Innovation and dynamism

Literature on post-socialist transformation usually deals with the political, economic and social sides of it, although there have also been important changes in the field of technical advance in the last twenty years. One of capitalism's main virtues is the strong incentive it gives to dynamism, enterprise and the innovation process. Every revolutionary new product (for civilian use) has been brought about by the capitalist system. The socialist system was capable at most of developing new military products. The article analyzes how far the radical difference can be explained by the innate tendencies and basic attributes of the two systems. Our daily lives have been transformed by these new products (for instance, the sphere of information and communications by the computer, the mobile phone and the internet). While many people see all these as favourable changes, fewer discern the causal relation between the capitalist system and rapid technical progress. Yet the usual syllabus of microeconomics does not enlighten students on this important virtue of capitalism, neither it is not adequately emphasized in the statements of leading politicians. Copyright (c) 2010 The Author. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.