Arts & Letters Daily - ideas, criticism, debate

The Rise, or The Decline

Arts & Letters Daily links to a feud between Matthew Parris of London and Victor Hanson of California. The topic? Whether America is about to collapse, or whether she's just getting started.

I won't try to summarize the arguments, which are well constructed and worth hearing. I do have some context to provide, however. I would like to point out that the feud takes precisely the form of the claims of Marx and Joseph Schumpeter. Marx outlined what he saw as structural problems with capitalism, and projected its inevitable demise. Schumpeter, while agreeing that capitalism was doomed in the long term, explained that Marx failed to grasp the robust nature of the beast.

Marx thought that the trends of capitalism he observed in his day were not reversable. The trend toward monopolization, for example: the growing powers in each industry would continue to eat up smaller businesses until they had swallowed them all, and then the giants would clash. Projecting from that clash of giants, he saw the ruin of titans of industry, cast down into the proleteriat, where they would become disaffected leaders of rebellion...

Schumpeter explained that the situation was more complex. There are external factors that prevent the Gotterdammerung that Marx believed he foresaw. The main one, Schumpeter explained, was new ideas. Big corporations have trouble enacting them, as they are tied to existing products and ways of doing things. In the largest, there are whole wings staffed by people whose continued success depends on doing things just as they are now done. The institutional resistance to change makes them vunerable to smaller, faster, young companies, who can -- in the fashion of a barracuda -- strip chunks of the flesh off the giants, perhaps until there is nothing left. It is this ability to assimilate change that is the deciding factor.

Parris and Hanson occupy the same positions. Parris is attempting to demonstrate that American power can grow no further, and that rising powers are approaching the ability to strike at the United States' economic structure. Hanson points out that there are external factors Parris fails to consider:

China and India are the new tigers, but their rapid industrialization and urbanization have created enormous social and civic problems long ago dealt with by the United States. Each must soon confront environmentalism, unionism, minority rights, free expression, community activism, and social entitlements that are the wages of any citizenry that begins to taste leisure and affluence. China is fueled by industrious laborers who toil at cut-rate wages for 14 hours per day, but that will begin to moderate once an empowered citizenry worries about dirty air, back backs, inadequate housing, and poor health care. The infrastructure of generations–bridges, roads, airports, universities, power grids–are well established and being constantly improved in the United States, and so there is a reason why a European would prefer to drink the water, get his appendix out, or drive in San Francisco rather than in Bombay, Beijing, Istanbul–or Paris or Rome.

America, like capitalism, is more robust than the straight-line projections would suggest. It is robust because it has a system unusually well develpoed for absorbing and reacting to change in the world. The statist EU, China, and the rest are tied into formal decision making processes that, like the corporations of Marx's day, place decision making power in the hands of vested bureaucracies. Not so in America.

I suspect that Hanson has the better of this argument, as Schumpeter did with Marx. However, I would caution Hanson to beware the doom that Schumpeter foresaw for capitalism, which may yet befall America.

Schumpeter believed that capitalism would be destroyed by its successes. Capitalism would spawn, he believed, a large intellectual class that made its living by attacking the very bourgeois system of private property and freedom so necessary for the intellectual class's existence.

These people are the enemy of us all. Literally enough: they not only work against the underpinnings of the world, as Schumpeter warned, but they even wish us ill.

Winds of Change has more on the "large intellectual class," which is not quite as intellectual as it might seem. And the Belmont Club has more as well.