Democracy and Exchange

Democracy and Exchange

Schumpeter, Galbraith, T.H. Marshall, Titmuss and Adam Smith

David Reisman

Democracy is the rule of the people. Exchange is supply and demand. Individualism, agreement, tolerance and choice are the underlying values that make possible the productive collaboration of the market and the state. This book assesses the theories of democracy and exchange of five interdisciplinary thinkers who tried to unite political and economic reasoning into a single theory of moderation and pragmatic management.

Chapter 4: Schumpeter: The Preconditions for Politics

David Reisman

Subjects: economics and finance, economic psychology, history of economic thought, institutional economics, social policy and sociology, economics of social policy


Schumpeter’s democracy is an institutional arrangement within which the people influence the issues through the decision makers that they elect. The procedure is most likely to be a success where four social conditions can be met. First, there must be an adequate number of adequate politicians. Second, the agenda must be in line with the capacity of the State to deliver. Third, there must be dependable back-up from a skilled and self-policing bureaucracy. Fourth, the charter must be such that the leaders are bound by internalised obligation and the masses amenable to democratic self-control. Schumpeter’s four preconditions will be considered in the first four sections of this chapter. The fifth section shows that Schumpeter’s constitution of the mind was more powerful to him than the legislative correctives of less sociological economists. The sixth section invokes the magisterial name of Max Weber. Convinced like Schumpeter that democracy is a method, Weber like Schumpeter made much of the moral precommitment that keeps the selfinterest-seeking within manageable limits. Schumpeter preferred the economic interpretation of democracy to the classical model of Aristotle and Rousseau. Even so, he, like Weber, saw that the exchange in the second approach was crucially dependent upon the value consensus of the first. Schumpeter did not have two theories of democracy at all. What he did have was an economic theory that was buttressed on all sides by the ethical judgments of the group. 4.1 THE POLITICIAN The first condition is that politicians ‘of adequate ability and moral character must...

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