Schumpeter

It seems what my readers like (all 8 of them) are my political posts. While that won't stop me from posting about the minutia of my life, I'm here to please. So, I'm going with another political post.

A few years ago, I was at the American Political Science Association annual meeting, and at several panels I attended, the name Schumpeter kept coming up. Joseph Schumpeter was an economist whose most well known work was Capitalism, Socialism and Democracy. In that work, he coined the phrase "creative destruction" to describe the way entrepreneurialism transforms existing economic relations.

Schumpeter argued that there were important differences between the behavior of entrepreneurial capitalism and oligopolistic or monopolistic capitalism. In short, he argued that the promised efficiencies of capitalism are only applicable to the entrepreneurial version. There is nothing surprising in that, of course. Except that Schumpeter went a step further, and here is why he is of interest to political scientists. He suggested that oligopolists, big business if you will, are essentially willing to operate under more or less socialistic conditions. The triumph of socialism will not come at the hands of Marxist revolutionaries, but at a political alliance between big business, who are seeking capital preservation, and democratic citizens, who seek the protection and security of the welfare state. Those with a stake in the established ways of doing things would have every reason to stifle innovation.

Considered by most people today a conservative, Schumpeter can be read as a response to Galbraith. Both are working to come to grips with the reality of twentieth century capitalism, which was very different from its nineteenth century predecessor, especially in the aftermath of World War II. Schumpeter did not believe that capitalism would endure past the twentieth century. Like Galbraith, he recognized that there was essentially no difference in the behavior of corporate managers and government bureaucrats. They dealt with other people's money, and responded to whatever incentives the structure they worked in provided, rather than the discipline of the market.

Given all that, it is difficult to categorize Schumpeter. Though Austrian, he is not part of the Austrian School. He obviously differs in important ways from Keynes and Galbraith, yet there seem to me to be certain continuities with these thinkers. He is sometimes linked with pragmatism, and there might be certain affinities with other mid-century thinkers like Walter Lippmann. He also appears to owe a debt to Max Weber. One thing should be clear by this: While he is he is no ideologue, he lamented what he thought was capitalism's demise. Regardless of your politics, a revival of interest in Schumpeter's thought is to be welcomed, for he has much to offer in coming to grips with the dramatic changes we see in our economic and political world. It would be nice if innovation led to the availability of less expensive editions of his work. It appears that he underestimated the resilience of capitalism. Or perhaps he was just off a bit in his timing.