Front Page Titles (by Subject) 4: The Theory of Increasing Poverty - Socialism: An Economic and Sociological Analysis
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4: The Theory of Increasing Poverty - Ludwig von Mises, Socialism: An Economic and Sociological Analysis 
Socialism: An Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981).
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The Theory of Increasing Poverty
The theory of increasing poverty among the masses stands at the centre of Marxist thought as well as of older socialist doctrines. The accumulation of poverty parallels the accumulation of capital. It is the “antagonistic character of capitalist production” that “the accumulation of wealth at one pole” is simultaneously “accumulation of misery, work torture, slavery, ignorance, brutalization, and moral degeneracy at the other.”18 This is the theory of the progressive increase in the absolute poverty of the masses. Based on nothing but the tortuous processes of an abstruse system of thought, it need occupy us all the less in that it is gradually receding into the background, even in the writings of orthodox Marxian disciples and the official programmes of the Social-Democratic parties. Even Kautsky, during the revisionism quarrel, was reduced to conceding that, according to all the facts, it was precisely in the most advanced capitalist countries that physical misery was on the decline, and that the working classes had a higher standard of life than fifty years ago.19 The Marxians still cling to the theory of increasing poverty purely on account of its propaganda value, and exploit it today just as much as during the youth of the now aged Party.
But intellectually the theory of the relative growth of poverty, developed by Rodbertus, has replaced the theory of absolute growth. “Poverty,” says Rodbertus, “is a social, that is, a relative, concept. Now, I maintain that the justifiable needs of the working classes, since these have attained a higher social position, have become considerably more numerous. It would be as wrong, now that they have attained this position, not to speak, even with unchanged wages, of a deterioration in their material condition as it would have been at an earlier stage when their wages fell, and they had not yet attained this position.”20 This thought is derived entirely from the point of view of the State Socialist, which considers a raising of the workers’ claims to be “justified” and assigns them a “higher position” in the social order. Against arbitrary judgments of this kind, no argument is possible.
The Marxians have taken over the doctrine of the relative growth of poverty. “If in the course of evolution the grandson of a small master weaver, who had lived with his own journeymen, comes to inhabit a palatial, magnificently furnished villa, while the journeyman’s grandson lives in lodgings, which though more comfortable, no doubt, than his grandfather’s garret in the master weaver’s house, yet serves to widen the social gulf between the two, then the journeyman’s grandson will feel his poverty all the more for seeing the comforts that are within his employer’s reach. His own position is better than his ancestor’s, his standard of living has risen, but relatively his situation has become worse. Social misery becomes greater ... the workers relatively more wretched.”21 Assuming that this were true, it would be no indictment against the capitalist system. If Capitalism improves the economic position all round, it is of secondary importance that it does not raise all to the same level. A social order is not bad simply because it helps one more than another. If I am doing better, what can it harm me that others are doing better still? Must one destroy Capitalism which better satisfies from day to day the wants of all people, merely because some individuals become rich and a few of them very rich? How, then, can it be asserted as “logically unassailable” that “a growth in the relative poverty of the masses ... must finally end in catastrophe.”22
Kautsky tries to make his conception of the Marxian theory of increasing poverty different from that which emerges from an unprejudiced reading of Das Kapital. “The word poverty,” he says, “may mean physical poverty, but it may also mean social poverty. In the first sense it is measured by man’s physiological needs. These are indeed not everywhere and at all times the same, still they do not show differences nearly so great as the social needs, non-satisfaction of which produces social poverty.”23 It is social poverty, says Kautsky, that Marx had in mind. Considering the clarity and precision of Marx’s style this interpretation is a masterpiece of sophistry, and it was accordingly rejected by the revisionists. To the person who does not take Marx’s words as revelation it may, indeed, be a matter of indifference whether the theory of increasing social poverty is contained in the first volume of Das Kapital or is taken from Engels or was first put forward by the neo-Marxists. The important questions are whether it is tenable and what conclusions follow from it.
Kautsky holds that the growth of poverty in the social sense is “attested by the bourgeoisie themselves, only they have given the matter a different name; they call it covetousness ... The decisive fact is that the contrast between the wage-earners’ needs and the possibility of satisfying them out of wages, the contrast therefore between wage-earning and capital, is becoming greater and greater.”24 Covetousness has always existed, however; it is no new phenomenon. We may even admit that it is more prevalent now than formerly; the general striving after improvement of economic position is a peculiarly characteristic mark of capitalist society. But how one can conclude from this that the capitalist order of society must necessarily change into the socialist, is inexplicable.
The fact is, that the doctrine of increasing relative social poverty is nothing more than an attempt to give an economic justification to policies based on the resentment of the masses. Growing social poverty means merely growing envy.25 Mandeville and Hume, two of the greatest observers of human nature, have remarked that the intensity of envy depends on the distance between the envier and the envied. If the distance is great one does not compare oneself with the envied, and, in fact, no envy is felt. The smaller the distance, however, the greater the envy.26 Thus one can deduce from the growth of resentment in the masses that inequalities of income are diminishing. The increasing “covetousness” is not, as Kautsky thinks, a proof of the relative growth of poverty; on the contrary, it shows that the economic distance between the classes is becoming less and less.
Monopoly and Its Effects
[18. ]Marx, Das Kapital, Vol. I, p. 611. Publisher’s Note: In the English Capital, Vol. I, pp. 736-737.
[19. ]Kautsky, Bernstein und das Sozialdemokratische Programm (Stuttgart, 1899), p. 116.
[20. ]Rodbertus, “Erster sozialer Brief an v. Kirchmann” (Ausgabe von Zeller, Zur Erkenntnis unserer staatwirtschaftlichen Zustände, 2nd ed. (Berlin, 1885), p. 273 n.
[21. ]Herman Müller, Karl Marx und die Gewerkschaften (Berlin, 1918) pp. 82 ff.
[22. ]As is done by Ballod, Der Zukunftsstaat, 2nd ed. (Stuttgart, 1919), p. 12.
[23. ]Kautsky, Bernstein und das Sozialdemokratische Programm, p. ll6.
[24. ]Ibid., p. 120.
[25. ]Compare the remarks of Weitling, quoted in Sombart, Der proletarische Sozialismus (Jena, 1924), Vol. I, p. 106.
[26. ]Hume, A Treatise of Human Nature, Philosophical Works, ed. Green and Grose (London, 1874), Vol. II, pp. 162 ff.; Mandeville, Bienenfabel, ed. Bobertag (Munich, 1914), p. 123. Publisher’s Note: In English, Mandeville, The Fable of the Bees, ed. F. B. Kaye (Oxford University Press, 1924), pp. 135-136; Schatz, L’Individualisme économique et social (Paris, 1907), p. 73 n2, calls this an “idée fondamentale pour bien comprendre la cause profonde des antagonismes sociaux.” (“Fundamental idea for a good understanding of the profound cause of social animosities.”)