… is from page 495 of Thomas K. McCraw’s 2007 biography of Joseph Schumpeter, Prophet of Innovation:
And despite his deep commitment to scientific objectivity, he had wished to ensure that people would understand how to keep its [capitalism’s] “engine” running well. To do that, he believed, they would have to look beyond what they saw immediately in front of them – venality, inequality, corruption – and imagine the long-term rise in living standards that capitalism alone could deliver, throughout the world.
Joseph Schumpeter died 63 years ago today.
Imagining the long-term rise in living standards that are still to come if markets are kept sufficiently free of government meddling and anti-commercial prejudices isn’t easy in detail. Who today can predict specifically just how people in, say, 2113 will travel the globe, communicate with their parents and children and lovers across great distances, and cure their illnesses? No one. We today are no more able to foretell such details about 2113 than were people in 1913 able to foretell the details of the jet planes, cell phones, and antibiotics that we in 2013 regard as ho-hum. But I believe that Schumpeter – anticipating, in this regard, Julian Simon – was correct to argue that innovation and economic growth will continue as long as entrepreneurs are free to innovate and markets are unobstructed by heavy taxation and regulation and by barriers to entry, to exit, and to consumer sovereignty.
The notion that there are natural limits to economic growth – limits rooted either in resource constraints or in the satiation of consumers’ demands – has very little history or theory to support it.
Looking backward to determine the details of the past, of course, is easier than looking forward to predict the details of the future. And any such looking back makes crystal clear that modern industrial capitalism (or, as Deirdre McCloskey calls it, “innovationism”) – the economic process grounded in secure private property rights, freedom of contract, limitations on the granting of special privileges, and widespread admiration for bourgeois pursuits and accomplishments – has raised the living standards of the poorest modern American or Swede or Australian to heights as unimaginable to the vast majority of our ancestors as, say, living comfortably on Venus while dining on rainbow stew and never getting the hiccups is unimaginable to us.