Continuing to read Schumpeter’s Capitalism, Socialism, and Democracy (1942) As I mentioned in a previous post, I was surprised to find that, in a book I thought would tell me about the currently prevailing theory of platform monopoly and competition, Schumpeter’s first few chapters are devoted entirely to a consideration of Karl Marx.
Schumpeter’s treatment of Marx is the epitome of respectful disagreement. Each chapter in his treatment, “Marx the Prophet”, “Marx the Sociologist”, “Marx the Economist”, and “Marx the Teacher”, is brimming with praise and reverence for the intellectual accomplishments of Marx. Schumpeter is particularly sensitive to the value of Marx’s contributions in their historical context: they exceeded what came before it and introduced many critical new ideas and questions.
Contextualizing it thus, Schumpeter then engages in a deep intellectual critique of Marx, pointing out many inconsistencies and omissions of the doctrine and of the contemporary Marxist or Marxian tendencies of his time.
“Marx the Prophet”
Schumpeter’s first chapter on Marx addresses the question of why Marx has such a devoted following, one that exceeds that of any other social scientist or economist. He does not find it plausible that Marx has been so attractive because of his purely intellectual analysis. The popular following of Marx far exceeds those who have engaged deeply with Marx’s work. So Schumpeter’s analysis is about the emotional power of Marxian thought. This is a humanistic discussion foremost. It is a discussion, quite literally and unmetaphorically, of religion.
In one important sense, Marxism is a religion. To the believer it presents, first, a system of ultimate ends that embody the meaning of life and are absolute standards by which to judge events and actions; and, secondly, a guide to those ends which implies a plan to salvation and the indication of the evil from which mankind, or a chosen section of mankind, is to be saved. We may specify further: Marxist socialism also belongs to that subgroup which promises paradise on this side of the grave.
Schumpeter believes that Marxism is successful because at some necessary points Marx sacrificed logical integrity for what was in effect good marketing to a audience that had an emotional need for his message.
This need came about in part because, with the success of bourgeois capitalism, other religions had begun to wane in influence. “Faith in any real sense was rapidly falling away from all classes of society”, leaving “the workman” literally hopeless. “Now, to millions of human hearts the Marxian message of the terrestrial paradise of socialism meant a new ray of light and a new meaning of life.” This acknowledgement of the emotional power of Marxism is not meant to be dismissive; on the contrary, what made it successful was that “the message was framed and conveyed in such a way as to be acceptable to the positivistic mind of its time.” He “formulat[ed] with unsurpassed force that feeling of being thwarted and ill treated which is the auto-therapeutic attitude of the unsuccessful many, and, on the other hand, by proclaiming that socialistic deliverance from these ills was a certainty amenable to rational proof.”
Marxism offered certainty of one’s course of action for people who were otherwise despairing, all in a form that seemed consistent with dominant rationalist and scientific modes of thought.
The religious quality of Marxism also explains the characteristic attitude of the orthodox Marxist towards opponents. To him, as any believer in a Faith, the opponent is not merely in error but in sin. Dissent is disapproved of not only intellectually but also morally. There cannot be any excuse for it once the Message has been revealed.
Schumpeter does find an intellectual weakness in Marxism here. He argues that Marxism excites individual feelings and attempts to direct them towards class consciousmess, an idea that depends on theoretical assumptions about the logic of social evolution. Schumpeter is doubtful about this logic of class formation. He writes that “the true psychology of the workman… centers in the wish to become a small bourgeois and to be helped to that status by political force.” This question of the structure of social classes is addressed in the next chapter.
Discussion:
Religion is a difficult topic for mainstream research and scholarship today, especially in the United States. For applications for University lecturer positions in the United Kingdom, there is commonly a section devoted to the applicant’s experience with “pastoral care”. The history of universities in the UK is tied up with religious history, and this resonates through the expectation that part of the role of a professor is to tend to the spiritual needs, in the broadest possible sense, of the students.
The equivalent section in applications in the United States is a section asking the applicant to discuss their experiences fostering or representing diversity, equity, and inclusion. These terms have had many meanings, but it requires a special amount of mental density to not read this as relating to the representation and treatment of minorities. This is a striking indication that the prevailing “religion” of education institutions in the U.S. is indeed a form of political progressivism.
There is a wide variance of opinion how much contemporary progressive ideals are aligned with or indebted to Marxian ones. I’m not sure I can add to that debate. Here, I am simply noting that both Marxism and progressivism have some of these religious traits in common, including perhaps the promise of a new material world order and a certain amount of epistemic closure.
Naturally there are more and less intellectual approaches to both Marxism and contemporary progressivism. There are priests and lay people of every good religion. Schumpeter’s analysis proceeds as intellectual critique.
“Marx the Sociologist”
Schumpeter next addresses the sociological content of Marx. He argues that though Marx was a neo-Hegelian and that these philosophical themes permeate his work, they do not dominate it. “Nowhere did he betray positive science to metaphysics.” He brought an powerful comprehensive of contemporary social facts to his work, and used the persuasively in his arguments in a way that raised the standard of empiricism in the scholarship of his time. And the result of this empiricism is Marx’s Economic Intepretation of History, according to which economic conditions shape and account for the rise and fall of the world of ideas: religions, metaphysics, schools of art, political volitions, etc. Ideas and values “had in the social engine the role of transmission belts.” This is as opposed to a vulgar interpretation that would assume all individual motives can be reduced to individual economic motivates; this is a misrepresentation.
Schumpeter views the term “materialism”, as applied to Marx, as meaningless, and mentions in a footnote his encounters with Catholic radicals who “declared themselves Marxists in everything except in matters related to their faith” with perfect consistency.
Schumpeter instead condenses Marx’s view of history into two statements:
- “The forms or conditions of production are the fundamental determinant of social structures. “[T]he “hand mill” creates feudal, and the “steam-mill,” capitalist societies. Technology thus becomes a driving factor of social change, though technology is understood in its fullness as situated sociotechnical process.
- The forms of production have a logic of their own. The hand-mill and steam-mill each create social orders which ultimately outgrow their own frame and lead to the practical necessity of the next technological advance.
This smacks of “technological determinism” which is full-throatedly rejected by more contemporary sociological and anthropological scholars. And Schumpeter points out this weakness as well, in a particular operational form: he notes that many social structures are quite durable, persisting past the technological context of their origins. This is a weakness of Marx’s work. There are historical facts, such as the emergence of feudal landlordism in the sixth century, which run counter to Marx’s analysis. The implication is that _unless_ one is taking Marx _religiously_, one would take his arguments seriously enough to engage them as positive science, and then refine one’s views in light of contradictory evidence. This all can be done with ample respect for Marx’s work. Schumpeter is warning against a fundamentalist use of Marx.
This is a buildup to his analysis of the next major sociological theme of Marx, the Theory of Social Classes. Schumpeter credits Marx with the introduction of the important idea of social class. The important claim made by Marx is that a social class is not simple a set of individuals that have something in common. Rather, they are theorized as a social form, “live entities that exist as such”, emergent beings with their own causal force. Marxism rejects methodological individualism.
Once we understand social classes to be social forms in themselves, it becomes sensible to discuss “class struggle”, an important Marxist idea. Schumpeter seems to believe that the strongest form of the idea of class struggle is incorrect, but a weaker version, “the proposition that historical events may often be interpreted in terms of class interests and class attitudes and that existing class structures are always an important factor in historical interpretation”, is a valuable contribution.
“Clearly, success on the line of advance opened up by the principle of class struggle depends upon the validity of the particular theory of classes we make our own. Our picture of history and all our interpretations of cultural patterns and the mechanism of social change will differ according to whether we choose, for instance, the racial theory of classes and like Gobineau reduce human history to the history of the struggle of races or, say, the division of labor theory of classes in the fashion of Schmoller or of Durkheim and resolve class antagonisms into antagonisms between the interests of vocational groups. Nor is the range of possible differences in analysis confined to the problem of the nature of classes. Whatever view we may hold about it, different interpretations will result from different definitions of class interest and from different opinions about how class action manifests itself. The subject is a hotbed of prejudice to this day, and as yet hardly in its scientific stage.”
Schumpeter sees Marx’s own theory of the nature and action of social classes as incomplete and under-specified. “The theory of his chief associate, Engels, was of the division of labor type and essentially un-Marxian in its implications.” Finding Marx’s true theory of social classes is, in Schumpeter’s view, a delicate task of piecing together disjoint parts of Das Kapital.
“The basic idea is clear enough, however. The stratifying principle consists in the ownership, or exclusion from ownership, of means of production such as factory buildings, machinery, raw materials and the consumers’ goods that enter in the workman’s budget. We have thus, fundamentally, two and only two classes, those owners, the capitalists, and those have-nots, who are compelled to sell their labor, the laboring class or proletariat. The existence of intermediate groups, such as are formed by farmers or artisans who employ labor but also do manual work, by clerks and by the professions is of course not denied; but they are treated as anomalies which tend to disappear in the course of the capitalist process.”
This sets up the most fundamental antagonism as that over the private control over the means to produce. The very nature of this relation is strife, or class war.
The crucial question raised by this framing is the question of primitive accumulation, “that is to say, how capitalists came to be capitalists in the first instance.” Here, Schumpeter calls shenanigans on Marx. For while Marx rejects wholesale the idea that some people became capitalists rather than others due to superior intelligence, work ethic, and saving. Schumpeter believes this ‘children’s tale’, “whale far from telling the whole truth, yet tells a good deal of it’. Schumpeter is a believer in entrepreneurial wit, energy, and frugality as the accounting for “the founding of industrial positions in nine cases out of ten.” And yet, he agrees that saving alone, as perhaps implied by classical economics predating Marx, does not account for capital accumulation.
Here, Schumpeter begins to work with some economics facts. Some people save. But saving does not in general turn one into a capitalist. Rather, typically an enterprise is begun by borrowing other people’s savings. Banks arise as the intermediary between household savings and entrepreneurial capital investments.
Schumpeter attributes to Marx a bad faith or at least simplistic rejection of this theory–a popularly applauded “guffaw”–that paves the way for an alternative theory: that primitive accumulation was the result of force or robbery. This is a popular theory. But Schumpeter argues that is begs the question. For how is it that “some people acquire the power to subjugate and rob”? Marx’s answer to this is a historical argument: feudalism was a classist regime of force. Feudal inequality gave way to capitalist inequality. This core logic of this idea is considered, skeptically, in several footnotes. For example, in one, Schumpeter asks whether it is more likely that control over cannons gives one power, or if power gives one control over cannons.
Schumpeter remains incredulous, as he sees Marx’s theory of primative accumulation as avoidant of the main phenomenon that it undertakes to explain. He points to the phenomenon of medium-sized owner-managed firms. Where do they come from? Class positions, he argues, are more often the cause of economic conditions than the other way around, as “business achievement is obviously not everywhere the only avenue to social eminence and only where it is can ownership of means of production causally determine group’s position in the social structure.” Schumpeter also questions the implied hereditary nature of Marx’s theory of social class, as he sees class mobility (both upward and downward) as a historical fact. For Schumpeter, the empirical counterarguments to Marx here are all “obvious”.
Schumpeter then places the value of Marxist theory instead in the propagandist joining of the Economic Theory of History and his theory of Social Classes, which together have more tightly deterministic implications than either do individually. Here Schumpeter makes all kinds of heretical points. For example, socialism, “which in reality has nothing to do with the presence or absence of social classes”, became, for Marx, the only possible kind of classless society. Why? It is so by virtue of the tautology given the definitions Marxist theory provides. But this begins to crumble once the strict binary of social classes is eroded into something more realistic. Schumpeter argues that, contra Marx, in normal times, the relationship between labor and capital is “primarily one of cooperation and that any theory to the contrary must draw largely on pathological cases for verification.” You wouldn’t have the grounds for antagonism at all, he points out, if you didn’t have some much cooperation to work with; indeed, in Schumpeter’s view the two are inseperable.
Ultimately, Schumpeter believes Marx’s theory of social classes depends on this economic theory, grounded in economic facts. The sociological theory of social classes is compelling to many in its own right, but does not hold up to scrutiny in itself. “Marx the Economist” is the subject of the next chapter.
Discussion:
Schumpeter is treating Marx dialectically, attempting to lay out the scope of his argument in its popularly understood, schematic form and showing how, while tautological in its structure, it depends ultimately on some more nuanced theories of economics which will no doubt be questioned in the next chapter.
Comparing Schumpeter’s analysis of Marx with the contemporary economy, we see all sorts of confusions that seem to violate that Marxian class binary. There are multiple social classes, many of whom seem to have a far more ambiguous relationship to capital than either the proletariat or capitalists. The relatively modern idea that one’s savings, however they are earned, should be invested directly into the stock market (a market for ownership over capital) rather than into a bank that then lends to companies has, it’s been said, given “everyone” with substantial savings a stake in the capitalist economy. What does this mean for Marx?
Economic sociology, such as that of Bourdieu, has since developed a far more nuanced analysis of social classes. It is an empirical question, truly, what sociological theory of social classes is most valid; it is unlikely to be anything simple, given how richly textured the social field is in fact. On the other hand, there is much to be learned from a theory of history that gives weight to economic forces, especially economic forces broadly construed. Schumpeter is asking us to try a little harder to understand what actually happens historically, including the plurality of explanations for a large aggregate social fact, rather than fall for the emotional potency and simplistic tautology Marx provides.
Digifesto 