There’s an intellectual timeline here, that goes more or less as follows. It goes from Marx, to Max Weber, to Schumpeter, to Talcott Parsons, to Alfred Chandler, to me.

Now, what’s the place of Marx in all this? It’s because Marx was the first person really to understand that capitalism was a dynamic sort of thing. I mean, Marx, of course, never used the term “creative destruction,” but it’s there. It’s just that Marx thought that there was a phase through which capitalism would pass on the way to the millennium of classless society. And just, you know, the heavens part, everybody’s equal, the dictatorship of the proletariat comes, and we have heaven on earth.

Weber -- in other words, what I’m talking about comes out of this grand social theory that was the habit of European intellectuals, many of them Germans, like Hegel and Marx. Others French, like August Comte. Some British, like John Stuart Mill. Then Weber, who I think had more influence on Chandler than anybody else, Weber starts to study bureaucracy, and the nature of large organizations, of any kind, whether they’re companies, armies, governments, whatever. Just what is it that happens in this? And then also Weber writes The Protestant Ethic, and The Spirit of Capitalism. Part of which is entirely mistaken, but much of which, you know, applies with particular force to the United States.

Chandler gets to Harvard after an abortive start in Southern history at the University of North Carolina, where he comes under the influence of these two sociologists who are very well known, and begins to think sociologically. Then he gets back to Harvard, and comes under the influence of Talcott Parsons, the greatest sociologist of his generation. Parsons had known Schumpeter since 1927, when Schumpeter came to Harvard as a visitor, and Parsons was still in the economics department. Weber had been an economic historian before he became a sociologist. So there’s a special kind of economics that goes all the way through this that’s inherently comparative, sociological, organizationally-oriented, rather than, say, price theory, which was all the rage in mainstream economics.

Parsons and Schumpeter were very close for a while. This is before the sociologists at Harvard College left to form the Social Relations group. They were still part of the economics department. That shift came in the early ‘30S, before Schumpeter came back permanently in 1932. But when he came back, he habitually created these study groups—the Chance, Love, and Logic Society; the Schumpeter Group of Seven Wise Men; things like that. The Rationality Group, which he did with Parsons.

Chandler is an undergraduate from 1936 to ’40, when a whole lot of this is going on. He has almost no contact with Schumpeter directly, but a whole lot of contact with Talcott Parsons, and with Frederick Merck in the history department. Merck had been a student of Frederick Jackson Turner, so there’s a Turnerian element to Chandler’s work as well. I’ll give you a brief thing to read. The latest issue of the Business History Review has seven or eight essays on Chandler, including one by me that explains part of what I’m telling you now. The other part is explained even more thoroughly in the introduction to The Essential Alfred Chandler.

So that’s the full circle, and that’s how it gets to me being so interested in Schumpeter. When I started this book, I was going to write a short, 200-page explication of the nature of capitalism, using Schumpeter as the biographical thread. What I did not know, but any fool should have been able to figure out, is that since he came to the U.S. at the age of 49, let’s say 2 million of his three-and-a-half million word total output was in German. And I was going to have to cope with that, which I figured out a way to do. I mean, my German was once much, much better than it is now, but I had to get a lot of help. But that’s the intellectual arc.

Thomas McCraw
Alfred Chandler