Capitalism, Socialism and Democracy by Joseph A. Schumpeter

Creative destruction, “impressive in its relentless necessity,” wipes away not only obsolete technologies, ideas, and institutions, but also the “flying buttresses that prevented capitalism’s collapse.” What drives Schumpeter to his unwelcome conclusion? Does a broader understanding of his analyses affect the way we read his now ubiquitous ideas? What does Capitalism, Socialism, and Democracy -one of the most cited and influential works of economic thought-tell us about the economic and social world of today? However, Schumpeter broke from his compatriots in taking a broader social view. In Schumpeter’s view, creative destruction is responsible for the constant reinvention of technologies, industries, and the long-term economic growth celebrated by Schumpeter and so many other economists. “If a doctor predicts that his patient will die presently,” Schumpeter writes, “this does not mean that he desires it.” Although a fierce critic of Karl Marx, Schumpeter derived the concept of creative destruction in part from Marx’s observations regarding innovation and business cycles. Like neoclassical economists, he viewed socialism as dismal if even possible at all. And yet, Schumpeter reluctantly concluded that the capitalist economic and social system would be, in his words, “killed by its achievements.” This was not a happy thought. Many of today’s most celebrated market-oriented economic ideas-from ideals of bold entrepreneurial leadership to the concept of “creative destruction,” which “blazes new trails” for ever more exciting technological developments-find their origins in Schumpeter.

Schumpeter may seem an unlikely candidate to question the very viability of capitalism. Is the very dynamism of innovation that animates capitalism also its potential ruin? This is the central question that the conservative, if heterodox, economist Joseph Schumpeter posed in his magnum opus Capitalism, Socialism, and Democracy.

Capitalism, Socialism and Democracy by Joseph A. Schumpeter