Can Capitalism Survive?
Sumner T. Bohee
[Reprinted in the Henry George News, June,
THE downfall of capitalism and the profit system predicted by Karl
Marx does not seem imminent today. However the demise of free
enterprise is foreseen by Dr. Joseph Schumpeter of Harvard University,
who, in his book entitled Capitalism, Socialism and Democracy
states that he does not think capitalism can survive.
The well known economist was an admirer of the capitalist system and
a stern critic of socialism, which he envisaged as being inevitable.
Paradoxically, he sees capitalism doomed by its successes rather than
its failures. To it he frankly attributes a high living standard,
increase in real incomes, and increased shares to lower income groups.
However, he sees the capitalist class lacking the ability to defend
its own interests and offering only feeble resistance to collectivist
and authoritarian concepts.
Dr. Schumpeter points to the dynamic character of capitalism, stating
that changes, innovations and improvements are the unique elements
instituted by the entrepreneur. Being an originator of new ideas and
also of new risks for investment specialists, the entrepreneur clears
the way for newer ventures. This he calls a process of creative
destruction. The march of progress which began about 1900 is shown to
be in danger, owing to certain factors which tend to limit investment
opportunities, thereby causing the shrinkage of profits. One of these
restrictive factors is the government's invasion of finance, and the
consequent tendency to usurp private investment operations for public
Emphasis is placed also on the effect of automation and
mechanization, not only in the industrial field, but in corporation
organization. Some methods of production have reached a point where
they seem to defy improvement in operations which are increasingly
collective. Personality and individuality count for less and less as
the committee and conference methods increase in favor. Impersonal
operation is more and more superseding individual importance.
The Marginal Drift
If capitalistic operation becomes progressively mechanistic, the
material gains of the investment class will eventually be reduced to
the level of executive salaries. Investment opportunities will
diminish and profits will approach a marginal limit. Increase of large
scale production and operation, and the gradual elimination of small
business firms is a trend toward a private bureaucracy.
Even more significant is the change in attitude towards capitalist
operations and the profit system. The one-time proud aristocrat, as
clearly delineated had the ability and strength to defend his class
interests. The theory of divine rights gave glamor and prestige to the
sovereign by which he commanded respect and submission, not only in
his own, but in all classes.
The industrialist and financier, though representatives of power and
wealth in an industrial society, have never been able to inspire
similar emotions or to command prestige for their class. Economic
leadership does not adapt itself to political rule or the leadership
of nations. The capitalist can hire and fire but he cannot inspire
loyalty. Cost accounting is termed by the author "dull and
Considering the effects of competition, the economic advantages
inherent in large-scale production have undermined the position of the
small producer. Justified or not, the apparent decline of competition
gives rise to an atmosphere of political hostility. Large scale
production has brought higher standards of living which are taken for
granted, but economic insecurity is a modern economic threat, and a
source of social unrest.
Rational thinking in an individualistic society develops critical
attitudes, as we have seen. These attitudes, when directed against the
capitalistic system, cannot be repressed, seeing that they represent
the right of freedom of expression. Universal education has expanded
the white collar class to a point of marginal return. Much of today's
employment is found to be in sub-standard occupations which are below
the wage rates of industrial workers.
External changes in our social patterns are, Dr. Schumpeter thinks,
affected by the current economic system. The attitude toward family
life, for example, appears to be undergoing a revision. Instead of
looking to parenthood, an increasing number of individuals lean toward
a "cost accounting philosophy." Are the responsibilities
worth while and should one not choose primarily those material goods
which can be enjoyed in a period of life expectancy - this is a
popular query. Old age is regarded as a social liability, void of
What have these considerations to do with the profit system and
investment? The author anticipates the decline of investment in
durable types of consumer capital and thus sees further evaporation of
opportunity. The savings motivation based upon the expectation of
family, a home and children, he believes, is being weakened. In the
absence of this basic urge, consumer goods which give immediate
enjoyment take preference over goods of greater durability and less
direct satisfaction. Widespread anti-saving attitudes develop and spur
a short-run philosophy of living.
Can capitalism survive under such disintegrating influences? Dr.
Schumpeter says "I do not think so."