The Cannibalization of the State

Why Schumpeter’s "Peaceful Transition" Failed and Marx’s "Crisis" Returned

For most of the 20th century, it appeared that Joseph Schumpeter had won the argument against Karl Marx.

Marx, writing from the vantage point of the early industrial revolution, saw capitalism as a system of inevitable self-immolation. He believed the relentless drive for accumulation would squeeze wages, radicalize the proletariat, and lead to a violent rupture. He saw the factory as a site of pure extraction.

Schumpeter, writing sixty years later, had the benefit of seeing what the factory actually produced: not just misery, but a massive middle class. He recognized that capitalism’s true power lay not in its stability, but in its "Creative Destruction"—the ability to constantly reinvent itself, creating enough surplus wealth to buy social peace. For decades, the Western world lived inside Schumpeter’s vision. The "post-war peace," the rise of unions, and the establishment of the welfare state seemed to prove that capitalism could be tamed, managed, and eventually, civilized.

Schumpeter even predicted the endgame. He argued that as capitalism matured, the "heroic" entrepreneur—the wild, disruptive individualist—would become obsolete. Innovation would move from the garage to the R&D department. The economy would become "trustified," run by salaried managers in grey suits who valued stability over conquest. He predicted that these giant, bureaucratized corporations would eventually merge seamlessly with the state, leading to a form of quiet, bureaucratic socialism. The transition would not be a revolution, but a shift in management.

Institutions like the European Union are the perfect embodiment of this Schumpeterian dream: a post-heroic, regulatory super-state where politics is replaced by technical management, and where corporations and the state operate in a boring, stable symbiosis.

But Schumpeter made a fatal miscalculation. He assumed that the capitalist class would accept its own obsolescence. He believed that the "bourgeoisie" would eventually lose the will to fight and would allow itself to be absorbed by the state apparatus.

He did not foresee Elon Musk.

The rise of the modern Tech Oligarch represents a violent rejection of Schumpeter’s "Managerial Revolution." Instead of evolving into boring bureaucrats, the new captains of capital have reverted to the rapacious, warlord capitalism of the 19th century. They have not been tamed by the state; they have grown larger than it.

We are currently witnessing the inverse of Schumpeter’s prediction. The "Trusts" are not merging with the state to create stability; they are raiding the state to strip it for parts. The phenomenon of the "Department of Government Efficiency" (DOGE) or the privatization of essential public infrastructure is not a merger—it is a hostile takeover.

Schumpeter believed the state would eventually inherit the economy. Instead, the economy is privatizing the state. The regulatory walls that were built to protect society from the excesses of the market—what Schumpeter called the "crumbling walls" of bourgeois protection—are being bulldozed. Crucially, they are being bulldozed by the capitalists themselves, who have forgotten that those walls were the only thing preserving the social stability that allowed them to operate.

This brings us, elegantly and terrifyingly, back to Marx.

Marx understood something that Schumpeter, in his optimism about "civilization," forgot: Capital has no loyalty to the state, to tradition, or to social peace. Its only logic is expansion. If the state becomes an obstacle to accumulation, Capital will not merge with it; it will dismantle it.

Schumpeter thought we were heading toward a boring, managed future—a "socialism of the managers." Instead, by hollowing out the state capacity that held the system together, the oligarchs have inadvertently recreated the exact conditions Marx predicted in 1848: a world of unchecked accumulation, a stripped-down state incapable of defending the public interest, and a stark confrontation between a tiny elite and the rest of society.

The "managers" did not evolve. They were cannibalized. And the system has returned to its factory settings.