Schumpeter's Vision: The Self-Destructive Tendencies of Capitalism
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Schumpeter's central question: "Can capitalism survive?" opens the second part of Schumpeter's classic Capitalism, Socialism and Democracy. He answers this question with a resounding no. What kind of society will replace it? Schumpeter believed that socialism would follow. Although he saw socialism as a matter of evolutionary necessity, he also asked whether socialism could function as an economic system. This question he answered with a clear yes…
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Today, after the unprecedented forty-year boom of the capitalist world economy and after the final breakdown of socialist economies, almost every student of capitalist development will find it difficult to follow Schumpeter's logic. Has not the postwar period proved that capitalism is an extremely flexible and efficient economic system?
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For Schumpeter what distinguished socialism from capitalism was that in capitalism markets function as mechanisms for the distribution of the social product. To abolish the markets for capital and labor, however, does not imply that in socialist societies rational economic behavior is impossible. For Schumpeter the reason for the decay of capitalism is not its economic failure. On the contrary, Schumpeter posits an inherent relationship between a capitalist economic order and growth. No other economic system is capable of attaining a comparable rate of economic growth. Therefore, if capitalism perishes, it is not all because of its economic failure. In fact, it is capitalism's success that dooms it. "My thesis," Schumpeter writes, is "that the actual and prospective performance of the capitalist system is such as to negate the idea of its breaking down under the weight of economic failure, but that its very success undermines the social institutions which protect it, and 'inevitably' creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent."
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In this way Schumpeter puts the theory of the self-destructive tendencies of capitalism on a new basis. He emphasizes that capitalism's self-destructive tendencies can be ascertained only if one leaves the field of economic considerations and turns to the cultural complement of the capitalist economy, namely, its sociopsychological superstructure. Among the social institutions that are undermined by the success of capitalism Schumpeter includes the entrepreneurial function, nonbourgeois groups, and private property and the freedom of contracting.
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As to nonbourgeois groups, Schumpeter argues that the aristocracy, the craft guilds, and the peasantry are not only feudal shackles but also a precondition for the vitality of capitalism, in part because they are allies in the conflict of the bourgeoisie with the proletariat and in part because the bourgeois class, when compared with the aristocracy, is "ill equipped to face the problems, both domestic and international, that have normally to be faced by a country of any importance".
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To analyze the future prospects of capitalism, Schumpeter uses the metaphor of a fortress under siege. Capitalism diminishes its chances to survive not only by weakening the walls that protect it but also by increasing the hostility of its enemies. Intellectuals play an important role in capitalism's creation of an "atmosphere of almost universal hostility". The bourgeois fortress becomes defenseless because a capitalist order is unable to control its intellectual sector, which "lives on criticism".
