Keynes x Schumpeter
The financial crisis (reduction in credit) that began in summer 2008
with the fall of Lehman Brothers, quickly became a global economic
crisis (increase in unemployment), and threatened to bring with
it a social crisis (poverty and disruption) that finally never arrived.
Many economic analysts have warned that this was no ordinary crisis,
but was possibly a structural crisis. A crisis that emerged from a
profound change in the socio-economic model. The extreme industrial
efficiency achieved during the 20th century, together with the unmeasured
stimulus of consumerism, had resulted in a two-sided situation
of hyper-production and hyper-debt, and made worse by the reality of
declining natural resources, oil in particular.
To resolve the crisis, countries reacted with Keynes’ method, with
huge packets of economic stimuli with the objective of creating employment
in the short term. In the US alone, between direct aid
and fiscal support, $900,000 million was mobilised. Of that, 100,000
million was destined for scientific and technological development.
For the first time in history, it was possible to create millions of jobs
through technology, especially in the field of green technologies.
Even though, during the last decades of the 20th century, Western
economies lost millions of jobs in factories (blue collar) and offices
(white collar), perhaps the new technologies in energy and sustainability
will be able to recreate them in the first decades of the 21st
century (green collar).
But many people pointed out that these crises are a natural effect
of capitalism. Schumpeter summed it up perfectly with his words
of caution: “stable capitalism is a contradiction in terms”. The main
mechanism of capitalist progress is creative destruction: less efficient
businesses must disappear in order to make way for new and better
ones. In a very Darwinian evolution, only the businesses that best
adapt to new market conditions will survive and grow. It is the entrepreneurs,
who question conventional methods, that bring progress to
the economy and society.
Who should we listen to – Keynes or Schumpeter? These two great
economists, both born in 1883, proposed very different versions of
what moves the economy, and in particular, of what to do in moments
of crisis (Keynes favoured the power of the state; Schumpeter advocated
the role of innovation). Historically, Schumpeter had to make do
with second place to Keynes’ ideas, which helped to combat the great
crash of 1929. But fortunately today there are many people who support
the relevance of creative destruction as a capitalist engine.
It is possible that the solution consists of going beyond the individual
K and S models of state and market, and backing a combination of
both factors: the power (solidness) of the state, and the risk (vision) of
the innovators (and entrepreneurs). We have a historic opportunity to
find out if massive investment by the state in new technologies can
create a wave of technological innovation led by entrepreneurs, and
create employment in the short term and economic growth in the long
term. The financial power of the state multiplied by the transformational
power (natural selection) of the market (the entrepreneurs). It
is no longer about K or S, but K x S.