3. Joseph Schumpeter
Context to Schumpeter’s writing
Lecture summary
• Hobbes does use the phrase ‘democracy’, he knows what it is. Hobbes thinks democracy is valid, but
that a monarchy is preferable.
• The label of democracy starts to be imposed on America, de Tocqueville’s literature has something to
do with this → American constitution aims to build a republic, not democracy, which they understood
as mob rule. The senate at the time for example, was selected, not elected. The supreme court was
extremely powerful. Institutions created by American republicans increasingly attract the label
‘democracy’. Labels have changed over time.
o Democracy starts to be used to describe Europe. In the 18th Century, there are increasingly
powerful states in Europe, but they are not democracies. By the time Constant gives his
lecture, the monarchy had been restored. Constant is not especially democratic.
o 1848 revolutions → revolution in Paris “when Paris sneezes, Europe catches a cold” → those
revolutions flourish, and are then shut down in 1849. It is the ‘turning point that didn’t turn’
o Ongoing democratisation takes place in 1832 in Britain → up until the civil war, more
Britons could vote, but after the war this was severely restricted.
▪ 1867 – ‘Tory democracy’ – now have the conservative and liberal parties, organising
large political parties
▪ Gladstone – 1884 – 1885 – very large electorate
▪ 1918 – universal male suffrage (age over 21) , and most women over the age of 30
▪ 1928 – act to equalise the franchise – uncomplicated to call Britain democratic
▪ Attlee government abolishes the university seat in 1940s
▪ 1969 – age of voting lowered from 21 to 18 for Harold Wilson’s government.
o In France – French rev = universal male suffrage; Napoleon introduces a less democratic
system but is fond of using referendums to authorise constitutional changes; monarchy is
restored;
▪ It is easy to be complacent about the spread of democracy, but from the 19thC, this
was not a given.
▪ Democratisation seemed to be happening, but it wasn’t obvious what its future
would look like
▪ Plenty of people who thought it might have developed into ‘Caesarism’ democracy
→ using referendums, with strong charismatic executive authority (this is the
Napoleonic model)
▪ When De Tocqueville is in America, Andrew Jackson is in office and mobilises those
who might not otherwise vote (new immigrants), displacing the plantation owners
→ Trump placed a portrait of Jackson in the Whitehouse.
▪ Popular Generals who occasionally secured mass support
o What democracy would look like was quite unclear.
• Nationalism → 19thC, national ideas start to spread and become the vehicle for democratisation
(France, Belgium, Italy). That being said, remember that what is happening in their colonies is not
democratic. The democracy flourishes in the homogenous national communities. The Habsburg
Empire were concerned by the rise of democracy.
o The process of national consolidation goes hand in hand with democratisation
o Eugen Weber writes ‘peasants into frenchman’ → observes how French schools enforced
children to speak French, and not dialects. French republican politics sought to create
‘french’ citizens.
o The end of WW1 is a key moment, the treaties (in tandem to Weber) – the national state
becomes the ‘norm’ → The national state becomes the normal unit, and increasingly, when
, people talk about democracies these are the states they mean. Politics as a vocation written
contemporaneously to this period, Weber worries there aren’t enough men in Germany to
make democracy work, and he was write to worry as the Nazis subverted it.
o The rise of socialism also in tandem, occurring in French elitist society → by the 1840s,
socialism is a bit less elite. Then Marx publishes the Manifesto in 1848, speaking to an
increasingly urbanised + literate population. Patterns of spread is different, England =
workers movement; Germany = very devoted to ideas of Marx and Engels; in America, no
strong spread of socialism.
• Joseph Schumpeter → born in 1883, dies in 1950.
o He is an Austrian-German. Educated at the university of Vienna, where Hayek is also
educated. He studied economics, in his early 30s when WW1 starts, emigrating to America in
1932.
o His lifespan covers some of the most tumultuous events, he is an anti-Marxist. When he goes
to America, he publishes capitalism, socialism and democracy in 1942 → his main book of
political analysis. He teaches at Harvard.
o He is from the old Habsburg Empire. Being an Austrian is an interesting perspective for
observing the break-up of the traditional way in which states operate. His PhD supervisor
was an avid critic of Marx.
• Capitalism, socialism and democracy → much of the book is about Marx
o His view on socialism → Marx is right to think socialism will displace capitalism, but how this
will happen is wrong. Marx state capitalism will destroy itself through conflicts + workers will
take over, politics is largely absent; Schumpeter thinks the figure of the entrepreneur is
central to his theory, capitalism is a restless dynamic not in equilibrium. Entrepreneurs look
for new ways of doing things, and when they produce new techniques → qualities of goods
goes up; Schumpeter introduces the phrase of ‘creative destruction’ – other people are put
out of business when others succeed, which makes ordinary workers feel
vulnerable/exposed → he thought social democrats would offer worker benefits, guaranteed
employment. Schumpeter thought this would be attractive to voters, who would eventually
win.
o Schumpeter thought education would be needed, but intellectuals would spread anti-
capitalist ideas. These worries in a way parallel Hayek’s road to serfdom. Socialists will
regulate economy so much, it will lose its dynamism. Societies would have more powerful
politicians. The rise of socialism is therefore regrettable, but likely
• Schumpeter’s view on democracy – what is the relationship with socialism and democracy? Socialists
tend to say they are the ‘real’ democrats, representing the interests of the majority of the people.
Some left-wing parties at the time are competing for power, but after 1917 we also have the
Bolshevik revolution, but these socialists are not running for power. They use the language of
democracy but were a one part dictatorship. His point is socialists use democracy when it suits them,
and don’t when it doesn’t suit them. This is not a cheap anti-socialist point, he argues this is what all
political ideologies do → he asks you to think about a democratic society where people vote to
murder jews. Would you approve of this because the it is democratic? No, we value it because the
outcomes are good, not because of the means. Democracy is a mechanism or process which can be
used for different means.
o Evil ends are not made better by democratic means. Schumpeter is a consequentialist.
People question whether Hayek is a committed democrat.
• He presents two types of democracy – one he doesn’t like, the other is slightly better. He defines
democracy as a “political method” and means, not an end in itself.
o He takes issue with the classical understanding of democracy → ‘realising the common good’
→ the people elect representatives to carry out the ‘will of the people’ to carry out the
‘common good’. Has anyone held the classical theory of democracy?
, o Three different theoretical strands sit within classical democracy → Athenian/ancient ideas;
enlightenment ideas of Rousseau (the general will) + utilitarianism, a form of
consequentialism which judges actions in terms of their consequences.
• Who is Schumpeter attacking? Possibly attacking the Nazi Karl Schmidt. Very authoritarian lawyer in
the Weimar republic. In the 1920s they are briefly colleagues. Schmidt understands democracy
according to classical democracy, which suggests Schumpeter might be an advocate of democracy.
• What doesn’t Schumpeter like about the classical theory?
o He rejects the idea of the common good – like Hobbes, the ‘good’ varies between people.
The common good will simply be what the sovereign says it is; Weber suggests different
people are committed to different ethical goals and values in a deeply plural + ethical world.
What are the goods genuinely common? Drinkable water. But the goods pursued in classical
democracy is about particular projects, which are not common. It’s a story of advantages and
disadvantages, some do well and others badly. We cannot pretend losers don’t exist through
the language of the common good.
o He rejects the will of the people – again similar to Hobbes, passions work on us. What we
call the will is the name of the passion which shapes out action. Schumpeter echoes this.
Different people vote for things for different reasons. This then means the people cannot
have a single ‘will’. Schumpeter questions whether we can talk about ‘will’ at all
▪ I.e. Brexit the 52:48 was stated to be the will of the people → some people wanted
a global Britain; others isolation. Red wall conservatives.
o Draws on crowd psychology – people can have a lower level of thought, enthusiasm for
politics. His point here is politics is the subject of ‘irresponsible conversation’ → it doesn’t
even rise to level of a hobby.
o Then why does democracy continue? He argues politicians appeal to the will of the people,
using language which appeals to them. This is similar to commercial advertising.
• Why does it persist?
o It’s a kind of religious faith. That is why this language persists.
o Language of the will of the people allows people to abdicate responsibility of what they
are doing – politicians can simply say ‘I was fulfilling the people’s will’. I.e. Hobbes says the
sovereign isn’t really responsible, nor are the people. Schumpeter thinks this is significant. It
gives politicians an excuse, and a psychological satisfaction to crush their opponents on the
basis of the people’s “will” → Oscar Wilde, democracy simply means the bludgeoning ‘of the
people, by the people, for the people’.
• What is the alternative?
o The rule of professional politicians. That which arrives at political decisions via competition
for votes.
o Parties → group of people whose members propose to act in concert for the competitive
struggle for power. Parties are contingent on people banding together
Part IV Schumpeter Summary “Capitalism, socialism and
democracy”(Schumpeter 1976)
• He asks whether socialism is compatible with democracy – he looks at two different theories of
democracy, the classical doctrine (free will + common good) and then a government appointment
system (competition of leaders through elections)
• Using this second definition, he argues the latter is compatible with democracy
1. The dictatorship of the proletariat
• Socialists argue socialism is the only true form of democracy, where citizens participate equally in
political power. However there is a tendency to place value of socialism above that of democracy →
example of the Bolshevik revolution.
• Until 1916 it would have ‘seemed quite obvious’ to most people of the relationship between
socialism and democracy. Socialists argued the two were ‘indissolubly wedded’ → according to this
, view, private control over the means of production is ‘at the bottom both of the ability of the
capitalist class to exploit labour and of its ability to impose the dictates of its class interest upon the
management of political affairs in a community.
o Consequently → political power of capitalist class = form of economic power
o Suggests democracy cannot exist with this structure, and Marxists argue by eliminating this
power, will bring about ‘rule of the people’ → ending the ‘exploitation of man by man’ p211
• He looks for a theory ‘independent of wishes and slogans’ p211
• Socialists are not ‘particular’ about the means to achieve their ends. He notes how ‘revolution and
dictatorship’ stare us in the face → “forcing the gates of the socialist paradise”. He notes that Marx
may have placed ‘socialism’ above ‘the observance of democratic procedure’
o The argument here for Marx, according to Schumpeter, is that Marx would not have been
‘deviating from the democratic path’ → instead the system needs overthrowing by any
means in order ‘to bring true democracy to life’ p212
o Schumpeter notes that anyone willing to pursue their ends through ‘undemocratic
procedure’ is proving ‘conclusively’ that they value other ideals above democracy. This is
anti-democratic belief.
2. The record of socialist parties
• He notes there are forms of socialism which do not incorporate democratic ideals “there are forms of
socialism which do not command the allegiance of all socialists and which include non-democratic
ones” p214 → this fact is ‘undeniable’, and is enabled by the fact that socialism does not ‘imply
anything about social procedure’ → he therefore asks under what conditions it can be democratic.
• Socialists who upheld ‘democratic faith’ → because they had no chance/motive of anything else → in
England/Sweden socialists would not have succeeded if they were anti-democratic. They pursue the
means which ‘satisfy them’ p214.
• He argues these ‘test cases’ are few + not particularly convincing. In the cases of Russia and Hungary,
they had the possibility of taking power whilst it was impossible to do ‘so by democratic means’
• He is not accusing socialists of being insincere, but instead making the broader point that ‘socialist
parties are presumably no more opportunists than any others; they simply espouse democracy if, as,
and when it serves their ideals and other interests and not otherwise’
3. A Mental Experiment
• In the example of a democracy which decides to ‘persecute religious dissent’ → i.e. persecution of
Christians was ‘approved by Roman public opinion’ p216 → we do not ‘approve of these practices on
the ground that they have been decided on according to the rules of democratic procedure’
o Would we approve of a democratic constitution that approved of them > ‘non-democratic
methods for the purpose of supressing it’? → if not, this explains why socialists seek to evade
democracy to overcome capitalism.
o Democrats therefore when they support democracy are simply saying democracy ‘will
guarantee those ideal and interests such as freedom of conscience and speech’ p217
• “Democracy is a political method” ➔ He defined democracy as “a certain type of institutional
arrangement for arriving at political – legislative and administrative – decisions and hence
incapable of an end in itself” p217
o Not an end in itself, though he notes some may argue it to be ‘an absolute ideal or ultimate
value’ p218
o It will NOT ‘necessarily, always and everywhere’ serve ‘certain interests of ideals’ → no
more than any other political method can it produce the same results, instead the working of
democracy must be understood with reference to ‘given times, places and situations’ p218
4. In search of a definition
• Political method = methods used by a nation to arrive at decisions
