeist’ – the “Spirit” of the entrepreneur -, the “innovative” aspect of “CREATIVE destruction” (shopferische Zerstorung). BUT his ENTIRE “evolutionary” account of capitalism and its intrinsic endogenous “CRISES” (taken straight out of Marx’s notion of “accumulation” through the reduction of production time through technological innovation) and “theoretical” relation to Bohm-Bawerk’s “roundaboutness” (itself the enucleation of Schopenhauer’s Entsagung or “Renunciation” or “Self-denial” as the Askesis at the origin of PROFIT -  cf. again Weber’s Protestant Ethic) BETRAY the clear unstated purpose of the “Will to Conquer” NOT JUST in the sphere of distribution but PRE-DOMINANTLY in the sphere of PRODUCTION!!

This is substantiated also by his AWARENESS that “crises” are brought about by wage antagonism (as in Keynes, the tendency to monopoly and stagnation) ESPECIALLY in his later re-statement of the theory of “Innovation” where it is no longer the “individual” entrepreneur that originates the process but rather the monopolistic firm itself (!) that now subsumes the entire process of “innovation”. At this juncture the distinction between “Individualitat” and “Monopol” or “bureaucratic Rationalisierung” (cf. reference to Weber at start of Ch.2 of ‘Theorie’) is DISSOLVED: capitalist innovation is seen in its full and bare guise as naked “Will to Power” as “domination” over living labour.

The Entrepreneur MUST INNOVATE or “create” NEW “technologies” in order to DOMINATE the antagonism of workers by “DESTROYING” the current methods or OLD “technologies” of production SO AS TO “EXTEND” or “DEVELOP” its POWER over workers IN THE WORKPLACE and in the SOCIETY OF CAPITAL!!

Schumpeter must have been aware of this POLITICAL dimension of his ‘Theorie’ of “Development” because as soon as he states it he proceeds immediately (Ch. On ‘Capital’) to reassert at great length the “innovative” and “creative” motive of the “entrepreneurial Spirit” (in both the individual AND in the monopolistic firm) by seeking to interpret and explain away the “accumulation” motive in his account of “CAPITAL” as simply an “instrument”, a means-to-an-end (‘Innovation’) for the capitalist “entrepreneur” (individual or monopolistic firm) and not as AN END IN ITSELF!

Schumpeter specifically and explicitly DISTINGUISHES between “invention” which is part of “scientific research” and INNOVATION which is a GUIDED, INSTRUMENTAL, POLITICAL WILL-TO-POWER (he called it “Will to Conquer”, see Intro to Th. Of Econ. Devlpt.) apt to “dominate” THE MARKET” so as to establish a NEW MONOPOLY that can control the market. BUT this “control” is NEVER STATIC, NEVER ABSOLUTE – because the “Spirit” of capitalism, the “Entrepreneurial Spirit” is ‘to dominate through technology”. (Cf. Audi’s motto, “Vorsprung durch Technik”).

(One could summarise the difference biographically by saying that Keynes loved to sip tea with aristocracy, whilst Schumpeter’s ambition was to become the greatest horse-rider of his time! See Skidelsky above.)

Schumpeter’s conception of capitalism is “evolutionary” but in a “revolutionary” way – he sees “technological trans-formation” or “Innovation” as an evolutionary “MUTATION” of the process of production and distribution, of capitalist social relations of production, of “domination” over “living labour” or workers.

While “technological Rationalisation” makes this political process ENDOGENOUS, it is always the CHARISMA, the “leitender Geist” of the Entrepreneur that is needed to push the process FORWARD. Therefore the Entrepreneur MASTERS or DOMINATES the workers by SUB-ORDINATING the “technological Rationalisation” to the TASK or GOAL of DOMINATION – THIS IS   I-N-N-O-V-A-T-I-O-N!!! (Schumpeter promoted the study of “economic sociology” in this regard.)

But the rise of “trustified capitalism” leads to the “deadening” of this function and eventual “tendency” (as with Keynes) to STAGNATION. The link between “oligopoly” and “technological innovation” and tencency to “stagnation” has been studied in a “Keynesian-political” key by Sylos-Labini. S-L’s conclusions are extremely interesting because whilst on one side they place much emphasis on Keynesian “psychological/irrational” elements in investment decisions leading out of ‘stagnation’ (cf. K’s “animal spirits” and of course S’s “Unt’geist”) on the other side it deepens the analysis of the role of “technological innovation” or less in the concentration of firms (oligopoly) and its consequences for both investments and employment. S-L concentrates especially on oligopolistic control of ‘market share’ and profits as well as on the related skewed distribution of income giving rise to the contraction of overall consumption (aggregate demand). This is very close to Minsky once S-L turns to the effect of loose monetary and fiscal policies (to alleviate unemployment) on the inflating of asset ‘bubbles’ and ‘financial pyramids” by “financial oligopolies” – see BNP paper in ‘Favorites’).

Paolo Sylos-Labini covers many of the themes contained here regarding “oligopoly and technical progress” and particularly the different stances of Keynes and Schumpeter. Like us, he stresses Keynes’s concern with “full employment” and the tendency of his “equilibrium” analysis to lead to “stagnation” (same as the Kreislauf in Schump). A whole section of the book is dedicated to “Stagnation”.

S-L is also like Minsky concerned about the “debt structure” and the role of “oligopolies” in ensuring that “full employment” does not occur by introducing “innovations” (and by ‘resisting’ competitive ones) and also by avoiding “haircuts” (in the case of “financial oligopolies”).

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