Monday, October 29, 2012

Joseph Schumpeter on how a swelling mass of unemployable college graduates sets the stage for anticapitalist radicalism

Joseph Schumpeter in 1942 on how a swelling mass of unemployed and unemployable college graduates sets the stage for anticapitalist radicalism.
The Wall Street Journal, October 29, 2012, on page A21

Joseph Schumpeter writing in "Capitalism, Socialism and Democracy," 1942:

The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. His failure to do so may be due either to lack of natural ability—perfectly compatible with passing academic tests—or to inadequate teaching; and both cases will . . . occur more frequently as ever larger numbers are drafted into higher education and as the required amount of teaching increases irrespective of how many teachers and scholars nature chooses to turn out.

The results of neglecting this and of acting on the theory that schools, colleges and universities are just a matter of money, are too obvious to insist upon. Cases in which among a dozen applicants for a job, all formally qualified, there is not one who can fill it satisfactorily, are known to everyone who has anything to do with appointments . . .

All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectator's typical attitude toward men, classes and institutions especially in a rationalist and utilitarian civilization.

Well, here we have numbers; a well-defined group situation of proletarian hue; and a group interest shaping a group attitude that will much more realistically account for hostility to the capitalist order than could the theory—itself a rationalization in the psychological sense—according to which the intellectual's righteous indignation about the wrongs of capitalism simply represents the logical inference from outrageous facts. . . . Moreover our theory also accounts for the fact that this hostility increases, instead of diminishing, with every achievement of capitalist evolution.

Tax Composition and Growth: A Broad Cross-Country Perspective. By Santiago Acosta-Ormaechea and Jiae Yoo

Tax Composition and Growth: A Broad Cross-Country Perspective. By Santiago Acosta-Ormaechea and Jiae Yoo
IMF Working Paper No. 12/257
October 25, 2012

Summary: We investigate the relation between changes in tax composition and long-run economic growth using a new dataset covering a broad cross-section of countries with different income levels. We specifically consider 69 countries with at least 20 years of observations on total tax revenue during the period 1970-2009—21 high-income, 23 middle-income and 25 low-income countries. To our knowledge this is the most comprehensive and up-to-date dataset on tax composition and growth. We find that increasing income taxes while reducing consumption and property taxes is associated with slower growth over the long run. We also find that: (1) among income taxes, social security contributions and personal income taxes have a stronger negative association with growth than corporate income taxes; (2) a shift from income taxes to property taxes has a strong positive association with growth; and (3) a reduction in income taxes while increasing value added and sales taxes is also associated with faster growth.