Schumpeter’s article, originally published in Der Arbeitgeber in 1927 and supplied here in a republication, argues that entrepreneurial activity serves workers’ material interests rather than necessarily opposing them. Its progression is deliberate: estimates of capitalist growth and distribution lead to an analysis of entrepreneurial income, then to the recruitment of economic leaders, and finally to the persistence of social antagonism. Economic diagnosis, he insists, should determine what political interests can reasonably demand, not merely supply arguments for predetermined positions.
Es ist ein Irrtum zu glauben, daß die soziale Analyse den Interessentengruppen und Parteien lediglich die Argumente beistellt, die sie in ihrem Kampf verwenden.
English translation: It is a mistake to believe that social analysis merely supplies interest groups and parties with the arguments they use in their struggle.
The opening calculations seek to displace a distributive conception of workers’ advancement with a productive one. Comparing England around 1800 with 1913, Schumpeter estimates a fourfold increase in real income per head. He acknowledges that the figures are rough and unreliable; moreover, he asserts rather than demonstrates here that private profit-seeking caused this growth. Invoking Pareto’s law, he then treats relative income shares as substantially constant, rejecting both increasing relative impoverishment and a progressive equalization of incomes.
His next calculation asks how much workers could gain by redistributing upper-class consumption. From national income he deducts public expenditure and savings, treating the latter as resources for improving production rather than as a consumption fund. After assigning a basic allowance to every household, he estimates that redistribution of the remaining luxury expenditure would raise household income by only eight percent. The argument depends on those deductions and allowances: it is not simply a comparison of gross incomes. Schumpeter nevertheless draws a sweeping conclusion that reducing inequality cannot substantially improve mass living standards and may damage the incentives sustaining them.
Large individual fortunes, on this account, conceal the comparatively modest aggregate cost of entrepreneurial leadership. Exceptional rewards induce effort from many competitors who receive little or nothing; their tendency to overvalue the chance of outstanding success makes this incentive system economical. Using industrial statistics, Schumpeter estimates entrepreneurial remuneration at roughly three to four percent, while explicitly conceding the weakness of the evidence and the absence of adequate business-cycle averages. Workers consequently appear as the largest beneficiaries of enterprise, and entrepreneurs as agents receiving a relatively small commission.
The conceptual centre is his separation of entrepreneurial profit from the heterogeneous receipts recorded as business income. Rent, interest, managerial wages, speculation, cyclical gains, appreciation, temporary opportunities, and monopoly returns must be distinguished from the entrepreneur’s specific reward.
Die Durchsetzung des Neuen in der Volkswirtschaft ist die wahre Unternehmerfunktion, das, was die Unternehmertätigkeit eigentlich ausmacht und vom bloßen Verwalten und laufender Routinearbeit unterscheidet.
English translation: Carrying through what is new in the economy is the true entrepreneurial function, that which properly constitutes entrepreneurial activity and distinguishes it from mere administration and ongoing routine work.
Entrepreneurship thus means implementing new productive or commercial combinations, not simply owning capital or supervising production. Successful innovation initially escapes competition and earns exceptional profits; imitation subsequently eliminates those profits and transfers the gains to consumers through lower prices. The same process both creates the incentive and terminates its reward. Schumpeter presents this mechanism as an answer to exploitation theory. His corresponding claim against socialism is expressly economic: ideals cannot be refuted economically, but, under existing conditions, he argues that socialization would impose material losses rather than improve workers’ consumption.
The discussion then shifts from the usefulness of entrepreneurship to access to entrepreneurial positions. Schumpeter disputes the picture of a permanently closed property-owning class. Competitive pressure erodes inherited businesses unless successive generations renew them, while successful innovators rise from below.
Sie gleicht sozusagen einem Omnibus, der zwar immer besetzt ist, aber von immer anderen Leuten.
English translation: It resembles, so to speak, an omnibus that is always occupied, but always by different people.
The image distinguishes continuity of social positions from continuity of their occupants. Yet Schumpeter makes the family, rather than the individual, the unit of mobility, and connects declining fortunes to inherited capacities. His dismissal of equal opportunity therefore rests partly on biological assumptions about unequal hereditary endowments, not solely on competitive selection. He also qualifies his account historically: large trusts weaken the competitive identity between personal advancement and productive achievement. Political and bureaucratic skills can secure success independently of commercial performance, although managerial promotion opens further routes upward.
The conclusion returns to the problem that economic interdependence does not prevent actual hostility.
Rein wirtschaftlich ist es einfach falsch, daß Arbeiter und Unternehmer auf verschiedenen Seiten der Barrikaden stehen und daß das kapitalistische System mit innerer Notwendigkeit einen Interessengegensatz zwischen beiden involviert.
English translation: In purely economic terms, it is simply false that workers and entrepreneurs stand on opposite sides of the barricades and that the capitalist system necessarily entails a conflict of interest between them.
Schumpeter explains the antagonism through authority, everyday discipline, and the unequal personal stakes of bargaining: wage negotiations affect workers’ lives directly, whereas interest negotiations affect lenders’ money. Employers aggravate these tensions through pretensions to mastery, political mistakes, and resistance to reforms subsequently accepted as ordinary. The article’s distinctive contribution is therefore double: it defines entrepreneurship dynamically through innovation while distinguishing its claimed economic service from its difficult social legitimacy. Its strongest qualifications—uncertain statistics, changing corporate organization, and the lived burden of subordination—also reveal where its confident reconciliation of entrepreneurial and worker interests remains contestable.
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