Reproducing their editorial ” “Hijacking Philanthropy to ‘Reimagine Capitalism: The Hewlett Foundation proves again that Joseph Schumpeter was right.” The Wall Street Journal, By The Editorial Board, Updated Feb. 24, 2022 11:43 am ET.
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Here is the article:
Hijacking Philanthropy to ‘Reimagine Capitalism’
The Hewlett Foundation proves again that Joseph Schumpeter was right.
The 20th-century economist Joseph Schumpeter famously wrote that capitalism sows its own destruction by creating a knowledge class who despise its success. Behold the Hewlett Foundation and Omidyar Network’s $40 million gift to the paupers at Harvard and MIT to “reimagine capitalism.”
Bill Hewlett and David Packard founded Hewlett-Packard in a one-car garage in Palo Alto and made it one of the world’s storied companies. Its capitalist success created wealth for shareholders and stakeholders alike, and Hewlett established his foundation to share even more of it. But his philanthropic legacy has become one more sad example of how the wealth of capitalist donors is hijacked by future generations of knowledge-class progressives.
“For more than 40 years, neoliberalism has dominated economic and political debates, both in the U.S. and globally, with its free-market fundamentalism and growth-at-all-costs approach to economic and social policy,” the press release says. It “offers no solutions for the biggest challenges of our time, such as the climate crisis, systemic racism, and rampant wealth inequality—and in many ways, it has made those problems even worse.”
Actually, capitalism offers solutions to all of those challenges. The largest reductions in carbon emissions have come from natural gas, thanks to the market innovation of shale fracking. Competitive labor markets have helped minorities rise despite residual racism because bigotry is too expensive. The wealth created by free markets and innovation, along with global trade, has lifted billions out of poverty. Extreme global poverty has plunged to less than 10% from 45% in 1980 while world GDP has more than tripled.
We now have fast broadband and smartphones that connect with others anywhere, anytime; 24-hour home delivery of almost anything we want; breakthrough medical treatments and vaccines; genetically engineered crops that have increased farm yields and global nutrition; cheap energy thanks to an oil and gas shale boom; and a rising standard of living for most of the world. Socialism didn’t build that.
Yet as Schumpeter predicted, people in the comfortable West, including many tech entrepreneurs, now take this prosperity for granted. “Neoliberalism’s anti-government, free-market fundamentalism is simply not suited for today’s economy and society,” says Larry Kramer, president of the Hewlett Foundation.
By “reimagining capitalism,” as the press release advertises, what these foundations really mean is putting politicians and the administrative state in charge of redistributing more of its proceeds. Yet if they had been paying attention in recent years, they might have noticed that “free-market fundamentalism” could have spared the U.S. from some terrible mistakes.
For example, when government pays people not to work, many don’t work. When government increases taxes and regulation, output declines. And when government floods the economy with money, inflation breaks out. Is 7.5% inflation helping “wealth inequality”?
The Hewlett and Omidyar grants will fund left-wing academics at the Harvard Kennedy School, Howard University, Johns Hopkins, MIT and the Santa Fe Institute to “rethink and replace neoliberalism.” As if these institutions need more money to indoctrinate young people in socialism. Endowments at Harvard ($53.2 billion), MIT ($27.4 billion) and Johns Hopkins ($9.3 billion), by the way, are swelling—thanks to investment in capitalist markets.
The Hewlett Foundation’s hard left turn is a warning to today’s successful capitalists to be wary of creating foundations or other vehicles that outlive them. Sooner or later, most of them are taken over by people who steer them for their own political purposes no matter the founder’s intent. Be careful not to finance the destruction of the system that made business success and wealth creation possible.
Correction: An earlier version misstated the size of the Johns Hopkins endowment.
The End.
That’s the article, good Reader. You should not be surprised to learn from the Wall Street Journal that there are all sorts of folks anxious to find a way to replace our market economy with one that will release them from the responsibility to fashion their own financial well-being. Others would like to be empowered to assist in the administration of such a system. Others are idealists who really would like to see the achievement of “equity, diversity, and sustainability,” supernal advantages that don’t seem to match the tactics and motives of the socialists we see in action today.
For those of good will from these groups one is inclined to express one compelling objection. That is that virtue is attributed to governmental bureaucracies. The agencies of our and other governments have been subjected to the scrutiny of perceptive scholarship. In my book Socialism, I have analyzed the motives and the institutional characteristics of administrative bureaucracies. One must remember that it is these organizations who administer any governance that is formed.
When one considers one of history’s latest governance fads the significance of this becomes apparent. I was a young economist when our profession became most enamored with Keynesian economics — the idea that government spending could make up for insufficient private sector expenditures and that in an inflationary period the government could curb its expenditures to remove excess demand from markets. These are simple and probably accurate observations. But history proved that congress (the legislative bureaucracy) and the agencies of government could never get the timing right. When we needed more taxes and spending restraint to slow down the inflationary powers, the governmental bureaucracy never did the right thing. When more spending was needed, it was not available soon enough. Finally, economists lost their enthusiasm and quit calling for fiscal and monetary policies to solve the cyclical problems.
After Lenin had been in power in the Soviet Union for some time, he warned that the Russian bureaucracy would prove to be a serious problem for the economic planning system of socialism. In actual fact, it proved to be a disaster. The state planning apparatus was always late, it always took the mechanically easier way rather than accomodating any theoretical principles that should have governed their functioning, and the bureaucracy had sufficient power (since party bosses and legislative groups are always too busy to direct economic activities and industrial regulation themselves) to meet their own objectives. They also stood in the way of any reform of economic processes that the mathematicians and scholars hoped so desperately to implement.
If contemporary academics in the United States develop clever techniques to solve the inevitable problem of hyper-centralization as they install their central planning system, they will doubtless be theoretical marvels. But those scholars won’t be available to implement them themselves. Rather, they will appear as memoranda in the halls of the bureaucracy which the bureaucrats will then implement according to their own preferences and understanding. The result will be much as we have seen in history. The “science” will be as absent as it usually is. It will be as it was in political attempts to overcome the pandemic in the United States.