Are capitalism and socialism opposed

Summary of Capitalism, socialism and democracy

The system competition between socialism and capitalism

The systemic competition between capitalism and socialism reached a climax in the period between 1930 and 1960. At first only the planned economy of the Soviet type existed, later other forms of "real existing socialism" were added, for example in China. From 1928 the Soviet Union realized under Joseph Stalin their first five-year plan. In doing so, Stalin relied on brutal harshness, carried out the forced collectivization of agriculture to collective farms and nationalized industrial companies. This transformation from an agricultural to an industrial state had impressive consequences: According to Western estimates, industrial production tripled in the decade before the Second World War; the Soviets officially spoke of a quadrupling. If one only considered this economic aspect, one could in fact come to the conclusion (presumably like Schumpeter) that socialism was superior to capitalism.

Starting around the year 1915 until around 1960 one speaks of "Fordist capitalism". Especially after the war, capitalism gave a large part of the population access to consumer goods (refrigerators, washing machines, cars). Technical innovations like the assembly line - in Henry Fords Automobile factories ran the world's first assembly line - enabled the mass production of standardized items. Before the war, however, capitalism, in contrast to socialism, experienced its deepest crisis: the great depression. An upswing that began in 1925 was ended abruptly by the stock market crash on Black Friday in 1929. The consequence: banking crisis, collapse of the world financial system, decline in production and high unemployment. Schumpeter was not particularly surprised by this crisis, as it was explicitly provided for in his previously published economic cycle model. In Germany, the National Socialists took power a little later and tried to curb the high unemployment with state control measures (motorway construction and armaments industry). In the US, President seized Franklin D. Roosevelt Control measures for the paralyzing economy, which have been summarized under the catchphrase "New Deal".


The preparatory work for Capitalism, socialism and democracy go back to 1927. At that time, Schumpeter gave a lecture in London in which he announced his new, pessimistic view of capitalism for the first time. After moving to the USA while he was a professor at Harvard, he felt isolated from his colleagues. One reason for this was certainly his rejection of Roosevelt's policies, but also his frustration that John Maynard Keynes had forestalled him in his attempt to publish a groundbreaking theory. As a result, Schumpeter's works, if they were published at all, were not viewed as particularly topical. In June 1939 he made the decision to write a small book with six essays, which he himself called “relaxation” after his major project, the Economic development theory, looked at. But it wasn't as simple as Schumpeter imagined this little book to be. For two and a half years he immersed himself in the work on the book, which was published in 1942 as Capitalism, Socialism and Democracy should appear in English. The fact that this most famous of his works became a swan song to capitalism is often attributed to the fact that Schumpeter wrote it during a dark phase of his life: During the Second World War he suffered from depression.

Impact history

While John Maynard Keynes with his General theory (1936) and his analysis of the business cycle celebrated true triumphs, initially hardly anyone was interested in Schumpeters Capitalism, socialism and democracy. He had written the book in English. Due to the war, the German version appeared only after a considerable delay in 1946. Translations into Japanese, Spanish and Italian were made in the 1950s; they were still being prepared by Schumpeter shortly before his death in 1950, as were the second and third American editions. Schumpeter's theory was already heavily criticized after it was first published. The author was very sensitive to the ungracious reviews. In the forewords of the other editions and in later publications, he tried to clarify his lines of thought and to clear up misunderstandings. It was not until the 1980s, when Keynes’s theories went out of fashion and - ironically, the real socialism was on the floor - that Schumpeter's book became keenly interested: Comments appeared, congresses were held, new editions were published. By 1993 a total of 20 translations and seven German editions had appeared. Because of his slogan of “creative destruction”, Schumpeter is often seen as an ardent defender of capitalism and not as an actual doubter of this system.