In Capitalism, Socialism and Democracy Joseph A. Schumpeter concluded that socialism would eventually displace capitalism in Western democracies. This would come about as a result of the superior performance of capitalism. We extract six "stylized" propositions that are essential elements of Schumpeter's prediction about the fate of capitalism. These propositions are confronted with the development of the Swedish economy. The three main results of the analysis are:
(1) The evolution of the Swedish economy closely followed Shumpeter's predictions until about 1980: Large firms became increasingly predominant in production and innovative activity, ownership of firms became more and more concentrated, individual entrepreneurship waned in importance, the general public grew increasingly hostile towards capitalism, and by the late 1970s explicit proposals for a gradual transfer of ownership of firms from private hands were launched.
(2) Design of tax and industrial policies fueled a development of the economy along the lines predicted by Schumpeter. In general, the policies discouraged private wealth accumulation. In particular, the policies favored concentration of firms and concentration of private ownership.
(3) The turning point away from the path to socialism coincides with real world developments that disclosed two major flaws in Schumpeter´s analysis. First, the ever more obvious failure of socialism in Eastern Europe went against Schumpeter's assertion that socialism can work. Second, Schumpeter, who thought that modern technology would make the giant corporation increasingly predominant, did not foresee the revival of entrepreneurship that took place in the Western countries around 1980.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
533.
Length: 33 pages Date of creation: 03 Apr 2000 Date of revision: Publication status: Published in Journal of Evolutionary Economics, 2001, pages 331-358. Handle: RePEc:hhs:iuiwop:0533
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Find related papers by JEL classification: M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Erik Norrman & Charles E. McLure Jr., 1997.
"Tax Policy in Sweden,"
NBER Chapters,
in: The Welfare State in Transition: Reforming the Swedish Model, pages 109-154
National Bureau of Economic Research, Inc.
[Downloadable!]
Blanchflower, David G & Oswald, Andrew J, 1998.
"What Makes an Entrepreneur?,"
Journal of Labor Economics,
University of Chicago Press, vol. 16(1), pages 26-60, January.
[Downloadable!] (restricted)
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