An eminent Marxist, the geographer David Harvey, says: ‘The performance of capitalism over the last 200 years has been nothing short of astonishingly creative.’23 A moderately left-of-center commentator, Jonathan Freedland, argues that, even though capitalism has led to the climate crisis,
we would be fools to banish global business from the great climate battle… Perhaps capitalism’s greatest contribution will come from the thing it does best: innovation.24
The idea is even, apparently, central to the theories of Karl Marx and Frederick Engels. Their Communist Manifesto of 1848 contains what a highly respected Marxist scholar, Michael Burawoy, calls ‘a panegyric to capitalism’s power to accumulate productive forces’. The Manifesto says:
Subjection of nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground – what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor?
But are Marx and Engels telling us that capitalism is a Good Thing? Of course not. They hated capitalism and expressed their hatred for it with vigor, relish and creativity. Marx continually alluded to its vampiric qualities (inspiring Mark Neocleous to call capitalism ‘the political economy of the dead’25). Marx often depicts capitalists as almost comical victims of circumstances. Capitalism, for Marx, is something like a natural phenomenon that hubristic entrepreneurs unleash but can barely control, still less understand. Marxism’s own parallel success story since 1848 surely stems to some extent from the way its explanation of grandiose capitalist behavior has rung so true, capturing the experience of so many millions of workers in so many different working situations.
But whatever Marxists think, conventional wisdom nowadays has it that capitalists are very wise, and that market competition between firms spurs innovation.
WHAT CAPITALISM CANNOT DO
A reputation for innovation started to become a valuable corporate asset around the time of the Second World War, and it has become almost an article of faith since then that modern, profit-driven capitalist firms, with their teams of highly motivated researchers, are the supreme exponents of technological innovation. Nonetheless, governments have occasionally felt the need to find out whether this really is the case or not.
A 1965 US Senate committee invited a succession of the leading authorities from all areas of industry to give them the benefit of their research into innovation, in an effort to decide whether the government should channel more of its research funding to large firms rather than small ones, and encourage business to concentrate into larger units, to foster a greater rate of innovation.26
The economist John Kenneth Galbraith, by no means an uncritical supporter of unfettered capitalism, had written not long before that ‘A benign providence… has made the modern industry of a few large firms an almost perfect instrument for inducing technical change’. Other eminent experts, such as the education theorist Donald Schön, disagreed, citing a major study called The Sources of Invention by a British research group headed by the Oxford economist, John Jewkes.27 This had seriously challenged the credibility of the corporate approach to major scientific challenges, with its emphasis on teamwork and targets – an approach equally prevalent both in the USSR and in the capitalist countries. Jewkes examined industries such as radar, television, the jet engine, antibiotics, human-made fibers, steel production, petroleum, silicones and detergents. The USSR came out badly from Jewkes’s study (no important innovations in any of the areas examined) but then, so did capitalist firms. In every area studied, innovation had dried up from the moment capitalist firms took a serious interest in it.
The Senate committee asked one of Jewkes’ co-authors, David Sawers, for an update on his study of the US and European aircraft industries. Sawers had found lots of growth, but not much serious innovation. US aviation had not come up with anything very new since the Second World War and it was still living off a few, mainly German, inventions that had been made in wartime. Almost none of the major advances in aircraft design, anywhere in the world, had come from private firms, and firms had been particularly resistant to jet propulsion. Jet airliners, he said, had only become established thanks to the US government underwriting the development costs and guaranteeing a military market for the Boeing 707. Major advances such as streamlining, swept-back wings, delta wings, and variable geometry all came from outside capitalist firms and had had a job being accepted by them – unless underwritten by military contracts. The only significant pre-War improvements made by capitalist firms that he had been able to find were the split flap (invented by Orville Wright, an old-school inventor, so not exactly representative) and the slotted flap (introduced by Handley Page in the UK). After the War, some modest innovation had been done by European aircraft firms on delta wings – the least adventurous of the new geometries (this work eventually led to the Concorde supersonic airliner, which was built largely at public expense, as a prestige project).
In the steel and automobile industries it was the same story: in general, no innovation except with lots of government support, or via the dogged persistence of independent inventors. In the photographic industry, Kodachrome (the first mass-market color film, launched in 1935) was literally invented in the kitchen sink by two musicians, Leopold Godowsky Jr and Leopold Mannes, in their spare time. The two men had struggled at the project largely at their own risk since 1917.
Sawers’ colleague, Richard Stillerman, put it thus:
Making profits is the primary goal of every firm. Few, if any, firms would support the kind of speculative research in manned flight undertaken by the Wright Brothers at the turn of the century after experts proclaimed that powered flight was impossible. Or the risky experiments on helicopters which a horde of optimistic individuals carried forward over several decades. Or the early rocket research pursued by individuals with limited financial backing.28
Turning to electronics, the committee learned that one of the industry’s greatest success stories, xerography (the technology behind the huge Xerox Corporation), had only seen the light of day after its inventor, Chester Carlson, approached the non-profit Battelle Memorial Institute for support. Other major innovations had been actively resisted by the firms in which they were being developed. Arthur K Watson (son of Thomas J Watson, founder of the IBM Corporation) was quoted to the effect that:
The disk memory unit, the heart of today’s random access computer… was developed in one of our laboratories as a bootleg project – over the stern warnings from management that the project had to be dropped because of budget difficulties. A handful of men ignored the warning … They risked their jobs to work on a project they believed in.29
The committee learned that talented researchers were fleeing capitalist firms to set up or join small, independently funded outfits where they could develop their ideas without interference. The ‘small startup’ subsequently became one of the iconic conventions of the electronics/computer industry and was touted as a great success, but small startups didn’t, don’t and can’t carry out the sustained research effort publicly funded teams are capable of. While some get rich, the vast majority do not.30
INNOVATION IN THE ‘NEW ECONOMY’
In the early 1980s the British government faced concerns about the country’s ability to compete in what was tentatively being called ‘the new economy’. Not all experts shared the government’s deep conviction that more intense commercial competition would deliver the requisite innovations, so they commissioned two US academics to nail the matter: Nathan Rosenberg and David Mowery.
Mowery examined nine major pieces of research into industrial innovations that claimed to have been inspired by market demand. On close inspection, he found that, while it was true that they had arisen within firms, most of them had been the fruit of researchers following their own interests, and ‘the most radical or fundamental ones were those least responsive to “needs”’.31