Quadragesimo Anno: Schumpeter's alternative to the omnipotent state*

Abstract

This article published in 1951 is Solterer's presidential address to Association for Social Economics. In it Solterer sets forth two tasks. First he shows that Schumpeterian economics is in harmony with teachings of Catholic church. Second he calls attention to some methods for furthering social in workplace. As to first, Solterer points to Schumpeter's embrace of vocational group ideas set forth in 1931 papal encyclical Quadragesimo as viable alternative to collective state in face of decomposition of market system in Great Depression. Schumpeter warns, however, that vocational group system calls for new sense of social responsibility. As to second task, Solterer advocates in particular profit sharing as way to reconcile differences between labor and management and to encourage industrial peace. His article ends with warning economic stability is rooted not in price stability or full employment but in business enterprises wherein everyone instructed and motivated by the ways of justice shares in both good and bad fortunes of enterprise. Keywords: Schumpeter, Catholic social teaching, subsidiarity, social justice, vocational group, Quadragesimo ********** I Among great economic theorists of our generation, only Joseph Alois Schumpeter explicitly recognized that a reorganization of society along lines of Quadragesima Anno is practical alternative to march into centralist socialism an alternative to development of an omnipotent, bureaucratic state (Schumpeter 1950). It is true that others have arrived at essentially similar conclusions, as for example Professor J. M. Clark with his formula of responsible individuals in responsible groups, but these others give no indication of familiarity with Catholic social philosophy. I shall not concern myself on this occasion with Schumpeter's prognosis of future. His reasons for believing that economic control--the making of decisions will continue to be transferred from private individuals and privately owned firms to public authority are well known. So also is his realization that such development of bureaucratic control is not at all inconsistent with labor capitalism, standing between syndicalism on one hand and new feudalism on other. In common with others, Schumpeter saw that general inflation would be instrument by which new order would come to pass although inflation would be engendered by policies having quite different intentions. In forecasting future, Schumpter predicted that reorganization of society along non-socialist lines is not unlikely alternative in Catholic countries, or in countries where position of Church is sufficiently strong. II My main concern this morning is not with such matters of forecasting most likely future form of society. In keeping with purposes of our Association, I shall rather turn to an examination of Schumpeter's work with respect to relation between ethics and economics. As you all realize, this is very difficult field. There is always dangerous temptation to deny validity either to ethics or to economics, and thus to fall into error of pan-economics--the denial that moral law is involved in economic relations at all; or on other hand (and may I observe that this is more common error among Catholics), to fall into error of pan-ethics, to assert that there is no economic Pius XI warned us against both these errors when he wrote in Quadragesima Anno, ([section]41), the Church can in no wise renounce duty which God entrusted to her authority, not of course in matters of technique for which she is neither suitably equipped nor endowed by office, but in all things that are connected with moral law. This morning I propose to show that Professor Schumpeter's view of relationship between economics and ethics is in harmony with Catholic teaching. …