Friday, October 7, 2011

Innovation & Fake Capitalism in America

The Fake Capitalist

With the passing of the amazing innovator, Steve Jobs, it is a good time to talk about the work of another earlier innovator: Harvard economist Joseph Schumpeter. Joe Schumpeter lived and worked as an academic in Austria and Germany until 1932. Then he immigrated to the USA and a lectureship at Harvard mainly because he was broke and needed a job. The Biedermann Bank he was running in Austria went belly up a few years before. Schumpeter's work was seen as a very conservative methodology back then and even now in some few circles. The nihilist Koch Brothers and Karl Rove gangs borrowed a few lines from Schumpeter's work to back up their inane desire to return us to the gold standard for our currency. Schumpeter said gold would reduce the size of government. So now Schumpeter holds a revered place as an iman for their gang's imagined new age of tiny governments and laissez faire everything.

However, most important Joe Schumpeter came up with a concept that is literally crucial for capitalism today and for all our nation's history. Joe separated the meanings of invention and innovation to analyze our nation's economy. According to Joe Schumpeter invention is the simple idea of something new. Invention is the concept. But innovation is the actual application of that idea to a manufacturing process or creation of a product or service. Innovation makes the invention work for profits in making goods and services and economic growth for the nation. Joe was one of the first economists to recognize the core importance of innovation to our capitalistic economy. This devilish detail leads to a look at the many examples of Fake Capitalism in present day America.

In our capitalist society companies and corporations compete with each other for clients and customers. Over time that competition inevitably trends to fewer and fewer companies and corporations in the field. Eventually the few, the proud, the oligarchs reap the profits from having eliminated the opposition. The profits can be enormous as we have seen in the American banking system for example over the past couple of decades following the complete deregulation by the US government. So Bank of America and Wells Fargo Bank and Chase Bank and Citi Bank have achieved almost all of the banking and financial business in our nation. They got to their lofty position by becoming the most profitable and the most influential of all the banks before them. Because they are so few these banks have made the competitive capitalist system an oligopoly or a system of only a few suppliers. This is "Fake Capitalism." The few can literally set the prices for their services. The few need not innovate and make better products or services for their clients and customers. The few need only inexorably change the rules and raise prices for goods and services to extort more and more from their clients and customers. The spoils go to the few victors.

Theories of economics are often not intuitive or practical. Albert Einstein gave up economics because he said it was too hard, and the great English mathematician and philosopher Bertrand Russell gave up economics because he said it was too easy.

Steve Jobs built his company on shrewdly creating more and better goods and services for his clients and customers. Jobs spent the money of his company on inventing and then applying the invention to products and services. That is innovation. That is how True Capitalism works.

The Fake Capitalists will certainly try everything to stop all innovation because innovation will lead to their ultimate deserved destruction. The white noise of the spin weenies of politics and the Fake Capitalists of finance and industry are lies of evil hucksters. The Fake Capitalists are trying to sell America a bill of damaged goods. The Fake Capitalists use quotes from the constitution or from the bible. The Fake Capitalists are the barkers for the evil destruction of our nation. Our national government must spend money on innovation now.