An analysis of the contemporary based on the ideas of J.A. Schumpeter

Please cite the paper as:
Leonardo Andriola, (2024), An analysis of the contemporary based on the ideas of J.A. Schumpeter, World Economics Association (WEA) Conferences, No. 1 2024, Capitalism, Socialism and Democracy 80 years later, Looking at capitalism today in light of its past and possible future


Analyzing the dynamics of entrepreneurial capitalism, Schumpeter highlights the incessant process of “Creative Destruction” in all its facets. A process that is characterized, in its creative genesis and in its bankruptcy genesis, by the symbiotic union of capital accumulation with production. In this context, as Schumpeter underlined, disciplines such as psychology, sociology and history enter fully, together with economics and, since the last half century, also with ecology. But even in the Marxist argumentation sociology and economics permeate each other; in intention, and up to a certain point also in practice, they are one and the same 1. These disciplines together are articulated in such a way to make the system unmanageable and dynamic: this is why a scholar can only delude himself that a capitalist state can be stationary.

Karl Marx in the chapter ‘Simple reproduction’ of ‘Capital’ underlines that the stationary state occurs when the system’s production is always the same and has the task of restoring subsistence and the exhausted means of production consumed in the previous period 2. Therefore, when the production system is such as to facilitate the accumulation of capital by focusing on the creation of new needs and new slavery through innovations with new technologies, new machinery and new markets, then we are in full capitalist system 3.

This process of economic and social development based on continuous exogenous innovations, such as the production system described above, and endogenous ones, when the entrepreneur himself innovates, is defined, by Joseph Alois Schumpeter, as “Creative Destruction”.

The process of creative destruction involves not only the system as such, but also characterizes the relationship with Nature and its resources, and here it presents itself only with its destructive power, it cannibalizes the riches of nature and does not provide to replenish them; it involves human and social values, destroying them; new knowledge is acquired unworthily; it destroys the entire world of values and bursts into the collective imagination as a representation of widespread well- being, but actually it leads to inequalities and dissatisfaction.

We write “creative destruction” and read change, involution, extreme wealth and poverty.

Schumpeter was the proponent of analyzes on the systematic role of innovation in modern economies. His distinction between invention and innovation is famous: a distinction that highlights how invention is the creation of new knowledge regardless of its actual use, while innovation means the actual use of knowledge to produce ‘things differently’ in the economic field , according to his well- known expression 4. For example, regarding writing, the personal computer is the invention, everything that is produced is innovation compared to what was produced by the typewriter, this represents a total innovation, since it represents a break with the past transforming the existing, while when the production process is speeded up or a certain product is updated, making it more attractive than the previous one, that is an improving innovation.

Knowledge, but also the interdependence of economic sectors are an integral part of technological innovation process, which inexorably aims at the realization of profit tout court, where desires, transformed into needs, must necessarily remain unsatisfied so that there is always the boost to produce new products, thanks to continuous innovations 5.

Capitalism, therefore, always needs to innovate, to destroy the old by making it obsolete to create new products and new markets, and new slavery, without worrying about the infinite consumption of Mother Earth’s exhaustible natural resources, the infamous ‘linear production process’.

The leviathan force of capitalism, which absorbs the essence of human intelligence and then enters the conscience and transforms cognitive impoverishment into a representation of widespread well- being, has flooded into the collective imagination.

According to Schumpeter, economic changes due to wars or other exogenous social or demographic factors are less relevant than economic changes due to the impulse deriving from new consumers, new products, new markets, new methods of production or transport and new forms of industrial organization, these are the factors that determine creative destruction 6, 7: the renewal process is immanent to the capitalist production process.

The analysis of creative destruction ultimately allows us to understand how the capitalist order has a tendency towards self-destruction, through self-engulfment, also assuming the tendency to delay progress, and it is for this reason, according to Schumpeter, that objective and subjective, economic and extraeconomic factors contribute to the destruction of capitalism and the birth of a socialist civilization 8. About this, I postpone the argument in the text of the report, with some reference to the effects on the environment.

A society oriented towards socialism presupposes a democratically socialist state that is able to satisfy the entire community in its primary (static) and secondary (dynamic) needs structurally and in a socially fair and ecologically sustainable way in order not to deprive future generations, ergo a society strongly critical towards capitalism.

The task of democracy is to create equality both in terms of law and in terms of politics, otherwise there is a risk a form of financial democracy, otherwise called “authoritarian democracy”, which may eliminate the social welfare of our civilization.

Capitalism is unfit to govern, because it is not able of ensuring an existence for its slave within his slavery, because it cannot help him and lets him sink into such a state, that it has to feed him, instead of being fed by him9.

From “The New York Times” of 14 October 2013.

We are entering a world divided not only between rich and poor countries, but also between the countries that do nothing to reduce the internal economic inequality and those that do something. Some countries will succeed in achieving shared prosperity, others will support to an absurd inequality. In divided and unequal societies, the rich will retreat to gated communities, almost completely separated from the poor, whose lives will be incomprehensible to them, and vice versa,” a statement by Nobel Prize Joseph Eugene Stiglitz.

Unfortunately, democracy and capitalism cannot coexist, they are antithetical: neoliberal hegemony in an unregulated globalization has not been able to reconcile economic growth and social cohesion; for this reason, according to Schumpeter’s expectations, we should have moved towards socialism.

1)  Schumpeter,A.Joseph.1994.Capitalismo,socialismoedemocrazia.Pioltello(MI):Grafica Pioltello, p. 43.

2)  Marx,Karl.1980.IlCapitale.Vol.I.Rome:Ed.Riuniti,pp.621-623.

3)  Marx,Karl.1980.IlCapitale,Vol.III.Rome:Ed.Riuniti,pp.932-933.

4)  Coccia, Mario. 2018. “The origins of the economics of innovation: the Rae’s contribution.” JournalofEconomicandSocialThought 5(1):9-28.

5)  Bauman, Zygmunt. 2007. Homo consumens. Gardolo (Trent) Italy: Erickson Ed, p. 50.

6)  Schumpeter, A Joseph. 1976. Capitalism, Socialism and Democracy. New York: Harper, George Allen and Unwin Ed., pp. 82-85.

7)  Schumpeter, A. Joseph. 2010. Il capitalismo può sopravvivere? Milan: Etas, pp. 40 – 41.

8)  Schumpeter,A.Joseph.1994.Capitalismo,socialismoedemocrazia.Pioltello(MI):Grafica Pioltello, p. 156.

9) K. Marx – F. Engels. 1848. Manifesto of the Communist Party, Chapter 1, Bourgeois and Proletarians, “The modern labourer, instead of rising with the process of industry, sinks deeper and deeper below the conditions of existence of his own class”.

3 comment

  • Arturo Hermann says:

    I agree with your interesting analysis, the challenge is how to move towards a socialist society, by avoiding at the same time the trap of the bureaucratic and centralised “socialism” of former URSS and Eastern European Countries. These systems may have of course achieved important results in poverty alleviation, but had been in the main not a dictatorship of proletariat but rather a dictatorship over the proletariat. And it is in this aspect – namely, not in their socialism but in their lack of real socialism – that lies the profound reason of the failure of real “socialist” countries. I tend to think that socialism is intrinsically linked to democracy: in a sense, socialism can be considered as the transition from the formal bourgeois democracy to a substantial democracy. But, how to realise all this? As remarked by Marx, Engels and Lenin among others, socialism is a difficult process that can only be realised gradually. A central step for attaining a real socialist economy is to improve the real participation of citizens to collective life. This implies a major psychological shift – that can be helped by considering important contributions of social psychology and psychoanalysis – towards a situation where citizens, by overcoming their psychological dependence on opinion leaders of various kinds, can actually play an active role in public decision making.

  • Leonardo Andriola says:

    Thanks for the comment, Dr. Hermann. First of all, I would like to underline that the trap of the USSR centralized socialism could no longer exist, just think of the achieved changes, about lifestyles, consumption and producing for the sake of producing today. Furthermore, the material and immaterial production of value no longer takes place only in the workplace but throughout daily life, and, as you stated, it is a true dictatorship over the proletariat, a true authoritarian democracy: after the dollar and oil crisis, since the second half of the 1970s we have passed from the mass worker to the social worker, the worker’s activities passed from the factory to society, exploitation intensified exploitation.
    About the transition from formal bourgeois democracy to substantial democracy, towards socialism, the psychological change consists in the transformation from the idea of individualism to the idea of subjectivity, since it is in subjectivity that community and socialization are realized.
    But five lines are not enough to describe this situation.

  • Arturo Hermann says:

    I agree with you. It would be interesting to further analyse what factors and theories can help promote that subjectivity.

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