Joseph Alois Schumpeter (8 February 1883 – 8 January 1950) was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.
Schumpeter began his career studying law at the University of Vienna under the Austrian capital theorist Eugen von Böhm-Bawerk, taking his PhD in 1906. In 1909, after some study trips, he became a professor of economics and government at the University of Czernowitz. In 1911 he joined the University of Graz, where he remained until World War I. In 1919, he served briefly as the Austrian Minister of Finance, with some success, and in 1920-1924, as president of the private Biedermann Bank. That bank, along with a great part of that regional economy, collapsed in 1924 leaving Schumpeter bankrupt.
From 1925-1932, he held a chair at the University of Bonn, Germany. He lectured at Harvard in 1927-1928 and 1930. In 1931 he was a visiting professor at The Tokyo College of Commerce. In 1932 he moved to the United States, in 1939 he became an US citizen. Schumpeter had a highly conservative political attitude. In the beginning of WWII, the FBI investigated him for pro-Nazi leanings, but no evidence was found that he had any sympathies for Nazism.
During his Harvard years he was not generally considered a good classroom teacher, but he acquired a school of loyal followers. His prestige among colleagues was likewise not very high because his views seemed outdated and not in tune with the then-fashionable Keynesianism. This period of his life was characterized by hard work but little recognition of his core ideas.
Although Schumpeter encouraged some young mathematical economists and was even the president of the Econometric Society (1940–41), Schumpeter was not a mathematician, but rather an economist, and tried instead to integrate sociological understanding into his economic theories. From current thought it has been argued that Schumpeter's ideas on business cycles and economic development could not be captured in the mathematics of his day - they need the language of non-linear dynamical systems to be partially formalized.
Schumpeter claimed that he had set himself three goals in life: to be the greatest economist in the world, to be the best horseman in all of Austria and the greatest lover in all of Vienna. He said he had reached two of his goals, but he never said which two. Although, he is reported to have said that there were too many fine horsemen in Austria for him to succeed in all his aspirations!
Schumpeter's most popular book in English is probably Capitalism, Socialism and Democracy. This book opens with a treatment of Karl Marx. While he is sympathetic to Marx's theory that capitalism will collapse and will be replaced by socialism, Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase "creative destruction", and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways.
Schumpeter's theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where "liberal capitalism" was evolving into democratic socialism because of the growth of workers' self-management, industrial democracy and regulatory institutions. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is, however, limited, and this lack, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.