Sunday, August 06, 2006


Josh Marshall writes:
But there do appear to be forces in Washington -- seemingly the stronger ones, with Rice just a facade -- who see this whole thing as an opportunity for a grand call of double or nothing to get out of the disaster they've created in the region. Go into Syria, maybe Iran. Try to roll the table once and for all. No failed war that a new war can't solve. Condi's mindless 'birth pangs' remark wasn't just a gaffe -- or perhaps it was a gaffe in the Kinsleyan sense of inopportunely saying what you really think. That seems to be the thinking -- transformation through destabilization.
This is spot-on. It's also manifestly clear, because this administration and its supporters make no bones about it. But the dynamic behind it is fascinating. The economist Joseph Schumpeter is revered by many on the Right. An important part of Schumpeterian theory is what he called "creative destruction," which essentially posits that capitalism is an organic, evolutionary process by which innovation destroys stagnation and inefficiency. It's somewhat analogous to a forest fire that clears old or dead vegetation so new growth can replace it. I'm a Schumpeter fan. (Unfortunately---and this is the basis of my criticism of the Federal Reserve---there's no place for Schumpeter in the nanny state, where malinvestment is never cleansed and inefficient giants never die; they just get fresh infusions of liquidity from the printing press.)

Here's the problem: Schumpeter has been co-opted by some on the Right as intellectual scaffolding for a geopolitical agenda. It's not a coincidence that Larry Kudlow gleefully invokes Schumpeter and "creative destruction" one moment, then urges viewers to "have faith in Israel" the next. Kudlow's not alone. In his book The War Against The Terror Masters, Michael Ledeen writes:
Creative destruction is our middle name, both within our own society and abroad. We tear down the old order every day, from business to science, literature, art, architecture, and cinema to politics and the law. Our enemies have always hated this whirlwind of energy and creativity, which menaces their traditions (whatever they may be) and shames them for their inability to keep pace. Seeing America undo traditional societies, they fear us, for they do not wish to be undone. They cannot feel secure so long as we are there, for our very existence -- our existence, not our politics -- threatens their legitimacy. They must attack us in order to survive, just as we must destroy them to advance our historic mission.
What would Schumpeter say to titular acolytes like Kudlow and Ledeen? My guess is he wouldn't be thrilled at the wedding of his economic theory to a geopolitical agenda. In chapter seven of his book Capitalism, Socialism and Democracy, Schumpeter writes (my bolds, his italics):
The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation -- if I may use that biological term -- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.
And what of attempts to impose creative destruction where it has not yet evolved naturally from within? Schumpeter is clear:
And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers.
Throughout history, of course, some have twisted narrow (and often obscure) economic, religious, racial, or genetic theories to fit unrelated larger agendas. The results are rarely pretty. But creative destruction sounds pretty good when your administration is trapped by a disastrous war in Iraq, a stagflationary economy, and exhausted fiscal and monetary policy (Middle East tension acts as a wonderful cover for the effect of irresponsible monetary policy on the price of oil). And all this, in the context of upcoming midterm elections in which control of Congress must be maintained at all costs. So creative destruction in Lebanon and ideally Syria and Iran is not only appealing, it's the only way out---particularly for an administration that manifestly hates doing the work that actual governing entails. And for the Raptured-up set, of course, creative destruction is the holy grail; shake things up, and it will all come out in the laundry---or in this case, on Judgment Day.

In Vegas, the pit bosses have a term for a player deep in the hole who starts increasing his bets dramatically in an attempt to get his money back: a "steamer." Desperate gamblers are dangerous, so steamers get extra scrutiny from the eye in the sky. It's "steaming" time for this White House. And the wife waiting anxiously at home, aware of her husband's compulsion and wondering how the mortgage or kids' tuition will get paid if he blows it all? That's us.


Blogger copy editor said...

Oh, Condi was on Meet the Press this morning. Everything is working out. Guess you missed it...

8/06/2006 9:47 PM  
Anonymous Anonymous said...

Saw Condi too. She wouldn't talk about a civil war because she won't talk about "hypotheticals."

8/06/2006 9:59 PM  
Anonymous Anonymous said...

Hi, I've read your site since you started. I'm a Brit working in the financial industry. I worked in NY for a number of years. I honestly don't think we can go to war with Iran. Steaming George is thinking about his legacy, and right now it's Saddam's statue coming down heading the highlight reel. But if we attack Iran, they can cut our supply lines from Kuwait and then the iconic image of the Bush presidency is the Iraqi equivalent of the last helicopter out of Saigon picture. I think the non-nut advisors like Condy have at least explained this to him, so I'm (literally) betting he won't do it.

For the first time ever, a US president starting a war would have to face actual known known consequences before he went to war. And he knows there's no good outcome in bombing Iran.

8/06/2006 10:36 PM  
Anonymous Anonymous said...

8/06/2006 10:41 PM  
Anonymous Anonymous said...

There may be "no good outcome in bombing Iran" as per a previous comment, but double-down steamers rarely think about consequences.

8/06/2006 10:57 PM  
Blogger The Cunning Realist said...

Apologies to a reader whose comment I deleted....I posted before I had made a minor change to a sentence to which the reader referred in his posted comments. Since his post referred to something that no longer appears, I deleted it to avoid confusion for others. Again, my apologies.

8/06/2006 10:59 PM  
Anonymous Anonymous said...

'.....I ask our youngest citizens to believe the evidence of your eyes. You have seen duty and allegiance in the determined faces of our soldiers. You have seen that life is fragile, and evil is real, and courage triumphs. Make the choice to serve in a cause larger than your wants, larger than yourself, and in your days you will add not just to the wealth of our country but to its character.....'

8/06/2006 11:42 PM  
Anonymous Mr. Hedley Bowes said...

Thank you for the background on Schumpeter. I haven't read him, but my limited study of economics and business theory would suggest that he would be limiting his theory of 'creative destruction' to markets and technologies, NOT governments and cultures.

I'll go a bit further, by suggesting that in order for 'creative destruction' to operate as an economic driver, certain base requirements are to be in place: a healthy diversified economy, low-inflation, access to resources (capital, physical and intellectual) and profit motives.

The foundation for these conditions: a dynamic yet relatively stable society with commonly recognized cultural values that is able to support functional professional and working classes.

If one accepts these tenets, one must conclude that 'creative destruction' is only possible within a predominately peaceful culture.

How dangerous and foolish it is to use this theory of 'creative destruction' when dealing in matters of diplomacy and projection of power.

But the mindset of the radical right is prone to this kind of conflation. It was "Saddam" "9/11" that formed the battle cry for invading Iraq (no connection whatever, but saying them in the same breath makes for high ratings).

Where are the grown ups? Who can unplug this tiresome show?

8/07/2006 1:37 AM  
Anonymous Mr. Hedley Bowes said...

As I hit 'post' one additional requirement for 'creative destruction' occurred: the existence of a credible legal framework for ensuring the efficient flow of capital, ideas, resources and goods.

This doesn't describe what we've done in Iraq, nor Lebanon. Why should it describe the present designs on Iran or Syria? How can you optimize an economy that you've just spent years and billions destroying?

It's been estimated that it cost $250,000 for every indigenous casualty in the Vietnam war.

What might have happened if we just put that capital into their hands and their economy? Would we even be fighting wars in the Middle East today?

8/07/2006 1:53 AM  
Anonymous jay said...

No failed war that a new war can't solve

What BS. People actually believe this?

8/07/2006 10:09 AM  
Blogger OrganicGeorge said...

Juan Cole has a post, it is a theroy for discussion not his postition that I think you should read.

Look forward to your thoughs on his post.

8/07/2006 10:37 AM  
Blogger owenz said...

"Creative destruction" certainly applies to the neocon analytical model, which was hyping the transformative powers of democracy about a week ago. Now that democracy has failed, they are putting their faith in chaos - confident that the geopolitical pieces will magically align themselves to their liking once the chaos stops. Fat chance.

Still, not all neocons are drinking the koolaid. Over at the Corner, earstwhile neocons like J-Pod have suddenly transformed into hardcore realists, advocating for the mass extermination of civilians in order to win the fight with IslamoFascism. Implicit in this call for a new Hiroshima is an admission that the neocon project in the Middle East is failing, that "creative destruction" is not reaping the desired outcomes.

I wonder what the neocons will be thinking a year from now if the U.S. pulls out of Iraq in abject failure -- and Israel signs on for an uneasy cease fire with Hezbollah without invading Iran. If things unfold this way, the neocon project will be labeled a failure by virtually all non-neocons. How will they react? By blaming Bush, I suspect. They will attack Bush/Rummy for failing to use enough force (the J-Pod contingent) and for failing to push through to Iran/Syria (the Ledeen contingent). Both arguments preserve the "more aggression is needed" core that lives at the heart of neoconservatism.

Sadly, this doesn't mean they will go away. It does not matter how completely the neocon project is repudiated - guys like Bill Kristol will continued to be viewed as "serious" foreign policy experts by the national media. Moreover, guys like Kristol are nothing if not creative. As events unfold the neocons will shift their views accordingly -- and in today's "yesterday is old news" culture, they'll get away with it.

8/07/2006 11:55 AM  
Blogger copy editor said...

Saw Condi too. She wouldn't talk about a civil war because she won't talk about "hypotheticals."

Yeap. Seems like a "democratic" and "stable" Iraq is a major hypothetical at this point.

Here's another hypothetical: Sadr storms the Green Zone with a mass of civilians a la the Bastille. Or it just happens on its own.

8/07/2006 1:36 PM  
Blogger BullandBearWise said...

The only problem I have with this "creative destruction" thing is all we've managed to create so far is the hypocrisy of promoting democracy in the Middle East while destroying its newest duly-elected democracy - Hamas. There's something vaguely discomforing about that.

8/07/2006 3:26 PM  
Anonymous Anonymous said...

This is "creative destruction" along the lines of Trotsky, i.e,. permanent revolution, which is just another name for psychopathy and about as non "conservative" as you can get. I don't know if you're right about Schumpeter, but it would seem, as discussed by others about, that his theory is grounded in a stable cultural/political framework that constrains the "destruction" to socially acceptable forms and keeps it from getting out of hand. For example, I doubt Schumpeter envisioned the virtues of murder, industrial espionage or sabotage in bringing about "creative destruction" of one's competitors. This is just an example of superficially educated wackos grasping at theories they fundamentally do not understand to justify what they want to do. The real point is they're just fine with killing arabs because,well, they're arabs.

8/07/2006 4:36 PM  
Anonymous Anonymous said...

CR, I respectfully hope you're wrong about this one. Darwin-esque economic theory masquerading as foreign policy isn't a great way to start the new millennium. Economic eugenics anyone?

Despite the wide-eyed hate mongers and broad-chested flag wavers, it becomes increasingly important to remember we're talking about people here.

8/07/2006 8:30 PM  
Anonymous Anonymous said...

where is the love everywhere...its just gone and anyone who speaks of love and kindness has become a sort of wimp.....

8/07/2006 11:19 PM  
Anonymous epmason said...

"In Vegas, the pit bosses have a term for a player deep in the hole who starts increasing his bets dramatically in an attempt to get his money back: a "steamer."

Soldiers as poker chips. Makes for a sickening but apt image. They should rename the DOD meetings "Dogs at Cards."

8/08/2006 4:15 AM  
Blogger mega said...

"Beyond the Euphrates began for us the land of mirage and danger, the sands where one helplessly sank, and the roads which ended in nothing. The slightest reversal would have resulted in a jolt to our prestige giving rise to all kinds of catastrophe; the problem was not only to conquer but to conquer again and again, perpetually; our forces would be drained off in the attempt."

Emperor Hadrian AD 117-138

8/08/2006 7:31 AM  
Blogger Jay C said...

And of course, the problem with this Adminstration utilizing "creative destruction" as a geopolitical principle is that while they have got the "destruction" part down pat, they have come up just a little short on the "creative" bit.

8/08/2006 9:46 AM  
Anonymous R$B said...

Great Post as always, nothing much to add, I just wanted to say how nice it is to have a commentator who actually acknowledges Schumpeter, and even better that you know and OWN his book.

I bet you have one hell of a home libray. So how many books do you have CR? Rough Count would be fine.

8/09/2006 9:05 PM  
Blogger Azael said...

Great post, as always - you rock.

The idea of sunk cost has always been a driver of this insanity. My favorite bit was the fact that we actually had no choice to go to war with Iraq because - well - we had all those troops just sitting there and gosh, we couldn't let all that investment go to waste.

It's sunk costs which seem to drive their entire ideology (or what passes for one). They can't give up on the tax cuts because we've invested too much in them. They can't give up on the religious right because they've invested too much in them.

You name it. With these jokers it's always a matter of stay the course, regardless of the subject, because we have way too much invested to give up now.

8/10/2006 12:58 AM  
Anonymous Anonymous said...

"innovation destroys stagnation and inefficiency", dream on.

If this were true we wouldn't be dependent on oil but have renewable clean energy sources. Those that are "inefficient" fight like hell to keep their power and destroy "innovation" through any means possible including paying off people in our very own government. And now the infrastructure of the "inefficient" is crumbling and corriding from lack of maintenance and innovation even those they are making record profits. If it gets too bad, those that stomped on innovation and remained inefficient will ask our own government to bail them out. There are many stories of innovation getting killed by the inefficient because the inefficient has the power and money. The bigger the inefficient the less the innovation.

The whole "desperate" thing became visual to the masses with the constant well financed attacks on Clinton with a sour sprinkling of Coulter, Limbaugh, and Fox. The level was raised in 2000 with our election debacle, and it keeps rising as we lose freedoms, our constitutional crisis, the lies to get into a war, the corruption... oh yeh, this "Republican" party has a lot to atone for.

8/10/2006 11:21 AM  
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Anonymous Anonymous said...

heres 'birth pangs' condi herself on what she is not responsible for...

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