38 pages • 1 hour read
Joseph Alois SchumpeterCapitalism, Socialism and Democracy
Nonfiction | Book | Adult | Published in 1942A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Part 4Chapter Summaries & Analyses
Part 4: “Socialism and Democracy”
Part 4, Chapter 20 Summary: “Setting of the Problem”
Schumpeter explores the relationship between socialism and democracy. Some socialists claim that socialism is the only true form of democracy: by eliminating the bourgeoisie’s economic potency, everyone can participate equally in political power. In practice, the relation is more complex. Socialist revolution may require a “transitional period” in which democracy is suspended to implement goals, or for society to acclimate. Socialists may hold up socialist society above the value of democracy. Such valuations can lead to conflict. Indeed, the case of Russia shows that socialism is compatible with such conflict and a radically undemocratic state.
“Democratic” socialist parties in the UK and Scandinavia may be democratic because it was the best way for them to get power. For them, pursuing a non-democratic road had little chance of success.
Part 4, Chapter 21 Summary: “The Classical Doctrine of Democracy”
Schumpeter seeks a robust definition of democracy. Democracy “is that institutional arrangement for arriving at political decisions which realizes the common good” (250). The common good can be understood as the general interest, welfare, or happiness of the public. This, and the means to achieve it, should be transparent to all rational members of the community. Due to the division of labour and skills, it is not possible for all citizens to participate in the process of implementing the common good directly. Instead, citizens elect representatives, specialists in politics, to articulate and execute the common good on their behalf.
Schumpeter suggests that this definition of democracy has two core problems. First, there is no unified common good. For example, citizens may disagree about whether to prioritize an egalitarian or meritocratic society. Second, they may disagree about how to realize their ideals.
Part 4, Chapter 22 Summary: “Another Theory of Democracy”
Schumpeter suggests an alternative model of democracy. Democracy, he says, is that “arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote” (269). This is a reversal of the classical doctrine. The central thing here is not what is decided or represented. Rather, the defining feature is the competitive process of elections to determine who makes decisions.
This has three main advantages over the classical doctrine. First, it makes it easier to determine whether a society or government is democratic, based on whether this competitive struggle takes place. With the classical theory it is possible that many types of government can claim to represent the will of the people. Napoleon Bonaparte’s government, for example, was authoritarian but represented in some sense the general will of France.
Second, the new theory, unlike the classical theory, takes account of how leadership crafts and manufactures the public will.
Thirdly, the new model gives an appropriate place to group interests, and how they arise as political forces. This occurs when effective leadership galvanizes these groups and supports them.
Part 4, Chapter 23 Summary: “The Inference”
Schumpeter discusses four conditions where democracy succeeds. First, the people who might potentially enter office “should be of sufficiently high quality” (290). Second, the range of political decision-making, the areas politics can affect, should be limited. Governing in too wide a range of fields can be difficult and complex. Instead, politicians should be willing to delegate to specialists. Thirdly and relatedly, politicians must be able to command well-trained and motivated bureaucracies to guide them, as politicians may be amateurs in the technical business of administration. Lastly, there should be “democratic self-control” (294). All elements and groups in society must be willing to accept the legitimacy of government and legislation even if they personally disagree with it. There must be a certain respect for the democratic process from all sides. Political warfare between parties and politicians should be kept within limits.
Capitalism is conducive to democracy in so far as it meets one of those conditions well. Limiting the state’s influence in the private sphere ensures that government is kept within definite bounds. Conversely, it may seem that socialism, by extending the state’s range into economic affairs, limits democracy. However, this is not necessarily the case. If the state bureaucracy and not the politicians themselves are responsible for this extension, there is not a problem of political interference. Socialism, provided it comes into being when capitalism has “matured,” can continue the democratic traditions of capitalism. Indeed, it may even improve upon them.
Part 4 Analysis
Schumpeter critiques the classical theory of democracy. He points out that voters often disagree about both values and the means of accomplishing them.
Yet the more fundamental reason for his critique rests on “social psychology” (256)—specifically, the rationality of voters.
Schumpeter cites Freud and Gustave Le Bon’s work on the psychology of crowds. In crowds, it is possible to have a “sudden eruption of primitive impulses, infantilisms and criminal propensities” (257). Groups can be formed and incited, especially with modern mass media like radio and television. When this happens, as evidenced by the rise of Nazi Party in Germany, ordinary standards of rationality and morality can be jettisoned. In their place comes basic, often violent, emotions, based on identification with one group or hatred of another. At such times, the “will” of voters, and their choices, can be both irrational and dangerous should any politician try to implement them.
The rationality of voters is not just limited in situations involving crowds. According to Schumpeter, the average voter makes poor or irrational decisions even in their absence. This is due, he claims, to a lack of incentive. In those areas which “directly concern himself” (258) the common citizen can behave rationally and morally. These are areas such as “his family, his business dealings, his hobbies, his friends and enemies, his township or ward, his class, church, trade union or any other social group” (258). He is directly invested in them and feels that his actions and decisions have clear consequences. For example, in buying a new car, the average citizen can rationally assess the strengths and weaknesses of different vehicles. They will also, most likely, invest considerable time into understanding how cars are judged. They may even canvas expert opinions.
The opposite is true when it comes to politics. The average voter feels that “he is a member of an unworkable committee, the committee of the whole nation, and this is why he expends less disciplined effort on mastering a political problem than he expends on a game of bridge” (261). With politics, people, for the most part, feel their decisions and vote have few tangible, personal consequences. It’s not just that any individual vote minimally impacts which party comes to power or any specific policy. It is also that possible outcomes are hard to decipher. For example, how is the average voter to know what the effects of running a budget deficit or nationalizing a bank will be in five- or 10-years’ time? Or the effects of pursing a new alliance with a country? Even when policies appear to affect them more directly, voters are typically poor judges. They may elect a party promising to impose tariffs on imports to protect domestic industries. The net long run result could be a higher cost of living and a general competitive weakening of the nation’s industries.
The character of most politicians and political parties do not help matters. To win power, politicians often have a vested interest in obscuring, simplifying, or even contradicting the truth. They can overestimate or underestimate a particular policy’s effects. This is when they even discuss policy. As Schumpeter stresses, modern politics is conducted after the fashion of commercial advertising.
Politicians eschew rational argument about policy in favor of making emotional and sub-rational appeals. As with advertising, politicians reenforce these through “reiterated assertion” (263), which embeds ideas in the public mind.
As a result, Schumpeter regards any appeal to the “general will” as flawed. Instead, given the limited rationality of voters, democracy needs to be based on a more minimal and pragmatic concept—one which sees its purpose as ensuring healthy competition between potential leaders. It does not require these leaders to represent, or pretend to represent, “the people.”
