Schumpeter, intellectuals and capitalism By Alberto Mingardi

Kevin Hassett recently debated Thomas Piketty on his book, “Capital in the 21st Century”. After presenting some interesting points on Piketty’s work, Hassett reminds his audience, somehow ironically, that not just Marx, but also Joseph Schumpeter thought that capitalism was going to die.

As he wrote in his voice “Capitalism” for the Encyclopaedia Britannica, Schumpeter was convinced that “the capitalist process by its very success tends to raise the economic and political positions of groups that are hostile to it.” The reference here is to the anti-capitalist attitude, which is very persistent among intellectuals. This might seem a rather inappropriate point to raise discussing Piketty’s book but, if I understand him correctly, Hassett was actually thinking about the overwhelmingly enthusiastic reception of the book by its reviewers. The great enthusiasm that many intellectuals showed for Piketty’s work may suggest that they were somehow looking for a new masterpiece arguing for a similar argument. It is easier to be impressed with somebody’s scholarship, when her findings confirm our biases.

Many authors have asked themselves “why the intellectuals oppose capitalism”: from Ludwig von Mises to Robert Nozick. Schumpeter’s treatment of this subject is very interesting, because it is so intertwined with his wider view of the way in which a modern industrial society developed. In a chapter of “Capitalism, Socialism and Democracy” aptly entitled “Growing Hostility,” he explains how “the bourgeois fortress” became “politically defenseless.”

He sees the capitalist order proceeding from a “rationalizing attitude”–“an attitude which spurns allegiance to extra-rational values.” Modern capitalism is “the propelling force of the rationalizing of human behavior,” but this critical mind doesn’t stop at the gates of modern factories, but also wages war to the very system it should hold dear, breeding egalitarian challenges to the legitimacy of capitalist inequality.

The argument in favor of capitalism, for Schumpeter, is a difficult one, that the masses naturally overlook: “any pro-capitalist argument must rest on long-run considerations. In the short run, it is profits and inefficiencies that dominate the picture.”

And yet, to be sure, “neither the opportunity of attack nor real or fancied grievances are in themselves sufficient to produce, however strongly they may favor, the emergence of active hostility against a social order. For such an atmosphere to develop it is necessary that there be groups to whose interest is to work up and organize resentment, to voice it and to lead it.”

Enter the intellectual.

For Schumpeter, intellectuals as we know them are a creation of a capitalist society. True, we always had “people who wield the power of the spoken and the written word”: but they were few in number, and their words could be accessed, debated and learned by a tiny fraction of the population. Capitalism nurtures intellectuals: on the one hand, a capitalist society is less keen to curb freedom of speech and discussion than any previous set of social institutions. On the other, innovation multiplies the means for the public debate: books become increasingly cheaper, newspapers mushroom everywhere, then of course you had radio and tv, and today social networks. Also, “one of the most important features of the later stages of capitalist civilization is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education.”

Yet this apparatus produces more intellectuals than could thrive economically, and this creates resentment. Schumpeter didn’t think that hostility against capitalism could be considered just a feature of the intellectuals as a social group: but assigned them a particular role. Modern capitalism creates opponents of a different kind, especially among those to whom the long-term benefits of the market system are less apparent, namely workers. But they yearn for leaders and narratives. Intellectuals do not often enter politics or labour unions directly, but “they staff political bureaus, write party pamphlets and speeches, act as secretaries and advisers” etc. “In doing these things they to some extent impress their mentality on almost everything that is being done.”

I’ve always been fascinated by reflections on the intellectual’s attitude towards the market system. For one thing, this is not a peripheral theme–but rather a central one–for classical liberal authors. It is pretty clear, for example, that Hayek considered this a question of not trivial importance.

Schumpeter’s reflection in this field may sound a bit over-deterministic, but it is full of insights, as it brings together different elements: from the “rationalizing” attitude of a modern, capitalist society, to the resentment that people who were highly successful in schools nurture as they face the labour market. I hope you’ll forgive me if I did not do justice to Schumpeter, painting a picture with too big a brush.

But let’s go back to Hassett. An interesting question is what we shall deduce from all of this. I suppose one extreme answer would be that it is basically useless to engage in a debate with anti-capitalist intellectuals, as they are drawn to their positions by forces too powerful to be countervailed by a good argument. And yet Hassett debated Piketty.

I suppose a less extreme inference from Schumpeter’s analysis would be that yes, there are very strong reasons why intellectuals may oppose capitalism. They are deeply ingrained in our society, and thus this makes any attempt to change their mind particularly difficult. But this doesn’t really make it a worthless effort.