After retreating into the academic world later on Schumpeter also started to rethink whether his libertarian approach does actually work in a real-life economy.

While Greenspan favored abstaining from any protectionist measures (and is best forgotten by now after publishing his coffee table memoirs), Schumpeter had gone the other way at the beginning of the 1930's.

Although an advocate of a free market economy, Schumpeter turned to protective ideas.

Had he first noted on the US depression 1839-1843 that the economic devastation caused by recessionary periods is essentially a process of "creative destruction" and such periods are essential to the advance of capitalism, his views changed with his personal fate, a situation remarkably similar to the change of attitude towards free trade of US policymakers nowadays.

Schumpeter: From Libertarian to Protectionist in 2 Decades

To quote Schumpeter (from a lecture held in Tokyo in 1931):

"I need only quote the wide spread belief, that every export means a gain and every import means a loss to the nation; or that it is always an advantage to produce at home, instead of importing, a commodity which a nation is able to produce, and that we ought to rejoice in every national industry created by a protective duty; or that tariffs remedy unemployment; or safeguard the national currency; or that they are necessary to keep up a high standard of wages; or that it is their function to equalize cost of production at home and abroad and to enable the home industry to compete with foreign products on what has been called ‘fair’ terms.
All this is wrong.
The last argument for instance, which is so popular in the United States runs directly against the very meaning of international trade.
What other reason can there be for importing a commodity from abroad, and why is international trade advantageous if not for the reason that a nation may, importing, get a commodity with less effort that is to say, at less cost, than if it produced it at home?
Hence, equalizing costs at home and abroad would, if carried out to its logical consequences, put a stop to importation and exportation and amount to prohibition of international trade.
And if we want this, it is much more logical and much simpler to say so and to prohibit imports entirely, instead of creating in the public mind a vague impression that equalizing costs of production at home and abroad only eliminates some 'unfairness' from international trade but is not really meant to prevent imports.
Yet, although protectionist arguments can often be proved to be nothing else but errors, it does not follow that protection itself is always wrong.
Indeed, few modern economists will hold the free-trade argument so absolutely as the classics did.
They will hold rather that every case has to be dealt with individually and that it is impossible to recommend free trade on general grounds, and for all times and places."

Not from Schumpeter, but nevertheless valid is my view that the US depressions of 1839-1843 and that of 1929-1934 acted as a catalyst for economic and political reform in the US. Still valid is also the view that there is no stronger catalyst for a political changes than a declining economy. Take your own clues (and be long gold.)

I nevertheless consider his late (last?) book "Capitalism, Socialism and Democracy" one of the best pieces of economic literature I have read so far.

I also see a tendency to equate Austrians with unfettered free market liberal policies.

This is simply not true.

Schumpeter and his liberal predecessors David Ricardo (no formulas, no tables, no charts) and Adam Smith (no formulas either) nowhere said that the process has to go so far to as being to the disadvantage of workers.
They all considered social peace by a more balanced distribution of profits as a necessity to avoid social unrest, which may be the last event in the current death of capitalism, initiated by US president Barack Obama who should better lend both his ears to his economic adviser Paul Volcker instead of sending more troops to Afghanistan in the name of petro-theism.

As a last note I need to react to one economist chiding me yesterday in one of those 400+ emails for my view that much of the macro outlook can be done on the back of an envelope. Check out the baffling simplicity of big government (Treasury) documents found at such fine blogs like Zerohedge and remember that people look to quick solutions when in panic mode, instead of doing due diligence before they go on air.