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Destruction of creative destruction - Death of Schumpeter.

The capitalist system, as we have known it until recently, is being dismantled with potentially

devastating long term consequences.

The list of risks covered by the state with taxpayer's money, is getting longer; financial crisis, fall in market valuations, "unfair" (or maybe just more efficient) global competition, natural disasters and now the pandemic. When entrepreneurs and companies know they can count on their government to cover them against unforeseen risks, risk thinking and normal prudence becomes obsolete and old-fashioned.

Combine this with a cost of capital that is artificially low by government manipulation, and what you get is the destruction of two foundations for the capitalist system.

What about technological innovation you may ask. I am far from sure that the increasing "business-by-lawyer" (including the use of unilateral global sanctions) or or by monopolist level revenues being harvested behind the protection of antiquated patent laws, will be the best bringer of innovation and growth. If we destroy too many of the foundations of the capitalistic creative destruction, the system will become less and less efficient. The cost for this experiment with collectivizing risk will need to be either exceedingly successful or we need to think about the size of the bill we are willing to hand over to our children.


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