Economics Dictionary of ArgumentsHome
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| Capitalism: Capitalism is an economic system where private individuals or businesses own and operate the means of production for profit. It is characterized by competition, markets, and a focus on individual wealth accumulation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Joseph A. Schumpeter on Capitalism - Dictionary of Arguments
Sobel I 33 Capitalism/Schumpeter/Sobel/Clemens: „Can capitalism survive? No. I do not think it can ... its very success undermines the social institutions which protect it, and "inevitably" creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent.“ (Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy(1): 61.) Sobel/Clemens: Perhaps the most interesting aspect of Schumpeter's lifelong work in economics was a similarity between his work and that of Karl Marx, the most noted socialist writer in history. What makes this similarity striking is that Schumpeter's greatest insights relate to the role of the innovative entrepreneur at the heart of capitalism. >Entrepreneurship/Schumpeter, >Karl Marx, >Marxism, >Socialism. Yet, despite this insight, Schumpeter, like Marx, believed that the economic system of capitalism would eventually be replaced by socialism as a result of forces from within. In Capitalism, Socialism, and Democracy (CSD)(1) Schumpeter himself states: "My final conclusion therefore does not differ, however much my argument may, from that of most socialist writers and in particular from that of all Marxists" (CSD(1): 61).* Socialism/SchumpeterVsMarx: There are, however, two important differences between the analysis of Schumpeter and Marx with regard to the end of capitalism. First, while Marx personally desired socialism and believed it to be a superior economic system, Schumpeter did not, declaring: "Prognosis does not imply anything about the desirability of the course of events that one predicts. If a doctor predicts that his patient will die presently, this does not mean he desires it" (CSD(1): 61). Schumpeter was a firm believer in the power of private innovation and entrepreneurship and the benefits capitalism produced; ones that he believed were superior to the outcomes under socialism. Unlike Marx, Schumpeter did not want capitalism to be replaced by socialism, nor did he think this transition would be beneficial for the well-being of society. Second, while both Marx and Schumpeter believed there was an inevitable transition of capitalism into socialism, they disagreed on the causes. Marx believed capitalism would produce inequalities, monopolies, and economic failures that would lead to a revolt of the "exploited" working class (the "proletariat") against the wealthy, capitalist class (the "bourgeoisie") that owned the means of production. >Bourgeoisie. In stark contrast, Schumpeter understood from his analysis of history that capitalism greatly benefitted the working class: „Queen Elizabeth owned Silk stockings. The capitalist achievement does not typically consist in providing more Silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.“ (CSD(1): 67) Schumpeter clearly dismisses Marx's argument in an essay published in a 2008 collection of his writings, Essays on Entrepreneurship, Innovations, Business Cycles, and the Evolution of Capitalism (EOE)(2): SchumpeterVsMarx: „In Marx ... it is necessary to separate the arguments ... and the answer itself. All his arguments, but in particular the one that asserts that labour will be goaded into revolution by steadily increasing misery, can be proved to be untenable. But this does not dispose of the answer itself, because it is possible to arrive at a correct result by faulty methods.“ (EOE(2): 207-208) So while he agreed with Marx's conclusion that capitalism would be replaced by socialism, he firmly disagreed with the cause of the transition. Capitalism/Schumpeter: Schumpeter instead believed that capitalism would be destroyed by its very economic success as it produced an intellectual class that would subsequently work to undermine the systems of private property and private contracting that underpin the economic system of capitalism. >Bureaucracy/Schumpeter, >Entrepreneurship/Schumpeter. Sobel I 34 Def Capitalism/Schumpeter: „A society is called capitalist ifit entrusts its economic process to the guidance of the private businessman. This may be said to imply, first, private ownership of nonpersonal means of production, such as land, mines, industrial plant and equipment; and, second, production for private account, i.e., production by private initiative for private profit.“ (EOE(2): 189).** *In Thomas K. McCraw's definitive biography of Schumpeter, Prophet of lnnovation (2009(3)), he argues that Schumpeter's discussion of the socialism successfully replacing capitalism should be interpreted as, at least to some extent, sarcastic. McCraw writes: "As a whole, the organization of Schumpeter's discussion of socialism has elements of a Shell game. At first his argument seems designed to establish the viability of socialism and its likely replacement of capitalism. But there follows such a lengthy series of convoluted qualifications and assumptions as to raise doubts about his candor ... a careful reading leaves little question that his purpose has been to praise capitalism and condemn socialism. Even so, Schumpeter's irony escaped many readers" (2009(3):366-367). ** Schumpeter also stressed that "the institution of bank credit is so essential to the functioning of the capitalist system that, though not strictly implied in its definition, it should be added to the other two criteria" of private ownership and private production for private profit as defining characteristics of the capitalist system (EOE(2): 189). 1. Schumpeter, Joseph A. (1942). Capitalism, Socialism, and Democracy [CSD]. Harper & Brothers. 2. Schumpeter, Joseph A. (2008). Essays on Entrepreneurs, Innovations, Business Cycles, and the Evolution of Capitalism. Edited by Richard V. Clemence. 3. McCraw, Thomas K. (2009). Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Harvard University Press. - - - Brocker I 250 Capitalism/Schumpeter: Thesis: a) Capitalism is best understood not as a system of market equilibria, but rather as a competitive dynamic process, driven by innovative companies, to disrupt equilibria; this process not only captures and transforms the structures of the economy, but all structures of modern society. b) For the sake of scientific progress, one must strictly distinguish between positive and normative analysis: Brocker I 251 SchumpeterVsClassical Economy/SchumpeterVsRicardo/SchumpeterVsKeynes: these authors did not make the distinction between positive and normative analysis. ((s) Distinction descriptive/normative.). Brocker I 254 Schumpeter's thesis: Capitalism will not perish from its failures, but from its successes. In contrast to Marx, however, this is presented as a conditional prognosis rather than an unconditional one. The condition is that no disturbing influences occur in the future development. (1) Schumpeter pro capitalism: see Civilization/Schumpeter. Brocker I 255 Innovation/Schumpeter: the development of capitalism can only be described taking into account the innovation competition for ever new products, processes and organizational forms, which is essential for the process of creative destruction. (2) Brocker I 262 Schumpeter's main message is that the (supposed) strengths of socialism should be feared as totalitarianism and that the (supposed) weaknesses of capitalism should be acknowledged as civilized in modern society and thus worthy of preservation. >Socialism/Schumpeter. 1. Joseph A. Schumpeter, Capitalism, Socialism and Democracy, New York 1942. Dt.: Joseph A. Schumpeter, Kapitalismus, Sozialismus und Demokratie, Tübingen/Basel 2005 (zuerst: Bern 1946). S. 105, 263. 2. Ebenda S. 142. Ingo Pies, „Joseph A. Schumpeter, Kapitalismus, Sozialismus und Demokratie (1942)“ in: Manfred Brocker (Hg.) Geschichte des politischen Denkens. Das 20. Jahrhundert. Frankfurt/M. 2018._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconSchum I Joseph A. Schumpeter The Theory of Economic Development An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Cambridge/MA 1934 German Edition: Theorie der wirtschaftlichen Entwicklung Leipzig 1912 Sobel I Russell S. Sobel Jason Clemens The Essential Joseph Schumpeter Vancouver 2020 Brocker I Manfred Brocker Geschichte des politischen Denkens. Das 20. Jahrhundert Frankfurt/M. 2018 |
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> Counter arguments against Schumpeter
> Counter arguments in relation to Capitalism
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