Fiscal crisis and creative destruction: Critical reflections on Schumpeter’s contemporary relevance

Abstract

Two matters addressed in the analyses of Joseph Schumpeter, namely fiscal crises to which modern ‘tax states’ are vulnerable and processes of ‘creative destruction’ intrinsic to modern capitalism, have grown steadily in significance since the mid-twentieth century. Schumpeter anticipated a continuing growth in demand for public services and forms of social provision and drew on aspects of Rudolf Goldscheid’s innovative designation of a critical new field of inquiry, ‘fiscal sociology’, to discuss fiscal limits to the state’s capacity to respond to needs and demands for social provision. The fiscal crisis symptoms identified by Schumpeter are argued to be bound up with much broader and more substantial underlying economic processes and tendencies exposed by Marx, in particular with social and economic costs arising from the necessity for continual rounds of ‘creative destruction’ which constitute an intrinsic feature of all phases in the development of the capitalist mode of production and have become even more prominent in ‘late’ globalized capitalism. The paper concludes by comparing Schumpeter’s unidirectional view of the state–capital relationship with views outlined by other social and economic analysts for whom the contradiction between capitalist economy and the public household or common good is paramount.