Austrian economist Joseph Schumpeter is best known for his idea of “creative destruction,” the way innovation upsets established businesses and forces capitalism to constantly evolve. But Schumpeter was as much a social theorist as an economic one. And he would have completely recognized the Occupy Wall Street phenomenon, especially the heavily indebted, liberal arts majors wondering why they can’t find decent jobs as political scientists or some such. Schumpeter, from “Capitalism, Socialism and Democracy”:
The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite. … They swell the host of intellectuals … whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment … righteous indignation about the wrongs of capitalism … Capitalism inevitably … educates and subsidizes a vested interest in social unrest.
Schumpeter argued that eventually “intellectuals” – or the jobless educated – would push for restrictions on entrepreneurship and undermine the capitalist order. Elements of the OWS movement, for instance, are demanding nationalized healthcare, forgiveness of debt, more powerful labor unions and massive new taxes on the wealthy, including investors and entrepreneurs. An analysis of Schumpeter by the Dallas Fed hits the nail on the head:
The proper role of a healthily functioning economy is to destroy jobs and put labor to better use elsewhere. Despite this simple truth, layoffs and firings will still always sting, as if the invisible hand of free enterprise has slapped workers in the face. Unsettling by nature, capitalism’s churn gives rise to a labor movement designed to protect workers from job loss. That movement is fed emotionally by displaced workers and others who blame the capitalist system for their troubles, but it is led psychologically by a whole other type of person—the intellectual. Intellectuals—with little to do owing to the success of the capitalist economic system but with an intense desire to be seen as caretakers of society’s general well-being—anoint themselves as leaders of the labor movement. They object to capitalism on moralistic grounds and seek its destruction and replacement by another system—socialism—which places them center stage.
Or running IPAB or the National Infrastructure Bank or the Consumer Financial Protection Bureau.