Tuesday, December 29, 2020

Joseph Schumpeter: "Capitalism Stands Its Trial before Judges Who Have the Sentence of Death in their Pockets"

In my experience, relatively few of those who pretend to adjudicate between capitalism and socialism are interested weighing the evidence: instead, most of these discussions quickly turn into denunciations of the flaws of capitalism, apparently with the assumption that any un-capitalism would inevitably be an improvement. Joseph Schumpeter, in his classic 1943 book Capitalism, Socialism, and Democracy coined a memorable phrase to describe this prejudgement, when he wrote: 

"[C]apitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear ..."

It's part of a passage that includes another of my favorite acerbic Schumpeter comments: ""[P]ractically every nonsense that has ever been said about capitalism has been championed by some professed economist."

Here's the broader context for these comments, from pp. 143-145.
1. The capitalist process, so we have seen, eventually decreases the importance of the function by which the capitalist class lives. We have also seen that it tends to wear away protective strata, to break down its own defenses, to disperse the garrisons of its entrenchments. And we have finally seen that capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own; the bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole scheme of bourgeois values.

The bourgeois fortress thus becomes politically defenseless. Defenseless fortresses invite aggression especially if there is rich booty in them. Aggressors will work themselves up into a state of rationalizing hostility —aggressors always do. No doubt it is possible, for a time, to buy them off. But this last resource fails as soon as they discover that they can have all. ...

2. But, so it might well be asked—in fact, so it is being asked in na├»ve bewilderment by many an industrialist who honestly feels he is doing his duty by all classes of society—why should the capitalist order need any protection by extra-capitalist powers or extra-rational loyalties? Can it not come out of the trial with flying colors? Does not our own previous argument sufficiently show that it has plenty of utilitarian credentials to present? Cannot a perfectly good case be made out for it? And those industrialists will assuredly not fail to point out that a sensible workman, in weighing the pro’s and con’s of his contract with, say, one of the big steel or automobile concerns, might well come to the conclusion that, everything considered, he is not doing so badly and that the advantages of this bargain are not all on one side. Yes—certainly, only all that is quite irrelevant.

For, first, it is an error to believe that political attack arises primarily from grievance and that it can be turned by justification. Political criticism cannot be met effectively by rational argument. ... Just as the call for utilitarian credentials has never been addressed to kings, lords and popes in a judicial frame of mind that would accept the possibility of a satisfactory answer, so capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear ...

Second, the success of the indictment becomes quite understandable as soon as we realize what acceptance of the case for capitalism would imply. That case, were it even much stronger than it actually is, could never be made simple. People at large would have to be possessed of an insight and a power of analysis which are altogether beyond them. Why, practically every nonsense that has ever been said about capitalism has been championed by some professed economist. But even if this is disregarded, rational recognition of the economic performance of capitalism and of the hopes it holds out for the future would require an almost impossible moral feat by the have-not. That performance stands out only if we take a long-run view; any pro-capitalist argument must rest on long-run considerations. In the short run, it is profits and inefficiencies that dominate the picture. ... In order to identify himself with the capitalist system, the unemployed of today would have completely to forget his personal fate and the politician of today his personal ambition. .... Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.