Defending Capitalism

Here's a striking paragraph about Austrian economist Joseph Schumpeter in a recent issue of City Journal:

"The economic historian Joseph Schumpeter made this point back in the 1940s, warning of a fundamental contradiction in many thinkers’ opposition to capitalism. Because economic rationalism destroyed most of the underpinnings of civil society—village, clan, craft guild—and did not replace them with any similar organic enterprise, more and more people would eventually yearn for a kind of moral authority that capitalism could not provide, Schumpeter predicted. With little direct responsibility for practical affairs, intellectuals would be especially prone to this tendency; they could support vague moral or cultural ideas with few of the tradeoffs that ordinary people face. As a result, the bourgeoisie would underwrite its own gravediggers, subsidizing an intellectual class hostile to itself. Capitalism’s long-run benefits were very much worth fighting for, Schumpeter argued: for those outside the system, they provided a path in, and for everyone else, a constant improvement in living standards through innovation. But capitalism’s negative consequences—constant volatility and income disparity, to name two—would remain stark, and intelligent people would often fail to grasp its redeeming values. Defending capitalism, even in the best of times, would always be an uphill battle."

In other words, capitalism is a tide that raises all boats but causes very visible disruptions. (Hello, financial crisis of 2008!) Thus, it is easy to scapegoat it for specific losses (I lost my job, my town no longer makes widgets) and hard to attribute to it broader gains (we hold more songs in our pocket than the jukebox at our parents' hangout spot, we have 10,000 things to choose from at our neighborhood grocery store). Here's hoping that between those who seek to trash capitalism and those who seek to advance it amorally will hear from those of us in the middle who understand how powerful it can be and want to harness that power for good.