Jerry Z. Muller

Capitalism, socialism, and irony: Understanding Schumpeter in context

Abstract The significance of the major claims of Joseph Schumpeters best‐known work, Capitalism, Socialism and Democracy, have often been misunderstood by readers unattuned to its ironic mode of presentation. The book reaffirms two themes that were central to Schumpeters thought from its very beginning, namely the significance of creative and extraordinary individuals in social processes, and the resentment created by the innovations they introduce. The thesis that socialism would replace capitalism, but that it would bring about few of the advantages imagined by socialists and many disadvantages with which they had not reckoned, was an ironic proposition, which Schumpeter put forth in a manner designed to overcome intellectuals’ dogmatic resistance to capitalism.

The democratic threat to capitalism

cal instances of capitalism without liberal, representative democracy, there are no known cases of liberal, representative democracy without capitalism. But with few exceptions, academic analysts have tended to focus either on the threat capitalism poses to democratic institutions, or on the support democratic politics offer to capitalist legitimacy. Academic discussion of the tensions between democracy and capitalism tends to treat capitalism as a hindrance, or even danger, to democracy. Capitalism is based upon inequality of reward, while democracy is based upon some notion of equality. The inequality of wealth, and the ability of the wealthy to influence the holders of political power, is said to undermine the equality of representation inherent in the democratic ideal. There are also powerful arguments for the compatibility of democracy and capitalism. Democracy smooths away the rougher edges of capitalism in a manner that ultimately contributes to capitalism’s legitimacy. Transfer payments from the wealthy to the less wealthy; insurance against illness, unemployment, and old age; and other policies associated with the democratic welfare state soften the harsh effects of the market, reconciling the vast majority of the populace to market institutions. My purpose in this essay is to explore the other, less examined side of the coin: a series of arguments that democracy may be a threat to the functioning of the capitalist market. Most of these arguments begin with the assumption that as an information and incentive system, the market tends to be more ef1⁄2cient than representative democracy. It was Adam Smith, in The Wealth of Nations (1776), who explained why productivity tends to increase with the expansion of the market. The existence of a market in which supply and demand, rather than political 1⁄2at, determine prices creates monetary incentives for entrepreneurs, landlords, and workers to move their resources into the most pro1⁄2table use. Prices and wages supply information indicating where effective

Beyond the Conceivable: Studies on Germany, Nazism, and the Holocaust

323 of the persistence of antisemitism is likely to have more appeal to an academic reader. In general, both books remind us that premodern, religious antisemitism made the modern variant possible. The two interacted to create a more potent mixture. However, the books also point out that the nineteenth-century German state, itself a product of the German Enlightenment, did not share the superstitious antisemitism of ordinary Germans. Not until the very modern year of 1933 did a German national government embrace the ideology that Konitz’s administrators had found embarrassing. If Jewish life in nineteenth-century Germany remained unsettled—even as embourgeoisification and assimilation proceeded—the threat came from below, from a population uncomfortable with many aspects of modernity and still partly anchored in the Middle Ages.

German Neo-Conservatism, ca. 1968–1985: Hermann Lübbe and Others

German neo-conservatism was primarily a reactive phenomenon, in which those who had been the reformist but loyal opposition were transformed into defenders of the existing order, in the face of a radical challenge.1 That is hardly surprising: Most intellectual conservatism has been neo-conservatism, since the rationale for existing institutions comes to require articulation only when those institutions are under attack.2 The institutions that conservatives defend do, of course, change over time, which is one reason for the neo- in neo-conservatism. What was the existing order that the German neo-conservatives set out to defend, and what were the forces challenging that order? The challenge came primarily from the German New Left, its academic Nestors and fellow travelers; by the New (neo-Marxist) Left I mean a range of movements, from the SDS to the K-Gruppen and the APO to the Red Army Faction. The existing order, on the broadest level, was “bourgeois democracy,” or if you prefer, the liberal-democratic, parliamentary, capitalist, welfare-statist Rechtsstaat. The major challenges to which the neo-conservatives responded included the neo-Marxist interpretation according to which the relationship between the Third Reich and the Federal Republic was one of fundamental continuity, not least since both were capitalist societies.