1842 – 1924
Joseph Schumpeter was a twentieth-century Moravian-born economist and political scientist who became one of the most influential thinkers on the nature of capitalism and economic development. After serving as the Austrian Minister of Finance and teaching at several European universities, he moved to the United States and spent the latter part of his career at Harvard University. Schumpeter is best remembered for moving the focus of economics away from the static equilibrium models of his contemporaries and toward the dynamic, often chaotic role of the entrepreneur and innovation.
His most famous work was published in 1942. It is in this work that he popularized his most enduring concept: creative destruction. He described this as the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." Schumpeter argued that capitalism cannot be stationary; it is a perennial gale of transformation where new technologies, products, and methods of organization constantly replace and render obsolete the ones that came before.
In the book, Schumpeter also offered a provocative and somewhat pessimistic thesis regarding the future of capitalism. Unlike Karl Marx, who believed capitalism would fail because of its internal contradictions and the uprising of the proletariat, Schumpeter suggested that capitalism might fail because of its own success. He feared that the rise of large, bureaucratic corporations would stifle the very entrepreneurial spirit that drove growth. He also argued that the intellectual class, produced and supported by the wealth of capitalism, would eventually turn against the system's foundations, leading to a gradual shift toward a form of social democracy.
Schumpeter also redefined the role of the entrepreneur. To him, an entrepreneur was not just a business manager or an investor, but an innovator—someone who "gets things done" by introducing new goods, opening new markets, or discovering new sources of supply. This focus on innovation-led growth provided a vital counterpoint to the Keynesian focus on aggregate demand.