Excessive concentration of power in large corporations and lobby groups under capitalism can do a lot of harm. Excessive concentration of power in big government under socialism can also do a lot of harm. Between these two extremes lies what Aristotle called “the golden mean”.
I have celebrated my birthday for 77 years without thinking about Joseph Schumpeter – until this year. I was born in 1942, the year he published his famous book “Capitalism, Socialism and Democracy” (nicely summarized here). This book was required reading when I studied economics at McGill in 1962. But I was not persuaded by Schumpeter’s prediction that because of its successes, capitalism would eventually evolve into what he called socialism. Schumpeter has proven to be right, but what he called socialism 1942 is the actual economy in 2020.
Today, in most developed countries, much of the real economic and political power lies with large government bureaucracies, not with capitalist billionaires. In the US in 2018, government expenditure amounted to 35% percent of the gross domestic product; in Canada, 44% [Source: MLI]. Governments that spend that much money, and also write laws, and also grant or deny approvals to private sector projects, have a lot of power. Public sector employees represent 1 of every 5 employed Canadians [Source: Fraser Institute].Continue reading “Capitalism, Socialism and Democracy in 2020”