Capitalism, Socialism and Democracy

Schumpeter examines whether capitalism can survive. He states that he does not believe that it will. However, this belief is based on observing current trends; as these trends might change, his prognosis is not inevitable. He believes that socialism is the socioeconomic system most likely to replace capitalism. He stresses that this does not mean socialism is ethically superior to capitalism.

Schumpeter argues that output, or the ability to produce goods and services, is one of the best ways of assessing an economic system. Capitalist economies, based on an average growth rate of 1.7% from 1928 onwards, would almost treble by 1978. This does not even take into account new products and commodities which enhance people’s quality of life, such as cars. Indeed, as Schumpeter points out, “there are no doubt some things available to the modern workman that Louis XIV himself would have been delighted to have yet was unable to” (67).

Schumpeter acknowledges that unemployment is a persistent problem with capitalism. However, output growth can mitigate this to some degree and enable societies to financially assist the unemployed.