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

This article published in 1951 is Solterer's presidential address to the Association for Social Economics. In it Solterer sets forth two tasks. First he shows that Schumpeterian economics is in harmony with the teachings of the Catholic church. Second he calls attention to some methods for furthering social justice in the workplace. As to the first, Solterer points to Schumpeter's embrace of the vocational group ideas set forth in the 1931 papal encyclical Quadragesimo Anno as a viable alternative to the collective state in the face of the decomposition of the market system in the Great Depression. Schumpeter warns, however, that the vocational group system calls for a new sense of social responsibility. As to the second task, Solterer advocates in particular profit sharing as a way to reconcile differences between labor and management and to encourage industrial peace. His article ends with a warning the 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 the good and bad fortunes of the enterprise. Keywords: Schumpeter, Catholic social teaching, subsidiarity, social justice, vocational group, Quadragesimo Anno ********** I Among the great economic theorists of our generation, only Joseph Alois Schumpeter explicitly recognized that "a reorganization of society along the lines of Quadragesima Anno" is a practical alternative to the march into centralist socialism an alternative to the 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 the 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 a development of bureaucratic control is not at all inconsistent with a labor capitalism, standing between syndicalism on the one hand and a new feudalism on the other. In common with others, Schumpeter saw that a general inflation would be the instrument by which the new order would come to pass although the inflation would be engendered by policies having quite different intentions. In forecasting the future, Schumpter predicted that a reorganization of society along non-socialist lines is a not unlikely alternative in Catholic countries, or in countries where the position of the Church is sufficiently strong. II My main concern this morning is not with such matters of forecasting the most likely future form of society. In keeping with the purposes of our Association, I shall rather turn to an examination of Schumpeter's work with respect to the relation between ethics and economics. As you all realize, this is a very difficult field. There is always the dangerous temptation to deny validity either to ethics or to economics, and thus to fall into the error of pan-economics--the denial that the moral law is involved in economic relations at all; or on the other hand (and may I observe that this is the more common error among Catholics), to fall into the error of pan-ethics, to assert that there is no economic law. Pius XI warned us against both these errors when he wrote in Quadragesima Anno, ([section]41), "the Church can in no wise renounce the 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 the moral law." This morning I propose to show that Professor Schumpeter's view of the relationship between economics and ethics is in harmony with Catholic teaching. …