38 pages 1 hour read

Joseph Alois Schumpeter

Capitalism, Socialism and Democracy

Nonfiction | Book | Adult | Published in 1942

A 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 3Chapter Summaries & Analyses

Part 3: “Can Socialism Work?”

Part 3, Chapter 15 Summary: “Clearing Decks”

Schumpeter believes that socialism will follow from capitalism’s demise. Capitalism tends toward increasing bureaucratic and technical control of industry. Therefore, the economic organization of capitalism leads toward socialism. Socialism is defined here as a socioeconomic system whereby “the control over means of production and over production itself is vested with a central authority” and with the public (167). This is in contrast to capitalism, where the means of production is in the hands of private individuals and groups.

Schumpeter argues that socialism is an economic doctrine. Socialists believe that the realization of social goods is predicated on a transformation of economic structures. In other words, they believe that a new culture and new values will emerge from economic change. However, socialists are divided on what these new values will amount to.

Part 3, Chapter 16 Summary: “The Socialist Blueprint”

Schumpeter asks whether socialism would work on a practical and economic level. Namely, would it allocate resources efficiently like capitalism?

One argument suggests that it would not: Optimal production and consumption requires a price mechanism. And without consumer demand, as found in capitalist markets, there could be no such mechanism. How would the socialist central planner know what is optimal to produce without price signals? Schumpeter argues that this problem could be overcome in a socialist economy by creating a system of “credits” or “premiums” for buying and selling.

blurred text
blurred text
blurred text
blurred text
blurred text
blurred text
blurred text
blurred text
Unlock IconUnlock all 38 pages of this Study Guide
Plus, gain access to 8,600+ more expert-written Study Guides.
Including features:
+ Mobile App
+ Printable PDF
+ Literary AI Tools