In the Summer issue of Regulation (rubric “From the Past”), I review Joseph Schumpeter’s most famous book, Capitalism, Socialism and Democracy, first published 80 years ago::
In the book, Schumpeter argued that capitalism will naturally evolve into socialism, that socialism can work, and that it is not logically incompatible with democracy. I will argue against all three of these claims.
The celebrated book is well-known for its defense of “creative destruction,” but it also offers puzzling arguments in defense of socialism. I write:
Didn’t the reservations [Schumpeter] expressed overcome the putative advantages of socialism? Why didn’t he see that? One hypothesis echoed by Harvard business historian Thomas K. McCraw in his introduction to the 2008 edition of the book is that Schumpeter’s praise for socialism was irony. He had to camouflage his conservative opinions lest his socialist readers put it down. In this view, apparently shared by other scholars, we would have to read the satire between the lines.
One puzzling argument I report about (the quoted part is from Schumpeter):
If income inequality … were not deemed acceptable under socialism, the high-level bureaucrats could be “compensated not only by honors but also by official residences staffed at the public expense, allowances for ‘official’ hospitality, the use of admiralty and other yachts,” and such. OK, perhaps we can find some satire there!
McCraw wrote (and I have kept this part exclusively for my EconLog readers) that the famous Harvard professor of economics
was known for his good cheer, polished manner, and mischievous wit. He often said that he aspired to be the world’s greatest economist, lover, and horseman. Then came the punch line: things were not working out well with the horses.
As you will see if you read my essay (scroll down after following the link) I cannot but conclude about Capitalism, Socialism and Democracy:
Perhaps, after all, it is a long, devastating satire against socialism.
READER COMMENTS
Don Boudreaux
Jul 12 2022 at 9:43pm
Pierre:
Yours is a splendid review of one of the greatest books of the past 100 years. (Alas, “greatest” doesn’t imply flawless.)
Walter Clark
Jul 13 2022 at 9:56am
I wonder what Schumpeter’s view was on inheriting the “official residences staffed at the public expense, and allowances for ‘official’ hospitality.”
I believe that’s a key difference between socialism-caused-inequality and market-caused-inequality; to those on the left. If it turns out government experts keep their property after being termed out, it is a matter of law that it can be undone, whereas market-caused-inequality because it is caused by lack of government control, inheriting riches can’t be undone. The biggest objection to inequality (from those on the left I know) is not from rich celebrities or even entrepreneurs like Steve Jobs. They find inherited wealth to be most unfair.
Unfair. That’s the key word. The more government takes care of problems, the more people assume that problems such as unfairness comes with a Universe endowed requirement that it be fixed. Without the example of government fixing problems, unfairness does not come with its own obligation that it be fixed. Living with a problem, however, is for the statist, unthinkable.
Pierre Lemieux
Jul 13 2022 at 9:55pm
Walter: Contrary to Buchanan, Schumpeter, as interpreted they way I do, did not oppose inherited wealth. In a speech delivered just before his death and reproduced at the end of the HarperPerennial edition, he wrote, “I do not advocate socialism”; he even defined capitalism (again in a strange way–see my review) as “the civilization of inequality and of the family fortune”!
On your question, I suspect he would say (as I would myself) that the high-level socialist bureaucrats do transmit part of their temporary wealth to their children by living in nice neighborhoods, obtaining better health care, and sending them to the best public schools and perhaps even to foreign universities. That can’t be undone–except by the Goulag, of course.
“Fairness” is a complex or easily arbitrary concept, much more than “liberty.” It is better to define fairness in terms of liberty (which, you might object, is exactly what Buchanan did).
What do you mean by your last paragraph?
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