I want to start this contribution with a personal remark why I was particularly pleased when I was asked to write a chapter on Eduard März and Schumpeter. The reason is that it gives me not only a chance of adding a small item to the picture of Schumpeter as he is seen by a former student – and a rather special student as we shall see – but also to introduce Eduard März, an important Austrian economist and economic historian and much appreciated friend who died twenty years ago, to a wider (non-German reading) audience. Footnote 1

This is done in the opening paragraphs which give a short summary of März´s roots and work. This will also serve as a background when we deal with his relations to Schumpeter and Schumpeter´s theories.Footnote 2

Eduard März (1908-1987) was born in Lemberg as the son of a Jewish family, the father being a watchmaker, the mother a teacher. Soon after his birth the family moved to Vienna where März went to school attaining afterwards – while working to support the meagre family income – a degree of business economics (Diplomvolkswirt) at the Advanced School for World Trade (now Economic University of Vienna). This helped him to get a job with the IBM which he held while studying at the same time political science (“Staatswissenschaften”) at the University of Vienna. Shortly before he could finish his studies in 1938 Hitler invaded Austria and März – being a Jew – had to leave the university. With no chances to survive he left the country and arrived shortly before the war via Switzerland and Turkey in the United States. There he could take up his IBM connection but started at the same time to study economics at Harvard University where he attended lectures of such outstanding economists as Schumpeter, Haberler, Hansen, and Chamberlin. After obtaining his MA in 1943 he volunteered to join the US Navy. On his return in 1945 he took up his PhD studies under Schumpeter which he finished in 1947 with a dissertation on the economic consequences of the break-down of the Habsburg Empire.

In the following years März taught economics in several American universities. In 1953 he decided to return to Vienna where he worked to begin with as a consultant at the main commercial bank (Creditanstalt). In 1956 he became head of the research department of the influential Chamber of LabourFootnote 3 which under his direction became an important centre for theoretical and policy research. There he stayed until his retirement in 1973. In the following years until his death he lectured as professor and guest professor at the universities of Salzburg and Vienna on economic theory and economic history.

März´s scientific background was formed by the world in which he lived. The economic misery of post-first world war Vienna led him at an early stage to an engagement in the labour movement which he maintained all through his life. In the inter-war years in “Red Vienna” he came early into touch with the Austro-Marxists and their Marxist studies which laid a foundation for a life-long interest in Marxian economics. This culminated in a book on the Marxian theory of development. In Harvard he was confronted with the then lively discussions on Keynes and with the lectures of Schumpeter. Both these influences had an important impact on him and his work which can be said to rest on three pillars: Marx, Schumpeter, and Keynes.Footnote 4 This was supported by a strong interest in economic and general history.

We can now turn to the special aspects of the März/Schumpeter relationship. That Schumpeter was in Harvard by far the most decisive and impressive influence for März is beyond doubt. Not only does Schumpeter appear in many of März´s texts, he and his theories are the main subject of five of März´s economic papers.Footnote 5 None of the other teachers in Harvard are acknowledged in this way and there are also few economists in the German-speaking area who have taken such a keen interest in Schumpeter. These five papers were later published in book form in the year 1983 under the title “Joseph Alois Schumpeter – Forscher, Lehrer und Politiker”.Footnote 6 To these papers he added two further papers: “ On the Schumpeterian Notion of the Entrepreneur” and “Personal Recollections of Joseph Schumpeter as an Academic Teacher”. The last-mentioned paper and several parts of the rest of the book provided a useful basis for the following considerations.

The first personal contact between März and Schumpeter had actually nothing to do with economics. It started with a lecture on Freud and psychoanalysis given by Schumpeter in the Harvard Economics Club in Spring of 1941. März who had been keenly interested in psychoanalysis in his Viennese days attended this lecture. It was his first confrontation with Schumpeter and he was impressed how Schumpeter talked completely free without notes, though he also noted that parts of the talk were rather unsystematic and casual about some difficult items. When März raised some questions and doubts in the ensuing discussion, Schumpeter – slightly irritated – invited him after a short inconclusive controversy to visit him in his office in the Litauer-Building for a more extensive discussion. This was the beginning of a chain of regular meetings between März and Schumpeter.

I do not know whether such regular discussions with individual students were a normal feature in Schumpeter´s program.Footnote 7 But I can well imagine tat the discussions with März were a special case because of the special nature of this student. More than any other student he possessed characteristics which should have attracted Schumpeter´s interest. First of all März was – in 1941 – already a man of 33 years of age with university and business experience and a corresponding greater maturity than the ordinary students. But more important was probably a common basis for their agreements and disagreements. Both, Schumpeter and März, shared a strong interest in and appreciation of Marx in contrast to the majority of professors and students. Their interests did of course not always go into the same direction. They both appreciated Marx´s dynamic, evolutionary approach and the strong link to history. They were also both aware that Marxian dogmatism is not justified. But they were rather divided with regard to the nature of the shortcomings and their attitude towards them. While März´s motivation was to “repair” the Marxian theory and the Marxian approach, Schumpeter stressed fundamental weaknesses. But there was obviously sufficient material for discussions which left a deep impression on März. In his book on Marxian theory Schumpeter is extensively represented and far more often quoted than such Marxists as Otto Bauer, Stalin or Lenin.

Another point of contact was of course the common Austrian background of Schumpeter and März. This together with a strong interest in history and the awareness of its importance for economic analysis which they also shared must have supported their discussions and led to the theme of März´s dissertation under Schumpeter dealing with the economic consequences of the breakdown of the Habsburg Empire. Finally there was in contrast to their distance between left and right a certain similarity in attitudes and personality. Like Schumpeter März was always extremely well dressed, spoke with a refined Viennese accent, and was a fair and eager discussant and listener in controversies. They also shared a certain nostalgic sympathy for the cultural past of fin de siècle Vienna.

When one tries to look at relations between Schumpeter and März both personally and in their work one can of course only find clues touching März´s views on Schumpeter and not Schumpeter´s views on März (if any), who was only one among many students including some particularly outstanding economists. Even when looking on März´s views one has not the full and coherent picture one would wish, because the role and influence of Schumpeter cannot always be easily detected in März´s writings. But the main outlines can be shown. This will be done first with regard to views at Schumpeter as a person and then on some special subjects.

Among all the economists who taught at Harvard in Schumpeter´s days none had such a special position as this Austrian immigrant. Partly this was due to his scientific prominence, but this was largely shared by some other members of the faculty (Taussig, Haberler, Hansen, Leontief etc.). What made Schumpeter unique was his puzzling personality which has attracted comments and reminiscences from many of his friends and students. März was no exception in this regard when he writes about Schumpeter in the book devoted to him.

März reports the first impression he got of Schumpeter when he attended a lecture of him. He saw “a plump man of medium height with strong shoulders and a massive head, somehow reminding of Napoleon”. But the outward appearance was of course only the first impression and was soon replaced by an admiration – reinforced by subsequent experiences – for the free and easy way in which Schumpeter presented his ideas flowing from an immense “monstrous” memory. However he also mentions occasional irritations created by a lack of a systematic presentation. Nevertheless the lectures and particularly the ensuing discussions were exciting and drew big audiences. A strange characteristic at these occasions was that during a lecture Schumpeter frequently took an empty clip of paper from his pocket and made a few stenographic notes on it to remember an idea which had just occurred to him. Nobody knew exactly what happened later to these clips. But an anaecdote survived that while Schumpeter´s colleagues made notes at home and took them to their lectures, he made notes in his lectures and took them home.

März remembers that Schumpeter used to tell his students that he has absolutely no pedagogical talent and that he teaches only in order to make a living. März mentions that many students were ready to believe this (coquettish?) statement because of the unsystematic structure of some lectures and the frequent improvisations; but he adds that while Schumpeter was certainly not a pedagogue in the usual sense, his enthusiasm for the economic discipline, his love for every detail of past economic doctrines, and his enormous command of theoretical and historical facts created almost a feeling of taking part in a great cultural event. In März´s words: “Schumpeter was in fact something like a high priest of his science”.

What struck März particularly strongly – just like other students – was that Schumpeter, with his stupendous knowledge of past and present theories which he shared with his students, never referred to his own theories and studies. This taboo was not only noticeable in his lectures but was characteristic for his attitude in general. März mentions two examples of this, as he calls it, “ambiguous, puzzling behaviour”. One refers to a public discussion on socialism when Paul Sweezy, then a young professor at Harvard, asked Schumpeter to state his own views on some of the controversial problems. In his reply Schumpeter ignored this completely and spoke – in spite of provocative protests from the students – extensively about the American economic system. The second example refers to the discussions of März with Schumpeter in connection with his dissertation on the economic consequences of the break-down of the Habsburg empire. Though Schumpeter was very keen to discuss all the historical circumstances of this dramatic period, he remained conspicuously silent about his role and experiences during his short position as Austrian Minister of Finance in 1919.

März´s book on Schumpeter also contains some speculations about the emotional side of this exceptional personality. When März met him to begin with as a student in the years following 1939 he had the impression that in spite of his strong ego and the good working conditions he had in Harvard Schumpeter was not a balanced, happy person. Several possible reasons for this fact are mentioned. In his private sphere there was still the aftermath of the tragic death of his young and much beloved (second) wife. And in his professional sphere several factors were probably at work. Though Schumpeter´s reputation was very high indeed, interest in his work was to some extent overshadowed by the intensive discussions which followed Keynes´s “General Theory”. In Harvard they found, with Hansen as a leading Keynesian, a particularly active centre.Footnote 8 This meant that Schumpeter´s monumental historical and theoretical work on Business Cycles (1939) which he then (before working on his History of Economic Analysis) regarded as his most important work, did not get the recognition and interest which he had expected. There was also, März assumes, an excessive burden of work on Schumpeter who was afraid that he would not live long enough to accomplish his life-long program. Contrasting with this picture of a not very happy Schumpeter März found after his return to Harvard in 1945 a “strangely peaceful and almost serene Schumpeter who had become reconciled with the world”. März thinks that this may have been due to the fact that he had become more grateful to be in the US after having learned about the cruelties of the Nazi regime (“Thank God for America” became a frequent utterance) and probably also to the stimulation provided by his work on the History of Economic Analysis.

So much for the personal aspects of Schumpeter. We can now turn to some of the Schumpeterian subjects which are discussed by März. As already mentioned a particularly attractive feature for März was Schumpeter´s interest in Marx whose work had already influenced Schumpeter´s early master piece on the Theory of Economic Development. In fact Schumpeter was – with the exception of Sweezy – the only professor in Harvard who ever mentioned Marx. Schumpeter and März had both a long experience with discussions about Marx – Schumpeter with Sweezy, März with the Austro-Marxists – so that a basis for a special relationship was given. It was reinforced by the fact that both had also been earlier confronted with the Austrian marginal utility doctrine and its theoretical opposition to Marx and Socialism, first by Böhm-Bawerk and later by Mises and Hayek. What März attracted and admired in Schumpeter was that he did not join the usual Marx-bashing but tried to weigh positive and negative elements of Marx´s writings in a fair manner notwithstanding his basically conservative preferences. Thus März acknowledged the fact that although Schumpeter in his Capitalism, Socialism and Democracy rejects Marxian and other left-wing prognoses of capitalism’s future he nevertheless praises Marx for the way he included history and sociology in his analysis. März asks why he did this knowing quite well that such praise of Marx would not be particularly welcomed in the dominant conservative circles. He assumes that this was partly due to Schumpeter´s tendency to act the part of an enfant terrible, stressing his independence and openness of judgement vis-à-vis the orthodoxy of the universities, but also because of a gratitude to Marx, whose influence on him side by side with Böhm-Bawerk he had always admitted.

The theoretical openness of Schumpeter which provided special contacts with März´s Marxist leanings affected also their positions with regard to economic policy. März who was used from his Austrian days to draw sharp divisions between socialist and anti-socialist positions found in Schumpeter an economist who was able to discuss these matters in a more discriminating way. This aspect of Schumpeter was clearly visible after the First World War when the question of socialization (a term then used for nationalization) of industries was hotly discussed in the Austrian coalition government of social democrats and conservatives. It was then, in 1919, that Schumpeter was appointed Minister of Finance at the suggestion of the Social Democrat Otto Bauer, who knew him as not being hostile to socialization in principle. Seven months later, however, Schumpeter was dismissed from the government not least because he did not go far enough in the socialization plans and was open to the pressure of the conservatives. Later, in 1921, Schumpeter specified more clearly his middle-of-the-road view regarding socialization. In an article on Socialist Possibilities Today (Archiv für Sozialwissenschaft und Sozialpolitik, vol.48) he argued that socializations of means of production could only be successful “when a historic and automatic process of socialization based in the situation as such has already begun, that is when the social development as such moves towards socialism”. And he adds that this insight can be contributed to Marx.

Another field where März and Schumpeter could meet in agreement and disagreement concerned their views on entrepreneurship and accumulation. Here it was of course Schumpeter who held the position of a rather idiosyncratic outsider with his stress on the pioneer entrepreneur and the role of bank credit as the main motors of economic and technical progress. März sided with the critics of this view as being too one-sided and restricted, but his criticism is obviously directed towards a helpful compromise. His main reservations affect both aspects of this Schumpeterian perspective. As far as the pioneer entrepreneur is concerned März sides with Redlich in pointing out that the sharp division between pioneers and followers cannot be maintained because in the ongoing development of processes and strategies many capitalists (managers) introduce important improvements and “creative destructions”. März points to Schumpeter´s tendency to hero worship and the influence of conservative elite theories of Pareto, Mosca and Gabriel Tarde. But he admits that Schumpeter´s view finds some justification in the real world of pre-1914 Austria which was characterized by a dearth of enterprising capitalists who had partly to be imported from abroad. März shows a preference for using Marx´s concept of an “average capitalist” caring less about differences in psychology and action. But in a conciliatory mood he suggests that the Schumpeterian entrepreneur is a “blood relation” of Marx´s capitalist.

Here an interesting aside is worth mentioning which März relates in this connection. He points out that there existed an almost exact forerunner of Schumpeter´s entrepreneur idea who was probably not known to him. This was Max Wirth and his ideas were presented in a book with the title “Österreichs Wiedergeburt” (Austria’s Rebirth) published 1876 in Vienna. Since I suppose that this earlier example is also unknown to most readers of this paper I insert here the relevant quotation from Wirth given by März.

“The expansive phase of the economy is a shift of equilibrium in the diverse parts of production and consumption. It has to be kept in mind that there exist only very few productive heads, which can give rise to new products and institutions, and that the great majority of producers carry on in the way their fathers did or copy the creations of individual ingenious inventors. As soon as a new product leads to extraordinary profits for the first producer the awareness of this income usually creates jealousy and greed among many producers so that they enter en masse into producing the new product or trading it”.

The comparatively slow industrial development in the Habsburg Empire in the 19 th century is also – in März´s opinion – one of the reasons for Schumpeter´s scenario of the capitalistic accumulation process being driven by the energy of the pioneering but penniless entrepreneur and the banks which provide the necessary credits. März, who wrote a standard work on the history of Austria’s first and leading big bank, the Creditanstalt, recognises developments in 19 th century Austria which are reflected in Schumpeter´s approach, but cannot accept it as a general characterization of a far more differentiated pattern of development and finance.

A further point worth mentioning is that – due to their common interest in history and sociology – März was specially attracted and influenced by Schumpeter´s writings in these fields, particularly when Marxist authors were involved. Thus Schumpeter´s rather neglected contributions on imperialism.Footnote 9 in which his views are contrasted with those of the Austro-Marxists Otto Bauer, Rudolf Hilferding and others drew März´s attention to this subject and an analysis of the differences between the two “schools.

I hope I have managed to indicate that März´s contact with Schumpeter created a strong and permanent influence on his interests and work. He did not become a complete Schumpeterian (if such a thing exists) and was more of a Marxian and Keynesian. He accepted a lot from Schumpeter, and he criticized other parts of his work. But there can be no doubt that he had a very high opinion of him. The first sentence in his book on Schumpeter says:

“Joseph A. Schumpeter, who would have been 100 years of age in February 1983, belongs to the few social scientists in our century who have left behind an intellectual heritage, which does not cease to exert constantly its fascination to new generations of teachers, scholars, and politicians”.

And as a motto for the book as a whole März chooses a quotation from Goethe about himself which he obviously meant to apply to Schumpeter. With it I want to round off this paper.

“I have never known a more presumptuous man than myself and that I say this is already an indication that it is true what I say. I never thought that something had to be achieved, I always thought that I had it already. If I had been crowned I would have regarded it as a self-evident matter. And yet just because of these things I was just a human being like other men. But that I tried to elaborate things which were beyond my powers and tried to deserve what I had obtained without my efforts is the reason for me being different from a truly mad person.”Footnote 10