Comparison of Capitalist Dynamics in Marx and Schumpeter

Seminar paper from the year 2006 in the subject Business economics - Economic and Social History, grade: A, McGill University, language: English, abstract: Joseph Schumpeter was born the same year Karl Marx died. One might say Schumpeter was destined to follow in Marx's footsteps. Marx had involved himself in the study of Capitalism and became a great source of influence for Schumpeter who elaborated on his theories. An essential part of their study was devoted to Capitalist Dynamics. Their views on the subject show fundamental similarities but demonstrate several differences as well, which are explained in part by their different experience of economic history. This paper will focus on comparing and contrasting the capitalist dynamics of Karl Marx and Joseph Schumpeter, their theories on what Capitalism is driven by and how it evolves. As a starting point, it is interesting to distinguish Marx's and Schumpeter's opposed feeling of Capitalism. Marx studied the laws of motion of Capitalism because he was concerned about the exploitation of workers and thus was against Capitalism. Schumpeter, on the other side, approved of Capitalism and considered free market Capitalism the 'best economic system'. Marx believes that unemployment will increase as workers are replaced by machines and that Capitalism impoverishes the masses. On the other side, Schumpeter believes that Capitalism can ameliorate the conditions of the workers: 'The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses. It does so through a sequence of vicissitudes, the severity of which is proportional to the speed of the advance. But it does so effectively.' Karl Marx, however, was not completely against Capitalism as it 'rescued a considerable part of the population from the idiocy of rural life'.