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Schumpeter and the Transformation of Capitalism, Liberalism and Democracy1

Published online by Cambridge University Press:  28 March 2014

Richard Bellamy
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Extract

RECENT EVENTS IN EASTERN EUROPE HAVE GENERATED A large degree of uncritical triumphalism amongst certain Western commentators. The collapse of the communist regimes in these countries as the result of their failure to manage their economies and the consequent demand on the part of their citizens for more accountable government, has led many to link the struggle for democracy with a desire for capitalism. Some writers have gone so far as to portray the demise of ‘actually existing socialism’ as the culmination of ‘a universal human evolution in the direction of free societies’ grounded in ‘the empirically undeniable correlation between advancing industrialisation and liberal democracy’.

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Government and Opposition , Volume 26 , Issue 4 , 01 October 1991 , pp. 500 - 519
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Copyright © Government and Opposition Ltd 1991

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References

2 Fukuyama, Francis, ‘The World Against a Family’, The Guardian, 12 09. 1990, p. 19 Google Scholar.

3 Schumpeter, J. A., Capitalism, Socialism and Democracy (1942), fifth ed., London, 1976 Google Scholar.

4 Sophisticated holders of this view accept that capitalism does not provide the sufficient conditions for liberal democracy. For examples of this position from Left and Right respectively, see Bobbio, N., The Future of Democracy, Cambridge, 1987, pp. 25— 6Google Scholar and idem, Which Socialism?, Cambridge, 1987, p. 44; and Friedman, M., Capitalism and Freedom, Chicago, 1962, pp. 10, 15, 19ffGoogle Scholar.

5 Schumpeter regarded democracy as a comparatively recent phenomenon, stemming from the recognition of the moral equality of all human beings. As a result, he does not trace democratic theory back to ancient Greece but to the eighteenth century.

6 e.g. Duncan, G. and Lukes, S., ‘The New Democracy’, Political Studies, XI, 1963, pp. 156–77Google Scholar; Parry, G., Political Elites, London, 1969, p. 149 Google Scholar and Held, D., Models of Democracy, Cambridge, 1987, p. 179 Google Scholar.

7 The books cited by Schumpeter as inspiring his work are Wallas, G., Human Nature in Politics, 3rd ed., London, 1920 Google Scholar, Lippmann, Walter, Public Opinion, New York, 1920 Google Scholar; Pareto, V., Trattato di sociologia generale, 2nd ed., Milan, 1923 Google Scholar and Bon, Gustav Le, La Psychologie des foules, Paris, 1895 Google Scholar. However, he undoubtedly knew and was profoundly influenced by Mosca, G., Elementi di scienza politica, 2nd ed., Bari, 1923 Google Scholar; Schmitt, Carl, Die geistesgeschichtliche Lage des heutigen Parlamentarismus, 2nd ed., Berlin, 1926 Google Scholar and above all Max Weber, ‘Parlament und Regierung im neugeordneten Deutschland’ (1918) and ‘Politik als Beruf (1919) in Gesammelte Politische Schriften, 3rd enlarged ed, Tubingen, 1971, pp. 306–443, 505–60. See Mommsen, Wolfgang, Max Weber and German Politics 1890–1920, Chicago, 1984, pp. 406—7Google Scholar; Beetham, David, Max Weber and the Theory of Modern Politics, 2nd ed, Cambridge, 1985, pp. 111—12Google Scholar and Held, Models of Democracy, Ch. 5, for details of the Schumpeter-Weber connection. I discuss this generation of European liberal theorists in my book Liberalism and Modern Society, Cambridge, forthcoming. I have partially expounded my thesis in my Modem Italian Social Theory, Cambridge, 1987, Chs. 2 — 3 (on Pareto and Mosca); the introduction to Bellamy, Richard (ed), Victorian Liberalism: Nineteenth Century Political Thought and Practice, London, 1990 Google Scholar, and an article ‘From Ethical to Economic Liberalism: The Sociology of Pareto’s Politics’, Economy and Society, 19, 1990, pp. 431–55.

8 James Bryce provided a paradigmatic example of this model in his introduction to the English translation of Ostrogorski’s, M. I. classic study Democracy and the Organisation of Political Parties, 2 vols, London, 1902 Google Scholar. ‘In the ideal democracy’, he wrote, ‘every citizen is intelligent, patriotic, disinterested. His sole wish is to discover the right side in each contested issue, and to fix upon the best man among competing candidates. His common sense, aided by a knowledge of the constitution of his country, enables him to judge wisely between the arguments submitted to him, while his own zeal is sufficient to carry him to the polling booth’ (I. p. xliv). As Schumpeter observes with approval (Capitalism, p. 256 n. 7), Wallas’s sarcasm at Bryce’s and Ostrogorski’s attempts to cling to this ideal against all the evidence they bring to bear against it is entirely appropriate (see Human Nature, pp. 142–8).

9 Schumpeter, Capitalism, p. 250.

10 e.g. Pateman, C., Participation and Democratic Theory, Cambridge, 1970, p. 17 Google Scholar and Held, Models of Democracy, p. 178.

11 Miller, David, ‘The Competitive Model of Democracy’, in Duncan, G. (ed.), Democratic Theory and Practice, Cambridge, 1983, p. 137 Google Scholar.

12 Schumpeter, Capitalism. p. 269.

13 McLean, Iain, ‘Forms of Representation and Systems of Voting’, in Held, D. (ed.). Political Theory Today, Cambridge, 1991, p. 181 Google Scholar.

14 Downs, A., An Economic Theory of Democracy, New York, 1957 Google Scholar. For a comparison between Downs and Schumpeter, see Miller, ‘Competitive Model’.

15 Schumpeter, Capitalism, p. 272.

16 These reflections are inspired by D. Held, ‘Democracy, the Nation State and the Global System’, in Held (ed.), Political Theory Today, pp. 197–235.

17 The challenge of interconnectedness has been a theme of Ghifa Ionescu’s writings, most recently in ‘Political Undercomprehension or the Overload of Political Cognition’, Government and Opposition, Vol. 24, No. 4, 1989, pp. 413–26. Much of what I have to say in this article echoes more generally the arguments of the special issue of this journal on Modem Knowledge and Modem Politics, of which Ionescu’s paper formed a part. However, it will be clear from section three that I am far less pessimistic about the role of democracy in the contemporary world than, with the exception of Geraint Parry, the other participants appear to be.

18 The reference is of course to Schmitt’s analysis of the link between sovereignty and plebiscitary democratic leadership, which to my mind provides the best theoretical framework for understanding the political dimensions of the Thatcher phenomenon. See Schmitt, C., Political Theology: Four Lessons on Sovereignty, trans. Schwab, G., Cambridge, Mass., 1985 Google Scholar.

19 For an argument for what here I must merely assert, see my ‘Liberal Rights and Socialist Goals’, in W. Maihofer and G. Sprenger (eds), Revolution and Human Rights, Archiv Für Rechls-und Socialphilosophie, Beiheft Nr. 41, 1990, pp. 249–64.

20 As Paul Hirst has recently revealed, this approach was developed by the English Pluralists, notably Figgis, Cole and Laski, at the turn of the century. My argument owes much to his exposition and extension of their ideas in Hirst, P. Q. (ed.), The Pluralist Theory of the State, London, 1989 Google Scholar and idem, Representative Democracy and its Limits, Cambridge, 1990. I have also found David Beetham, ‘Beyond Liberal Democracy’, Socialist Register, 1981; Keane, J., Democracy and Civil Society, London, 1988 Google Scholar; and Zolo, D., Complessitd e democrazia: per una ricostruzione della teoria democratica, Turin, 1987 Google Scholar all extremely useful.

21 See Walzer, M., Spheres of Justice, Oxford, 1983 Google Scholar.

22 The contrast I have in mind, of course, is with Rawls’s, J. conception of political justice in his recent writings, e.g. ‘Justice as Fairness: Political not Metaphysical’, Philosophy and Public Affairs, 14, 1985, pp. 223—51Google Scholar. For more detailed criticism, see my Liberalism and Modern Society, ch.6.

23 For detailed arguments to this effect, see Dahl, R. A., A Preface to Economic Democracy, Cambridge, 1985 Google Scholar and Miller, D., Market, State and Community: Theoretical Foundations of Market Socialism, Oxford, 1989 Google Scholar.