Joseph A. Schumpeter

His Life and Work

Richard Swedberg

• Publisher: Polity
• Year: 2013
• ISBN:
  9780745668703
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Joseph A. Schumpeter (1883-1950) is one of the most celebrated authors on the economics and sociology of the twentieth century. Richard Swedberg's new biography provides an engaging and vivid account of Schumpeter's varied life, including his ventures into politics and private banking as well as his academic career. As a backdrop to these, Swedberg also discusses Schumpeter's tragic personal life.

This book provides a thorough overview of Schumpeter's writings, and also introduces previously unpublished material based on his letters and interviews. Swedberg emphasizes that Schumpeter saw economics as a form of social investigation, consisting of four fields: economic theory, economic sociology, economic history and statistics. The author describes and analyses Schumpeter's theory of social classes and modern states as well as his more famous theory of the entrepreneur.

1

Childhood and Youth

‘Early in life I formed an idea of a rich life to include economics, politics, science, art, and love.’ To this he drily adds today, ‘All my failures are due to observance of this program and my successes to neglect of it; concentration is necessary for success in any field.’

(Interview with Schumpeter in The Harvard Crimson, 1944)

Schumpeter never wrote about himself and only touched upon his own life in anecdotes and witticisms as the one cited above. As will become clear later on, this penchant for using anecdotes and witticisms is an interesting fact in itself. Indeed, it constitutes a clue of sorts to Schumpeter’s enigmatic personality. For the moment, however, let us leave this issue aside and instead introduce some of the basic facts about Schumpeter’s early life. For this purpose consider a letter that Schumpeter wrote in 1934 to Stewart S. Morgan, a professor of English who had just told Schumpeter that one of his essays had been singled out for inclusion in a collection to be used in courses of composition. Schumpeter was clearly pleased with this acknowledgement of his handling of English, which after all was a foreign language to him (‘I muddle along all right both in writing and in talking’), and he wrote happily back to Morgan:

You want to have some facts about myself. Well, I am an Austrian by birth, born in 1883 in a village called Triesch in what was then a province of the Austro-Hungarian Empire, viz. Moravia, which now forms part of the Czechoslovakian Republic. I was educated in Vienna, and following up an impulse which very early asserted itself, I then travelled about for a few years studying economics from various standpoints and began to give lectures on Economic Theory at the University of Vienna in 1909, in which year I also was appointed to a chair of Economics in Czernowitz, then the most eastern town of Austria, now belonging to Roumania. I was called to the University of Graz in 1911, and in 1913–141 acted as what was called an exchange professor to Columbia University, when I first made acquaintance with and fell in love with this country. Later on I entered politics and took office as Minister of Finance in Austria after the war. I did not return to scientific life until 1925, when I accepted a professorship at the University of Bonn, Germany. In 1927–8 and again in 1930 I visited Harvard University, which I joined as a member of her permanent staff in 1932. I think this is as much as you will want to know about my past history and type of life.¹

I

Schumpeter never wrote much more than this about his own life. There exists no autobiography or autobiographical articles in his giant production, which has been estimated to be around 250 items. What this means for our purposes is that Schumpeter’s life has to be reconstructed bit by bit from official documents, recollections of friends, and the like. It may also be noted that Schumpeter never made any particular effort to save material about his life, such as letters or interviews. Indeed, when he in 1932 decided to emigrate to the United States, he left behind most of his correspondence, private library and public documents in Germany. He even left some of his own writings in economics. His wife Elizabeth says that he ‘always regretted’ that he did this and that various logistical problems prevented him from having his things shipped to the United States.² But Schumpeter could have sent for them whenever he wanted – they were all neatly stored in a number of trunks in a house outside Bonn. One gets the distinct impression that Schumpeter preferred to leave his European past behind and in this way be free from it.

Because of the lack of written records, what we know about Schumpeter’s childhood is rather limited. According to his birth certificate ‘Joseph Aloisius Julius Schumpeter’ was born on 8 February 1883 in Triesch.³ A few days later he was baptized into the Roman Catholic faith. His father, Josef Schumpeter, is described in the birth certificate as a Tuchfabrikant (cloth manufacturer) and so is his grandfather, Alois Schumpeter. The mother, Johanna Schumpeter (born Grüner), came from a well-known doctor’s family in Iglau, a town close to Triesch. According to other official information, Joseph was the only child in the Schumpeter family; a second son was born dead on 10 April 1884.⁴ At the time of Joseph’s birth, his parents had been married for a little more than a year – their wedding had taken place in Iglau on 3 September 1881.

Triesch, where Schumpeter was born, is today called Trest and is a small town of about 6,000 people, situated in Moravia, Czechoslovakia. In those days Triesch was part of the Austro-Hungarian Empire and the population was around 4,000. The predominant language was Czech but there was also a small German minority, which controlled most of the economic and political life of the town. Most of the German-speaking inhabitants were Jewish, but some were Catholic. The Schumpeter family was a prominent and successful bourgeois family of the Catholic faith, which belonged to the German minority. Exactly when the family arrived in the region is unclear, but there exist records of the Schumpeters in Moravia since at least 1523. This means that Joseph Schumpeter was the eleventh generation of Schumpeters residing in Moravia. Schumpeter himself seems to have speculated that the Schumpeter family, before arriving in Moravia, had lived in Italy and that ‘Schumpeter’ was a German corruption of ‘Giampietro’. No reliable confirmation of this has been found. Neither is it known whether there is any truth in the colourful legend about an early Schumpeter being a nobleman who was decapitated in the thirteenth century. In the Schumpeter family, however, this legend was apparently believed. To cite a letter (written in charming but faulty English) that Elizabeth Schumpeter received from one of her husband’s relatives some time after his death:

The family is said to descend from barons of the Roman Empire of the German Nation; one of them was decapitated at Nüremberg as a robber knight under the Emperor Rudolph (1273–1291). The whole posterity was sentenced to lose its nobility and to be ‘banished for ever from the country’. At Nüremberg, so it is told, there is a little church in which there is a sepulchre of a ‘Reichsfreiherr’ Schumpeter . . . Then the Schumpeters appear in the Böhmerwald as glassblowers and later in the Sudetengebirge as clothweavers. Then they settled at Triesch about 200 years ago and acquired a big fortune, houses, factories, fields and forests. I am born there and I remember clearly the house, the furniture, the garden, the horses and the old servants. It is certain that the Schumpeters were an old patrician family with high freemanspirit and democratic feelings, and they refused several times titles of nobility, offered them by the Austrian Emperor.⁵

The factories referred to in the letter had been founded by Schumpeter’s great-grandfather, Josef Schumpeter (1777–1848). In the early 1830s, according to a local chronicle, he established the first textile mill in Triesch.⁶ This event, we are told, helped to trigger industrialization in the town. Josef’s entrepreneurial feat was continued in the late 1840s by his son Alois Schumpeter (1813–98), who expanded and rationalized the factory. Alois Schumpeter, like his father, also served as Mayor of Triesch for several years. He and his wife were apparently very popular. To cite another passage from the letter to Elizabeth Schumpeter, already referred to: ‘Alois was nicknamed ‘Djedouschek’, which signifies ‘Little old grandfather’ in Czech. He was a very good and wise man and his wife Maria was considered the angel of the workers. She installed a gratuite lunch for them in her home and was a great benefactor of the poor.’⁷

It is obvious that Schumpeter’s great-grandfather and grandfather were the kind of entrepreneur about whom Schumpeter would later write so glowingly. So also, in all likelihood, was Schumpeter’s own father, Josef Schumpeter (1855–87), even though we cannot be certain. The reason why we know so little about Schumpeter’s father is that he died at an early age – when he was only 31 years old. At the time of his father’s death, which happened on 14 January 1887 and which seems to have involved a hunting accident, Schumpeter was only four years old. It is clear that this event was not only a terrible shock to him, but that it would also have very important consequences for his whole future life. If his father had lived to a mature age, Schumpeter may very well have spent the rest of his life in Triesch and become a factory-owner like the other men in his family. But, as we know, that was not to be; and the life of Schumpeter was to take many unexpected turns.

Schumpeter’s mother Johanna (1861–1926) was 25 years old when her husband died suddenly. She first seems to have moved back to her parents’ home in Iglau. In October 1888, however, she and her little son moved to the much larger town of Graz. The reason for the move is not known. Johanna may possibly have wanted to be near the man she was later to marry, the recently retired Lieutenant-fieldmarshal Sigismund von Kéler. She may also have just wanted to move away from a small place like Iglau, which cannot have presented many opportunities for a young widow. In any case, von Kéler represented something new for Johanna: he was more than 30 years older than she; he was an aristocrat; and he was the son of a court dignitary. In 1885 von Kéler had retired to Graz, where his mother lived. He was not particularly wealthy (though he is supposed to have had a generous pension), but he had excellent connections in Vienna and elsewhere due to his family background.

Graz was where the young Schumpeter went to primary school. In September 1893, a few months after he had completed his four years of Volksschule, the whole family moved to Vienna where his mother and von Kéler immediately got married. The family moved into a spacious apartment on Doblhofgasse 3, which was an excellent address. Through his stepfather’s connections, Schumpeter was promptly admitted to Theresianum, the famous preparatory school for the aristocracy. A new and important period of his life had begun.

But before recounting what we know about Schumpeter in Theresianum, a few words should be said about the people who influenced Schumpeter the most during his early years. The three most important people in Schumpeter’s childhood were clearly his father, his mother and his stepfather. His grandfather Alois, who lived till 1898, may also have played an important role – grandparents often do when one parent is missing – but about this we know very little. There exists next to no information about Schumpeter’s father. According to one of Schumpeter’s life-long friends, it was from his father that Schumpeter had inherited his ‘dark features’.⁸ Some people, however, have challenged even this and pointed to the ‘persistent rumour’ that Schumpeter was the illegitimate son of ‘a very highly placed Austrian noble’.⁹ If this rumour were true, von Kéler would be the obvious candidate as Schumpeter’s real father. There is, however, nothing whatsoever to confirm this rumour. In any case, it is clear that Josef Senior mainly had an impact on his son by virtue of his absence.

That Schumpeter had an uncommonly close relationship with his mother is also obvious. And von Kéler does not seem to have intruded on this. When Schumpeter later spoke of his stepfather, he did so in a very relaxed manner; and he clearly did not look upon him ‘as a father’, according to a friend.¹⁰ The adult Schumpeter, however, liked to hint that von Kéler was a bit more powerful than he actually was. To several of his friends Schumpeter apparently suggested that von Kéler was the commander of all the troops in Vienna, which at this time was the capital of the giant Austro-Hungarian Empire. Von Kéler, however, never commanded the troops in Vienna. The last position he held, before retiring to Graz (presumably because of bad health), was as the commander of the infantry troop division at Terezin (now Theresienstadt).¹¹

But if von Kéler did not influence Schumpeter very much by virtue of his personality, he certainly did so by virtue of his class position. By marrying von Kéler, Johanna Schumpeter had in one stroke moved from the provincial bourgeoisie into an aristocratic family that was both well-known and respected in the capital. This, no doubt, made a great difference to her. She could now escape the not too enviable role of being a young bourgeois widow with a small child to care for and enter her new husband’s aristocratic circles. On her son, of course, all of this made a different and ultimately more profound impression. He had originally been brought up to become an ordinary man with a specific social and psychological niche in bourgeois society. Suddenly, however, this path was altered when he gained an aristocratic stepfather and was placed with other aristocratic children in Theresianum.

Undeniably, the key person in Schumpeter’s childhood was his mother. She was forever to be the emotional centre of his life. Several friends and acquaintances have testified to how extremely attached Schumpeter was to her, even long after her death. One friend describes the influence of Johanna Schumpeter on her son like this: ‘Without doubt, his mother was the most important personal influence in Schumpeter ‘s life. She was handsome, talented, and ambitious for her son. His devotion to her continued without diminution or disillusion not only to the end of her life but to the end of his.’¹² Schumpeter never mentioned his mother in any of his writings but in a thinly veiled autobiographical novel (which was never completed) he describes her as ‘an excellent woman, strong and kind’. ‘To make him an English gentleman was the one aim in life [and] she had connections she resolutely exploited for her darling.’ She was ‘the one great human factor in [his] life.¹³

Where does all of this leave us in so far as Schumpeter’s personality is concerned? On an emotional level, how did he react to being at the centre of this triangle, consisting of an absent father, an aristocratic elderly stepfather, and a mother who was first widowed and then remarried? Well, there is first the exceedingly close relationship with his mother. Johanna Schumpeter seems to have doted on her son, brought him up as her little prince, and inculcated in him great designs for the future: he should succeed. Throughout his life, Schumpeter always feared that he would disappoint her. There was also the double opportunity for male identification – with the absent father (who one could fantasize about) and with the present stepfather (who was a real aristocrat and a military man). On some level it is clear that Schumpeter succeeded in fusing these two male influences in his vision of the bold and aristocratic entrepreneur, but it seems to have been more difficult to handle them on an emotional level. Beneath the brilliant and well-constructed surface that he loved to display in public, Schumpeter would always feel lost and unhappy. Why this was so is hard to say. There had perhaps been too many new and competing influences on his individual psyche before it had had the time to grow strong on its own. And when he was older, these conspired to make him feel that he did not really have an authentic self. The hero of his semi-autobiographical novel keeps saying that there was no place where he really ‘felt at home’: ‘Certainly not in Germany or what had been the Austro-Hungarian Empire’. And even worse: ‘he did not with subconscious allegiance belong either to society or the business class or the professions or the trade union world, all of which provided such comfortable homes for everyone he knew.’ There was only one thing he could do that would help him. And that was to work: ‘for modern man his work is everything.’¹⁴

When Schumpeter wrote the outline to this novel, which was to be called Ships in Fog, he was probably in his fifties and the contours of his life were by now fairly clear to him. In our story we shall, however, now return to 1893 when Schumpeter was ten years old and about to enter Theresianum. This famous school had originally been founded by Empress Maria Theresa in 1746 as a ‘knight’s academy’ but had evolved into a school for the children of the high aristocracy and the top officials of the empire. When Schumpeter became a student this was still very much its task, even if the First World War would soon put an end to such pretensions. Theresianum was, one might say, a kind of Austro-Hungarian Eton and its main function more to teach the students how to govern the empire than to impart knowledge to them in...