Joseph Schumpeter predicted the end of capitalism and the victory of socialism

Some food for thought! Joseph Schumpeter (1883-1950), besides Karl Marx, is probably one of the best known intellectuals to proclaim the demise of capitalism to be overtaken by socialism, but for different reasons.

Schumpeter is most famous for his economic concept of creative destruction!

I believe, Schumpeter was way too pessimistic as far as the success and survival of capitalism is concerned! No wonder, he lived through both  world wars and the Great Depression! He may have also underestimated the dynamics and power of creative destruction of capitalism.

"Can capitalism survive? No. I do not think it can... its very success undermines the social institutions which protect it, and ‘inevitably’ creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent.

—Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy (Harper & Brothers), p. 61."

"... Many people today believe that Schumpeter’s predictions are coming true or at least the wheels of this transition are in motion in many of the world’s historically capitalist-based economies such as Canada, the United States, and most of Western Europe. These countries have all witnessed the size of government and economic intervention both growing rapidly. But to some, perhaps the clearest indicator that Schumpeter’s predicted transition, and its causes, are emerging is the growing prevalence of anti-capitalist views among the intellectual elite on college campuses."

A side note: Schumpeter was born in the same year as John Maynard Keynes (1883-1946).

Note: I did not have the time to read the essay below.

Entrepreneurial Economist Predicted Socialism | Fraser Institute

Entrepreneurial Economist Predicted Socialism (full essay)

The Essential Joseph Schumpeter

Historian Niall Ferguson on capitalism in crisis

I am sorry to witness that as Niall Ferguson gets older his views become stranger and grumpier! He, in his earlier career, produced great video/TV documentaries like “Civilization: Is the West History? (2011)” or “The Ascent of Money” (2008). 

Latest case in point: Ferguson’s commentary published in the November 2019 McKinsey Quarterly: ‘Don’t be the villain’: Niall Ferguson looks forward and back at capitalism in crisis. In my opinion, a disappointing commentary!

In his opening paragraph of his commentary, Ferguson states (emphasis added):

“Capitalism is in crisis, as usual. There will always be people questioning the legitimacy of the system. As Joseph Schumpeter wrote in Capitalism, Socialism and Democracy, published in 1942, capitalism has at its heart creative destruction, and that creates pain; it creates losers. This is the normal state of affairs, and we shouldn’t be surprised that it’s going on.” 

This is a highly one sided and very pessimistic view of capitalism! Yes, Creative Destruction creates losers, but it creates many more winners and those losers become winners again easily if they “incessantly revolutionizes the economic structure from within, ... incessantly creating a new one” (Source). Thus, Ferguson has only quoted the negative part of Schumpeter's Creative Destruction!

“The obvious lesson from the Gilded Age is don’t be the villain of the piece. John D. Rockefeller became the villain of the original antitrust movement in a way that Andrew Carnegie avoided. Why? I think it’s partly about bad luck, in the sense that Standard Oil was unlucky enough to be the target of some extremely effective muckraking reporting, and that didn’t happen to Carnegie. But it’s also because Carnegie understood the power of philanthropy to offset the unpopularity that you inevitably accumulate as a successful businessman. And Carnegie was extraordinarily revolutionary in his philanthropy. He said that you should give it all away—not half, as in the giving pledge that we have today—all of it. In a wonderful essay on wealth, Carnegie argued that you should spend the first third of your life educating yourself, the second third making money, and the third third giving it all away.”

Nice try by Ferguson to juxtapose Rockefeller and Carnegie in this way! Except it is terribly flawed in several respects: 

1. Carnegie was not the first super rich to give away most of his wealth, there were others before like Stephen Girard (1750 - 1831) of Philadelphia, perhaps one of the first multimillionaires of the U.S. 
2. The Gospel of Wealth essay by Carnegie is everything but wonderful, it is actually terrible. I have blogged about it here!

Historian Niall Ferguson on capitalism in crisis | McKinsey: Capitalism is in crisis, as usual, argues historian Niall Ferguson. By looking back, business leaders can get a clearer view of what’s coming.