This is an extract from Douglas Rae’s lecture Karl Marx, Joseph Schumpeter, and an Economic System Incapable of Coming to Rest, which unpacks some of the dynamics behind waves of innovation and Schumpeter’s Creative Destruction – on which more in a future post.
The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.
Karl Marx – Communist Manifesto
Here’s Douglas Rae:
Let’s begin with Howard Head’s tennis racquet. Howard Head was an alum of Harvard College, a bright guy, and a not very good airframe engineer. He was a second-class designer of the details of airplanes for McDonnell Douglas Corporation, and he was an avid skier, and an avid, but very untalented, tennis player. As he tells the story, there was a night on a bus, a motor coach to use his words, bringing him back to New York from Vermont, from Stowe, and he’d had a rough weekend of skiing and he said, “What would happen if we took the aluminum wafer with which we’re building airplanes, and made a ski from it?” Sure enough he did that, and the skiing industry, not just the sale of skis but the total size of the skiing market, was transformed forever because skiing now became more fun and vastly easier. Five years later he had the same — he applied the same thought process to tennis racquets.
At the time the world market in tennis racquets had converged on the Bancroft wooden racquet… and everybody was competing on price and details of quality with the wooden racquet. There were no rules about how big a racquet could be. It occurred to Head that, if he substituted in the bow of the racquet, substituted aluminum for wood, the structural properties of aluminum would allow the head of the racquet to be much bigger….
Now the [Schumpeterian] idea of creative destruction, which is usually about things more complicated than skiing and tennis… is that the process of competing to sell the best product at the lowest price within the given market framework often does, indeed, lead to something like monopoly, or at least oligopoly, and a point made at length by Marxist critics of capitalism. As that happens, it occurs over and over and over again, that somebody like Howard Head finds an alternative technology invariably aimed not at luxury markets, aimed at regular people, and very seldom aimed at corporate or governmental buyers, but again at private sector buyers, and generates with that product an entirely new market, shatters the equilibrium, hits it with a hammer. And this thought is, on the one hand, antagonistic to Marx. That is, it is a way of refuting Marx’s idea about monopoly capitalism.
On the other hand, it is exactly in the spirit of young Marx, the young Marx we hear in The Communist Manifesto… saw capitalism as an enormously productive system which was incapable of standing still, which was always leaning forward into the wind, which was, to use Schumpeter’s term, nothing more than a mechanism for economic change. According to Schumpeter the very essence of capitalism is that it is a system always in the process of revising itself. It is never capable of standing still, and young Marx certainly believed just about that same thing, and believed that the productive forces — now remember he’s writing in 1847, 1848 — that the productive forces associated with capitalism were unprecedented in world history…
At the time he’s writing, railroads are just beginning to transform the European world around him. Steamships are a generation and a half into transforming world commerce. The use of newly efficient steam engines in manufacturing is creating ever cheaper goods. The market in world textiles has driven the price of ordinary cotton cloth nearly to zero, so that nearly everyone in… advanced market societies, can afford to dress, more or less, the way all of you are dressed.
Douglas W. Rae – Lecture 4 – Karl Marx, Joseph Schumpeter, and an Economic System Incapable of Coming in Open Yale’s PLSC 270: Capitalism: Success, Crisis, and Reform