CAPITALISM, SOCIALISM - eet.pixel-online.org

1 CAPITALISM, SOCIALISMAND DEMOCRACYWhen Joseph Schumpeter s book first appeared, the New English Weeklypredicted that for the next five to ten years it will certainly remain awork with which no one who professes any degree of information onsociology or economics can afford to be unacquainted . The prophecy hasbeen justified, but how much more fully than its maker anticipated. Ageneration later, it is more widely read than when it first appeared. Themixed economy has become established in North America as well as inthe countries of the European Community, while in the socialist countriesthere has been a move towards various forms of decentralisation and ofa market economy. In this new context the issues that Schumpeter raisesare still matters of lively , SOCIALISM ANDDEMOCRACYJ oseph SWEDBERGS tockholm UniversityLondon and New YorkFirst published in the USAThis edition published in the Taylor & Francis e-Library, published in the UK in 1943 First impression 1944 Second edition 1947 Third edition 1950 First impression 1952 Fourth edition 1954 Eighth impression 1974 Fifth edition 1976 Third impression 1981 New in paperback 1994 George Allen & Unwin (Publishers) Ltd 1976 All rights reserved.

2 No part of this book may be reprinted orreproduced or utilized in any form or by any electronic,mechanical, orother means, now known or hereafter invented, includingphotocopyingand recording, or in any information storage or retrieval system,withoutpermission in writing from the Library Cataloguing-in-Publication DataA catalogue record for this book is available from the 0-203-20205-8 Master e-book ISBNISBN 0-203-26611-0 (Adobe eReader Format)ISBN 0-415-10762-8 (Print Edition)vCONTENTSI ntroduction by Richard SwedbergixPARTI: THE MARXIAN DOCTRINE1 Prologue3I. Marx the Prophet5II. Marx the Sociologist9 III. Marx the Economist21IV. Marx the Teacher45 PART II: CAN CAPITALISM SURVIVE?59 Prologue61V. The Rate of Increase of Total Output63VI.

3 Plausible Capitalism72 VII. The Process of Creative Destruction81 VIII. Monopolistic Practices87IX. Closed Season107X. The Vanishing of Investment Opportunity111XI. The Civilization of Capitalism121 XII. Crumbling Walls131I. The Obsolescence of the Entrepreneurial Function 131II. The Destruction of the Protecting Strata134 III. The Destruction of the Institutional Framework ofCapitalist Society139 XIII. Growing Hostility143I. The Social Atmosphere of Capitalism143II. The Sociology of the Intellectual145 XIV. Decomposition156 PART III: CAN SOCIALISM WORK?165XV. Clearing Decks167 XVI. The Socialist Blueprint172 XVII. Comparison of Blueprints187I. A Preliminary Point187II. A Discussion of Comparative Efficiency188 III. The Case for the Superiority of the Socialist Blueprint 193 ContentsviXVIII.

4 The Human Element200A Warning200I. The Historical Relativity of the Argument200II. About Demigods and Archangels202 III. The Problem of Bureaucratic Management205IV. Saving and Discipline210V. Authoritarian Discipline in SOCIALISM ; a Lesson fromRussia212 XIX. Transition219I. Two Different Problems Distinguished219II. Socialization in a State of Maturity221 III. Socialization in a State of Immaturity223IV. Socialist Policy Before the Act; the English Example228 PART IV: SOCIALISM AND DEMOCRACY232XX. The Setting of the Problem235I. The Dictatorship of the Proletariat235II. The Record of Socialist Parties237 III. A Mental Experiment240IV. In Search of a Definition243 XXI. The Classical Doctrine of Democracy250I. The Common Good and the Will of the People250II.

5 The Will of the People and Individual Volition252 III. Human Nature in Politics256IV. Reasons for the Survival of the Classical Doctrine264 XXII. Another Theory of Democracy269I. Competition for Political Leadership269II. The Principle Applied273 XXIII. The Inference284I. Some Implications of the Preceding Analysis284II. Conditions for the Success of the Democratic Method289 III. Democracy in the Socialist Order296 PART V: A HISTORICAL SKETCH OF SOCIALISTPARTIES303 Prologue305 XXIV. The Nonage306 XXV. The Situation that Marx Faced312 XXVI. From 1875 to 1914320I. English Developments and the Spirit of Fabianism320II. Sweden on the One Hand and Russia on the Other325 III. Socialist Groups in the United States331 ContentsviiIV.

6 The French Case; Analysis of Syndicalism336V. The German Party and Revisionism; the AustrianSocialists341VI. The Second International349 XXVII. From the First to the Second World War352I. The Gran Rifiuto 352II. The Effects of the First World War on the Chances of theSocialist Parties of Europe354 III. Communism and the Russian Element358IV. Administering Capitalism?363V. The Present War and the Future of Socialist Parties373 XXVIII. The Consequences of the Second World War376I. England and Orthodox Socialism377II. Economic Possibilities in the United States3801. Redistribution of Income through Taxation3812. The Great Possibility3823. Conditions for Its Realization3854. Transitional Problems3915.

7 The Stagnationist Thesis3926. Conclusion398 III. Russian Imperialism and Communism398 PREFACES AND COMMENTS ON LATER DEVELOPMENTSP reface to the First Edition, 1942409 Preface to the Second Edition, 1946411 Preface to the Third Edition, 1949415 The March into Socialism421 Index433ixINTRODUCTIONThis is a book to be read not for the agreement or disagreement itprovokes but for the thought it Kenneth GalbraithCapitalism, SOCIALISM and Democracy is one of the great classics intwentieth century social science. What makes Schumpeter s book so brilliantare three things in particular: its novel view of democracy; its hereticanalysis of the workings of the capitalist economy; and its provocativeargument that capitalism is bound to disappear not because of its failure,but because of its success.

8 Schumpeter s style, it should be emphasized,also makes the book a pleasure to read: Even if, in places, you may dislikewhat Schumpeter says , as one reviewer put it, you will like the way hesays it .1 In this introduction I shall say, first, a few words about the writingofCapitalism, SOCIALISM and Democracy and its place in Schumpeter soutput as a whole (Part I). I shall provide then a reader s guide toSchumpeter s book, which may be of assistance to those who areapproaching it for the first time. This will also enable the hurried readerto go straight to the most important parts of Capitalism, SOCIALISM andDemocracy (Part II). The third and final part of the introduction deals withthe contemporary relevance of Schumpeter s work. Schumpeter, forexample, argued that SOCIALISM is about to replace capitalism an opinionthat seems totally wrong today, especially after the disintegration of statesocialism in the Soviet Union and East-Central Europe (Part III).

9 I. THE MAKINGOFCAPITALISM, SOCIALISMAND DEMOCRACYAND ITS PLACEIN SCHUMPETER S WORKASA WHOLEThe story of how Schumpeter came to write Capitalism, SOCIALISM andDemocracy can be sketched in a few lines. Towards the end of the 1930s,Schumpeter decided to write a small book on SOCIALISM . To cite his wife,Elizabeth Boody Schumpeter: had finished his monumental BusinessCycles in 1938 and sought relaxation in Capitalism, SOCIALISM and Democracy,which he regarded as a distinctly popular offering that he expected to finishin a few months. 2 Schumpeter s book, however, took longer to complete thanhe had expected, and it was not published until 1942. It was very well received,both in England and in the United States, and its reputation grew as furthereditions were published in 1947 and 1950.

10 Today, according to John KennethIntroductionxGalbraith,Capitalism , SOCIALISM and Democracy is the main work by whichSchumpeter is summary account of this type fails, however, to do justice to the making ofCapitalism, SOCIALISM and Democracy in at least two important ways. First,Schumpeter s work draws very much on his earlier research and personal the preface to the first edition, Schumpeter says that his book was the result of almostforty years thought, observation and research on the subject of SOCIALISM .4 GottfriedHaberler one of the foremost authorities on Schumpeter has added that the book sums up, brings up-to-date and slightly modifies the result of Schumpeter s life-longwork and study [not only of SOCIALISM but of economic theory as well] .5 There is alsothe fact that the period during which Capitalism, SOCIALISM and Democracy was writtenwas a particularly turbulent and dramatic one in Schumpeter s life.