Capitalism, Socialism, and Democracy | Study Guide

Joseph A. Schumpeter

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Capitalism, Socialism, and Democracy | Part 5, Chapter 27 : A Historical Sketch of Socialist Parties (From the First to the Second World War) | Summary



Schumpeter notes that socialists had tried to avert World War I. However, they universally "rallied to their national causes" when it broke out. One development during the war was the entry of socialist politicians into war cabinets. Schumpeter uses this opportunity to suggest that a commitment to Marxist internationalism at that moment could have alienated the parties from their followers and supporters. Even so, the socialists' war cabinet appointments were in Lenin's judgment a betrayal of the socialist cause. Schumpeter notes, however, that these parties were in a sense exercising responsibility rather than perching on "unrealistic clouds."

Schumpeter notes that the war created conditions for governing classes and parties, even the victorious ones, that "do not differ essentially than those of defeat." For this reason socialist opposition parties discovered an opportunity. England's Labour Party achieved political office in 1924. The German Social Democrats found themselves the power brokers in post-revolution Germany in 1918, and it was they who accepted and enforced the peace treaty.

Meanwhile, in Russia, communist parties had taken power. This put them at the head of the communist parties that grew in the period. Lenin initially attempted to turn the "imperialist war into an international revolution." He was unsuccessful, and national parties generally did not take Lenin's lead. Schumpeter suggests that the Bolshevik victory in "the most backward of all the great nations" was "nothing but a fluke." In 1927 revolutionary Joseph Stalin (1878–1953) rose to power in the Soviet Union. Schumpeter takes his rise to mean that from that point on every decision in Russia was the decision of "a Russian statesman acting on behalf of ... Russian interests" as viewed by a "streamlined despotism." The Communist International was instrumentalized as a tool of Russian policy.

Next, Schumpeter considers the general situation in the interwar years, which was "everywhere precarious." He discusses in particular the entry of socialist parties into bourgeois states to manage social and economic systems that could not function "except on capitalist lines." Even socialist control would not make it a socialist system. Moreover, Marxist doctrine provided little precedent for what socialists were to do in such a situation. Schumpeter sketches the travails of the British Labour Party and the German Social Democratic Party as they contended with the needs of holding office.

Finally, Schumpeter considers how the then-ongoing world war would affect socialist parties. He predicted that Russia would emerge with expanded power and prestige. He suggests this emergence would mean the end of orthodox socialism and the triumph of the Leninist/Stalinist model. Another observation is that taxation of businesses in nonsocialist countries will not be reduced as it was in 1919. This element, in Schumpeter's view, could be enough to "paralyze the motors of capitalism for good."

Schumpeter concludes by suggesting that it is only socialism as he has defined and analyzed it that is predictable. He sees little reason to believe that socialism will usher in the good society socialists have dreamed of. Instead, it is more likely to "present fascist features."


Schumpeter's lengthy sketch of the interwar years between World War I and World War II take in some of the greatest upheavals of all the periods covered. This sketch may thus strike the reader as unsatisfying, a reaction for which Schumpeter has already apologized. An especially striking note is the emphasis on socialism to the almost total exclusion of fascism. This exclusion renders the whole rather unsatisfying and may cause the reader, with hindsight, to consider how much else of the work might have been improved with a fuller appreciation of fascism and right-wing authoritarianism in the mix with socialism, capitalism, and democracy.

Schumpeter clearly does not think much of the Russian claim to be building socialism. Nevertheless, he is clear-sighted about what this development means: communism had acquired a base from which to attempt, falteringly, to spread its revolution. Russia had catapulted to the head of the socialist world from almost nowhere.

More pressing for Schumpeter's argument, though, is the development in the United States. Recall that Schumpeter's argument rests not on revolutions but on the evolution of capitalism into socialism. The regimes of higher taxes risk not only capitalism itself, for him, but potentially cutting off capitalist development before the system can mature. Remembering Schumpeter's dire account of a socialist revolution in an "immature" situation gives an adequate account of the stakes Schumpeter has in mind.

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