Assessment of Joseph Schumpeter's idea of Democracy

CASIRJ Volume 5 Issue 6 [Year - 2014] ISSN 2319 – 9202

International Research Journal of Commerce Arts and Science http://www.casirj.com Page 326

Assessment of Joseph Schumpeter's idea of Democracy

Ishta Vohra

PhD Scholar

Centre for Political Studies,

Jawaharlal Nehru University

New Delhi

Email id- [email protected]

Joseph Schumpeter is evoked during studies of democratic theories for the remarkable relevance

his expositions have borne in furthering the understanding of the concept. Though his writings

on democracy were confined to four chapters in the book Capitalism, Socialism and Democracy,

and he took up discussion on democracy only to make connections with the larger theme of his

book, his ideas on democracy hold three crucial aspects that make it significant.

First, he provides a lethal critique of the classical model of democracy (which he constantly

refers to as a doctrine) before embarking on his competitive theory of democracy. This critique

becomes important because it marks a big moment in the discourse on democracy, whereby long

held theories are questioned and rebuffed. What becomes epical is that he strips democracy of its

moral and ethical dimensions, and rejects the liberty/equality argument associated with it

historically. Schumpeter also provides an alternative to studying democracy, as that of

competition for leadership. One need not agree with his conception, but his arguments certainly

make one question popular notions. It is also interesting that Schumpeter does not mention the

proponents of the classical model and leaves it to the reader to unravel. This paper will, thus,

begin by tracing the classical thinkers on democracy in brief before outlining Schumpeter‟s

critique and alternative.

Secondly, in his understanding of democracy as competition for leadership, he continuously

draws parallel between democracy and the market. This paper will try to understand how he does

it, and what influences him to equate economics and democracy.

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Thirdly, his model of democracy has provided basis for a procedural understanding of

democracy that encouraged behavioural studies in political science in America for over two

decades since 1950s. What we can detect is an institutional approach in the understanding of

democracy, as also a realist and procedural one. One also needs to understand how the idea of

plural democracy shaped up from Schumpeter‟s model. Both these aspects take Schumpeter

closer to being called a liberal democrat. The paper will, thus, touch upon Schumpeter‟s

contribution to liberal conception of democracy, before making a final assessment of his thought.

In the chapter, THE CLASSICAL DOCTRINE OF DEMOCRACY from Capitalism, Socialism

and Democracy (CSD), Schumpeter makes a staunch critique of the classical understanding of

democracy. According to Schumpeter, the classical understanding of democracy assumes that

people, through their common will elect their representatives to realise the common good

after thorough rational discussions. “The democratic method is that institutional arrangement for

arriving at political decisions which realises the common good by making the people itself

decide issues through the election of individuals who are to assemble in order to carry out its

will.” As per the classical understanding then, representatives have a secondary role to play in

democracy, „elected to merely carry out the will of the people exactly as a doctor acts in order to

carry out the will of the patient to get well.‟ (Schumpeter, 2003, p.252)

Though there is certainly no one proponent of the classical understanding, and even Schumpeter

does not give names, except mention the Utilitarians, he sets forth to critique ideas of common

good, common/general will, and individual will that are associated with the classical

understanding of democracy. As he starts to explain these ideas, one can begin tracing their roots

in the ancient Greek philosophy, mainly Pericles and Aristotle and later in Rousseau‟s work,

(Reisman, 2005, p.13) to go on to Enlightenment.

Even though Greek philosophers were mostly critical of democracy, because it involved large

number of people and they were wary of popular power, some of their ideas became relevant to

modern theories of democracy. The idea of an active citizenry seeking common good comes

from the Greek tradition. Aristotle laid the foundation for Schumpeter‟s common good through

his celebrated declaration that man is a social being in whose nature it is to live in a polis: man is

a political animal… the real difference between man and other animals is that humans alone have




perception of good and evil, just and unjust. It is the sharing of a common view in these matters

that makes a house-hold and state. We are all parts one of another. Aristotle was conscious of

majority takeover of decision making and thus used the term „deviated constitution‟ to refer to a

political order in which one section, large or small, takes precedence over the common good to

impose its private interest. (Aristotle, 1981 cited in Reisman, 2005, p 26)

Pericles, who is remembered in history as the champion of democracy in Athens, saw common

good and civic virtue to be strong reasons to fight to the death for a self governed city-state in

which the laws are consensually self imposed. Power was in the hands of whole people, and each

was interested in the affairs of the state. We do not say that a man who takes no interest in

politics is a man who minds his own business; we say he has no business here at all (Thucydides,

1972: 145,147 cited in Reisman, 2005, p 27)

[*Thucydides saw this as an example of Pericles‟ leadership over Athens. It was under him that

Athens was at her greatest. Schumpeter would have agreed. ]

One knows for sure that Schumpeter is referring to Rousseau when he begins his criticism of the

general will for being non-existent. One can also point to Rousseau for having provided the idea

of popular sovereignty, though he would have certainly opposed the way it got modified in later

theories of democracy to imply representation of people in parliament.

Schumpeter also critiques the Enlightenment, which has eulogised idealist conceptions of

democracy, liberty and equality, as also rationality.

Finally, Schumpeter condemns the utilitarian understanding, which is described as the greatest

happiness principle. The utilitarian principle can actually be criticised for being a majoritarian

principle, as also the one that can go against principles of justice, equality or freedom if there is

democratic approval against them. In fact, this form of democracy becomes a big point of fear

for Schumpeter, as will be discussed later in the paper.

Thus, these are the main cannons of classical theories of democracy that Schumpeter begins to

tackle. He begins criticising the three inherent ideas: that of common good, general/common

will and the individual will.




He begins by questioning the idea of a uniquely determined common good that people agree on

by rational agreements on the ground that different people have different ideas of common good.

This difference is rooted in different conceptions of life and society, and not necessarily has any

logic to it. Rational arguments cannot really reconcile these conflicting values. This argument

also reminds one of the debates between facts and values that are made during discussions about

reason and universality of concepts. Moreover, Schumpeter says that whenever some common

good is sought, there is always bound to disagreements on how to reach the end. So, he says,

health may be desirable to all, but people would still disagree on the various ways of stating

healthy. (Schumpeter, 2003, p.252)

Now, since there is no common good, there cannot be a common will of the people, as envisaged

by Rousseau. If there is no greater good for the greatest number, there is nothing for the people

to assent to. Wills are supposed to be centred on an idea of common good. In the absence of that,

there cannot be any general/common will.

Some might argue that even in the absence of a common good, general will can be generated by

combining individual wills. However, Schumpeter disagrees on the grounds that the public

opinion that will be sought through this combination will lack rational unity and rational

sanction. There cannot be any reconciliation of individual views nor there acceptance to the

reconciled resolution.

Finally, Schumpeter investigates the presumption that individual wills on their own are rational

and independent. The idea of a rational individual, which has been mooted by many theorists,

like J.S Mill and also derives from the Enlightenment, highlights a rational progressive modern

man. Schumpeter questions this ideal. He wonders if an individual can show definite will

conclusively- that which is based on one knows definitely what he wants to stand for. This

definite will would have to be implemented by the ability to observe and interpret correctly the

facts, sifting through them critically. This activity would require unflinching acumen to be able

to see through the propaganda and manipulative techniques of pressure groups. However, for

Schumpeter, an individual will cannot be quite definite or independent to make informed

judgements. And this he blames on the human nature in politics. By doing so, he also questions

the rationality of men posited by classical theorists.




Schumpeter, deriving inference from consumer behaviour claims that as distance increases

between man and issues, such that some issues do not concern him directly, his judgements and

definite capacity to think about them reduces. This is because he has no real interest in that issue.

So, even though he will have a definite will over consumer products that he buys directly, he

might not have one when it comes to affairs of politics that do not directly concern him. And this

is the point when the individual can be manipulated. Schumpeter even quotes studies on

psychology of crowds to put across his believe that humans as crowds exhibit unruly irrational

behaviour, the madness of which is generalized to apply to any and all, and this is detrimental in

creation of any definite will of the individuals of that group or mob or crowd.

Schumpeter, it seems, deliberately refers to the classical theories of democracy as classical

doctrine. A doctrine holds the strength of being believed unquestioningly, is a dogma that is

advocated without questioning it. It is quite intelligent on Schumpeter‟s part to highlight how

entrenched is this classical understanding of democracy.

He cleverly explains that this classical conception remains strong despite inherent limitations on

the basis of its ability to find resonance with protestant Christianity. The ideal of common good

can be equated to the voice of the God, a strong equalitarian element is assumed in this theory,

that which is inherent to Protestant Christianity, there is also the idea of the redeemer dying for

all, not differentiating between individuals of different social status. What this implies is that the

conception of democracy could find an appeal with not just the rationalists, but also the believers

in God, depending upon how you see it. By doing so, the society is unable to weigh this method

of democracy critically and instead ideals and ethics get connoted to it. On the other hand, for

the rationalists, the appeal of Enlightenment never dies. Historically, some nations have come

into existence through revolutions that have heralded the Enlightenment and people continue to

be besotted with the accompanying principles of freedom, democracy, and equality.

After critiquing the classical conception, Schumpeter himself embarked on providing an

innovative „ANOTHER THEORY OF DEMOCRACY‟. Schumpeter wrote, “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 people’s vote.”

(Schumpeter, 2003, p.269)




As the definition suggests, what is of utmost importance is the selection of leaders by people i.e.

the part about choosing the leader. Role of the electorate in deciding issues, which was the

foundation of classical model, now becomes secondary and in fact gradually null for

Schumpeter. He has already articulated what are the problems with the electorate deciding on

issues. Democracy thus has a minimalist understanding, that of an institutional arrangement

through which individuals compete for people‟s vote. Issues are to be decided by leaders, who

seek out people‟s vote through competition that entails manipulating their wills and opinions in

their favour. Schumpeter acknowledges such a role of the leader and thus is able to account for

manufactured wills of the people. In this way, his definition appears grounded in political

realities. It is here that one can sense the influence of the realist school of thought in

Schumpeter‟s work that gained prominence during the Second World War. The realist that he

was, democracy was all about opportunism for him. Leaders are most interested in their survival

and offer incentives to different people only to ensure their support for themselves. Leaders are

only making a career for themselves; policies for people are mere by-products of it.

There is a reason why Schumpeter does not use the word representatives in his definition. A

representative implies one who is carrying out the wishes of the person he/she stands for.

Schumpeter does not see leaders as representatives. Leaders are only carrying out the political

jobs for self-aggregation. Moreover, democracy is only a method, not an end in itself.

Schumpeter detested the classical theories for being doctrinal and decided to save his model from

the same.

Since it is in USA where people directly vote the government, Schumpeter begins to look at how

a parliament produces a government. He sees the parliament as the intermediate organ between

the people and leader. Though it is the parliament that has to elect the prime minister and his

cabinet, it is the clout of the leader of the winning party that prevails. The leader of the winning

party is accepted as the prime minister by the parliament, as are the group of ministers he needs.

The prime minister is no longer just the leader of the political party, but also a national leader

now. Moreover, the competition for leadership continues between the prime minister and

opponents in the parliament, and within the cabinet as well.




There have been questions raised in academia by many that why is Schumpeter talking about

democracy at all, given his leanings towards aristocracy based on his past (Medearis, 2009).

Now, one has to remember that his writings on democracy in CSD were not his primary aim. He

was in fact, trying to comprehend the change of political systems, and in the process gave

attention to relationship between the process of economic development and political system. In

his analysis, democracy was a result of capitalism, (though not dependent on it) and thus he

could not wish it away. What is interesting, that why is he thinking of democracy in a particular

way? He designates an elitist characteristic to democracy, stripping it off all idealism, all

substantive connotations, so to reach his conclusion that such a leadership democracy will

survive under socialism as well. By doing so, he also manages to stay as close as possible to an

aristocratic system. In fact, as a footnote, it may be added that Schumpeter was very much

impressed by “Tory democracy” perfected in England, “where even in periods of sharpest

democratic tendencies has preserved the influence of the aristocracy and generally of

conservative interests.” (Medearis, 2009, p 15)

Schumpeter‟s definition also enabled him to measure the performance of „democracy‟ that could

be used to verify his conclusion. In fact, this definition and understanding of democracy serves

as an efficient criterion by which to distinguish democratic government from other forms of

government, since electoral competition for political leadership is usually easy to measure –

through election results, voter turnouts, presence of political parties, etc. Thus, one detects an

institutional approach towards conceptualising democracy in Schumpeter. This understanding

gradually also became the hallmark of the liberal idea of democracy. Schumpeter influenced and

encouraged the behavioural school in political science, which began to utilise his procedural

understanding to measure voter behaviour during elections. “One of the first prominent books to

make use of Schumpeter‟s elite conception of democracy was the l 1954 public opinion study,

Voting (1954). The book‟s authors, Bernard Berelson, Paul Lazarsfeld, and William McPhee,

interviewed voters in the small city of Elmira, New York as they prepared to take part in the

presidential election of 1948, and concluded that the formation of political opinions was a group

rather than an individual process. They saw this as an encouraging prospect for democracy.

Resting on Schumpeter‟s elite conception, they argued that democracy did not require much

understanding or participation on the part of average citizens.” (Medearis, 2009, p 107)




It is also interesting how the essence of what Schumpeter was doing in his analysis finds traces

in his definition of democracy. One can infer that his focus on relationships between economic

activities and political organisation in CSD propelled him to draw parallel between democracy

and the market. For him, both were avenues for competition – one is competition for supremacy

of leadership, the other competition for profits. Competition for office resembles competition for

customers. Competition on the political field is required to ensure that military or autocracy

doesn‟t take over. However, at the same time, competition does not exclude unfairness or

fraudulence, just as experienced in the market. Schumpeter is satisfied with this understanding of

democracy because it represents a realistic picture, rather than allude to the two extremes – an

ideal democracy or a martial leadership. Even when explaining his model of democracy, he

keeps drawing its similarities with economic activities. So, when he explains that leaders are

only pursuing a career for themselves and legislation and administration are by-products of the

struggle for political office, he refers to the functioning markets which do not rely on producers

seeking directly to provide society with the things needed to thrive.” (Schumpeter, 2003, p 285)

Schumpeter understands of democracy strips it of all the idealism of classical theories.

Competition for leadership has no place for values of equality or freedom. Since Schumpeter

does not have to defend principles of equality or liberty in his democratic model, he can draw out

easy contrasts with the market, which is marked by inequalities and limited political freedom.

The only time he allows liberty to be associated with democracy is with regard to being free to

vote and compete for leadership by standing for elections, which for him, in fact, ensures

freedom for all groups and voices to participate in democracy. Thus, Schumpeter says his theory

takes into account the differences in opinions and wills between groups, since their interests are

brought to fore by their leaders, who, as mentioned before have an equal chance in the

democracy to emerge. Groups have equal chance to throw their leaders to be able to get heard.

Different groups ensure checks and balances on leadership. One can also replace a leader with

another by refusing to re-elect him, if not satisfied with his leadership.

This understanding became the basis for pluralist conception of democracy, charting a course

between Schumpeter and pluralists such as Robert Dahl. (Though Dahl would not use the term

democracy, he used plurarchy instead). It makes way for political freedom and equality of all

individuals, who can choose to join any interest group voluntarily as well as enjoy equal status at




par with any other interest group. This conception of democracy is rooted in individualism as it

makes space for the different individual interests of a person through voluntary interest groups.

These interests then get reflected during competition for leadership. Thus, Schumpeter‟s model

of democracy is said to have continued its contributed to the liberal tradition by allowing for the

plurality of individuals in the society [in addition to providing an institutional approach, as

mentioned earlier, identified as competition among political parties, voting, interest groups etc.].

Many academicians protest that there is a dichotomy in Schumpeter‟s explanation of the human

being. He is supposed to be intelligent and rational while making economic decisions, but all of a

sudden loses his reason when it comes to political issues (O'Toole, 1977). Schumpeter‟s

contention that this is because politics does not affect people directly, as say, the decision about

which colour shirt to buy also appears flimsy. People are very much affected by the political

actions of the leaders of a government, be it with regard to their social security, health, food or

larger identity. One is already witness to mass protests by people against heavy concessions to

financial institutions by governments globally. There is also a problem if Schumpeter assumes

that people can decide to change the leadership when they are affected by his decision-making,

while maintaining all along that people are distant from and unaffected by political affairs and so

lack a definite will. He also makes the claim that the electorate has no control over the

leadership. One wonders how he would then explain pressure on leadership through dharnas,

protests, strikes by the people.

Schumpeter also claims to have a problem with democracy on the grounds that it is the rule of

majority. He gives the example of how a state can arrive at a democratic decision to persecute

people of minority religions for common good. (Schumpeter [1942] 1976, 240cited in Medearis,

2009, p 84) Through this example he makes a case that democracy does not imply justice,

equality or freedom contrary to widely held beliefs and thus cannot be an end in itself. It is here

that he questions the substantive definition of democracy. For him, these are ultimate ideals that

that are not offshoots of democracy. Why else would there be democratic approval to kill

people? Idealism and morality emerge from the ethos and culture of a society and its people and

groups.




There have to be alternatives to understanding democracy. There is certainly a problem when we

see it as rule of the majority, or as an effort to seek common good. However, Schumpeter has

himself managed to provide alternatives that give voice to different individuals and groups. Sure,

there is competition and vested interests, but there are certain ideals that are to be guaranteed,

and the fact remains that democracy which respects differences within individuals and groups

can do so only by providing scope for liberty, justice and equality. In contrast, Schumpeter has a

very limited understanding of freedom in a democracy.

Freedom does not become so, till it has been guaranteed as a right. Such rights can only be

guaranteed and be made to prevail through a democratic system. There is a reason why

democratic countries like India, even as they fare low on development index, pride themselves

on the political freedom enjoyed by its citizens. In comparison, nations with authoritarian

regimes, like Singapore, cannot speak of having political rights like the Indians. Of course, a

democratic government could take away ones right, but the process of democracy is just this

struggle to ensure one‟s security of rights and freedom. This entails different ways of conducting

democracy at different times, be it deliberative, representative or participative. Surely, there

cannot be any one common good. But some basic idea of good is required for any society, which

can be reworked and contested democratically all the time.

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Assessment of Joseph Schumpeter's idea of Democracy