If you like big ideas, Joseph Schumpeter’s great work Capitalism, Socialism, and Democracy, is a book you will devour. It is packed with scintillating insight on all the topics that really matter: capitalism and its future, the absurdities of socialism, the dangers of democratic rule, the future of freedom, and the social dynamics that protect and undermine freedom.
Schumpeter himself cannot be called a member of the Austrian School but he emerges from within its culture and among its leading thinkers. Schumpeter went his own way with an eclectic and unsystematic theory of economics. But he is second to none in the integration of social, political, and economic thought. He understood Marxism and capitalist theory as well as any of his contemporaries, and managed to keep enough distance from the affair of the day to observe the big trends and the dynamics pushing them.
It was written in 1942 and its importance has grown year by year to the point that no student of the liberal society can afford not to read and master this treatise. It is most famous for its prediction that capitalism is unsustainable not because it is a flawed system but rather because voters and bureaucrats in an otherwise free society will fail to protect capitalism from its enemies.
He is particularly ruthless in observing how people take the triumphs of capitalism for granted, and how even those who benefit most from its productivity tend to be the same people who want the capitalist process shut down in their own self-interest.
Not everything he says in here is prophetic but he makes the reader think hard about the big issues in society. His most lasting contribution is his insight that capitalism is a process of creative destruction, constantly bringing us new innovations and wiping out the old ways. Thus does the free society insist on relentless adaption to progress – and he has grave doubts that people are culturally prepared for this process. Insofar as the democratic process allows them to do so, the public will turn on freedom, he predicts, and smash the source of its own well being.
Schumpeter was also a pioneer in doing what Rothbard later perfected: drawing from both left and right to forge a new path forward. (Rothbard, in particular, was a huge fan of this work.)
Rather than being a gloomy book, as one might think, the prose is bursting with energy, creativity, and insight – and has a lasting power to provoke deep thought on the social, cultural, and intellectual foundations of the economic order.
Schumpeter was never better than in his crafting of this masterpiece, and no one serious about social and economic thought can fail to benefit from his provocations.
{ 5 comments }
Thanks for the suggestion. I got myself a copy and will read it shortly after I finish re-reading Human Action. In my survey and quick reading of the intro, it seems a good book to read alongside Mises’ Socialism. This guy doesn’t agree with Mises’ calculation critique and suggests mimicking the market in socialism, but it seems that a person studying the pros and cons of socialism cannot help but read this book along with Socialism to get a complete picture. Reading Socialism alone is insufficient for a scholarly study of it.
If Schumpeter can’t be truly considered a member of the Austrian School, can he at least be a visiting professor or something along those lines? In The Theory of Economic Development, he does an amazing job of demonstrating the power of Menger’s theory of imputation, and certainly broke ground in dealing with entrepreneurship. In Capitalism, Socialism, and Democracy, he talks about various neoclassical models of competition in one chapter and in the next explains how they’re all missing the fact that the economy is a dynamic system. His analysis also anticipated, and likely inspired, both Rothbard and Hoppe. While he wasn’t on the same level as Mises, he certainly was one of the greatest economists of his time.
I’ve read the second part of the book “Can Capitalism Survive?” (it’s sitting on my desk here)
To be honest, I don’t like any writing style that isn’t contemporary, and his isn’t. Others like the writing style. I’m picky that way.
Aside from that one little problem, I found the read to be very enlightening and thought-provoking. It’s worth taking a look, at the very least.
That is a hilarious denial of Schumpeter as a member of the Austrian School. I would hope we would have a big tent mentality and appreciate the insights of one much more “Austrian” than any so-called credentialed Austrian today.
Everytime I think of Schumpeter I remember an incident in South Carolina after hurricane Hugo.Anticipating the strike of the hurricane a couple of enterprising young college students bought a huge amount of ice and stored it in a freezer warehouse. After the hurricane passed the students rented a truck and loaded the ice inside, then drove to the area hit the hardest by the storm. They began to sell ice out of the back of the truck for about 4 times what a bag of ice would have cost before the hurricane and they had a line of buyers about 100 yeads long.
In the afternoon the South Carolina State Police arrested the boys and confiscated the ice.
Now all of that is not a surprise. It is typical of the state to prevent any encroachment on its territory, but what surprised me was the reaction of the buyers. As the boys were hauled off the people in line applauded the police. Those people in line were not going to get any ice and were going to suffer but when interviewed they thought the boys got what they deserved because their prices were “gouging” the buyers.
Generally, I believe that people are not insane but there is something insane about applauding the state destroying your peace and happiness simply because the one providing you the service is making a profit. Not one person was forced to buy the ice and not one person benefited from the state police arresting the students, but a perceived violation of the value of a product caused the people to applaud their own discomfort. Oh how strange our world is.
Comments on this entry are closed.