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Abstract

In Capitalism, Socialism and Democracy, Joseph A. Schumpeter asked his famous question on the future of capitalism: «Can Capitalism Survive?» (Schumpeter, 2014, p. 106). In my work I will show that Schumpeter’s question is still relevant today, although for reasons other than those he considered. To explain this statement, it should be recalled that, in the vision of the great Czech economist, capitalism is definitely dynamic: «The essential point to grasp», he wrote, «is that in dealing with capitalism we are dealing with an evolutionary process», «and not only never is but never can be stationary» (Schumpeter, 2014, p. 138).

According to Schumpeter, that fundamental character of capitalism depends upon several factors, but «the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new forms of industrial organization that capitalist enterprise creates» (ibid.). According to Schumpeter (and Marx), at the end of its evolution, capitalism will collapse for internal contradictions: it has an «inherent … tendency toward self-destruction», so the «decomposition of capitalistic society» is «inevitable» (Schumpeter, 2014, pp. 14, 261).

Against this background, we consider the following statements:

a)  if capitalism «never can be stationary», it needs the continue accumulation and the growth of production and consumption, i.e. the GDP growth (or “economic growth”);

b)  GDP growth has become the main economic goal: to quote Schumpeter, «to many economists [is] the postwar problem par excellence» is «how to secure adequate consumption» (Schumpeter, 2014, p. 609)¹;

c)  economic growth needs an increasing amount of natural resources (land, minerals, water) and is responsible for higher levels of pollution, climate change and depletion of natural resources;

d) given the points above, a question arises: “Is capitalism compatible with the environmental sustainability?”

Economists have different positions on the above mentioned points. For ease of reference those positions can be divided into two main groups.

The first group is composed by “neoclassical mainstream economists” or “optimists”. They agree with Schumpeter on the evolutionary nature of capitalism (point a)) and think that economic growth, as measured by GDP, is the ultimate goal of the economic life (point b)).

Also, many of these economists do not deem point c) completely true. Some distinguished scholars, in the recent past, denied or underestimated the ecological issue, and in any case they thought that it could be overcome by adopting the classic remedies provided by the orthodox economic theory (internalization of externalities). Nowadays, they are generally more concerned; however, they believe that technological progress allows (or will allow) the production of many goods and services with less pollution and less resources (the so called “decoupling”). And to achieve technological progress the growth of GDP is considered crucial. Consequently, the answer of the neoclassical mainstream economists to the question under c) is “yes”: they consider capitalism, as we know it, compatible with the environmental sustainability.

In conclusion, the economists of this group are not of the opinion that capitalism has an «inherent tendency toward self-destruction», neither for ecological reasons nor for the reasons expressed by Schumpeter. On the contrary, in their view, capitalism can and must keep on the current path without substantial changes; at most, someone advocates innovations to achieve a “green” or “smart” growth.

The economists of the second group – which we can define as “ecological economists”, or “pessimists” – have an entirely different position. Leaving aside point a) for now, they consider negatively point b), agreeing with the statement in point c). In fact, they believe that extensive deforestation, increasing climate change and soil, air and water pollution are such serious and widespread problems that the economy cannot continue the «evolutionary process» undertaken since the World War II. On the basis of the observation that the world has physical limits, they think that an exponential growth, in the future decades, is physically impossible. Besides, insisting in the pursuit of growth of production and consumption will cause a collapse not only of the capitalist economic structures, but of the human civilization itself.

Hence, pessimists share with Schumpeter the idea that capitalism has an «inherent tendency toward self-destruction», yet for reasons other than those he considered.

On the remedies to be taken, ecological economists have different views.

A first subgroup believes that the problem of the environmental crisis can be addressed by adopting radical changes in the functioning of capitalist system, without completely overcoming it. The proposed changes are the stationarity of the stock of capital and population (“steady-state economics”), the decrease of GDP and/or wealth, consumption and so on (“degrowth economics”), the radical shift towards “green” technologies and “circular economy”. These changes would modify the functioning of the economy heavily, though without calling into question the private ownership of the means of production. In other words, capitalism would continue to operate, but it would be “forced” into the tracks of environmental sustainability (however, some economists of this subgroup, notably among the “degrowthists”, think that the degrowth would represent an exit from capitalism).

A second subgroup of the ecological economists, known as “eco-socialists”, believes that the ecological problem is mainly due to the way the market operates and that the real cause of the ecological crisis is capitalism itself. Therefore, in order to face the environmental problem adequately, it would be necessary to overcome capitalism by adopting a “green socialism”.

We can assume that, also in the “green version”, socialism would have the same basic characteristics of the “classic socialism” as defined by Schumpeter: «the organization of society in which the means of production are controlled, and the decisions on how and what to produce and on who is to get what, are made by public authority, instead of by privately owned and privately-managed firms» (Schumpeter, 1950, p. 446).

Eco-socialists claim, in agreement with Schumpeter, that a stationary capitalism is not possible (and a fortiori a capitalism in decline on the basis of a decision of policymakers, not as a result of the economic contingent situation), because the raison d’etre of capitalism is the accumulation and the growth (point a) above). They argue that a “steady- state capitalism” or a ”degrowth capitalism” would be systems no longer capitalistic and not socialist, a sort of platonic “goat-stag” that wouldn’t work. Therefore, the only solution for the environmental crisis – if one rejects the optimistic positions of mainstream neoclassical economists – would be the same expected by Schumpeter: the transition to socialism. Naturally, the cause of the capitalism breakdown would be different, namely the impossibility of achieving an adequate environmental protection.

The non-socialist ecological economists counter that, historically, the “real socialism” was aimed at quantitative growth and paid little attention to the environment. This raises considerable doubts on neo-socialism as a suitable alternative. The point is debatable: in fact, Schumpeter wrote that we can think of a socialism quite different from the sovietic one (see Schumpeter, 2014, p. 298).

Non-socialist ecological economists also claim that eco-socialists do not clarify how they mean to achieve socialism: with violent revolution? With a coup without bloodshed? With a democratic decision? This point recalls the problem of the transition to socialism analyzed at length by Schumpeter. He wrote: «The capitalist or any other order of things may evidently break down – or economic and social evolution may outgrow it – and yet the socialist phoenix may fail to rise from the ashes. There may be chaos and […] there are other possibilities» (Schumpeter, 2014, p. 100).

Finally, the non-socialist ecological economists consider socialism not a desirable option because of the cumbersome and excessive bureaucracy it would involve. This aspect of socialism is confirmed by Schumpeter: «I for one cannot visualize, in the conditions of modern society, a socialist organization in any form other than that of a huge and all- embracing bureaucratic apparatus» (Schumpeter, 2014, p. 326). This heavy apparatus, most likely, would be inefficient, perhaps even to protect the environment.

The controversy between the neoclassical “optimistic” economists and the ecological “pessimistic” economists, and the other controversy within the latter group, are not just academic. The debate regards the future of humanity. My work shows that Capitalism, Socialism and Democracy is a useful point of reference to interpret those controversies, thus demonstrating its relevance also in our time.

References

Schumpeter J. A. (2014), Capitalism, Socialism and Democracy, 2nd edition, Sublime Books, Floyd, VA. Orig. publ.: 1946, George Allen & Unwin.

Schumpeter J. A. (1950), The March into Socialism, The American Economic Review, Vol. 40, No. 2, Papers and Proceedings of the Sixty-second Annual Meeting of the American Economic Association (May).

1. The «postwar» period was intended the period after the World War II.

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