- From the Schumpeter Wikpedia Page
Schumpeter'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. He argued that capitalism's collapse from within will come about as democratic majorities vote for the creation of a welfare state and place restrictions upon entrepreneurship that will burden and destroy the capitalist structure. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is however limited and this, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organise protest and develop critical ideas.
Oops. Schumpeter was apparently right again. I just wish it didn't have to happen on our watch.
He goes on:
In the same book, Schumpeter expounded a theory of democracy which sought to challenge what he called the 'classical doctrine'. He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable. Instead he advocated a minimalist model, much influenced by Max Weber, whereby democracy is the mechanism for competition between leaders, much like a market structure. Although periodical votes from the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is severely limited.
Schumpeter wrote this stuff in 1942. The world was embroiled in the greatest industrial war to date, following a profoundly destructive economic depression. Those who don't understand history are destined to repeat it, and the small majority who do understand it are still just screwed anyway.
Tonight I was looking at gas prices. It has seemed to me that there has been a bit of a disconnect between the price of oil and the retail price of gasoline, and I was fascinated by what I found.
Of course the price of gasoline at the pump lags the spot price of oil, so statistics are a little tough. Looking at trends over different time periods can be very illustrative, however.
Wonder what gas is supposed to cost? Here's the formula:
(Oil price per barrel/42)/0.56*
* A general average using the spot price for benchmark North Sea Brent Crude
Today oil was $69. That equals $2.93 per gallon of regular unleaded at the pump. Today the national average for regular unleaded was 3.08. As we say, gas prices naturally lag oil prices, because of the delay in getting the oil refined and delivered. When gas prices are stable, they tend to equal out near the 56% factor - e.g. the cost of oil averages 56% of the cost of a gallon of regular gasoline.
When oil prices are volatile, the relationship lags in both directions, but the lag is a lot longer to the downside: i.e. gas goes up the minute that oil goes up, but doesn't come down until the market forces it down.
But it is interesting: when oil is volatile, price fixing and collusion in the market is a lot easier to spot. When gas and oil move in opposite directions, clearly there's something going on.
There's a great web site to observe this: Vermont Gas Prices
Go there, select your local area, the national average, and overlay crude oil prices.
What I saw was that the relationship is usually pretty consistent, but recently, in some selected parts of the country, gas and oil spot prices have headed in opposite directions.
This sort of thing is extremely corrosive to the economy. In a market as large as oil, it takes a great deal of collusion to send gasoline prices in the opposite direction from oil prices.
Even in a rigged market, however, it is very difficult to maintain this sort of price fixing, and it is certain that if the price of oil stabilizes, the price of gasoline across the country will eventually level off near the actual opportunity cost.
We're in a time where economics are the paramount issue of the day. Our nation is currently making decisions that will define our national economic identity for years, perhaps generations, to come. Perhaps we will never recover if we make the wrong decisions. Perhaps it's already too late.
Some fantastically significant and important decisions were made in the last couple of weeks, basically without any serious discussion or consideration, either by government or the people. Were the right decisions made? I don't think we have any idea. Have we commited our future to socialism with no possible alternative course? I really hope not.
We should be having a very serious national discussion about the role of government, what we expect from it, and what sacrifices or tradeoffs we are willing to make. But that discussion is masked or distorted by the coincidental political season. I wonder if future historians will look at this period and judge that we drove ourselves off a cliff because of a very unlucky coincidence of fate.