Of himself, Joseph Schumpeter is reported to have said that “my ambition was to be the greatest lover in Vienna, the greatest horseman in Austria, and the greatest economist in the world. In one of those goals, I have failed.”
Joseph Schumpeter: The illuminator of modernity
By Anthony Kila
Today, it is difficult, if not impossible for anyone, let alone students of economics or business studies, politics or management, sociology or history to imagine any society or process of production and consumption of goods and services without factoring the role of the entrepreneur, discussions and arguments at best would be about the public or private entrepreneur or manager.
General education indeed teaches about the four main factors of production which include land, labour, capital and yes entrepreneurship. It seems very obvious and even intuitive to consider entrepreneurship as a part of any process that satisfies the need of two or more interacting human beings that are not linked together by blood or love. Things were not however always this way.
The founding fathers of economics, as we know it today, did not include entrepreneurship in their thoughts and teachings. David Ricardo, Adam Smith, Karl Marx and most of those that followed the tradition that they founded limited their contemplations and shared wisdoms to land that belonged to the aristocrats, labour supplied by workers and capital provided by merchants.
We had to wait till Jean-Baptiste Say used that term in the early 19th century when he explained that the entrepreneur is the one that shifts economic resources out of an area of lower productivity into an area of higher one and of greater yield. For the kind of modern and fuller understanding of the concept of entrepreneurship we have today, we had to wait till the 19th century, and in it, the appearance of a thinker that theorized and expatiated the notion of entrepreneurship as well as the role and profile of the entrepreneur.
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The thinker that did the theorisation and expatiation of entrepreneurship for us is our Unforgettable of the day, his name is Joseph Schumpeter. He was a teacher, writer, finance minister and yes, a political economist. Of himself, Joseph Schumpeter is reported to have said that “my ambition was to be the greatest lover in Vienna, the greatest horseman in Austria, and the greatest economist in the world. In one of those goals, I have failed”. Those who knew him never agreed on which was the goal he failed in.
Born on February 8, 1883 in Moravian region of the old Austro-Hungarian Empire (now part of the Czech Republic), to catholic German speaking parents who named him Joseph Alois Schumpeter, his father was a factory owner who died when Joseph Schumpeter was a boy of four and he was raised by his mother who moved the family to Vienna. A move that would shape Schumpeter’s education and whole life.
He started his professional career with a doctorate degree in law but academia and economics, as history has shown, were the real calling. In his rich and eventful life of just sixty-seven years (marked by a series of personal pain and tragedy, professional success and failures), Joseph Schumpeter not only traveled across the main capitals of Europe, he also practiced law in Cairo (Egypt) then studied, taught and wrote about the most defining elements of modern societies.
Two of the most known concepts that modern society owes to Joseph Schumpeter’s knowledge include the notion of entrepreneurship presented as a peculiar and crucial element of the modern society and the concept of innovation linked to competition and progress that he presents and explains in a way radically different from how we had been taught for centuries.
In explaining growth and innovation, he moved away from the idea of gradual and passive growth towards equilibrium until margins are totally eroded. Schumpeter talks about creative destruction in which growth does not come from a continuum but from an occurrence that interrupts the ongoing process in a sometimes brutal and painful way to make way for a better order. For Schumpeter, only organizations that adapt to the new order that change brings can survive and grow, the ones that cannot will simply perish.
Joseph Schumpeter explains entrepreneurship as revolutionary process that culminates with the discovery, invention and introduction of new popular products (and or service), new value adding markets, new methods of production and or new forms of organization. The revolutionary in Schumpeter’s revolution, his hero, is the entrepreneur who is not only necessarily nor just an investor but agent of change that comes to fore thanks to his or her vision, dynamism, outstanding creativity, conscientiousness and determination that come along once in a while to disrupt the way things are done and what is being done.
For Schumpeter, development (the essence of modernity I add) is possible thanks to the hero (the entrepreneur) that has the audacity, resolve and gravitas to bend and break the way things are done. For Schumpeter this revolutionary agent of change is the leader par excellence.
As if talking to the postmodernists of our time, amazingly and as a testament to the depth of the man whose knowledge and position was not just based on economics but relied on his knowledge of and passion for history, law, sociology and other studies, Schumpeter warned us not to confuse or interchange the entrepreneur for other kind of leadership such as military or political leadership. Unlike the politician that is charged to act in the interest of the many and therefore needs to persuade the most (using law and morality), the entrepreneur needed only to persuade his source of finance (bank manager) and this is done by focusing on viability measured by profit.
Joseph Schumpeter’s teachings were published in early 1930s, given the relationship we now have in most parts of the world between finance and politics, markets and government, I think it is time we rediscover Joseph Schumpeter and give more recognition to his thoughts and methods of study and teaching.
With the aid of Joseph Schumpeter’s teachings as one of the tools for analyzing and managing our societies, many more are likely to note and question the profile and nature of many politicians as well as the link between public policies and sectors of the society. Whilst at it, we might as well have a look at the profile and contributions of the most rewarded members of the society. It might also help to ask ourselves who are the true agents of development in our societies, who are those that benefit most from societal development, who are those that contribute most and how are we treating each one?
- Join me if you can @anthonykila to continue these conversations.
- Anthony Kila is Institute Director at the Commonwealth Institute of Advanced and Professional Studies. www.ciaps.org.
