Adaptation and Influence: The Schumpeterian Perspective on Business-Politics Relations

This paper introduces Schumpeter’s views on the relationship between business and politics and argues that we can discern a distinct Schumpeterian perspective of business-politics relations. Schumpeter’s views about the pivotal role of entrepreneurs in economic development attracted substantial interest in economic sociology and in political economy. His views about the role of entrepreneurs in politics have so far however hardly been studied. The paper identifies the following four aspects as central to Schumpeter’s perspective of business-politics relations: (a) entrepreneurs and corporations drive economic change, (b) entrepreneurs and corporations are ineffective in defending their political interests and vulnerable to hostile movements, (c) the resulting divergence of the economic and the political impact of entrepreneurs and corporations makes capitalism socio-politically instable, and (d) the relationship of entrepreneurs and corporations to political institutions and public policies is primarily adaptive, rather than causative. The paper proposes a two-dimensional typology of business-politics relations that combines the Schumpeterian focus on adaptation with the Marxian focus on influence. These two dimensions - adaptation and influence - result in four ideal types: business-dominated social compromise, imposed social compromise, business dominance, and political confrontation. Examples from German welfare state history illustrate these four types. The paper suggests that the Schumpeterian and the Marxian perspective, while in contrast to each other, may be complementary and each perspective valid under different socio-political conditions.