Schumpeter and plausible capitalism.

The article presents the author's comments on the book "Capitalism, Socialism, and Democracy," by Joseph A. Schumpeter. The book is best known for arguing that by virtue of its success in cranking out goods and services, capitalism would undermine its own social, organizational, and moral foundations, setting the stage for the ascendance of socialism. Presently, as the tumultuous changes in Eastern Europe unfold, that warning appears wildly off the mark. The book embodies Schumpeter's most complete characterization of "plausible capitalism," contrasting the dynamics of the system, as he viewed them, against the essentially static conception emphasized in contemporary neoclassical economic analyses, both at the time he wrote and fifty years later. The hallmark of capitalism, Schumpeter argued both in 1912 and 1942, was not the equilibration of supplies with demands for an unchanging array of goods and services, but dynamic evolutionary growth, which permanently increased the output available for consumption and further growth.