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The End of Incumbent Capitalism

Santa Barbara — While the “Eco:nomics — Creating Environmental Capital” — conference is hosted by The Wall Street Journal, the anti-government bias that dominates the Journal’s editorial page was slammed by speaker after speaker, beginning with venture capitalist Vinod Khosla. Khosla went after what he
called “incumbent capitalism,” in which government policy and incentives are designed not to encourage competition and innovation, but to protect entrenched incumbent interests, with coal, oil, nuclear, and utility monopolies being the most spectacular beneficiaries of this bias against innovation.
Dow Chemical CEO Andrew Liveris would seem to represent a well-entrenched incumbent company, then piled on. Liveris, an Australian, has a new book
called Make It In America: The Case for Re-Inventing The Economy, which makes the case for bringing America back as a manufacturing power. Liveris concedes that — for wierd historical reasons — the term “industrial policy” is too politically toxic to use, but that’s what he’s talking about. Challenged by the Journal’s moderator on whether this won’t simply lead to the government wasting money, Liveris pushes back hard, citing China and Germany today and Japan in the 1960s and 70s as models for government intervention that’s essential for economic vibrancy.
“Around the world, countries are acting more and more like companies: competing aggressively against one another for business and progress and wealth. Governments are boosting business, creating a climate that attracts and rewards investment, spurs innovation and job creation, and appeals to companies that are less bound by national borders than ever before…” Meanwhile, in the United States, we operate as if little has changed. Our faith in the wisdom of markets may be shaken, but not at a fundamental level.
Liveris is not the only incumbent CEO here calling for massive restructing of the American economy based on government support for innovation. Dupont’s Ellen Kullman warns skeptics that customer interest in the sustainability and greenness of products soared from 2005-2008, and surprisingly did not fall back with the economic crisis.

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