Book Highlights: Capitalism, Socialism, and Democracy, Schumpeter, (Part 2.2: Can Capitalism Survive?)

The conquest of the air may well be more important than the conquest of India was—we must not confuse geographical frontiers with economic ones.

Thus agricultural countries or regions may lose permanently by the competitive synthetic products (rayon, dyes, synthetic rubber for instance), and it may be no comfort to them that, if the process be taken as a whole, there may be net gain in total output.

But we cannot reason in this fashion about the future possibilities of technological advance. From the fact that some of them have been exploited before others, it cannot be inferred that the former were more productive than the latter. And those that are still in the lap of the gods may be more or less productive than any that have thus far come within our range of observation.

But for us the negative result suffices: there is no reason to expect slackening of the rate of output through exhaustion of technological possibilities.

Some economists have held that the labor force of every country had to be fitted out at some time or other with the necessary equipment. This, so they argue, has been accomplished roughly in the course of the nineteenth century. While it was being accomplished, it incessantly created new demand for capital goods, whereas, barring additions, only replacement demand remains forever after.

The period of capitalist armament thus would turn out to be a unique intermezzo after all, characterized by the capitalist economy’s straining every nerve in order to create for itself the necessary complement of tools and machines, and thus becoming equipped for the purpose of producing for further production at a rate which it is now impossible to keep up.

Was there no equipment in the eighteenth century or, in fact, at the time our ancestors dwelled in caves? And if there was, why should the additions that occurred in the nineteenth century have been more saturating than any that went before? Moreover, additions to the armor of capitalism are as a rule competitive with the preexisting pieces of it. They destroy the economic usefulness of the latter. Hence the task of providing equipment can never be solved once for all.

barring possible disturbances in the saving-investment process which it is the fashion to exaggerate—no

no different in the case of devices that economize outlay on capital goods per unit of the final product. In fact, it is not far from the truth to say that almost any new process that is economically workable economizes both labor and capital. Railroads were presumably capital-saving as compared with the outlay that transportation, by mailcoach or cart, of the same numbers of passengers and of the same quantities of goods that actually are being transported by railroads now would have involved.

Those who hope to see capitalism break down solely by virtue of the fact that the unit of capital goes further in productive effect than it used to, may have to wait long indeed.

First, with increasing wealth certain lines of expenditure are likely to gain ground which do not naturally enter into any cost-profit calculation, such as expenditure on the beautification of cities, on public health and so on.

When the habit of rational analysis of, and rational behavior in, the daily tasks of life has gone far enough, it turns back upon the mass of collective ideas and criticizes and to some extent “rationalizes” them by way of such questions as why there should be kings and popes or subordination or tithes or property.

First it exalts the monetary unit—not itself a creation of capitalism—into a unit of account. That is to say, capitalist practice turns the unit of money into a tool of rational cost-profit calculations, of which the towering monument is double-entry bookkeeping.4

This element has been stressed, and more suo overstressed, by Sombart. Double-entry bookkeeping is the last step on a long and tortuous road. Its immediate predecessor was the practice of making up from time to time an inventory and figuring out profit or loss; see A. Sapori in Bibhoteca Storica Toscana, VII, 1932.

it is a vital fact to notice that rational bookkeeping did not intrude into the management of public funds until the eighteenth century and that even then it did so imperfectly and in the primitive form of “cameralist” bookkeeping.]

The rugged individualism of Galileo was the individualism of the rising capitalist class. The surgeon began to rise above the midwife and the barber. The artist who at the same time was an engineer and an entrepreneur—the type immortalized by such men as Vinci, Alberti, Cellini; even Dürer busied himself with plans for fortifications—illustrates best of all what I mean.

Precapitalist economic life left no scope for achievement that would carry over class boundaries or, to put it differently, be adequate to create social positions comparable to those of the members of the then ruling classes. Not that it precluded ascent in general.5

But business activity was, broadly speaking, essentially subordinate, even at the peak of success within the craft guild, and it hardly ever led out of it. The main avenues to advancement and large gain were the church—nearly as accessible throughout the Middle Ages as it is now—to which we may add the chanceries of the great territorial magnates, and the hierarchy of warrior lords—quite accessible to every man who was physically and psychically fit until about the middle of the twelfth century, and not quite inaccessible thereafter.

At that I could leave this point if radical liturgy did not consist largely in picturesque denials of what I mean to convey. Radicals may insist that the masses are crying for salvation from intolerable sufferings and rattling their chains in darkness and despair, but of course there never was so much personal freedom of mind and body for all, never so much readiness to bear with and even to finance the mortal enemies of the leading class, never so much active sympathy with real and faked sufferings, never so much readiness to accept burdens, as there is in modern capitalist society; and whatever democracy there was, outside of peasant communities, developed historically in the wake of both modern and ancient capitalism.

Again plenty of facts can be adduced from the past to make up a counterargument that will be effective but is irrelevant in a discussion of present conditions and future alternatives.8

And it cannot be replied that “those were different times.” For it is precisely the capitalist process that made the difference.

As a matter of fact, the more completely capitalist the structure and attitude of a nation, the more pacifist—and the more prone to count the costs of war—we observe it to be.

The armored knights practiced an art that required lifelong training and every one of them counted individually by virtue of personal skill and prowess. It is easy to understand why this craft should have become the basis of a social class in the fullest and richest sense of that term.

The centerpiece, the king, was king by the grace of God, and the root of his position was feudal, not only in the historical but also in the sociological sense, however much he availed himself of the economic possibilities offered by capitalism. All this was more than atavism.

we might well wonder whether it is quite correct to look upon capitalism as a social form sui generis or, in fact, as anything else but the last stage of the decomposition of what we have called feudalism.

And we have finally seen that capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own; the bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole scheme of bourgeois values.

Why, practically every nonsense that has ever been said about capitalism has been championed by some professed economist.

rational recognition of the economic performance of capitalism and of the hopes it holds out for the future would require an almost impossible moral feat by the have-not.

In the short run, it is profits and inefficiencies that dominate the picture. In order to accept his lot, the leveler or the chartist of old would have had to comfort himself with hopes for his great-grandchildren. In order to identify himself with the capitalist system, the unemployed of today would have completely to forget his personal fate and the politician of today his personal ambition. The long-run interests of society are so entirely lodged with the upper strata of bourgeois society that it is perfectly natural for people to look upon them as the interests of that class only.

Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.

Intellectuals are in fact people who wield the power of the spoken and the written word, and one of the touches that distinguish them from other people who do the same is the absence of direct responsibility for practical affairs. This touch in general accounts for another—the absence of that first-hand knowledge of them which only actual experience can give. The critical attitude, arising no less from the intellectual’s situation as an onlooker—in most cases also as an outsider—than from the fact that his main chance of asserting himself lies in his actual or potential nuisance value, should add a third touch.

Charles V was a devoted husband but, during his campaigns which kept him from home for many months at a time, he lived the life of a gentleman of his time and class. Very well, the public—and what particularly mattered to Charles, his empress—need never know, provided arguments of the right kind and weight were duly handed to the great critic of politics and morals. Charles paid up. But the point is that this was not simple blackmail which in general benefits one party only and inflicts un-compensated loss on the other. Charles knew why he paid though doubtless it would have been possible to secure silence by cheaper if more drastic methods. He did not display resentment. On the contrary he even went out of his way to honor the man. Obviously he wanted more than silence and, as a matter of fact, he received full value for his gifts. [5Pietro Aretino, 1492-1556.]

Cases in which among a dozen applicants for a job, all formally qualified, there is not one who can fill it satisfactorily, are known to everyone who has anything to do with appointments—to everyone, that is, who is himself qualified to judge.

Thus, though intellectuals have not created the labor movement, they have yet worked it up into something that differs substantially from what it would be without them.

The most glamorous of these bourgeois aims, the foundation of an industrial dynasty, has in most countries become unattainable already, and even more modest ones are so difficult to attain that they may cease to be thought worth the struggle as the permanence of these conditions is being increasingly realized.

the reader need only visualize the situation in a thoroughly practical spirit: the successful man or couple or the “society” man or couple who can pay for the best available accommodation in hotel, ship and train, and for the best available qualities of the objects of personal consumption and use—which qualities are increasingly being turned out by the conveyor of mass production3—will,

In any case there are no purely economic reasons why capitalism should not have another successful run which is all I wished to establish.]