Introduction

When Joseph Schumpeter died, in January 1950, one month before his sixty-seventh birthday, he was generally acknowledged to have been one of the three or four greatest economists of his time. In the memorials which appeared in the months after his death his friends, students, and associates endeavored to answer three questions about his contribution to social science: which are Schumpeter’s greatest and most lasting works; wherein consists the peculiar quality of his genius; and how can the apparently widely dissociated interests of the man be related to one another so as to form a coherent system of social thought?

It is impossible to answer these questions exhaustively in a few paragraphs, but a short survey of Schumpeter’s life, his writings, and his actions, plans, and hopes go far to provide a fairly adequate picture of the nature and quality of his contribution to social science.

Not all of Schumpeter’s adult life was spent in the quiet and peaceful environment of academic institutions. For a time he administered the estate of an Egyptian princess, was president of a private bank, in 1918 was a consultant of the Socialization Commission in Berlin, and for a few short months, in 1919, was Minister of Finance of Austria. From 1909 to 1920 Schumpeter held academic positions, first at Cernauti and then at Graz. Both were small universities in a provincial, narrow environment which was distasteful to him and from which he fled whenever his teaching obligations permitted. Even in 1925 when he was appointed to a professorship at Bonn, he was so heavily committed to writing articles on current economic topics for various magazines, that again he could not enjoy the calmness and serenity normally associated with academic life. Only when he came to Harvard in 1932 did he devote his full time to teaching and research. He consciously abstained from any attempt to exert a direct influence on practical affairs and, in 1943, turned to writing his last posthumously published book on the History of Economic Analysis, because, as he said in a letter, “it is simply the subject among all those at hand, that is farthest removed from current affairs.”

In spite of the varied activities of his younger years, Schumpeter had produced three books by the time he was thirty-one. The first and third dealt with problems of economic theory and the history of economic ideas. They were solid and imaginative contributions to the science of economics, but they were not works which make history. His second book, The Theory of Economic Development, which appeared in 1912, established his reputation. This work contains his basic views on the dynamics of modern capitalism, and almost all his later scientific work—most of which was written more than two decades after the fertile outpouring of his youthful vision—constitutes an elaboration and refinement of the fundamental theories expostulated by a youthful man in his twenties.

The two essays reprinted in this volume belong to this group of writings. Imperialism had been subjected to a scientific study first by John A. Hobson, Rudolf Hilferding and Rosa Luxemburg. They all considered it an aspect of mature capitalism. What was more natural than that Schumpeter should attempt to throw further light on it and determine its relationship to the dynamics of capitalism as expounded in his system? The problem of class structure in modern society also was under dispute. Capitalism was based on slogans emphasizing the equality of all men. Yet, social classes and class differences continued to exist. Here were two problems whose full explanation went beyond purely economic analysis and which required sociological and historical depth for their full solution.

Far from being satisfied with explaining imperialism with reference to cycles of overproduction, the concentration of finance capital, or a struggle for markets or outlets for investment, as his predecessors had done, Schumpeter searched for a basically social explanation of imperialism. Instead of asking, what is imperialism? he asks, who are the imperialists? What groups in society form the spearhead of imperialist policies? How do these groups come into being? And what makes them disappear? Similarly in the case of social classes, he asks not what these classes are, but what function certain social structures perform under different economic and social conditions, and how the control of different values (i.e., objects of aspiration) determine differences in class structure.

Schumpeter’s analysis of the sociology of imperialism and class structure is closely related to his analysis of economic growth. In each case he identifies a particular group, an elite, which under given historical and sociological conditions becomes the carrier of a movement. The carrier of economic development is the innovating entrepreneur. The carrier of imperialist ventures is the “machine of warriors, created by wars that required it, which now creates the wars it requires.” The capitalistic elite is a group of peaceful businessmen whose main “exploits” are profit-making innovations. The imperialistic elite is an aristocracy whose chief reason for existence is the ever-renewed unleashing of aggressive wars.

The essay on social classes is a study of the connections between the ancient imperialisms and modern capitalist civilization in which aggressive war and imperialism has become an atavism. Schumpeter contrasts a social order in which the peak positions are held by an aristocracy, often with strong military leanings, to one in which the center of the stage is taken by a bourgeoisie led by a group of creative entrepreneurs. But the class structures and leadership patterns in an aristocratic and a bourgeois society differ because under each of the two systems different “socially necessary functions” need to be performed. As Schumpeter points out, this difference may be stated by saying that “the feudal master class was once—and the bourgeoisie was never—the supreme pinnacle of a uniformly constructed social pyramid. The feudal nobility was once—and the bourgeoisie was never—not only the sole possessor of physical power; it was physical power incarnate. . . . The nobility conquered the material complement to its position, while the bourgeoisie created this complement for itself.”

These two essays form, in a very real sense, the capstone to Schumpeter’s system. They were written in the interval between his fertile youth and the re-evaluation of his doctrines in his mature age. But although Schumpeter wrote (in addition to many articles) three full-sized books during his Harvard period, he never again discussed the problems of imperialism and social classes in his later work. Hence, we may regard these two essays as the final word he had to say on these subjects. His concern with the nature of capitalist dynamics demanded that he contrast it with socio-economic movements in pre-capitalist periods. Who took on leadership roles in society in the absence of the creative entrepreneurs? What were the conditions which brought forth these leaders, and why were they able to perform the “socially necessary functions” of their societies? In the essays on imperialism and on social classes the answers to these questions are provided. The process of capitalist development is not only set against a different process of feudalist social dynamics, but at the same time placed in its historical perspective.

Schumpeter’s emphasis of the role of elite groups appears to place him among several other writers of the first two decades of this century who also developed “elitist” theories. Pareto had suggested such a theory, but later Robert Michels and, especially, Gaetano Mosca had developed this idea further. Other aspects of elitist thinking were developed by Max Weber in his discussion of forms of domination. Schumpeter was, of course, aware of these men and their works. But there are several significant differences between Schumpeter’s theorizing and that of the Italian elitist school. Michels and Mosca applied their theories to the explanation of forms of government or existing social structures. These theories were either completely; or at least, comparatively static. In Schumpeter’s reasoning the elite is the main force accounting for the dynamics of a system. In fact it is Schumpeter’s emphasis on dynamics, on social processes, which distinguishes his work not only from that of most contemporary economists and sociologists, but also from his teachers in the Austrian school of economics.

Although schooled in the analysis of rigorous logical theorems of stationary economic states, Schumpeter was most impressed by two men who were the butt of attack by the members of the Austrian school, Leon Walras and Karl Marx. Walras impressed Schumpeter as an economist in whose system the mutual interaction of all parts upon each other were clearly recognized and explicitly stated. Marx exerted an influence upon him in that he was the last and most outspoken exponent of a line of theorizing in which the dynamism of capitalist society was stressed. However much Schumpeter disagreed with many of the detailed theories of Marx he always acknowledged his genius in recognizing capitalism as a stage in the development of human society and in emphasizing that only by studying its dynamics can one gain full understanding of its nature.

Schumpeter’s main contribution to social theory consists then, above all, in having overcome the partial equilibrium analysis of the Austrian school of economics and replacing it by emphasis on general equilibrium; a general equilibrium, moreover, in which due attention is paid not merely to economic factors, but also to political and social forces. In addition it consists in his stressing the essential sterility of the static approach and the need to regard social phenomena as dynamic processes, whose most important dimension is the historical. This is confirmed by a statement Schumpeter made in his last work, the posthumously published History of Economic Analysis. Discussing the relation of statistics (economic measurement), economic theory, and economic history, and finding that all three are important for the progress of science, he concludes by saying, “I wish to state right now that, if starting my work in economics afresh, I were told that I could study only one of the three, but have my choice, it would be history I would choose.” But the essays reprinted in this volume show that his conception of economic history was much wider than is common. The inclusion of all socially relevant phenomena and, as the essay on imperialism shows, the survey of all human historical experience were the material upon which Schumpeter’s theories and insights are based. These essays, therefore, exhibit perhaps more clearly than any other of his works how true the designation was which his colleagues and friends gave him when he died: Schumpeter, Social Scientist.*

BERT HOSELITZ, 1955

*  This is the title of a book, edited by S. E. Harris, containing 20 essays on the life and various aspects of the work of J. A. Schumpeter.