The Clash of Capitalisms: Keynes & Schumpeter Reclaim the Commons - Hayek & Friedman Crash and Burn

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From privatised water, rail, energy, and housing to AI-displaced labour, the neoliberal order falters — and emergence of Keynesian and Schumpeterian principles offer a new path to freedom, security, and dignity.

Keynes and Schumpeter understand something that Hayek and Friedman explicitly deny: capitalism is not morally neutral and cannot govern itself. For Keynes, markets do not self‑stabilise and unemployment is not a personal failing but a systemic outcome that destroys democratic legitimacy if left unauthorised; social provision is not charity but the currency of collective consent.¹ Schumpeter shows that innovation is not merely creative — it is destructive, permanently displacing workers and communities in a dynamic that economics must absorb, not celebrate.² Both locate economics within ethics and politics, asking not how efficient markets are, but whether they can sustain a society without tearing it apart.

Hayek and Friedman take the opposite view. They elevate markets from mechanisms of allocation to moral authorities, recasting suffering as natural outcome and inequality as virtuous signal. What Keynes and Schumpeter regard as political responsibilities, Hayek and Friedman treat as immutable natural facts demanding obedience. This is not academic nuance — it is a rupture in the moral framework of governance, where obedience to market outcomes replaces collective accountability as the criterion for legitimacy.

Under this view, work becomes a test of moral worth. Labour — any labour — is valorised. Hardship is taken as character discipline. Those pushed out by structural shifts are recast not as victims of systemic change but as personal failures. Neoliberalism sacrifices social responsibility to belief in markets as ethical arbiters.

This theology of markets cannot be democratically sustained in its pure form. In Chile under Pinochet, the Chicago School's neoliberal policy is imposed through authoritarian violence — wages crushed, unions destroyed, public sectors dismantled — because pure‑market rule cannot win consent on its own terms. This is not an aberration; it is a demonstration of what neoliberalism requires when it asserts markets as moral imperatives rather than tools of governance.

When the same logic arrives in Britain and the United States, it does not come with tanks but with policy. Thatcher and Reagan break unions, slash welfare, deregulate finance, and sell off public infrastructure. Water, rail, energy, and housing — the essential commons of collective life — are privatised, transferred from democratic stewardship into private profit streams. This is not reform. It is organised expropriation: public utilities built through collective investment turn into sites of monopolistic extraction where prices rise and investment lags, benefitting shareholders rather than users.³ Privatised water or energy companies in the UK, for example, have handed hundreds of billions to shareholders while families face higher bills and deteriorating services.⁴

This is enclosure in its modern form: the seizure of shared resources and their conversion into private revenue flows. Citizens become captive consumers paying for essentials that were once structured as rights, not profit centres. This is not market efficiency — it is organised extraction that erodes the very conditions of collective life.

The state does not retreat; it changes sides. Coercion morphs into bureaucracy. Workfare regimes, public/private partnerships, benefit sanctions, surveillance architectures, and moralised scarcity insist that survival still must be earned, even as the jobs that once anchored survival disappear.

At the heart of this order lies its defining injustice. It insists that dignity must be earned through labour, yet rewards ownership without labour. Owners of capital, landlords, rentiers, and financiers extract income detached from meaningful contribution while everyone else must fight for precarious work that is increasingly automated and insecure. Freedom flows upward; discipline flows downward. This is not hypocrisy. It is the system functioning exactly as it was designed.

Neoliberalism is not merely an economic doctrine; it is a political theology. Markets are omniscient; scarcity is sacred; failure is moral deficiency.

Artificial intelligence now lays this theology bare. AI decouples productivity from human labour; value is generated without jobs. Efficiency accelerates even as livelihoods evaporate — precisely the desert neoliberal theology never accounted for. The neoliberal response — harsher discipline, deeper exclusion — no longer even pretends to offer legitimacy. It can only punish despair with moral judgement.

Universal Wage is not utopia. It is institutional necessity. It recognises what Keynes and Schumpeter both understood and neoliberalism worked to erase: displacement is structural and inevitable; it is not moral failure. Keynes saw unemployment as a systemic condition requiring social protection to sustain democracy;³ Schumpeter saw displacement as continuous, requiring institutions capable of absorbing capitalism’s own disruptions.⁴ Universal Wage unites these insights by recognising independent human life beyond compulsory employment as legitimate.

Under Universal Wage, those displaced by automation are not treated as deviant, idle, or deficient. They are recognised as full members of society — creating, caring, learning, organising, experimenting, living outside the labour market without punishment. This is not idleness. It is the formal recognition of human life beyond work.

Most crucially, Universal Wage generalises the freedom already monopolised by elites. The wealthy are not required to justify their existence through labour; they are free to explore, fail, withdraw, and create. Universal Wage extends that freedom downward instead of enclosing it behind capital ownership.

In this frame, AI’s productivity is socialised rather than captured. Economic security becomes foundational rather than conditional. Public support ceases to be emergency relief and becomes the infrastructure of autonomy, creativity, care, and ecological repair. Markets persist; innovation continues; but dignity no longer depends on employment.

Neoliberalism claims inevitability. In truth, it is a moral narrowing enforced through enclosure, discipline, and fear. Universal Wage is the real innovation — not because it abandons markets, but because it restores legitimacy where neoliberalism destroys it. Where Hayek and Friedman demand obedience to markets, Keynes and Schumpeter demand responsibility to society. Where neoliberalism sanctifies suffering, Universal Wage restores dignity as the precondition of democracy. And where neoliberalism encloses commons — water, rail, energy, housing — Universal Wage points toward a future where the economy exists to sustain life, not extract from it.

In a world where work no longer anchors worth or survival, the question is no longer whether this argument is radical.

It is whether democratic life can survive without acting on it.

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Footnotes

1. Keynes on legitimacy and unemployment: Keynes, J.M. The General Theory of Employment, Interest and Money (Macmillan, 1936), Chapters 2–3, 10–12 — argues that full employment cannot be left to spontaneous market forces and that unemployment is a macroeconomic problem requiring collective solutions.

2. Schumpeter on destruction as structural: Schumpeter, J.A. Capitalism, Socialism and Democracy (Harper & Row, 1942), Part II — articulates the concept of “creative destruction,” emphasising that innovation inherently disrupts existing social structures and labour.

3. Privatisation effects on utilities and shared resources: Bayliss, K., Fine, B., & Robertson, M. “Privatisation, Inequality and Poverty in the UK,” International Journal of Public Policy, 2018 — documents how privatised utilities often prioritise shareholder returns over public service quality and affordability.

4. Empirical evidence of privatisation transfers: Booth, R. & Kollewe, J., “UK public paid nearly £200bn to shareholders of key industries since privatisation, study finds,” The Guardian (2025) — shows how privatised sectors transfer significant wealth to investors while consumers face higher costs.

5. AI, labour, and decoupling of productivity: Ng, A. & Brynjolfsson, E., “Artificial Intelligence and the Future of Work,” Journal of Economic Perspectives, 2025 — analyses how AI reduces reliance on human labour and challenges traditional social contracts around work.

The Grand Deception Policy: How GDP Hides Planetary Destruction in Plain Sight

 

Gross Domestic Product reporting (GDP) functions as the lingua franca of the global economy. States, multilateral institutions, and financial markets treat it as the primary indicator of economic performance. Fiscal policy, central bank mandates, sovereign credit assessments, and development assistance are routinely justified through GDP growth, while alternative indicators—such as the Human Development Index (HDI) or the Genuine Progress Indicator (GPI)—remain marginal to decision-making processes. In practice, GDP dominates how governments, corporations, and investors define “growth,” even as it systematically records ecological destruction, social harm, and resource depletion as positive economic activity.¹

Despite its use today, GDP was never intended to measure economic 'success'. National income accounting emerged in the 1930s as a tool to track aggregate output during the Great Depression. Simon Kuznets, one of its principal architects, explicitly warned that “the welfare of a nation can scarcely be inferred from a measure of national income.”² During the Second World War, statisticians working under John Maynard Keynes—including Richard Stone and Erwin Rothbarth — refined these accounting systems for purposes of mobilisation, planning, and resource allocation.³ Following the Bretton Woods conference, GDP was standardised as the global metric of economic performance and consolidated through the work of economists such as Colin Clark and Stone.⁴ What began as a limited accounting instrument gradually hardened into the dominant proxy for measuring prosperity itself.

This shift constitutes a profound conceptual error. A metric designed to measure the monetary value of market output has been elevated into the primary signifier of economic success, conferring legitimacy on policy while systematically obscuring social and ecological costs. The gross monetisation of a diminishing, finite asset base is recorded as “growth,” as though the biophysical foundations of economic activity were inexhaustible.

Nothing in the material world is exempt from limits—least of all natural systems subjected to continuous extraction. Nevertheless, mainstream growth economics treats the economy as if it operates independently of ecological constraints. This is not optimism; it is a category error. As ecological economists have long argued, the economy is a subsystem of the biosphere, not the reverse.⁵

GDP does not measure prosperity. It measures the aggregate market value of monetised transactions, irrespective of whether those transactions enhance or undermine human or ecological wellbeing.

Forests enter national accounts only when felled. Rivers register economically when dammed, or when polluted and commercially remediated. Human beings appear primarily as units of labour or consumption—productive when employed, valuable when sick enough to require treatment, visible when exhausted or repaired sufficiently to return to work. The value of oceans, lakes, soils, community cohesion, and ecological regeneration are not accounted for unless they are directly priced and sold.⁶

Under GDP accounting, a society can actively degrade its own life-support systems and still appear economically successful. War increases output through arms production and reconstruction. Oil spills generate cleanup contracts. Prison expansion boosts construction and employment. Chronic illness drives healthcare expenditure. Deforestation produces timber, pulp, and transport revenue while eliminating carbon sinks. Hurricanes, floods, and wildfires raise GDP through emergency response and rebuilding. This is not a misinterpretation of the data; it follows directly from the accounting logic of GDP.⁷

GDP tracks monetised flows, not depleted assets. A standing forest contributes nothing to national income; once destroyed, it generates measurable growth across extraction, processing, logistics, and finance. Resource exhaustion is treated as an “externality” until collapse forces recognition through crisis expenditure. In material terms, growth functions as liquidation.⁸

Karl Polanyi demonstrated that this outcome is structural rather than accidental. Growth depends on the dis-embedding of land, labour, and money from the social and ecological relations that sustain them. Land is reduced to property, labour to output, money to a self-reproducing abstraction. Once stripped of relational context, extraction proceeds with diminished moral and political visibility.⁹

Herman Daly removes any remaining ambiguity. Economies are physical systems governed by the laws of thermodynamics. Every increment of growth requires energy and material throughput and produces waste. When extraction exceeds regenerative capacity, growth becomes unequivocally destructive—regardless of what aggregate indicators report.¹⁰

Arturo Escobar identifies a further mechanism sustaining the growth paradigm: epistemic exclusion. Indigenous, subsistence, and care-based economies are marginalised not because they are inefficient, but because they reveal growth to be contingent rather than inevitable. These systems are neither utopian nor conflict-free, but they demonstrate that economies need not be organised around perpetual throughput and growth.¹¹

GDP persists because it concentrates power while exporting the costs of growth—onto extraction zones, racialised labour, degraded ecosystems, and future generations absent from national accounts. Growth appears clean only because its violence is spatially, socially, and temporally displaced.

If this is what prosperity looks like, the central danger is not collapse alone.
It is the continued misrecognition of destruction as success.

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Footnotes

1. Stiglitz, J. E., Sen, A., & Fitoussi, J.-P. (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress.

2. Kuznets, S. (1934). National Income, 1929–1932. U.S. Senate Document No. 124.

3. Stone, R. (1951). The Role of Measurement in Economics. Cambridge University Press.

4. Clark, C. (1940). The Conditions of Economic Progress. Macmillan.

5. Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Harvard University Press.

6. Waring, M. (1988). If Women Counted. Harper & Row.

7. Fioramonti, L. (2017). The World After GDP. Polity Press.

8. Daly, H. (1996). Beyond Growth. Beacon Press.

9. Polanyi, K. (1944). The Great Transformation. Beacon Press.

10. Daly, H. & Farley, J. (2011). Ecological Economics: Principles and Applications. Island Press.

11. Escobar, A. (2015). Encountering Development. Princeton University Press.