Quite a few people have sent emails inquiring about the buggy site's inaction the last three weeks. My thanks to all of them, except for one poison-pen type who hoped that I had come down with some terminal brain disease and was in a comatose position in a site funded by Hospice. Well, no such luck. Nothing anyway as serious as terminal damage in the upstairs department, at any rate none that the buggy prof can detect (despite what his wife claims to notice daily) --- only a little time off for some reading and lazing around Santa Barbara, with the site primed for more bugged out incandescent stuff to start anew next week, probably with a report on some of the books (mainly novels and historical works, plus some terrific fact-based investigative journalism.)

Best Book

One of the latter is James McManus's Positively Fifth Street, the most absorbing book I've read in a year or two, and of any sort: fiction or non-fiction.

A novelist, McManus --- who also writes sports journalism on the side --- went to Las Vegas early in this decade to report on two related events, a murder trial and the World Series of Poker. Written with hilarious vigor and in a flashy style that works to a tee, McManus --- a totally amateur player --- uses some money to enter satellite competition, finds himself pitted against snake-eyed pros, and manages to win enough satellites to get into the finals with the real pros, the world's best. The book is also autobiographical in parts, revealing enough of McManus's own hyped-up persona --- Good Jim and Bad Jim, the former a solid husband and father, the latter given to a rakish life --- that makes him every bit as interesting as the grafters, casino owners, hookers, drugged-out poker pros, washed-out gangsters, and sad-sack millionaires who congregate in Las Vegas, 12 months of the year. You can tell, despite the racy, show-off style (which perfectly captures the Rabelaisian extravaganzas of Las Vegas life), there's a lot of careful thought that went into the book's composition, including McManus's deft ability to juggle four parallel stories: the murder trial (the victim, as it happens, none other than the druggy son of the man who owned the casino and invented the world-series of poker); the poker series itself with its colorful players; and McManus's own barnstorming antics . . . not to forget the gaudy story always in the background of Las Vegas itself, Sin City Deluxe, the Mecca of low-life people everywhere on terra-firma.

 

Films: A Slight Digression

Very fitting that Bugsy Siegel and the Syndicate who first financed him, then killed him off, is the creator of modern-day Las Vegas, no?

The film Bugsy, which is the best gangster movie since the Godfathers' saga, stars Warren Beatty, and has a great cast as a back up: Annette Bening, Harvey Keitel, and Ben Kingsley. Interesting too, isn't it, that though films generally lack the scripts and cleverness that they enjoyed until the digital stuff took over in the 1990s, the consistently best ones since 1990 are gangster and cops-and-robbers ones: The Score (with Edward Norton, Robert De Niro, and Marlon Brandon), The Heist with Gene Hackman, Confidence with Edward Burns, Miller's Crossing with Gabriel Byrne, Albert Finney, and John Turtorro, and --- a twist of sorts --- American History X with Norton, Edward Furlong, and a remarkable supporting cast of neo-Nazis, black thugs, a terrific black inmate (who helps Norton overcome his racism), and what have you, plus several Clint Eastwood ones. Not to forget all the Coen brother films, including Fargo or L.A. Confidential or The Usual Suspects by other directors.

No, I'm not a Tarantino fan, for all the raves he gets. His films strike me as nihilistic, unfolded with radical chic hokum about American life and no redeeming features. A far better film than his Pulp Fiction is Things to Do in Denver When You're Dead, with Andy Garcia and Christopher Walken, the script written before Quarantino's Pulp Fiction hit the movie circuit. Even at a cut below in quality, say Kiss of Death --- the 1995 remake of a film noir classic of the late 1940s --- most cops-and-robber films are far better than the average Hollywood product these days. Don't forget Silence of the Lambs or the slightly earlier Die Hard . . . version one, mind you, the brainless follow-ups about as exciting as the successors to Simple Blood, the first Rambo film, with its engrossing script and gorgeous wilderness scenery of western Washington. If you ever get a chance to see Al Pacino's Sea of Love (around 1987), don't let it slip by. It's a remarkably exciting police-film on one level, and on another all about the burned up lives of Pacino and Ellen Barkin and their hunger for a meaningful erotic relationship in big city America.

There are also the good prison films like the Shawshank Redemption or Eastwood's earlier Escape from Alcatraz, for my money the best breakout film of all time. The Fugitive too has to be placed in this category. For that matter, if you add spy thrillers to the list, the Bourne Identity or Robert Redford's Spy Game, you have the best films generally these days, period.

The secret of these films?

Not hard to fathom. Unless it's all shoot 'em up stuff with predictable car chases, or starring the biggest ham-actor in Hollywood these days --- Nicholas Cage --- these films need a good script and actors and directors who can interpret both action-scenes and the emotions of the chief characters even as a coherent plot unfolds with twists and surprises. Even when the rules of the genre set limits to any script's boundaries, there's still ample scope for imaginative end-rounds and extensions. Which, come to think of it, is why Red Rock West --- which featured Cage's first starring role in a gangster whodunnit --- was itself a film full of unpredictable twists and a solid performance by The Great Ham.







 

Other Top-Flight Books: Chess vs. Poker

A natural accompaniment to McManus's book --- less boisterous and absorbing but informative and highly readable all the same --- is Bobby Fischer Goes to War: How the Soviets Loss the Most Extraordinar Chess Match of All Time, a rapid-moving study of the 1972 match when Fischer best Boris Spassky and dethroned Russian supremacy in international chess. Agreed: poker --- even the Texas 'no limit holdem" form played in the Vegas world series (a variant of 7-card stud, where a player can throw in all his chips and force all others to match or throw in their hole cards) --- isn't as cerebral as chess, but it's hardly a game of pure luck either; and there are serious academic programs, statistically based, that have sought to apply game-theory and other approaches to the game, both as an aid to middling players and ultimately as a way to beat the human players.

No such luck.

The main difference is that chess is a game of complete information: once you have a board and the line-up of pieces on both sides, all strategic outcomes can be programmed, hundreds of millions . . . including the best counter-moves to an expert chess player's moves. That's why the reigning world champion loss to a computer-based game a few years back. By contrast, poker --- which involves bluffing and an ability to read various tell-tell signs of opponents (tics, changes in breathing rhythms when bluffing or holding a good hand, changes in voice tone, and so on) --- is a game of incomplete information, and the best poker programs can't beat the best pros.

 

Some Journalists and Essayists Outdo Most Novelists

Another top-drawer factual book is Homicide Special: A Year with the LAPD's Elite Detective Unit by Miles Corwin, one of the L.A. Times' better known journalists. You learn far more about the police, L.A. as a city of both energy and crime, and criminal investigations --- not to mention the lives of certain key detectives --- than you will in even the best novels about the same subjects by Michael Connelly or James Ellroy (L.A. Confidential), or ---to leap back 60 years in time --- Raymond Chandler, much as the latter is an indispensable guide to the nature of life, criminal and otherwise, in the Los Angeles of the mid-20th century.

In the end, you can't but conclude that the best investigative journalists of this sort --- who have no equivalent in Europe, save a few in England --- are better writers than all but a handful of imaginative novelists these days: superior in intellect, insight, and writing style. Think here of Sebastian Junger's Perfect Storm, the filmed version far short of its caliber, or John Krakauer's Into Thin Air on a tragic climb on Mount Everest or the remarkable works of John McPhee until that very gifted writer for the New Yorker got a bug in his bonnet --- not from this site! --- about geology.

 

Paul Theroux, a Case Unto Himself

Similarly, a talented novelist like Paul Theroux is at his best when he writes those numerous first-person travels of his by train around the world, the latest being Dark Star Safari: Overland from Cairo to Cape Town --- a saga, full of adventure (often life-risking), as Theroux winds his way by train, bus, and canoe southward across east Africa, including a visit to Uganda where he spent a stint as a teacher of English back in the 1960s. Theroux had revolutionized the travel story back in the 1970s with his first train trip, and he has continued to do so ever since. How so? His works are really fact-based novels, with remarkable true characters, dialogue, adventures, and insights, Theroux himself --- like McManus --- the central figure, with a matchless ability to attract oddball types into his orbit as he gambits around the world.

Read Dark Star Safari --- written with brilliant dazzle --- and you'll have a better idea of why, in the end, despite Theroux's own fondness for the average Africans he keeps company with throughout his travels, from the Arabs in Egypt and the Sudan to the tropical Africans to the south, the Continent remains economically backward and in the grip of corrupt, totally incompetent leaders . . . no thanks due to the professional aid-givers from international organizations and wealthy countries whom Theroux comes to regard, rightly it seems, as part of the problem, not the solution.

Other Bugged Books

Lots of other books looked at or read by the buggy prof in the interval too: a few novels, some serious histories --- a very good one, full of riveting narrative and technical detail on submarine warfare in WWII (War Beneath the Seas by Peter Padfield, another on the Reformation, yet one more on the attractions of fascist thought to intellectuals from Nietzsche to post-modernist enthusiasts --- come to that, another on Italian fascism's attractions to the artists and writers in Italy --- and a couple on the Spanish civil war. One also on American history: Freedom Just Around the Corner by Walter McDougall. An intriguing book, written with skill too, it features a thesis that Mark Twain would have liked: America as a country of matchless hustlers and con artists from the start, people fleeing dark Europe and its tyrannies of poverty and political or religious persecution back in the 17th and 18th century --- followed by immigrants from all around the world afterwards --- who saw the New World as fertile ground for one clever scheme after another, with the Puritans convinced that such cleverness, assuming it succeeded, was a sign of God's grace.

That's the Calvinist specialty, first understood by Max Weber, the great German sociologist of the early 20th century (The Protestant Ethic and the Spirit of Capitalism). The main drawback of McDougall's book? it loses sight of its thesis too often, becoming too often a solid if not particularly astute work on early American history from the Puritans through the Jacksonian period of the 1830s.

 

Misunderstood: Franklin, The Embodiment of Calvinism???

Interestingly, Weber singled out Benjamin Franklin as the matchless exemplar of the Protestant spirit, frugal, hard-working, always out to improve himself, churning with one scheme after another to make himself famous . . . a stingy, self-denying man full of gabby piety.

In reality, Franklin as we now know was a rakish sort, a chronic womanizer and gambler, addicted to constant whoring and boozing . . . whether in the colonies, later the US, or in London or Paris. There's a moral here. Europeans, it appears, almost always have trouble making sense of the weird combinations of American life --- full of conniving people, restless and imaginative, ready to try one scheme after another if nothing pans out (failure nothing to fear in itself) while remaining religious, very patriotic, hard-working, and striving all the time to improve themselves . . . the residue of a strong Calvinist ethos. Then too, for all our individualism, we are able to cooperate easily for cooperative purposes. Anyone who has been in American universities can easily note the differences here . . . even compared to British ones. American universities teem with student-run newspapers, literary journals, intramural sports, choruses, threatrical groups, orchestras and bands, student government, and dozens of other voluntary organizations. And --- in ways almost impossible for foreign observers to appreciate --- the average American's mind mixes equal parts of idealism and hard-headed pragmatism, sometimes uneasily, other times in jarring form, yet other times in mutually reinforcing manner.

Life for Europeans tends to be different. They live in far more structured societies than the US --- more hierarchical in the Latin countries and Germany and Britain than in North Europe, with highly organized ways of advancement that can't be easily finessed (from adolescence on) --- and they are also far more accustomed to accepting life's shortcomings and constraints than Americans are. Except for the British, they are also more habituated to reliance on government and bureaucracy, and failure at almost any point in your life --- starting with the highly regulated school systems --- tends to be unforgiving, whether in school-life, universities, or business or the professions. Maybe --- a speculation only --- the big risk-takers in Europe and elsewhere left long ago for the USA, the last ones in the buggy prof's lifetime . . . fleeing European homicidal madness.

 

The upshot?

For Europeans, at any rate left-wing and paternalistic conservative politicos, most intellectuals, and most media types, American life is mainly full of greedy humbug, money-chasing schemers, and patriotic braggadocio. They can't appreciate how American life --- in its economic, cultural, and social existence --- is always in flux, swept up in multiple changes that most Americans easily adapt to. That includes the ability --- no, gritty habit --- to pick yourself up after a big setback or failure and start life anew . . . in a new university after dropping out, in a new profession, in a new business you start, or in a new city or state.

Take the head of Microsoft. Bored with Harvard, Bill Gates dropped out his first year, traveled 3000 miles across the USA to Seattle, founded a small company, and became the richest man in the world within two decades . . . even as he has put billions of dollars into a philanthropic effort to help minority students go on to university. A ruthless businessman, a freebooting entrepreneur, he also is concerned to improve American life, like the robber barons and others who created Stanford, the University of Chicago, Vanderbilt University, the Rockefeller Institute, Princeton's great mathematical department in the 1930s, not to forget Harvard, Princeton, Yale, Carnegic Tech, the US public library system (Carnegie again), and the Ford Foundation.

 

Back to Franklin, treated snobbishly in London before the revolution by the local aristocracy, but regarded as the most intriguing man in Paris when he served as the US diplomat to revolutionary France.

As his multi-sided life showed --- a statesman, businessman, diplomat, and inventor who conned others and himself repeatedly with a facade of piety --- he would no doubt have been happily at home in contemporary Las Vegas with its low-lifers and schemers, probably besting McManus and T.J. Coultier and the rest at poker to take the world-series, then going off at 2:00 A.M. to some strip joint for some dilly-dally lap dancing and booze . . . only to get up at seven the next morning and head for the nearest church for a tete-a-tete with the Deity (the latter a fitting description of his and most of the Founding Fathers' skepticism toward traditional Christianity).

Weber got Franklin wrong exactly the way most Europeans, whether in the past or at present, get most Americans wrong. If he embodies anything, it's not Calvinist piety and denial of worldly pleasures for the sake of money-grubbing . . . rather, the spirit of American freebooting capitalism and a roving, rambuctious imagination.

 

The End

And so . . . see you soon, no more than a week or so from now. After a longer report on the books, the buggy prof will follow up the article of August 9th on intellectuals and anti-capitalism with a study of why the USA never had either a socialist tradition or, on the right, paternalistic conservatism after the destruction of the Antebellum South by 1865, never mind fascism as a political movement. (Two of the novels the buggy prof has read on this vac are by that remarkable father-son duo, Killer Angels by Michael Sharra on Gettysburg, which came out in the late 1970s and won the Pulitzer Prize, and Jeff Sharra's Last Full Measure, a novel that deals with Lee and Grant and a few others from Gettysburg on until Appomatox in April 1865. Both are remarkably good books, written with penetrating ability to get into the minds of the real main characters. And both are in the same league as Emile Zola's Debacle (the Franco-Prussian War) and Stephen Crane's Badge of Courage as dissections of men holding up or collapsing under the strains of warfare, the main difference being the resort in the Sharras' books to the factual novel . . . a genre, I believe, pioneered by Truman Capote when he did In Cold Blood back in the late 1960s.

Oops, it just dawned on me. No need for a fuller report on the books or films the buggy prof has been whirligigging with of late. What's unfolded here is full enough, no?

This, the 10th article in a series on the US economy, comparatively viewed --- the lengthy, strung-out argument focused above all on why it has been the richest country in the world for 125 years --- continues the thrust and substance of the general points set out in the previous article. Their overarching theme? Schumpeterian views of industrial capitalism: its economic life as always dynamic and in flux, never in equilibrium; radical technology change as the major disruptive force here; and the role of bold, risk-taking entrepreneurs as the key innovators and challengers to the economic status quo . . . with the resulting dislocating conflicts between them and existing vested interests fought out in what Schumpeter called the gales of creative destruction.

Thus the previous article's argument. One of its points, discussed there in a fast, top-skimming manner --- the non-stop hostility of most intellectuals toward free-market capitalism and bourgeois society and democracy, whether they're historically on the left or right --- is important to understanding their discontent and assaults these days too: toward globalization, Anglo-American free-market capitalism, and much that remains of traditional bourgeois life. That hostility deserves to be teased out and clarified at length

Doing so is the task here.

As you'll see in a few moments, Schumpeter's own work helps illuminate the sources of that hostility, in the past and at present --- this, despite all the massive changes in contemporary industrial societies, economic and social, that were initially applauded by all but ideologically extremist intellectuals, Communist or Fascist, when they began after WWII. Not that Schumpeter's own views, originally set out at the start of WWII, exhaust the argument here. More specifically, as you'll also soon see, the buggy prof analysis will draw on several other views, not least his own.

PART ONE:
WHAT DO WE MEAN BY INTELLECTUALS?

Obviously, some definitional spadework is needed to start the argument --- beginning with the key object under our analytical microscope: intellectuals. First though, to ensure that you grasp the nature and degree of their hostility to capitalist free markets, bourgeois society, and bourgeois democracy --- voiced loudly on both the left and right from the start of the industrial revolution on --- consider a . . .

. . . Brief Catalogue of Complaints, Fleshed Out Later

For many intellectuals, capitalism and bourgeois society are a raucous system of vulgar leveling, the rise of mass-man --- a threat to the past and all that's good: the rule of aristocracy, the discipline of the Church, and notions of quality and cultivated taste, not to forget respect for authority and traditional wisdom. For others, it's the enemy of heroic codes and ways-of-life, whether those of the warrior, the saint, or the artist: a desiccated, dissociated world, in Max Weber's view, of constant calculation and deals --- an iron cage of bureaucracy and rationality; the enemy of mystery, wonder, and awe. For yet others, it's a tool of Jews and their schemes to take over traditional societies . . . to the point that they are also behind the challenge of Godless Communism to Christian (and now Muslim) societies.

These, needless to say, are some prominent right-wing outlooks, which flourished in Europe for two centuries, only to moderate after WWII with the destruction of fascism and Nazism. They still flourish, right down to the anti-Semitic themes of a racist crackpot sort, in Islamist radical circles in the Middle East and elsewhere.

For others on the left, capitalism unleashes greed and endless competition. It creates alienation, it spawns huge gaps between rich and poor, it immiserizes the poor --- or if it doesn't, it's thanks to imperialism; and not least it's irrational and unplanned, atomistic and unstable, the destroyer of international cooperation, global harmony, and peace. These days too, so it's argued, greed and the profit motive are threatening to destroy the environment and even bring ruin to humankind --- look, to be more precise, at Bush-led America's refusal to sign onto the Kyoto Treaty about global warming.

In less extremist circles that flourish in the centrist politics of moderate Social Democrats and moderate Conservatives in the EU, capitalism's worst features have reappeared in "neo-liberalism" --- read: libertarian free-markets --- set off by a line of merciless, hard-nosed Conservative leaders, starting in the 1980s with Ronald Reagan in the US and Margaret Thatcher in Britain. Their most intransigent successors these days --- George Bush or his lapdog in 10 Downing Street, Tony Blair --- won't rest until, with the aid of globalizing forces and American neo-imperialism, casino-capitalism a l'americain is thrust down the throats of the inhabitants in the far more stable, civilized societies of the EU Continental Welfare State: highly regulated, on both the national and EU regional level, along with welfare transfers galore and other forms of governmental expenditures . . . not to forget a large role for statist bureaucracies in every area of economic and social life.

That's in the EU.

In the US and Britain (as well as New Zealand and Australia), left-wing intellectuals have been particularly frustrated by the neo-liberal shifts in economic and regulatory policies --- not to forget welfare-reform --- that were initiated by Reagan and Thatcher in the 1980s and continued more or less intact in the era of Bill Clinton and Tony Blair . . . for all the hoopla about a third-way, which fooled nobody. These two leaders continued to support free trade, deregulation, welfare reforms, and the rest of the neo-liberal agenda, save for the brief flurry of tax rises early in the first year of the Clinton administration. In any case, as cognoscenti might remember, these tax rises were initiated two years earlier by George Bush Sr.

Imagine, then, the frustrations and rippling anger that rage in left-wing intellectual circles both here and in Britain. George Bush Jr. is a Texas nightmare; Tony Blair, his smooth-speaking lapdog, scarcely better. All the radical left's longed-for changes, the heart of the New Left agenda of the 1960s, were dashed within a decade of the left's "march through the institutions" of the two countries.

And now, against this sketched-in background, time for our definitional digging.

 

(i.) Intellectuals As Wordsmiths

The term intellectual, which seems to have originated in the 19th century --- and applies historically to certain European Continental like France, Germany, Italy, or Russia more than the English-speaking ones --- doesn't cover all those who have a certain level of intelligence or education. Obviously. It refers, as noted a couple of decades ago by Robert Nozick --- a gifted Harvard philosopher, a big influence in both professional philosophy and libertarian thought --- to those whose livelihood turns on "ideas as expressed in words, shaping the word flow others receive." Nozick called them wordsmiths : novelists, dramatists, poets, literary critics, journalists (newspapers, magazines, news programs), and numerous professors in the humanities and many of the social sciences. Where do wordsmiths earn their livelihood? Increasingly, since 1900 --- and especially in the wake of the vast extension of higher education in the rich countries after WWII --- in academia, the media, the mass entertainment industries, some professional political circles, and certain parts of government and non-profit agencies.

This is the latest article in a series about a month old now --- which deals with the various reasons why the US has been the richest country in the world now for 125 years, roughly half the total time since the industrial revolution of mid-18th century. This new installment extends the lengthy, stretched-out argument by probing a host of Schumpeterian concepts about capitalism, technological innovation, and long-term economic growth. Schumpeterian? The term refers to the work of Joseph Schumpeter, a Harvard economist in the early and mid-20th century, plus his recent followers . . . all of whom will be identified and explained later. Fairly marginalized in economics until the 1990s, the work of the Schumpeterians --- more and more numerous these days --- has moved toward the center stage of growth economics, and for reasons set out in parts two and three in this article.

...........................................................

(i.) America's Lead Is A Problem For Mainstream Economics

Of these Schumpeterian concepts, the most useful for our purposes postulates that there are different systems of national innovation across the countries of the world.

As previous articles in this series have hinted at, it's our chief explanatory variable to account for what stands out as a puzzle for mainstream economics: why the US continues to be the richest country in the world, and by far . . . these days, a good 35% richer than the Japanese or EU average in per capita income. In particular, superior American success here defies the predictions of both convergence catch-up theory and standard neo-classical market theories,

(i.) The former prediction argues that dynamic follower countries --- assuming they have good institutions and sufficient human skills to work with modern technologies, two things Japan and the member-states of the EU clearly have --- should grow faster than the lead country, thanks to a host of convergence processes that include the transfer of cutting-edge technologies from the leader and the swift diffuse of them throughout their economies. Over time, in consequence, they should fully close the gaps between them and the leader in per capita income and labor productivity: hence the term, catch-up growth . . . something that was occurring as Japan and Germany drew within 85-90% of the US level by 1990, only to fall way behind since then. These days, the gaps between them and the US in per capita income are where they were in the mid-1960s.

(ii-a.) Neo-classical economics, for its part, predicts that any best practices of one firm or another in competitive markets will be quickly emulated by rival firms, either in the home country or abroad: whether they're cheaper production costs, better products, or newer products. Otherwise, the rival firms will lose customers to the more go-ahead firms and eventually go bankrupt.

In the previous article, the dominant neo-classical growth model --- pioneered by Robert Solow of MIT back in the 1950s and still very much influential today --- gives a twist to this best-practices prediction.

(ii-b.) Assume that the superior performance of one or several firms turns out to derive mainly from better technology. In that case, their technological advantages should all the more quickly adopted by rival firms in competitive markets . . . whether in the home country or abroad. Why? Because, so the argument goes, technology is embodied knowledge that shows up in as new or better production machines, and knowledge --- no matter how innovative --- is a public good; it's not exhausted whether used by 2 firms or 2000 or 2 million of them around the world.

 

(ii.) What The Previous Argument Showed

For reasons that the previous article set out, none of these mainstream predictions holds up when it comes to explaining the huge gap, now well over a century old, that separates American living standards from those abroad. In particular,

• Best practices aren't quickly adopted by the firms in other countries, not always.

• Most markets aren't perfectly competitive; they reflect various degrees of monopolistic competition.

• Technology isn't strictly a public good; rather, it's protected by patents and trademarks for a good reason --- to reward innovative risk-taking.

The upshot? It's multi-sided.

Above all, even when technological transfers do take place across countries --- note that the same applies to other emulated best-practices like statistical quality control in manufacturing, or just-in-time inventory delivery, or superior marketing, to name just a few --- they almost always have to be carefully adapted to a bevy of local national conditions: among them, 1) specific managerial practices, 2) regulations surrounding labor relations (think of affirmative action in the USA or restrictions on lay-offs in the EU), and 3) trade union influences. Nor is that all. 4) The dominant ways corporate firms raise capital for investment purposes --- say, stock markets in the English-speaking countries vs. bank credit in the EU and Japan --- will influence the speed with which managers switch to new technologies. Not to forget the 5) impact of very different cultural attitudes toward change and the costs of altering the status quo, all of which have politically charged consequences for electoral outcomes in democratic countries.

 

(iii.) Some Key EU Countries As An Illustration

Recently, to take just one instance, even the fairly modest efforts in both France and Germany to let market forces operate more effectively have generated raw vocal backlashes in both countries. The governments in both, one on the right and the other on the left, have had to retreat under pressure of electoral outcomes in local or regional elections . . . especially when it comes to withdrawing government aid to giant uncompetitive firms and forcing them to restructure or go bankrupt. The outcome? Both governments are now back to the self-defeating practice of subsidizing such firms. In Schumpeterian terms, the politicians in these and most other EU countries are futilely holding back the inevitable forces of creative destruction . . . a key insight of Schumpeter's, explained later here. The longer they seek to dam them, the longer it will take to rejuvenate their overall national competitiveness by exploiting the bountiful promises of the latest breakthrough technologies in information and communications.

With rapidly aging populations supported by state pensions, at best slow-growing work forces, and high long-term unemployment --- not to forget increasing spread of industrial prowess in Pacific Asia and India and East Europe --- these EU laggards don't have that many years left before the tasks of restructuring and reviving their economic vigor become politically next-to-impossible . . . any reform-minded government liable to be rejected in the next election by an unhappy, increasingly aged and ultra-cautious electorate. Fortunately, the tiny Scandinavian members of the EU, plus Ireland and to an extent Britain and Holland, show that it isn't impossible as things stand to rejuvenate their economies.

The American response has been far different than most of the EU's or Japan's. The gales of creative destruction have been allowed to work their impact, dislocations and all to the previous economic status quo. The outcome here? As the previous article in this series showed, the rate of growth in the US's labor productivity began to more than double after 1996 . . . almost all of it due to the effective diffusion of ICT throughout the American economy. Not only has the EU suffered a decline in its rate of productivity growth since the same year, it has hardly reaped any benefits whatever from the huge financial investments in ICT in the 1990s and early part of this decade.

 

PART TWO:
JOSEPH SCHUMPETER AND RADICAL TECHNOLOGICAL CHANGE

We'll explain who Joseph Schumpeter, the Austrian economist at Harvard, was in a few moments, along with the other key Schumpeterian insights into capitalism and its inevitably dynamic, dislocating nature. For the time being, fix your attention on these introductory comments --- especially about different systems of national innovation, a concept that Schumpeter's recent followers have developed and elaborated on.

 

(i.) Our Main Explanatory Task

If used properly, the Schumpeterian concept of different systems of national innovation does what mainstream economics, whether micro or macro, can't effectively account for: why, if your country's firms are doing something better than those in other countries --- in the US case, being more innovative --- those foreign firms don't quickly emulate these superior American techniques or best practices: whether 1) higher levels of R&D, or 2) better managerial know-how, or 3) greater levels of overall investment, or 4) better training of the work-force, or 5) or greater mobility of workers, or what have you.

As you'll see in detail in the next article in this series, the concept refers to an interwoven cluster of institutional, political, and cultural influences that vary across countries.

 

(ii.) The Payoff

Taken together, these interwoven influences shape how their national economies cope with and perform in a wider environment of restless globalizing forces on one side and repeatedly disruptive waves of technological change on the other . . . especially radically restructuring technologies. Think of electrification and automobiles around 1900 --- or airplane travel, mass tourism, credit cards, synthetics, the mass media, and consumer electronics in the mid-20th century --- or computers, information, and communications breakthroughs more recently. These breakthrough technologies, which appear to erupt every 50 to 60 years in clustered waves since the industrial revolution, alter the very ways we work and live and spend our leisure or fight our wars.

Consider just some of these revolutionary changes that pop to mind, all threatening to the status quo when they materialized --- even as they eventually transformed the basic fabric of human societies --- that have occurred since the late 19th century:

• Will we live on farms and work the land for a living, or in cities and labor in factories, or in suburbs and commute by train or car to office buildings in urban conglomerations?

• Will we tell stories to one another in villages or isolated farms at night, or go to films and theater or watch TV for hours at a time?

• Will we need only basic literacy and traditionally handed-down knowledge of farming or have to spend 16-20 years in formal education to carry out complex, highly specialized tasks in our professions?

• Will it take months for news from Europe to reach American shores --- which is what happened when the Treaty of London that ended the war of 1812 arrived weeks after the battle of New Orleans won by Andrew Jackson and the Americans --- or will we communicate instantaneously thanks to the Internet with anybody, anywhere, whatever the day or hour, around the world.?

• Will half our children die before the age of 10, requiring large farming families, or will child mortality rates drastically decline in rich industrial countries, with the large extended family reduced to a much smaller two-child family, the parents living into their late 70's on an average?

• Will we . . . well, you get the idea; no need to belabor it.

 

(iii.) Something Else

As it turns out, big breakthrough technologies also have a radical impact elsewhere --- no less far-reaching, no less disruptive. In a word,

• They directly influence the distribution of global power and change the basic ways wars are fought.

Is it accidental, to elaborate briefly, nothing more at this point, that the two most successful great powers of the 19th and 20th centuries --- the British and American --- share a similar overall model of national capitalism, are democratic, have a firm rule of law, and are firm believers in the value of free trade and markets? Is it only an accident, inversely, that their main challengers --- Napoleonic France, Imperial Germany, militarist Japan, Nazi Germany and its fascist allies, or the Soviet Communists --- were all state-dominated systems, with no firm rule-of-law, no democracy, a contempt for commercial values and free markets, and a rule by militarized, power-crazy elites?

Questions only, though the answers are probably self-evident.

 

PART THREE:
SCHUMPETER'S WIDER WORLD-VIEW OF CAPITALISM: AT ODDS WITH MAINSTREAM ECONOMICS IN ALL ITS THEORETICAL VERSIONS

(i.) Creative Destruction and The Schumpeterian Outlook :

Note what's inherent in this Schumpeterian view of capitalism, first formulated by him in the early decades of the last century: the capitalist economy is revolutionary in nature . . . inherently dynamic and unstable, so full of flux and often uncertainty that radically restructuring technological innovations repeatedly disrupt the economic status quo around the world and transform our lives for good. As Schumpeter and his followers see it, these disruptions and unruly challenges to the economic and social status quo are essential to technological and economic progress. Schumpeter called them these destabilizing changes the gales of creative destruction.

When the forces of creative destruction pound the economic status quo in a country, they divide the population into winners and losers . . . always a matter of degree in each camp.

 

The Losers . . .