Joseph A. Schumpeter

The Economics and Sociology of Capitalism

Richard Swedberg, Richard Swedberg

• Publisher: Princeton University Press
• Year: 2020
• ISBN:
  9780691222141
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

The renowned economist Joseph A. Schumpeter (1883-1950) made seminal contributions not only to economic theory but also to sociology and economic history. His work is now attracting wide attention among sociologists, as well as experiencing a remarkable revival among economists. This anthology, which serves as an excellent introduction to Schumpeter, emphasizes his broad socio-economic vision and his attempt to analyze economic reality from several different perspectives. An ambitious introductory essay by Richard Swedberg uses many new sources to enhance our understanding of Schumpeter's life and work and to help analyze his fascinating character. This essay stresses Schumpeter's ability to draw on several social sciences in his study of capitalism.
Some of the articles in the anthology are published for the first time. The most important of these are Schumpeter's Lowell Lectures from 1941, "An Economic Interpretation of Our Time." Also included is the transcript of his lecture "Can Capitalism Survive?" (1936) and the high-spirited debate that followed. The anthology contains many of Schumpeter's classical sociological articles, such as his essays on the tax state, imperialism, and social classes. And, finally, there are lesser known articles on the future of private enterprise, on the concept of rationality in the social sciences, and on the work of Max Weber, with whom Schumpeter collaborated on several occasions.

Introduction

The Man and His Work

JOSEPH A. SCHUMPETER: A BIOGRAPHICAL PROFILE

The first thing you notice when you enter the conference room of the economics department at Harvard are the rows of photographs of previous members of the department. Your eyes wander from one stern-looking gentleman to the next, recognizing a few and trying to determine the identity of the others. You suddenly realize that one photograph is in some way different from the others—that of Schumpeter. After looking at it for a while, you figure out the reason: While all the other photographs are in black and white, that of Schumpeter is in color.

It is clear that Schumpeter’s personality as well as his work are considerably more colorful than those of most economists. Joseph Alois Schumpeter was born on February 8, 1883, in Triesch (Třešť) in the Austro-Hungarian Empire, which is in present-day Czechoslovakia.¹ His mother, Johanna Schumpeter (born Grüner), was the daughter of a physician. His father, Joseph Schumpeter, Sr., was a cloth manufacturer who also owned a factory in Triesch. The paternal grandfather, Alois Schumpeter, had founded the factory, and his son expanded and mechanized it, replacing horse power with mechanical power. By the time Joseph was born in the early 1880s, the Schumpeters were a well-established and respected family in the small town of Triesch.

The Schumpeter family was Catholic and belonged to the German minority in a town of about five thousand people, the majority of whom were Czech. It seems that the family came to the region after the Reformation. There has been speculation that “Schumpeter” is a German version of the Italian “Giampietro,” and that the origin of the family is Italian. There exists no proof for this—or for the colorful legend which circulated in the Schumpeter family, that an early member of the family was a robber knight who was beheaded and demoted from the nobility at Nuremburg in the 1200s. According to the same legend, the Schumpeters thereafter made their living as glassblowers and weavers. The family then became prosperous; individual members were several times offered positions within the nobility by the Austrian emperor, but never accepted.²

Schumpeter—affectionately called “Jozsi” (pronounced “Yoshi”) by family members and friends—was the only child of Joseph, Sr. and Johanna. On January 14, 1887, when Schumpeter was four years old, his father died of unknown causes. The widow and her little boy continued to live in Triesch, but then moved to Graz. They probably moved so that Johanna could be near the person who was to become her second husband, the recently retired field marshal—lieutenant Sigismund von Kéler. Joseph, Jr. therefore entered primary school (Volksschule) in Graz, in 1888. In 1893, when he had completed the first stage of his education, his mother and von Kéler, who was thirty-three years older than she, were married and the whole family moved to Vienna. Schumpeter’s stepfather had earlier been stationed in Vienna where, by virtue of his position and family name, he had good contacts. Von Kéler used these to get the young boy into the famous school Theresianum, where the aristocracy of the Austro-Hungarian Empire traditionally sent their children. The education Schumpeter attained here was roughly the equivalent of American high school and two years of college.³

Little is known about Schumpeter’s stay in Theresianum, which began in 1893. However, there exists a photo of him from 1898 (which incidentally is the earliest photo of him), and it depicts a shy and unsure boy.⁴ In all other photos of Schumpeter, he virtually radiates self-confidence and determination, so one might assume that he felt somewhat out of place in this prep school for the aristocracy. He was also a day student, which put him in a special category. One of the goals of Theresianum was to teach the students to look at the world from different perspectives and not to adhere to any one view; this was intended to be good training for the day when the students would be taking over the administration of the Empire with all its nationalities and ethnic groups. According to Schumpeter’s lifelong friend, Felix Somary, this attitude at Theresianum was to have a profound impact on Schumpeter’s character:

Schumpeter . . . never seemed to take anything in life seriously. He had been educated in Theresianum, where the pupils were taught to stick to the issue and not let personal feelings interfere. One should know the rules of all parties and ideologies, but not belong to any party or believe in any one opinion. And Schumpeter knew how to play all political games superbly, from the extreme left to the extreme right.⁵

According to the pupils, the unofficial motto of Theresianum was, “To be a bit stupid means that you come from a good family” (A bisserl blöd is vornehm). On this account too, Schumpeter must pretty quickly have shown that he came from the wrong circles in society. He excelled in Greek and Latin as well as in French, English, and Italian. He was also very interested in sociology and philosophy.⁶ And his grades were excellent when he graduated from Theresianum in 1901.

Later in 1901, Schumpeter enrolled at the University of Vienna and began to study economics. He first focused on social history and the history of law, but this was soon followed by “a sharp turn” toward economic theory.⁷ In 1906 he received his Ph.D., and at this point he was pretty well set on his course in life: He wanted to be an economist.

But before we say anything more about Schumpeter’s career as an economist, we need to pause for a moment. A person’s character is to a large extent shaped by what happens in childhood; and since Schumpeter was a very complex person, it is necessary to look more carefully at his first years. When we do this, however, we are struck by how little knowledge there is. All that is known covers little more than a page, and most of it has been presented here. What is especially lacking is some insight into Schumpeter’s character. How did he react to the death of his father? What was his relationship to his mother? And what did he think of his stepfather?

Insofar as Schumpeter’s relationship to his father is concerned, there exists no information whatsoever. We know a little bit more about what he thought of his stepfather. According to a friend, Schumpeter did not look upon von Kéler as a father, but he did regard him with a certain admiration.⁸ Later in life he would hint that von Kéler was the supreme commander of all troops in Vienna—rather than just a retired officer with a generous pension. Our knowledge of Schumpeter’s mother—and this is probably the greatest lacunae of them all—is also very sketchy. Schumpeter supposedly idolized his mother, and he described her as “handsome, talented, and ambitious for her son.”⁹ Schumpeter, we are told by the same source, was extremely attached to his mother: “His devotion to her continued without diminution or disillusion not only to the end of her life but to the end of his.” After having left Austria in 1925, Schumpeter returned only once in his life to his native country, and that was for his mother’s funeral.

Given what we know about Schumpeter being admitted to Theresianum through von Kéler’s connections, the description of Schumpeter’s mother as ambitious for her son makes sense. There also exist many stories which confirm that Schumpeter desperately wanted to be successful; unfortunately, it appears that his hopes were consistently dashed. He never could live up to his mother’s expectations.

Still, we need to know much more about Schumpeter as a child and as a youngster to understand his personality when he was ready to enter adulthood as a student in Vienna. There exists no autobiographical fragment on this point; Schumpeter did not like to write about his past, nor did he preserve material about himself.¹⁰ There are not even any anecdotes about his early life; the anecdotes that Schumpeter liked to tell about himself are all about his life as an adult. There is, however, one document, which, in the eyes of one of Schumpeter’s closest friends, gives some clues to his psychology. It is the outline to a novel entitled Ships in the Fog. Schumpeter probably wrote the outline in the early 1930s, and it was found among his papers after his death. The novel itself was never written.¹¹

It is often the case that people who write fiction for the first time produce thinly veiled autobiographical stories. This seems to have been true of Schumpeter and his projected novel. The hero in Ships in the Fog—Henry—is an only child. When he is four years old, his father has an accident and is killed. The widowed mother does not have much money, but she does her best to see to it that her son gets a good start in life: “She had connections which she resolutely exploited for her darling.” And how did Henry see his mother? According to the outline, she was “an excellent woman, strong and kind.” After the death of her husband, she became “the one great human factor in Henry’s life.” Her ancestry was British and was rather plain compared to that of Henry’s father, “which racially was a mixture defying analysis.” The father’s family came from “Trieste” in the Austro-Hungarian Empire and had “Greek, German, Serb, and Italian elements.”

And how was Henry himself—the central figure—portrayed by Schumpeter? First of all, Henry had a pervasive feeling of homelessness. Even though he loved his mother, he could not really identify with her, and he did not feel English at all: “Where was he at home? Not really in England! Often he had thought so but ancestral past had asserted itself each time.” But neither did he feel at home in his father’s home country: “Certainly not . . . in what had been the Austro-Hungarian Empire.” Henry was also confused about which social group to identify with: “More important than country means class—but 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.” The only stable point in Henry’s life was work. He had “no family,” “no real friends,” and “no woman.” Work was “all that is left.”

There are indeed several sides to Schumpeter’s personality that cannot be found in his portrait of Henry. Schumpeter, for example, was a bit of a snob and a showman—not to mention that he also was a brilliant scientist. Still, there are striking parallels between the character Henry and Schumpeter. Both were fatherless early in life and had strong mothers; and both often felt lost and unhappy.

In 1901, the eighteen-year-old Schumpeter registered as a student at the Faculty of Law at the University of Vienna. While there, he specialized in the study of economics. He had several famous teachers, in particular Eugen von Böhm-Bawerk and Friedrich von Wieser. After six years of studies, Schumpeter received his doctorate of law (Doctor utriusque juris; literally, “doctor of each of the two laws—Roman law and canon law”). When his university education was completed, Schumpeter applied for his Habilitation or permission to lecture in three areas: economics, statistics, and sociology.¹² This was granted on suggestion by the two referees, Böhm-Bawerk and von Wieser. Schumpeter also could have taught law and political science. In addition, he had acquired some knowledge of mathematics, even if he never was to become particularly skillful in this area. Mathematics, incidentally, was frowned upon by the Austrian economists—especially by von Wieser—and Schumpeter had to attend lectures in mathematics on his own. While he was a student in Vienna, he became exposed to Marxist ideas, but little is known about Schumpeter’s early reaction to Marxism. We do know that in 1905–1906, Schumpeter participated in a very lively seminar together with the two famous Marxists Otto Bauer and Rudolf Hilferding. Böhm-Bawerk had published a harsh critique of Marxism a few years earlier, which had created quite a stir in Marxist circles. “In the heated debates between Böhm-Bawerk and the Marxists,” according to one of the participants in the seminar, “Schumpeter attracted general attention through his cool, scientific detachment. The seemingly playful manner in which he took part in the discussion . . . was evidently mistaken by many for a lack of seriousness or an artificial mannerism.”¹³

The University of Vienna was an extremely interesting place to be at the turn of the century for someone like Schumpeter. Carl Menger had just stopped teaching when Schumpeter arrived in 1901, but his spirit was very much alive in the teachings of his two foremost disciples, Eugen von Böhm-Bawerk and Friedrich von Wieser. Schumpeter took courses from both, as well as from Eugen von Philippovich and Karl Theodor von Inama-Sternegg. The latter was a famous statistician and economic historian, for whom Schumpeter wrote a series of brilliant statistical papers. It is generally considered that it was von Wieser and Böhm-Bawerk who had the greatest influence on Schumpeter in Vienna. In his first book, Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (The Nature and Essence of Theoretical Economics, 1908), Schumpeter says that von Wieser and Walras are the two economists to whom he owes the most.¹⁴ And in his next work, Theorie der wirtschaftlichen Entwicklung (The Theory of Economic Development, 1911), it is Böhm-Bawerk whom Schumpeter explicitly mentions.¹⁵ However, there seems to have been a third professor in Vienna to whom Schumpeter also felt indebted. When Schumpeter applied for his Habilitation in 1909, he did not single out von Wieser or Böhm-Bawerk. Instead he wrote: “My studies have . . . first of all been influenced by the Counciller von Philippovich.”¹⁶

After he received his doctorate in law on February 16, 1906, Schumpeter seems to have been unsure about what to do next. Since he had no private fortune, he needed a profession. There were a few alternatives open to him. First, he could become an academic and teach. To do this, however, he first needed his Habilitation...