Schrumpeter in The Economist as a valedictory piece on December 20th comments: In 1942 Joseph Schumpeter warned that capitalism might not survive. A surge of populism means it is once more in danger.
Is the democratic deficit partly responsible for the lack of honesty, collusion of denial, and demise of the UK’s Health Services? It started with Mr Blair, continued with the coalition, and now with Mrs May we are ignoring the safety net that a wonderful health service could offer.
….At the same time democracy is becoming more dysfunctional. Plato’s great worry about representative government was that citizens would “live from day to day, indulging the pleasure of the moment”. He was right: most democracies overspend to give citizens what they want in the short run (whether tax cuts or enhanced entitlements) and neglect long-term investments. On top of that, lobbyists and other vested interests have by now made a science of gaming the system to produce private benefits.
Storm clouds gather
The result of this toxic brew is a wave of populism that is rapidly destroying the foundations of the post-war international order and producing a far more unstable world. One of its many dangers is that it is self-reinforcing. It contains just enough truth to be plausible. It may be nonsense that “the people” are infallible repositories of common sense, but there is no doubt that liberal elites have been smug and self-serving. And populism feeds on its own failures. The more that business copes with uncertainty by delaying investment or moving money abroad, the more politicians will bully or bribe them into doing “the right thing”. As economic stagnation breeds populism, so excessive regard for the popular will reinforces stagnation.
These comforting thoughts are the last that this columnist will offer you as Schumpeter, though not his last as a scribe for The Economist. From April he will write the Bagehot column on Britain and its politics. One of the many extraordinary things about joint-stock firms is that they are potentially immortal: the people who run them come and go but the company itself keeps going. The same is true of our columns. The Schumpeter column will return in 2017 with a new (and possibly more optimistic) author.