Schumpeter's Democracy

Northeastern Political Science Association

Schumpeter's "Democracy": A Critical ViewAuthor(s): Laurence J. O'Toole, Jr.Source: Polity, Vol. 9, No. 4 (Summer, 1977), pp. 446-462Published by: Palgrave Macmillan JournalsStable URL: http://www.jstor.org/stable/3234325 .

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Schumpeter's "Democracy": A Critical View*

Laurence J. O'Toole, Jr. University of Virginia

For decades Schumpeter's Capitalism, Socialism and Democracy has had a notable impact on democratic theorizing. Laurence O'Toole compares Schumpeter's thesis of the delegitimation of capitalism with his views toward the legitimacy of elitist democracy and finds a fundamental contradiction which has invariably been overlooked by theorists. The contradiction goes well beyond the internal inconsistencies of Schum- peter's thought; it is inherent in the profound tensions in modern life between delegitimating tendencies in the political and economic spheres and the continued pull of democratic idealism. O'Toole provides an original and illuminating analysis. Laurence I. O'Toole, Jr., is assistant professor in the Woodrow Wilson Department of Government and Foreign Affairs at the University of Virginia. His research interests include democratic theory, organization theory, and the history and theory of public administration. He is cur- rently writing a book on reform and American public administration.

Joseph A. Schumpeter's influential Capitalism, Socialism and Democ- racy' remains pertinent to political analysis for a number of reasons, inasmuch as his argument has occupied a prominent place during the last few decades in discussions of democratic theory.2

* I gratefully acknowledge the comments provided on earlier versions of this paper by Joseph Wagner, Dwight Waldo, and the readers for Polity.

1. Joseph A. Schumpeter, Capitalism, Socialism and Democracy (New York: Harper and Brothers, 1942, 1947, 1950). The page references in this paper will be those of the Harper Torchbook version of the third edition (1962).

2. The literature is vast and growing. The present essay is not an effort to sup- port or refute the "classical" democratic ideal; it is an analysis of Schumpeter's rejection of a purported "classical theory." In this connection, it is interesting to note that this classical theory may be an "image" of a theory which never really existed. See, on this point, Frank Marini, "Popular Sovereignty But Representative



Laurence J. O'Toole, Jr. 447

Because of the continuing importance of Schumpeter's formulation of democracy, his argument will be examined in the context of his entire treatise. The purpose is to expose a serious internal inconsistency, which casts considerable doubt upon the coherence of his argument and has implications for current discussions of democratic theory in general.

Schumpeter's general ideas of social change form the basis of his prediction of incipient capitalist decline. The "external causes" which he credits with weakening capitalism center around a crisis of legitimacy in an age of rationality. But the necessary condition of "democratic self- control," which he prescribes for his political system, is counteracted by the external causes which undermine capitalism. Thus, Schumpeter's economic analysis critically weakens his political discussion, and this weakness bears not only on the coherence of his theory but also on the future of modern democracy.

I. An Influential "New Theory"

Schumpeter's work has served with extraordinary frequency as a source or as a foil in discussions of democratic theory. The originality and pertinence of his work have been acclaimed by pluralists, realists, and empiricists as well as by opponents of these views.3

Ironically Schumpeter is an economist. And though this volume is

Government: The Other Rousseau," Midwest Journal of Political Science 11, 4 (November 1967): 451-470; and "John Locke and the Revision of Classical Democratic Theory," Western Political Quarterly 22, 1 (March 1969): 5-18. In addition, a book by Carole Pateman has also echoed this theme; see her Par- ticipation and Democratic Theory (Cambridge: Cambridge University Press, 1970). John Plamenatz has argued against the popular notion of the "classical theory" in his Democracy and Illusion: An Examination of Certain Aspects of Modern Democratic Theory (London: Longman, 1973).

3. Among these are Peter Bachrach, The Theory of Democratic Elitism: A Critique (Boston: Little, Brown, 1967), which includes a chapter on "The Pre- cursors: Mosca and Schumpeter"; T. B. Bottomore, Elites and Society (Middle- sex, England: Penguin Books Ltd., 1966); C. B. Macpherson, Democratic Theory: Essays in Retrieval (Oxford: Clarendon Press, 1973), which refers to the "Schum- peter-Dahl Axis" (p. 73); Lane Davis, "The Cost of Realism: Contemporary Restatements of Democracy," Western Political Quarterly 17, 1 (March 1964): 37-46, which calls Schumpeter "classic" on articulation of his (Schumpeter's) point of view (p. 37, n.1); Jack L. Walker, "A Critique of the Elitist Theory of Democracy," APSR 60, 2 (June 1966): 285-95, which labels Schumpeter's critique of classical theory "the best statement of the basic objections" (p. 285, n.2); and Robert A. Dahl, A Preface to Democratic Theory (Chicago: University of Chicago Press, 1956), which limits itself to the critique of only one point of an "otherwise excellent analysis of democracy" (p. 131, n.12).



448 Schumpeter's "Democracy"

judged to be so important by students of democratic theory, he consid- ered the thoughts on democratic theory it contains to be of secondary concern. They are, in fact, only important insofar as they illuminate the issue of socialism, with which he is primarily concerned:

This volume is the result of an effort to weld into a readable form the bulk of almost forty years' thought, observation and research on the subject of socialism. The problem of democracy forced its way into the place it now occupies in this volume because it proved im- possible to state my views on the relation between the socialist order of society and the democratic method of government without a rather extensive analysis of the latter.4

Thus, Schumpeter acknowledges the fundamental interrelation of the issues with which he is dealing and doubtless would have objected to political analyses which examine the section of his treatise on "socialism and democracy" without considering its place in the entire work. This fact may seem relatively unimportant; however, given the importance of his formulation of democracy to later theorists, it should be analyzed carefully in the context of the total argument.

II. Schumpeter and Marx

Schumpeter begins his analysis with a discussion of the importance of Marx. Though their theories are very different, their conclusions concerning the fate of capitalism are similar. And his discussion of Marx reveals a premise which becomes important later in his analysis of economic and political systems. This premise concerns the fundamental importance of cultural values and ideas as forces for social change.

Schumpeter holds a deep respect for the Marxian perspective. He admires the grand vision and originality of Marx's economic and social theorizing. And-importantly for our purposes-he portrays the Marx- ian theory of social change in an essentially sympathetic perspective; thus (by implication), he closely identifies his own explanation of social change with Marx's broad view. Schumpeter rejects as naive and un- warranted (on the basis of the evidence of Marx's writings as well as his own evaluation of the nature of Marx's "true self" 5) the common flip- pant dismissal of Marx's analysis as a crude, unicausal, economic interpretation of history.

Schumpeter seems to claim that Marx was much too sophisticated a

4. Schumpeter, Capitalism, Socialism and Democracy, p. xiii. 5. Ibid., p. 8.




student of society to accept this unicausality uncritically; he feels that most evidence indicates that Marx did not embrace a "materialistic" interpretation of history. "Nowhere did he [that is, Marx] betray posi- tive science to metaphysics." 6 Schumpeter's own assessment of Marx on this point is both complex and enlightening:

The economic interpretation of history does not mean that men are, consciously or unconsciously, wholly or primarily, actuated by economic motives. On the contrary, the explanation of the role and mechanism of non-economic motives and the analysis of the way in which social reality mirrors itself in the individual psyches is an essential element of the theory and one of its most significant con- tributions. Marx did not hold that religions, metaphysics, schools of art, ethical ideas and political volitions were either reducible to economic motives or of no importance. He only tried to unveil the economic conditions which shape them and which account for their rise and fall .... Marx's philosophy is no more materialistic than is Hegel's, and his theory of history is not more materialistic than is any other attempt to account for the historic process by the means at the command of empirical science. It should be clear that this is logically compatible with any metaphysical or religious belief- exactly as any physical picture of the world is.7 It is important to note, however, that Schumpeter admits that Marx

may have overstressed the point: Social structures, types and attitudes are coins that do not readily

melt. Once they are formed they persist, possibly for centuries, and since different structures and types display different degrees of this ability to survive, we almost always find that actual group and national behavior more or less departs from what we should expect it to be if we tried to infer it from the dominant forms of the productive process.8 This refinement in Marx's ideas serves a useful purpose for Schum-

peter. It allows him to premise broadly his own theme of the eventual destruction of the capitalist order on a theory of social change which subtly combines the most convincing elements of an economic interpretation with the corresponding importance of what Marx had called the superstructure. It is possible, then, for Schumpeter to come to the some-

6. Ibid., p. 10. 7. Ibid., pp. 10-11. Emphasis in original. 8. Ibid., pp. 12-13.




what surprising conclusion that "the whole of Max Weber's facts and arguments [on the sociology of religions, especially The Protestant Ethic and the Spirit of Capitalism] fits perfectly into Marx's system." 9

How does Schumpeter succeed in squaring what at first glance appears to be a circle? He proceeds with a charming industrial metaphor.

Social groups and classes and the ways in which these groups or classes explain to themselves their own existence, location and behavior were of course what interested him [that is, Marx] most. He poured the vials of his most bilious wrath on the historians who took those attitudes and their verbalizations (the ideologies or, as Pareto would have said, derivations) at their face value and who tried to interpret social reality by means of them. But if ideas or values were not for him the prime movers of the social process, neither were they mere smoke. If I may use the analogy, they had in the social engine the role of transmission belts.'0 Nor are ideas and values "mere smoke" for Schumpeter. Indeed they

are important in themselves, but likewise they must be understood in context with the sustaining forces of the economy. Thus, because the "social structures, types and attitudes" arising in the context of these forces cannot be manipulated easily, they do not resemble "transmission belts." Instead, they resemble logically comprehensible but sluggish, tricky, complex features in the "social engine." In characteristic manner, Schumpeter concludes his estimation of Marx: "To say that Marx, stripped of phrases, admits of interpretation in a conservative sense is only saying that he can be taken seriously." 11

III. The End of Capitalism: A Question of Legitimacy It may seem paradoxical that Schumpeter proceeds directly from a conservative view of the process of social change to the prediction of the eventual collapse of capitalism. Yet this conclusion follows logically from his view of social change, which we have outlined above. In bril- liant logic, resembling Marx's dialectic, Schumpeter argues that capitalism contains within itself the seeds of its own destruction. The essence of his famous thesis is that this process is occurring not because of the economic deficiencies of capitalistic organization but, on the contrary, that "capitalism is being killed by its achievements." 12

9. Ibid., p. 11. 10. Ibid. Emphasis in original. 11. Ibid., p. 58. 12. Ibid., p. xiv.




Against the Marxian analysis, which posits an increasingly dreary economic future (through "immiserization"), Schumpeter elaborates the implications of the logic and institutional dynamics of the capitalist system. His own summary addresses the issue. "The actual and prospec- tive performance of the capitalist system is such as to negative the idea of its breaking down under the weight of economic failure, but.., .its very success undermines the social institutions which protect it, and 'inevitably' creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent." 13

For the purposes of this paper, Schumpeter's thesis can be interpreted as an involved explanation of the weakened legitimacy accorded an institution under pressure from the products of its own success. This is an original, intriguing, and interesting proposition by an economist who has been careful to lay the groundwork for important "implications" of values and ideas.

An adequate analysis of the richness and subtlety of the thesis is beyond the scope of the present paper. It is sufficient here to note that capitalism in Schumpeter's scheme is an extraordinarily successful institution. And Schumpeter judges the success of capitalism in terms of the important innovative function of the entrepreneur. It is in the linking of the entrepreneur with his opportunities to produce instability in the economic system that the dynamism of the system originates. In another work on this subject, Schumpeter waxed nearly poetic in his praise of the entrepreneurial function (in large as well as in small enterprises). The entrepreneur has "the dream and the will to found a private king- dom," "the impulse to fight, to prove oneself superior to others," and the "joy of creating, of getting things done, or simply of exercising one's energy and ingenuity." 14 The influence of capitalism upon civilization is so all-encompassing, as a result of a relentless "rationalization of human behavior," that it is no exaggeration to observe that "all the features and achievements of modern civilization are, directly or indirectly, the products of the capitalist process." 15

Schumpeter's description of the process is not fully satisfying, but that matters little here. "The capitalist process rationalizes behavior and ideas and by so doing chases from our minds, along with metaphysical belief, mystic and romantic ideas of all sorts." In fact, "capitalistic civ-

13. Ibid., p. 61. 14. These are excerpts from Chapter ii, "The Fundamental Phenomenon of

Economic Development," in Schumpeter's The Theory of Economic Develop- ment, trans. Redvers Opie (Cambridge: Harvard University Press, 1934), p. 93.

15. Schumpeter, Capitalism, Socialism and Democracy, p. 125.




ilization is ... 'antiheroic.' " 16 And an antiheroic society is one in which legitimacy is precarious. Although Schumpeter wastes no space on an explicit discussion of the notion of legitimacy per se, there can be no doubt that this is the key concept implicit in such passages as the fol- lowing, which summarizes the effect of capitalism on society: "When the habit of rational analysis of, and rational behavior in, the daily tasks of life has gone far enough, it turns back upon the mass of collective ideas and criticizes and to some extent 'rationalizes' them by way of such questions as why there should be kings and popes or subordination or tithes or property." 17

How, exactly, does Schumpeter explain the dismemberment of the capitalist world? He is quite explicit on this point, and it is the causes of decline which are most interesting in his prognosis. Schumpeter lists "internal" and "external causes." The internal causes (that is, internal "to the bourgeois mind" 18) include "Evaporation of the Substance of Property" (a fundamental capitalist institution) and "the disintegration of the bourgeois family." 19 The former refers to the separation of capital ownership from its management, causing a change in the psychology of the capitalist, in "his system of values and his conception of duty." 20 The latter may be summarized as a "decline in the driving power sup- plied by the family motive," 21 which traditionally had been responsible for the entrepreneur's calculation of long-term interests. Consequently, Schumpeter claims, returning to his mechanical metaphor, that there exists a set of elements within the bourgeoisie itself which "decomposes the motor forces of capitalism from within." 22

However, it is the external causes which are of particular concern here. First, Schumpeter speculates on the "obsolescence of the entrepreneurial function" 23 in capitalist society and describes the "mechanization of progress" in a manner reminiscent of Weber's routinization of charisma:

Many of the effects on the structure of society and on the organization of the productive process that we might expect from an approx- imately complete satisfaction of wants or from absolute technological perfection can also be expected from a development that is

16. Ibid., p. 127. 17. Ibid., p. 122. 18. Ibid., p. 156. 19. Ibid., pp. 156-57. 20. Ibid., p. 156. 21. Ibid., p. 161. 22. Ibid., p. 162. 23. Ibid., p. 131.




clearly observable already. Progress itself may be mechanized as well as the management of a stationary economy, and this mechanization of progress may effect entrepreneurship and capitalist society nearly as much as the cessation of economic progress would....

This social function [that is, the entrepreneurial function] is already losing importance and is bound to lose it at an accelerating rate in the future even if the economic process itself of which entrepreneurship was the prime mover went on unabated. For, on the one hand, it is much easier now than it has been in the past to do things that lie outside familiar routine-innovation itself is being reduced to routine. Technological progress is increasingly becoming the business of teams of trained specialists who turn out what is required and make it work in predictable ways....

On the other hand, personality and will power must count for less in environments which have become accustomed to economic change-best instanced by an incessant stream of new consumers' and producers' goods-and which, instead of resisting, accept it as a matter of course.24

Thus, by eliminating the "entrepreneurial function," capitalism "tends to make itself superfluous." 25

Second, Schumpeter points to what he calls the "destruction of the protecting strata"-the bourgeoisie.26 In examining the industrialist or the merchant, "there is surely no trace of any mystic glamour about him which is what counts in the ruling of men. The stock exchange is a poor substitute for the Holy Grail." 27 The argument seems to be that capitalism necessitates a theory of governance which legitimates the rule of the entrepreneur-king; but the very rationality which is the mark of capitalist society precludes such legitimation. And the continual rational exposure of the economic order ultimately "broke not only barriers that impeded its [capitalism's] progress but also flying buttresses that pre- vented its collapse." 28

In discussing the "social atmosphere of capitalism" Schumpeter becomes even more explicit. "The bourgeois fortress thus becomes politi- cally defenseless." 29

24. Ibid., pp. 131-32. 25. Ibid., p. 134. 26. Ibid. 27. Ibid., p. 137. 28. Ibid., p. 139. 29. Ibid., p. 143.




Political criticism cannot be met effectively by rational argument. ... Utilitarian reason is in any case weak as a prime mover of group action.... The long-run interests of society are so entirely lodged with the upper strata of bourgeois society that it is perfectly natural for people to look upon them as the interests of that class only. For the masses, it is the short-run view that counts ....

Emotional attachment to the social order-i.e., the very thing capitalism is constitutionally unable to produce-is necessary in order to overcome the hostile impulse by which we react to them [that is, troubles within any social system]. If there is no emotional attachment, then that impulse has its way and grows into a perma- nent constituent of our psychic setup.30

Finally Schumpeter adds his-perhaps most interesting-"external cause" for the decline of capitalism: the increased importance of the intellectuals to society. He first attempts to describe this group. They "are not a social class in the sense in which peasants or industrial labor- ers constitute social classes," yet "large numbers of them behave in the way that is usually associated with the concept of social classes." 31 He then proceeds to attribute to them an uncanny and somewhat mys- tical uniformity, cohesion, and self-consciousness. Indeed, though Schum- peter himself would probably be incensed at the parallel, he attributes to his intellectuals characteristics which in their naivete are actually quite similar to Marx's social classes. (What characteristics would Schumpeter ascribe, for instance, to an "intellectual" who defended the capitalist economic system? False consciousness? Or anti-intellectualism?)

It seems to Schumpeter that "unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates, and subsidizes a vested interest in social unrest." 32 This interest is realized in the intellectuals, "people who wield the power of the spoken and the written word, with "absence of direct responsibility for practical affairs." 33 Even granting all this, it is obvious that he is at- tributing to the intellectual force-the force of ideas-a large and perhaps decisive role in the social system. However, Schumpeter himself seems quite ambivalent-or confused-with respect to the possibilities for control over this powerful group. He claims, "Only a government of non-bourgeois nature and non-bourgeois creed-under modern circum- stances only a socialist or fascist one-is strong enough to discipline

30. Ibid., pp. 144-45. Emphasis in original. 31. Ibid., p. 146. 32. Ibid. 33. Ibid., p. 147.




them." 34 Thus, it is possible for a sufficiently autocratic government to control the intellectuals.

However, it also appears that the bureaucratic machine necessary for the modem state to function is susceptible of being subverted by these same intellectuals: "there is also a more direct relation between the intellectual group and bureaucracy.... Except for inhibitions due to professional training and experience, they are therefore open to conversion by the modem intellectual with whom, through a similar education, they have much in common." And not only is there a similar- ity in background, but "moreover, in times of rapid expansion of the sphere of public administration, much of the additional personnel required has to be taken directly from the intellectual group-witness this country." 35

In sum, Schumpeter presents a version of Marx "turned on his head" in a sense. For he shows, with great originality, that capitalism may indeed fail, but for precisely the wrong reasons in a Marxian sense. Capitalism is threatened because of the obsolescence of the emotional involvement necessary for the existence and legitimation of any social system and because of a virulent ideational attack by an articulate and powerful intellectual elite.

IV. Schumpeter's "Democracy" and Its Legitimacy It is this background which becomes important for an examination of Schumpeter's theory of democracy; and this is why some of Schumpeter's ideas have been analyzed here, although they may seem only peripher- ally related to the concerns of democratic theory. It is inevitable that parallels and contrasts be made between his explanation of economics and his discussion of democracy. But in explaining the "democratic method of government" Schumpeter seems to forsake his earlier analysis of capitalism and legitimacy and adhere instead to an aristo- cratic bias. We shall attempt to illustrate this apparent contradiction.

The present argument proceeds directly from Schumpeter's diagnosis of the causes of the impending capitalist downfall to his analysis of the problem of democracy. Schumpeter's definition of democracy is well known. First of all, "democracy is a political method, that is to say, a certain type of institutional arrangement for arriving at political- legislative and administrative-decisions and hence incapable of being an end in itself, irrespective of what decisions it will produce under given

34. Ibid., p. 150. 35. Ibid., p. 155.




historical conditions." 36 After a caustic attack on "the Classical Doc- trine of Democracy"-an attack which is immaterial to the point under discussion-he introduces the basis for "another theory": "the democratic method is that institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the people's vote." 37

Now it can be shown that Schumpeter has hoisted himself with his own petard. How has this happened? The answer may be found by probing his explicit paralleling of the political and the economic spheres with the very same questions about legitimacy in politics as he himself used to explain the impending collapse of capitalism.

It should be clear, first of all, that Schumpeter means to establish a clear link between the competition which is the hallmark of the capitalist system and a similar political competition which is the hallmark of the "democratic method." In case his definition of the method does not clarify the parallel, he elaborates the analogy further.

Our theory is of course no more definite than is' the concept of competition for leadership. This concept presents similar difficulties as the concept of competition in the economic sphere, with which it may be usefully compared. In economic life competition is never completely lacking, but hardly ever is it perfect. Similarly, in political life there is always some competition, though perhaps only a potential one, for the allegiance of the people. To simplify matters we have restricted the kind of competition for leadership which is to define democracy, to free competition for a free vote.38

These last few concepts are never really clarified, but it is clear that Schumpeter's affinity for the successes of capitalism carries over to his democratic method.

He even vulgarizes the analogy by drawing further parallels between economic and political institutions. His technique is crude--demystifica- tion followed by analogy. For example:

A party is not, as classical doctrine (or Edmund Burke) would have us believe, a group of men who intend to promote public wel- fare "upon some principle on which they are all agreed."... But the department store cannot be defined in terms of its brands and a party cannot be defined in terms of its principles. A party is a group whose members propose to act in concert in the competitive

36. Ibid., p. 242. Emphasis in original. 37. Ibid., p. 269. 38. Ibid., p. 271.




struggle for political power. ... Party and machine politicians... constitute an attempt to regulate political competition exactly similar to the corresponding practices of a trade association.89 In an amazing passage, Schumpeter comes very close to identifying

the politician as the representative of a group which is as cohesive as the entrepreneurial bourgeoisie. Thus:

democracy is the rule of the politician .... If we wish to face facts squarely, we must recognize that, in modern democracies of any type other than the Swiss, politics will unavoidably be a career. This in turn spells recognition of a distinct professional interest in the individual politician and of a distinct group interest in the political pro- fession as such.40

And he cites "the saying attributed to one of the most successful politicians that ever lived: 'What businessmen do not understand is that exactly as they are dealing in oil so I am dealing in votes.' " 41

Finally, Schumpeter realistically judges that his "method" will not be an automatic one. He elaborates several sets of conditions which must be met for this method to function properly. One key condition is "Democratic Self-control." 42 The remainder of this section will attempt to demonstrate that, given the accuracy of his analysis of the crisis of legitimacy which he predicts for the economic sphere, his proposal for the political system runs afoul of his own "condition" of democratic self-control. First, let us try to explain this condition.

In Schumpeter's formulation democratic self-control includes many elements. But one of these conditional elements may be seen as the pre- requisite of a legitimate political order. Schumpeter lucidly explains this in terms reminiscent of the role of "magic" of "primitive" peoples.48

Indeed Schumpeter seems to accept the parallel when he notes that "any discussion of political issues may convince the reader that a large and-for action-most important body of our own processes is of exactly the same nature" as the "magic" of earlier times. Actually, on this point he waffles badly in his attempt to cover all the obvious empirical evidence and yet maintain his thesis of incessant rationalization. Thus, "rational thought or behavior and a rationalistic civilization therefore do not imply absence of the criteria mentioned but only a slow though

39. Ibid., p. 283. 40. Ibid., p. 285. 41. Ibid. 42. Ibid., p. 294. 43. Ibid., p. 121.




incessant widening of the sector of social life" coming under the critical scrutiny of rationality,4 and yet, as was noted earlier, "all the features and achievements of modem civilization" are products of this omni- present rationalization.

Schumpeter's condition may be read as a recommendation that the polity accept what Pareto would call a "derivation" and abstain from interfering in the conduct of political decision-making:

The voters outside of parliament must respect the division of labor between themselves and the politicians they elect. They must not withdraw confidence too easily between elections and they must understand that, once they have elected an individual, political action is his business and not theirs. This means that they must refrain from instructing him about what he is to do.45

What must be conveyed to the voters, in other words, is a belief that they "must" forgo "back-seat driving" when it comes to matters dealt with by a group earlier identified by Schumpeter as an "interest."

At least part of the profound inconsistency inherent in these ac- counts is attributable to Schumpeter's conservative political tendencies and his deep suspicion of the character of the masses. In fact, it is diffi- cult to believe that the same author (who usually demonstrates superb appreciation for the logical congruence of a complex argument) could write simultaneously of: (1) "inevitabilities" spawned by relentless rationalization of life, and (2) the citizen who "drops down to a lower level of mental performance as soon as he enters the political field" 46 and masses who exhibit characteristics discussed in the pages of Pareto and LeBon. As one critic has remarked, "the contradiction between the assumed rationality of homo oeconomicus under plausible capitalism and the irrationality of homo politicus is never successfully resolved." 47

The contradiction is thus clear enough: Schumpeter wishes to demand that a civilization exercise an uncritical "self-control" in one sphere, a self-control which is the very antithesis of its character in the rest of its life. But the implications of this inconsistency for the question of legitimacy are important and just below the surface of discussion to this point. To summarize the problem of legitimacy faced by Schumpeter: it might be said that if, as Schumpeter claims, increasing rationalization

44. Ibid., p. 122. 45. Ibid., p. 295. 46. Ibid., p. 262. 47. Martin Kessler, "The Synthetic Vision of Joseph Schumpeter," Review of

Politics 23, 3 (July 1961): 353.




means that "the stock exchange is a poor substitute for the Holy Grail," it is also true that, in the same rational society, the quadrennial election- night vote tally is a poor substitute for the "will of the people."

Thus, one should be able to apply Schumpeterian notions of capitalistic legitimacy or illegitimacy to his political theory as well. It is here that his notions of capitalism must face those of his "other theory" of democracy. It is contended here that the results are such that his democratic theory is weakened considerably.

Specifically, if competition by elites is the best way to look at democracy, why does the entrepreneurial competition seem on the decline? If capitalism cannot survive the mechanization and routinization of its functions, thus leading to a lack of emotional commitment on the part of the economic polis, why then should we expect this same process- a process which glorifies apathy and noninvolvement in the political polis-to generate a healthy situation? If, as was mentioned above, the capitalist as ruler can command no legitimacy for his position in the economic sphere because of the pervasive spirit of rationality, how then is the political entrepreneur-the elite candidate or civil servant-to legitimate his all-too-precarious position of dominion? If "emotional attachment to the social order" is necessary with reference to economics, why is this not equally necessary with reference to politics? Schumpeter seems to answer none of these questions?

Besides lack of emotional commitment as an important cause for the decline of capitalism, Schumpeter also includes the role of ideas and analysis, as shown above. If the entrepreneurial function is obsolescent, what about the function of the political leader? Has "mechanization of progress" a parallel in a "mechanization of government," reducing the importance of the "interest" of the politician? Has the "bureaucracy" parallel roles in this regard in the corporation and the state?

If the protecting strata serving to divert critical attention from the bourgeoisie are removed, unmasking and delegitimating the entrepreneur and his stratum, how long will it take for the criticism to be leveled in a focused attack upon the political elite? After unmasking the capitalist stratum, there are precious few bogies left. It would seem from Schumpeter's account that the beneficence or reasonableness of the political elite is no help, since "political criticism cannot be met effectively by rational argument."

Finally, there are the intellectuals. They are a prime critical group; as has been demonstrated earlier, for Schumpeter's description of change, ideas are powerful. But if this is so, what is to happen to these intellectuals when discussions arise concerning the legitimacy of elite competition as a theory of government? If the critical role of intellectuals




functions to destroy the massive capitalistic leviathan, what happens to the elitist state extolled by Schumpeter? Do the intellectuals take more kindly to this beast? Are they less powerful in this sphere than in the economic sphere (a dubious conclusion, using Schumpeter's own paralleling of the economic and the political)? Indeed, Schumpeter's description of the controlling influence of the intellectuals on democracy would seem to indicate that by his own analysis they are a force to be reck- oned with. He does not answer these questions satisfactorily; this is perhaps why he is loath to employ notions of causality: because any careful explanation of cause would expose flaws in his analysis.

Finally, the remark noted earlier on politicians "dealing in votes" is especially telling in regard to Schumpeter's inconsistencies. If politicians and businessmen are analogous characters, why is it that Schumpeter's analysis shows the businessman holding an illegitimate function, while his description of democracy siphons all power and all legitimacy to the role of politician-elites? If, as he seems to intimate, results are all- important in assessing the validity or invalidity of a theory, then why is it that "utilitarian reason is ... in no case... a match for the extra- rational determinants of conduct"? 48

To summarize: if one views Schumpeter's entire book as a piece, there appear to be serious inconsistencies and ambiguities centering around the notion of legitimacy. These might be discussed profitably by those interested in Schumpeter's contribution to the debate about democratic theory.

V. Contemporary Discussions

Some conclusions of more general significance may be drawn from this analysis of the weakness in Schumpeter's argument. Schumpeter's work is especially important for recent discussions of democratic theory because it attempts to combine two ideas which are shared widely in the contemporary intellectual world: (1) incessant rationalization of society and, (2) the need for a view of democracy which reduces reliance on citizen participation. Schumpeter's contradiction calls into question the assumption of an enduring compatibility between a probing, questioning, "rational" society and theories of democracy which assume that elite competition will suffice to satisfy the masses.

In fact, our criticism of Schumpeter's thought has implications for both the "realist" and the "classical" side in the contemporary debate

48. Schumpeter, Capitalism, Socialism and Democracy, p. 144.




on democratic theory.49 The "realists" are prone to the same contradiction that occurs in Schumpeter's work. It is their common assumption that a democratic society must be fashioned so as to meet the needs of a complex industrial society; the "classical" theory was suitable-if at all-for a rosy, simple, agrarian past. The above critique of Schum- peter applies to this theme as well. That is, Schumpeter critically explored the threats to legitimacy unleashed in a rational society. These forces make short shrift of "myths" holding a society together by allot- ing disproportionate acclaim and rewards to a privileged few. The realists attempt simultaneously to emphasize the significance of incessant rationalization while downgrading its effects upon the legitimacy of the social order.

On the other hand, proponents of the "classical" theory are guilty of the opposite error: recognizing the precarious legitimacy of elites in such a society, they recommend more widespread citizen participation; but they fail to make sufficient allowance for the need of expertise in a complex society.

In a very real sense, then, Schumpeter's thesis illuminates an important tension in the modern state: industrialized democracies require that their experts be accorded differential influence, yet tend to undermine such experts' positions through their antiheroic stance. Thus, the problem dealt with here is not wholly one of logic. Rather, Schumpeter's analysis of the dynamics of capitalist systems suggests that the problem of democratic legitimacy is a real one. That is, the self-critical character of a rational society may destabilize the order of that society. Paradox- ically, experts may be both necessary and illegitimate in modern democracies.

Perhaps the most easily identifiable institutional locus of this tension is the public bureaucracy. For here can be found large numbers of experts, dispensing policies in the manner of Weber's machine, while the

49. Any classification which herds these theorists into two groups entails dis- tortion and homogenization of the detailed positions of individual scholars. How- ever, any effort to sort out the intricacies of the views would occupy far too much space here. Suffice it to say that one "side" has maintained that a "classical" democratic theory-advocating broad inclusive mass participation, egalitarianism, and intelligent, rational civic decision-is naive in the extreme and unreflective of human nature and the industrialized state. This strain recommends a more restrained and "realistic" empirical theory. The other "side" sees much merit in this "classical" theory as a normative ideal and chastizes the realists for near- sighted vision, conservative interpretations of human possibility, and slavish em- piricism.




political attack on the institution is mounted from disparate positions on the ideological spectrum.50

Two conclusions follow. First, a careful examination of Schumpeter's work as a piece compels a critical evaluation of the relatively crude in- junctions of his democratic theory. If there is, indeed, a crisis of legitimacy, simple nostrums-and another myth-will not suffice. To the extent that his analysis of the economy is correct, Schumpeter is too sanguine about the prospects for long-term survival of his brand of democracy. His thesis is flawed.

But, in addition, the importance democratic theorists attach to Schum- peter's "other theory" of democracy indicates that he has struck a re- sponsive chord. What are the limits of the "possible"? How constrained are we in our search for the "good life" by the products and parameters of our own rationalized civilization? Does the modern rational edifice itself contain imperatives which impose restrictions on the range of "permissible" ideals? Have we rendered "utopian" versions of democracy increasingly necessary (to extract legitimacy from a cynical polity) while less possible (because of the incessant rationalization explored so well by Schumpeter)?

Thus careful analysis of Schumpeter's work indicates that tendencies produced by capitalism may be more complex-and less easily resolv- able-than he himself had assumed. Schumpeter's own work shows that his theory of democracy is shortsighted and "illegitimate." Though intriguing, it points to a contradiction visible in the American pursuit of policies which at once demythologize outer space via technical organization and claim to grant power to the people in inner cities.

A "solution" requires more extended analysis of the implications and requirements of a rational society. The contending positions have con- tributed partial solutions. A worthy goal would be to combine the in- sights of both in the production of suggestions which are, in John Dewey's phrase, "empirically idealistic."

50. For an interesting discussion of this phenomenon during the turbulent 1960's, see James Q. Wilson, "The Bureaucracy Problem," The Public Interest 6 (Winter 1967): 3-9.



Documents

Schumpeter's Democracy