1. The state does not own the means of production (like socialism, which does).
2. The state does incentivize innovation, via grants, tax breaks and, in some cases direct subsidies to innovative technologies, social services, health care services, etc.
3. The enterprises receiving these benefits do so to support political goals. Others are not discouraged, but not overtly encouraged by state incentives.
" to support political goals" is the part that riles most folks up. But lets look at what that means.
Our understanding of politics in practice in detail hangs on the Athenian experience, which is the best documented.
From Aristotle's "Politics", the underlying principle of Athenian democracy was liberty which was ruling and being ruled in turn, and living as each individual chooses. There are two types of equality - numerical and merit-based. The former gives equal weight to all individuals, the latter to the elite, therefore the former gives true liberty.
There was also emphasis on 'justice', a many-faceted word, the underlying meaning was 'settlement' - that is justice was the settlement of problems in consonance with community standards.
A third principle was support of the common good. As citizens were fully part of the state, so they were to embrace and promote it.
The Athenian Democracy was based on the citizens, who performed all legislative, judicial and public service functions. The regular assembly of all citizens had sole prerogative to pass laws, large juries constituted courts (there were no judges or lawyers), and office bearers were popularly elected or chosen annually by lot and for once term only. Women, slaves and resident aliens were excluded from the body politic.
A political goal then, viz-a-viz the US context is supposed to mean the people (Greek "polis - the people") electing representative, which then work the peoples will. Of course, we don't do anything close to that here, but you get the idea.
That being said -
Schumpter and the second coming of Locke, Hume and Smith.
Joseph Shumpter. Born in Triesch, Moravia (then part of Austria-Hungary, now Třešť in the Czech Republic), Schumpeter was a brilliant student praised by his teachers. He began his career studying law at the University of Vienna under the Austrian capital theorist Eugen von Böhm-Bawerk, taking his PhD in 1906. In 1909, after some study trips, he became a professor of economics and government at the University of Czernowitz. But that is not why he is important, perhaps the most important economist of the 20th Century (Sorry Miltie!). Schumpeter's vast scope of knowledge is apparent in his posthumous "History of Economic Analysis", although some of his judgments seem quite idiosyncratic and sometimes downright shallow and undisciplined. For our discussion, his most relevant works are:
• Business cycles
• Criticism of Keynesianism
• Capitalism's demise
• Democratic theory
• Entrepreneurship
So, to unfairly distill all this down (time and space constraints), what Schumpter contributed to the further refinement of state capitalism is the following:
- although business cycles follow measurable and predictable (!!???!!?!) cycles, barring any sudden innovation (creative destruction he called it), the actions of entrepreneur has the greatest effect on economic disruption and expansion.
- Keynes...oh to Hell with Keynes!
- first real explication of "Third Way" political-economic frameworks - http://www.ppionline.org/ppi_ci.cfm?contentid=895&knlgAreaID=85&subsecid=109
- Schumpter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive, will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another.
- The concept of entrepreneurship cannot be fully understood without his contributions, being probably the first scholar to develop its theories.
This represents a radical re-working of the theories of David Hume, John Locke and Adam Smith, yet squarely in that camp... the camp of the governments role in shaping market forces. Now, please understand, I am not a socialist who wants to regulate markets. I prefer a variety of incentives for both businesses and consumers. I also firmly believe that free markets (we don't have a free energy market today) guided by these incentives can work, and I expect that corporations and new entrepreneurship will lead the way on technological innovation, once they smell a dollar.
Next - Pulling It All Together & Bringing It All back Home.
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