Capitalism, Socialism and Democracy

Joseph A. Schumpeter

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134841509
• Edition: 5
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

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 prediction seems a little understated.Why has the work endured so well? Schumpeter's contention that the seeds of capitalism's decline were internal, and his equal and opposite hostility to centralist socialism have perplexed, engaged and infuriated readers since the book's publication. By refusing to become an advocate for either position Schumpeter was able both to make his own great and original contribution and to clear the way for a more balanced consideration of the most important social movements of his and our time.

PART I The Marxian Doctrine

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PROLOGUE

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MOST of the creations of the intellect or fancy pass away for good after a time that varies between an after-dinner hour and a generation. Some, however, do not. They suffer eclipses but they come back again, and they come back not as unrecognizable elements of a cultural inheritance, but in their individual garb and with their personal scars which people may see and touch. These we may well call the great ones—it is no disadvantage of this definition that it links greatness to vitality. Taken in this sense, this is undoubtedly the word to apply to the message of Marx. But there is an additional advantage to defining greatness by revivals: it thereby becomes independent of our love or hate. We need not believe that a great achievement must necessarily be a source of light or faultless in either fundamental design or details. On the contrary, we may believe it to be a power of darkness; we may think it fundamentally wrong or disagree with it on any number of particular points. In the case of the Marxian system, such adverse judgment or even exact disproof, by its very failure to injure fatally, only serves to bring out the power of the structure.

The last twenty years have witnessed a most interesting Marxian revival. That the great teacher of the socialist creed should have come into his own in Soviet Russia is not surprising. And it is only characteristic of such processes of canonization that there is, between the true meaning of Marx’s message and bolshevist practice and ideology, at least as great a gulf as there was between the religion of humble Galileans and the practice and ideology of the princes of the church or the warlords of the Middle Ages.

But another revival is less easy to explain—the Marxian revival in the United States. This phenomenon is so interesting because until the twenties there was no Marxian strain of importance in either the American labor movement or in the thought of the American intellectual. What Marxism there was always had been superficial, insignificant and without standing. Moreover, the bolshevist type of revival produced no similar spurt in those countries which had previously been most steeped in Marxology. In Germany notably, which of all countries had the strongest Marxian tradition, a small orthodox sect indeed kept alive during the post-war socialist boom as it had during the previous depression. But the leaders of socialist thought (not only those allied to the Social Democratic party but also those who went much beyond its cautious conservatism in practical questions) betrayed little taste for reverting to the old tenets and, while worshiping the deity, took good care to keep it at a distance and to reason in economic matters exactly like other economists. Outside of Russia, therefore, the American phenomenon stands alone. We are not concerned with its causes. But it is worth while to survey the contours and the meaning of the message so many Americans have made their own.¹

1. References to Marx’s writings will be confined to a minimum, and no data about his life will be given. This seems unnecessary because any reader who wishes for a list of the former and a general outline of the latter finds all he needs for our purposes in any dictionary, but especially in the Encyclopedia Britannica or the Encyclopaedia of the Social Sciences. A study of Marx begins most conveniently with the first volume of Das Kapital (first English translation by S.Moore and E.Aveling, edited by F.Engels, 1886). In spite of a huge amount of more recent work, I still think that F.Mehring’s biography is the best, at least from the standpoint of the general reader.

CHAPTER I MARX THE PROPHET

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IT WAS not by a slip that an analogy from the world of religion was permitted to intrude into the title of this chapter. There is more than analogy. 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. We may specify still further: Marxist socialism also belongs to that subgroup which promises paradise on this side of the grave. I believe that a formulation of these characteristics by an hierologist would give opportunities for classification and comment which might possibly lead much deeper into the sociological essence of Marxism than anything a mere economist can say.

The least important point about this is that it explains the success of Marxism.¹ Purely scientific achievement, had it even been much more perfect than it was in the case of Marx, would never have won the immortality in the historical sense which is his. Nor would his arsenal of party slogans have done it. Part of his success, although a very minor part, is indeed attributable to the barrelful of white-hot phrases, of impassioned accusations and wrathful gesticulations, ready for use on any platform, that he put at the disposal of his flock. All that needs to be said about this aspect of the matter is that this ammunition has served and is serving its purpose very well, but that the production of it carried a disadvantage: in order to forge such weapons for the arena of social strife Marx had occasionally to bend, or to deviate from, the opinions that would logically follow from his system. However, if Marx had not been more than a purveyor of phraseology, he would be dead by now. Mankind is not grateful for that sort of service and forgets quickly the names of the people who write the librettos for its political operas.

But he was a prophet, and in order to understand the nature of this achievement we must visualize it in the setting of his own time. It was the zenith of bourgeois realization and the nadir of bourgeois civilization, the time of mechanistic materialism, of a cultural milieu which had as yet betrayed no sign that a new art and a new mode of life were in its womb, and which rioted in most repulsive banality. Faith in any real sense was rapidly falling away from all classes of society, and with it the only ray of light (apart from what may have been derived from Rochdale attitudes and saving banks) died from the workman’s world, while intellectuals professed themselves highly satisfied with Mill’s Logic and the Poor Law.

Now, to millions of human hearts the Marxian message of the terrestrial paradise of socialism meant a new ray of light and a new meaning of life. Call Marxist religion a counterfeit if you like, or a caricature of faith—there is plenty to be said for this view—but do not overlook or fail to admire the greatness of the achievement. Never mind that nearly all of those millions were unable to understand and appreciate the message in its true significance. That is the fate of all messages. The important thing is that the message was framed and conveyed in such a way as to be acceptable to the positivistic mind of its time—which was essentially bourgeois no doubt, but there is no paradox in saying that Marxism is essentially a product of the bourgeois mind. This was done, on the one hand, by formulating with unsurpassed force that feeling of being thwarted and ill treated which is the auto-therapeutic attitude of the unsuccessful many, and, on the other hand, by proclaiming that socialistic deliverance from those ills was a certainty amenable to rational proof.

Observe how supreme art here succeeds in weaving together those extra-rational cravings which receding religion had left running about like masterless dogs, and the rationalistic and materialistic tendencies of the time, ineluctable for the moment, which would not tolerate any creed that had no scientific or pseudo-scientific connotation. Preaching the goal would have been ineffectual; analyzing a social process would have interested only a few hundred specialists. But preaching in the garb of analysis and analyzing with a view to heartfelt needs, this is what conquered passionate allegiance and gave to the Marxist that supreme boon which consists in the conviction that what one is and stands for can never be defeated but must conquer victoriously in the end. This, of course, does not exhaust the achievement. Personal force and the flash of prophecy work independently of the contents of the creed. No new life and no new meaning of life can be effectively revealed without. But this does not concern us here.

Something will have to be said about the cogency and correctness of Marx’s attempt to prove the inevitability of the socialist goal. One remark, however, suffices as to what has been called above his formulation of the feelings of the unsuccessful many. It was, of course, not a true formulation of actual feelings, conscious or subconscious. Rather we could call it an attempt at replacing actual feelings by a true or false revelation of the logic of social evolution. By doing this and by at tributing—quite unrealistically— to the masses his own shibboleth of “class consciousness,” he undoubtedly falsified the true psychology of the workman (which centers in the wish to become a small bourgeois and to be helped to that status by political force), but in so far as his teaching took effect he also expanded and ennobled it. He did not weep any sentimental tears about the beauty of the socialist idea. This is one of his claims to superiority over what he called the Utopian Socialists. Nor did he glorify the workmen into heroes of daily toil as bourgeois love to do when trembling for their dividends. He was perfectly free from any tendency, so conspicuous in some of his weaker followers, toward licking the workman’s boots. He had probably a clear perception of what the masses are and he looked far above their heads toward social goals altogether beyond what they thought or wanted. Also, he never taught any ideals as set by himself. Such vanity was quite foreign to him. As every true prophet styles himself the humble mouthpiece of his deity, so Marx pretended no more than to speak the logic of the dialectic process of history. There is dignity in all this which compensates for many pettinesses and vulgarities with which, in his work and in his life, this dignity formed so strange an alliance.

Another point, finally, should not go unmentioned. Marx was personally much too civilized to fall in with those vulgar professors of socialism who do not recognize a temple when they see it. He was perfectly able to understand a civilization and the “relatively absolute” value of its values, however far removed from it he may have felt himself to be. In this respect no better testimony to his broad-mindedness can be offered than the Communist Manifesto which is an account nothing short of glowing² of the achievements of capitalism; and even in pronouncing pro futuro death sentence on it, he never failed to recognize its historical necessity. This attitude, of course, implies quite a lot of things Marx himself would have been unwilling to accept. But he was undoubtedly strengthened in it, and it was made more easy for him to take, because of that perception of the organic logic of things to which his theory of history gives one particular expression. Things social fell into order for him, and however much of a coffeehouse conspirator he may have been at some junctures of his life, his true self despised that sort of thing. Socialism for him was no obsession which blots out all other colors of life and creates an unhealthy and stupid hatred or contempt for other civilizations. And there is, in more senses than one, justification for the title claimed for his type of socialist thought and of socialist volition which are welded together by virtue of his fundamental position: Scientific Socialism.

1. The religious quality of Marxism also explains a characteristic attitude of the orthodox Marxist toward opponents. To him, as to any believer in a Faith, the opponent is not merely inerror but in sin. Dissent is disapproved of not only intellectually but also morally. There cannot be any excuse for it once the Message has been revealed.
2. This may seem to be an exaggeration. But let us quote from the authorized English translation: “The bourgeoisie…has been the first to show what man’s activity can bring about.It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts and Gothic cathedrals…. The bourgeoisie… draws all nations…into civilization…. It has created enormous cities… and thus rescued a considerable part of the population from the idiocy [sic!] of rural life…. The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.” Observe that all the achievements referred to are attributed to the bourgeoisie alone which is more than many thoroughly bourgeois economists would claim. This is all I meant by the above passage—and strikingly different from the views of the vulgarized Marxism of today or from the Veblenite stuff of the modern non-Marxist radical. Let me say at once: not more than that is implied in anything I shall say in the second part about the performance of capitalism.

CHAPTER II MARX THE SOCIOLOGIST

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WE HAVE now to do a thing which is very objectionable to the faithful. They naturally resent any application of cold analysis to what for them is the very fountain of truth. But one of the things they resent most is cutting Marx’s work into pieces and discussing them one by one. They would say that the very act displays the incapacity of the bourgeois to grasp the resplendent whole, all parts of which complement and explain one another, so that the true meaning is missed as soon as any one part or aspect is considered by itself. We have no choice, however. By committing the offense and next taking up Marx the sociologist after Marx the prophet, I do not mean to deny either the presence of a unity of social vision which succeeds in giving some measure of analytic unity, and still more a semblance of unity, to the Marxian work, or the fact that every part of it, however independent intrinsically, has been correlated by the author with every other. Enough independence remains nevertheless in every province of the vast realm to make it possible for the student to accept the fruits of his labors in one of them while rejecting those in another. Much of the glamour of the faith is lost in the process but something is gained by salvaging important and stimulating truth which is much more valuable by itself than it would be if tied to hopeless wreckage.

This applies first of all to Marx’s philosophy which we may as well get out of our way once and for all. German-trained and speculative-minded as he was, he had a thorough grounding and a passionate interest in philosophy. Pure philosophy of the German kind was his starting point and the love of his youth. For a time he thought of it as his true vocation. He was a Neo-Hegelian, which roughly means that while accepting the master’s fundamental attitudes and methods he and his group eliminated, and replaced by pretty much their opposites, the conservative interpretations put upon Hegel’s philosophy by many of its other adherents. This background shows in all his writings wherever the opportunity offers itself. It is no wonder that his German and Russian readers, by bent of mind and training similarly disposed, should seize primarily upon this element and make it the master key to the system.

I believe this to be a mistake and an injustice to Marx’s scientific powers. He retained his early love during the whole of his lifetime. He enjoyed certain formal analogies which may be found between his and Hegel’s argument. He liked to testify to his Hegelianism and to use Hegelian phraseology. But this is all. Nowhere did he betray positive science to metaphysics. He says himself as much in the preface to the second edition of the first volume of Das Kapital, and that what he says there is true and no self-delusion can be proved by analyzing his argument, which everywhere rests upon social fact, and the true sources of his propositions none of which lies in the domain of philosophy. Of course, those commentators or critics who themselves started from the philosophic side were unable to do this because they did not know enough about the social sciences involved. The propensity of the philosophic system-builder, moreover, made them averse to any other interpretation but the one which proceeds from some philosophic principle. So they saw philosophy in the most matter-of-fact statements about economic experience, thereby shunting discussion on to the wrong track, misleading friends and foes alike.

Marx the sociologist brought to bear on his task an equipment which consisted primarily of an extensive command over historical and contemporaneous fact. His knowledge of the latter was always somewhat antiquated, for he was the most bookish of men and therefore fundamental materials, as distinguished from the material of the newspapers, always reached him with a lag. But hardly any historical work of his time that was of any general importance or scope escaped him, although much of the monographic literature did. While we cannot extol the completeness of his information in this field as much as we shall his erudition in the field of economic theory, he was yet able to illustrate his social visions not only by large historical frescoes but also by many details most of which were as regards reliability rather above than below the standards of other sociologists of his time. These facts he embraced with a glance that pierced through the random irregularities of the surface down to the grandiose logic of things historical. In this there was not merely passion. There was not merely analytic impulse. There were both. And the outcome of his attempt to formulate that logic, the so-called Economic Interpretation of History,¹ is doubtless one of the greatest individual achievements of sociology to this day. Befo...