Democracy and Exchange
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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.
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Chapter 2: Schumpeter on Democracy: The Classical Doctrine

David Reisman


Schumpeter said that democracy, like the market, is not an ideal but an instrument: ‘Democracy is a political method . . . and hence incapable of being an end in itself’ (Schumpeter, 1942: 242). Democracy is an ‘institutional arrangement’ (ibid.). It is chosen because it is the most expedient means to an end of which the method per se in no sense forms a part. Democracy is not the highest value: ‘There are ultimate ideals and interests which the most ardent democrat will put above democracy’ (ibid.). It is precisely those ‘hyper-rational values’, indeed, which attract the practising democrat to the system: ‘He feels convinced that democracy will guarantee those ideals and interests, such as freedom of conscience and speech, justice, decent government and so on’ (ibid.: 243, 242). Democracy is believed to protect the summum bonum of human dignity and individual autonomy. Democracy is believed to embody the Christian equality of respect that is implied in the credo that ‘the Redeemer died for all’ (ibid.: 265). Democracy is believed to make each person the best judge of his own private interest and to treat each preference revealed as an ethical absolute in itself. Democracy, in short, is the material embodiment of moral values like freedom, equality and respect. If the method did not deliver the ethics, it would lose the function that more than anything else made it attractive and legitimate. This chapter, like Chapters 3, 4 and 5, is concerned with Schumpeter’s democracy in the interstices of the economic systems. Section...

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