Debunking the Myth of Increased Innovation Under Capitalism

One of the most common refrains that supporters of capitalism provide to rationalize the issues it presents goes as follows:

“Sure, capitalism has its downsides, but no other economic system boosts innovation as well.”

But does the data really back that up? Sure, it’s easy to find articles dating back decades touting the idea that capitalism has the market cornered when it comes to innovation. Even some earlier economic theorists with ties to socialist and communist thought, like Joseph Schumpeter, put forward the idea that capitalism accelerates innovation.

But theory and preaching aren’t data.

The data shows a very different picture, especially in the later part of the 20th century to today.

Why Would Capitalists Suppress Innovation?

It seems ridiculous, whether you’re a plumber, a lawyer, an economist, or a customer service agent: why would capitalists want to suppress innovation? After all, everyone wants the Next New, Big Thing, right?

In the world of CEOs, Boards of Directors, and Shareholders, innovation is often a scary thing.

Innovation outside of the company—new technology, new processes, new businesses—is competition. Competition threatens the monopolies that most capitalists try to assemble.

Innovation inside of the company—new technology, new processes, new ventures—represents risk. The biggest risk? All investment, no return.

So capitalists don’t like others coming up with fresh ideas that could challenge their control of a market, and they don’t like internal developments that could cost money without ever paying off. Math like that makes it easy to understand why, for example, major movie companies keep rehashing and rebooting the same old stories.

How do Capitalists Suppress Innovation?

There are a few methods that capitalists use to suppress innovation, depending on whether it’s coming from inside of the company or outside of it.

For potential competition, capitalists have a standard playbook that they turn to time and again. See if you recognize the steps in the behavior of 21st century companies:

Attempt to regulate the industry to their advantage Undercut the competitor on price Launch lawsuits against the competitor on flimsy grounds, but requiring heavy legal spending for the newer company Buy out the company and shutter it Buy out the company and absorb the staff, but discontinue/downgrade projects

It’s even easier for capitalists to use their resources, power, and wealth to suppress potentially expensive innovations or developments from within:

Require all employees to sign agreements that any developments they make on “company time” or company equipment belong to the company Enforce strict “performance improvement plans” on employees who show too much interest in changing things Create endless loops of reporting/documenting requirements so that employees give up Require and enforce non-compete agreements that exclude their employees from going elsewhere, even from starting their own business in the same industry

Is Innovation Really All That Important?

Innovation has always been a key factor in human success on the planet—and, for that matter, off of the planet. As climate change ramps up, bringing with it cascading problems, innovation will only become more important.

Oil executives had an inkling of the problems associated with massive carbon emissions back in the 1960s and 1970s, and suppressed not just the information, but also the technological advances that would decrease the reliance on fossil fuels.

Think about how much further along green energy would be if the technology had the chance to develop in the 1960s. Think about how much of the current climate crisis could have been averted if countries had started shifting to renewable energies 60 years ago.

Final Thoughts: Capitalism Doesn’t Improve Innovation, it Stifles it

Capitalism’s main selling point—that it is uniquely good at boosting innovation—turns out to not be true when you really look at the facts.

Capitalists have a vested interest in suppressing innovations that could threaten their market share, or that could reduce profits. And they act on that interest every single day.