Alberto Mingardi

Schumpeter, intellectuals and capitalism

Too Many... "The 'liquidity trap' only is ...

Kevin Hassett recently debated Thomas Piketty on his book, "Capital in the 21st Century". After presenting some interesting points on Piketty's work, Hassett reminds his audience, somehow ironically, that not just Marx, but also Joseph Schumpeter thought that capitalism was going to die.

As he wrote in his voice "Capitalism" for the Encyclopaedia Britannica, Schumpeter was convinced that "the capitalist process by its very success tends to raise the economic and political positions of groups that are hostile to it." The reference here is to the anti-capitalist attitude, which is very persistent among intellectuals. This might seem a rather inappropriate point to raise discussing Piketty's book but, if I understand him correctly, Hassett was actually thinking about the overwhelmingly enthusiastic reception of the book by its reviewers. The great enthusiasm that many intellectuals showed for Piketty's work may suggest that they were somehow looking for a new masterpiece arguing for a similar argument. It is easier to be impressed with somebody's scholarship, when her findings confirm our biases.

Many authors have asked themselves "why the intellectuals oppose capitalism": from Ludwig von Mises to Robert Nozick. Schumpeter's treatment of this subject is very interesting, because it is so intertwined with his wider view of the way in which a modern industrial society developed. In a chapter of "Capitalism, Socialism and Democracy" aptly entitled "Growing Hostility," he explains how "the bourgeois fortress" became "politically defenseless."

He sees the capitalist order proceeding from a "rationalizing attitude"--"an attitude which spurns allegiance to extra-rational values." Modern capitalism is "the propelling force of the rationalizing of human behavior," but this critical mind doesn't stop at the gates of modern factories, but also wages war to the very system it should hold dear, breeding egalitarian challenges to the legitimacy of capitalist inequality.

The argument in favor of capitalism, for Schumpeter, is a difficult one, that the masses naturally overlook: "any pro-capitalist argument must rest on long-run considerations. In the short run, it is profits and inefficiencies that dominate the picture."

And yet, to be sure, "neither the opportunity of attack nor real or fancied grievances are in themselves sufficient to produce, however strongly they may favor, the emergence of active hostility against a social order. For such an atmosphere to develop it is necessary that there be groups to whose interest is to work up and organize resentment, to voice it and to lead it."

Enter the intellectual.

For Schumpeter, intellectuals as we know them are a creation of a capitalist society. True, we always had "people who wield the power of the spoken and the written word": but they were few in number, and their words could be accessed, debated and learned by a tiny fraction of the population. Capitalism nurtures intellectuals: on the one hand, a capitalist society is less keen to curb freedom of speech and discussion than any previous set of social institutions. On the other, innovation multiplies the means for the public debate: books become increasingly cheaper, newspapers mushroom everywhere, then of course you had radio and tv, and today social networks. Also, "one of the most important features of the later stages of capitalist civilization is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education."

Yet this apparatus produces more intellectuals than could thrive economically, and this creates resentment. Schumpeter didn't think that hostility against capitalism could be considered just a feature of the intellectuals as a social group: but assigned them a particular role. Modern capitalism creates opponents of a different kind, especially among those to whom the long-term benefits of the market system are less apparent, namely workers. But they yearn for leaders and narratives. Intellectuals do not often enter politics or labour unions directly, but "they staff political bureaus, write party pamphlets and speeches, act as secretaries and advisers" etc. "In doing these things they to some extent impress their mentality on almost everything that is being done."

I've always been fascinated by reflections on the intellectual's attitude towards the market system. For one thing, this is not a peripheral theme--but rather a central one--for classical liberal authors. It is pretty clear, for example, that Hayek considered this a question of not trivial importance.

Schumpeter's reflection in this field may sound a bit over-deterministic, but it is full of insights, as it brings together different elements: from the "rationalizing" attitude of a modern, capitalist society, to the resentment that people who were highly successful in schools nurture as they face the labour market. I hope you'll forgive me if I did not do justice to Schumpeter, painting a picture with too big a brush.

But let's go back to Hassett. An interesting question is what we shall deduce from all of this. I suppose one extreme answer would be that it is basically useless to engage in a debate with anti-capitalist intellectuals, as they are drawn to their positions by forces too powerful to be countervailed by a good argument. And yet Hassett debated Piketty.

I suppose a less extreme inference from Schumpeter's analysis would be that yes, there are very strong reasons why intellectuals may oppose capitalism. They are deeply ingrained in our society, and thus this makes any attempt to change their mind particularly difficult. But this doesn't really make it a worthless effort.

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COMMENTS (11 to date)
F. Lynx Pardinus writes:

I found David Brooks' version of a similar argument less condescending toward fellow intellectuals and more convincing.

Mr. Econotarian writes:

I don't think capitalism is a natural viewpoint of most individuals. It is an emergent property of humanity at odds with most people's common sense.

Capitalism is the right to own and be secure in your property, as well as the ability to freely transact. Leaders limited both for their own rent-seeing for quite a while. Also in a time of primitive technology, land was the primary capital, and all the land was owned.

European colonialism opened up new lands and capital intensive businesses (for Europeans anyway). This may have enhanced the belief for personal freedom to own and have secure property & capital, which kicked off capitalism as we know it. But capitalism as a system may not have been fully understood or appreciated by those engaging in it (as it rarely is today.)

Inside our emotional brains, we are still in our small tribal band on the plains of Africa, not in the capitalist metropolis where we post to web sites from our phones.

foobarista writes:

Intellectuals have always disdained "traders", although they also celebrated "noble poverty". All you have to do is look at traditional societies and you'll see that intellectual professions (priests, teachers, bureaucrats) are "at the top" in formal social ranking, while traders and merchants are "at the bottom". Indian castes and Chinese Confucianism formalize actual sequences.

By seeming to put trade at the center of human activity and diminishing the importance of bureaucracy or interactions with God (as mediated by priestly intellectuals), capitalism weakens intellectualism even while it allows more of them to exist and creates more and new types of "intellectual employment".

I always thought the appeal of various flavors of statist leftism to intellectuals was that it restored intellectuals to what they think of as their proper place in social hierarchies, and pushes trade and money-grubbing aside.

A modern progressive intellectual would have been quite at home as a Ming Dynasty tax-farming bureaucrat, writing poetry, painting, designing nice gardens, studying the Confucian classics, and disdaining all things money-related while some servants took care of his every need and others actually paid the bills.

Kuze writes:

[Comment removed for name-calling.--Econlib Ed.]

R Richard Schweitzer writes:

While not an economist and never having practiced or taught in the field, it was my good fortune to be influenced in the last part (1950)of my graduate studies by courses with one of Schumpeter's doctrinal graduates; more so because he was at the time completing what is one of the few works describing and entitled Capitalism.

But strangely that exposure, and the actual study and reading of Schumpeter, is part of what has led me to conclude that there is a basic reversal in the understanding of Democracy and Capitalism.

Democracy seems to be understood as a condition, when in fact it is a process.

Capitalism seems to be understood as a process or system when it is in fact a resulting condition.

Capitalism is the condition resulting from particular forms of human interactions with one another and with their material surroundings. It results from individual and group determinations of objectives and interests and the means of attaining them, as well as similar determinations of the aggregations of interests. It therefore requires certain degrees of freedom for those determinations to be made (which does not rule out influences on those determinations).

As the nature of the various human interactions have developed over succeeding periods, the predominant nature of the resulting condition has changed or evolved, and we have seen Commercial Capitalism resulting principally from merchant trading; followed by Industrial Capitalism from interactions focused on production of goods and services; followed yet again by Financial Capitalism dominated by the influence of distributive interactions; and the current Managerial Capitalism resultant from the dispersion of beneficial ownership of the means of production and distribution, accompanied by increasing specializations of information required for effective human interactions.

Over the same periods the Democratic process in many Western nations has, for social and political reasons, become "objective oriented." That orientation has significantly altered the human interactions involved in the Democratic process.

It is more likely that the ideologies promulgated and propagated by "Intellectuals" have had more effect on the Democratic process than on the resulting condition of capitalism. However, from the objectives of that process there have been substantial impacts on the human interactions that make up the resulting condition of capitalism.

Glen Smith writes:

People in general hate capitalism. It does not value the person or directly value anything that the person brings to the table (like hard work) but only the value that others get from that person. While we may like being the one who values others productivity, we hate being the one whose productivity is being evaluated.

R Richard Schweitzer writes:

Glenn Smith,

you say of Capitalism:

*It* [Capitalism] does not value the person or directly value anything that the person brings to the table (like hard work) but only the value that others get from that person.

it is the interactions of humans, reflecting their preferences, judgments, priorities, prejudices that reflect the values observed in the condition resulting from those interactions. The condition [Capitalism] does not set the values.

Even so, that judgment about values that may determine or influence the interactions that create the condition of capitalism is incomplete at best, and probably wrong in what predominates.

In the broader aspects of the social order, individuals appear to value most the significance they perceive their own existence has to others; followed closely by the significance that others have to them. Of course, the significance of others is influenced, but not determined, and certainly not exclusively, by what they produce of material significance.

Try making comparisons to the human interactions which predominate in any of the various forms of "managed" social orders, even those within closed religious orders.

Pajser writes:

It is easy to criticize capitalism. The capitalism is not perfectly efficient, just, empathic - all that is more less obvious. It is very natural that some, even many people try to improve over that. It is human nature. No need for tinkering about it.

Steve Sailer writes:

I'm an old coot, so I remember how much intellectuals on average despised capitalism in 1975. So I also noticed how much more positive they were about capitalism by 2007. The current dip in regard for capitalism is obviously related to the unfortunate events of 2008, but today's mindset is still nowhere near what it was when I was in high school.

I explain one reason why capitalism remains far more popular today with pundits than it was in much of the 20th Century here:

Troy Camplin writes:

The left have also historically supported their intellectuals, while the same cannot be said of (American-style) conservatives and libertarians. The economistic world view also does not create a lot of room for those who work in other areas, like the gift economies (philanthropy, the arts, literature, etc.). The Freeman is starting to show some respect for poets, at least, with their recently starting to publish poetry, but for the most part I have found few interested in reading my poetry or in supporting my work as a poet and playwright from anyone who is pro-market. When I get my plays performed, what do you think will be the ideology of the theater owners and producers? How do you think that is going to affect my material?

Roger McKinney writes:

It has been a while since I read Schumpeter, but I think you did a good job of summarizing his views. And I think as you mentioned that Hayek amplified Schumpeter's ideas in "Fatal Conceit."

Still, I think Helmut Schoeck's "Envy: A Theory of Social Behavior" does the best job of identifying the Achilles heel of capitalism - envy is a major part of human nature. Schoeck says that Christianity managed to restrain envy in the 17th century enough to allow room for economic development.

Socialism developed in conjunction with the rise of atheism/deism in the late 18th century. The "intellectuals" were for the most part atheists/deists who elevated the base characteristics of human nature to the highest level. As Hayek wrote, they wanted to destroy Christian morality along with the Christian God. They freed envy from its Christian chains and destroyed Christian sexual morality as well as the sanctity of property.

As traditional Christianity receded socialism advanced. Keynes despised the Protestant emphasis on frugality and thrift and dedicated all his effort to destroying them. Most "intellectuals" today are atheist/agnostic and continue to hate Christian morality.

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