Capitalism, Socialism, and Democracy is an argument about the nature and future of competing economic systems, namely, capitalism and socialism, and their compatibility with democracy as a political system. In capitalism economic decisions are made by private entities, like corporations and entrepreneurs. In socialism economic decisions are made by public authorities. Schumpeter considers whether a socialist society is compatible with democracy, which he defines as a system of competition between leaders and representatives.
Capitalism, Socialism, and Democracy, published in 1942, is Joseph Schumpeter's attempt to analyze the competing economic systems of capitalism and socialism and to predict how the competition between the two would evolve. Schumpeter argues that capitalism is successful because it empowers private entrepreneurs to produce innovations and drive the production of greater wealth. However, he also argues that capitalism's success tends to undermine the social systems that support it, so its replacement by socialism—public control of the economy—is inevitable.
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