Capitalism, socialism and democracy

Capitalism, Socialism and Democracy is a work by Joseph Schumpeter published in 1942 . It is one of 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 draws on historical, socio-psychological and political aspects. The concept of creative destruction , which is developed in the seventh chapter of the work as a core element of the capitalist economy, has become particularly well known .

Schumpeter appreciates the historical successes of capitalism almost enthusiastically . Nevertheless, one day capitalism will perish, not due to economic failures and not as a result of a violent revolution, as Karl Marx assumed, but paradoxically due to its successes, creating the conditions under which the system cannot survive , and which will inevitably result in a transition to socialism . Schumpeter begins his work with an analysis of Marxist economic theory . Schumpeter can be seen as a "critical admirer" of Karl Marx, who appreciates his achievements more than is usual among economists of the 20th century, but who criticizes his weak points nonetheless.

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Marxist economic theory

Schumpeter characterizes Marxist economic theory using the following four elements:

Class struggle theory: natural enmity between the capitalist class and the working class
Theory of Exploitation: The surplus value , that is, the difference between the value of the commodity produced by the worker and the value of the labor-power employed for production, remains with the capitalist alone.
Law of the tendency of the rate of profit to fall: Part of the surplus value is invested in the means of production , so that if the surplus value remains the same, the rate of return of total capital (rate of profit) decreases; only the larger capitalists can assert themselves by investing more and more capital .
Impoverishment theory: The increased use of capital leads to workers being replaced by machines . As a result, the wage bill falls; d. H. where the wages of the workers are above their subsistence level, there are wage cuts; to unemployment where there is no longer any scope for wage cuts . As a result, the standard of living of the masses falls to the point of general impoverishment. As a result, the working class rises and expropriates the capitalist class in the course of a world revolution .

Schumpeter, in particular, doubts the correctness of the theory of exploitation, since Marx inappropriately equates the value of labor with the value of the reproductive labor needed to raise, feed, clothe, and house the worker. The level of wages, however, is determined according to completely different points of view, and it is by no means guaranteed that the “surplus value” remains with the capitalist alone. In return, Marx recognized the trend towards corporate concentration as early as the middle of the 19th century and was one of the first economists to analyze the phenomenon of business cycle fluctuations . Marx was refuted by history insofar as the impoverishment of the masses that he prophesied and the world revolution that followed did not occur. Nevertheless, Schumpeter Marx agrees that one day capitalism will be replaced by a socialist system - but not by a world revolution, but by a “gentle path”.

Schumpeter's theory of the self-destruction of capitalism

The historical achievements of capitalism

Schumpeter agrees with most economists that the profit motive causes entrepreneurs to work to the utmost in order to optimally satisfy consumers' needs at minimal production costs. To this end, the corporate sector is constantly introducing new products and production methods, new sales channels, etc., and each time the result is an avalanche of consumer goods that raise the standard of living of the masses, although at first they can cause irritation, loss and unemployment. (Schumpeter cites the example of the invention of the railroad, which initially hit stagecoach operators hard and caused unemployment in this area, but in the long term ensured faster and cheaper transport for the benefit of the entire population.) All in all, the capitalist production machine is one Machine for mass production and thus a production for the masses. The essence of capitalism is not to introduce luxury goods for the privileged few, but to provide the masses with goods that were once luxuries; because only through mass production can entrepreneurs maximize their profit. It is the general prosperity that capitalism has created, which has also made the introduction of comprehensive social legislation affordable in the first place. According to Schumpeter, capitalism is not only able to generate increasing prosperity overall, but also to enable a more equitable distribution of general prosperity.

The dominance of the large corporations, which began around the end of the 19th century, has in no way damaged economic development. The large company prevailed over the many small industrial companies because it was superior. Only large-scale industry can finance the innovations that enable technical progress and the long-term expansion of inexpensive mass production that have made general prosperity so impressive over the decades. The tendency towards corporate concentration inherent in capitalism 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 over many decades and also created the means for social legislation and modern social institutions. Thus not only cars, airplanes and television sets are products of the capitalist profit economy, but B. also modern and efficient hospitals for all strata of the population. Nevertheless, Schumpeter assumes that capitalism, despite its great successes, which would never have been possible in a socialist system on this scale, will one day be replaced by socialism - at a time when socialism, due to changed conditions, which capitalism itself created will be superior.

The decline of capitalism

The production of new types of goods, the use of new production methods, the opening up of new procurement markets or sales areas, the reorganization of an existing enterprise, all of this is responsible, according to Schumpeter's theory, for the successes of capitalism described above. Doing such things as an entrepreneur requires special skills, which only a small part of the population possesses, because the requirements go far beyond all routine tasks and because such innovations can only be implemented against internal and social resistance. The role of the capitalist entrepreneur is comparable to the role of an ancient general, a form of individual leadership that sought success on the basis of personal strength and personal responsibility. In modern large companies, however, technical progress is increasingly no longer a matter of a brilliant leader, but is more and more a matter of trained specialist groups. In the place of the owner (= entrepreneur) with his specific interest in property, there have been paid managers whose interests primarily consist in maximizing their own benefit and not necessarily the benefit of the company that employs them. With the personal separation of the company's management from ownership of the company and the progressive, work-related alienation of the owner, the moral duty of loyalty that characterized the former entrepreneur, who identified himself fully with “his company”, disappears, while shareholders sell their shares at any time and managers are employed can change their employer at any time.

Schumpeter sees a further cause for the predicted decline of capitalism in the emergence of the class of the “intellectuals”. Intellectuals are people with a higher level of education who usually express themselves in writing or orally on social 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 given more and more people a higher education, while in pre-capitalist times (in the age of feudalism) the good “higher education” was reserved for only a few people. Since the number of jobs for executives does not automatically increase as more people enjoy a higher education, many educated people are unsatisfactorily employed or remain unemployed - the number of intellectuals increases. The intellectuals try to transfer their dissatisfaction to their fellow men, they organize protests against the existing conditions, they put socially critical thinking into words and provide the labor movement with theories and catchphrases (such as that of the class struggle). They stir up resentment about the economic and political system, promise the workers better conditions if they follow them, and thus create an atmosphere hostile to capitalism.

If the once enormous average rates of increase in capitalist production will one day become history, i.e. if the economy approaches a steady state, that is, a state with only low average economic growth, then, according to Schumpeter, the time has come when a transition from capitalist production will come to a socialist economic order should and will take place. This transition is unproblematic because the former competition of many small companies has given way to large firms and the former type of entrepreneur has largely disappeared and because capitalism is losing its popular support.

Socialism as the “natural inheritance” of capitalism

While capitalism is characterized by private ownership of the means of production and the regulation of the production process through private management, Schumpeter defines socialism as a system in which control over the means of production and production itself is subject to a central authority. Since in a socialist system all businesses belong to the state, competition between many small businesses is not per se possible under socialism. The tendency towards large-scale enterprises inherent in the capitalist process and the end of the former capitalist entrepreneur meet the transition to socialism, since large-scale enterprises and paid managers are also characteristic of socialism.

The transition therefore no longer represents a fundamental upheaval, but basically only a change that can take place without revolution and violence - that is, democratically legitimized through elections - to a democratic socialism . If the majority of the population refuses allegiance to capitalism, shareholders will not offer much resistance to expropriation for adequate compensation. While the capitalist system was superior in times of dynamic economic development, now, when the entire economy is becoming increasingly static, socialism can show its advantages, which, according to Schumpeter, should consist in the absence of disruptive business cycles, greater planning security for companies and lower unemployment.

The maximum satisfaction of consumer needs should be guaranteed under socialism by the following rule: The production companies order the required production goods from the central authority and receive them in the desired quantity under the following conditions:

The companies must produce as economically as possible.
The companies pay the central authority a price set by the authority for the production goods, which the authority sets in such a way that it is “market-clearing”, that is, that the demand corresponds to the supply.
The companies have to request such quantities (and no less!) As they can use in an economical production method without having to sell part of their products below the procurement costs.

If this is followed, according to Schumpeter, efficient production geared to the needs of the population is ensured - without the tendencies inherent in capitalism towards economic fluctuations, unemployment and dwindling acceptance of the system.

reception

The book has been translated into 20 languages and has received worldwide attention as an academic bestseller. The late work is described by Volker Kunz as Schumpeter's best-known work, whose considerations on capitalism and democracy theory are of great importance for political science . Karl Schiller counts it among the great works of economics and social sciences.

expenditure

Joseph A. Schumpeter: Capitalism, socialism and democracy. Harper, New York / London 1942; 3rd edition, ibid. 1950

German

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
  - Capitalism, socialism and democracy. 10th, completed edition. With an introduction by Heinz D. Kurz; translated by Susanne Preiswerk (part I-IV) and Theresa Hager, Philipp Kohlgruber and Patrick Mellacher (part V) Narr Francke Attempto, Tübingen 2020, ISBN 978-3-8252-5317-2 (print), 978-3-8385- 5317-7 (ePDF)

Footnotes

↑ See also under alienation of the work of the employed manager
↑ Ingo Pies : Irony in Schumpeter: A suggested interpretation for the 75th anniversary of capitalism, socialism and democracy . In: ORDO - Yearbook for the Order of Economy and Society . Volume 68, Issue 1, 2018, pp. 339–362, doi : 10.1515 / ordo-2018-0017 .
^ Volker Kunz: Joseph A. Schumpeter, Capitalism, Socialism, Democracy, New York 1942 . In: Steffen Kailitz (Ed.): Key works of political science , VS Verlag für Sozialwissenschaften, 2007, pp. 441–446, doi : 10.1007 / 978-3-531-90400-9_117 .
^ Karl Schiller : Joseph Alois Schumpeter: Capitalism, Socialism and Democracy . In: Die Zeit 25/1983.

[1] See also under alienation of the work of the employed manager

[pies-2] Ingo Pies : Irony in Schumpeter: A suggested interpretation for the 75th anniversary of capitalism, socialism and democracy . In: ORDO - Yearbook for the Order of Economy and Society . Volume 68, Issue 1, 2018, pp. 339–362, doi : 10.1515 / ordo-2018-0017 .

[3] Volker Kunz: Joseph A. Schumpeter, Capitalism, Socialism, Democracy, New York 1942 . In: Steffen Kailitz (Ed.): Key works of political science , VS Verlag für Sozialwissenschaften, 2007, pp. 441–446, doi : 10.1007 / 978-3-531-90400-9_117 .

[4] Karl Schiller : Joseph Alois Schumpeter: Capitalism, Socialism and Democracy . In: Die Zeit 25/1983.