The German Genius

philosophy but from pragmatic self-interest. This flatly contradicted Marx’s analysis. 11 The second element of Schumpeter’s outlook was that profit, as generated by entrepreneurs, was temporary. Whatever innovation was introduced would be followed up by others in that sector of industry or commerce, and a new stability eventually achieved. This meant that capitalism was inevitably characterized by cycles of boom and stagnation. As a result, Schumpeter’s view of the 1930s was diametrically opposite to Keynes’s (that economies could spend their way out of recession). Schumpeter thought the Depression was to an extent inevitable, a cold shower of reality. By the time the war began, he had developed doubts that capitalism could survive. He thought that, as a basically bourgeois activity, it would lead to increasing bureaucratization, a world for “men in lounge suits” rather than buccaneers. In other words, it contained the seeds of its own ultimate failure, an economic success but not a sociological one.
    If Mannheim took planning for granted in the postwar world, and if Schumpeter was lukewarm about it, the third Austro-Hungarian, Friedrich von Hayek, was downright hostile. Born in 1899, Hayek came from a family of scientists, distantly related to the Wittgensteins. He took two doctorates at the University of Vienna, became a professor of economics at the LSE in 1931, and acquired British citizenship in 1938. He loathed Stalinism and fascism equally, but he was much less convinced than the others that the same centralizing and totalitarian tendencies that existed in Russia and Germany couldn’t extend eventually to Britain and even America. In The Road to Serfdom (1944), he set out his opposition to planning and linked freedom firmly to the market, which, he thought, helped produce a “spontaneous social order.” He was critical of Mannheim, regarded Keynesian economics as “an experiment” that in 1944 had yet to be proved, and reminded his readers that democracy was not an end in itself but “essentially a means, a utilitarian device for safeguarding internal peace and individual freedom.” He acknowledged that the market was less than perfect, but he reminded his readers that the rule of law had grown up at the same time as the market, in part as a response to its shortcomings: the two were intertwined achievements of the Enlightenment. 12 His reply to Mannheim’s point about the importance of having greater sociological knowledge was that markets are “blind,” producing effects that no one can predict, and that that is part of their point, part of their contribution to freedom, the “invisible hand” as it has been called. For him, therefore, planning was not only wrong in principle but impractical. 13 Hayek then went on to produce three reasons why, under planning, “the worst get on top.” The first was that the more highly educated people are always those who can see through arguments and don’t join the group or agree to any hierarchy of values. Second, the centralizer finds it easier to appeal to the gullible and docile; and third, it is always easier for a group of people to agree on a negative program—on the hatred of foreigners or a different class, for example—than on a positive one. He conceded that the tendency to monopoly needed watching and should be guarded against, but he saw a greater threat from the monopolies of the labor unions under socialism.
    As the war was ending, a fourth Austro-Hungarian, Karl Popper, released The Open Society and Its Enemies. Born in Vienna in 1902, Popper flirted with socialism, but Freud and Adler were deeper influences, and he attended Einstein’s lectures in Vienna. He completed his PhD in philosophy in 1928, then worked as a social worker with children who had been abandoned after World War I, and as a teacher. He came into contact with the Vienna Circle, and was encouraged to write. 14 His first books, Die beiden Grundprobleme der Erkenntnistheorie ( Two Fundamental Problems of the Theory of Knowledge ) and Logik der Forschung ( The Logic of Scientific Discovery ), attracted enough attention for him to be invited to Britain in the mid-1930s for two long lecture tours. 15 But when Moritz Schlick was assassinated in 1936 by a Nazi student, Popper, who had Jewish blood, accepted an invitation to teach at the University of Canterbury in New Zealand. It was in the Southern Hemisphere that he produced his next two books, The Poverty of