Primitive Accumulation of Capital - Schumpeter's Critique of Marx's Theory

Schumpeter's Critique of Marx's Theory

The economist Joseph Schumpeter disagreed with the Marxist explanation of the origin of capital, because Schumpeter did not believe in exploitation. In liberal economic theory, the market returns to each person the exact value she added into it; capitalists are just people who are very adept at saving and whose contributions are especially magnificent, and they do not take anything away from other people or the environment. Liberalists believe that capitalism has no internal flaws or contradictions; only outside threats. To liberalists, the idea of the necessity of violent primitive accumulation to capital is particularly incendiary. Schumpeter wrote rather testily:

" presented itself first to those authors, chiefly to Marx and the Marxists, who held an exploitation theory of interest and had, therefore, to face the question of how exploiters secured control of an initial stock of 'capital' (however defined) with which to exploit – a question which that theory per se is incapable of answering, and which may obviously be answered in a manner highly uncongenial to the idea of exploitation" (Joseph Schumpeter, Business Cycles, Vol. 1, New York; McGraw-Hill, 1939, p. 229).

Schumpeter argued that imperialism was not a necessary jump-start for capitalism, nor is it needed to bolster capitalism, because imperialism pre-existed capitalism. Schumpeter believed that, whatever the empirical evidence, capitalist world trade could in principle just expand peacefully. If imperialism occurred, Schumpeter asserted, it has nothing to do with the intrinsic nature of capitalism itself, or with capitalist market expansion. The distinction between Schumpeter and Marx here is subtle. Marx claimed that capitalism requires violence and imperialism—first, to kick-start capitalism with a pile of booty and to dispossess a population to induce them to enter into capitalist relations as workers, and then to surmount the otherwise-fatal contradictions generated within capitalist relations over time. Schumpeter's view was that imperialism is an atavistic impulse pursued by a state independent of the interests of the economic ruling class.

"Imperialism is the object-less disposition of a state to expansion by force without assigned limits... Modern Imperialism is one of the heirlooms of the absolute monarchical state. The "inner logic" of capitalism would have never evolved it. Its sources come from the policy of the princes and the customs of a pre-capitalist milieu. But even export monopoly is not imperialism and it would never have developed to imperialism in the hands of the pacific bourgeoisie. This happened only because the war machine, its social atmosphere, and the martial will were inherited and because a martially oriented class (i.e., the nobility) maintained itself in a ruling position with which of all the varied interests of the bourgeoisie the martial ones could ally themselves. This alliance keeps alive fighting instincts and ideas of domination. It led to social relations which perhaps ultimately are to be explained by relations of production but not by the productive relations of capitalism alone." (Joseph A. Schumpeter: The Sociology of Imperialism, 1918).