New Class Dismissed
Wisconsinites have gone to the polls and decided the political fate of Governor Scott Walker and perhaps, one could say with only modest exaggeration, the fate of the country as well. Walker’s retention means that his reforms will be kept on the books, which in turn means that the stranglehold of public-sector unions will be broken. No one knows all of the national repercussions that will flow from Walker’s win, but few doubt that they will be profound.
In all of the punditry about the aftermath of the Wisconsin recall, it’s unlikely you’ll hear much about Joseph Schumpeter. So let me remedy that here.
Schumpeter is most famous for updating and popularizing the concept of “creative destruction” found in Marx’s writing. The basic idea of this version of creative destruction, also known as Schumpeter’s Gale, is that capitalism is constantly breaking down inefficient means of production and creating new and better ones. Creative destruction describes how candlemakers got replaced by light-bulb manufacturers. Creative destruction is why there’s so much churn in the list of the top 50 companies. Firms grow big, are challenged by more innovative and nimble firms, and eventually die (or adapt). Schumpeter (and Marx) recognized that creative destruction generated enormous amounts of productivity and wealth.
So far, so good. But Schumpeter also had a gloomy side. He predicted that capitalism was doomed in the long run because the very wealth it created would produce a new class of workers who would undermine it from within. This new class of managers, lawyers, social workers, and intellectuals, despite benefiting enormously from the prosperity capitalism makes possible, would personify values hostile to capitalism. It would advocate policies of social democracy and technocracy, policies that would further empower the new class and enfeeble capitalism. Like a parasitic infection that wears down the host over time, the new class would ensure the demise of capitalism and the birth of corporatism (not socialism, as Marx had predicted).
Anyone looking at what has happened to Europe and the United States over the last few decades can acknowledge that Schumpeter was at least on to something. Just look at the role public-sector unions are playing in California. A diverse coalition of new-class activists has driven that state to the brink of oblivion. Or look at the relationship between Obama and Wall Street, GE, the insurance companies, and the auto industry.
What Schumpeter didn’t fully appreciate was the capacity for democratic societies to self-correct. In Wisconsin, the first state to legalize public-sector unions and the intellectual birthplace of the corporatist-progressive project, the election results dealt the new class a terrible blow.
That’s the great flaw in Schumpeter’s theory. While the new class may be perfectly happy to feed parasitically off the host until it dies, the host has a say in things, too. The tea parties represent an antibody counterstrike to the new-class infection. Of course, there’s no guarantee that this immune response will succeed. One doesn’t get the sense that the Europeans have as strong an immune system (which points to the huge importance of culture). Democracy has merely a capacity for self-correction. It also has a capacity to fail.
Still, the self-correcting is blowing strong in the Badger State, and that is cause for hope.