Enterprise and Evolution
Chapter 7: The Socialist Economy
19492_Schumpeter/7 24/10/03 2:49 PM Page 1 7. The socialist economy The future is unknowable. Probability is less uncooperative. Schumpeter as an institutional economist identified a ‘tendency toward socialism’ (Schumpeter, 1942a:309) which suggested to him that the age of the capitalist might be nearing its end: ‘Things and souls shape themselves for socialism automatically, i.e. independently of anyone’s volition.’ (Schumpeter, 1942a:220). Tomorrow or the next day we are all likely to be making our living under socialism. This chapter explores the nature of the economic reality that never-chosen evolution is imposing upon us and is making our own. Socialism builds on capitalism. Section 1, State socialism, returns to Chapter 5 to show that the business corporation is at once the harbinger and the exemplar of the bureaucratic State that will take over the reins. Section 2, From corporation to state, explains that socialism enjoys a high incomeelasticity not because under-performing capitalism spells misery and Marxian impoverishment but rather because welfare-enhancing capitalism must paradoxically ‘break to pieces under the pressure of its own success’ (Schumpeter, 1942a:134). Section 3, Countervailing forces, ends the chapter on a hesitant note. The track record of the corporate sector, the healthy contribution of small business, principled resistance from people who do not want the change, all will work against the inevitable. Perhaps it is they that will have the last word. 7.1 STATE SOCIALISM The essence of socialism is that it ‘turns on an exclusively economic point’ (Schumpeter, 1942a:169). The attraction...
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