Capitalism, Socialism, and Democracy | Study Guide

Joseph A. Schumpeter

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Capitalism, Socialism, and Democracy | Part 3, Chapter 15 : Can Socialism Work? (Clearing Decks) | Summary



Schumpeter boldly proclaims that "of course" socialism can work, so long as the "requisite stage of industrial development" has been reached and "transitional" issues from capitalism to socialism have been resolved. Schumpeter defines socialist society as "an institutional pattern" in which the control of the means of production is invested in a central authority. In other words, socialism is public control of economic affairs. He chooses this form of socialism, called centralist socialism, because it seemed to be the dominant form at the time. He deals with some expected criticisms of his definition and terms of inquiry, explaining why he will use the term socialist rather than communist. He also explains that he does not discuss things in terms of "state ownership" because the state is a concept that belongs to a specific set of circumstances that would be ended by socialism.

Further, Schumpeter suggests that he will use not only economic performance to judge socialism. Socialism itself has "higher goals than full bellies," so it would be reductive to appraise the system only by one part of its goals. Additionally, he suggests that socialism is "culturally indeterminate," that is, it has no intrinsic cultural form and may appear in a number of guises.


Having dealt with capitalism's demise, Schumpeter moves on to the socialist system he believes will inevitably follow. Again, he begins with a provocative statement, that socialism can "of course" work. At the time, the true capacity of socialism to function, much less succeed over capitalism, was a matter of some controversy. Nevertheless, Schumpeter is confident that socialism could "of course" work. Many of his contemporaries were not so confident, and, arguably, they were more correct.

As elsewhere, however, it is necessary to pay close attention to the caveats and definitions Schumpeter uses in his discussion of socialism. These caveats and definitions are not just rhetorical hedges; they are crucial to his arguments. The reason he took centralist socialism as his preferred form is simple. It was in the ascendancy at the time, both in the Soviet Union and in the socialist parties of Europe and America.

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