Capitalism, Socialism, and Democracy | Study Guide

Joseph A. Schumpeter

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Capitalism, Socialism, and Democracy | Part 2, Chapter 14 : Can Capitalism Survive? (Decomposition) | Summary



Entrepreneurs and capitalists will cease to function. Schumpeter believes this element of capitalist evolution is already underway, evident in the decrease of bourgeois motivation because of policies that take bourgeois goals like the foundation of an "industrial dynasty" out of reach. Another cause is the "evaporation of the substance of property." Overall, the modern corporation "narrows the scope of capitalist motivation."

Another cause of capitalist decomposition is the "disintegration of the bourgeois family." Schumpeter alleges that the bonds of traditional nuclear families are breaking down because of the "utilitarian" lesson that raising a family implies economic and personal sacrifices, a result of capitalism-motivated economic thinking in everyday life. Moreover, homes and the "amenities of the bourgeois life" are becoming burdensome. Schumpeter further notes that capitalist development helps shorten the businessman's perspective into the short run, thus allowing him to disdain saving activities and even to accept anti-capitalist rhetoric and reasoning.

In this overview of the next phases of capitalist evolution, Schumpeter believed he identified an "inherent" tendency in capitalism toward self-destruction. Moreover, capitalism creates the conditions for another system. Thus, capitalism is perhaps not destroyed at all, but "transformed" into "the socialist form of life."


The language of "decomposition," which calls to mind the rotting of a body, sums up Schumpeter's grim view of the processes he saw underway in his contemporary society. Thematically, the language of "rot" is strongly linked to the capitalist evolutionary process. That process is not caused by revolutionary activity or a strong challenge but by capitalism's eating away of itself and by its beneficiaries' failure to defend it. It is an almost passive process.

Like many conservative writers of the 20th century, Schumpeter's attitude betrays an apparent paradox. For all that he is delighted by the productive genius of capitalism, he is dismayed at the way it breaks up traditional social forms like the family. But, more than that, he at times seems also to be saddened by the lack of "heroic" goals available in capitalist societies. The strange mixture of an elegy for the heroic lost world with a defiant stance in favor of capitalist production feeds into Schumpeter's seeming ambivalence about what the socialist future holds.

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