Development and Underdevelopment in the History of Economic Thought

Competition in Transitional Processes: Polanyi & Schumpeter

Hager Theresa, Institute for Comprehensive Analysis of the Economy, University of Linz
Rath Johanna, ICAE, Johannes Kepler University Linz
Heck Ines, University of Greenwich, London

We examine parallels and differences in the analyses of societal transition by Karl Polanyi and Joseph A. Schumpeter. We argue that although their understanding of historical processes differs – transformational-political vs. evolutionary-natural – the central mechanism of change they describe is the same. We identify three spheres essential to both authors’ works: the economic, the political and the socio-cultural sphere. Polanyi and Schumpeter describe an expansion of the economic sphere culminating in a subordination of the other parts of society. In capitalism, this dominance stems from capitalism’s emergence as well as the concept of competition. The consequence is a profound change in societal relations. Changes in the socio-cultural sphere, in turn, produce changes in the political sphere that bring about detrimental consequences for democracy. In our paper, we carve out the similarities as well as the differences in the respective theories, clarify the role competition plays therein and discuss the consequences for the political process. We adopt an analytical framework that puts the nearly analogous mechanism of change in the centre. This in turn enables us to make use of the complementarity and to gain valuable insights on the interdependence of capitalism and democracy that can inform trends and phenomena that are currently observed.

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Keywords: societal change, social norms, transformation, evolution, Schumpeter, Polanyi

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