Schumpeter and the end of Western Capitalism

Document Type : Translation

Authors

1 Assistant Professor , Knowledge-Based Economy Department Technology Study Institute, Presidency of the I.R. of IRAN Tehran, Iran

2 Researcher, Knowledge-Based Economy Department Technology Study Institute, Presidency of the I.R. of IRAN Tehran, Iran

Abstract

Schumpeter’s forecast in his Capitalism, Socialism and Democracy (1942)
that ‘a socialist form of society will inevitably emerge from an equally inevitable
decomposition of capitalist society’ did great damage to his reputation. This was
especially so after the fall of the Berlin wall, when the spectre of Communism
seemed to have been finally exorcised. The current financial crisis, however, has
vindicated him. For Schumpeter, capitalism rightly meant, not just individual property rights, but the ability to ‘create money from nothing.’ This is such an enormous
and dangerous power that it obviously has to be subject to the strictest constraint,
which was traditionally provided, however imperfectly, by denial of incorporation
with limited liability to those who dealt in money. The decline of capitalism began
when financiers were released from this discipline, and it ended with the catastrophe
caused by belief that bureaucratic control could replace it. The cause of the change
was the progressive capture of democratically elected politicians by interests. On
this, Schumpeter’s The Crisis of the Tax State (1918) was almost as insightful as
his later book. When Governments could not allow banks to fail, they signalled the
definitive arrival of centralized financing, which is a fundamental characteristic of a
socialist economy

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Science and Technology Policy Letters

Articles in Press, Accepted Manuscript
Available Online from 05 September 2023

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History

  • Receive Date: 15 June 2023
  • Accept Date: 22 August 2023

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