Dale Cramer and Charles Leathers’s analysis of economist and social theorist Joseph Schumpeter’s views on corporatism (discussed here) rely heavily on Schumpeter 1945 Montreal speech to a group of Quebec businessmen, “How to Preserve Private Enterprise: The Importance of Professional Organizations.” The speech, delivered originally in French, was translated into English by Michael G. Prime and David R. Henderson and published as “Schumpter on Preserving Private Enterprise,” 7 History of Political Economy 293 (1975). In their brief introduction to the translation, Prime and Henderson express some bafflement concerning Schumpeter’s concrete political views in the 1940s, though they note that “[t]here is little doubt that he regarded utilitarian liberalism as an inadequate basis for a durable social order.” Being that he was a critic of both fascism and bolshevism, the translators estimate that “Schumpeter’s sympathies lay with an aristocratic social order” and that “he thought that social reconstruction along the lines suggested by [Pope Pius XI’s] Quadragesimo Anno (QA), as an alternative to impractical laissez-faire or a totalitarian state, was a possibility worth exploring.”
Rejecting out of hand utilitarian liberalism, Schumpeter is no less clear in the speech that he also rejects the idea of class struggle, which he sees as “one the worst theories of industrial relations” on the grounds “that the material progress of the working class is closely aligned with the success of private enterprise[.]” Schumpeter prefers to look at the relationship between businessmen and workers, and the social organism as a whole, as containing elements of both solidarity and antagonism. Using a military unit as an example, Schumpeter notes that it is only successful if the soldiers cooperate with the commander, though mistakes, presumably on the part of either the soldiers or the commander, will yield antagonism. This example dovetails into Schumpeter’s later point that a lack of leadership is one of the main causes of social decomposition. Here are Schumpeter’s words: “Families, workshops, societies do not function if nobody accepts his duties, if no one knows how to make himself a leader and if each applies himself to constantly drawing up a balance-sheet of his personal and immediate benefits and costs at any given time.”
But this dysfunctional model, according to Schumpeter, is precisely what utilitarian liberalism, which “recognizes no other regulatory principle that that of individual egoism,” ultimately upholds. It is worth quoting in full Schumpeter’s recommendation on how this problem may be remedied.
Will the solution to this grave problem spring from authoritarian statism, which may doubtless assume more than one form but of which the perfect example is bolshevism? Not at all. Does it come from democratic socialism? Again, no. But where then is it necessary to look? It will be necessary to turn to corporate organization in the sense advocated by Quadragesirno Anno [QA]. It is not the economist’s role to praise a moral message of the Pope. But he can draw out an economic doctrine from it. This doctrine does not call upon false theories. It does not rest on so-called tendencies that do not exist. It recognizes all the facts of the modern economy. And, while bringing a remedy to the present disorganization, it shows us the functions of private initiative in a new framework. The corporate principle organizes but it does not regiment. It is opposed to all social systems with a centralizing tendency and to all bureaucratic regimentation; it is, in fact, the only means of rendering the latter impossible.
There are several striking features in this passage with the most striking perhaps being Schumpeter’s belief that QA’s “doctrine does not call upon false theories.” It is commonplace for Catholic libertarians dedicated to so-called “Austrian Economics” to dismiss QA’s economic prescriptions out of hand precisely because they appear to rely on “false theories,” or rather theories which are not necessarily “Austrian.” More distressing for Catholic libertarians is QA’s invitation to look at “the functions of private initiative in a new framework,” that is, one divorced from the individual egoism which contemporary liberal economic ideology holds out as the root cause of wealth creation and social prosperity. Although certain aspects of economic reality have changed over the past 70 years, they appear to not have changed so much as to divorce QA from that reality. Those who may wish to hold that such a divorce has indeed been inaugurated have yet to make their case.
Continuing on, Schumpeter mentions that “good men whose minds who are complete open to the message of Pius XI see in it only the vision of an ideal” before offering the reminder that “the Pope was not speaking ‘from up in the clouds’” but rather “showing us a practical method to solve practical problems of immediate urgency,” the sort which economic liberalism cannot solve. It is therefore to corporatism that society must look. Here again it is worth quoting Schumpeter at length:
To give only one example, let us ask ourselves what happens in a depression. Business firm A cannot work because business firm B is not working; B can’t because C finds itself incapable of producing, and so on. No single firm can, by its own action, break the “vicious circle.” Whence the closing down of an entire industry, a closing down that ends only too easily in the ruin which menaces all enterprises and of which the workers are the victims. But the corporate action of professional associations, by the fact that it guarantees to every individual enterprise that it will not be the only one to advance, that consequently it will find in the production of others the demand for its output, is the most natural remedy for the situation. It follows that the corporatism of association would eliminate the most serious of the obstacles to peaceable cooperation between worker and owner. In the economic world stabilized by corporate action, the idea of the “annual wage” would no longer meet with insurmountable obstacles and would no longer impose intolerable risks upon anyone.
To prove that he didn’t have his own head in the clouds when making these remarks, Schumpeter “cannot deny that [for the corporatist model] to succeed it will be necessary first to resolve the problem of organization.” Because “corporatism of associations is not a mechanical thing[,]” “[i]t cannot be imposed or created by legislative power. It does not tend to materialize itself. It can be brought to birth only by the action of free men and by the faith which inspires them.” That is, corporatism’s “main problem, as well as its glory, is summed up in the fact that, more than an economic and social reform, it implies a moral reform.”
These challenging words from seven decades ago are rendered even more challenging today due to the distressing reality that the only authentic and lasting wellspring of moral reform, the Holy Catholic Church of Jesus Christ, is steered by so many who seem to have no interest in inaugurating one.