Joseph Schumpeter

Capitalism, Socialism and Democracy



Can Socialism Work?

Can socialism work? Of course it can. No doubt is possible about that once we assume, first, that the requisite stage of industrial development has been reached and, second, that transitional problems can be successfully resolved. One may, of course, feel very uneasy about these assumptions themselves or about the questions whether the socialist form of society can be expected to be democratic and, democratic or not, how well it is likely to function. All that will be discussed later on. But if we accept these assumptions and discard these doubts the answer to the remaining question is clearly Yes.

Before I attempt to prove it, I should like to clear some obstacles from our way. We have so far been rather careless about certain definitions and we must make up for it now. We shall simply envisage two types of society and mention others only incidentally. These types we will call Commercial and Socialist.

Commercial society is defined by an institutional pattern of which we need only mention two elements: private property in means of production and regulation of the productive process by private contract (or management or initiative). Such a type of society is not as a rule purely bourgeois, however. For as we have seen in Part II an industrial and commercial bourgeoisie will in general not be able to exist except in symbiosis with a non-bourgeois stratum. Nor is commercial society identical with capitalist society. The latter, a special case of the former, is defined by the additional phenomenon of credit creation—by the practice, responsible for so many outstanding features of modern economic life, of financing enterprise by bank credit, i.e., by money (notes or deposits) manufactured for that purpose. But since commercial society, as an alternative to socialism, in practice always appears in the particular form of capitalism, it will make no great difference if the reader prefers to keep to the traditional contrast between capitalism and socialism.

By socialist society we shall designate an institutional pattern in which the control over means of production and over production itself is vested with a central authority—or, as we may say, in which, as a matter of principle, the economic affairs of society belong to the public and not to the private sphere. Socialism has been called an intellectual Proteus. There are many ways of defining it—many acceptable ways, that is, besides the silly ones such as that socialism means bread for all—and ours is not necessarily the best. But there are some points about it which it may be well for us to notice, braving the danger of an indictment on the score of pedantry.

Our definition excludes guild socialism, syndicalism and other types. This is because what may be termed Centralist Socialism seems to me to hold the field so clearly that it would be waste of space to consider other forms. But if we adopt this term in order to indicate the only kind of socialism we shall consider, we must be careful to avoid a misunderstanding. The term centralist socialism is only intended to exclude the existence of a plurality of units of control such that each of them would on principle stand for a distinct interest of its own, in particular the existence of a plurality of autonomous territorial sectors that would go far toward reproducing the antagonisms of capitalist society. This exclusion of sectional interests may well be thought unrealistic. Nonetheless it is essential.

But our term is not intended to suggest centralism either in the sense that the central authority, which we shall alternatively call Central Board or Ministry of Production, is necessarily absolute or in the sense that all the initiative that pertains to the executive proceeds from it alone. As regards the first point, the board or ministry may have to submit its plan to a congress or parliament. There may also be a supervising and checking authority—a kind of cour des comptes that could conceivably even have the right to veto particular decisions. As regards the second point, some freedom of action must be left, and almost any amount of freedom might be left, to the “men on the spot,” say, the managers of the individual industries or plants. For the moment, I will make the bold assumption that the rational amount of freedom is experimentally found and actually granted so that efficiency suffers neither from the unbridled ambitions of subordinates nor from the piling up on the desk of the minister of reports and unanswered questions—nor from orders of the latter suggestive of Mark Twain’s rules about the harvesting of potatoes.

I have not separately defined collectivism or communism. The former term I shall not use at all and the latter only incidentally with reference to groups that call themselves so. But if I had to use them I should make them synonymous with socialism. Analyzing historical usage, most writers have tried to give them distinct meanings. It is true that the term communist has fairly consistently been chosen to denote ideas more thoroughgoing or radical than others. But then, one of the classic documents of socialism is entitled the “Communist” Manifesto. And the difference of principle has never been fundamental—what there is of it is no less pronounced within the socialist camp than it is as between it and the communist one. Bolsheviks call themselves communists and at the same time the true and only socialist. Whether or not the true and only ones, they are certainly socialists.

I have avoided the terms state ownership of, or property in, natural resources, plant and equipment. This point is of some importance in the methodology of the social sciences. There are no doubt concepts that bear no relation to any particular epoch or social world, such as want or choice or economic good. There are others which, while in their everyday meaning they do bear such a relation, have been refined by the analyst to the point of losing it. Price or cost may serve as examples. But there are still others which by virtue of their nature cannot stand transplantation and always carry the flavor of a particular institutional framework. It is extremely dangerous, in fact it amounts to a distortion of historical description, to use them beyond the social world or culture whose denizens they are. Now ownership or property—also, so I believe, taxation—are such denizens of the world of commercial society, exactly as knights and fiefs are denizens of the feudal world.

But so is the state. We might of course define it by the criterion of sovereignty and then speak of a socialist state. But if there is to be meat in the concept and not merely legal or philosophic gas, the state should not be allowed to intrude into discussions of either feudal or socialist society, neither of which did or would display that dividing line between the private and the public sphere from which the better part of its meaning flows. To conserve that meaning with all its wealth of functions, methods and attitudes, it seems best to say that the state, the product of the clashes and compromises between feudal lords and bourgeoisie, will form part of the ashes from which the socialist phoenix is to rise. Therefore, I did not use it in my definition of socialism. Of course socialism may come about by an act of the state. But there is no inconvenience that I can see in saying that the state dies in this act—as has been pointed out by Marx and repeated by Lenin.

In one respect, finally, our definition agrees with all the others that I have ever come across, viz., in that it turns on an exclusively economic point. Every socialist wishes to revolutionize society from the economic angle and all the blessings he expects are to come through a change in economic institutions. This of course implies a theory about social causation—the theory that the economic pattern is the really operative element in the sum total of the phenomena that we call society. Two remarks, however, suggest themselves.

First, it has been pointed out in the preceding part with reference to capitalism, and must now be pointed out with reference to socialism, that neither for us, the observers, nor for the people that are to put their trust in socialism, is the economic aspect the only or even the most important one.

In defining as I did, I did not intend to deny that. And in fairness to all the civilized socialists whom I have ever met or read, it should be stated that the same holds true for them: that in stressing the economic element because of the causative importance their creed attributes to it, they do not mean to suggest that nothing is worth struggling for except beefsteaks and radios. There are indeed insufferable stick-in-the-muds who mean precisely that And many who are not stick-in-the-muds will nevertheless, in the hunt for votes, emphasize the economic promise because of its immediate appeal. In doing so they distort and degrade their creed. We will not do the same. Instead we will keep in mind that socialism aims at higher goals than full bellies, exactly as Christianity means more than the somewhat hedonistic values of heaven and hell. First and foremost, socialism means a new cultural world. For the sake of it, one might conceivably be a fervent socialist even though believing that the socialist arrangement is likely to be inferior as to economic performance. Hence no merely economic argument for or against can ever be decisive, however successful in itself.

But second—what cultural world? We might try to answer this question by surveying the actual professions of accredited socialists in order to see whether a type emerges from them. At first sight, the material seems to be abundant. Some socialists are ready enough, with folded hands and the smile of the blessed on their lips, to chant the canticle of justice, equality, freedom in general and freedom from “the exploitation of man by man” in particular, of peace and love, of fetters broken and cultural energies unchained, of new horizons opened, of new dignities revealed. But that is Rousseau adulterated with some Bentham. Others simply voice the interests and appetites of the radical wing of trade unionism. Still others, however, are remarkably reticent. Because they despise cheap slogans but cannot think of anything else? Because, though they do think of something else, they doubt its popular appeal? Because they know that they differ hopelessly with their comrades?

So we cannot proceed on this line. Instead we have to face what I shall refer to as the Cultural Indeterminateness of Socialism. In fact, according to our definition as well as to most others, a society may be fully and truly socialist and yet be led by an absolute ruler or be organized in the most democratic of all possible ways; it may be aristocratic or proletarian; it may be a theocracy and hierarchic or atheist or indifferent as to religion; it may be much more strictly disciplined than men are in a modern army or completely lacking in discipline; it may be ascetic or eudemonist in spirit; energetic or slack; thinking only of the future or only of the day; warlike and nationalist or peaceful and internationalist; equalitarian or the opposite; it may have the ethics of lords or the ethics of slaves; its art may be subjective or objective; its forms of life individualistic or standardized; and—what for some of us would by itself suffice to command our allegiance or to arouse our contempt—it may breed from its supernormal or from its subnormal stock and produce supermen or submen accordingly.

Why is this so? Well, the reader may have his choice. He may say either that Marx is wrong and that the economic pattern does not determine a civilization or else that the complete economic pattern would determine it but that, without the aid of further economic data and assumptions, the element that constitutes socialism in our sense does not. We should not have fared any better with capitalism, by the way, had we tried to reconstruct its cultural world from nothing but the facts embodied in our definition of it. We have in this case no doubt an impression of determinateness and find it possible to reason on tendencies in capitalist civilization. But this is only because we have a historic reality before us that supplies us with all the additional data we need and via facti excludes an infinite number of possibilities.

We have, however, used the word determinateness in a rather strict and technical sense and, moreover, with reference to a whole cultural world. Indeterminateness in this sense is no absolute bar to attempts at discovering certain features or tendencies that the socialist arrangement as such may be more likely to produce than others, especially features of, and tendencies in, particular spots of the cultural organism. Nor is it impossible to frame reasonable additional assumptions. This much is obvious from the above survey of possibilities. If, for instance, we believe as many socialists do—wrongly, as I think—that wars are nothing but one of the forms of the conflict of capitalist interests, it readily follows that socialism would be pacifist and not warlike. Or if we assume that socialism evolves along with, and is inseparable from, a certain type of rationalism we shall conclude that it is likely to be irreligious if not anti-religious. We shall ourselves try our hand at this game here and there, although in the main we had better yield the floor to the only truly great performer in that field, Plato. But all this does not do away with the fact that socialism is indeed a cultural Proteus and that its cultural possibilities can be made more definite only if we resign ourselves to speaking of special cases within the socialist genus—each of which to be sure will be the only true one for the man who stands for it but any one of which may be in store for us.

Posted: February 2020
Category: Essays