Introduction
Modern capitalism is not a monolithic system. It is a dynamic structure where success is determined by the distribution of competencies: the right to allocate capital, the protection of resources, and the definition of legitimate enrichment. The key to understanding development is the concept of the growth machine—a set of institutional conditions that promote innovation. This article analyzes four models of capitalism, their internal contradictions, and the mechanisms that cause some economies to flourish while others mire in stagnation.
Baumol’s Typology: Four Regimes of Capitalism
We distinguish four ideal types of capitalism: entrepreneurial (dispersed innovation), big-firm (routine production), state-guided (state selection), and oligarchic (protection of elites). The foundation of progress is innovative entrepreneurship, which—unlike replicative entrepreneurship—“creatively destroys” the old order rather than merely duplicating it.
Oligarchic capitalism is systemically inefficient because it rewards political loyalty instead of market proficiency. This leads to the creation of dead capital—real assets that, due to bureaucratic barriers, cannot be used as collateral or integrated into the investment cycle. In such a system, entrepreneurial talent drifts toward destructive or rent-seeking activities.
The Growth Machine: The Economy’s Institutional Engine
Sustainable development depends on four foundations: low barriers to entry and exit, rewarding productivity, limiting lobbying, and enforcing competition. The reward structure in an economy determines whether individuals choose innovation or the sterile pursuit of privileges. If lobbying is more profitable than creating new goods, the growth machine grinds to a halt.
In dysfunctional models, particularly oligarchic ones, a systemic evasion of responsibility dominates. Risk is externalized: elites privatize profits from risky projects, while losses are socialized through the state budget or the banking system. This phenomenon destroys the market mechanism of learning from mistakes and distorts capital allocation.
Systemic Aporias: Internal Contradictions of Regimes
Every capitalist regime harbors an aporia—a logical contradiction. Big-firm capitalism requires stability, which simultaneously stifles breakthroughs. The state-guided model succeeds in technological imitation but loses its epistemic advantage at the frontier of innovation, as it cannot know which direction the market will choose. The evolution of these systems is usually forced only by external pressure, such as currency crises or bankruptcies.
These differences are illustrated by the clash between Israel and France. The Israeli model is a decentralized, agile network of innovation, while the French model relies on state dirigisme and corporate hierarchy. Today, global capital and the flow of information limit state sovereignty—politicians are becoming clients of tech platforms that control the infrastructure of communication with voters.
Summary
The analysis of capitalist regimes shows that "good economic policy" is merely a derivative of a deeper institutional architecture. Each system carries the seeds of its own degeneration, and attempts to radically strengthen a single function often lead to self-destruction. In a world dominated by global data flows, is it possible to build the ideal growth machine? The question remains whether the only path forward is a constant balancing act between the conflicting forces of freedom and control.
📄 Full analysis available in PDF