Schumpeter vs. Minsky on the Evolution of Capitalism and Entrepreneurship

In the course of their lives, both Joseph Schumpeter and Hyman Minsky developed a theory of business cycles and of capitalist development. Minsky was influenced by Schumpeter during the period he spent at Harvard University in 1942 and he thought that Schumpeter’s vision of the capitalist process required integration of the financial markets and investment behaviour: roughly speaking, Minsky’s financial Keynesianism was what Schumpeter needed to complete his own theory of the development of a capitalist economy. Minsky explored an even broader historical framework during the last decade of his life: his theory of capitalist development was forged along the lines of the idea that there are many types of capitalism. In this paper, I shall focus particularly on this analysis with the endeavour to up-date his taxonomy, taking into account the process of global financialization, and comparing it with Schumpeter’s previous scrutiny into the evolution of capitalism. On one hand, in fact, in his 1942 book Schumpeter stressed that in the last stages of capitalist evolution, entrepreneurship would end up in impasse, and he forecast that a socialist form of society would inevitably emerge from an equally inevitable disintegration of capitalist society. On the other hand, Minsky made it clear that the evolution of the capitalist systems is not necessarily a progressive process since speculative activity by money managers, globally conceived, may crowd out entrepreneurship and bring about profound global financial fragility. Both Schumpeter’s and Minsky’s theories of capitalist development continue to guide us and challenge us to explore important questions regarding the evolution of capitalism, although their analyses of this evolution showed different results.