Schumpeter And Capitalism

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3. Extensions & applications
3.1.1 Schumpeter ’s contribution on capitalism and decay of the capitalism
Schumpeter explained the chief characteristic of capitalism was the conduct of economic actors. The economic actors implemented new combinations. The banks provided financing channel to the entrepreneurs. Economic performance could be evaluated by total output within a year. The role of entrepreneurship was to pursue long-lasting increase of total output. If the society did not accept the technology improvement, the society would remain at a stage of stasis.

Entrepreneurs utilized new combination and technical possibilities in the production pattern reform. The revolution created qualitative change and effectiveness increase in production.
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Profit was not the only standard to evaluate the economic outcomes in the business activities. Profit also could evaluate the effectiveness of entrepreneurship. Schumpeter illustrated his opinions on innovation which was important to market competition, business cycle and capitalism evolution. In monopolistic competition, profit of entrepreneurship depends on the innovation success. Entrepreneurship profit is impermanent because of the market competition and imitation.

Schumpeter explained the importance of interest. Entrepreneurs were willing to paid the loan with interest as they would utilize the loan to establish a new industries and products, as well as developing the new technology. Schumpeter explained the concept of men of action which referred to the elites in the society with initiative. The elites established the economic development because they took the initiate to allocate the resources efficiently. For instance, investing on a production of new products, developing on the quality as well as the application of the current products are the new combination. Moreover, a new enterprise and new combination included start-up in a new industry, economic organizational reform and technology development in production. Most of the people did not understand the potential contribution of innovation and new combination. In contemporary economic, entrepreneurs as a man of action with willpower, management experience and considerable insight understand the economic potential of of new

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