It is the intrinsic instability
of capitalism (cf. Schumpeter’s article by the same title in Economic Journal [1928]) due to the
presence of the social conflict expressed by the profit motive in a competitive
market society that neither Classical nor Neo-classical economic theories with
their “Law of Value” (whether based on Labor Value or on Marginal Utility)
could explain theoretically: – the latter because it postulated axiomatically that the economy must be in equilibrium unless it is disturbed or displaced away from it by the presence
of political interference through
State regulation occasioned by ethical, religious or cultural opposition to
individual self-interest; and the former because it also assumed that there can be such a thing as economic
equilibrium provided that all exchanges correctly reflect the quantity of labor
objectively embodied in the goods exchanged, and that therefore
“dis-equilibrium” can be attributed solely to the “anarchy” of individual
self-interest, particularly by inter-capitalist competition and rivalry occasioned
by private property and the corresponding “theft of labour time”, due to the absence
of political interference through
State regulation (cf. M. Dobb, Political
Economy and Capitalism, chpts.1 to 3).
In other words, for Neoclassical equilibrium theory
it is political interference with the possessive individualism of the market
mechanism that causes disequilibria and crises, whereas for Classical and
Marxian political economy it is precisely the lack of such interference with
possessive individualism that causes crises through the “anarchy” of the market
mechanism. Classical and Marxian political economy therefore, to the extent
that it too relied on “the market” to fix values or “socially necessary labour
time”, reduced political conflict to the anarchy
of possessive individualism – something that contradicts the Marxian notion of
“class interests”, for how can capitalists in competition with one another ever
form a political class?! And if they can, then how can Marx theorise that “the
market mechanism” fixes the value of labour power below the value realized by
capitalists? (We will discuss this objection moved by Bohm-Bawerk and
Schumpeter against Marx’s theory of surplus value in the next section.) And in
any case, other than the “mis-appropriation” of value by capitalists from
workers and the fortuitous dis-connection between production and consumption
due to the “anarchy” of competition, other than this inequality of distribution, there is nothing - nothing systemic - in Classical and Marxian
political economy that is intrinsically wrong with capitalism, to induce the
observable regular crises of the
economic system.
It is legitimate therefore to
conclude that for both Neoclassical and Classical Political Economy “crises”
are only “mal-functions” of what is an inherently “techno-scientific” economic
system – capitalism: – a system that is indeed so “scientific” as to coincide
with the concept of “economics” tout court
– because for bourgeois economic theory capitalism
and economic science are one and the
same thing! (This negative notion of crisis is in M.Cacciari, “La Transformacion del Estado”.) For both
Classical and Neoclassical Political
Economy the central problem of economic theory is the avoidance of crises, the removal
of “obstacles” to the healthy or optimal operation of what is seen as a techno-scientifically determinable
economic system. For these theories, the economic system deals either with
“relations” (exchange in equilibrium theory) or with “quantities” (labour
values in Classical political economy) that are capable of “scientific”
measurement and “technical” manipulation, and it will succumb to crises only if “the market mechanism” fails to
operate properly (Neoclassical equilibrium) or if the “product” is not
distributed in proportion to labour values (Classical equilibrium). The only
problem with capitalism, then, is that of economic co-ordination: for the
Neoclassics, this is assured by the correct information signaled to all
economic agents through the market mechanism by virtue of the “atomicity” and
self-interest of market participants, whereas for the Classics this is done by
eliminating from the process of distribution precisely the atomicity and
self-interest of the Neoclassics which cause the “anarchy of the market” and
the “unequal distribution of income” (crises of overproduction or underconsumption).
As we have seen in the preceding
sections, Schumpeter concedes the ultimate inadequacy of the Statik analysis of the capitalist
economy proffered by both Classical and Neoclassical Political Economy – which
he himself had hitherto embraced wholeheartedly – to explain the “nature of the
forces” that characterize capitalism for the very simple reason that capitalism
is “endogenously” and “intrinsically” an economic system that is incompatible
with any notion of “equilibrium”, whether static or dynamic, and is instead one
whose differentia specifica consists
precisely in the process of “creative destruction” (schopferische Zerstorung), that is, of
“development-through-crisis”. Crisis
therefore is not an anomaly to be eschewed, it is not an aberration to be
corrected, it is not a temporary setback waiting to be remedied: crisis is the very essence of capitalism; capitalism is permanent crisis.
The essential characteristic of
capitalism, to develop or grow through the “incessant mutation” of the economy
– this trans-crescence makes both
Neoclassical and Classical Theory wholly irrelevant to the understanding of how
and why this economy has developed into its present state. At best,
Neoclassical and Classical economic theories can “describe” positivistically and functionally the
operation of the capitalist economy; they can pinpoint and formalize
mathematically certain patterns and regularities in its behaviour (Jevons); but
they cannot even begin to “understand” its development or evolution (Marshall’s
aim) or indeed its “co-ordination” (Hayek’s objective). This fact reduces
Neoclassical and Classical theories to mere “heuristic” or didactic or
illustrative devices, descriptive synchronic
and essentialist accounts of the
separate aspects of the capitalist economy – its “skeleton” or function - that
can never explain its diachronic evolution
– its “flesh-and-blood” or metabolism (cf. BC, pp60ff).
Here in Schumpeter we find a very
different rationale from that adopted in the natural sciences in which the sole
apparent aim is to photograph reality, “to find the truth” about the world, “to discover the laws of nature and of society”. We also find a different rationale
from the Lockean liberal vision of civil society in which the economy is a
simple continuation of the jusnaturalist individual possessivism of the state
of nature. Although, as we are about to see, Schumpeter’s aim is to unify
economics and politics by associating different “economic agents” to different
types of income, Schumpeter could no more believe in “natural rights” as the
rationale of income distribution in capitalist society than he could lay faith
in Walras’s axiomatic determinism or in Marx’s historical materialism.
Our main thesis here is that the
most plausible and radical
interpretion of Schumpeter’s notion of Entwicklung
is that it seeks to theorize capitalism as an economic system founded on
“incessant crisis” or “permanent innovation” (cf. Trotszky’s “permanent
revolution”), in the sense that now capitalism is seen as an economic system
that, far from seeking equilibrium,
far from being founded on a Law of
Value that validates the homologation and equivalence of Political and
Economic, continually generates or “constantly
recreates” crises.
The opening up of new markets…and organizational development…illustrate
the same process of industrial mutation – if I may use that biological term –
that incessantly
revolutionizes
the economic structure from within,
incessantly destroying the old one, incessantly creating a new one. This
process of Creative Destruction is the essential fact about capitalism. It is
what capitalism consists in and what every capitalist concern has to live in.
(CS&D, p.83)
Cf. Marx’s Manifesto:
“The bourgeoisie cannot exist without constantly revolutionizing the
instruments of production, and
thereby the
relations of production, and with them the whole relations of society.”
Schumpeter’s theory of Entwicklung acknowledges – indeed it is founded on the assumption –
that capitalism is a social system that must
constantly recreate social and economic antagonism and crises because its
entire rationale is the creation and
containment of conflict in the expanded reproduction of society. The notion of
Value, of an economy based on essence or substance or static Being, is now
replaced by a ceaseless Becoming, a constant trans-formation, mutation,
meta-morphosis or, more controversially, “evolution”.
The essential point to grasp is that in dealing with capitalism we are
dealing with an evolutionary process. It may seem strange that anyone can fail
to see so obvious a fact which moreover was long ago emphasized by Karl Marx.
Yet that fragmentary analysis which yields the bulk of our propositions about
the functioning of modern capitalism persistently neglects it. Let us restate
the point and see how it bears upon our problem.
Capitalism, then, is by nature a form
or method of economic change and not
only never is but never can be stationary. (p.83?)
But this is evolution in the sense of development-through-crisis: in this
“evolution”, the antagonistic foundations of capitalism do not change, only the
“form” of capitalism changes, not its conflictual content, not its antagonism,
not its being a state of “crisis”. This is the “renunciation” (Entsagung) of Schumpeter’s negatives Denken: unlike the
theoreticians of the dialectic – Hegel and Marx -, Schumpeter’s notion of
“incessant revolution” does not contain the supersession or resolution of the
social antagonism that “constantly recreates” capitalist crisis.
If you like, Schumpeter’s
“creative destruction”, like Nietzsche’s similar concept in Zarathustra, preserves only the
mechanical shell of Hegel’s dialectic – the “becoming” or “movement” – but not
its “rationalist-idealist” foundation: cf. Gadamer’s quotation from Hegel:
"The reason why dialectic first seizes upon motion as its object
lies in the fact that true dialectic is itself this motion; or, put another
way, motion is the dialectic of all that is" (Logic, XIII, 313). (Hegel’s
Dialectic, p.13.)
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