Joseph Schumpeter: Capitalism as Entrepreneurial Creative Destruction
Sombart sees the entrepreneur as the subject of capitalism who invents new economic strategies. Sombart here anticipated the Austrian-American economist Joseph Schumpeter’s (1883–1950) stress on the entrepreneur as the subject who innovates capitalism by causing creative destruction. Schumpeter defines capitalism as “that form of private property economy in which innovations are carried out by means of borrowed money, which in general, though not by logical necessity, implies credit creation” (Schumpeter 1939, 216) and where “[c]reative destruction is the essential fact” (Schumpeter 1943/2003, 83).
Sombart’s and Schumpeter’s definitions of capitalism fetishise and idealise the capitalist as capitalism’s subject and are methodologically individualist in character. The economy is reduced to the individual spontaneous activity of the entrepreneur. There is neither a capitalist class nor the working class in these definitions of capitalism. They are devoid of class, labour, surplus-value, surplus-labour, and exploitation – elements that are key for the Marxian understanding of capitalism. Sombart stresses the need to grow capital as a feature of capitalism and that technological innovation is a means for capital growth. Schumpeter has a strong focus on creative destruction via technological innovations.
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Introduction