Schumpeter, Creative Destruction and the Golden Age of Capitalism

by Lee Gesmer on March 5, 2009

Schumpeter, Creative Destruction and the Golden Age of Capitalism

In the late 1970s and early 1980s, the American economy was in crisis after years of stagflation. Mortgage rates were 17%, business loans carried 20% interest rates and productivity had collapsed. On April 21, 1980, Time magazine ran a cover story that asked the question: “Is Capitalism Working?” Today, the crisis that the American economic system faces is greater than that during the darkest days of stagflation. In this opinion piece, George M. Taber, former business editor of Time magazine and author of the 1980 cover story, asks and answers the same question — 29 years later. [Continue reading at Knowledge@Wharton]

Taber still agrees with the final sentence of his 1980 article in Time:

For all its obvious blemishes and needed reforms, capitalism alone holds out the most creative and dynamic force that any civilization has ever discovered: the power of the free, ambitious individual.

And, he warns that despite the pain inflicted by the boom and bust business cycle that is the downside of unfettered capitalism — pain that we are suffering from now –

well-intentioned, but unwise, changes in the nature of American capitalism could do damage that will be felt for decades . . . The American brand of capitalism rests on creative destruction, innovation and, ultimately, entrepreneurs. It is impossible to rebuild the superstructure of U.S. prosperity by destroying its foundation.

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