Schumpeter explained austerity’s failure through the bureaucratization of large firms

Evidence

Apart from normalizing turmoil, Schumpeter focused on changes in industrial structure of capitalist economies and the rise of very large firms to explain the failure of austerity to produce recovery. This is his long-run evolutionary story in which the locus of production and innovation has undergone a scale-shift, and as a result, the capitalism of small producers, entrepreneurs, and perfect competition “is not only impossible, but inferior” and on its way to being replaced. Bureaucratization and institutional change are the prime movers in this story, driving economic evolution, taking innovation out of the hands of entrepreneurs and putting it in the hands of specialists and managers in large firms. Firms become giant bureaucratic entities that are slower to adapt to environmental shifts and that operate on much larger scales. They become, in short, more like, and more dependent upon, states. Oligopoly and interventionism go hand in hand. — Mark Blyth, Austerity, 349

Categorization

• DEFINE: Distinguishes Schumpeter’s structural-evolutionary explanation of austerity failure from the more familiar Keynesian one.
• XREF: Connects to the broader intellectual-history thread of this book and to Mattei’s work on economic ideas doing political work. — connects to: Schumpeter traced capitalism’s crises to a distinctive capital structure. — Mark Blyth, Austerity: The History of a Dangerous…, 322; Schumpeter blamed the Depression on organizational change, not austerity’s failure. — Mark Blyth, Austerity: The History of a Dangerous…, 346; Schumpeter expected giant bureaucracies to end capitalism by crowding out entrepreneurs — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 272 (+4 more)

Broader Connections

• Schumpeter expected giant bureaucracies to end capitalism by crowding out entrepreneurs #expands (0.85) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 272
• Schumpeter predicted capitalism’s end from entrepreneurial decline. #expands (0.82) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 263
• Austerity was installed by deliberately confusing cause and correlation #complicates (0.75) — Mark Blyth, Austerity, 204
• Bureaucratic party rule can develop into a dictatorship masking capitalist development #expands (0.75) — Antonio Gramsci, Selections from the Prison Notebooks, 180
• Schumpeter rejected the Ayn Rand heroic-entrepreneur view of economic progress #corroborates (0.72) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 272