Bourgeois economics: neo-Schumpeterians

jones/bhandari djones at
Sat Jun 3 18:34:32 MDT 1995

Notes on Richard R Nelson, "Recent Evolutionary Theorizing About Economic
Change", Journal of Economic Literature vol XXXIII (March 1995), pp. 48-90

I did not finish my summary of Mattick's Economic Crisis and Crisis Theory,
though the next two chapters are critical--the discussion of the splendors
and the misery of the mixed economy and the critique of Mandel's Late
Capitalism.  I shall finish up the summaries when I return after a month
vacation; this will be my last post for a month or so.

This post is only to draw attention to a survey article by a eminent
neo-Schumpeterian economist Richard R Nelson.  To me, it proved the
bankruptcy of bourgeois economics.

One can only marvel at the absolute inability to advance one inch beyond
Marx's economic theory of the concentration and centalization of capital.

 One can only be surprised why this new economics is even called
Schumpeterian.  Its understanding of competition remains closer to the
neo-classical view than Schumpeter, who did not shy away from the the
destructiveness of the competitive process.  There is much evasion here
that one does not find in the Marxist work of Anwar Shaikh, Richard Walker
or Henryk Grossmann.

Nelson simply does not pay much attention to the violence of devaluation
which Schumpeter (drawing as usual from Marx) found paradoxically
restorative for the system.  David Harvey is here far ahead of the greatest
of Schumpeter's epigones.

This is Nelson's view of competition, a far cry from creative destruction:
"Firms using more profitable technologies grow.  And more profitable
technologies tend to be imitated and adopted by firms who had been using
less profitable ones." This is Schumpeter?  It is surely not the capitalist
reality of bankruptcies, unemployment, default, credit spasms and
concentration and centralization of a world scale (for which Barnet and
Cavanagh's recent book on multinational corporations gives us powerful

The "radical" Schumpeterian critique of neo-classical growth theory is
quite unnovel. "Thus the (neo-Schumpeterian) theory is consistent with both
the large body of empirical work that has been documented considerable and
persistent intra-industry inter-firm dispersion...and what is known
empirically about the diffusion of new technologies."  But this has already
been much more powerfully demonstrated by John Weeks

For Nelson, "the fundamental question" about a macroeconomic growth theory
"is this.  Can they generate, hence in a sense explain, the rising output
per worker, growing capital intensity, rising real wages, and a relatively
constant rate of return on capital, that have been the standard pattern in
advanced industrial nations?" Nelson praises neo-Schumpeterian theory
because it can answer these fundamental questions, as well as explain
unequal development within branches.  This is not impressive for a Marxist.
  For all this,  Capital is complete, as a reading of Blake's Marxian
Economic Theory and Its Criticism will reveal.

But then there are stunning admissions  about these supposedly dynamic
models: "Certain variables grow over time, in particular output worker and
real wages.  Others remain more or less constant, like the rate of return
on capital and factor shares, or show no systematic drift. However, by and
large nothing goes on that be called 'development.' While an industry may
become more concentrated over time, there are no major changes in industry
structure of this sort often highlighted in economic histories.  No
radically new technologies emerge, no new institutions."

I will leave it to the reader to decide whether Nelson is able to offer any
explanation for said variables or historical developments, instead of
merely redescribing in a highly selective ways some of the history of the
capitalist mode of production (and my god what does he leave out: the
export of capital, the rise of armaments, unequal exchange on a world
scale, wars and migration, etc.).  One has only to read Grossmann's magnum
opus or Dobb's Political Economy and Capitalism of six decades ago to laugh
at the limited horizons of the most brilliant bourgois minds of today

Suffice to say, there is no theory for and only a begruding recognition of
that which regulates the system: the average rate of profit and its
movement which, as Mattick has argued, served as the central proof of
Marx's value theory.

We are also expected to accept certain propositions on faith: "Firm growth
generally is sufficient to outweigh any decline in employment per unit of
output associated with productivity growth, and hence results in an
increase in demand for labor, which pulls up the wage rate."

Needless to say, there is no discussion here of Hans Neisser's theory of
permanent technological unemployment or Henryk Grossmann's arguments that
real wage increases (even if we are to grant their quasi-axiomatic status
in both neo-classical and neo-Schumpeterian models of growth) may not be
sufficient to compensate for the intensification and fragmentation of work.
 Indeed the whole condition of the worker is reduced to a study of the
demand for labor and the real wage rate.

And then certain problems fall into Nelson's vision only to be ignored or
denied.  "British industry was sorely handicapped in adopting the new
technologies that were coming into place around the turn of the century by
an interlocking set of constraints associated with her institutions and
past investments, whereas Germany could work with a relatively clean

Of course.  And as Walter Daum has explained, this is but the result of the
central contradiction between use-value and exchange value.  But Nelson
gives no explanation for the sorry state of the once most technically
dynamic capitalism turned stagnant.

  He bypasses this critical problem in evolutionary history (to which he is
alerted by Veblen who he then completely ignores).  Moreover, he forgets
that Britain was not merely stagnant but aggressive in its export of
capital and collection of rents.  These are the contradictions of the
imperial rentier state which Lenin and Grossmann theorized as indication of
a late stage capitalism, of a capitalism ripe for revolutionary overthrow.
As RC Dutt wrote in his Economic History of India (vol II) about 90 years
ago, India lost the population the size of France every decade because of
the famines induced by Britain's "bleeding process with a vengeance" as
Marx put it late in his life.

And finally Nelson wants to comfort us.  Check this out: "However there
seem to be forces that stop or turn around particular directions of
institutional evolution that, pursued at great length, would be
disastrous." I suppose that Nelson has not read much of the Marxist
theorizing of capitalism's unchecked destruction of the environment.

Which leaves me with one point of praise.  Nelson is interesting in regards
to the evolution of the auto industry.  He does show how the unplanned
nature of capitalism yields industries and structures which create grave
environmental and social problems.

I'm going to take a bike ride to the bookstore.

Best wishes for the summer.


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