It is of no exaggeration to state that the history of the capitalist process and the process itself – despite over 200 years of history and chronologies, and the general discrediting of Socialism as a practical economic system - is still one of the least-understood economic phenomenons in the world today. With the publication of “Prophet of Innovation – Joseph Schumpeter and Creative Destruction,” not only has Thomas McCraw – the Isidor Straus Professor of Business History, Emeritus at Harvard Business School penned a superb biography of one of the preeminent economists of the 20th century, Joseph Schumpeter, but has also brought the lay reader one step closer to understanding the capitalist process and Schumpeter's chronicles and observations of the process, such as the inherent concept of “Creative Destruction.”
The publication of the book is also very timely, as the resurgence of the capitalist engine in America and the rest of the world starting in the early 1980s rekindled an interest in Schumpeter's ideas and writings. Dubbed “America's Hottest Economist” by BusinessWeek in December 2000, Schumpeter could arguably represent the face of early 21st century economics, following the (not undisputed) reign of “Keynesian Economics” during the middle to late 20th century. Schumpeter was a scholar, observer, and philosopher who “played at the highest level” in both economic and public policy circles for most of the first half of the 20th century. Unfortunately, while many of his books and writings are certainly timeless in nature, Schumpeter never got the recognition he deserved during his lifetime – as circumstances (such as the Great Depression and World War II) undermined his observations and philosophies while elevating those who provided attractive and easy-to-understand economic solutions for those times. The “numero uno” on this list was no doubt John Maynard Keynes (Schumpeter's “Business Cycles” received almost no publicity at the time of its publication, while Keynes' “The General Theory of Employment, Interest, and Money” attracted a wide following among all college campuses around the world when it was published three years earlier, in 1936).
Another one of Schumpeter's central ideas involves his observation of technological progress. Unlike most economists (who prefer the nearly static world of 3% GDP growth and its inherent predictability), Schumpeter effectively equates technological progress as part of the capitalist process. In his seminal work, “Capitalism, Socialism, and Democracy,” he questions this contrary view:
Was not the observed performance due to that stream of inventions that revolutionized the technique of production rather than to the businessman's hunt for profits? The answer is in the negative. The carrying into effect of those technological novelties was of the essence of that hunt. And even the inventing itself, as will be more fully explained in a moment, was a function of the capitalist process which is responsible for the mental habits that will produce invention. It is therefore quite wrong – and also quite un-Marxian – to say, as so many economists do, that capitalist enterprise was one, and technological progress a second, distinct factor in the observed development of output; they were essentially one and the same thing or, as we may also put it, the former was the propelling force of the latter.
This book serves as a great introduction to Schumpeter – the man, his teachings, and his personal thoughts on capitalism. Professor McCraw has done a great service to economic students around the world, as Schumpeter's own writings can be difficult to decipher and as there are few other interpretations lying around. That said, McCraw's biography is partially biased towards Schumpeter, given McCraw's affiliations to Harvard (where Schumpeter “ruled” the economics department for nearly 20 years). All in all, however, this book is a great addition to anyone who at least has a passing interest in modern-day economics and the way that capitalism is reshaping the globalized world today.