Capitalism, socialism and democracy: A summary and some quotes 

The book was written almost eighty years ago by Schumpeter. His ideas are much easier to understand today as the reality evolves closer toward his prophecies. Here is a summary.

With the breakdown of family value, parenthood becomes increasingly a burden and sacrifice. More and more couples have no children or only one child. With fewer offspring, a person’s time horizon shortens to roughly one’s own life expectation. People are unwilling to work and save for the future. When under direct attack, they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideas and interests. Hence capitalism can not survive.

Geniuses and the prophets do not usually excel in professional learning, and their originality, if any, is often due to precisely to the fact that they do not. (P. 21)


On Creative Destruction

The opening up of the new markets ... illustrate the same process of industrial mutation— if I may use that biological term— that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.  ... This fact bears upon our problem in two ways. 

First, since we are dealing with a process whose every element takes considerable time in revealing its true features and ultimate effects, there is no point in appraising the performance of that process ex visu of a given point of time, as it unfolds through decades or centuries.  A system — any system, economic or other— that at every given point of time fully utilizes its possibilities to the best advantage may yet in the long run be inferior to system that does no at no given point of time, because the latter’s failure to do so may be a condition for the level or speed of long run performance. 

Second, since we are dealing with an organic process, analysis of what happens in any particular part of it — say, in an individual concern or industry — may indeed clarify details of mechanism but is inconclusive beyond that. Evert piece of business strategy acquires its true significance only against the background of that process and within the situation created by it. It must be seen in its role in the perennial gale of creative destruction; it cannot be understood irrespective of it or, in fact, on the hypothesis that there is a perennial lull. (P 84)

On amateur and academic researchers

It is highly significant that modern mathematico-experimental science developed, in the fifteenth, sixteenth and seventeenth centuries, not only along with the social process referred to as the Rise of Capitalism, but also outside of the fortress of scholastic thought and in the face of its contemptuous hostility. In the fifteenth century mathematics was mainly concerned with questions of commercial arithmetics and the problems of the architect. The utilitarian mechanical device, invented by men of the craftsman type, stood at the source of modern physics. The rugged individualism of Galileo was the individualism of the rising capitalist class. The surgeon began to rise above the midwife and the barber. The artist who at the same time was an engineer and an entrepreneur— the type immortalized by such men as Vinci ... By cursing it all, scholastic professors in the Italian universities showed more sense than we give them credit for. The trouble was not with individual unorthodox propositions. Any decent schoolman could be trusted to twist his texts so as to fit the Copernican system.  But those professors quite rightly sensed the spirit behind such exploits — the spirit of rational individualism, the spirit generated by rising capitalism. (P 124)

Comments: Ideas from the outsiders are suppressed not because they are hard to understand. Rather they are viewed as challenges to the dominant institutions by individuals from periphery or outside. 

For more, check out a short video by James Galbraith.

https://m.youtube.com/watch?v=1yOdicriZ4k

Chap 14.  Decomposition 

To men and women in modern capitalist societies, family life and parenthood mean less than they meant before and hence are less powerful moulders of their behaviors ... The   proportion of marriages that produce no children or only one child ... might come as nearly as we can hope to come to indicating its numerical importance. 

As soon as they introduce into their private life a sort of inarticulate system of cost accounting — they cannot fail to become aware of the heavy personal sacrifices that family ties and especially parenthood entails under modern conditions and of the fact that at the same time ... children cease to be economic assets. (P 157)

Family and family home used to be the mainspring of the typical bourgeois kind of profit motive. Economists have not always given due weight to this fact. When we look more closely at their idea of the self interest of entrepreneurs and capitalists we cannot fail to discover that the results it was supposed to produce are really not at all what one would expect from the rational self interest of the detached individual or childless couple who no longer look at the world through the windows of a family home. Consciously or unconsciously they analyzed the behavior of the man whose views and motives are shaped by such a home and who means to work and to save primarily for wife and children. As soon as these fade out from the moral vision of the businessman, we have a different kind of homo oeconomicus before us who care for different things and act in different ways. For him and from the standpoint of his individualistic utilitarianism, the behavior of that old type would in fact be completely irrational. He loses the only type of romance and heroism that is left in the unromantic and unheroic civilization of capitalism — “Seafaring is necessary, living is not necessary”. And he loses the capitalist ethics that enjoins working for the future irrespective of whether or not one is going to harvest the crop oneself. (P 160)

With the decline of the driving power suppled by the family motive, the businessman’s time horizon shrinks, roughly, to his life expectation. ... He drifts into an anti saving frame of mind and accepts with an increasing readiness anti saving theories that are indicative of a short run philosophy.

... Perhaps the most striking feature of the picture is the extent to which the bourgeoisie, besides educating its own enemies, allows itself in turn to be educated by them. It absorbs the slogans of current radicalism and seems willing to undergo a proces of conversion to a creed hostile to its own very existence. ...

This is verified by the very characteristic manner in which particularly capitalist interests and the bourgeoisie as a whole behave when facing direct attack. They talk and plead ... they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideas and interests. (P. 161)