"Can capitalism survive? No, I do not think it can. The thesis I shall endeavor to establish is that the actual and prospective performance of the capitalist system is such…that 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."
This prognosis of capitalism's future was written in 1942 by the Austrian-born Harvard economist Joseph A. Schumpeter in Capitalism, Socialism and Democracy.
Although Schumpeter had contemplated the future of capitalism as early as 1918, it was not until the 1930s, in light of New Deal economics, that he formalized his ideas. Writing in 1935, he saw that even though the components of capitalist society possessed an "observable tendency" toward decay, they were holding their own. Such factors as competition, business enterprise, family ownership of controlling blocks of stock, bourgeois standards and traditions, family stability, and the political dominance of the middle class were still thriving. And at the time Schumpeter believed that "all this surface may be more important than the tendency toward another civilization that slowly works deep down below." Yet, even though he thought "the thirties may well turn out to have been the last gasp of capitalism," he could not see any "purely economic reasons why capitalism should not have another run."
Ten years later, and four years after the publication of Capitalism, Socialism and Democracy, he was considerably less doubtful about capitalism's transition into socialism. In his essay "Capitalism" for the 1946 edition of Encyclopedia Britannica, he wrote of how far the socialistic transformation of capitalism had already advanced: "Government control of the capital and labour markets, of price policies, and by means of taxation, of income distribution is already established," he observed. "Control needs only to be complemented systematically by government initiative in indicating the general lines of production (housing programs, foreign investment) in order to transform, even without extensive nationalization of industries, regulated or fettered, capitalism into a guided capitalism that might, with almost equal justice, be called socialism."
In the face of such extensive controls and interventions, the issue of the survival of the capitalist order was hardly open to question. Its survival, at that stage of decline, depended upon "a reversal not only of existing tendencies, but also of an established state of things." But such a reversal depended upon political forces that were able and willing to effect it, and Schumpeter saw no evidence of such forces under the postwar regimes.
Schumpeter was not alone in his pessimism. When Capitalism, Socialism and Democracy was published, many left-wing intellectuals who had presumed the obsolescence of bourgeois society and thought in the 1930s were reconsidering and repudiating socialism on the one hand, while lamenting economic decay and ethical-political degeneration on the other. In To the Finland Station (1940), Edmund Wilson saw the war years as "a time when the systems of thought of the West were already in an advanced state of decadence." In The Managerial Revolution (1941), James Burnham deplored the bourgeoisie's loss of confidence in its ideology of individualism, private initiative, natural rights, and progress. And in The Children of Light
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