SSE/EFI Working Paper Series in Economics and Finance
No 370:
Where Schumpeter was nearly Right - the Swedish Model and Capitalism, Socialism and Democracy
Magnus Henrekson ()
and Ulf Jakobsson ()
Abstract: In Capitalism, Socialism and Democracy Joseph A.
Schumpeter concluded that socialism would eventually displace capitalism in
Western democracies. This would come about as a result of the superior
performance of capitalism. We extract six "stylized" propositions that are
essential elements of Schumpeter's prediction about the fate of capitalism.
These propositions are confronted with the development of the Swedish
economy. The three main results of the analysis are:
(1) The evolution
of the Swedish economy closely followed Shumpeter's predictions until about
1980: Large firms became increasingly predominant in production and
innovative activity, ownership of firms became more and more concentrated,
individual entrepreneurship waned in importance, the general public grew
increasingly hostile towards capitalism, and by the late 1970s explicit
proposals for a gradual transfer of ownership of firms from private hands
were launched.
(2) Design of tax and industrial policies fueled a
development of the economy along the lines predicted by Schumpeter. In
general, the policies discouraged private wealth accumulation. In
particular, the policies favored concentration of firms and concentration
of private ownership.
(3) The turning point away from the path to
socialism coincides with real world developments that disclosed two major
flaws in Schumpeter´s analysis. First, the ever more obvious failure of
socialism in Eastern Europe went against Schumpeter's assertion that
socialism can work. Second, Schumpeter, who thought that modern technology
would make the giant corporation increasingly predominant, did not foresee
the revival of entrepreneurship that took place in the Western countries
around 1980.
Keywords: Corporatism; entrepreneurship; industrial policy; Schumpeter; Swedish Model; (follow links to similar papers)
JEL-Codes: M13; O38; P16; (follow links to similar papers)
29 pages, April 3, 2000
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- This paper is published as:
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Henrekson, Magnus and Ulf Jakobsson, (2001), 'Where Schumpeter was nearly Right - the Swedish Model and Capitalism, Socialism and Democracy', Journal of Evolutionary Economics, Vol. 11, August, No. 3, pages 331-358
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