Neue Unternehmergeist: Sustainable Finance for Innovation and a New Entrepreneurial Spirit

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Neue Unternehmergeist: Sustainable Finance for Innovation and a New Entrepreneurial Spirit

Somewhere between Schumpeter and Keynes is a sustainable theory of economic growth through innovation finance, involving both the public and private sectors
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Tuesday, October 16, 2012 - 10:00am

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In his 1934 book, The Theory of Economic Development, Austrian-American economist Joseph Schumpeter argued that the primary drivers of innovation and economic growth were entrepreneurs, almost heroic figures who created new products, markets and ways of doing business that propelled the economy boldly into the future. He disagreed with the neoclassical economists of the time, who saw economic life as a passive affair. Instead, he sensed "a source of energy within the economic system which would of itself disrupt any equilibrium that might be attained."[1]

Schumpeter saw the transformational nature of entrepreneurial innovation as part of an adapt-or-die process he called "creative destruction," in which old ways of doing things perished in the face of the new. In his 1942 book,Capitalism, Socialism and Democracy, he argued that "the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on."[2] To describe this élan vital, he coined the wordUnternehmergeist, German for "entrepreneur-spirit."

COMPANIES BUILD ON UNCLE SAM'S RESEARCH FUNDING

Schumpeter's Unternehmergeist was reserved for the private sector; government intervention, he argued, could only lead to inflation that, if left unchecked, would ultimately devour all available capital. But Schumpeter, who died in 1950, would not live to see just how beneficial government spending would be to spurring modern innovation in a kind of financial assembly line system that can be seen as an unintended public-private partnership. A report published earlier this year by the National Research Council, for example, found that 30 of the largest IT firms, including Google, Yahoo!, IBM, Microsoft, Apple, Dell, Cisco and Intel, can attribute a portion of their revenue—almost $500 billion annually—to government-funded research.[3]

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Reynard is a Justmeans staff writer for Sustainable Finance and Corporate Social Responsibility. A former media executive with 15 years experience in the private and non-profit sectors, Reynard is the co-founder of MomenTech, a New York-based experimental production studio that explores transnational progressivism, neo-nomadism, post-humanism and futurism. He is also author of the blog 13.7 Billion Years, covering cosmology, biodiversity, animal welfare, conservation and ethical consumption. He is currently developing the Underground Desert Living Unit (UDLU), a sustainable single-family dwelling envisioned as a potential adaptation response to the future loss of human habitat due to the effects of anthropogenic climate change. Reynard is also a contributing author of "Biomes and Ecosystems," a comprehensive reference encyclopedia of the Earth's key biological and geographic classifications, to be published by Salem Press in 2013.

Keywords: Sustainable Finance & Socially Responsible Investment | Government Spending | Innovation | Innovation Finance | Innovation Funding | John Maynard Keynes | Joseph Schumpeter | Social Finance | entrepreneurship | venture capital

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CONTENT: Blog

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