Capitalism, Socialism, and Democracy | Study Guide

Joseph A. Schumpeter

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Capitalism, Socialism, and Democracy | Part 3, Chapter 17 : Can Socialism Work? (Comparison of Blueprints) | Summary



Schumpeter cautions that he has no intention of conducting a "comparative appraisal of the socialist plan." Such an appraisal would be "hazardous," comparing a system that exists (capitalism) with one that does not (socialism). Schumpeter discounts the Soviet system as not a truly socialist society. Nevertheless, he thinks some comparative remarks are possible.

On the question of the comparative efficiency of socialism and capitalism, he says the comparison should rest on the system that will "in the long run" produce a greater amount of consumer goods in an equal length of time. Schumpeter dismisses the socialist argument that a socialist economy would more equally distribute incomes because if a different system produces more abundance, the idea of equal distribution becomes effectively immaterial.

On the case for the superiority of the socialist blueprint, Schumpeter suggests that the socialist plan is "drawn at a higher level of rationality." As a result, socialism will deal with the problem of unemployment caused by depressions. Moreover, a socialist order could potentially spread improvements in technology and other factors by decree, rather than through more fickle capitalist mechanics. Socialism, moreover, does away with the conflict between the private and the public sphere. Another consequence of socialism's ascendancy would be the vanishing of taxation, along with the state.


Schumpeter's offhanded dismissal of the Soviet Union as a socialist system is amusing, but it also reflects his agreement with many non-Soviet socialists that the Soviet Union represented a deviant and debased form of socialism. However, the Soviet Union's defenders would argue that nowhere else was faced with the problem of trying to make socialism work in the here and now, not just in the imagined future.

Schumpeter's other comparisons between capitalism and socialism are fairly tentative, partly because, as he notes, he cannot compare a real system with one that does not yet exist. Again Schumpeter's insistence on the long run resurfaces. It because of the long-run consideration that equality of distribution ultimately doesn't matter. In the long run the more productive society guarantees a greater degree of prosperity. In this constant insistence on the long run over the immediate, readers might detect some of the reasons why Schumpeter's ideas went broadly unheeded in the social upheaval of the Great Depression.

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