One of the most prophetic of modern economists, the late Harvard Professor Joseph A. Schumpeter, hypothesized that capitalism would ultimately be undone from within the system. This conclusion springs, at least in part, from two concepts that are significant to us today.
First, Schumpeter predicted that one danger to capitalism is found in its very success; in other words, it has been so successful that success itself will increasingly be taken for granted. So many people and businesses are successful today that it will soon appear that the achievement of success is not a great problem and that capitalism, which is really the necessary ingredient, is unimportant.
Obviously, Schumpeter did not make this prediction in the middle of a recession or he would have made it clear his prediction transcended periodic changes in the economy.
To continue the professor’s thoughts–most now view an uninterrupted supply of most things we need for an abundant life as ordinary and rather expected. Even the poorest in our society look upon such things as clean water as ordinary and its availability is taken for granted.
But the supply of such things is a product of our capitalist system. One does not have to travel far to learn that such things are not ordinary in large parts of the world and their lack of availability in other places serves as a constant reminder that they can be lost to us if we are not good stewards of our system.
On this point it’s clear that the public at large, for a long time, has been ignoring its stewardship role in a highly significant way. In its mad scramble to consume more and more, the public is ignoring the need for capital formation, as evidenced by a savings rate that has, over several decades, dropped precipitously. At the moment the savings rate has bounced up to about 6%, but this is more a reaction to the current recession and the fear it has created, rather than a long-term trend. Forty years ago, the savings rate in the U.S. was about 11% or 12% and fairly steady year-to-year and we were good stewards.
Clearly, capitalism is being taken for granted and to the extent that it is viewed as unimportant, the first steps toward its downfall have been taken. Considering the vital role our industry plays in the formation of capital, does this not pose an enormous challenge to each of us?
Responding to this challenge is always difficult, for Schumpeter also maintained that capitalist societies tend to create an intelligentsia hostile to capitalism. By its very nature, capitalism produces dynamic people–people who are innovative, inquiring and dissatisfied with the status quo.