Can Socialism Work? Of Course it Can’t!

In Capitalism, Socialism and Democracy Schumpeter explains why capitalism will most likely be replaced by a socialist economy and why this socialist economy seems to him to be perfectly sustainable and viable. Many commentators have noted the irony in Schumpeter’s tone, particularly in the section on the performance of socialism. In this article, we show, by mobilizing concepts that are at the heart of Schumpeterian dynamics of capitalism, why he could not seriously consider that socialism could outperform capitalism in terms of economic development. We argue that Schumpeter’s ontology of the entrepreneur and the emergence of pure novelty makes it absolutely impossible to support the idea that a bureaucracy (socialist or otherwise), in which all decisions are routinized and rationalized, can reproduce the performance of the individual and energetic entrepreneur. Our analysis suggests that, for Schumpeter, socialism may possibly outperform degenerate/fettered capitalism at the end of the cycle, but it is absolutely not compatible with a regime of economic development, which only entrepreneurial capitalism could continuously generate.