[In Capitalism, Socialism and Democracy (1942), Joseph Schumpeter] suggested [that] capitalism’s greatest strength — its propensity for “creative destruction” — is also a source of weakness. Disruption may be the process that clears out the obsolescent and fosters the advent of the new, but precisely for that reason it can never be universally loved. Second, capitalism itself tends toward oligopoly, not perfect competition. The more concentrated economic power becomes, the harder it is to legitimize the system, especially in America, where “big business” tends to get confused with “monopoly.” Third, capitalism “creates, educates and subsidizes a vested interest in social unrest” — namely, intellectuals. (Here was the influence of Harvard; Schumpeter knew whereof he spoke.) Finally, Schumpeter noted, socialism is politically irresistible to bureaucrats and democratic politicians.
The idea that socialism would ultimately prevail over capitalism was quite a widespread view — especially in Cambridge, Massachusetts. It persisted throughout the Cold War. “The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive,” wrote Paul Samuelson, Schumpeter’s pupil, in the 1961 edition of his economics textbook — a sentence that still appeared in the 1989 edition. In successive editions, Samuelson’s hugely influential book carried a chart projecting that the gross national product of the Soviet Union would exceed that of the United States at some point between 1984 and 1997. The 1967 edition suggested that the great overtaking could happen as early as 1977. By the 1980 edition, the timeframe for this great overtaking had been moved forward to 2002–12. The graph was quietly dropped after the 1980 edition.
Niall Ferguson, “Capitalism, Socialism and Nationalism: Lessons from History”, 2020-02.
January 15, 2021
QotD: Capitalism and socialism, viewed from Harvard in 1942
Filed under: Books, Economics, History, Quotations, Russia, USA — Tags: Socialism, SovietUnion, University — Nicholas @ 01:00
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