Wednesday, November 4, 2020

Review of Capitalism, Socialism, and Democracy by Joseph Schumpeter

This review was written by Eugene Kernes

Book can be found in:
Genre = Economics
Intriguing Connections = 1) Learning Economics: Basic to Advanced,

Elaborate Description

This book is an artful explanation of Marxism, capitalism, socialism, and democracy. Always starting from the concepts intended purpose, the way the concept was meant to be. Followed by the criticism of the concept and the way the realities of the world interact with it. Schumpeter shows a critical eye towards everything he tries to explain.

Schumpeter can be described as eclectic, while at the same time point to how eclectic Marx was. Sociology and economics made Marx seem like a prophet. The exploitation of the worker by the capitalist is central stage in Marx while Schumpeter points out that this requires a watertight division between those groups of people to last throughout their descendants. Exploitation occurs when the worker does obtain the full value of their work, but Schumpeter explains that labor theory of value cannot work without perfect competition, while exploitation does not work with perfect competition. What seems to be underplayed, or rather contradictory, in Marx are cycles of capitalist innovation, the turmoil of economic progress.

Capitalism cannot survive because the social institutions that give capitalism life are in jeopardy in the capitalistic process. This is where the famous phrase, creative destruction, is born. A process that phases out old technology or poorly managed capital and initiates new technology and ventures. The whole economic structure is changed with creative destruction as over time the resources that are utilized to their best opportunities phase out those which are inferior. This process leads to economic development at the cost of some hardship such as unemployment for those who use the inferior process or resources. Schumpeter argues that as long as the process continuously increases economic development, the social agitation is acceptable. Only when social agitation, such as unemployment, interferes with economic development is it unacceptable. Economic development can continue ad infinitum for new wants are borne from higher livings standards. But the costs to some inspire negative responses from intellectuals, creating a social environment which forces policies that try to remove the capitalistic process.

Socialism means that production is vested in a central authority. A state or some board makes all of the decisions on behalf of the population. Schumpeter believes that a board can organize itself in a way as to set all prices and quantities needed for the society. The board will have to set prices which will create no unused goods. The benefit of socialism is that the individual energy would be spent on other pursuits rather than on a source of income for food. Socialism can be democratic or not, but as history shows that it can survive via controlling peoples’ freedoms of speech and removing agitators of the system.

Democracy is just one of the political processes to make decisions, and it may not be the best process for every decision. History has shown that many decisions made by a democratic procedure led to the persecution of many people. Democracy is a method which elects people to represent the people. For people to vote for the appropriate person, information has to be independent which reality shows that almost always the effective information is adulterated or selective. Good candidates for democratic election may not be good administrations or those skillful in undertaking the tasks for national success. The democratic system may actually remove from the elections the people who can best lead the nation. Schumpeter makes the case that the needed or merited government may not be the one chosen by the people.

A fairly decently written book, but not meant as an introductory book. In many, if not all, parts of the book, the reader cannot tell Schumpeter’s true intention, his actual view on the subject. The introductory chapter is quite accurate when expressing that much of Schumpeter’s writing happens between the lines. This style is helpful at times as it shows Schumpeter’s understanding of the subject from varied perspectives, while also costly as at times as it creates a mass of confusion.

Book Details

Edition ISBN:  9780061561610
Pages to read:   447
Publication:     2008
1st Edition:      1942
Format:            Paperback

Ratings out of 5:
Readability     3
Content          4
Overall           4