At the same time, I doubt the rules for a well-run, ethical business offered in this book will be enough to satisfy today’s most ardent anticapitalists. The activists are not challenging the quality of the capitalism on offer but rather what they perceive to be its inherent flaws. But the rules in this book will give executives welcome food for thought on how to respond to the rising tide of corporate criticism.
An Enduring System
The creativity that fosters growth and raises living standards can be at the same time the destroyer of jobs or traditional economic relationships, those that are overturned when better opportunities arise. The loss of the security of the village economy, for example, is what many early critics of capitalism most regretted. Joseph Schumpeter thought that that very dynamic rendered capitalism fragile, and he feared it would give way to socialism. The experience of the half century or so after he published Capitalism, Socialism and Democracy suggests that capitalism is more resilient than the socialist alternative.
Perhaps that is why today’s anticapitalists sound so nihilistic. Pure socialism, once the only other game in town, has failed. And although there could one day be a viable blend of the best of the different varieties of capitalism — combining entrepreneurial vigor and adequate protections against the disruptive social and environmental effects of a dynamic economy — such a blend has not emerged yet.
Nihilism has always been a powerful force in politics. Anybody who doubts this should read McCraw’s biography of Schumpeter, whose thinking was forged by his own participation in the tumultuous politics of the early 20th century. Indeed, his acute economic insights were not enough to enable him, as Austria’s minister of finance in 1919, to prevent the economic cataclysm of hyperinflation and depression following World War I. Good sense was trumped by bad politics.
Capitalism as we know it was forged by early 20th-century geopolitics. Today’s political tensions will shape the kind of capitalism and the standard of life inherited by our children and grandchildren. Anybody with strong views on capitalism — as either a defender or a debunker — ought to make sure he or she understands it properly. Executives, who clearly are among the defenders, will find that all of this year’s books on capitalism will heighten their knowledge of its complex facets and their ability to debate its good and bad characteristics. But if you have time to read just one book in this category, McCraw’s Prophet of Innovation, a brilliant study of a brilliant economist who experienced for himself the acute political and cultural tensions of capitalism, should be your choice.
Diane Coyle (email@example.com) runs the London-based consulting firm Enlightenment Economics and is a visiting professor at the University of Manchester. She is the author of five books, including The Soulful Science: What Economists Really Do and Why It Matters (Princeton University Press, 2007) and Sex, Drugs & Economics: An Unconventional Introduction to Economics (Texere, 2004; new edition forthcoming in 2008).