Creative Destruction

Joseph Schumpeter

Capitalism, Socialism and Democracy, written in 1949.

excerpt:

The incessant tendency toward larger institutions attacks the very institutional framework of the capitalist order itself. private property and free contracting. With the exception of the corporation that is practically owned by a single individual or family, the figure of the proprietor, and with it the specifically proprietary interest, have vanished from the picture.

Instead there are the salaried executives and managers and submanagers; the big stockholders and the small stockholders. The first group tends to adopt the employee mentality and does not identify itself with the stockholder interest; the second group is removed from both the functions and attitudes of the owner; the third group do not care much about what for most of them is but a minor source of income, unless they are out to exploit their nuisance value. No element of any of these three groups is truly characterized by the term "Property."

In its full vitality, "freedom of contracting" meant individual contracting regulated by individual choice between an indefinite number of possibilities. Today, there is only the stereotyped, unindividual, impersonal and bureaucratized contract involving giant concerns and impersonal masses of workers and consumers. The void is being filled by a tropical growth of new legal structures.

Thus, the capitalist process pushes into the background all those institutions, the institutions of property and free contracting in particular, that expressed the needs and ways of the truly "private" economic activity.

The capitalist process, by substituting a mere parcel of shares for the walls and the machines in a factory, takes the life out of the idea of property. It loosens the grip that once was so strong - the legal right to do as one pleases with one's own; the grip also in the sense that the holder of the title loses the will to fight for "his" factory and his control over it, to die if necessary on its steps.

This evaporation of what we may term the material substance of property - its visible and touchable reality - affects not only the attitude of holders but also that of the workmen and of the public in general.

Dematerialized, defunctionalized and absentee ownership does not impress and call forth moral allegiance as the vital form of property did. Eventually, there will be nobody left who cares to stand for it - nobody within and nobody without the precincts of the big concerns.