Want Change? Let’s Try Truly Free Markets
Neither right nor left supports the "creative destruction" necessary for real economic progress.
November 17, 2008 - 12:00 am
For all of the talk about “change!” in this election, the incoming president’s political party, and perhaps the president-elect himself, seems stubbornly resistant to it.
Joseph Schumpeter famously — and admiringly — wrote about the “creative destruction” inherent in the actions of the free market. I refuse to use the word “capitalism” in this context, because it’s really a Marxist term and doesn’t capture the essence of a system in which individuals and corporations freely exchange goods and services without government interference, if indeed it ever did. When so-called “capitalists” who run the finance, real estate, insurance, and now automotive industries come to Washington, hat in hand, for taxpayer dollars, it’s laughably ludicrous to call them supporters of the free market. Moreover, the term “capitalism” doesn’t capture or connote the importance of property rights and the ability to exchange them freely that are at the base of human liberty in the way that the phrase “free market” does.
In Schumpeter’s view — which is supported abundantly by history — as new technological or financial or cultural innovations arise, or as the societal desires and composition change, so change the markets and business models for existing companies. They have a choice of adapting to that change or, if incapable of doing so for either corporate cultural or other reasons, they can die. They can die, that is, if they don’t have courtiers at the royal court. Then, their options are more varied and they don’t require the necessary and painful change to their ways of doing business that might be required to survive in the new circumstances.
In her seminal book, The Future and Its Enemies, Virginia Postrel writes about the real political divide — not left versus right, but what she calls stasists versus dynamists. The former fear change and want to use government power to minimize it, if not eliminate it. The latter accept that improvements in the human condition require change by definition, and understand that the best way to ensure it is to allow individuals the freedom to make choices, with consequences, both good and ill, to be borne by them.
By these definitions, both presidential candidates in this election were largely stasists. Barack Obama wanted, and wants, to avoid the “change” of having people lose their jobs. John McCain wanted homeowners — even homeowners who didn’t really “own” their home by any sensible definition of that word, in that they had no equity in it — to “stay in their homes” and avoid the change of having to move out and rent. Never mind that in many cases they made no down payment. Never mind that in many cases they could probably rent for less than the mortgage they cannot afford. Never mind that in not selling or foreclosing, the day at which the market prices of the homes are determined, and the point at which we can discover the value of the paper that is based on them, is put off further into the future, delaying the bottom of the market and the resolution of the financial crisis. No, they must stay in “their” homes and not have to undergo “change.”