[As a reward to our loyal friends I publish here some "notes" on Keynes and Schumpeter that were written to form part of the final chapters of "Krisis".]
"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 (
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! Ch.
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”).
(Conclude with hint to Grundrisse and “the limit to capital”.)
(Please DO NOT misunderstand our analysis as some “late-Romantic” opposition to “Technology” similar to Mary Shelley’s depiction in “Frankenstein” or Herbert Marcuse’s “One-Dimensional Man”. FAR FROM IT! What we are doing is exploring the ways in which “undemocratic” science and technology become “INSTRUMENTS or tools of DOMINATION”.)