I believe before going on I should state that Capitalism, Socialism and Democracy is written FOR ACADEMIC EYES ONLY. It is a very heavy and trying read and I don't say that about many texts. This may be the age of the text itself (it was written in 1942, after all) but I feel the book was often written in an unnecessarily complicated and obtuse manner, even when compared to the book's contemporaries. I couldn't complete the book in one go and that is a rarity for me.
Capitalism, Socialism and Democracy is broken up into five distinct chapters. I won't bore you with the table of contents but, in reality, it often reads more as a collection of books than one single work. Each one could have been an enjoyable book on its own. I found this did help to reduce some of the burden of reading such a text- there was the relief of a different topic always on the horizon.
The first part deals with the importance of Marx in his roles as prophet, sociologist, economist and teacher. This part is hugely uninteresting to those who have no interest in Marx and Schumpeter says as much in his introduction. However, for those who have an interest in Marxist or Marxian thought, it is an interesting analysis, especially coming from a writer who disagrees so vehemently with Marxists and their ideological successors. I found his evaluation of Marx to be roughly in-line with my own. His was an opinion I hadn't often seen stated, so I quite enjoyed this chapter. It was among the hardest to read, as anyone well-versed in Marxism could probably guess.
The second chapter deals with what could be called the central theme of Capitalism, Socialism and Democracy. Schumpeter asks the reader "Can capitalism survive?" His answer is as clear as it is shocking. "No. I do not believe it can." This is perhaps the best part of the book. Schumpeter outlines how capitalism destroys the very social structures it relies on for its existence. This is reminiscent of the historical viewpoint that it was capitalism that destroyed feudalism- only Schumpeter shows capitalism does the same to itself. Capitalism, through the creation of the intellectual class, creates a class intrinsically opposed to capitalism and its structures. Capitalism, relying on the process of "primitive accumulation" by entrepreneurs and other entrants to the bourgeoisie, slowly creates roadblocks for the process of primitive accumulation. Capitalism, having created the modern state out of convenience, now finds itself "fettered" by the very type of state it helped to birth. Capitalism, relying on principles of enlightened self-interest, creates a class of administrators who have no personal stake in the very property they manage. This is a really enlightening part of the book and certain portions seem oddly prescient.
For example, he discusses how modern capitalism destroys the pre-modern bourgeois family ideal as well as "dematerializing" property ownership. Writing as he was in 1942, he discusses how the declining importance of the home has opened up certain segments of the economy once contained in the household- hospitality, specifically- to the market at large. The result is the ascendancy during the post-War period of restaurants and the hospitality sector. The economic rationale behind aspiring to a "manorial" way of living disappeared, taking to market one aspect of home life no longer economica;. I find this a really interesting idea to explore- just look at how modern services like Zipcar and other sharing economy startups "outsource" the economic costs of owning and maintaining a car. The fact that such a thing is even considered a viable business is a definite effect of our changing relationship to property and a change in our aspirations towards ownership of property.
This is also the part of the book where he discusses "creative destruction", the modern conception of which we owe to him. (It is often known as Schumpeter's Gale.) This part of the book should be of great interest to anyone interested in the tech industry- where disruptive innovation is very much in vogue and which is, in reality, just another expression of creative destruction.
The third part deals with whether socialism, conceived as bureaucratic control of the economy, can work. Schumpeter believes that it could, in fact, work. Writing as he was before the realities of the Soviet system were revealed, he can be forgiven for some of his errors here, but the primary point of this chapter was merely as a proof-of-concept. He believes that rational price markers could still be expressed through a bureaucratic means- a denial of Ludwig von Mises' Economic Planning In The Socialist Commonwealth. Those familiar with Alvin Toffler's works will likely see the parallels with his much later "economy as switchboard" metaphor. It makes a certain sort of sense in the time, as industrial consolidation and bureaucratization of management were alive and well even in the most avowedly of capitalist countries. Realistically, one could presume that socialist management would not look much different. He also opines on the ability of a socialist state to instill discipline in the populace in excess of the means available to a capitalist state- a chapter that he readily admits is chilling, even as we have the advantage of having seen the limits of such 'discipline'.
The fourth part deals with the relationship of socialism to democracy. This is yet another prescient and thoroughly enjoyable part of the book. He savages the idea of democracy as an ideal or a goal and makes the reader look at it for what it is- a method, bound to produce any manner of undesirable results. In a surprisingly forward-thinking interdisciplinary stroke, he looks at examples of crowd psychology to explain the problems democracy as a system has in working. Many of the passages seem eerily prophetic as in his depiction of capitalism's demise earlier in the book. It is hard to imagine a politics of trivialities and division, ruled by lobbyists and propagandists, truly described the politics of the United States in the forties, but it is easy to imagine those words being written today. (And in fact, he is still cited today, although not often for his critiques of democracy.) Unlike many other writers I am aware of, he insists such an evolution is an inevitability of democracy, which is a darkly pessimistic view to take, no matter how well-founded.
The fifth part deals with the history of socialist parties in Europe and the United States. This chapter is primarily of interest to the sorts of people who were interested in the first chapter. If you aren't a student of Marxism, most of this chapter could be skipped. This is also where Schumpeter reveals some shortsightedness- particularly in his predictions of what would happen in the United States following World War II. Despite seeming like a prophet of the modern day in his earlier chapters, here he fails completely to recognize what would happen in the post-War period. He isn't even close to the mark.
Overall, Capitalism, Socialism and Democracy was a worthy read. Trying at times, but the moments of brilliance were well worth it. I would highly recommend it to anyone interested in economics and willing to persevere.
Final thought: "Assassinations might be futile and productive of nothing but repression but there was not much else to do." That sentence is probably the best description of late 19th-early 20th century Russian political violence ever written.
UP NEXT: The End of Power, Moises Naim (A Year of Books' 1st pick)
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