Schumpeter on socialism


I recently came across the following quote 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. Every other possibility I can conceive would spell failure and breakdown”.

The idea of an “all-embracing bureaucratic apparatus” is disturbing. Ardent socialists place faith in the power of men to handle the gigantic amount of planning necessitated by a centralized economy, but there is obvious potential for failure when we assign such great responsibility to subjective decision-makers. Determining the prices of inputs and outputs, making sure demand is met by supply and markets clear smoothly, while taking into consideration changing consumer preferences is too complex a task to be carried out by individuals. And, in line with the utilitarians, how are we to be sure the resulting allocation is “fair”? How will we determine what exactly is “fair”?

Then there is the problem of enforcing “the rules of the game”. Schumpeter foresaw the necessity of authoritarian discipline for the success of socialism. He described the efficiency of the disciplinary mechanisms employed by the Russian Communists while attributing the cruelties of the system to “the unripeness of the situation”. However, power tends to corrupt, and absolute power corrupts absolutely. Some believe the failed Soviet experiment was a one-time blunder, but what of Mao, Chavez, Castro and Ceausescu? Can any authoritarian regime stop short of infringing on basic human liberties? And even if people were to unanimously elect this kind of social order, would the fact be sufficient to label it as democratic?