part0015

From a macro-perspective, innovation-based growth is the key mechanism of capitalism for coping with social contingencies as well as with its extra-social environment. A growing economy provides the basis for the settlement of class conflicts and for social integration, as well as for the progressive mastery of nature. It is not only the economic system in a narrow sense that depends on growth, but governments as well. For the latter, growth is a crucial variable, as it determines the tax revenues required to finance the entire range of state activities, including the maintenance of material infrastructure, welfare expenditures, scientific research, defence and education. Almost all social sub-systems and most social activities depend directly or indirectly on financial resources, which only a growing economy can provide. In this sense, growth can be considered to be a social imperative in capitalist societies, though it often has destructive repercussions on society as well as on the natural environment.

Viewed from a larger historical perspective, growth is an extremely singular phenomenon, which had been confined largely to the era of disembedded markets and industrial capitalism during the last two centuries. If we take Angus Maddison’s study (Maddison 2001) as a starting point, stationary reproduction with only small and gradual adaptions (and, of course, interruptions due to wars, diseases and natural disasters) had been the rule during almost all of pre-capitalist history. Even the Western European economies, which are usually considered the ‘seedbed’ of capitalism, grew only at a very slow pace (0.15 percent annually) during the period 1500–1820. After 1820, however, a veritable ‘growth explosion’ could be observed, first in Western Europe and the ‘Western offshoots’ of Europe (North America, Australia, New Zealand), and then successively in other world regions too. While almost stagnating in earlier times, per capita growth in the world soared to annual rates of 0.53 (1820–1870), 1.30 (1870–1913), 0.91 (1913–1950), 2.93 (1950–1973) and 1.33 (1973–1998) percent (Maddison 2001: 126). During the entire period, the world’s per capita income rose by a factor of eight-and-a-half.

The growth process developed very unevenly across the world’s regions; moreover, it was interrupted by recessions and severe crises. Nevertheless, it is evident that, after 1820, growth became the ‘normal’ mode of economic reproduction, replacing the traditional stationary pattern (Broadberry and O’Rourke 2010). Although the take-off of growth started in the western hemisphere, other world regions caught up in the late nineteenth century, detaching the growth process from its western origins. Due to the wars and economic crises of the first half of the twentieth century, growth declined significantly during this period. By contrast, the period after the Second World War was characterised by an unprecedented global boom. Since the last quarter of the twentieth century, the growth rates of the mature industrial economies of Europe, North America and Japan declined again, while the emerging economies – particularly in East Asia – became more dynamic. Today, emerging economies such as those of China, Indonesia, Thailand and Vietnam – and in recent times even the countries of sub-Saharan Africa – are showing much higher rates of growth than the mature industrial economies (4–7 percent vs. 1–2 percent; see IMF 2018). There can be no doubt that capitalist growth today has become a genuinely global phenomenon based on the worldwide integration of markets and no longer bound to any particular culture or civilisation (Deutschmann 2016b). At the same time, the unevenness of growth around the world has led to a dramatic increase in the inter-regional spread of per capita income, from 3:1 (Western Europe to Africa in 1820) to 14:1 and ultimately 19:1 (Western Europe and Western Offshoots to Africa in 1998; Maddison 2001: 126). The growth explosion coincided with a population explosion, though population growth (5.6-fold during the period 1820–1998) fell behind the growth of per capita income. While the population explosion can explain partly the rise in the absolute levels of income, it cannot account for the rise of per capita income. According to common definitions, only growth due to higher productivity, which implies a higher level of income per person, is considered to be ‘true’ growth.

‘Productivity growth’, however, is a highly abstract statistical artefact, which contains no information about the real, empirical factors underlying growth. It suggests the fiction of an increasing physical output of a given collection of goods per unit of time, while concealing innovation as the truly important factor. Growth does not result simply from a proportional increase of a given set of products, but from permanent quantitative and qualitative changes in the composition of the output, reflecting itself in a higher valuation of production in the markets. Innovations take many forms, including new products, new technologies, new systems of organisation and logistics, and new market explorations; their reach extends from everyday improvements to new technological paradigms revolutionising entire sectors, or even the total economic system. The permanent contest of capitalist firms for innovation (Baumol 2002) is the main factor promoting the expansion and disembedding of markets in all of their four dimensions.

Because of their multi-dimensionality, it is extremely difficult to measure the impact of innovations on the market value of the social product. Therefore, quantitative economic models such as ‘y growth = x capital + u labour + v knowledge’ are of little help to understand the innovative process. Of course, capital, labour and knowledge are required to generate innovations, but the real question obviously is: what precise kind of capital, labour and knowledge? As Joseph Schumpeter, Frank Knight and Friedrich Hayek have emphasised, such questions cannot be answered on the basis of abstract models, but only from the situational expertise of the historical actors. It is only in the recent past that intensive attempts to combine theoretical and historical analyses of capitalist growth have developed (Freeman and Louca 2001; Osterhammel 2009: 909–910; Broadberry and O’Rourke 2010). Apparently, qualitative and historical studies are more promising when it comes to explaining the success of innovations than are studies focusing on general, economic or evolutionary ‘laws’. 1 Moreover, growth is not understood sufficiently when conceptualised merely as an outcome of political action. State intervention can promote the growth process by providing an institutional framework that favourable to innovation; however, it cannot control it. Genuine innovations cannot be made by political decisions. The state could play a key role only in ‘late-comer societies’, such as Japan, the Soviet Union, or China, which took over ready-made technologies invented and developed elsewhere. Last, but not least, growth does not come from intentional individual action alone. When consumers go shopping, or firms invest in new machines, their intention is to satisfy their wants or to improve their market position, not to make the economy grow. The popular moral critique of growth, tracing growth back to excessive consumer wants (e.g. Gross 1994; Skidelsky and Skidelsky 2012) suffers from shortcut methodological individualism.

Thus, neither the macro-, nor the micro-perspective alone is sufficient to analyse growth. The most promising approaches from a sociological viewpoint are those conceptualising growth as a social emergent that develops from largely unintentional interactions between the macro-and micro-levels of society. As argued above ( Chapter 8 ), innovation is based on creativity; creativity, however, is a genuinely individual capacity that develops in an unforeseeable way and should not be equalised with rational action. The uncertainty inherent in capitalist dynamics goes back largely to the incalculability of entrepreneurial innovations and their economic and social consequences. An appropriate way to analyse macro–micro interactions in a social system is dynamic multi-level analysis (DMA), which aims to clarify the feedback processes between individual actions and their structural conditions (Coleman 1990; Esser 1993). 2 Usually DMA proceeds in three main steps (Esser 1993, 1999): first, a reconstruction of the social situation of the actors, which in its turn is to be carried on from the two-fold perspective of the scientific observer, on the one hand, and of the actors themselves, on the other one (the ‘logic of the situation’, according to Hartmut Esser); second, a theoretically based interpretation of individual action in the given situation (the ‘logic of selection’); and third, an explanation of the newly constituted collective situation from the aggregated effects of individual actions (the ‘logic of aggregation’). The three steps can be iterated to reconstruct the long-term dynamics of social processes. DMA thus allows one to view the feedback process between the institutional and social framing of individual action, its emergent effects, and its unintended collective consequences.

In my analysis of growth, I will follow this approach. To anticipate the line of argument: capitalist growth is a collective emergent based on the aggregate effects of innovative actions and entrepreneurial projects; entrepreneurial creativity, however, is motivated largely by the prospect of market-based social advancement. To become a force of growth, the capitalist polarisation of classes needs to be socially framed in a way that makes it appear individually surmountable . The innovative capacity of capitalism depends largely on its potential to generate entrepreneurial careers that are capable of crossing the class dichotomy individually while leaving it intact collectively . The creative performances of entrepreneurs and workers, in turn, nourish the profitability of capital and, with it, the expansion of markets and macro-economic growth. The profit of capital, thus, does not come simply from the quantitative amount of surplus labour, as Marx contended. What is vital, rather, is the creative capacity of labour (as defined above in Chapter 4 ). I am arguing, along with Joseph Schumpeter and Werner Sombart, that profit comes from new products as well as from technical and logistical combinations, which are based on the innovative performances of entrepreneurs. Profit is a premium on the temporary monopoly which the successful entrepreneur enjoys. Moreover, as I emphasise, beyond Schumpeter and Sombart, the creative commitment of employees and their thousands of ‘small’ ideas in implementing innovations is vital for profitability and growth too – in this respect, Marx was right. Capitalist growth, in other words, is the aggregate effect of the quest of entrepreneurs and employees to cope creatively with the institutional and structural inconsistencies of their situations. The continuation of the Sisyphean task depends on the capacity of capitalism to generate entrepreneurs and entrepreneurial careers, which, however, is not likely to persist. Rather, as I am going to show, it tends to undermine itself not only due to diminishing population growth, but also due to unintended collective consequences of structural upward mobility. The biggest challenge for capitalism, thus, lies in its own success.

The logic of the situation circumscribes the structural conditions of society relevant to explaining capitalist growth, as well their cultural and subjective framing. Again, my starting point is the disembedding process of markets, Polanyi’s ‘Great Transformation’, which began to develop on a large scale around the turn of the nineteenth century. As I have argued above (Chapter 2 , Chapter 4 ), the process of disembedding was the process of markets becoming universal in their territorial, social, material and temporal dimensions. Markets expanded across national borders; they started to permeate social relations, creating a class dichotomy between those owning wealth and those owning nothing but their labour power. With regard to the structural conditions of growth, the capitalist class dichotomy, with capital as the positive pole and labour as the negative pole of wealth, deserves particular attention. It is only the prospect of profit that motivates capital owners to invest their capital. Without profit, there would be no reason for the owners of capital to expose their property to the risks of circulation and to enter into the productive process at all. With workers possessing the means of production themselves and with the incomes of capital and labour coinciding, there would be no need for growth and little danger of recession. At the same time, there would be less market pressure for efficiency enhancement and innovation, though both would remain possible. The counterpart to the exclusive attribution of property rights over the material factors of production to a separate class of owners is the exclusive ‘ownership’ of the human factors by those owning nothing. The historical precondition for the emergence of formally free labour was (and continues to be) the expropriation of the rural workforce from their land, as I have maintained above (Chapter 4 ) in agreement with Marx. From an ecological perspective, a further precondition was (and is) a rapidly growing population based on the agricultural revolution and giving rise to a large young labour force competing intensively for gainful employment and market success.

Moreover, it is the ambivalent, double-bind character of capitalist property relations that appears to be relevant here. On the one hand, the class dichotomy seems to be collectively closed due to the superior market power of wealth owners. This means a primary inequality with regard to social opportunities (i.e. social rise), which is acerbated by the transmission of fortunes in families and the factual amalgamation of capitalist class positions with inherited pre-capitalist status hierarchies (Beckert 2004). On the other hand, the class dichotomy appears individually open, as the affiliation of individuals to classes is not fixed formally by social origin or ascription, such as in pre-modern status hierarchies, but depends solely on factual ownership of marketable resources. Individual advancement from the working into the wealthy classes appears possible, either within the individual life course, or at least within a few generations. Due to the global character of markets, such careers may no longer occur only within national boundaries; rather, they can also follow transnational paths. The capitalist class dichotomy turned out not to be as hermetically closed for workers as Marx had expected. At least temporarily, and due not least to the impact of social-democratic reforms, it took on the character of an incentive structure for social advancement. Actually, this meant a historically new type of social rise, entrepreneurial advancement, based not on vested privileges, educational privileges or bureaucratic rules, but on individual success through the market. It is important here not to make a sharp distinction between self-employed entrepreneurs in a legal sense and employees striving for market success and social advancement within firms.

Though social advancement across the class dichotomy is possible, its actual chances are often thin. The basic message coming from the structural context, thus, is an ambivalent one. The class dichotomy appears to be open and closed at the same time ; its formal openness gives rise to aspirations for social climbing, making people struggle for success despite the factual inequality of social chances. Arlie Hochschild has aptly illustrated this constellation with her metaphor of social climbers waiting patiently in a line leading up a hill and striving to reach the sanctuary of the American Dream located on the top of the hill (Hochschild 2016: 136). In other words, to enter paradise, praying and singing are not enough, as in the case of the traditional religious believer; one has to work hard for ascension. Thus, despite the social polarisation between capital and labour, the liberal dream of freedom materialises to some degree; however, it does so at the price of instituting a struggle for social advancement as a social imperative for the majority of the population.

Inequality of wealth is a structural precondition for entrepreneurship; without inequality, there would be no incentive for the struggle for advancement. To leave room for upward mobility, however, the class dichotomy should not be too rigid and unequal, as is shown by a quantitative analysis performed by Lippman and colleagues (2005) of the relationship between inequality and entrepreneurship. Based on an internationally comparative analysis of the data of the Global Entrepreneurship Monitor (GEM), the authors found a significant positive correlation between the level of (national) wealth inequality and the frequency of early entrepreneurship (in terms of the workforce share of persons engaged in founding or managing start-up firms). To identify genuine entrepreneurship, the GEM survey distinguishes between ‘necessity-based’ and ‘opportunity-based’ entrepreneurship (GEM 2014). While in the first case the motive to start a business lies in the sheer absence of alternative bases of subsistence, the main motive in the second case has to do with perceived economic chances. As it turned out in Lippman and colleagues’ (2005) study, the frequency of necessity-based entrepreneurship tends to increase linearly with wealth inequality. By contrast, the correlation of wealth inequality with opportunity-based entrepreneurship shows a curvilinear pattern, with nascent entrepreneurship rising with inequality but declining again beyond a medium level of inequality. As the authors conclude, it appears that only ‘moderate levels of inequality do help opportunity-based entrepreneurship to flourish. Countries with high levels of inequality do not experience as much opportunity entrepreneurship, because people lack the resources and information required to take advantage of opportunities essential for such activity’ (Lippman et al. 2005: 15). This confirms the importance of intermediate social layers with regard to generating ‘genuine’, opportunity oriented entrepreneurship. A highly polarised social distribution of wealth fosters necessity-based entrepreneurship, but is detrimental to genuine, opportunity-based entrepreneurship. Entrepreneurship as an option for social advancement via the exploration of innovative opportunities is most likely to occur under conditions of moderate wealth inequality and the existence of financially stable middle classes.

To mediate the process of entrepreneurial rise, and to render it economically productive, however, further institutional conditions beyond the class-based distribution of property rights are required. The innovation contest may be carried on by violence and illegal means, as in the case of many emerging and developing countries. Workers may be not truly ‘free’ due to extreme poverty, or due to informally continuing master–servant relationships. As I argued above ( Chapter 4 ), the disembedding process can become economically productive only under the paradoxical condition of a parallel ‘re-embedding’ of markets into additional institutional structures at the local, regional and national levels, such as industrial relations, labour laws, education, and social security systems. Recent institutional theories of growth, again, have emphasised the relevance of these structures. For Douglass North (1990), the key factors for promoting growth are a meritocratic culture and a strong state being able to guarantee private property rights and to contain political corruption. In a similar vein, Daron Acemoglu and James Robinson stressed the importance of ‘inclusive’ political institutions setting incentives for economic entrepreneurship, in contrast to ‘extractive’ institutions existing solely for the enrichment of small circles of elites (Acemoglu and Robinson 2012). Xavier Sala-i-Martin and Elsa Artadi developed a more elaborate model built on three groups of institutional factors relevant for growth, which they called ‘basic requirements’, ‘efficiency enhancers’ and ‘innovation and sophistication factors’ (Sala-i-Martin and Artadi 2004). ‘Basic requirements’ include elementary material infrastructure, a minimum level of personal and legal security, macro-economic stability, and a workforce with a basic education. The category of ‘efficiency enhancers’ circumscribes conditions such as an efficient regulation of labour, commodity and financial markets, an ability to adopt and implement new technologies, and an elaborated system of secondary education. ‘Innovation and sophistication factors’ include an advanced research infrastructure at the corporate and the societal level and a superior level of human capital and academic education. While cross-cutting national, cultural and civilisational differences, Sala-i-Martin and Artadi’s model aims to describe different degrees of competitiveness and growth potential at the national and the company level. Basically, three kinds of economies are distinguished: developing (‘factor-driven’) economies can offer not more than the basic requirements for growth; emerging (‘efficiency-driven’) economies rate high with regard to ‘basic requirements’ and ‘efficiency enhancers’; and industrial (‘innovation-driven’) economies show high scores in all three dimensions.

The institutional structures identified by North and Sala-i-Martin and Artadi, however, do not basically change the ambivalent character of the incentive structure embodied in the capitalist class dichotomy. The guarantee of private property rights, for example, has a different meaning for capital owners and for employees. While capital owners are interested primarily in ‘negative’ guarantees, such as protection against force and fraud; low taxes; and a fair and efficient public administration, such provisions are not sufficient for employees. What is no less important for them are state interventions to guarantee positive ‘social rights’ (to use T.H. Marshall’s well-known terminology; see Marshall 1950), including the institutionalisation of collective-bargaining systems, public education, social insurance schemes, and social aid. Without such support systems, employees would be subject immediately to the hazards of markets and would have little incentive to invest in their qualifications and to work hard for social advancement. The wealth owners, in their turn, oppose the high tax and social insurance burdens created by the welfare state, which they view as an illegitimate curtailment of their property rights and of the employer’s prerogative. Thus, the state finds itself caught up in a conflict of interests: whichever definition of property rights is applied, state interventions will always be both supportive and detrimental to the growth process at the same time.

A similar dilemma can be observed in the field of labour market institutions and qualification systems. It is a commonplace of labour market theory that labour markets are not homogeneous, but are divided into different segments with diverging levels of institutional regulation. A well-known segmentation model distinguishes between ‘secondary’ and ‘primary’ labour markets, the latter in their turn being divided into occupational, internal and ‘network’ labour markets (Marsden 1999). While secondary markets are lightly regulated, characterised by low levels of pay and skill, external flexibility, and rigid job definitions, primary markets are highly institutionalised, distinguishing themselves by high pay and qualification levels, internal flexibility, and long-term career and qualification prospects (Gordon et al. 1982; Sengenberger 1987; Marsden 1999). It is not the first, but the second type of labour market which is dominant in innovative and technologically advanced firms. Primary (network, internal as well as occupational) labour markets offer greater chances for employees to learn, to develop skills and innovative ideas, and to advance, thus contributing to the ‘dynamic capabilities’” (Teece et al. 1997) of firms. At the same time, primary labour markets are burdening firms with high fixed costs, thus creating incentives to externalise employment, to cut wages and to downsize bureaucracies. Deregulation and downsizing, however, tend to be detrimental to employee commitment, and are likely to endanger firms’ innovative potential.

Another similar dilemma has to do with gender roles and family structures. For Schumpeter, the traditional pattern of gender roles, with women concentrating on domestic duties and men taking on the role of breadwinner, constituted an indirect precondition for an entrepreneurial career. It is only an intact family and the will to build a dynasty that can motivate the entrepreneur and give meaning to his projects, even beyond his death. Without the background of his family and his wife staying at home, the entrepreneur would feel no strong commitment to his mission. Therefore, entrepreneurship would crumble as soon as women were to detect their own market potential (Schumpeter 2003 [1942]: 156–157). Yet, women started to enter into that process even in Schumpeter’s time. Today, the traditional gender arrangement, preventing – as it is being criticised – one half of the population from taking their chances, has largely vanished. Though women are still underrepresented in self-employment and nascent entrepreneurship (OECD 2013), the social norm of entrepreneurial advance applies to men and women alike. 3 However, women in their turn are in need of family support too when devoting themselves to entrepreneurial careers – at least as long as they do not renounce having children. A possible solution to the dilemma is to outsource homework to externally hired service workers, with the result of a further commercialisation of the family sphere. For the less affluent, the only possible remedy again lies in the state and public childcare facilities.

Beyond the issue of gender roles, historical research has often pointed to the importance of family support and family networks for nascent entrepreneurs’ success (Croner 1962; Kocka 1975, 1982; Gall 2000; Berghoff 2004; Nasaw 2006; Lesczenski 2008; Stamm 2013). The family is important as a provider of capital, for marriages are often arranged with a view to potential business synergies. Core tasks of firm governance, such as the provision of capital, management, and the exploration of new business fields, are assigned frequently to relatives or close friends; trust and trustworthiness are vital when it comes to managing the challenges associated with entrepreneurship. Even in highly industrialised countries, family firms constitute the dominant type of enterprise (Granovetter 2005b: 441). Beyond the family, ethnic, religious and gender affiliations are important preconditions for establishing trust-based relationships. Empirical studies on start-up teams in the United States have revealed a strong inclination towards social homogeneity, 4 and despite all campaigns to promote ‘diversity’, little seems to have changed in the underrepresentation of women, Hispanic Americans and African Americans in the management of American firms (Dobbin and Kalev 2016). Social homogeneity, however, does not only provide opportunities, but also traps, as it can block innovative potential and it can lead to a selective perception of market opportunities. Despite the importance of network support for nascent entrepreneurs, it is equally important for them to distance themselves from excessive in-group claims. Entrepreneurs need to maintain a ‘balance between coupling and decoupling’ (Granovetter 2005b), that is, to build trustful relationships with external partners and customers without losing their network support – a balance, which often comes down to trying to ‘square the circle’.

Again, all of this confirms the hypothesis of the ‘double-bind’ character of capitalist institutions: while the distribution of economic, social and cultural capital is polarised and strongly uneven at the collective level, the class structure appears open at the individual level. Individual advancement aspirations, thus, are encouraged and blocked at the same time. From this background, the following question seems vital: how do individuals perceive their actual chances of entrepreneurial advancement? Here, we arrive at the second step in the reconstruction of the logic of the situation, namely, the analysis of cultural and subjective framings.

The structural conditions of the capitalist economy as analysed by scientific observers will certainly not be completely different from how they are perceived by the historical actors themselves. Nevertheless, the perceptions of the latter cannot be expected to be a one-to-one copy of the first. As Hartmut Esser (1999) argues, the analysis of perceptions and their cultural framings require its own separate enquiry, one that goes beyond the analysis of class structures. Observations are always selective, and the selectivity of the scientific observer is likely to be different from that of the actor himself or herself. The scientific observer in turn will have to take this difference into account when analysing the actor’s perceptions from a reflexive perspective (Schütz 1971: 6–7). As Alfred Schütz argues, a main difference between scientific and everyday knowledge is that the latter is much more subject to the consistency imperatives of practical action; hence it is less tolerant of contradictions and ambiguities. In comparison to the scientific observer, the life-world actor is much more pressed to homogenise his or her views and to disregard all aspects that do not fit into their chosen framework. Obviously, these insights are relevant with regard to structural conditions of action in capitalist class societies too. Since these conditions, as we have seen, have a contradictory character and are subject to a ‘double bind’, it cannot be expected that they will reflect themselves one-to-one in the practical consciousness of actors, be they capitalists, entrepreneurs, managers or employees. Rather, the subjective perceptions and their cultural framings will show a trend towards selective homogenisation, depending on the relative position of actors in the class dichotomy. Moreover, as the class dichotomy is internally stratified according to criteria of education, occupation, ethnicity, gender, and so on, corresponding differences in subjective framings are to be expected too.

Under which conditions is the ‘double-bind’ of capitalist class relations likely to reflect itself in entrepreneurial frames of individual action? There can be no doubt that entrepreneurial orientations are influenced not only by class positions, but also by a variety of other social and cultural contexts, including religious ones. For instance, the individual orientation towards financial success, as a precondition of entrepreneurship, certainly is not a simple reflection of class structurs, but also depends on overarching cultural traditions. In his seminal work on the rise of capitalism, Werner Sombart showed how the ‘capitalist spirit’ of the early merchant classes developed historically under the conditions of the urban culture in Western European cities well before the Great Transformation of the early nineteenth century and before the emergence of the modern capitalist class dichotomy. Religious beliefs, such as the ethics of ascetic Protestantism, had been only one factor behind this cultural transformation amongst others (Sombart 2002: 151–152). The emergence of capitalist entrepreneurship, nevertheless, would have been unthinkable without the religious and moral changes in the seventeenth and eighteenth centuries that gave rise to a ‘disciplinary’ society (Tawney 1926; Taylor 2007: 90–91); in this respect, Max Weber’s interpretation of ascetic Protestantism as a catalyst for capitalist entrepreneurship remains central. In advanced capitalism, however, the influence of genuine religious motivations on entrepreneurship is much more uncertain, as Weber himself had emphasised. Contemporary researchers analysing the motives of nascent entrepreneurs, too, found it difficult to differentiate between genuinely religious motivations and other motivations (Dodd and Gotsis 2007).

Robert Merton’s classic analysis of the concept of ‘anomie’ (Merton 1968: 127–128) offers an alternative starting point from which to explore the socio-cultural background of entrepreneurship in advanced capitalism. According to Merton’s model, individuals find themselves in anomic situations if they lack access to the legitimate means of reaching institutionalised social goals. Since they share these goals, they have no choice but to opt to use illegitimate means to achieve them, or at least to pursue their goals around the edges of the law (the pattern of ‘innovation’). Merton’s analysis focuses on ‘deviance’ in the sense of illegal behaviour. However, the ‘innovation’ pattern can be extended also to deviant behaviour in an economic sense: entrepreneurship as discussed above. Just as Merton’s innovative actor cannot succeed without breaking or creatively re-interpreting the law, the entrepreneur cannot advance and achieve his or her aim of profit without disrupting or creatively re-arranging given economic routines.

According to Merton’s model, the supreme social goal in capitalist societies is financial wealth. A conflict between the goal and the available means will surely not occur at the level of the top rich, the elites and the upper middle classes. Here, neither the goal nor the access to means appear problematic; thus, ‘conformity’ in Merton’s sense seems to be the most likely pattern. Innovation as a pattern of economic action is equally unlikely to emerge at the bottom of the class dichotomy, that is, on the level of the socially marginalised and the lower strata of the working class. Though they experience the double-bind of capitalist class relations, the members of the underclass are hardly susceptible to the illusion of social advance, ‘ritualism’ ‘retreat’, or ‘rebellion’ being the most likely patterns. People in traditional working class milieus, too, usually do not see realistic options to solve the means–end conflict individually. Rather, they tend to develop a defensive stance about their interests, which they try to pursue collectively.

By contrast, middle-class individuals, including not only the self-employed, but also white-collar and qualified blue-collar workers, tend to view their personal chances in a more positive light. To bridge the gap between ambitious personal objectives and limited resources, they are more inclined towards ‘innovative’ ways of adaptation. This does not only include an extraordinary work ethic, but also ambitious styles of consumption enacted by social climbers trying to anticipate the social status they are striving after (McCracken 1988; Calder 1999; Deutschmann 2012b). The pattern of economic innovation is most likely to occur in the middle and lower middle classes, which include immigrants striving for social integration and success. This conclusion is in line with the above-cited quantitative findings of Lippman and colleagues (2005) about the correlation between social inequality and entrepreneurship. While the inconsistency between goals and accessible means is felt most clearly in the middle layers of society, the confidence in one’s own capabilities to overcome social barriers tends to be high enough. This conforms with the empirical observation that entrepreneurs – as a rule – do not come from the lower working classes. Self-recruitment notwithstanding, entrepreneurs often have a petty-bourgeois or middle-class background (Sombart 1955[1902]: 19–20; Bendix and Howton 1978; Kaelble 1978, 1983; Berghoff 2004; Mokyr and Voth 2010: 28–29). Moreover, as mentioned above, the entrepreneur is not necessarily a self-employed person. He or she can be also an ‘intrapreneur’, building their career on innovative performances in their job as an employee, and advancing in internal, vocational or project labour markets (Kanter 2000; Marsden 1999; Voss and Pongratz 1998). Even employees, who have abandoned the goal of upward mobility for themselves, may put their hopes on the success of their children. This corresponds to the phenomenon of the embourgeoisement of the working class after the Second World War, which had been a key theme of industrial sociology in the 1960s and 1970s (for the United Kingdom, see Goldthorpe et al. 1968; for Germany, see Mooser 1983). As Schumpeter had maintained, entrepreneurs are not a class, but a category of individuals motivated by the prospect of social advancement.

The social framing of capitalist entrepreneurship varies considerably between regions, sectors, nations and cultures. The original ambiguity of the institutional constellation, however, cannot be neutralised completely on the level of cultural framings. Rather, it reproduces itself in an internal inconsistency in the frame itself. The entrepreneur is faced with a complex world of promises, chances and risks, which can almost never offer a guaranteed path to success. Uncertainty is a key characteristic not only of the situation of the entrepreneur, but also of the situation of the capital owner making investment decisions, be these investments in the form of loans or shares. While the entrepreneur usually needs an advance of capital or credit to finance his or her projects and thus will try to communicate his visions and plans in a promising light, the capital owner has to assess the chances that his or her capital will flow back with profit. How do economic actors actually cope with conditions of uncertainty, as they are prevalent in capitalist markets?

As argued above ( Chapter 4 ), rational choice (RC) theories cannot be of great help here, as entrepreneurial action fails to meet the former’s analytical premises. Neither is the actor fully aware about his or her own preferences, nor are the outcomes of potential action known and open to evaluation. The actor himself or herself is deeply involved in the perplexing, contradictory nature of the situation. He or she first has to disentangle himself or herself from the context and to come to a consistent definition of the situation as a precondition for developing an adequate strategy. RC concepts appear too narrow to understand and conceptualise such processes; instead, pragmatist concepts appear more promising (Beckert 2002; Lester and Piore 2004; Deutschmann 2009a, 2011a; Stark 2009). As noted above, this is not to deny the relevance of RC theories in general. However, RC theories cannot be applied to the innovative process as a whole, but only to its final stage, with a stable and socially accepted definition of the situation and clearly articulated options for action already having been achieved.

According to Schumpeter (1991 [1947]: 411), entrepreneurs need to act ‘creatively’, not only ‘adaptively’. What does that mean exactly? To enter the market, the entrepreneur first has to build his or her ‘niche’ (White 2005), that is, a unique profile of competencies, which can bring him or her as close as possible to the position of a (temporary) monopolist. If there is a ‘logic’ to the process of building niches, it is not one of rational choice but of ‘enquiry’, to use John Dewey’s (1938) terminology (as cited above in Chapter 4 ). The actor will ‘test’ different possible definitions of the situation by comparing himself or herself with the competition; only gradually will he or she be able to establish a consistent position in the market that will allow him or her to take part in the competitive process. The entrepreneur does not simply exploit the chances given to him or her in the given situation; what happens, rather, is a process of mutual adaptation between the actors, their situation and their perceptions. In practice, this means a tough contest between rival projects, challengers and incumbents, often carried out with means at the edge of or even beyond the law and ending with the elimination of not a few of the players (Welskopp 2017). The common view of markets being guided by rules of competition is not very convincing, since it does not take account of the emergence of new market players, which is hardly governed by any rules except for the Darwinist principle of the survival of the fittest. The very notion of competition would make little sense if competition were to be perfect. Price competition hardly offers a sufficient basis for new players to succeed in the market. Their products must be also qualitatively different – qualities which need to be discovered and tested in prior processes of niche-building. Product idiosyncrasies give rise to market imperfections and information asymmetries, which in the case of success can be exploited by the producers to gain an edge over their competitors (Thielemann 2010: 167). Not only the products, but also the underlying skills and organisational capabilities of the producing firm need to be unique in some way (Teece et al. 1997; Teece 2009). The reality of markets, thus, is characterised not simply by competition, but by a mixture between monopoly and competition, ‘monopolistic competition’, as Edward Chamberlin (1956 [1933]) has put it.

While it might be possible to manage a given set of niches in a rational way, the emergence of a new niche creates a situation that cannot be anticipated by any of the participants. Niches are, as White (1981) has shown, relational phenomena, as the position of every actor in a given market depends on his or her relations to all other market actors. Hence, the building of a new niche tends to change the entire set of relations between the participants, thus invalidating the very basis of ex ante calculations. The niche or monopoly that the entrepreneur is striving to establish might not necessarily come from economic innovation; it may also come from social innovation in a wider sense, such as from exploiting personal contacts and network ‘holes’ (Burt 2000), or from inconsistencies in institutional regulations (Streeck 2011). In his analysis of the careers of the very rich of his time, C. Wright Mills concluded that these careers could be characterised neither as bureaucratic nor as entrepreneurial; rather, the key to success had been the accumulation of personal advantages (Mills 1957: 114). The entrepreneurial promotion of new combinations is not a game determined by rules of fairness and economic rationality, but is the outcome of struggles aiming to build niches and monopoly positions.

Richard Lester and Michael Piore and David Stark have highlighted niche-building processes in illuminating case studies (Lester and Piore 2004; Stark 2005; see also Ruef 2005). As the authors argue, innovation does not fit into the conventional analytical management approach of presupposing a given problem definition and allowing for a rationally ordered sequence of solution steps. Rather, it is an activity directed towards finding solutions for problems which are still unknown. Consumer wants, for example, are not treated simply as a given, but as developing in a process of ‘joint discovery’ between supplier and customer (Lester and Piore 2004: 78). The suppliers are not faced with a clear-cut task, but with contradictory expectations, such as the website designers in one of Stark’s case studies who had to serve the wants of their customers and to re-interpret them at the same time. Hence, suppliers have to move permanently between contradictory criteria of relevance. The search for the unknown is based on an interpretive assessment of diverse fields of knowledge, with ‘interpretation’, not ‘analysis’, being the dominant mode of proceeding. Entrepreneurship is ‘the ability to keep multiple evaluative principles in play and to exploit the resulting frictions of their interplay’ (Stark 2009: 15).

In the first stages of the innovative process, risks are incalculable, as are potential profits. Competition will concentrate on the qualitative dimensions of products. If the niche-building is successful, and the new product gets established in the market, the risks tend to diminish and to become calculable; with intensifying price competition, however, profits will dwindle too. In the final phase of the product cycle, the product will reach its highest level of sophistication. At the same time, competition is likely to become ‘perfect’, transparent and calculable, with the consequence, however, of profits beginning to vanish (see also Deutschmann 2008: 72–73).

Innovation is a genuinely individual capacity, as I argued above in agreement with Dewey (1938). It is only the individual – not groups or organisations – that, due to his or her simultaneous presence in the symbolic as well as in the physical world, can become creative in the sense of generating something genuinely new in practice . Only creative individual action can intentionally surmount technical and social routines. However, were innovation to exhaust itself in idiosyncratic actions of individuals, it would indeed end up in collective anomie, as Merton (1968) argued. By building his niche, the innovator strives to consolidate his or her own position at the price of generating uncertainty for others. This dilemma can be managed only if innovation becomes communicated and institutionalised in a dynamic way. Innovation is always a social process, which, though being based on creative individual action, depends also on communication and cooperation (Kanter 2000; Dopfer 2006). Social skills (Fligstein 2001) that one can use to find financiers, partners and customers are vital. Not all entrepreneurs are genuine innovators: many prefer to jump on running trains or drive in a convoy. As the vast research literature on innovation has shown, the diffusion of innovations is communicatively framed in various spatial, social and temporal ways. These frames reduce the complexity of entrepreneurial and investment decisions to a degree that makes coordinated action possible. Here, I am focusing on the communicative frames that arise in the innovative process itself, which are to be distinguished from pre-existing institutional frames, which I discussed above in this chapter.

Innovations always start with process or product inventions; however, it is a long way from inventions to new products and technologies actually finding resonance in the market and entering into customers’ daily routines. At its initial stages, the development prospects of the original invention, including its potential uses and applications, are largely unpredictable (Nye 2004). The actual path of the innovation depends on conditions emerging in the process itself, in particular in the communication of the invention, the mobilisation of relevant actors in diverse social arenas, and the cooperative networks between these actors. To conceptualise the communication of innovations, the concept of ‘technological paradigm’ (Dosi 1982, 1988; Choi 1993; Bijker 1995; Peine 2006) and the concept of ‘vision’ (Dierkes et al. 1996; Rammert 2000; Nye 2004; Sturken et al. 2004) have become common topics in the literature. With the concept of ‘technological paradigm, the authors refer to the well-known work of Thomas Kuhn, suggesting that the logic of scientific paradigms described by Kuhn can be applied to the development of economic innovations. ‘Paradigms’ are composed of a real and a symbolic element. The real element is an artefact representing a prototypical solution to a technical or logistical problem and bearing the potential for further improvement. The first prototype of a fast-running petrol engine constructed by Gottlieb Daimler, which is displayed in the Mercedes-Benz-Museum in Stuttgart, may serve as a prominent example of this. The symbolic element is ‘a set of heuristics – “Where do we go from there?” “Where should we research?” “On what sort of knowledge should we draw?”’ (Dosi 1988: 224). In the case of the Daimler engine, the symbolic element is represented by the Mercedes star, which indicates the sucessful use of the company’s engines on earth, on water and in the air. Paradigms are projections which link the present with the future, give direction to the search for the ‘new’, and enable and motivate cooperation between producers in heterogeneous fields, thus securing the ‘social embedding’ (Halfmann 1997) of the innovative process.

To make the innovation a success, however, cooperation between researchers, experts and producers is a necessary but not a sufficient condition. In order to ‘valorise’ the innovation (Canzler and Marz 2011) and to secure its acceptance in the market, communication with the larger milieu of potential users and customers is vital too. To circumscribe the symbolic framing of larger market communication, the concept of ‘vision’ has become popular. ‘Visions’ are narratives about the new product emerging in the early stages of the innovative process; they may be generated intentionally by the producers themselves, or by third parties such as scientists, journalists, intellectuals or writers. Visions depict an imaginary future of the new technology and new life-worlds associated with it (such as the ‘information society’ around the internet, or the ‘green’ mobility associated with electric cars), presenting these future worlds as desirable or inevitable. These projections do not have the status of objective predictions but rely on their performative effects: 5 ‘As public relations people are well aware, when investors and consumers believe such stories, they can become self-fulfilling’ (Nye 2004: 160). If the feedback between paradigms and visions becomes successful in the sense of convincing a critical mass of actors about the promises of the new technology, a ‘path’ of innovation will be generated (Garud and Karnoe 2001; Beckert 2016).

To safeguard the continuity of innovative dynamics, visions and myths need to be continuously created anew. No single vision can represent the entire potential of human creativity; thus visions tend to exhaust themselves in the process of their implementation, thereby giving room for the emergence of new ones. In the literature, various phase models of the innovative cycle have been developed (Anderson and Tushman 1990; Tolbert and Zucker 1996; Rammert 2000; Freeman and Louca 2001; Schreyögg et al. 2003; Meyer and Schubert 2007; for the field of finance, see Kraemer 2016). Summing up these models, four stylised phases can be distinguished. The first is the phase of path creation (Garud and Karnoe 2001; Windeler 2003), where the basic discoveries are made and corresponding new visions and paradigms are developed. Visions and utopias, giving meaning to the invention and showing ways to explore its potential, play a crucial role in this phase. The personal creativity of inventors and entrepreneurs is equally important, as is their ability to win the cooperation of other relevant actors. The risks of the project are high in this phase, as are the potential gains.

If the pioneers are successful in winning over a critical mass of partners, motivating them to believe in and to invest in the paradigm, the second phase of path consolidation begins. This phase is characterised by the self-reinforcing positive feedback effects of the initial paradigm. To join the train now appears promising no longer only for insiders, but for larger circles of investors. With more actors joining and investing, a snowball effect of further opportunity develops. What first appeared as a risky speculation can now become a realistic project due to the cumulative effects of cooperative efforts and investments. An increasing variety of applications of the basic invention are being developed, which gives rise to a lasting market expansion (for the case of electricity, see Nye 2004).

The third phase is that of institutionalisation , where the paradigm gets established as a general technological standard. The technology or product now has become widespread, and has reached a high degree of sophistication and reliability; at the same time, it has largely lost its original innovative aura. Competition shifts from the level of product quality to that of price and cost. Further improvements are largely confined to cosmetic refinements; the market has become largely transparent and calculable; and profits have started to dwindle.

The fourth and final phase is that of lock-in , where the potential of the original invention reaches its exhaustion; any further development seems to be blocked, and market competition increasingly becomes ruinous. This is the phase of crisis, which however bears the potential of generating a new path. What appears as a dead end for the majority of actors can be perceived by some as a chance to come up with new ideas. Thus, the possibility of a new cycle arises.

Innovations occur in all fields of the economy from finance to technology and from production to organisation and consumption. At the same time, they differ considerably in their reach: Christopher Freeman and Carlota Perez distinguish between ‘incremental innovations’, ‘radical innovations’, ‘changes in the technology system’ and ‘changes in the techno-economic paradigm’ (Freeman and Perez 1988). Whereas the impact of incremental innovations is confined to the local or to the firm level, radical innovations and changes in the technology system give rise to industry- and sector-level structural changes. Changes in the techno-economic paradigm are governed by so-called ‘meta-paradigms’, which can transform the structure of the entire economy. Not only is the economy in a narrow sense involved in such big transformations, but so is the larger frame of social institutions, including industrial relations, education, science, politics and law. New meta-paradigms are associated with overall changes in ‘regimes’ or ‘spirits’ (Boltanski and Chiapello 2007) of capitalism. Drawing largely on Nikolai Kontratieff’s theory of long waves, Christopher Freeman and Francisco Louca identify five such ‘meta-paradigms’ and corresponding ages in the history of capitalism: (1) the age of cotton, iron, and water power, starting with the British Industrial Revolution in the late eighteenth century; (2) the age of iron railways, steam power and mechanisation; (3) the age of steel, heavy engineering and electrification; (4) the age of oil, automobiles, motorisation and mass production; and (5) the contemporary age of information and communication technology (Freeman and Louca 2001).

As mentioned above, the success of innovative paradigms can never be calculated in advance, but depends on experiences emerging in the process itself and on the response of actors to these experiences. As a result, new cooperative relationships between inventors, customers and financiers, which help to implement the project, may develop (or not). As entrepreneurs need to finance their projects, new visions and paradigms cannot be successful without financial promotion, be it by shareholders, credit issuers or business angels. Again, the key relevance of credit becomes evident here. To be continued, capitalist dynamics requires a permanent inflow of additional credit-financed demand motivated by the visions and profit expectations associated with innovations. Without such an inflow, the system will stagnate and recede, though it is not the inflow of credit alone that keeps the system moving. The point is that capitalist growth depends on relating different kinds of contingencies to each other: the contingencies of entrepreneurial creativity, socially mediated by the circulation of economic myths, on the one hand, and the contingencies of credit, on the other. 6 The positive response that myths may find in the markets (or not) will ultimately ratify the original investment decisions and make the economy grow (or not); failure can be due to conditions on the financial as well as on the non-financial side. There is no inherent drive towards any state of equilibrium between these financial and non-financial contingencies: like a bicycle, the capitalist system can only move forward or fall over.

The approach I have developed so far can be summarised in five propositions. First, capitalist dynamics go back to the performative, self-fulfilling effects of innovation myths and the parallel expansion of credit. Second, the social force behind the generation of myths are entrepreneurs striving to build up niches to consolidate their market positions. Third, the quest of entrepreneurs for market success and social advance in turn is structurally based in the double-bind of capitalist class relations, which are collectively closed and individually open at the same time. Fourth, the social perception of the double bind of the class dichotomy as an incentive for social advancement tends to be most pronounced in the intermediate social layers of society, in particular the lower middle classes. Fifth, by working hard and running up debts for their social advancement, entrepreneurs are developing innovative ways of social adaptation. Successful innovation, in turn, will secure the profitability of the capital and, with it, the social position of the wealthy classes. The collective success of innovations is the precondition for making the economy grow as a whole, while the individual success of entrepreneurial projects can never be guaranteed in advance.

The ideal constellation for a capitalist system to flourish, then, would be a dichotomous, but socially open distribution of wealth, on the one hand, and a growing population with masses of young and poor but ambitious social climbers, on the other. Such conditions indeed have occurred repeatedly in the history of modern capitalism, such as in Britain during the Industrial Revolution, in the United States with its continuous waves of immigration during the nineteenth and early twentieth centuries, in the West German ‘economic miracle’ after the Second World War, and today perhaps in China, India, South Africa and Brazil and other emerging countries. Nevertheless, it would be naïve to assume that this is the normal case, and that there is something like a built-in equilibrium in capitalist growth. Indeed, there is no ideal path of smooth development, but only, as I am going to argue now, a basic dilemma, which capitalist dynamics muddles through: on the one hand, growth will be hampered by a stagnating or decreasing population, or by a socially closed class structure allowing for too little upward mobility. On the other hand, too much upward mobility will be detrimental to growth as well.

An ageing and decreasing population, as it is to be observed today in many advanced capitalist countries, will result in a relative or absolute decline in the social reservoirs of entrepreneurship. Capitalist growth presupposes a growing population and large young cohorts, as entrepreneurial mentalities are a privilege of the young developing plans for their life and striving for success and social advancement. As entrepreneurship is highly concentrated in young cohorts (Kelley et al. 2011: 32), an ageing population will have a negative effect on growth. Entrepreneurship, however, can be blocked not only by demographic factors, but also by rigidly closed social class structures demotivating social climbers, such as it had been the case in the semi-feudal property relationships prevailing for a long time in Latin America and many other emerging countries. If nascent entrepreneurs do not get social support, or even meet resistance due to political corruption, social discrimination, or despotic political power structures, the growth potential will be hampered in a two-fold way. On the one hand, entrepreneurs will be discouraged and deprived from vital means and resources, such as access to education, network support, and credit, with the likely consequences of resignation or political conflict, but, on the other hand, the privileged will be protected against competition and feel even less motivated to engage in innovative activities.

At the same time, however, growth is not likely to sustain itself, should too many people be successful in social advancement. If the capitalist growth machine is working efficiently, the result will be an upward shift in the social structure, that is, a relative expansion of the elites and higher middle classes at the cost of the lower classes. Indeed, this is what seems to have happened in the mature economies of Western Europe, North America and Japan in the second half of the twentieth century. As a consequence of the social ‘elevator effect’, as Ulrich Beck (1986: 122) characterised the shift, economic growth rates too went up initially. At the same time, however, the structural tension between the classes diminished and the incentive structure for entrepreneurial advancement eroded. The financial rentier became progressively dominant over the entrepreneur. On the one hand, the elevator effect made the rich layers of society grow. Even the upper middle classes – the ‘patrimonial middle classes’, as Thomas Piketty (2014) termed them – accumulated substantial amounts of financial wealth, let alone the top rich, whose wealth grew to unprecedented levels. The volume of rent-seeking assets soared accordingly, paving the way for mutual funds, pension funds, and investment banks to serve the needs of a larger and larger clientele. However, financial assets always depend on debts as their necessary counterpart, with the value of assets depending precisely on the availability of solvent debtors servicing the claims of capital. Due to the elevator effect, the social reservoir of potential debtors coming from the lower classes and still being eager to advance and to run debts for their career shrunk. And this effect was exacerbated by the stagnation or decline of the population. Moreover, the chances of subsequent climbers deteriorated, as the intergenerational transmission of fortunes cemented the financial and educational privileges of earlier climbers and their offspring. For those not belonging to the privileged networks and lacking access to credit, resources and education, their chances dwindled. Nascent real economy entrepreneurs, when they asked banks for credit, often could not compete with the apparently superior profitability of financial investments. At the same time, firm-internal entrepreneurs felt frustrated by the tough cost regime and the short-term profit targets characteristic of financialised firms. As a consequence, the gospel of social advancement, and, with it, of growth, lost its credibility even for many qualified young entrepreneurs (Blossfeld et al. 2005).

The descendants of the successful may still be career-oriented, but they no longer have a stringent motive for entering into the hazards of a genuinely entrepreneurial career; instead, they are likely to prefer careers in organisations or public bureaucracies. Higher education indeed is becoming an increasingly important precondition for qualifying employees and entrepreneurs for the innovative process. However, it does not necessarily pave the way to more genuine entrepreneurship, as it also opens ways to alternative, more comfortable elite positions without real entrepreneurial responsibility. In short, it is the very success of the capitalist growth machine that reveals itself in the collective upward trend of social mobility. However, the social elevator effect tends to create a structural imbalance in the capital markets, as a growing volume of financial assets meets less and less debtors servicing the claims of capital. Thus, the conditions required for sustained growth are progressively undermined.

A possible countervailing factor against structural upward mobility is immigration, which, indeed, seems to have mitigated the dilemma in some cases, for example in the United States in the nineteenth century. With constantly arriving immigrants filling in the shrinking lower layers of the host society, the detrimental economic effects of structural upward mobility on growth could be counterbalanced. It seems, however, premature to expect a simple repetition of the American experiences of the nineteenth century in contemporary advanced capitalist economies. To enter into entrepreneurial careers, migrants today need to command advanced levels of general, professional and cultural skills – a condition, which present-day immigrants coming from poor backgrounds cannot fulfil. The share of nascent entrepreneurs, indeed, tends to be higher amongst immigrants than amongst natives. However, immigrant entrepreneurship is largely confined to certain segments of the economy already overcrowded, such as gastronomy, import–export and trade, and personal services. Immigrant entrepreneurs are largely absent in more sophisticated areas, such as software and digital technologies (OECD 2013). At the same time, international competition in the fields of qualified employment and ‘high-potential’ careers is tough. Thus, one should not expect too much from immigrant entrepreneurs rejuvenating the shrinking potentials of domestic entrepreneurship in present-day advanced capitalist economies. As the GEM surveys have shown, the level of early-stage entrepreneurial activity as well as the social attractiveness of the entrepreneurial role is much lower in mature capitalist economies than in emerging economies. 8 The authors of the report make the following conclusion:

While non-financial entrepreneurship and real growth are declining, financial entrepreneurship and wealth are on the rise. What is developing, then, is a mismatch between the growing volume of financial assets, on the one hand, and declining non-financial investment opportunities, on the other. Financial innovators are trying to fill in the gap by inventing new outlets for idle financial capital, investing capital no longer directly into shares and credit, but into ‘bets’ on the price development of other financial titles, such as derivatives, securitisations and swaps. Capital is no longer mediating the contingencies of real entrepreneurship, but is switching towards a self-referential mode of operation driven by ever-increasing financial leverage. Indeed, this seems to have happened since the last decades of the twentieth century, particularly in the advanced capitalist economies. 9 Key developments were a tremendous nominal increase of financial wealth; an exploding circulation of new financial products; the rising power of shareholders at the corporate level, and a secular shift in capitalist dynamics towards ‘financialisation’ (Windolf 2005; Epstein 2005; Krippner 2005; Reinhart and Rogoff 2009; Lounsbury and Hirsch 2010; Deutschmann 2011b; Heires and Nölke 2014; Kornrich and Hicks 2015). As we know, many of the financial innovations did not prove sustainable and ended up being wiped out in the crash of 2008–2009. Central banks and nation-states had to intervene with historically unprecedented rescue packages to avoid the imminent collapse of the global economy. Only by continuing policies of quantitative easing (QE), flooding the banking system with liquidity, and lowering not only real but even nominal interest rates below zero, did they manage to maintain a state of precarious stabilisation. This is the status quo up to the present day; nobody knows how long it can continue.

To conclude, present-day advanced capitalist economies seem to be exposed to the second horn of the dilemma mentioned above, that is, the consequences of too many people having advanced socially in the past. A capitalist system, however, can never content itself with its own success, and cannot reach a stable state of general affluence; rather, it is bound to restore the polarisation of capital and labour, of wealth and poverty, continuously anew as a precondition for mobilising new dynamic forces. Capitalism mobilises people by promising affluence for everybody. However, should the majority of social climbers actually reach the sanctuary of the American Dream at the top of the hill – to take up again Arlie Hochschild’s above-mentioned metaphor – the dream will vanish. Crisis will set in, as there will be no longer enough debtors to service the claims of capital. Indeed, since the late twentieth century the advanced capitalist countries have experienced increasingly severe crises, which have led to a marked resurgence in unemployment and social inequality. In the United States, Britain and other European countries, a tiny and extremely rich new financial aristocracy, monopolising financial wealth as well as controlling education, politics and media, has emerged (Haseler 2001; Philipps 2003; Hertz 2006; Murray 2012; Piketty 2014; Sayer 2015). At the same time, real growth has continued to decrease, as has social upward mobility (Byrne 2005; Grabka and Frick 2008). The move back to the first horn of the dilemma seems to have begun already. However, to fully restore the polarisation of capital and labour, a major global crash wiping out the still huge amount of ailing assets hidden in bank balances would have to occur. Keeping the traumatic experiences of the 1930s still in mind, central banks and nation-states, however, seem to be utterly determined to prevent such a crash. Though the present QE policies of central banks and nominally negative interest rates may prevent a marked downturn of the economy, they cannot make it grow either. Stagnation, however, means a permanent crisis which is likely to stir up not only social polarisations, but also ethnic and national particularisms. The key problem with capitalism is that it is incapable of putting its own success on a sustainable footing.

9 According to analyses performed by the McKinsey Global Institute, global financial depth (ratio of total financial assets to GDP) rose from 256 percent in 1995 to 355 percent in 2007. In the advanced economies (United States, Japan, Western Europe), financial depth was significantly above the global average. Almost two-thirds (62 percent) of the overall increase in financial depth was due to rising equity market valuations and the growing leverage and size of the financial sector itself. Only 28 percent went back to the financing of households and corporations (McKinsey 2013: 17).