Front Page Titles (by Subject) Schumpeter and Papal Social Theory - Literature of Liberty, Autumn 1982, vol. 5, No. 3
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Schumpeter and Papal Social Theory - Leonard P. Liggio, Literature of Liberty, Autumn 1982, vol. 5, No. 3 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Schumpeter and Papal Social Theory
“Schumpeter's Corporatist Views: Links Among His Social Theory, Quadragesimo Anno, and Moral Reform.” History of Political Economy 13 (Winter 1981): 745–771.
Joseph Schumpeter was one of several prominent social thinkers of the first half of our century to attempt an analysis of the legitimacy crisis afflicting capitalism during that period. Profs. Cramer and Leathers outline Schumpeter's diagnosis of capitalism's malaise, and they assemble hints from his writings and speeches concerning a likely remedy for this unsatisfactory situation. In the course of their discussion, they find close and perhaps not fortuitous parallels between Schumpeter's views and views expressed in the first two papal social encyclicals: Rerum Novarum and Quadragesimo Anno.
Schumpeter saw the sociopsychological foundations of capitalism to be in a state of rapid collapse. He perceived the cause of this debacle in the break-up of family arrangements which had hitherto allowed the bourgeoisie to serve as the governing class of Western society. The socially redeeming value of bourgeois individualism was its long-range character. The real basis of the old entrepreneur's effort and drive was his desire to move his family into a higher social status and a more secure economic situation. Dynastic motivation tended to cause the entrepreneur to take the long view and to acquire assets not necessary for his own short-run satisfaction.
The rise of the anonymous public corporation has drastically reduced the familial aspect of economic activity in capitalist countries. In its place, there has arisen a trend toward short-run profiteering in which managers directing the corporation concentrated more and more on end-of-the-year profit statements and their individual advancements.
Interestingly, both Popes Leo XIII and Pius XI likewise stressed the primacy of the family unit in society along with the natural right of property ownership. Leo wrote that the individual right to property can be “seen in a much stronger light if…considered in relation to man's social and domestic obligation,” i.e. his family. Capitalism fostered the “evil of individualism” which tended to undermine family integrity and solidarity in favor of an unbridled pursuit of personal gain. Similarly, Leo viewed socialism as an illegitimate system because it threatened to disturb the family.
Thus, clear parallels exist between Schumpeter's and the Popes' analyses of the sickness of Western society. Their prescriptions for a cure shjow certain resemblances as well. Profs. Cramer and Leathers admit that Schumpeter's views in this regard must be gleaned and reassembled from various writings and lectures. Nonetheless, they believe they find strong evidence that Schumpeter favored (at least ideally) the establishment of a corporatist society. Under such a system, voluntary associations would cooperate toward the orderly and mutually beneficial development of the economy—without substantial intrusion by the state. Such groups closely resemble the “vocational associations” proposed by Pius XI in Quadragesimo Anno. Schumpeter specifically referred to that encyclical in a 1945 speech in Montreal as he discussed the possibilities of reform.
In that same speech, however, Schumpeter indicates that, before corporatism could be implemented in the West, a “moral reform,” a basic change in human values, would have to take place. Pius XI would concur, setting forth Christian values as a prerequisite for the establishment of a just society. For Schumpeter, moral reform meant something more secular, namely a rejection of the hedonistic, short-sighted, and narrowly focused ideas of utilitarian individualism. In a democratic society stripped of its liberal fallacies, it would be possible to erect a corporatism in which the war of conflicting interests would be replaced by harmony and cooperation between related economic interest groups.