Schumpeter and the Rise of Modern Environmentalism

Abstract:     
In Capitalism, Socialism and Democracy (CSD, 1942), Schumpeter presents his paradoxical thesis that capitalism will destroy its own foundation, not by failure but by its success. He argues that the emergence of unfavourable circumstances will activate strong opposition from social critics and intellectuals. Considering the recent growth in national and international environmental legislation and the subsequent emergence of rather vague ecological concepts like sustainable development and the precautionary principle - both challenging economic growth - one could argue that modern environmentalism is one of the most powerful forces that will further impact capitalism as we know it. Did Schumpeter foresee this evolution and what are the mechanisms that did lead to this situation? We discuss aspects of Schumpeterian issue entrepreneurship and relate these to theories on the emergence of environmental regulation, the expansion of environmental organisations, the use of new instruments in environmental policy and pro-active business strategies. Where possible, recent developments in climate policy, acid rain policy and biotechnology policy are integrated in the analysis.

Keywords: Environmental policy, political entrepreneurs, economic instruments

JEL Classifications: A14, B31, Q20

Working Paper Series