Joseph Schumpeter And Karl Marx : The Philosophy Of Capitalism

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Joseph Schumpeter was an Austrian economist who wrote many critiques of Keynesianism and Marxism. A fervent supporter of capitalism, he saw capitalism as an economic success. Karl Marx was the father of scientific socialism and one of the biggest critics of the capitalist system. He saw capitalism as destined to end and collapse under its failures. Both economists believed that capitalism was destined to transition to socialism. This report touches about the morality of capitalism, specifically the system of profit-making, as perceived by the two. It will also look at how two economists with such different views of capitalism came to the same conclusion about its end.
Marx describes how capitalism is in a constant state of flux, where the
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But where Schumpeter saw the inevitable end of capitalism as pushed by the intellectual class, Marx saw it as pushed by the working class.
One of the major revolutions of capitalism according to Marx is the proletariat, the working class who must earn a wage for their labour. In the communist manifesto, Marx lays out a history of class struggle which highlights the capitalist creation of a class of persons, the proletariat, who will eventually begin a revolution that ends the “exploitation” of their labour. This exploitation is expressed in the appropriation of surplus value by capitalists according to Marx. Surplus value is understood to be the difference between the value of one’s labour in producing a good and the wage that the labourer receives (Marx 1887, p. 107). The profit of the capitalist cannot be realised without this surplus value if we accept the assumptions of Marx about the nature of wages and labour theory of value. Schumpeter had a significantly different view on the nature of profit.
Schumpeter builds upon the work of Eugen von Böhm-Bawerk, who undermined Marx’s exploitation of profit by applying his time preference theory of interest to the concept of profit. Böhm-Bawerk (1930, pp. 10-22) argued that workers were not being exploited but were in fact being advanced their marginal revenue product at a discount, saving workers from the

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