Capitalism, Socialism and Democracy

Capitalism, Socialism and Democracy is a 1942 published work of Joseph Schumpeter. It belongs to the classics of political economy and has been translated into 20 languages. Its core is the analysis of capitalism, its achievements and future prospects. Schumpeter this draws on historical, social, psychological and political aspects. Become particularly well known, the concept of creative destruction, which is being developed in the seventh chapter of the work as a core element of the capitalist economy.

Schumpeter recognizes absolutely ecstatic about the historical achievements of capitalism. Nevertheless, capitalism would one day go to ruin, and has not underpinned by economic failures and not as a result of violent revolution as Karl Marx believed it, but, paradoxically, due to its success, create the conditions under which the system can not survive and are bound to have a transition to socialism result. Schumpeter begins his work with an analysis of Marxist economic theory. You can Schumpeter as " critical admirer " Karl Marx's view that acknowledges its services more than is usual among economists of the 20th century, but criticized its weak points anyway.


Marxist Economic Theory

Schumpeter characterized the Marxist economic theory by means of the following four elements:

Schumpeter doubted in particular the accuracy of the theory of exploitation, as Marx equates the value of labor power incorrectly to the number of hours worked, which is needed to bring up the workers to feed, clothe and accommodate. However, the rate of wages would be calculated after all other respects, and it is not guaranteed that the "added value" alone remains with the capitalists. For Marx, but I already recognized by the mid 19th century, the tendency to concentration of companies and was one of the first economists who analyzed the phenomenon of economic fluctuations. From the story Marx was so far refuted, as the prophesied by him impoverishment of the masses and the subsequent world revolution did not occur. Nevertheless, Marx, Schumpeter agrees to the result that capitalism will one day be replaced by a socialist system - but not through a world revolution but to " gentle way ".

Schumpeter's theory of the self-destruction of capitalism

The historic achievements of capitalism

Schumpeter agrees with most economists agree that the profit motive causes the entrepreneur to exert themselves to the utmost to achieve optimum satisfaction of needs of consumers at minimal production costs. To this end, the corporate sector is constantly introducing new products and production methods, new distribution channels, etc., and the results are made each time in an avalanche of consumer products that raise the living standards of the masses, although they may initially cause irritation, loss and unemployment. ( Schumpeter cites the example of the invention of the railway, which first made ​​the operators of stagecoach hard and caused unemployment in this area, but has ensured long term for faster and cheaper transport for the benefit of the entire population. ) All in all capitalist production machine a machine of mass production and thus a production for the masses. The essence of capitalism is not to introduce luxury goods for a privileged few, but to provide the masses with goods which are once been luxury goods; because only through mass production, the entrepreneurs can maximize their profit. It is the general prosperity that capitalism has created, which has only made ​​beyond the introduction of a comprehensive social legislation at all affordable. According to Schumpeter, capitalism is not only able to produce an overall increase in wealth, but also to enable a fairer distribution of general prosperity.

At about the end of the 19th century onset dominance of large corporations has not harmed the economic development. The large company has over the many small industrial firms enforced because it was superior. Only the big industry can fund the innovations that enable technical progress and the long-term expansion of low-cost mass production, which have caused an increase general prosperity over the decades as impressive. The capitalism 's inherent tendency towards corporate concentration is thus largely responsible for its historical success.

According to Schumpeter, it is the capitalist process that has raised the standard of living of the masses for many decades and in addition also created nor the means for social legislation and modern social institutions. Thus, not only cars, airplanes, and televisions products of the capitalist profit system, but also eg modern and efficient hospitals for all classes of people. Nevertheless, Schumpeter assumes that capitalism, despite its great successes, which would never have been possible in a socialist system to this extent, will one day be replaced by socialism - at a time when socialism due to changed conditions that capitalism itself has created, will be superior.

The decline of the capitalism

The production of new goods, the application of new methods of production, the development of new procurement or geographic markets, the reorganization of an existing enterprise, all of which is responsible for the above-mentioned successes of capitalism according to Schumpeter's theory. As a business owner to operate such things, requires special skills, which has only a small part of the population, because the requirements go far beyond all routine tasks and because such innovations are always enforce only against internal and social resistance. The role of the capitalist entrepreneur is comparable to the role of an ancient military commander, a form of individual leadership, targeted on the basis of personal power and personal responsibility for success. In the modern large enterprise, technological progress, however, is increasingly not a matter of a brilliant leader anymore, but is more and more becoming a thing of trained specialists groups. In place of the owner ( = operator ) with its specific ownership interest paid managers are entered, the priority interest is to maximize their own benefit and not necessarily of the benefits of the establishment, they just got engaged. Due to the clear separation of the management of the company from the property company the moral duty of loyalty that made up the former employer and the completely identified himself with "his company", while shareholders hired managers may at any time change employers at any time sell their shares and disappears.

Another reason for the projected decline of capitalism, Schumpeter sees the emergence of the class of " intellectuals ". As intellectuals, people of higher education are referred to which written or oral care to comment on societal matters for which they are not directly responsible; they stand up for the interests of social classes to which they do not belong. It is one of the great achievements of capitalism, to have more and more people allows for a higher education, while to pre-capitalist times (over the age of feudalism ) was reserved for the Good "higher education" only a few people. As the number of jobs for managers but not automatically by growing that more people enjoy a higher education, many educated people are unsatisfactory busy or remain unemployed - the number of intellectuals increases. Their discontent try the intellectuals to be transferred to their fellow men, they organize protest against existing conditions, they take socially critical thinking in words and provide the labor movement theories and slogans (such as the class struggle ). They stir up discontent with the economic and political system which promise the workers better conditions when she follows them, and thus create a capitalism hostile atmosphere set.

If have become the once mighty average growth rates of capitalist production one day story, ie, when the economy to a steady state, ie a state with only low average economic growth approaches, then to Schumpeter, the time has come when a transition from the capitalist to be made to a socialist economic order and will. This transition is not a problem because the former competition, many small company given way to large-scale enterprises and the former type of entrepreneur has largely disappeared and because capitalism losing its popular support.

Socialism as a "natural heritage " of capitalism

While capitalism is characterized by private ownership of the means of production and control of the production process by private line, Schumpeter defines socialism as a system in which subject to the control of the means of production and to production itself a central authority. Because in a socialist system all enterprises belonging to the state, a competition between many small businesses under socialism per se is not possible. The capitalist process inherent tendency for large-scale enterprise and the end of the previous capitalist entrepreneur come to meet the transition to socialism, because large farms and paid managers are also characteristic of socialism.

The transition is therefore no longer represents a fundamental upheaval, but basically just a change that without revolution and violence - can make to a democratic socialism - so legimtiert democratically through elections. If the majority capitalism failed their followers, the shareholders of expropriation subject to fair compensation are set against a large resistance. While the capitalist system was superior in times of dynamic economic development, is now where the entire economy is increasingly static, socialism use of its capabilities, which should relate to the absence of disturbing economic cycles, greater planning certainty for businesses and lower unemployment, according to Schumpeter.

The maximum satisfaction of consumer needs to be ensured by the following rule under socialism: The production companies order the required capital goods at the central and get them in the correct amount under the following conditions:

  • The companies have to produce as economically as possible.
  • The companies pay the central authority for the production of goods for a set of the authority price, they shall fix so that it is just "mark dreaming ," which means that the demand corresponds to the offer.
  • Establishments must request such amounts ( and no less ), how they can be used in economic mode of production, without having to sell some of their products below the replacement cost.

When will hereafter be moved, according to Schumpeter, an efficient, geared to the needs of the population production is assured - without the capitalism inherent tendencies to economic fluctuations, unemployment and dwindling acceptance of the system.

Critical appreciation of " Capitalism, Socialism and Democracy"

Schumpeter mid -1940s argued that the time for a transition to state socialism was possibly already ripe, on the other hand, it can not be excluded a continuation of capitalism for a period of up to 50 years. With its core message of the decline of capitalism within half a century Schumpeter is also considered to have failed to see how Marx with his vision of the world revolution. On the other hand, Schumpeter with remarkable clarity anticipated developments that are all clearly visible today: the long term on average decreasing rates of economic growth and the associated impact on unemployment, the global merger wave and the associated trend towards ever larger companies, the disappearance of yourself with its operation identifying operator in favor of often extremely highly paid and highly self-interest serving their top managers. Schumpeter's analysis of capitalism enjoys a high reputation among economists. However, serious doubts are expressed as to whether a framed according to Schumpeter's ideas socialism would work as smoothly as he had imagined.


  • Joseph A. Schumpeter: Capitalism, socialism and democracy. Harper, New York / London 1942; 3rd edition ibid. 1950
  • Capitalism, Socialism and Democracy. Translated by Susanne Preiswerk. Introduction by Edgar Salin. Francke, Bern 1946; 2nd expanded edition ibid. 1950; 3rd edition, 1972, ISBN 3-7720-0917-4 Capitalism, Socialism and Democracy. Introduction by Eberhard K. Seifert. 7th expanded edition. UTB, Stuttgart 1993, ISBN 3-8252-0172-4
  • Literary work
  • Literature ( 20th century)
  • Literature ( German )
  • Economic literature
  • Work of political philosophy
  • Political literature