One of the reasons that I'm not jumping on the bandwagon for Thomas McCraw's new Schumpeter biography is that I think that Jerry Z. Muller provides more insight into Schumpeter using many fewer words in The Mind and the Market, one of my favorite books for anyone interested in the history of economic thought. I'll use this post to excerpt some of Muller's chapter on Schumpeter.
Two of the most pervasive themes of Schumpeter's oeuvre are Nietzschean: the role of the superior few as a source of creativity, and the stultifying effects of the resentment of the many against the claims and creativity of the few.
On p. 294:
He argued that it was precisely the dynamism injected into capitalist society by the entrepreneur that made him an object of antipathy. For the rise of a new entrepreneur...necessarily meant the relative economic decline of those ensconced in the status quo...
In attempting to account for the appeal of socialism, Schumpeter borrowed not only from Nietzsche but from the Italian political theorist Vilfredo Pareto...Pareto's 1901 essay "The Rise and Fall of Elites," conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was "most probable and almost inevitable." Yet, he predicted...the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine, Pareto asserted, since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives.
Schumpeter was skeptical of the government's antitrust efforts...What those who criticized monopoly in the name of free competition failed to understand was that it was in the very nature of dynamic capitalism to produce high, "monopoly" profits for those who were the first to innovate successfully...large firms had to continue to innovate or face decline...
In the early 1930's, the shock of the Depression and the dominant interpretation of the Depression by intellectuals had led to a "radicalization of the public mind" in the United States, which in turn had resulted in policies that left capitalism in shackles.
It was no accident, Schumpeter thought, that capitalism had been so productive...For it appeals to, and helps create, a system of motives that is both simple and forceful. It rewards success with wealth and, no less over, it attracts the brightest and most energetic into market-related activity: as capitalist values come to dominate, a large portion of those with "supernormal brains" move toward business, as opposed to military, governmental, cultural, or theological pursuits.