Laurie Thomas Vass, CLP News Network www.clpnewsnetwork.com
The Fed has been in existence since 1913, when the U. S. Congress issued a charter for the private bank to act as the government’s banker for managing the nation’s supply of money and buying and selling government debt.
The Fed operates as a private for-profit bank. The Fed is not an agency of the government, but functions as the banker for the U. S., Treasury Department.
In Lewis v. United States, 680 F.2d 1239 (1982), the U. S. Supreme Court ruled that the Federal Reserve Bank is,
“Independent, privately owned and locally controlled corporations”, and there is not sufficient “federal government control over ‘detailed physical performance’ and ‘day to day operation'” of the Federal Reserve Bank for it to be considered a federal agency.”
From the time that the Fed was created, the U. S. economy has suffered a financial panic and economic collapse about every 10 years. This series of periodic, empirically observable cycles of economic collapse is not happenstance, serendipity, or a normal, expected outcome of the workings of a free market economy.
During each economic collapse, middle and working class citizens lose their jobs, incomes, houses, and farms, while the Ruling Class escapes unharmed, because the Fed bails them out, and makes them whole.
We explain the dismal economic performance of the Fed by placing their performance within the social class conflict thesis that the Fed acts for the benefit of the American Ruling Class.
The financial decisions of the Fed reflect their own social class ideology to protect the financial interests of America’s wealthy families and largest banks.
Following the writings of James Buchanan, the social welfare function that the Fed maximizes is the welfare of the American Ruling Class.
The staff and leaders at the Fed do not have some scientific formula to guide them in making financial decisions to benefit the common good of middle and working class citizens.
They are not connected to the consent of the governed and no citizen elected any of them.
Unlike the social class consciousness of the Ruling Class, the middle class and working class common citizens do not have a social class awareness of their own financial interests, and thus, the Ruling Class has no comparable ideological competitor.
The middle and working classes do not have powerful lobbying associations to represent their interests in Congress, such as the Ruling Class’ American Bankers Association.
The event that precipitated the creation of the Federal Reserve Bank is related to a financial crisis in 1907, when the Knickerbocker Bank became insolvent.
At that time, the U. S. economy was in a severe recession, the second recession in 10 years, after the great depression of 1894.
A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction. The contraction in money supply deepened the severity of the economic recession.
The executives of Knickerbocker went to the other private banks for a loan, in order to stay in business. The other private banks refused the loan, and the executives of Knickerbocker then went to the U. S. Treasury to ask for a bailout.
The U. S. Treasury refused the bailout.
If the bank failed, the owners of Knickerbocker would lose their capital investment and could also be forced to pay an additional assessment in order to compensate depositors and other creditors, who lost everything when the bank went bust.
In other words, the owners of the Bank would lose both the value of their capital investment in the bank, and also face double liability to compensate depositors, who lost their savings when the bank failed.
The double liability of bank owners when a bank went bust seemed unfair to the American banking community.
The intent of the banking reform that created the Fed, began with the Aldrich-Vreeland Act, aimed at eliminating this double liability of bank shareholders, when a bank failed.
During the 1907 economic recession, Congress passed the Aldrich-Vreeland Act, to study the 10-year pattern of economic collapse and to prepare a report to Congress on solutions to the economic instability.
Senator Nelson W. Aldrich introduced the Aldrich-Vreeland Currency Law and became the Chairman of the National Monetary Commission. Aldrich was not an ordinary, middle-class citizen. He was a powerful member of the Northeastern ruling class. He was referred to by the press and public alike as the “general manager of the Nation.”
Aldrich owned his own train car, and invited a select group of Ruling Class elites to ride on his train car down to Georgia for the secret meeting to create the Fed.
The other attendees of the meeting who rode down to Jekyll Island on Aldrich’s train car were:
- Prominent European banker and Kuhn, Loeb, & Co. partner Paul Warburg, who would later serve on the Federal Reserve’s first Board of Governors, and whose knowledge of European central banking was crucial to the meeting’s success. [because the model of the U. S. central bank looked just like the Bank of England.]
- J.P. Morgan & Co. senior partner Henry Davison.
- National City Bank of New York president Frank Vanderlip.
- Banker’s Trust of New York vice president Benjamin Strong, who would later head the Federal Reserve Bank of New York.
- A. Piatt Andrew, Assistant Secretary of the Treasury.
Attendee Frank Vanderlip later wrote in his autobiography,
“None of us who participated [in the secret meeting] felt we were conspirators; on the contrary we felt we were engaged in patriotic work… Yet, who was there in Congress [elected representatives] who might have drafted a sound piece of legislation dealing with the purely banking [Ruling Class] problem with which we were concerned?”
Aldrich was particularly fond of the feature of the private European central banks that their deliberations were secret, and not publically transparent. He intended to replicate this European feature of secrecy of the Fed, in his ensuing Congressional legislation, called the “Aldrich Plan.”
In other words, not only was the meeting on Jekyll Island to create the Fed a secret, but the future deliberations of the Fed’s Board of Governors would also be secret, when they met to manipulate interest rates and the money supply. [coin money].
Soon after the Fed went into business, in 1914, it was confronted with an economic collapse, and the Fed functioned as the lender of last resort to bail out banks, as it was intended, in the Aldrich Plan.
During the economic collapse of 1914, the New York Stock Exchange closed and major banks were insolvent.
Secretary of the Treasury William Gibbs McAdoo created emergency banknotes, in accordance with the Aldrich–Vreeland Act, and issued the new supply of money to the insolvent banks, via the Fed. [bailout].
The crisis abated only when three events took place:
- the U.S. Treasury intervened [to add reserves to the banking system].
- John D. Rockefeller contributed $10 million of his own fortune [to the reserves].
- J.P. Morgan, acting as self-appointed head of the financial system, prevailed on solvent New York City financial institutions, including his own, to extend a total of $25 million in emergency funds.
The Fed is a private bank, similar in banking functions to commercial banks, like WellsFargo or to investment banks, like JP Morgan Chase.
Just like other private banks, the Fed has shareholders, who buy an ownership interest in the Fed.
In exchange for their capital investment in the Fed, the shareholders receive a guaranteed, risk-free, rate of interest on their ownership shares, paid out from the profits of the Fed’s operations.
After the payment of interest to shareholders, and the deduction of other business operating expenses, the Fed gives the U. S. Treasury its bottom line net income.
In 2020, the Fed earned $90.5 billion in profits. Of this, $1.6 billion was paid out in dividends on stock owned by the member commercial banks.
As a private, for-profit business, the business model of the Fed is a fool-proof, guaranteed-profit enterprise, whose operations are guaranteed to make a profit, each year.
The left hand of the U. S. Treasury issues debt, which the right hand of the Fed buys and sells to outside investors.
The right hand of the Fed makes guaranteed profits, and the left hand of the U. S. Treasury obtains a share of the profits from the Fed at the end of each year.
The executives and directors of the Fed are self-selected members of the Ruling Class banking community, with a coherent social class awareness of their financial interests.
Of the 202 Director members of the Fed, during the 2008 crash, 73 were bankers, 54 were financial services members from brokerage houses and transfer agents, and 52 were from professional services, mostly lawyers, whose firms represent the banking industry.
Nearly 90% of the 202 directors were linked to the Ruling Class financial interests, and all of them possess a Ruling Class banker community social class perspective of what is good for the American banks.
The business model of the Fed is risk-free, and fool-proof. It is guaranteed never to lose money, because of its banking relationship with the U. S. government, and its ability to create money, out of thin air, during an economic crisis.
The operating, top line revenues of the Fed are independent of Congressional appropriations and beyond any concept of “the consent of the governed.”
The investors who buy the U. S. government bonds are buying a flow of future interest payments that make it worthwhile for them to sacrifice their consumption today.
Thus, debt-financed government projects are not paid for by the government’s creditors, who buy the government bonds.
The middle and working class classes in America pay for the future interest and principle repayment of the bonds through higher taxes.
As we describe in our recent book, America’s Final Revolution, the U. S. economy, since 1947, entered a permanent boom-bust-bubble economy, managed by the Fed, for the benefit of the American Ruling Class. [America’s Final Revolution: Reconstructing Jefferson’s American Dream of An Entrepreneurial Capitalist Society. GabbyPress, 2022].
“Since 1947, the Fed has manufactured a series of asset bubbles, caused by a sequence of easy money, followed by a policy of tight money, primarily by raising the rate of interest on overnight bank deposits, that are held at the 12 regional Fed banks. Our argument concludes that the Fed’s economic performance has resulted in a systematic series of boom-bust cycles, where the financial welfare of common citizens is devastated, while the privileged wealthy elite bankers escape unharmed. We conclude that the Fed’s arbitrary discretion to manipulate the economy by setting interest rates and manipulating the supply of money, must be taken away from them.”
During the plunder and investment speculation phase of the U. S. economy, the Board of Governors are directly responsible for causing the economic conditions of inflation and easy credit by their manipulation of interest rates and bank reserve requirements.
Their poor economic decisions, over the past 110 years, have caused the economy to collapse, on a regular, periodic basis. After each collapse, the Board of Governors act to restore the banks and corporations to their former economic social status by bailing them out.
The sequence of economic collapse follows a historically observable path.
First, banks and the U. S. Treasury Department create too much money, and too much loose credit.
The era of loose credit causes the Ruling Class to plunder national financial resources, and make worthless investments that do not create “real” economic growth.
But, the loose credit does allow the Ruling Class to rack up incredible profits during the bubble part of the era of plunder. The capital gains and paper profits on asset speculation, by the Ruling Class, are protected when the Fed bails them out, after the collapse.
The era of plunder, and investment speculation, ends in economic collapse, where common citizens suffer social welfare declines, while the Ruling Class escapes unharmed, because crony capitalism allows the government to bail them out, and make them “whole” again from their paper losses.
The period of economic collapse is preceded by a sharp contraction of both credit and the money supply, which causes commodity prices of farmers to collapse, and the income of common citizens to decline.
The Fed repeatedly overshoots the interest rate target, at the beginning of each plunder period, resulting in rampant inflation, which the Fed is required by law, to control. As a result, the Fed tightens money supply, the economy contracts, and inflation is brought under control, usually after about 3 years.
The Fed repeatedly overshoots the money supply target, leading to prolonged, avoidable, recessions.
The Federal Reserve Bank of St. Louis publishes the GDP-Based Recession Indicator Index, which looks at past data and measures the probability that the U.S. economy was in a recession during the indicated quarter.
The hindsight of the St. Louis Index is better than the real-time NBER estimate of the beginning of a recession which is based upon contemporaneous subjective data, which are usually not released to the public for several years.
The Index describes a perfectly symmetrical, recurring five year cycle of Fed induced economic chaos. The great benefit of this index is that its construction is entirely mechanical, and is based solely on real, not subjective, GDP data.
The economic performance of the Fed, described in the index, is not “based on the best interests of the nation,” as the Fed chairmen wrote in their WSJ op-ed, defending their performance.
Their performance is based upon stabilizing the global money and currency exchange system, and rewarding wealthy global banks, who engaged in risky speculative investments during the asset-based speculation period.
The Fed’s policies create unearned, rent-seeking, financial benefits that give the five biggest banks a competitive advantage in the cost of obtaining loanable funds over the 6000 smaller banks.
The Fed induced competitive advantage for large banks provides an unelected, illegitimate political power for the big banks to set national economic policy that is aimed at protecting global financial profits, not national domestic financial interests.
The Big Banks know that they can take excessive risks, during the plunder-bubble phase, because they know that the Fed will use tax dollars to bail them out when their loans and investments, during the bubble phase of the economy, go bust.
Richard Fisher, former President and CEO of the Federal Reserve Bank of Dallas,
“A dozen megabanks today control almost 70 percent of the assets in the U.S. banking industry. The concentration of assets has been ongoing, but it intensified during the 2008-09 financial crisis, when several failing giants were absorbed by larger, presumably healthier ones. [crony capitalism]. Today, these megabanks—a mere 0.2 percent of banks, deemed candidates to be considered “too big to fail”—are treated differently from the other 99.8 percent and differently from other businesses… Without fear of failure, these banks and their counterparties can take excessive risks.”
We supplement the data from the Federal Reserve Bank of St. Louis Index by adding the 110 year chronology of economic collapse manufactured by Fed’s monetary policy.
Panic of 1907. A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction. The fallout from the panic led to Congress creating the Federal Reserve System.
Panic of 1910–1911. This was a mild but lengthy recession. The national product grew by less than 1%, and commercial activity and industrial activity declined. The period was also marked by deflation.
Recession of 1913–1914. Production and real income declined during this period and were not offset until the start of World War I increased demand. Incidentally, the Federal Reserve Act was signed during this recession, creating the Federal Reserve System, the culmination of a sequence of events following the Panic of 1907.
1918 –1919. Post-World War I recession. Severe hyperinflation in Europe took place over production in North America. This was a brief but very sharp recession and was caused by the end of wartime production, along with an influx of labor from returning troops. This, in turn, caused high unemployment.
Depression of 1920–21. The 1921 recession began a mere 10 months after the post-World War I recession, as the economy continued working through the shift to a peacetime economy. The recession was short, but extremely painful. The year 1920 was the single most deflationary year in American history; production, however, did not fall as much as might be expected from the deflation. GNP may have declined between 2.5 and 7 percent, even as wholesale prices declined by 36.8.
1923–24 recession. From the depression of 1920–21 until the Great Depression, an era dubbed the Roaring Twenties, the economy was generally expanding. Industrial production declined in 1923–24, but on the whole this was a mild recession.
1926–27 recession. This was an unusual and mild recession, thought to be caused largely because Henry Ford closed production in his factories for six months to switch from production of the Model T to the Model A.
1929–March 1933. Great Depression. A banking panic and a collapse in the money supply took place in the United States that was exacerbated by international commitment to the gold standard. Extensive new tariffs and other factors contributed to an extremely deep depression. GDP, industrial production, employment, and prices fell substantially. A small economic expansion within the depression began in 1933, with gold inflow expanding the money supply and improving expectations; the expansion would end in 1937. The ultimate recovery, which would occur with the start of World War II in 1940, was credited to monetary policy and monetary expansion.
Recession of 1937–1938. The Recession of 1937 is only considered minor when compared to the Great Depression, but is otherwise among the worst recessions of the 20th century. Three explanations are offered as causes for the recession: the tight fiscal policy resulting from an attempt to balance the budget after New Deal spending; the tight monetary policy of the Federal Reserve; and the declining profits of businesses leading to a reduction in business investment.
Recession of 1945. The decline in government spending at the end of World War II led to an enormous drop in gross domestic product, making this technically a recession. This was the result of demobilization and the shift from a wartime to peacetime economy.
Recession of 1949. The 1948 recession was a brief economic downturn; The recession also followed a period of monetary tightening.
Recession of 1953. In 1951, the Federal Reserve reasserted its independence from the U.S. Treasury and in 1952, the Federal Reserve changed monetary policy to be more restrictive because of fears of further inflation or of a bubble forming.
Recession of 1958. Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957.
Recession of 1960–61. Another primarily monetary recession occurred after the Federal Reserve began raising interest rates in 1959.
Recession of 1969–70. The relatively mild 1969 recession followed a lengthy expansion. At the end of the expansion, inflation was rising, possibly a result of increased deficits.
1973–75 recession. A quadrupling of oil prices by OPEC coupled with high government spending because of the Vietnam War led to stagflation in the United States. The period was also marked by the 1973 oil crisis and the 1973–1974 stock market crash. The period is remarkable for rising unemployment coinciding with rising inflation.
1980 recession. The NBER considers a very short recession to have occurred in 1980, followed by a short period of growth and then a deep recession. Unemployment remained relatively elevated in between recessions. The recession began as the Federal Reserve, under Paul Volcker, raised interest rates dramatically to fight the inflation of the 1970s.
Early 1980s recession. The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. Tight monetary policy in the United States to control inflation led to another recession.
Early 1990s recession. After the lengthy peacetime expansion of the 1980s, inflation began to increase and the Federal Reserve responded by raising interest rates from 1986 to 1989. This weakened but did not stop growth, but some combination of the subsequent 1990 oil price shock, the debt accumulation of the 1980s, and growing consumer pessimism combined with the weakened economy to produce a brief recession.
Early 2000s recession. The collapse of the speculative dot-com bubble, a fall in business outlays and investments, and the September 11th attacks brought the decade of growth to an end.
2007 –2009. Great Recession. The subprime mortgage crisis led to the collapse of the United States housing bubble. Falling housing-related assets contributed to a global financial crisis, even as oil and food prices soared. The crisis led to the failure or collapse of many of the United States’ largest financial institutions: Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Citi Bank and AIG, as well as a crisis in the automobile industry. The government responded with an unprecedented $700 billion bank bailout and $787 billion fiscal stimulus package.
Generally, the periodic recessions end when increased government spending on the military-industrial deep state leads to a period of real economic growth. The wars are financed by the issuance of government bonds, which are bought by banks and wealthy families.
The issuance of bonds to finance the military-industrial deep state begins a new sequence of economic collapse.
In their economic analysis, “International Aspects of Financial-Market
Imperfections: The Aftermath of Financial Crises,” Carmen Reinhart and Kenneth Rogoff, (American Economic Review, Vol. 99, No.2 , 2009b) provide insight into the recurring cycle of economic collapse, manufactured by the Federal Reserve.
According to Reinhart and Rogoff,
“Severe financial crises share three characteristics:
- First, asset market collapses are deep and prolonged. Real housing prices decline an average of 35 percent over six years, while equity prices collapse an average of 55 percent over a downturn of about three and a half years.
- Second, the aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts, on average, over four years. In addition, output falls, from peak to trough, an average of over 9 percent, although the duration of the downturn, av eraging roughly two years, is considerably shorter than for unemployment.
- Third, the real value of government debt tends to explode, rising an average of 86 percent in the major post–World War II episodes…the main cause of debt explosions is not the costs of bailing out and recapitalizing the banking system. The main cause of debt increases are the inevitable collapse in tax revenues that governments incur as a result of deep and prolonged output contractions, and the countercyclical fiscal policies in advanced economies aimed at counteracting the downturn.
They explain the relationship between risky asset-based speculative investments and the risk-free bail outs by the Fed.
“So long as bank creditors can expect high returns on the upside, with implicit government guarantees against losses on the downside, they will lend too cheaply to risky poorly diversified banks, making overly high leverage (thin capital) an attractive strategy. Normal market discipline against risk-taking is thus significantly undermined… (see Roberts 2010). Already by 2002, according to one estimate (Walter and Weinberg 2002), more than 60% of all U.S. financial institution liabilities, including all those of the 21 largest bank holding
companies, were either explicitly or implicitly guaranteed.”
Nouriel Roubini. chairman of Roubini Macro Associates LLC, an economic consultancy firm, also describes the relationship between locking in profits during the asset bubble period with the Fed’s bailouts.
“Repeated cycles of asset bubbles and credit bubbles, leading to financial crisies driven by excessive debt and leverage in the private sector leading to excessive public sector debt accumulation, via socialization of private losses, that leads to twin risks of outright default or the use of the inflation tax through monetization of fiscal deficits at the federal level.”
After the economic collapse of 2008, The Fed bailed out the following big domestic and foreign banks:
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
Source: United States Government Accountability Office. GAO Report to Congressional October 2011.
For comparison with the 2008 collapse, the current 2022 cycle of asset speculation and bailouts will require the Fed to increase short-term interest rates to around 9.6%, and withdraw about $4 trillion dollars from the money supply.
Economist John Taylor came up with a formula that links the Federal Reserve’s benchmark interest rate to levels of inflation and economic growth.
His analysis of the current economic collapse is that the Fed fund rate needs to be 9.69% assuming 2% real neutral rates.
The problem currently, as described by economist Bedassa Tadesse, is that such aggressive monetary tightening with a focus solely on inflation containment, even at the cost of inducing recession, would require overall monetary tightening of about 11.6%.
There is no way that the Fed will be able to do years of Quantitative Tightening at a pace of $100BN per month…without pushing the US into a full-blown depression (especially since the recession has already officially started). But it will take a few months of -300,000 payroll prints for markets to pivot again, and realize that when Powell vowed the Fed would not even think about pivoting [to economic stimulus] in 2023, he was wrong… again… as usual.[emphasis added].
As we mentioned above, this economic performance by the Fed is not happenstance, and not the expected outcome of the price system in a competitive market economy.
The Fed works on behalf of America’s Ruling Class, and their function shifted from protecting the interests of American economic elites, to a globalist perspective, around 1992.
In other words, the Fed sees itself as banker for the new world order.
Our counter-argument against the Fed’s independence is based upon our observation that the workings and functions of the free, competitive market would lead to better Pareto Optimal social welfare outcomes for middle and working class citizens, than the private, secret, decisions of 12 members of the Fed’s Ruling Class.
The Fed’s 110 year economic performance has resulted in a systematic series of boom-bust cycles, where the financial welfare of common citizens is devastated, while the privileged wealthy elite bankers escape unharmed.
A better goal for national economic policy is to target increased rates of gross domestic private business investment, which leads to high rates of technological innovation, which create new future markets, which reduce wealth and income inequality.
In addition to removing the Fed’s discretion on setting short-term interest rates, the U. S. Congress should authorize the SEC to create a GDP futures currency market that would help bankers find the natural real rate of interest to charge each other in overnight bank loans.
If the GDP currency futures market creates actual interest rates that are above the natural interest rate, then less money will be lent by banks.
Conversely, if the currency future market creates actual interest rates that are below this natural rate, then lending should increase, and economic expansion should result.
The U. S. Congress should authorize the SEC to create regional capital market exchanges, in each major metro region to help entrepreneurial companies raise capital.
Entrepreneurial capitalism, not crony corporate capitalism, creates real economic growth, not the fake economic growth promoted by the Fed. Real economic growth is an unambiguous public purpose, that distributes income and welfare benefits to all social classes in the society.
The existing 12 Regional Fed Banks, which currently have no written Congressional mission statement, should be tasked with the regulatory and management oversight of creating the conditions for increased private capital investment in each metro region.
Re-focusing the Fed on the goal of economic growth, and the expected economic performance of a market-based interest rate would be vastly superior to the Fed’s erratic job performance of creating the ten year boom-bust economy, that devastates common American citizens, and is the political result of an unelected financial elite that has more authority over the future of the American economy than the President.
About Gabby Press: www.gabbypress.com
GABBY is short for The Great American Business & Economics Press. The political ideology of Gabby books is natural rights conservative. Rather than dwell upon the daily news of “he-said-she-said,” between Democrats and Republicans, our mission is to describe a pathway to the future for natural rights conservatives.
We believe there is only one path back to liberty.
In our new book, America’s Final Revolution, we argue that the differences between conservatives and Marxist Democrats are irreconcilable because the two visions of the American Dream are incompatible. No cultural or ideological values bind the two sides into a shared common understanding on the mission of the nation. We believe that a better idea, for conservatives, is to start over at the point in history of Jefferson’s document of 1776.
Read our 4-star review on Reedsy, the British book review website.
We are currently writing a new book, titled “George Mason’s America: The State Sovereignty Alternative to Madison’s Centralized Ruling Class Aristocracy.” We argue that common citizens would have been better off if Mason’s vision of decentralized individual liberty had been followed, rather than Madison’s centralized aristocracy. We provide a synthesis of Mason’s ideology of individual liberty, with James Buchanan’s constitutional rules, with Joseph Schumpeter’s entrepreneurial capitalist economy.