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Capitalism, Socialism and Democracy

Joseph Schumpeter

4.04 · Rating details · 2,098 ratings · 86 reviews

Capitalism, Socialism and Democracy remains one of the greatest works of social theory written this century. When it first appeared the New English Weekly predicted that 'for the next five to ten years it will cetainly remain a work with which no one who professes any degree of information on sociology or economics can afford to be unacquainted.' Fifty years on, this predi ...more

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Paperback, 460 pages

Published June 28th 2005 by Taylor and Francis (first published 1942)

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Feb 20, 2015 Edward rated it really liked it · review of another edition

Shelves: non-fiction, philosophy-psychology-sociology, own, austria-hungary-slovakia-czech, 4-star

Introduction

--Capitalism, Socialism and Democracy

Prefaces and Comments on Later Developments:
Preface to the First Edition, 1942
Preface to the Second Edition, 1946
Preface to the Third Edition, 1949
The March into Socialism

Notes
Index

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Mar 29, 2011 Hadrian added it

Shelves: economics-finance-business, nonfiction, history, politics-and-foreign-policy

Brilliant at times, but also pigheaded — my star rating would only detract from a more comprehensive understanding of the book — deserves more time and effort than I can spare here, so I'm going to instead present a fraction of my notes

Schumpeter might be loosely grouped with the other Austrian School of economists, but I see traces of him in some neo-Marxist thought, including Wallerstein and Sweezy, as well as many of the neo-Keynesians—

Schumpeter is arguably most famous for his phrase and ide Brilliant at times, but also pigheaded — my star rating would only detract from a more comprehensive understanding of the book — deserves more time and effort than I can spare here, so I'm going to instead present a fraction of my notes

Schumpeter might be loosely grouped with the other Austrian School of economists, but I see traces of him in some neo-Marxist thought, including Wallerstein and Sweezy, as well as many of the neo-Keynesians—

Schumpeter is arguably most famous for his phrase and idea of 'creative destruction', which he covers in about six pages — economic development arises out of the destruction of a previous economic order — e.g. how electronic media have upended so many other industries over the past fifteen years —

He (correctly) places Marx as an inheritor of the classical economic tradition of David Ricardo, and notes that Marx, aside from his 'prophetic' attraction to discontents, is important for noting the economic sociology of history —

Curiously enough, sees monopoly as being more efficient than competitive economies, largely based on the idea of economies of scale — technology will lead to greater concentration of capital — also sees the downfall of capitalism as coming not from the proletariat, but from a dissident movement of intellectuals — Profoundly elitist in his view of politics, arguing for an elite managerial class to rule — Claims that modern intellectual growth is allowed only by capitalism, and I can see this idea clearly swiped by Sowell

Concludes by noting that democracy can exist without socialism, and vice versa, predicts that communism eventually overtake capitalism not through revolution but by peaceful assimilation through democratic means — then a history of Marxist political parties from 1848 to the late 1940s

At times, Schumpeter is bone-headed, but when he is right, he is profoundly right, as in the case of 'creative destruction' — will no doubt return to this book, as there is much to grapple with. Reading books like this is fun — well, as fun as economic history can be, anyway ...more

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Jan 03, 2011 Joe rated it it was amazing · review of another edition

Shelves: history, marxism, conservative, sociology, economics, political-thought

Comment:

In the end it will be seen that the greatest enemy of capitalism was always democracy, i.e. the will of the people. Once the people turn anti-capitalistic, under the influence of a disaffected intelligencia, there is absolutely nothing that can stand against them. Schumpeter at one and the same time believes that Capitalism is the most adequate description of economic reality and that it is doomed. How is this possible? - But it is exactly as the Savior of the Christians said so long ago ...more

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Apr 10, 2011 Marks54 rated it really liked it

This is a classic of economics and of entrepreneurship that lots of people have read in their undergraduate economics or business classes. It is worth reading to get the full perspective of Schumpeter's view of how the economy works. This is perhaps the most articulate statement on the role of of "creative destruction" and innovation as critical to the success of capitalism. It is also also very cynical of Marxist approaches to economics. Strangely enough, the section on socialism suggests that ...more

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Jan 04, 2012 Eric Baldwin added it

It shows how democracy is a vast conspiracy, elections are fraudulent, individual votes are useless, and human nature is corrupt.

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Jun 14, 2016 Jim Puskas rated it it was ok

Shelves: human-relations, sociology

Schumpeter is best remembered for having coined the term "creative destruction" a process well understood today whereby entire industries and the jobs that go with them are continually rendered obsolete as new products, new technologies, new ways to make money emerge. Schumpeter speculates about the possibility of a democratic socialist utopia, but he unconvincingly discounts the reality of human acquisitiveness and the desire for upward mobility. Further, he naïvely discounted the authoritarian ...more

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Mar 14, 2013 Andrew added it

Shelves: economics

In the wake of the Second World War, Joseph Schumpeter wrote an exceptionally intriguing book that everyone, capitalist or socialist in persuasion, should read, and will probably enjoy reading. Heavily inspired by Marx and especially his theory of history, as much a sociological as an economic text, and broad-ranging in its analysis of the relationship between capital and society, it's a difficult book to pin down, and clearly the product of a remarkable thinker.

The question-- which all propheti ...more

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Dec 06, 2014 Patrick rated it it was ok

Schumpeter lived a very, well, Schumpeterian lifestyle, battered up and down and around the world by the winds of economic turmoil. He argues that this undulating dynamism is in fact the defining attribute of capitalism and the reason it has been so undeniably successful at achieving economic growth. Unlike most economists he defends capitalism warts-and-all: He fully recognizes that we have never lived in anything like a perfectly-competitive efficient market, and goes on to say that we wouldn' ...more

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Oct 13, 2017 Whitlaw Mugwiji rated it really liked it · review of another edition

Shelves: non-fiction

It is a great read, especially for those interested in the political economy. It is Schumpeter’s best book, which is famous for popularising his acclaimed theory on capitalism, "creative destruction". Definitely not a light read, it took me forever to finish. But it was worth the read. I must confess, it is a difficult read even for those with an economics background, or those who have read Hegel’s dialectics or Karl Marx’s interpretation of history through dialectic materialism, as these theori ...more

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Jun 22, 2019 Tyler rated it really liked it

I am finished with this book finally and I think I have read a glimpse into Marx a little more. I have read Marx's Communist Manifesto before, believe it or not, and it was one of the first books on economics I've read. Well that state of mind was very similar to many others in the early 20th century as they read the pamphleteering of various political party interests.

This work discounts some of the more radical notions but retains some of the core tenets of Marxist communism. A thorough look a I am finished with this book finally and I think I have read a glimpse into Marx a little more. I have read Marx's Communist Manifesto before, believe it or not, and it was one of the first books on economics I've read. Well that state of mind was very similar to many others in the early 20th century as they read the pamphleteering of various political party interests.

This work discounts some of the more radical notions but retains some of the core tenets of Marxist communism. A thorough look at some of the more finer kinds of socialism is a little wanting, but their history is not. He will simply lump all forms of older socialism like Fourierism into 'Orthodox socialism'. Every shape and kind of socialism is in here, St. Simon, Plato, everyone. You could hardly think of a type of society not mentioned. This is a must read for the political theorist.

As an economist though, I am lukewarm. I think that his analysis of economic conditions is interesting at times, but choppily made. I have just started Morgenstern's book on accuracy in economic investigations, so I am no pro, but I don't think you should ever 'roughly' compute figures while dropping entire numbers off of both sides of the eventual estimate. For instance, if you're going to have a liberal or conservative estimate that's fine, but I can think of at least one time whilst in Part II (where the unbelievably atrocious statistical estimates occur) that he just leaves off entire numbers on both sides, so that the answer is both conservative and liberal... I mean that's just not right, nor is it accurate.

Now to speak of his economic terminology. If he isn't a good quantitative economist, surely he must be a good qualitative one? Wrong. I was first struck with difficulty when he wasn't including 'wages to employees' in his term 'prime cost'. I assumed it was because he hadn't read Keynes yet. I was right. I still think he should have defined that particular term before he used it in the footnote. The issue I have starts at the last chapter, as you can imagine. It seems he finally did his homework and read Keynes' General Theory of Employment, Interest, and Money, and while I did not enjoy many of Keynes' conclusions or his solutions to those conclusions either, I must admit I am at once struck with how he grossly misinterpreted him. At some point in the book, he essentially equates consumption with saving. This would be the same as saying consumption = investment under the Keynesian system because savings and investment are used interchangeably throughout. So either he didn't read the book or just didn't understand it. He also failed to use any of its important concepts like marginality or elasticity and just decided to drone on and on incorrectly about Keynes.

But. That was one chapter. He kept himself within the sphere of history of political science and political philosophy mostly the entire time, so I cannot complain with his ability to deftly explain these concepts in a way which was coeval with some of the greater political scientists like Tocqueville or Burke (the latter of whom is specifically referenced at least three times).

This was a good read overall by what can only be described as an 'Austrian socialist'. A socialist, because he believed in socialism and wasn't a Marxist, and an Austrian, because he didn't understand the quantitative side of economics. 4/5 stars though, because he's a way better read than Hayek. ...more

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Feb 09, 2013 Otto Lehto rated it liked it

Schumpeter was a fascinating character, and his essays and books are fascinating to read. They seem to elude easy categorization. This particular book evinces an almost Hegelian dialectical method, whereby socialism and capitalism are seen as two sides of the same modernist coin.

The section on capitalism contains the analysis of "creative destruction", which is justifiably well-known. But that only takes up a few pages, whereas the rest is devoted to a historical analysis of the conditions unde Schumpeter was a fascinating character, and his essays and books are fascinating to read. They seem to elude easy categorization. This particular book evinces an almost Hegelian dialectical method, whereby socialism and capitalism are seen as two sides of the same modernist coin.

The section on capitalism contains the analysis of "creative destruction", which is justifiably well-known. But that only takes up a few pages, whereas the rest is devoted to a historical analysis of the conditions under which socialism seems to arise as a viable, almost inevitable, successor, to it.

Although a bourgeois economist, out of the three things he covers, capitalism seems to be the least important - at least for the argument he wants to make. And as he allows the market society to take the back seat, he allows the promise of socialism to bear its full weight as the next stage in the evolution.

The sections on socialism rely on a notion of socialism that seems very curious to us today. He seems to think there are no fundamental problems with organizing a society through a central planning board. Partially outdated, partially all over the place, partially just crazy, the book is nonetheless a fascinating read, since Schumpeter is such a unique thinker, even though the book's value as a lasting contribution - outside of the tremendously important notion of "creative destruction" (which seems to have achieved a life of its own) - to the field of economics is dubious.

The chapter on democracy, I should say, contains a brilliant and almost entirely distinct analysis on democracy, which is almost Machiavellian in its exposé of the power-hungry nature of politics. It bears very little immediate relevance for his further argument on the relationship between capitalism and socialism, but it provides very definite proof of the occasional genius of Schumpeter.

At 400 pages, it is too long. There is almost no reason to read the whole book. The gist of his historical argument for the inevitability of the transition from capitalism to socialism can be gained by skimming through a couple of the central chapters. His charitable analysis of the positive potential of centralized socialism as a method of efficient economic management has been completely disproved both theoretically and empirically (which unfortunately makes the middle part of the book almost valueless, aside from its occasionally brilliant observations). The last 100 pages that deal with the history of socialist parties is entirely superfluous (I admit to skipping it). So, I would say the book could be condensed to about a 100-150 pages without losing anything.

As such, I cannot entirely recommend reading the book, unless you are interested in the history of state socialism as a cause célèbre among intellectuals. I would, however, recommend reading the sections on "creative destruction" and his brilliantly caustic (and spot on) analysis of democracy. ...more

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Dec 11, 2017 Mehmed Gokcel rated it really liked it

I got to read selective parts of this book and thought the analysis of Marxist thought was incredibly insightful and Schumpeter's prediction of capitalism's end compellingly argued. Particularly his analysis of Democracy as a mode of self-determination both politically and economically leads to the argument that it is inseparable from socialism. He is not a fan of this outcome, but is inclined to give credit to the power of this motive in determining systems of governing and economics.

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Dec 08, 2016 Stevenglinert rated it it was amazing

Schumpeter must have been a really shitty human being to hang out with. And his dating profile must have been intolerable to even read. Schumpeter does a better take-down of socialism and Marx than Hayek or Von Mises, but never gets into any libertarian sounding nonsense and his shtick about capitalism is the best pitch I've heard for it in awhile. Also for a book about economics, it's written in like, the most bitchy tone.

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Sep 08, 2011 Curtis rated it it was amazing

Excellent. An Austrian economist I can read and agree with most of the time. One of the best analysts since Weber.

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Apr 16, 2018 Buck rated it really liked it

For someone who criticizes others for being prolix, he sure can ramble. Visionary economic foresight though.

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Oct 20, 2018 O O rated it liked it · review of another edition

Having heard of Schumpeter mostly from conservative authors, and this book in particular for the introduction of the idea of “creative destruction”, I was tempted to read “Capitalism, Socialism and Democracy” after also finding out that in it, someone affiliated with the Austrian School was anticipating an upcoming end of capitalism.

The book has five major parts: Marx, capitalism, socialism, and democracy, plus a brief history of socialist parties. Having only negligible familiarity with Marx’s Having heard of Schumpeter mostly from conservative authors, and this book in particular for the introduction of the idea of “creative destruction”, I was tempted to read “Capitalism, Socialism and Democracy” after also finding out that in it, someone affiliated with the Austrian School was anticipating an upcoming end of capitalism.

The book has five major parts: Marx, capitalism, socialism, and democracy, plus a brief history of socialist parties. Having only negligible familiarity with Marx’s work, and that from secondary sources, the first part was—to me—irrelevant, but I guess serves as an introduction and disclaimer of sorts.

The second part about capitalism, on the other hand, assuming some familiarity with classical economics, appears very interesting and I assume to a large extent still original to most readers: the near-universal absence of perfect competition, the desirability of mono- and oligopolies for economic growth and efficiency, the dissipation of attentive proprietors through diluted ownership, the intellectuals’ critique of capitalism and bourgeoisie as their sole raison d’être and their solicitation of all non-bourgeois elements of society, the gradual irrelevance of entrepreneurship, and the “automation” and on-demand production of research and innovation. All these are to Schumpeter signs of a mature capitalist economy that is ripe for harvest by socialism.

The third part about future socialism describes, according to Schumpeter, the only viable implementation of socialism. It is defined as the management of the means of production by a central authority according to rational/utilitarian economic principles. There is deliberately no speculation on elements that are not immediately relevant to the mechanics of production—most importantly—politics. Hence Schumpeter describes an economy that operates in the mode of “big business” with the bourgeois managerial class, and their excesses, having being replaced by bureaucrats of a socialist persuasion. The success of such an endeavour is argued to depend on the maturity of the capitalist economy it succeeds. Centralized control of the economy could be feasible, since there is no need of the new managerial bureaucracy taking over a mature capitalist economy to be constantly adapting production to the creative destruction of a developing and dynamic economy. The bottom line being that Schumpeter’s socialism and mature capitalism differ mainly on the make-up of the managerial class which in both cases presides over a static economy.

The fourth part is about representative democracy both historically and in Schumpeter’s socialism. Hastily he makes away both with the “will-of-the-people” tropes and the “bill-of-rights” overwhelmingly concomitant with democracy, to define democracy as: “the institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote”. He credits the bourgeois class with limiting the economic power of the political authorities (à la laissez-faire liberalism) and argues that a similar organization is possible in a socialist economy with a well-developed managerial bureaucracy independent of political authority, and a liberal dose of curtailment of human rights. Human rights, of the fair trial and free speech type, being sine qua non to the economic self-interest of the bourgeois class but not that much in socialism.

The final part describes the history and speculates on the future of socialist parties, their policies and idiosyncrasies according to the particularities of the respective economic and political development of their countries. Sweden for example, being a country with an advanced capitalist economy, placing socialists in positions of power gradually and democratically, juxtaposed to the history of the Bolsheviks.

The thesis of the book, in summary, is that a hypothetical mature capitalism differs from Schumpeter’s socialism in its economic organization only in appearances but not at all in function. At a state of maturity the economic engine of capitalism has reached near-peak efficiency but also a static equilibrium. There is nothing more to be gained by maintaining the status-quo, but, crucially, also nothing (or very little) to be lost in economic terms by transitioning to socialism.

Although the book is not technical, Schumpeter assumes an economically literate audience, which might be the reason he generally glosses over and hand-waves important parts of his arguments. In his defense, explaining the workings and arguing the merits of two economic systems and one political system in a couple hundred pages is no easy task. So, the book reads like a hurried sketch of his thoughts on these matters.

Especially the speculative parts about socialism very much resemble wishful thinking. Schumpeter raises potential objections to and criticisms of his statements, only to do away with them with mere affirmations and assertions. Though being aware of the work of Hayek and von Mises he barely mentions their arguments. This makes the book very demanding to the reader, who has to reconstruct Schumpeter’s line of arguments if he is to be convinced of anything—and that only if he has the ability, knowledge and time.

Adding to these a peculiar and convoluted syntax and style (multitude of secondary clauses; pronouns with no clear reference; excessive footnotes etc.) makes the book a very dry and demanding read.

Despite this, it is full of original thoughts, unusual opinions and less known facts, even if not always well argued, presented or supported. For example: the bourgeoisie cannot produce a successful ruling class and has often allied with the scions of nobility or other authoritarians who are better at government (Schumpeter’s “protective strata”); the motivational role of “the family” in bourgeois activities; the ability of individuals like Gladstone to single-handedly win elections (the Midlothian Campaign) etc.

What might be of value to modern readers with classical or marxist notions of capitalism (and ownership, the bourgeoisie etc.) is the description of mature capitalism. There, even innovation and creative destruction can be decreed to the R&D department. Even the haute bourgeoisie owns only a small percentage in individual companies to be actively involved and interested in their affairs, which are left to a multitude of disinterested managerial bureaucracies. Investment opportunities are vanishing and interest rates declining. Oligopolies are providing for the masses with an unprecedented efficiency, while the intellectuals agitate a working class (white and blue collar) that is increasingly disenchanted both with capitalism and democracy… To what extent are these true today? If they are true, does this imply stasis and equilibrium? And if yes, is socialism a desirable and feasible way out? ...more

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Jun 14, 2013 Sean Rosenthal rated it really liked it

Shelves: non-fiction, economics

Interesting Quotes:

"The...process of industrial mutation...incessantly revolutionizes the economic structure FROM WITHIN, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism...The problem that is usually...visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them."

-Joseph Schumpeter, Capitalism, Socialism, and Democracy

"There are ultima ...more

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Jan 03, 2015 Edward Tse rated it really liked it

Shelves: economics

This review has been hidden because it contains spoilers. To view it, click here.

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Aug 30, 2011 Dan rated it really liked it · review of another edition

Shelves: philosophy, history, social-science

A tough book, but a vitally important book for understanding the subtle relationships between capitalism, socialism and democracy, especially in its explanation of how capitalism works through 'creative destruction'. Originally published in 1942, 1947 and 1950, this book still has wide applications for today, especially those sections dealing with entrepreneurship, central planning, and democratic processes. But beware, the points Schumpeter makes in this book are extremely subtle, and one canno ...more

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Jun 05, 2014 Nick rated it it was amazing

Famous for two things, creative destruction and the theory of democratic elitism. Most of the work is about socialism, its history and why he thought it would triumph over capitalism. His democratic elitism, which I used for a paper, is a lot like Woodrow Wilson's idea of presidential leadership, of the will of the people being incoherent and contradictory, and the necessity of elites to present coherent visions of leadership through open competition.

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Aug 08, 2014 Ethan Jacobs rated it really liked it · review of another edition

- His writing style is a little tough to engage with at times, but his astute and eye-opening analysis of the progression of capitalism certainly made this book worth reading. The ouline of socialism with its somewhat arduous details, while necessary to appeal to his audience, was a bit... dull. I guess that the reality of a potentially effective socialism just isn't very romantic. All in all, worth the read.

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Apr 25, 2012 M rated it it was amazing

Shelves: 2012, ppe, non-fiction, extracts-articles

Chapters 21 and 22. I do really like his two conceptions of democracy. Perhaps a little too pessimistic when it comes to the stupidity of the population, especially in political matter. Chapter 22 was great, and I think the role of leadership in a democracy is too often overlooked. Conception of democracy as the power struggle between the political elite very interesting.

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Jan 12, 2011 David rated it it was amazing · review of another edition

Recommends it for: Eggheads

The man can turn a phrase. Very enjoyable, though the economics content is rather minimal beyond Chapter 8. After wrestling with the question over the past few months, I have to disagree with McCraw's thesis that this was a satire. And with that, the logic on the end of capitalism seems weak. Most of my colleagues loved reading this, but certainly not all.

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Jun 28, 2014 Vitaly Repin rated it it was amazing

Great book.

I think that this is "must read" book for everybody who is interested in the perspectives of capitalism and socialism and their connections with democracy. The book was published in the middle of XX century but it is still very valid for our time.

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Oct 15, 2014 Philip Chaston rated it really liked it

An interesting exploration of how Schumpeter tried to reconcile socialism and democracy. Like Marx, the trends he identified did not last ten years. He thought they might outlive the C20th.

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Jan 18, 2016 Neil Rempel rated it really liked it · review of another edition

A hard book, will need to reread it in the future....slower!

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Jun 03, 2013 Radwa rated it really liked it

Shelves: study

I didn't read the whole book; i enjoyed what i read, although the language was quiet difficult for me. . .

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Jul 17, 2018 Eugene Kernes rated it really liked it · review of another edition

Shelves: economics

This book is an artful explanation of Marxism, capitalism, socialism, and democracy. Always starting from the concepts intended purpose, the way the concept was meant to be. Followed by the criticism of the concept and the way the realities of the world interact with it. Schumpeter shows a critical eye towards everything he tries to explain.

Schumpeter can be described as eclectic, while at the same time point to how eclectic Marx was. Sociology and economics made Marx seem like a prophet. The e This book is an artful explanation of Marxism, capitalism, socialism, and democracy. Always starting from the concepts intended purpose, the way the concept was meant to be. Followed by the criticism of the concept and the way the realities of the world interact with it. Schumpeter shows a critical eye towards everything he tries to explain.

Schumpeter can be described as eclectic, while at the same time point to how eclectic Marx was. Sociology and economics made Marx seem like a prophet. The exploitation of the worker by the capitalist is central stage in Marx while Schumpeter points out that this requires a watertight division between those groups of people to last throughout their descendants. Exploitation occurs when the worker does obtain the full value of their work, but Schumpeter explains that labor theory of value cannot work without perfect competition, while exploitation does not work with perfect competition. What seems to be underplayed, or rather contradictory, in Marx are cycles of capitalist innovation, the turmoil of economic progress.

Capitalism cannot survive because the social institutions that give capitalism life are in jeopardy in the capitalistic process. This is where the famous phrase, creative destruction, is born. A process that phases out old technology or poorly managed capital and initiates new technology and ventures. The whole economic structure is changed with creative destruction as over time the resources that are utilized to their best opportunities phase out those which are inferior. This process leads to economic development at the cost of some hardship such as unemployment for those who use the inferior process or resources. Schumpeter argues that as long as the process continuously increases economic development, the social agitation is acceptable. Only when social agitation, such as unemployment, interferes with economic development is it unacceptable. Economic development can continue ad infinitum for new wants are borne from higher livings standards. But the costs to some inspire negative responses from intellectuals, creating a social environment which forces policies that try to remove the capitalistic process.

Socialism means that production is vested in a central authority. A state or some board makes all of the decisions on behalf of the population. Schumpeter believes that a board can organize itself in a way as to set all prices and quantities needed for the society. The board will have to set prices which will create no unused goods. The benefit of socialism is that the individual energy would be spent on other pursuits rather than on a source of income for food. Socialism can be democratic or not, but as history shows that it can survive via controlling peoples’ freedoms of speech and removing agitators of the system.

Democracy is just one of the political processes to make decisions, and it may not be the best process for every decision. History has shown that many decisions made by a democratic procedure led to the persecution of many people. Democracy is a method which elects people to represent the people. For people to vote for the appropriate person, information has to be independent which reality shows that almost always the effective information is adulterated or selective. Good candidates for democratic election may not be good administrations or those skillful in undertaking the tasks for national success. The democratic system may actually remove from the elections the people who can best lead the nation. Schumpeter makes the case that the needed or merited government may not be the one chosen by the people.

A fairly decently written book, but not meant as an introductory book. In many, if not all, parts of the book, the reader cannot tell Schumpeter’s true intention, his actual view on the subject. The introductory chapter is quite accurate when expressing that much of Schumpeter’s writing happens between the lines. This style is helpful at times as it shows Schumpeter’s understanding of the subject from varied perspectives, while also costly as at times as it creates a mass of confusion. ...more

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Dec 02, 2018 Tina Doncheva rated it really liked it

Despite the title, the book does little justice to socialism (although focusing on Marx in the first about 50 pages) or democracy. That being said, the book is a great reading about capitalism - its essence, its virtues and its defects. And it is mostly such from an economic point of view, despite Schumpeter's slight efforts to touch a bit on history, sociology and psychology.

Not being an economist myself, I found the book hard to read, yet, once one grasps Schumpeter's language and point of vie Despite the title, the book does little justice to socialism (although focusing on Marx in the first about 50 pages) or democracy. That being said, the book is a great reading about capitalism - its essence, its virtues and its defects. And it is mostly such from an economic point of view, despite Schumpeter's slight efforts to touch a bit on history, sociology and psychology.

Not being an economist myself, I found the book hard to read, yet, once one grasps Schumpeter's language and point of view, it becomes interesting. "Innovation" is the key word in the author's understanding of capitalism. Thus, he renders the term "static equilibrium" as totally misleading, in terms of being impossible to keep markets and economies stable and unchanged over time, considering the constantly ongoing political, social, legal and economic changes.

Thus, the most triggering sentence in the book is on page 73 and states: "Can capitalism survive? No. I do not think it can." Thereafter, the author goes into a lengthy analysis of how capitalism is on the path of its self-destruction. Once again, as a non-economist, I cannot and do not wish to evaluate Schumpeter's purely economist points of view. Nonetheless, there are some points with which I can fully agree, such as, for example, the fact that, in its development, capitalism destroyed essential roots of the human socium and replaced them with... virtually nothing. Another point I share with Schumpeter is self-explanatory and contained in this very sentence: "A genius in the business office may be, and often is, utterly unable outside of it to say boo to a goose - both in the drawing room and on the platform."

In conclusion, the book is actually 3.5/5 for me. And this, I am fully aware, is mainly due to my competition law background, not an economics one. But I cannot deny the economics genius behind it - Schumpeter grasps many of the problems of capitalism (some of which I have not thought previously of) from a capitalist point of view, which was honestly interesting to me. Being first published in the 1940s, it, of course, has some points that do not correspond to nowadays' circumstances but that is quite understandable. One such point is that society, having noted the defects of capitalism, would undeniably turn solely to socialism. Nowadays, I am afraid, the far-right is much more present amongst society. ...more

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Jul 23, 2019 Zach Mazlish rated it really liked it

This book was a mix of brilliant insights and feeling quite confused. Schumpeter writes in a style where he assumes a fair amount of prior knowledge, which makes parts where one does have that knowledge feel jam-packed with thought-provoking comments, but other parts (particularly the beginning and ending sections focused on Marx and specific historical developments) hard to follow. I also definitely struggled to follow some of his economic arguments, and need to read more about how his analysis This book was a mix of brilliant insights and feeling quite confused. Schumpeter writes in a style where he assumes a fair amount of prior knowledge, which makes parts where one does have that knowledge feel jam-packed with thought-provoking comments, but other parts (particularly the beginning and ending sections focused on Marx and specific historical developments) hard to follow. I also definitely struggled to follow some of his economic arguments, and need to read more about how his analysis of different phenomena is generally regarded. I found his comments on the nature of big business, "creative destruction," and the way innovation works in the capitalist economy all perceptive, but I am unsure whether the historical reality of what has occurred refutes or affirms some of his arguments. Has business continued to concentrate in a way that displays the tendencies he argues for? Or have innovations in sectors he didn't anticipate (and political contingencies) undermined his argument? Obviously, he is wrong about the occurrence of socialism, but he is a careful enough writer about the indeterminacy of his predictions and his work being an assessment of tendencies/patterns that I think he still might be largely right. I also had a tough time evaluating his sections on the feasibility of socialism. They seemed naive/wrong without assuming an incredible amount of top-down information organization efficiency, but maybe we are heading in that direction? (Gwern has a blog post about this). What made this book so impressive to me are some of the more sociological/psychological bits. His sections on the sociology of the intellectual and his analysis of democracy are both superb, and he has a number of passing comments about attitudes/psychology that seem to forerun a number of later psychological findings (e.g. mini-comments on why people don't like capitalism and don't acknowledge its successes both contain and get ahead of Pinker in certain ways). I also find myself agreeing with his more moral convictions about socialism/capitalism, but am somewhat tentative in that assessment, because I'm not sure I understand his exact positions. Anyway, excited to read more secondary literature about this and hope to gain a greater understanding of its place in economic thought over time. ...more

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About Joseph Schumpeter

Joseph Schumpeter

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Joseph Alois Schumpeter was an Austrian American economist and political scientist. He briefly served as Finance Minister of Austria in 1919. One of the most influential economists of the 20th century, Schumpeter popularized the term "creative destruction" in economics.

Books by Joseph Schumpeter

History of Economic Analysis: With a New Introduction

Can Capitalism Survive? Creative Destruction and the Future of the Global Economy

Essays: On Entrepreneurs, Innovations, Business Cycles and the Evolution of Capitalism

Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. Vol 1-Vol 2

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“Geniuses and prophets do not usually excel in professional learning, and their originality, if any, is often due precisely to the fact that they do not.” — 35 likes

“In one important sense, Marxism is a religion. To the believer it presents, first, a system of ultimate ends that embody the meaning of life and are absolute standards by which to judge events and actions; and, secondly, a guide to those ends which implies a plan of salvation and the indication of the evil from which mankind, or a chosen section of mankind, is to be saved.” — 9 likes

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