Guy Sorman writes this hugely debatable article in city journal.
Most of us know the differences in ideology between Keynes and Schumpeter during crisis. First asks for government intervention to increase demand. Second suggests market forces to take over and let the new take over the old..
What is interesting is to see Romney being pitted as Schumpeter:
Mitt Romney has run smack into this problem during his campaign for the Republican nomination. Bain Capital, the firm he led, was a pure engine of creative destruction: a private investment fund that bought troubled businesses, restructured them (often by firing people), and sold them for a profit. Even some of Romney’s Republican opponents, who know better, couldn’t resist attacking him for his entrepreneurial work; Newt Gingrich went so far as to run ads featuring workers who had lost their jobs because of Bain’s restructuring. Romney contended that Bain had helped create 100,000 new jobs, which may be true, but—underscoring Friedman’s point—no one knows exactly where they are.
He says Romney to make his ideas politically acceptable should balance with some social support for displaced workers:
It may therefore be necessary for defenders of creative destruction to balance Schumpeter with some form of social support. It is misguided to protect superseded firms and industries, they would maintain, but helping people displaced by economic progress is a moral imperative. They would argue for the implementation of a “compassionate capitalism,” perhaps including unemployment benefits, retraining, and various welfare services. (These should be designed not to become disincentives to work, as they frequently have been in the past.) A compassionate capitalism wouldn’t merely be humane; it would also help preserve capitalism, because in a democracy, creative destruction cannot occur without some type of safety net. Workers who risk losing their jobs and lack any social support will soon vote an end to free markets.
So, will Schumpeter beat Keynes in 2012 elections:
Can a Schumpeterian candidate make it to the White House in 2012? Yes, but in the current climate of economic uncertainty, he will need to be a talented rhetorician. Otherwise, America in a second Obama term will probably continue to move in a European direction, with the government playing an increasingly activist role in the economy, protecting out-of-date ways of doing business. And without the liberating fire of creative destruction, America will follow Europe down the path of slow growth, high unemployment, and decline.
Am not sure…
It is fair bit to argue whether one should believe in Schumpeter or Keynes. It is all together a different thing to put Romney and Private Equity in the Schumpeterian club. There is no real concrete evidence which says Private equity has only led to creative destruction in the true sense (atleast not aware of any such study). There have been instances when it has actually led to destruction of wealth with some bad real bad deals.
And then if Obama would have taken the Schumpeter route (just say) Romney would have jumped to Keynes route…It is all about politics and winning elections at the end of the day…
Having said all this and seeing tons of research and anecdotal evidence, Keynes seems to be winning in crisis like these..In smaller recessions etc may be one can argue for different policies.
But in these depression kinds of situations, Keynes seem to be getting the upper hand atleast at the ground level. It is extremely difficult to get creative destruction in place, when the whole economic sentiment is so lowbeat…
A good article nevertheless…a different perspective…