Reference no: EM131379365

One of the premiere economists of the last century was a Harvard professor named Joseph Schumpeter, who wrote a treatise entitled Capitalism, Socialism, and Democracy in which he foretold the ultimate end of the capitalist economic system.

Oddly, Schumpeter was himself a confirmed capitalist, so when he predicted the end of the capitalist economy, it was without joy or pleasure.

In fact, it was more of a warning than a prediction, offered with the hope that something could be done to divert the path away from destruction. Schumpeter's affection for capitalism is described in the following passage, penned by Allen M. Sievers in his study, Revolution, Evolution, and the Economic Order: The capitalist, for one thing, wishes to provide for his family, and indeed capitalism is really not individualcentered but family-centered.

Further, the capitalist shares in lesser degree the romantic adventuresomeness which characterized feudal society, or there would be no risky innovation or entrepreneurial exploit. Capitalism also requires a kind of symbiosis with the aristocracy and other non-bourgeois elements to run the state, and this depends on a kind of loyalty by these classes to capitalism. The masses must also be awed by the glamor or prestige of capitalist success in order to submit to the discipline necessary for business production.

The business classes themselves must have an esprit de corps and a devotion to their way of life, as well as a code of ethics if the contract and property system is to work. We might say in sum, that Schumpeter believed that capitalist civilization is based on a rationalism qualified just a bit by other human qualities.

Self-Evident Questions
1. Which of the business organizations described in this chapter is best suited for realizing Sievers's capitalistic ideals? Explain.

2. According to Sievers , capitalism requires an integration of the aristocratic and the working class elements of society. Is such an integration promoted or hampered by the partnership form of doing business? Explain.

3. Take another look at the Opening Case at the beginning of this chapter. In that case, a working class clerk manages to become a member of the capitalistic aristocracy. Does a case like Robinson v. Kleinfield disprove Sievers's theory? Why or why not?

4. Do the alternate forms of partnership such as the limited partnership structure prove or disprove Sievers's theory? Explain.

5. Recall that Schumpeter, like F.A. Hayek, opposes governmental interference in the economy. Does this not mean that the sole proprietorship would be the perfect Schumpeter business? Why or why not?