Schumpeter, "Pay Grades", And The Cycles Of History

clipped from www.realclearmarkets.com In his 1942 book, Capitalism, Socialism and Democracy, Joseph Schumpeter asked the essential question: “Can capitalism survive?” His unsettling answer was, “No. I do not think it can.” Schumpeter’s words were in no way meant to denigrate capitalism, instead he felt “its very success undermines the social institutions which protect it.” History in many ways proved his views prophetic. The success of capitalism means that many are allowed to do things that have nothing to do with productivity. What’s rarely asked is how the very people who achieve stature through something called “pay grades” could ever successfully regulate those who make millions by gaming those same regulations and regulators. Regulations merely tell those eager to cheat or take excessive risks what they’ll have to comply with while cheating and taking excessive risks Schumpeter may have been early in his suggestion that socialism would win out over capitalism, but this in no way detracts from his visionary predictions

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