Front Page Titles (by Subject) PART V: DESTRUCTIONISM - Socialism: An Economic and Sociological Analysis
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PART V: DESTRUCTIONISM - 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 Motive Powers of Destructionism
The Nature of Destructionism
To the socialist, the coming of Socialism means a transition from an irrational to a rational economy. Under Socialism, planned management of economic life takes the place of anarchy of production; society, which is conceived as the incarnation of reason, takes the place of the conflicting aims of unreasonable and self-interested individuals. A just distribution replaces an unjust distribution of goods. Want and misery vanish and there is wealth for all. A picture of paradise is unfolded before us, a paradise which—so the laws of historical evolution tell us—we, or at least our heirs, must at length inherit. For all history leads to that promised land, and all that has happened in the past has only prepared the way for our salvation.
This is how our contemporaries see Socialism, and they believe in its excellence. It is false to imagine that the socialist ideology dominates only those parties which call themselves socialist or—what is generally intended to mean the same thing—“social.” All present-day political parties are saturated with the leading socialistic ideas. Even the stoutest opponents of Socialism fall within its shadow. They, too, are convinced that the socialist economy is more rational than the capitalist, that it guarantees a more just distribution of income, that historical evolution is driving man inexorably in that direction. When they oppose Socialism they do so with the sense that they are defending selfish private interests and that they are combating a development which from the standpoint of public welfare is desirable and is based upon the only ethically acceptable principle. And in their hearts they are convinced that their resistance is hopeless.
Yet the socialist idea is nothing but a grandiose rationalization of petty resentments. Not one of its theories can withstand scientific criticism and all its deductions are ill-founded. Its conception of the capitalist economy has long been seen to be false; its plan of a future social order proves to be inwardly contradictory, and therefore impracticable. Not only would Socialism fail to make economic life more rational, it would abolish social cooperation outright. That it would bring justice is merely an arbitrary assertion, arising, as we can show, from resentment and the false interpretation of what takes place under Capitalism. And that historical evolution leaves us no alternative but Socialism turns out to be a prophecy which differs from the chiliastic dreams of primitive Christian sectarians only in its claim to the title “science.”
In fact Socialism is not in the least what it pretends to be. It is not the pioneer of a better and finer world, but the spoiler of what thousands of years of civilization have created. It does not build; it destroys. For destruction is the essence of it. It produces nothing, it only consumes what the social order based on private ownership in the means of production has created. Since a socialist order of society cannot exist, unless it be as a fragment of Socialism within an economic order resting otherwise on private property, each step leading towards Socialism must exhaust itself in the destruction of what already exists.
Such a policy of destructionism means the consumption of capital. There are few who recognize this fact. Capital consumption can be detected statistically and can be conceived intellectually, but it is not obvious to everyone. To see the weakness of a policy which raises the consumption of the masses at the cost of existing capital wealth, and thus sacrifices the future to the present, and to recognize the nature of this policy, requires deeper insight than that vouchsafed to statesmen and politicians or to the masses who have put them into power. As long as the walls of the factory buildings stand, and the trains continue to run, it is supposed that all is well with the world. The increasing difficulties of maintaining the higher standard of living are ascribed to various causes, but never to the fact that a policy of capital consumption is being followed.
In the problem of the capital consumption of a destructionist society we find one of the key problems of the socialist economic policy. The danger of capital consumption would be particularly great in the socialist community; the demagogue would achieve success most easily by increasing consumption per head at the cost of the formation of additional capital and to the detriment of existing capital.
It is in the nature of capitalist society that new capital is continually being formed. The greater the capital fund becomes, the higher does the marginal productivity of labour rise and the higher, therefore, are wages, absolute and relative. The progressive formation of capital is the only way to increase the quantity of goods which society can consume annually without diminishing production in the future—the only way to increase the workers’ consumption without harm to future generations of workers. Therefore, it has been laid down by Liberalism that progressive capital formation is the only means by which the position of the great masses can be permanently improved. Socialism and destructionism seek to attain this end in a different way. They propose to use up capital so as to achieve present wealth at the expense of the future. The policy of Liberalism is the procedure of the prudent father who saves and builds for himself and his successors. The policy of destructionism is the policy of the spendthrift who dissipates his inheritance regardless of the future.
To Marxians, Karl Marx’s supreme achievement lay in the fact that he roused the proletariat to class-consciousness. Before he wrote, socialist ideas had led an academic existence in the writings of the Utopians and in the narrow circles of their disciples. By connecting these ideas with a revolutionary workers’ movement, which till then had only a petty bourgeois aim, Marx created, say the Marxians, the foundations of the proletarian movement. This movement, they believe, will live until it has accomplished its historical mission, the setting up of the socialist order of society.
Marx is supposed to have discovered the dynamic laws of capitalist society and, with the aid of the theory of historical evolution, to have defined the aims of the modern social movement as inevitable consequences of that evolution. He is said to have shown that the proletariat could free itself as a class only by itself abolishing the class conflict, and so making possible a society in which “the free development of each individual is the condition for the free development of all.”
Ecstatic enthusiasts see in Marx one of the heroic figures of world history, and class him among the great economists and sociologists, even among the most eminent philosophers. The unbiased observer looks on Karl Marx’s work with different eyes. As an economist Marx entirely lacked originality. He was a follower of the Classical political economists, but he lacked the ability to approach essentially economic problems without a political bias. He saw everything through the spectacles of the agitator, who considers first and foremost the effect made on the popular mind. Even here he was not really original, for the English socialist defenders of the “right to the full produce of labour,” who with their pamphlets in the third and fourth decades of the nineteenth century prepared the way for Chartism, had already anticipated him in all essentials. Moreover, he had the misfortune to be entirely ignorant of the revolution in theoretical economics which was proceeding during the years when he worked out his system, a transformation which made itself known soon after the issue of the first volume of Das Kapital. As a result, the later volumes of Das Kapital, from the day they were published, were quite out of touch with modern science. This was a piece of bad luck which hit his infatuated followers particularly hard. From the beginning, they had to be content with barren expositions of the master’s writings. They have timidly avoided any contact with the modern theory of value. As a sociologist and historical philosopher Marx was never more than an able agitator writing for the daily needs of his party. The materialist conception of history is scientifically worthless; moreover Marx never worked it out exactly but propounded it in various incompatible forms. His philosophic standpoint was that of the Hegelians. He is one of the many writers of his time, now mostly forgotten, who applied the dialectic method to all fields of science. Decades had to pass before people had the face to call him a philosopher and to place him side by side with the great thinkers.
As a scientific writer Marx was dry, pedantic, and heavy. The gift of expressing himself intelligibly had been denied him. In his political writings alone does he produce powerful effects, and these only by means of dazzling antitheses and of phrases which are easy to remember, sentences which by play of words hide their own vacuity. In his polemics he does not hesitate to distort what his own opponent had said. Instead of refuting he tends to abuse.1 Here, too, his disciples (his school really exists only in Germany and Eastern Europe, especially in Russia) have faithfully imitated the master’s example, reviling their opponents but never attempting to refute them by argument.
Marx’s originality and historical significance lie entirely in the field of political technique. He recognizes the immense social power that can be achieved by welding out of the great masses of workers, herded together in workshops, a political factor; and he seeks and finds the slogans to unite these masses into a coherent movement. He produces the catchword which leads people otherwise indifferent to politics to attack private property. He preaches a doctrine of salvation which rationalizes their resentment and transfigures their envy and desire for revenge into a mission ordained by world history. He inspires them with consciousness of their mission by greeting them as those who carry in themselves the future of the human race. The rapid expansion of Socialism has been compared to that of Christianity. More appropriate, perhaps, would be a comparison with Islam, which inspired the sons of the desert to lay waste ancient civilizations, cloaked their destructive fury with an ethical ideology and stiffened their courage with rigid fatalism.2
At the core of Marxism is the doctrine of the identity of interests of all proletarians. As an individual, however, the worker is daily in sharp competitive conflict with his fellow-workers and with those who are quite ready to take his job from him; together with his own comrades in his own trade he competes with workers in other branches of the trade and with the consumers of the products in the production of which he collaborates. In the face of all these facts, all his passions had to be raised to induce him to seek his salvation in union with other workers. But this was not so very difficult; it always pays to rouse what is evil in the human heart. Yet Marx has done more: he has decked out the resentment of the common man with the nimbus of science, and has thus made it attractive to those who live on a higher intellectual and ethical plane. Every socialist movement has borrowed in this respect from Marx, adapting the doctrine slightly for its special needs.
As a master of demagogic technique Marx was a genius; this cannot be sufficiently emphasized. He found the propitious historical moment for uniting the masses into a single political movement, and was himself on the spot to lead this movement. For him all politics was only the continuation of war by other means; his political art was always political tactics. The socialist parties which trace their origin back to Marx have kept this up, as have those who have taken the Marxist parties for their model. They have elaborated the technique of agitation, the cadging for votes and for souls, the stirring up of electoral excitement, the street demonstrations, and the terrorism. To learn the technique of these things requires years of hard study. At their party conferences and in their party literature, the Marxians give more attention to questions of organization and of tactics than to the most important basic problems of politics. In fact, if one wished to be more precise one would have to admit that nothing interests them at all except from the point of view of party tactics and that they have no interest to spare for anything else.
This militarist attitude to politics, which reveals the inner affinity of Marxism with Prussian and Russian etatism has quickly found adherents. The modern parties of the continent of Europe have completely accepted the Marxian ideology. Especially the parties which aim to promote particular interests, and which gather together the peasant class, the industrial middle class and the class of employers, make use of the Marxist doctrine of class-war for their own purposes. They have learnt all they know from Marxism.
The defeat of the liberal ideology could not long be postponed. Liberalism has anxiously avoided all political artifice. It has relied entirely upon the inner vitality of its ideas and their power to convince, and has disdained all other means of political conflict. It has never pursued political tactics, never stooped to demagogy. The old Liberalism was honest through and through and faithful to its principles. Its opponents called this being “doctrinaire.”
Today the old liberal principles have to be submitted to a thorough reexamination. Science has been completely transformed in the last hundred years, and today the general sociological and economic foundations of the liberal doctrine have to be relaid. On many questions Liberalism did not think logically to the conclusion. There are loose threads to be gathered up.3 But the mode of political activity of Liberalism cannot alter. It regards all social co-operation as an emanation of rationally recognized utility, in which all power is based on public opinion, and can undertake no course of action that would hinder the free decision of thinking men. Liberalism knows that society can advance to a higher stage only by men recognizing the usefulness of social co-operation; that neither God nor veiled destiny determines the future of the human race, but only man himself. When nations rush blindly towards destruction, Liberalism must try to enlighten them. But even if they do not hear, whether because they are deaf or because the warning voice is too feeble, one must not seek to seduce them to the right mode of conduct by tactical and demagogic artifice. It might be possible to destroy society by demagogy. But it can never be built up by that means.
The Destructionism of the Literati
The romantic and the social art of the nineteenth century have prepared the way for socialist destructionism. Without the help it got from this direction Socialism would never have gained its hold on people’s minds.
Romanticism is man’s revolt against reason, as well as against the condition under which nature has compelled him to live. The romantic is a daydreamer; he easily manages in imagination to disregard the laws of logic and of nature. The thinking and rationally acting man tries to rid himself of the discomfort of unsatisfied wants by economic action and work; he produces in order to improve his position. The romantic is too weak—too neurasthenic—for work; he imagines the pleasures of success but he does nothing to achieve them. He does not remove the obstacles; he merely removes them in imagination. He has a grudge against reality because it is not like the dream world he has created. He hates work, economy, and reason.
The romantic takes all the gifts of a social civilization for granted and desires, in addition, everything fine and beatiful that, as he thinks, distant times and countries had or have to offer. Surrounded by the comforts of European town life he longs to be an Indian rajah, Bedouin, corsair, or troubadour. But he sees only that portion of these people’s lives which seems pleasant to him, never their lack of the things he obtains in such abundance. His horsemen gallop over the plains on fiery steeds, his corsairs capture beautiful women, his knights vanquish their enemies between episodes of love and song. The perilous nature of their existence, the comparative poverty of their circumstances, their miseries and their toils—these things his imagination tactfully overlooks: all is transfigured by a rosy gleam. Compared with this dream ideal, reality appears arid and shallow. There are obstacles to overcome which do not exist in the dream. There are very different tasks to be undertaken. Here are no beautiful women to be rescued from the hands of robbers, no lost treasures to be found, no dragons to kill. Here there is work to do, ceaselessly, assiduously, day after day, year after year. Here one must plough and sow if one wishes to reap. The romantic does not choose to admit all this. Obstinate as a child, he refuses to recognize it. He mocks and jeers; he despises and loathes the bourgeois.
The spread of capitalist thought produced an attitude of mind unfriendly to Romanticism. The poetic figures of knights and pirates become objects of mirth. Now that the lives of Bedouins, maharajahs, pirates, and other romantic heroes had been observed at close quarters, any desire to emulate them vanished. The achievements of the capitalist social order made it good to be alive and there was a growing feeling that security of life and liberty, peaceful welfare, and richer satisfaction of wants could be expected only from Capitalism. The romantic contempt for what is bourgeois fell into disrepute.
But the mental attitude from which Romanticism sprang was not so easy to eradicate. The neurasthenic protest against life sought other forms of expression. it found it in the “social” art of the nineteenth century.
The really great poets and novelists of the period were not social-political propagandist writers. Flaubert, Maupassant, Jacobsen, Strindberg, Konrad Ferdinand Meyer, to name only a few, were far from being followers of the fashionable literature. We do not owe the statement of these social and political problems to the writers whose works have given the nineteenth century its lasting place in the history of literature. This was the task assumed by second- or third-rate writers. It was writers of this class who introduced as literary figures the bloodsucking capitalist entrepreneur and the noble proletarian. To them the rich man is in the wrong because he is rich, and the poor in the right because he is poor.4 “But this is just as if wealth were a crime,” Gerhart Hauptmann makes Frau Dreissiger exclaim in Die Weber. The literature of this period is full of the condemnation of property.
This is not the place for an aesthetic analysis of these works; our task is to examine their political efforts. They have brought victory to Socialism by enlisting the allegiance of the educated classes. By means of such books Socialism has been carried into the houses of the wealthy, captivating the wives and daughters and causing the sons to turn away from the family business until at last the capitalist entrepreneur himself has begun to believe in the baseness of his activities. Bankers, captains of industry, and merchants have filled the boxes of theatres in which plays of a socialist tendency were given before enthusiastic audiences.
Social art is tendentious art: all social literature has a thesis to demonstrate.5 It is ever the same thesis: Capitalism is an evil, Socialism is salvation. That such eternal repetition has not led to boredom sooner must be attributed solely to the fact that the various writers have had different forms of Socialism in mind. But they all follow Marx’s example in avoiding detailed exposition of the socialist social order they praise; most of them merely indicate by allusion, though clearly enough, that they desire a socialist order. That the logic of their argument is inadequate and that the conclusions are driven home by an appeal to the emotions rather than to reason is hardly surprising, seeing that the same method is followed by soi-disant scientific authorities on Socialism. Fiction is a favoured vehicle for this kind of procedure, as there is little fear that anyone will try to refute its assertions in detail by logical criticism. It is not the custom to inquire into the accuracy of particular remarks in novels and plays. Even if it were, the author could still find a way out by denying responsibility for the particular words put into the mouth of a hero. The conclusions forced home by character-drawing cannot be invalidated by logic. Even if the “man of property” is always depicted as bad through and through, one cannot reproach the author on account of a simple example. For the total effect of the literature of his time no single writer is responsible.
In Hard Times Dickens puts into the mouth of Sissy Jupe, the deserted little daughter of a circus clown and dancer, remarks designed to shatter Utilitarianism and Liberalism. He makes Mr. M’Choackumchild, teacher in the model school of the Benthamite capitalist Gradgrind, ask how great is the percentage of victims when, out of 100,000 sea travellers, 500 are drowned. The good child answers, that for the relatives and friends of the victims there is no percentage—and so condemns with quiet simplicity the self-complacency of Manchesterism. Leaving aside the far-fetched improbability of the scene, this is of course all very fine and touching. But it does not diminish the satisfaction which members of a capitalist community may feel when they contemplate the great reduction of the dangers of navigation under Capitalism. And if Capitalism has so contrived that out of 1,000,000 people only twenty-five starve each year, while under more ancient economic systems a much greater proportion starved, then our estimation of this achievement is not impaired by Sissy’s platitude, that for those who starve the ordeal is just as bitter when a million or a million million others are starving at the same time or not. Moreover, we are offered no proof that in a socialist society fewer people would starve. The third observation which Dickens puts into Sissy’s mouth is intended to show that one cannot judge the economic prosperity of a nation by the amount of its wealth, but one must consider also the distribution of that wealth. Dickens was too ignorant of the writings of the utilitarians to know that these views did not contradict the older utilitarianism. Bentham, particularly, maintained with special emphasis that a sum of wealth brings more happiness when it is evenly distributed than when it is so distributed as to endow some richly while others have little.6
Sissy’s counterpart is the model boy, Bitzer. He gets his mother into the workhouse and then contents himself with giving her half a pound of tea once a year. Even this, says Dickens, is a weakness in the otherwise admirable youth, whom he calls an excellent young economist. For one thing, all almsgiving inevitably tends to pauperize the recipient. Further, Bitzer’s only rational action with regard to tea would have been to buy as cheaply, and sell it as dearly as possible. Have not philosophers demonstrated that in this consists the whole duty of man (the whole, not a part of his duty)? Millions who have read these observations have felt the indignation for the baseness of utilitarian thought which the author meant them to feel. Nevertheless, they are quite unjust. It is true that liberal politicians have striven against the encouragement of beggars by means of indiscriminate almsgiving and have shown the futility of any attempt at bettering the situation of the poor which does not proceed by increasing the productivity of labour. They have exposed the danger to the proletarians themselves of proposals for increasing the birth rate by premature marriages between persons not in a position to take care of their children. But they have never protested against support through the Poor Law of people unable to work. Neither have they contested the moral duty of children to support their parents in old age. The liberal social philosophy has never said that it was a “duty,” let alone the beginning and end of morality, to buy as cheaply as possible and sell as dearly as possible. It has shown that this is the rational behaviour for the individual seeking (by buying and selling) the means for the indirect satisfaction of his wants. But Liberalism has no more called it irrational to give tea to one’s aged mother than it has called tea drinking in itself irrational.
One glance into the works of the utilitarians is enough to unmask these sophistical distortions. But there is hardly one in every hundred thousand readers of Dickens who has ever read a line of a utilitarian writer. Dickens, with other romantics less gifted as storytellers but following the same tendencies, has taught millions to hate Liberalism and Capitalism. And yet Dickens was not an open and direct champion of destructionism, any more than were William Morris, Shaw, Wells, Zola, Anatole France, Gerhart Hauptmann, Edmondo de Amicis, and many others. They all reject the capitalist social order and combat private ownership in the means of production, without perhaps always being conscious of it. Between the lines they suggest an inspiring picture of a better state of affairs economically and socially. They are recruiting agents for Socialism and, since Socialism must destroy society, are at the same time paving the way for destructionism. But just as political Socialism became finally, in Bolshevism, an open avowal of destructionism, so too did literary Socialism. Tolstoy is the great prophet of a destructionism that goes back to the words of the Gospels. He makes the teachings of Christ, which rested on a belief that the Kingdom of God was imminent, a gospel for all times and all men. Like the communist sects of the Middle Ages and the Reformation he tries to build society on the commands of the Sermon on the Mount. He does not of course go so far as to take literally the exhortation to follow the example of the lilies of the field, which toil not. But in his idea of society there is only room for self-sufficing agriculturists who, with modest means, till a small piece of land, and he is logical enough to demand that everything else shall be destroyed.
And now the peoples which have hailed with the greatest enthusiasm such writings, which call for the destruction of all cultural values, are themselves on the verge of a great social catastrophe.
The Methods of Destructionism
The Means of Destructionism
Socialist policy employs two methods to accomplish its purposes: the first aims directly at converting society to Socialism; the second aims only indirectly at this conversion by destroying the social order which is based on private ownership. The parties of social reform and the evolutionary wings of the socialist parties prefer the first means; the second is the weapon of revolutionary Socialism, which is primarily concerned to clear the ground for building up a new civilization by liquidating the old one. To the first category belong municipalization and nationalization of enterprises; to the second, sabotage and revolution.
The importance of this division is lessened materially by the fact that the effects achieved by both groups do not greatly differ. As we have shown, even the direct method which aims at the creation of a new society can only destroy; it cannot create. Thus the beginning and end of the socialist policy, which has dominated the world for decades, is destruction. In the policy of the communists the will to destroy is so clear that no one can overlook it. But although destructionism is more easily recognized in the actions of the Bolshevists than in other parties, it is essentially just as strong in all other socialist movements. State interference in economic life, which calls itself “economic policy,” has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness. Already during the war period this policy had gained so much ground that practically all economic action of the entrepreneur was branded as violation of the law. That production is still being carried on, even semi-rationally, is to be ascribed only to the fact that destructionist laws and measures have not yet been able to operate completely and effectively. Were they more effective, hunger and mass extinction would be the lot of all civilized nations today.
Our whole life is so given over to destructionism that one can name hardly a field into which it has not penetrated. “Social” art preaches it, schools teach it, the churches disseminate it. In recent decades the legislation of civilized states has created hardly one important law in which at least a few concessions have not been made to destructionism; some laws it completely dominates. To give a comprehensive account of destructionism one would have to write the history of the years in which the catastrophic World War and the Bolshevist Revolution were prepared and consummated. This cannot be undertaken here. We must content ourselves with a few remarks which may contribute to an understanding of destructionist development.
Amongst the means destructionist policy has employed, the legal protection of labour is, in its direct effects, the most harmless. Yet this aspect of social policy is specially important as an outcome of destructionist thought.
The advocates of the protection of labour like to consider the problem as analogous to the situation which led to the measures taken in the eighteenth and the first half of the nineteenth century to protect tied labourers under the manorial system. Just as at that time the peasant’s labour obligations were continually reduced by State intervention in an attempt to free the serf step by step, so labour legislation at the present day is supposed to be no more than the attempt to raise the modern proletarian from wage slavery to an existence worthy of a human being. But this comparison is quite invalid. The restriction of the labour duties of the serf did not diminish, but rather increased the amount of work done in the country. Forced labour, poor in quality and in quantity, was reduced so that the peasant would be free to improve his own bit of land or work for hire. Most of the measures taken in favour of the unfree peasant aimed, on the one hand, at increasing the intensity of agricultural work, and, on the other, at freeing labour power for industrial production. When the peasant-policy finally abolished the forced labour of agricultural workers it did not abolish work but increased its opportunities. The effect is quite different when modern social policy “regulates” working time by restricting the working day to ten, nine, and eight hours a day, or, as in various categories of public officials, to six hours or even less. For this reduces the amount of work done and thus the yield of production.
The effect of such measures for the limitation of labour have been too obvious to be overlooked. This is why all efforts to extend the legal protection of labour in calling for a radical reconstruction of conditions of work have encountered strong resistance. Etatist writers generally talk as though the general shortening of working time, the gradual elimination of women’s and children’s labour, and the limitation of night work were to be ascribed exclusively to legislative intervention and the activity of trade unions.7 This attitude shows that they are still influenced by the views on the character of industrial wage labour held in circles unsympathetic to modern capitalist industry. According to these views factory industry has a peculiar aversion to using fully trained labour. It is supposed to prefer the unskilled labourer, the weak woman, and the frail child to the all-round trained expert. For on the one hand it wishes to produce only inferior mass commodities, in the manufacture of which it has no use for the skilled employee; on the other, the simplicity of the movements involved in mechanical production enables industry to employ the undeveloped and the physically weak. As the factories are supposed to be profitable only if they under-pay the workers, it is natural that they should employ unskilled workers, women, and children and try to extend the working day as much as possible. It is supposed that this view can be substantiated by referring to the evolution of large scale industry. But in its beginnings large scale industry had to be content with such labour because at that time it could only employ labour outside the guild organization of handicrafts. It had to take the untrained women and children because they were the only ones available, and was forced to arrange its processes so as to manage with inferior labour. Wages paid in the factories were lower than the earnings of handicraft workers because the labour yield was lower. For the same reason the working-day was longer than in the handicrafts. Only when in time these conditions changed, could large scale industry change the conditions of its labour. The factory had no other alternative than to employ women and children in the beginning, fully trained workers not being available; but when, by competition, it had vanquished the older labour systems and had attracted to itself all the workers there employed, it altered its processes so that skilled male workers became the main labour factor and women and children were forced more and more out of industry. Wages rose, because the production of the efficient worker was higher than the production of the factory girl or child. The worker’s family found that the wife and children did not need to earn. Working hours lessened because the more intensive labour of the efficient worker made possible a better exploitation of the machinery than could be achived with the sluggish and unskilled work of inferior labour.8
The shorter working day and the limitation of woman and child labour, in so far as these improvements were in operation in Germany about the outbreak of the War, were by no means a victory won by the champions of the legal protection of labour from selfish entrepreneurs. They were the result of an evolution in large scale industry which, being no longer compelled to seek its workers on the fringe of economic life, had to transform its working conditions to suit the better quality of labour. On the whole, legislation has only anticipated changes which were maturing, or simply sanctioned those that had already taken place. Certainly it has always tried to go further than the development of industry allowed, but it has not been able to maintain the struggle. It has been obstructed, not so much by the resistance of entrepreneurs, as by the resistance of the workers themselves, a resistance not the less effective for being unvocal and little advertised. For the workers themselves had to pay for every protective regulation, directly as well as indirectly. A restriction on female and child labour burdened the workers’ budget just as much as a limitation of employment in adult labour. The reduction in the supply of labour achieved by such measures does indeed raise the marginal productivity of labour and thus the wage rate corresponding to one unit of production. Whether this rise is sufficient to compensate the worker for the burden of rising commodity prices is questionable. One would have to examine the data of each individual example before forming any conclusions about this. It is probable that the decline of production cannot bring an absolute rise of real income to the worker. But we need not go into this in detail. For one could only speak of a considerable reduction in the supply of labour, brought about by labour laws, if these laws were valid beyond a single country. As long as this was not so, as long as every state proceeded on its own lines, and those countries, whose recently developed industry took every opportunity to supplant the industry of the older industrial states, were backward in promulgating labour-protection, then the worker’s position in the market could not be improved by labour protection. Efforts to generalize labour protection by international treaties were intended to remedy this. But of international labour protection, even more truly than of the national movement, one may say that the process has not gone beyond the stage which would have been reached in the normal evolution of industry.
This attitude of destructionism emerges more clearly from the theory than from the execution of labour protection, for the danger to industrial development implied in the regulations has to a certain extent limited attempts to carry theory into practice. That the theory of the exploitation of wage earners has spread and been so rapidly accepted is due above all to destructionism, which has not hesitated to use a technique for describing industrial working conditions which can only be called emotional. The popular figures, the hard-hearted entrepreneur and the grasping capitalist on the one side, and the noble poor, the exploited worker on the other side, have, so to speak, been introduced into the presuppositions of the legal system. Legislators have been taught to see in every frustration of the plans of an entrepreneur a victory of public welfare over the selfish interests of parasitic individuals. The worker has been taught to believe that he is toiling thanklessly for the profit of capital, and that it is his duty to his class and to history to perform his work as sluggishly as possible.
The theory of wages assumed by the advocates of legal labour protection has many defects. They treat Senior’s arguments against the legal regulation of working hours with contempt, but they produce nothing relevant in refutation of the conclusions he reaches on the assumption of stationary conditions. The inability of the “Socialists of the Chair” (“Kathedersozialist”) school to understand economic problems is particularly evident in Brentano. The idea that wages correspond to the efficiency of labour is so far beyond his comprehension that he actually formulates a “law” that a high wage increases the product of labour, whilst a low wage reduces it, although nothing could be more clear than the fact that good work is paid for at a higher rate than bad.9 This mistake is again obvious when he goes on to say that the shortening of working hours is a cause and not a result of greater efficiency of labour.
Marx and Engels, the fathers of German Socialism, well understood how fundamentally important to the spread of destructionist ideas was the fight for labour legislation. The “Inaugural Address of the International Association of Workers” says that the English ten-hour day was “not only a great practical success; it was the victory of a principle. For the first time the political economy of the bourgeoisie was openly vanquished by the political economy of the working class.”10 Over twenty years before, Engels had made an even more candid admission of the destructionist nature of the Ten Hour Day Bill. He could not help admitting that the counter-arguments of the entrepreneurs were half true. The Bill would, he thought, depress wages and make English industry unable to compete. But this did not alarm him. “Naturally,” he added, “were the Ten Hour Day Bill a final measure, England would be ruined, but because it necessarily involves the passing of subsequent measures, which must lead England into a path quite different from that she has travelled up till now, it will mean progress.”11 If English industry were to succumb to foreign competition the revolution would be unavoidable.12 In a later essay he said of the Ten Hour Day Bill: “It is no longer an isolated attempt to lame industrial development. It is one link in a long chain of measures which will transform the whole present form of society and gradually destroy the former class conflicts. It is not a reactionary but a revolutionary measure.”13
The fundamental importance of the fight for labour legislation cannot be overestimated. But Marx and Engels and their liberal opponents both over-estimated the immediate destructive effects of the particular measures. Destructionism advanced on other fronts.
Compulsory Social Insurance
The essence of the programme of German etatism is social insurance. But people outside the German Empire have also come to look upon social insurance as the highest point to which the insight of the statesman and political wisdom can attain. If some praise the wonderful results of these institutions, others can only reproach them for not going far enough, for not including all classes and for not giving the favoured all that, in their opinion, they should have. Social insurance, it was said, ultimately aimed at giving every citizen adequate care and the best medical treatment in sickness and adequate sustenance if he should become incapable of work through accident, sickness or old age, or if he should fail to find work on conditions he considered necessary.
No ordered community has callously allowed the poor and incapacitated to starve. There has always been some sort of institution designed to save from destitution people unable to sustain themselves. As general well-being has increased hand in hand with the development of Capitalism, so too has the relief of the poor improved. Simultaneously the legal basis of this relief has changed. What was formerly a charity on which the poor had no claim is now a duty of the community. Arrangements are made to ensure the support of the poor. But at first people took care not to give the individual poor a legally enforceable claim to support or sustenance. In the same way they did not at once think of removing the slight stigma attaching to all who were thus maintained by the community. This was not callousness. The discussions which grew out of the English Poor Law in particular show that people were fully conscious of the great social dangers involved in every extension of poor relief.
German social insurance and the corresponding institutions of other states are constructed on a very different basis. Maintenance is a claim which the person entitled to it can enforce at law. The claimant suffers no slur on his social standing. He is a State pensioner like the king or his ministers or the receiver of an insurance annuity, like anyone else who has entered into an insurance contract. There is also no doubt that he is entitled to look on what he receives as the equivalent of his own contributions. For the insurance contributions are always at the expense of wages, immaterial of whether they are collected from the entrepreneur or from the workers. What the entrepreneur has to pay for the insurance is a charge on labour’s marginal productivity, it thus tends to reduce the wages of labour. When the costs of maintenance are provided out of taxes the worker clearly contributes towards them, directly or indirectly.
To the intellectual champions of social insurance, and to the politicians and statesmen who enacted it, illness and health appeared as two conditions of the human body sharply separated from each other and always recognizable without difficulty or doubt. Any doctor could diagnose the characteristics of “health.” “Illness” was a bodily phenomenon which showed itself independently of human will, and was not susceptible to influence by will. There were people who for some reason or other simulated illness, but a doctor could expose the pretence. Only the healthy person was fully efficient. The efficiency of the sick person was lowered according to the gravity and nature of his illness, and the doctor was able, by means of objectively ascertainable physiological tests, to indicate the degree of the reduction of efficiency.
Now every statement in this theory is false. There is no clearly defined frontier between health and illness. Being ill is not a phenomenon independent of conscious will and of psychic forces working in the subconscious. A man’s efficiency is not merely the result of his physical condition; it depends largely on his mind and will. Thus the whole idea of being able to separate, by medical examination, the unfit from the fit and from the malingerers, and those able to work from those unable to work, proves to be untenable. Those who believed that accident and health insurance could be based on completely effective means of ascertaining illnesses and injuries and their consequences were very much mistaken. The destructionist aspect of accident and health insurance lies above all in the fact that such institutions promote accidents and illness, hinder recovery, and very often create, or at any rate intensify and lengthen, the functional disorders which follow illness or accident.
A special disease, traumatic neurosis, which had already appeared in some cases as a result of the legal regulation of claims for compensation for injury, has been thus turned into a national disease by compulsory social insurance. No one any longer denies that traumatic neurosis is a result of social legislation. Overwhelming statistics show that insured persons take much longer time to recover from their injuries than other persons, and that they are liable to more extensions and permanent functional disturbances than those of the uninsured. Insurance against diseases breeds disease. Individual observation by doctors as well as statistics prove that recovery from illnesses and injuries is much slower in officials and permanent employees and people compulsorily insured than in members of the professions and those not insured. The desire and the necessity of becoming well again and ready for work as soon as possible assist recuperation to a degree so great as to be capable of demonstration.14
To feel healthy is quite different from being healthy in the medical sense, and a man’s ability to work is largely independent of the physiologically ascertainable and measurable performances of his individual organs. The man who does not want to be healthy is not merely a malingerer. He is a sick person. If the will to be well and efficient is weakened, illness and inability to work is caused. By weakening or completely destroying the will to be well and able to work, social insurance creates illness and inability to work; it produces the habit of complaining—which is in itself a neurosis—and neuroses of other kinds. In short, it is an institution which tends to encourage disease, not to say accidents, and to intensify considerably the physical and psychic results of accidents and illnesses. As a social institution it makes a people sick bodily and mentally or at least helps to multiply, lengthen, and intensify disease.
The psychic forces which are active in every living thing, including man, in the form of a will to health and a desire to work, are not independent of social surroundings. Certain circumstances strengthen them; others weaken them. The social environment of an African tribe living by hunting is decidedly calculated to stimulate these forces. The same is true of the quite different environment of the citizens of a capitalist society, based on division of labour and on private property. On the other hand a social order weakens these forces when it promises that if the individual’s work is hindered by illness or the effects of a trauma he shall live without work or with little work and suffer no very noticeable reduction in his income. Matters are not so simple as they appear to the naive pathology of the army or prison doctor.
Social insurance has thus made the neurosis of the insured a dangerous public disease. Should the institution be extended and developed the disease will spread. No reform can be of any assistance. We cannot weaken or destroy the will to health without producing illness.
The fundamental problem for the appreciation of the economic and social consequences of the trade unionism is the question whether labour can succeed, within a market economy, by association and by collective bargaining, in getting high wages lastingly and for all workers. To this question, economic theory—both the classic (including its Marxist wing), and the modern (including its socialist wing too)—answers categorically in the negative. Public opinion believes that the facts have proved the efficiency of trade unionism to improve the conditions of labour, because the standard of living of the masses has been steadily rising in the last hundred years. But economists explain this fact in an absolutely different way. According to them, this improvement is due to the progress of capitalism, to the progressive accumulation of capital and to its corollary, the increase of the marginal productivity of labour. And there is no doubt that we must give more credit to the views of the economists, substantiated as they are by the actual course of events, than to the naive belief of men who simply argue post hoc ergo propter hoc (after this, therefore, because of it). It is true that this fundamental point has been entirely misunderstood by many thousands of worthy labour leaders, who have devoted their life work to the organization of trade unions, and by many eminent philanthropists who have advocated trade unionism as the cornerstone of future society. It was the true tragedy of the age of capitalism that this attitude was wrong and that trade unionism developed into the most important weapon of destructionist policy. Socialist ideology has so successfully obscured the nature and peculiarity of the trade union that nowadays it is difficult to envisage what trade unions are and what they do. People are still inclined to treat the problem of workers’ associations as if it were a question of the freedom to combine and the right to strike. But there has been no question for decades now of whether the workers shall be granted liberty to form associations or whether they shall have the right to cease work, even in violation of a labour contract. No legislation denies them this right, for the legal damages which might devolve upon individual workers for stopping work in breach of contract have no importance in practice. Thus even the most extreme advocates of destructionism have hardly bothered to claim for the worker the right to break contractual obligations at will. When in recent years some countries, and among them Great Britain, the cradle of modern trade unionism, tried to limit the power of trade union policy, it was not part of their purpose to do away with what they considered the non-political action of trade unionism. The Act of 1927 attempted to outlaw general strikes and sympathetic strikes, but did not in any way interfere either with the freedom of association or with the strike for the sake of obtaining better rates of pay.
The general strike has always been considered, both by its supporters and by its opponents, as a revolutionary measure, or even as the essence of revolution itself. The vital element in the general strike is the more or less complete paralysis of the economic life of the community in order to bring about certain desired ends. How successful a general strike can be was proved when the Kapp Putsch,15 supported both by the German legal army and by a great illegal armed force which had compelled the Government to flee from the capital, was defeated in a few days by the general strike. In this case the weapon of the general strike was used to defend democracy. But whether one finds the political attitude of organized labour sympathetic or not, is of no consequence. The fact is that in a country where trade unionism is strong enough to set in motion a general strike, the supreme power is in the hands of trade unions and not in the hands of parliament and the government dependent on it. It was the comprehension of the real meaning of trade unionism and its working which inspired the French Syndicalists with their basic idea that violence is the means which political parties must use if they want to come to power. It should never be forgotten that the philosophy of violence, which replaced the conciliatory teaching of liberalism and democracy, started as a philosophy of trade unionism. Syndicalism is nothing else but the French word for trade unionism. The glorification of violence which characterizes the policy of Russian Sovietism, of Italian Fascism and of German Nazism, and which today seriously threatens all democratic governments, sprang from the teachings of revolutionary syndicalists. The essence of the trade union problem is the compulsion to coalesce and to strike. The unions claim the right to force out of employment all those who refuse to combine with them or those to whom they have refused membership. They claim the right to stop work at will, and to prevent anyone from taking the place of the strikers. They claim the right to prevent and punish by violence the contravention of their decisions, and to take all steps to organize this violent action so that its success shall be assured.
Every association becomes more cumbrous and prudent when the men at its head have grown old. Fighting associations lose the desire to attack and the ability to overcome their opponents by swift action. The armies of military powers, above all the armies of Austria and Prussia have learned over and over again that victory is difficult under old leaders. The Unions are no exception to the rule. So it may come about that some of the older and fully developed trade unions have temporarily lost some of their destructionist lust for attack and readiness for battle. Thus when the aged resist the destructive policy of impetuous youth, an instrument of destruction becomes for the moment an instrument which supports the status quo. It is just on this ground that the radicals have continually reproached the trade unions, and it is just this plea which the trade unions have themselves put forward when they have wanted help from the nonsocialist classes of the community in their work of extending compulsory unionism. These pauses for breath in the trade unions’ destructive fights have always been short. Over and over again those who triumphed were those who advocated an uninterrupted continuation of the fight against the capitalist social order. The violent elements have either pushed out the old trade union leaders or erected new organizations in the place of the old. It could not be otherwise. For, consistently with the idea on which they have developed, the associations of workers in trade unions are only imaginable as a weapon of destruction. We have shown that the solidarity of the members of the trade union can be founded only on the idea of a war to destroy the social order based on private ownership in the means of production. The basic idea and not merely the practice of the trades unions is destructionist.
The cornerstone of trade unionism is compulsory membership. The workers refuse to work with men who belong to an organization not recognized by themselves. They exclude the non-union men by threatening to strike or, ultimately, by striking. Those who refuse to join the union are sometimes compelled to do so by rough handling. It is not necessary to dilate upon the drastic violation of the liberty of the individual which this implies. Even the sophistries of advocates of trade union destructionism have not succeeded in reassuring public opinion on this point. When from time to time specially gross examples of violence against a non-union worker get publicity, even those newspapers which otherwise stand more or less on the side of the destructionist parties are moved to protest.
The weapon of the trade union is the strike. It must be borne in mind that every strike is an act of coercion, a form of extortion, a measure of violence directed against all who might act in opposition to the strikers’ intentions. For the purpose of the strike would be defeated if the entrepreneur were able to employ others to do the work of the strikers, or if only a section of the workers joined the strike. The long and the short of trade union rights is in fact the right to proceed against the strike-breaker with primitive violence, and this right the workers have successfully maintained. How this right was established by the trade unions in various countries does not concern us here. It is sufficient to say that in the last decades it has been established everywhere, less by explicit legislative sanction than by the tacit toleration of public authority and the law. For years it has hardly been possible to break a strike in any part of Europe by employing strike-breakers. For a long time it was at least possible to avoid strikes on railways, lighting and water services, and the most important urban food supply enterprises. But here, too, destructionism has at last carried the day.
No one has seriously contested the destructionist function of trade unionism. There has never yet been a wage-theory from which one could deduce that association by means of trade unions led to a permanent increase in the real income of the workers. Certainly Marx was far from allowing that trade unions had any effect on wages. In a speech made in 1865 before the General Council of the “International”16 Marx tried to win over his comrades to joint action with the trade unions. His introductory words reveal his object in doing so. The view that increase of wages could not be obtained by strikes—a view represented in France by the Proudhonists, in Germany by the Lassallians—was, he said, “most unpopular with the working class.” But his great qualities as a tactitian, which a year before had enabled him in his “Inaugural Address” to weld into one unitary programme the most diverse opinions upon the nature, aims, and tasks of the labour movement, were now again brought into play, and as he was anxious to link up the trade union movement with the International, he produced everything that can be said in favour of trade unions. Nevertheless he is careful not to commit himself to a statement that the workers’ economic position could be directly improved through the trade unions. As he sees it, the foremost task of the trade unions is to lead the fight against Capitalism. The position he assigns to trade unions admits of no doubt as to the results he expects from their intervention. “In place of the conservative motto: ’A just day’s wage for a just day’s work’ they ought to print on their banners, ’Abolition of the wage system’—They generally miss their aim because they limit themselves to carrying on a guerilla war against the consequences of the present system, instead of working at the same time for its transformation and employing their organized power as a lever for the final emancipation of the working classes; that is, for the final abolition of the wage system.”17 Marx could hardly have said more plainly that he could see nothing more in the trade unions than tools for the destruction of the capitalist social order. It remained for the “realistic” economists and revisionist Marxians to assert that the trade unions were able to maintain wages permanently above the level at which they would have stood without trade unionism. There is no need to argue the point, for no attempt was made even to develop a theory from it. It remains an assertion which is always made without any reference to the interdependence of economic factors and without any sort of proof.
The policy of strike, violence, and sabotage can claim no merit whatever for any improvement in the workers’ position.18 It has helped to shake to the foundations the skillfully constructed edifice of the capitalist economy, in which the lot of everyone down to the poorest worker has been continually rising. And it has operated not in the interests of Socialism but in that of Syndicalism.
If workers in the so-called non-vital industries succeed in their demand for wages above the level given by the situation on the market, there ensues a dislocation which sets in motion forces that lead finally to a readjustment of the market’s disturbed equilibrium. If, however, the workers in vital industries are able to enforce by strikes or threat of strikes their demands for higher wages, and to claim all those rights claimed in the wage struggle by other workers, the position is altogether different. It would be misleading to say that those workers were then virtually monopolists, for the question here lies outside the concept of economic monopoly. If the employees of all transport undertakings strike and circumvent action which might weaken the intended effect of their strike, they are absolute tyrants of the territories under their dominion. One may say, of course, that they make a sober use of their power, but this does not alter the fact that they have the power. That being so, there are only two classes in the country: members of the trade unions for the branches of production essential to life, and the remainder of the people, who are slaves without rights. We arrive at a position where “the indispensable workers dominate the remaining classes by the rule of violence.”19
And, speaking once again of power it may be well to inquire at this point on what this power, in common with all other power, is based. The power of the workers organized in trade unions, before which the world now trembles, has precisely the same foundations as the power of any other tyrants at any time; it is nothing more than the product of human ideologies. For decades it was impressed upon people that the association of workers in trade unions was necessary and useful to the individual as well as to the community, that only the wicked selfishness of exploiters could think of combating the unions, that in strikes the strikers were always right, that there could hardly be a worse infamy than strike-breaking, and that attempts to protect those willing to work were anti-social. The generations which grew up in the last decades have been taught from childhood that membership in a trade union was a worker’s most important social duty. A strike came to mean a sort of holy action, a social ordinance. On this ideology rests the power of the workers’ association. It would break down if the theory of its social utility were superseded by other views on the effects of trade unionism. Plainly, therefore, it is precisely the most powerful unions which are obliged to use their power sparingly, since, by putting an undue strain on society, they might cause people to reflect upon the nature and effect of trade unionism and so lead to a re-examination and rejection of these theories. This, of course, is and always has been true of all holders of power and is no peculiarity of the trade unions.
For this surely is clear: that should there ever be a thorough discussion of the right of the workers in vital industries to strike, the whole theory of trade unionism and compulsory strikes would soon collapse and such strike-breaking associations as the “Technische Nothilfe”20 would receive the applause which today goes to the strikers. It is possible that in the ensuing conflict society would be destroyed. On the other hand, it is certain that a society which aims at preserving trade unionism on its present lines is in a fair way towards destroying itself.
Assistance of the unemployed has proved to be one of the most effective weapons of destructionism.
The reasoning which brought about unemployment insurance was the same as that which led to the setting up of insurance against sickness and accident. Unemployment was held to be a misfortune which overwhelmed men like an avalanche. It occurred to no one that lack of wages would be a better term than lack of employment, for what the unemployed person misses is not work but the remuneration of work. The point was not that the “unemployed” could not find work, but that they were not willing to work at the wages they could get in the labour market for the particular work they were able and willing to perform.
The value of health and accident insurance becomes problematic by reason of the possibility that the insured person may himself bring about, or at least intensify, the condition insured against. But in the case of unemployment insurance, the condition insured against can never develop unless the insured persons so will. If they did not act as trade unionists, but reduced their demands and changed their locations and occupations according to the requirements of the labour market, they could eventually find work. For as long as we live in the real world and not in the Land of Heart’s Desire, labour will be a scarce good, that is, there will be an unsatisfied demand for labour. Unemployment is a problem of wages, not of work. It is just as impossible to insure against unemployment as it would be to insure against, say, the unsaleability of commodities.
Unemployment insurance is definitely a misnomer. There can never be any statistical foundation for such an insurance. Most countries have acknowledged this by dropping the name “insurance,” or at least by ignoring its implications. It has now become undisguised “assistance.” It enables the trade unions to keep wages up to a rate at which only a part of those seeking work can be employed. Therefore, the assistance of the unemployed is what first creates unemployment as a permanent phenomenon. At present many European states are devoting to the purpose sums that considerably exceed the capacity of their public finances.
The fact that there exists in almost every country permanent mass unemployment is considered by public opinion as conclusive proof that Capitalism is incapable of solving the economic problem, and that therefore government interference, totalitarian planning and Socialism are necessary. And this argument is regarded as irrefutable when people realize that the only big country which does not suffer from the evils of unemployment is communist Russia. The logic of this argument however, is very weak. Unemployment in the capitalist countries is due to the fact that the policy both of the governments and of the trade unions aims at maintaining a level of wages which is out of harmony with the existing productivity of labour. It is true that as far as we can see there is no large scale unemployment in Russia. But the standard of living of the Russian worker is much lower than the standard of living of the unemployed dole receiver in the capitalist countries of the West. If the British or Continental workers were ready to accept wages which would indeed be lower than their present wages but which would still be several times higher than the wages of the Russian worker, unemployment would disappear in these countries too. Unemployment in the capitalist countries is not a proof of the insufficiency of the capitalist system, nor is the absence of unemployment in Russia a proof of the efficiency of the communist system. But the fact that there is unemployment as a mass phenomenon in almost every capitalist country is nevertheless the most formidable menace to the continuance of the capitalist system. Permanent mass unemployment destroys the moral foundations of the social order. The young people, who, having finished their training for work, are forced to remain idle, are the ferment out of which the most radical political movements are formed. In their ranks the soldiers of the coming revolutions are recruited.
This indeed is the tragedy of our situation. The friends of trade unionism and of the policy of unemployment doles honestly believe that there is no way to ensure the maintenance of fair conditions of life for the masses other than the policy of the trade unions. They do not see that in the long run all efforts to raise wages above a level corresponding to the market reflection of the marginal productivity of the labour concerned must lead to unemployment, and that in the long run unemployment doles can have no other effect than the perpetuation of unemployment. They do not see that the remedies which they recommend for the relief of the victims—doles and public works—lead to consumption of capital, and that finally capital consumption necessitates a lowering of the wage level still further. Under present conditions it is clear that it would not be feasible to abolish the dole and the other less important provisions for the relief of the unemployed, public works and so on, at one single stroke. It is indeed one of the principal drawbacks of every kind of interventionism that it is so difficult to reverse the process—that its abolition gives rise to problems which it is almost impossible to solve in a completely satisfactory way. At the present day the great problem of statesmanship is how to find a way out of this labyrinth of interventionist measures. For what has been done in recent years has been nothing else than a series of attempts to conceal the effects of an economic policy which has lowered the productivity of labour. What is now needed is first of all a return to a policy which ensures the higher productivity of labour. This includes clearly the abandonment of the whole policy of protectionism, import duties and quotas. It is necessary to restore to labour the possibility to move freely from industry to industry and from country to country.
It is not Capitalism which is responsible for the evils of permanent mass unemployment, but the policy which paralyses its working.
Under Liberalism, state-owned factories and production by the State were abolished. The postal service was practically the only exception to the general principle that the means of production should be left to private ownership and every economic activity made over to the private citizen. The advocates of etatism have gone to a lot of trouble to set forth the reasons which they suppose to favour the nationalization of the postal and the related telegraph service. In the first place they put forward political arguments. But in such discussions of the pros and cons of state control of the post and telegraph system, two things are generally lumped together which ought to be considered separately: the questions of unifying the service and of transferring it exclusively to the State. No one denies that the post and telegraph systems afford excellent facilities for unification, and that, even if they were left perfectly free, trusts would inevitably be formed, leading to a de facto monopoly of individuals over whole territories at least. With no other enterprises are the advantages of concentration more obvious. But to admit this is not by any means to decide whether the State is to be granted a legally assured monopoly for all branches of such services. It could easily be demonstrated that State management works uneconomically, that it is slow to extend the facilities for the transmission of letters and parcels in accordance with business requirements, and that it can only with difficulty be persuaded to introduce practical improvements. The great progress in this sphere of economic life has been achieved by private enterprise. We owe largely to private enterprise the development on a large scale of overland telegraphy: in England this was nationalized only in 1869, in the U.S.A. it is still in the hands of joint stock companies. Submarine cables are mostly in the hands of private enterprise. Even German etatism showed hesitation in “freeing” the State from collaboration with private enterprise in deep sea telegraphy. The liberals of that time also advocated the principle of full freedom in post and telegraph services and attempted with great success to expose the inadequacy of State enterprise.21 That nevertheless these branches of production have not been denationalized is to be ascribed only to the fact that those holding political power need the post and telegraph to control public opinion.
The military powers, everywhere ready to hinder the entrepreneur, have acknowledged his superiority by handing over to him the production of arms and munitions. The great advances in war technique date from the moment when private enterprise began to produce war material. The State has had to recognize that the entrepreneur produces better arms than the civil servant; this was proved on the battlefields in a way that enlightened even the most stubborn advocate of state production. In the nineteenth century arsenals and state shipyards disappeared almost completely, or were transformed into mere magazines, and their place was taken by private enterprises. Literary and parliamentary supporters of the nationalization of industry had scant success with their demand for the nationalization of the armaments industry, even in the most flourishing days of etatism in the years immediately preceding the World War. The general staffs knew well the superiority of the private undertaking.
For reasons of public finance, certain revenue monopolies which had existed from a distant past were not abolished even during the epoch of Liberalism. They remained because they were looked upon as a convenient way of collecting a tax on consumption. But people had no illusions about the uneconomic nature of state enterprise—in the administration of the tobacco monopolies, for example. But before Liberalism could carry its victorious principle into this field, Socialism had already introduced a retrograde movement.
The ideas from which sprang the first modern nationalizations and municipalizations were not altogether inspired by modern Socialism. In the origins of the movement, ideas of the old police state and purely military and political considerations played a great part. But soon the socialist ideology became dominant. It was a conscious socialization that was carried out by states and municipalities. The slogan was: away with uneconomic private enterprise, away with private ownership.
At first the economic inferiority of socialist production did not hinder the progress of nationalization and municipalization. The voice of caution was not heard. It was lost in the shouting of etatists, socialists, and all the elements whose interests were at stake. People did not choose to see the faults of government enterprise, and so overlooked them. Only one circumstance restricted the excessive zeal of the enemies of private property—the financial difficulties with which a large number of public undertakings had to contend. For political reasons the government could not completely pass on to consumers the higher costs of State management, and working losses were therefore frequent. Its supporters consoled themselves by stating that the general economic and social political advantages of state and municipal enterprise were well worth the sacrifice. All the same, it became necessary to proceed cautiously with the etatistic policy. The embarrassment in which economists writing on these problems found themselves became evident from their reluctance to ascribe the financial failure of public enterprises to the uneconomic methods of this kind of enterprise. They tried instead to account for it by some special circumstance, such as personal mistakes in the management and errors in organization. And they pointed repeatedly to the Prussian State railways as the most brilliant model of a good administration. Of course the Prussian State railways have yielded good working surpluses. But there were special reasons. Prussia acquired the most important part of its State railway system in the first half of the ’eighties, that was at a time of specially low prices, and the whole system was equipped and expanded to a large extent before the rapid growth of German industrial prosperity which set in during the second half of the ’nineties. Thus there was nothing particularly remarkable in the fact that these railways paid well, for their loads grew from year to year without any solicitation, they ran mostly through plains, they had coal on every hand, and could count on favourable running conditions. Their situation was such that they could yield profits for a while although run by the State. It was the same with the gas, water, and electricity works and with the tramway systems of several large cities. The conclusions generally drawn from this were, however, far from accurate.
Generally speaking, the result of nationalization and municipalization was that taxation had to contribute to running costs. So it may be said that no catchword has ever been made public at so inappropriate a moment as Goldscheid’s slogan of “the suppression of the taxation state.” Goldscheid thinks that the financial troubles into which the World War and its consequences have landed the State can no longer be remedied by the old methods of public finance. The taxation of private enterprise is failing. Therefore, one must start to “repropriate” the State by expropriating capitalist enterprises, so that the State will be able to cover its expenses out of the profits of its own undertakings.22 Here we have the cart before the horse. The financial difficulties result from the fact that taxation can no longer pay the large contributions required by socialist enterprises. Were all enterprises socialized, the form of the evil would indeed be changed, but far from being abolished it would be intensified. The smaller yield of the public enterprises would no longer be visible in a budget deficit, it is true, but the population would be worse off. Distress and misery would increase, not diminish. To remove the State’s financial troubles Goldscheid proposes to carry socialization to the bitter end. But this financial trouble has come about because socialization has already gone too far. It will vanish only when socialized enterprises are returned to private ownership. Socialism has arrived at a point where the impossibility of carrying out its technique is apparent to all, where even the blind begin to see that it is hastening the decline of all civilization. The effort made in Central Europe to socialize completely at a single stroke was wrecked not by the resistance of the bourgeoisie, but by the fact that further socialization was quite impossible from a financial point of view. The systematic, cool and deliberate socialization practised by states and municipalities up to the war, came to a standstill because the result to which it was leading became all too clear. The attempt to pass it off under a different name, as the socialization commission in Germany and Austria tried to do, could have no success in these circumstances. If the work of socialization had to be carried on, it was not possible to do so by the old methods. The voice of reason which warned men not to venture any further on this path must be silenced, criticism must be obliterated by the intoxication of enthusiasm and fanaticism, opponents must be killed, as there was no other way of refuting them. Bolshevism and Spartacism were the last weapons of Socialism. In this sense they are the inevitable outcome of the policy of destructionism.
For classical nineteenth-century Liberalism, which assigns to the State the sole task of safeguarding the citizen’s property and person, the problem of raising the means needed for public services is a matter of small importance. The expenditure caused by the apparatus of a liberal community is so small, compared with the total national income, that there is little appreciable difference between meeting it one way or another. If the liberal writers of that period have been concerned to find the best form of taxation, they have done so because they wish to arrange every detail of the social system in the most effective way, not because they think that public finance is one of the main problems of society. They have of course to take into account the fact that nowhere in the world have their ideas been realized, and that the hope of seeing them completely realized in the near future is slender. They see clear evidence of liberal development everywhere, they believe that the distant future belongs to Liberalism; but the forces of the past still seem sufficiently strong to inhibit its progress, though no longer strong enough to stop it completely, let alone suppress it. There still exist schemes for violence and conquest, there are standing armies, secret diplomatic treaties, wars, tariffs, State interference in trade and industry—in short, interventionism of every kind in home and foreign policy. So, for a considerable time to come, the nations must be prepared to allow considerable sums for governmental expenditure. Though questions of taxation would be of minor importance in the purely liberal state, they call for increased attention in the authoritarian state in which liberal politicians of their time have to work. In the first place,therefore, they recommend that State expenditure shall be restricted. But if they do not completely succeed in this they must decide how the necessary funds are to be raised without more harm than is absolutely necessary.
Liberal taxation proposals must necessarily be misunderstood unless it is realized that liberal politicians look on every tax as an evil—though up to a point an unavoidable one—and that they proceed from the supposition that one must try to keep State expenditure down to a minimum. When they recommend a certain tax, or, to speak more correctly, call it less harmful than other taxes, they always have in mind the raising of only a relatively small sum. A low rate of taxation is an integral part of all liberal programmes of taxation. This alone explains their attitude towards the income tax, which they were the first to introduce into serious discussions on public finance, and their willingness to agree that a modest minimum of subsistence shall be free from taxation and the rate of taxation on small incomes lowered.23
The socialist financial policy also is only a temporary one, its validity being limited to the period of transition. For the Socialist State, where all means of production belong to society and all income finds its way in the first place to the State coffers, questions of finance and taxation do not exist at all in the sense in which the social order based on private property has to deal with them. Those forms of the socialist community which, like State Socialism, intend to allow private property to continue in name and in outward form, would not really need to levy taxes either, although they might retain the name and legal form of taxation. They would simply decree how much of the social income obtained in the individual enterprises should remain with the nominal owner and how much should be handed over to the State. There would not be any question here of a taxation which imposes certain obstacles in individual businesses, but leaves the market to deal with its effect upon the prices of commodities and wages, on profits, interest, and rents. Questions of public finance and the policy of taxation exist only where there is private ownership in the means of production.
But for socialists, too, the public finance problems of capitalist society increase in importance as the period of transition becomes more and more prolonged. This is inevitable, seeing that they are continually trying to expand the area of the State’s tasks and that there is consequently an increase in expenditure. They thus take over the responsibility of increasing the income of the State. The socialist policy has become the decisive factor in the development of government expenditure, socialist demands regulate the policy of taxation and in the socialist programme itself public finance comes more and more into the foreground. Whilst in the liberal programme the basic principle is a low rate of taxation, the socialists think a tax is better the heavier it is.
Classical economics achieved much in the theory of the incidence of taxes. This must be admitted in spite of all the faults of its basic theory of value. When liberal politicians criticized existing conditions and proposed reforms they started from the masterly propositions of Ricardo’s admirable investigations on this subject. Socialist politicians have taken things much more easily. They had no new opinions of their own, and from the Classical writers they took merely what they needed for the politics of the moment—isolated remarks, torn from their context and dealing mainly with the incidence of taxes on consumption. They improvised a rough system which nowhere penetrated to the main problem, but had the virtue of being so simple that the masses could understand it. Taxes were to be paid by the rich, the entrepreneurs, the capitalists, in short, by “the others”; the workers, that is the electors whose votes were what mattered at the moment, should remain tax free. All taxes on mass consumption, even on alcoholic drinks, were to be rejected, because they burdened the people. Direct taxes could be as high as the government wished to make them, as long as the incomes and possessions of the workers were left alone. Not for one moment does it occur to the advocates of this popular taxation policy that direct taxes and taxes on trade may start a chain of events that will force down the standard of living of the very classes whose alleged special interests they claim to represent. Seldom does anyone ask whether the restriction of capital formation, which results from the taxation of property, may not harm the non-propertied members of society as well. More and more the policy of taxation evolves into a policy of confiscation. The aim on which it concentrates is to tax out of existence every kind of fortune and income from property, in which process property invested in trade and industry, in shares and bonds, is generally treated more ruthlessly than property in land. Taxation becomes the favourite weapon of interventionism. Taxation laws no longer aim exclusively or predominantly at increasing State revenues; they are intended to serve other purposes besides fiscal requirements. Sometimes their relation to public finance vanishes completely and they fulfil an entirely different function. Some taxes seem to be inflicted as punishment for behaviour that is considered injurious; the tax on big stores is intended to make it more difficult for big stores to compete with small shops; the taxes on stock exchange transactions are designed to restrict speculation. The dues become so numerous and varied that in making business transactions a man must first of all consider what the effect on his taxation will be. Innumerable economic projects lie fallow because the load of taxation would make them unprofitable. Thus in many states the high duties on founding, maintaining, amalgamating, and liquidating joint stock companies seriously restrict the development of the system.
Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxes on the rich. Capital levies and high income taxes on the larger incomes are extraordinarily popular with the masses, who do not have to pay them. The assessors and collectors go about their business with positive enthusiasm; they are intent upon increasing the taxpayer’s liability by the subtleties of legal interpretation.
The destructionist policy of taxation culminates in capital levies. Property is expropriated and then consumed. Capital is transformed into goods for use and for consumption. The effect of all this should be plain to see. Yet the whole popular theory of taxation today leads to the same result.
Confiscations of capital through the legal form of taxation are neither socialistic nor a means to Socialism. They lead, not to socialization of the means of production, but to consumption of capital. Only when they are set within a socialist system, which retains the name and form of private property, are they a part of Socialism. In “War Socialism” they supplemented the compulsory economic system and were instrumental in determining the evolution of the whole system towards Socialism.24 In a socialist system where the means of production are totally and formally socialized, there could in principle be no more taxes on property or income from property. When the socialist community levies dues from its members this in no way alters the disposal of the means of production.
Marx has spoken unfavourably of efforts to alter the social order by measures of taxation. He emphatically insisted that taxation reform alone could not replace Socialism.25 His views on the effect of taxes within the capitalist order were also different from those of the ordinary run of socialists. He said on one occasion, that to assert that “the income tax does not affect the workers” was “truly absurd.” “In our present social order, where entrepreneurs and workers stand opposed, the bourgeoisie generally compensates itself for higher taxation by reducing wages or raising prices.”26 But the Communist Manifesto had already demanded “a heavy progressive tax” and the Social Democratic Party’s demands in taxation have always been the most radical. In that field also, therefore, it is moving towards destructionism.
Inflation is the last word in destructionism. The Bolshevists, with their inimitable gift for rationalizing their resentments and interpreting defeats as victories, have represented their financial policy as an effort to abolish Capitalism by destroying the institution of money. But although inflation does indeed destroy Capitalism, it does not do away with private property. It effects great changes of fortune and income, it destroys the whole finely organized mechanism of production based on division of labour, it can cause a relapse into an economy without trade if the use of metal money or at least of barter trade is not maintained. But it cannot create anything, not even a socialist order of society.
By destroying the basis of reckoning values—the possibility of calculating with a general denominator of prices which, for short periods at least, does not fluctuate too wildly—inflation shakes the system of calculations in terms of money, the most important aid to economic action which thought has evolved. As long as it is kept within certain limits, inflation is an excellent psychological support of an economic policy which lives on the consumption of capital. In the usual, and indeed the only possible, kind of capitalist book-keeping, inflation creates an illusion of profit where in reality there are only losses. As people start off from the nominal sum of the erstwhile cost price, they allow too little for depreciation on fixed capital, and since they take into account the apparent increases in the value of circulating capital as if these increases were real increases of value, they show profits where accounts in a stable currency would reveal losses.27 This is certainly not a means of abolishing the effects of an evil etatistic policy, of war and revolution; it merely hides them from the eye of the multitude. People talk of profits, they think they are living in a period of economic progress, and finally they even applaud the wise policy which apparently makes everyone richer.
But the moment inflation passes a certain point the picture changes. It begins to promote destructionism, not merely indirectly by disguising the effects of destructionist policy; it becomes in itself one of the most important tools of destructionism. It leads everyone to consume his fortune; it discourages saving, and thereby prevents the formation of fresh capital. It encourages the confiscatory policy of taxation. The depreciation of money raises the monetary expression of commodity values and this, reacting on the book values of changes in capital—which the tax administration regards as increases in income and capital—becomes a new legal justification for confiscation of part of the owners’ fortune. References to the apparently high profits which entrepreneurs can be shown to be making, on a calculation assuming that the value of money remains stable, offers an excellent means of stimulating popular frenzy. In this way, one can easily represent all entrepreneurial activity as profiteering, swindling, and parasitism. And the chaos which follows, the money system collapsing under the avalanche of continuous issues of additional notes, gives a favourable opportunity for completing the work of destruction.
The destructionist policy of interventionism and Socialism has plunged the world into great misery. Politicians are helpless in the face of the crisis they have conjured up. They cannot recommend any way out except more inflation or, as they call it now, reflation. Economic life is to be “cranked up again” by new bank credits (that is, by additional “circulation” credit) as the moderates demand, or by the issue of fresh government paper money, which is the more radical programme.
But increases in the quantity of money and fiduciary media will not enrich the world or build up what destructionism has torn down. Expansion of credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must land the nation in profounder catastrophe. For the damage such methods inflict on national well-being is all the heavier, the longer people have managed to deceive themselves with the illusion of prosperity which the continuous creation of credit has conjured up.28
Marxism and Destructionism
Socialism has not consciously willed the destruction of society. It believed it was creating a higher form of society. But since a socialist society is not a possibility every step towards it must harm society.
It is the history of Marxian Socialism which shows most clearly that every socialist policy must turn into destructionism. Marxism described Capitalism as the inevitable preliminary to Socialism, and looked forward to the new society only as the result of Capitalism’s fruition. If we take our stand on this part of Marx’s theory—it is true that he has put forward other theories with which this is completely incompatible—then the policy of all the parties that claim Marx’s authority is quite non-Marxian. The Marxians ought to have combated everything that could in any way hinder the development of Capitalism. They should have protested against the trade unions and their methods, against laws protecting labour, against compulsory social insurance, against the taxation of property; they should have fought laws hindering the full working of the stock and produce exchanges, the fixation of prices, the policy which proceeds against cartels and trusts; they should have resisted inflationism. But they have done the reverse of all this, have been content to repeat Marx’s condemnation of the “petty bourgeois” policy, without however drawing the inevitable conclusions. The Marxians who, in the beginning, wished to dissociate themselves definitely from the policy of all parties looking to the pre-capitalist economic idea, arrived in the end at exactly the same point of view.
The fight between Marxists and the parties calling themselves emphatically anti-Marxists is carried on by both sides with such a violence of expression that one might easily be led into supposing them irreconcilable. But this is by no means the case. Both parties, Marxism and National Socialism, agree in opposing Liberalism and rejecting the capitalist social order. Both desire a socialist order of society. The only difference in their programme lies in slight variations in their respective pictures of the future socialist State; nonessential variations, as we could easily show. The foremost demands of the National Socialist agitation are different from those of the Marxists. While the Marxists speak of abolishing the commodity character of labour, the National Socialists speak of breaking the slavery of interest (Brechung der Zinsknechtschaft). While the Marxists hold the “capitalists” responsible for every evil, the National Socialists think to express themselves more concretely by shouting “Death to the Jews” (Juda verrecke).29
Marxism, National Socialism, and other anti-capitalist parties are indeed separated, not only by clique enmities, and personal resentments, but also by problems of metaphysics and the conduct of life. But they all agree on the decisive problem of reshaping the social order: they reject private ownership in the means of production and desire a socialist order of society. It is true that the paths by which they hope to reach the common goal run parallel only for short stretches, but even where they diverge they remain on adjacent territories.
It is not surprising that in spite of this close relationship they fight out their feud with consuming bitterness. In a socialist community the fate of the political minorities would necessarily become unbearable. How would National Socialists fare under a Bolshevist rule or Bolshevists under National Socialism?
The “Interest” as an Obstacle to Destructionism
According to Marx the political faith of the individual depends upon the class to which he belongs; the political faith of his class depends upon its interests as a class. The bourgeoisie is bound to support Capitalism. On the other hand the proletariat can only achieve its purpose, can only free itself from capitalist exploitation, by preparing the way for Socialism. Thus the respective positions of the bourgeoisie and the proletariat in the political arena are defined in advance. Perhaps no doctrine of Marx has made a deeper or more lasting impression on political theory than this. It has found acceptance far beyond the immediate range of Marxism. Liberalism has come to be regarded as the doctrine in which the class interests of the bourgeoisie and of big business find expression. Whoever professes liberal opinions is considered to be a more or less well-meaning representative of the special interests which stand in opposition to the general good. Economists who reject the Marxian doctrine are characterized as the “spiritual bodyguard of the profits of capital—and sometimes also of ground-rents”31 —a remarkably convenient theory which saves the Marxian the trouble of arguing with them.
Nothing indicates more clearly the widespread recognition which has been accorded to this doctrine of Marx than its acceptance even by the opponents of Socialism. When people suggest that the defeat of socialist effort is a task chiefly or even exclusively for the propertied classes, when they attempt to form a “united front” of all the bourgeois parties in order to oppose Socialism, they then admit that the maintenance of private property in the means of production is the special interest of a certain class, and that it is antagonistic to the public welfare. These strangely short-sighted adversaries of Socialism do not realize that any attempt on the part of a class, which is comparatively small when contrasted with the masses, to defend its particular interests must be futile; they do not recognize that private property is doomed when it is regarded as the privilege of its owners. Still less are they able to perceive that their assumption is radically contradicted by the experience of the formation of actual political parties.
Liberalism is not a doctrine which serves the class interests of those in possession of property. Whoever conceives it as such has already admitted one of the leading contentions of Socialism; he is no liberal. Liberalism upholds private property not in the interests of the owners, but in the general interest; it believes that the maintenance of the capitalist system is to the advantage not only of the capitalists but of every member of society. It admits that in the socialist community there will, in all probability, be little or no inequality of income. But it urges that owing to the smaller yield of socialist production, the total amount to be shared will be considerably smaller, so that each individual will receive less than the poorest receives today. Whether this thesis is accepted or rejected is another question. This is precisely the point upon which Socialism and Liberalism are in conflict. Whoever rejects it out of hand, rejects Liberalism. Yet it would be unreasonable to do this without careful consideration of the problem and of the arguments of either sides.
In fact nothing is further from the particular interests of the entrepreneurs, whether as individuals or as a class, than to defend the principle of private property or to resist the principle of Socialism. That the introduction of Socialism must necessarily injure the entrepreneurs and capitalists, or at least their children, cannot be disputed. by those who believe that Socialism implies want and distress for all. To this extent, therefore, the propertied classes are admittedly concerned in resisting Socialism. But their interest is no greater than that of any other member of society and is quite independent of their privileged position. If it were possible to imagine that Socialism would be introduced lock stock and barrel overnight, then it might be said that the entrepreneurs and capitalists had special reasons for wishing to maintain the capitalist system. They would have more to lose. Even if the distress which resulted from the reorganization were the same for all, those would suffer more whose fall had been the greater. But it is not possible to imagine that Socialism will be introduced so rapidly; and if it were, it may be assumed that the entrepreneurs, by reason of their expert knowledge and ability to take responsibility, would occupy, at any rate for a time, privileged positions within the socialist organization.
The entrepreneur is unable to provide for his grandchildren and great-grandchildren, for it is characteristic of private property in the means of production under the capitalist system that it creates no permanent source of income. Every fortune must be renewed by effort. When the feudal lord supported the feudal system he was defending not only his own property but that of his descendants. But the entrepreneur in the capitalist system knows that his children and grandchildren will only survive in the face of new competition if they can hold their ground as directors of productive enterprise. If he is concerned for the fate of his successors and wants to consolidate his property for them in a way contrary to the interests of the community, he will have to become an enemy of the capitalist social order and demand every kind of restriction on competition. Even the way to Socialism may strike him as the best means for this, provided the transition does not take place too suddenly, for he may expect compensation against expropriation so that, for a longer or shorter time, the expropriated will enjoy a secure income in place of the uncertainty and insecurity that is the lot of owners of an enterprise. Consideration for his own property and for the property of his successors may, therefore, urge the entrepreneurs rather to support than to oppose Socialism. He must welcome all efforts which aim at suppressing newly created and newly developed fortunes, especially all measures intended to limit anything in the nature of economic freedom, because they make secure the income which otherwise must be earned by daily struggle as long as competition is not restricted—because they exclude new competitors.32
Entrepreneurs have an interest in combining to proceed uniformly in wage negotiations with the workers organized in trade unions.33 And they have an interest in combining to carry through tariff and other restrictions which conflict with the essence and principle of Liberalism or to resist government interference which may injure them. But they have absolutely no special interest in fighting Socialism and socialization as such. They have no special interest in fighting destructionism. The whole purpose of the entrepreneur is to adjust himself to the economic contingencies of any moment. His aim is not to fight Socialism, but to adjust himself to conditions created by a policy directed towards socialization. It is not to be expected that entrepreneurs or any other particular group in the community should, out of self-interest, necessarily make the general principles of well-being the maxim of their own procedure. The necessities of life compel them to make the best of any given circumstances. It is not the business of the entrepreneurs to lead the political fight against Socialism; all that concerns them is to adjust themselves and their enterprises to the situations created by the measures directed towards socialization, so that they will make the greatest profit possible under the conditions prevailing.
It follows, therefore, that neither associations of entrepreneurs, nor those organizations in which the entrepreneurs’ support counts, are inclined to fight on principle against Socialism. The entrepreneur, the man who seizes the opportunity of the moment, has little interest in the issue of a secular struggle of indefinite duration. His interest is to adjust himself to the circumstances in which he finds himself at the moment. An entrepreneurs’ organization aims solely at repulsing some individual encroachment of the trade unions; or it may oppose acts of legislation, such as special forms of taxation. It carries out the tasks assigned to it by parliaments and governments in cases where it is desired that the organized body of entrepreneurs should co-operate with the organized working class in order to give the destructionist element its say in the national economy. To fight on principle for the maintenance of an economy based on private property in the means of production is no part of the programme of organized entrepreneurs. Its attitude towards Liberalism is one of indifference or even, as in the case of tariff policy, of antagonism.
Organized interests, as the socialist doctrine depicts them, correspond not to the entrepreneurs’ associations but to the farmers’ unions, which advocate tariff duties on agricultural products, or those associations of small producers, which—above all in Austria—press for the exclusion of competition. These clearly are not efforts on behalf of Liberalism.
Thus there are no individuals and no classes whose particular interests would lead them to support Capitalism as such. The policy of Liberalism is the policy of the common good, the policy of subjecting particular interests to the public welfare—a process that demands from the individual not so much a renunciation of his own interests as a perception of the harmony of all individual interests. There are, therefore, no individuals and no groups whose interests would ultimately be better guarded by Socialism than by a society based on private ownership in the means of production. But although ultimately no one’s interests would actually be better served by Socialism, there are plenty of people whose particular interests of the moment are better guarded by a policy directed towards socialization than by the maintenance of Liberalism. Liberalism has opposed everything in the nature of a sinecure and has sought to reduce to a minimum the number of public officials. The interventionist policy provides thousands and thousands of people with safe, placid, and not too strenuous jobs at the expense of the rest of society. All nationalization or setting up of a municipal or public enterprise links private interests with the movement against private property. Today Socialism and destructionism find their strongest supporters in the millions for whom a return to a freer economy would be at first and in the short run detrimental to their particular interests.
Violence and Authority
The attitude of mind which sees in private property a privilege of the owners is an echo from former periods in the history of property. All property ownership began with appropriation of ownerless things. The history of property passed through a period in which forcible dispossession of the owners was the rule. It is safe to say that the ownership of any piece of ground property can be traced back to seizure by violence. This has of course no application to the social order of Capitalism, as property here is constantly being acquired in the process of market competition. But as the liberal principles have nowhere—in Europe at least—been put into practice in their entirety, and as everywhere, especially in landed property, very much of the old taint of violence survives, the tradition of the feudal owners is still upheld: “Ich lieg und besitze” (I occupy and possess). Criticism of property rights is met with violent abuse. This is the policy the German Junkers adopted against Social Democracy—with what success is well known.34
Partisans of this order can say nothing in justification of private ownership in the means of production but that it is upheld by force. The fight of the strong is the only fight they can enforce. They boast of their physical force, rely on their armed equipment, and consider themselves entitled to despise any other argument. Only when the ground begins to tremble under their feet, do they produce another argument by taking their stand upon acquired rights. Violation of their property becomes an illegality which must be avoided. We need waste no words in exposing the weakness of this point of view in the struggle against a movement that wants to found new rights. It is quite powerless to change public opinion if that opinion has condemned property. Its beneficiaries recognize this with horror and turn in their distress to the Church, with the odd request that the Church shall keep the misera plebs (wretched masses) modest and humble, fight covetousness and turn the eyes of the propertyless from earthly goods to heavenly things.35 Christianity is to be kept alive so that the people shall not become covetous. But the demand thus made to the Church is monstrous. It is asked to serve the interests, generally assumed to be harmful to the community, of a number of privileged persons. It is obvious that the true servants of the Church have revolted against this presumptuous demand, while enemies of the Church have found it an effective weapon in their war of liberation against religion. What is surprising is that ecclesiastical enemies of Socialism, in their efforts to represent Socialism as a child of Liberalism, of the free school, and of atheism, have taken up just the same attitude towards the work which the Church performs in maintaining existing property relations. Thus the Jesuit Cathrein says: “If one assumes that with this life all is finished, that to man is given no greater destiny than to any other mammal that wallows in the mire, who then will ask of the poor and oppressed, whose life is a constant struggle for existence, that they should bear their hard fate with patience and resignation, and look on while others clothe themselves in silk and purple and have regular and ample meals? Does not the worker too carry in his heart the indestructible impulse towards perfect happiness? If he is robbed of every hope of a better world beyond, by what right is he prevented from seeking his happiness as far as possible on earth and so demanding imperatively, his share of the earth’s riches? Is he not just as much man as his employer? Why should some just manage to exist in want and poverty while others live on the fat of the land, when from their point of view there is no reason why the good things of this world should belong to some rather than to others? If the atheistic-naturalistic standpoint is justified, so also is the Socialist demand: that worldly goods and happiness should be distributed to all as equally as possible, that it is wrong for some to live a life of idle enjoyment in palaces while others live in miserable cellars and attics, barely able in spite of the most strenuous efforts to earn their daily bread.”36 Assuming matters to be just as Cathrein imagines them—that private property is a privilege of the owners, that the others are poorer in proportion as these are rich, that some starve because others carouse, that some live in miserable little rooms because others live in lordly places—does he really believe that it could possibly be a work of the Church to maintain such conditions? Whatever one may read into the Church’s social teaching, one cannot suppose that its founder or his supporters would have approved of its being used to bolster up unjust social institutions that are obviously disadvantageous to the greater part of humanity. Christianity would long since have vanished from the earth, were it that for which, in common with many of its bitterest enemies, Bismarck and Cathrein mistook it: a bodyguard for a social institution injurious to the masses.
The socialist idea can be suppressed neither by force nor by authority, for both are on the side of Socialism and not of its opponents. If guns and machine-guns are brought into action today they will be in the ranks of Socialism and Syndicalism, and not opposed to them. For the great mass of our contemporaries are imbued with the spirit of Socialism or of Syndicalism. Whatever system is set in authority at the present time, it can certainly not be Capitalism, for the masses do not believe in it.
The Battle of Ideas
It is a mistake to think that the lack of success of experiments in Socialism that have been made can help to overcome Socialism. Facts per se can neither prove nor refute anything. Everything is decided by the interpretation and explanation of the facts, by the ideas and the theories.
The man who clings to Socialism will continue to ascribe all the world’s evil to private property and to expect salvation from Socialism. Socialists ascribe the failures of Russian Bolshevism to every circumstance except the inadequacy of the system. From the socialist point of view, Capitalism alone is responsible for all the misery the world has had to endure in recent years. Socialists see only what they want to see and are blind to anything that might contradict their theory.
Only ideas can overcome ideas and it is only the ideas of Capitalism and of Liberalism that can overcome Socialism. Only by a battle of ideas can a decision be reached.
Liberalism and Capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions. Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts.
Even with those of intellectually higher standing, with the few capable of independent reflection, this seems to give Socialism an advantage. With the others, the great masses who are unable to think, the Socialist position is considered unshakable. A speaker who inflames the passions of the masses is supposed to have a better chance of success than one who appeals to their reason. Thus the prospects of Liberalism in the fight with Socialism are accounted very poor.
This pessimistic point of view is completely mistaken in its estimate of the influence which rational and quiet reflection can exercise on the masses. It also exaggerates enormously the importance of the part played by the masses, and consequently mass-psychological elements, in creating and forming the predominant ideas of an epoch.
It is true that the masses do not think. But just for this reason they follow those who do think. The intellectual guidance of humanity belongs to the very few who think for themselves. At first they influence the circle of those capable of grasping and understanding what others have thought; through these intermediaries their ideas reach the masses and there condense themselves into the public opinion of the time. Socialism has not become the ruling idea of our period because the masses first thought out the idea of the socialization of the means of production and then transmitted it to the intellectually higher classes. Even the materialistic conception of history, haunted as it is by “the psyche of the people” as conceived by Romanticism and the historical school of jurisprudence does not risk such an assertion. Of itself the mass psyche has never produced anything but mass crime, devastation, and destruction.37 Admittedly the idea of Socialism is also in its effects nothing more than destruction, but it is nevertheless an idea. It had to be thought out, and this could only be the work of individual thinkers. Like every other great thought, it has penetrated to the masses only through the intellectual middle class. Neither the people nor the masses were the first socialists. Even today they are agrarian socialist and syndicalist rather than socialist. The first socialists were the intellectuals; they and not the masses are the backbone of Socialism.38 The power of Socialism too, is like any other power ultimately spiritual; and it finds its support in ideas proceeding from the intellectual leaders, who give them to the people. If the intelligentsia abandoned Socialism its power would end. In the long run the masses cannot withstand the ideas of the leaders. True, individual demagogues may be ready, for the sake of a career and against their better knowledge, to instil into the people ideas which flatter their baser instincts and which are therefore sure to be well received. But in the end, prophets who in their heart know themselves to be false cannot prevail against those filled with the power of sincere conviction. Nothing can corrupt ideas. Neither by money nor by other rewards can one hire men for the fight against ideas.
Human society is an issue of the mind. Social co-operation must first be conceived, then willed, then realized in action. It is ideas that make history, not the “material productive forces,” those nebulous and mystical schemata of the materialist conception of history. If we could overcome the idea of Socialism, if humanity could be brought to recognize the social necessity of private ownership in the means of production, then Socialism would have to leave the stage. That is the only thing that counts.
The victory of the socialist idea over the Liberal idea has only come about through the displacement of the social attitude, which has regard to the social function of the single institution and the total effect of the whole social apparatus, by an anti-social attitude, which considers the individual parts of the social mechanism as detached units. Socialism sees the individuals--the hungry, the unemployed, and the rich—and finds fault on that account; Liberalism never forgets the whole and the interdependence of every phenomenon. It knows well enough that private ownership in the means of production is not able to transform the world into a paradise; it has never tried to establish anything beyond the simple fact that the socialist order of society is unrealizable, and therefore less able than Capitalism to promote the well-being of all.
No one has understood Liberalism less than those who have joined its ranks during the recent decades. They have felt themselves obliged to fight excrescences” of Capitalism, thereby taking over without a qualm the characteristic anti-social attitude of the socialists. A social order has no excrescences which can be cut off at will. If a phenomenon results inevitably from a social system based on private ownership in the means of production, no ethical or aesthetic caprice can condemn it. Speculation, for example, which is inherent in all economic action, in a socialistic society as well as any other, cannot be condemned for the form it takes under Capitalism merely because the censor of morals mistakes its social function. Nor have these disciples of Liberalism been any more fortunate in their criticisms of Socialism. They have constantly declared that Socialism is a beautiful and noble ideal towards which one ought to strive were it realizable, but that, alas, it could not be so, because it presupposed human beings more perfect morally than those with whom we have to deal. It is difficult to see how people can decide that Socialism is in any way better than Capitalism unless they can maintain that it functions better as a social system. With the same justification it might be said that a machine constructed on the basis of perpetual motion would be better than one worked according to the given laws of mechanics—if only it could be made to function reliably. If the concept of Socialism contains an error which prevents that system from doing what it is supposed to do, then Socialism cannot be compared with the Capitalist system, for this has proved itself workable. Neither can it be called nobler, more beautiful or more just.
It is true, Socialism cannot be realized, but it is not because it calls for sublime and altruistic beings. One of the things this book set out to prove was that the socialist commonwealth lacks above all one quality which is indispensable for every economic system which does not live from hand to mouth but works with indirect and roundabout methods of production: that is the ability to calculate, and therefore to proceed rationally. Once this has been generally recognized, all socialist ideas must vanish from the minds of reasonable human beings.
How untenable is the opinion that Socialism must come because social evolution necessarily leads to it, has been shown in earlier sections of this book. The world inclines to Socialism because the great majority of people want it. They want it because they believe that Socialism will guarantee a higher standard of welfare. The loss of this conviction would signify the end of Socialism.
[1. ]See, for instance, in Das Kapital the remarks on Bentham: “the most homely platitude,” “only copied stupidly,” “trash,” “a genius of bourgeois stupidity,” op. cit., Vol. I, p. 573; on Malthus, “a schoolboyishly superficial and clerically stilted plagiarism,” Ibid., Vol. I, p. 580. Publisher’s Note: In the English edition of Marx, Capital, Volume I, these quotations appear on p. 668 (Bentham) and P. 675 n3 (Malthus).
[2. ]Thus Marxism finds it easy to ally with Islamic zealotism. Full of pride the Marxist Otto Bauer cries: “In Turkestan and Azerbaijan monuments to Marx stand opposite the mosques, and the Mullah in Persia mingles quotations from Marx with passages from the Koran when he calls the people to the Holy War against European Imperialism.” See Otto Bauer, “Marx als Mahnung” in Der Kampf, XVI, 1923, p. 83.
[3. ]See my Liberalismus (Jena, 1927). Publisher’s Note: In English as The Free and Prosperous Commonwealth: An Exposition of the Ideas of Classical Liberalism (Princeton: Van Nostrand, 1962).
[4. ]Cazamian, Le roman social en Angleterre, 1830-50 (Paris, 1904), pp. 267 ff.
[5. ]On the socialist tendency in painting see Muther, Geschichte der Malerei im 19. Jahrhundert (Munich, 1893), Vol. II. pp. 186 ff.; Coulin, Die sozialistische Weltanschauung in der franzöisischen Malerei (Leipzig, 1909), pp. 85 ff.
[6. ]Bentham, Principles of the Civil Code, pp. 304 ff.
[7. ]See the criticism of this legend by Hutt, Economica, Vol. VI, pp. 92 ff.
[8. ]This even Brentano has to admit, who otherwise boundlessly overvalues the effects of labour legislation. “The imperfect machine had replaced the family father with child labour ... the perfected machine makes the father again the nourisher of family and gives the child back to the school ... Grown-up workers are now needed again and only those can be used who, by their higher standard of living, are equal to the heightened claims of the machines.” Brentano, Über das Verkältnis von Arbeitslohn und Arbeitszeit zur Arbeitsleistung, 2nd ed. (Leipzig, 1893), p. 43.
[9. ]Brentano, Über das Verhältnis von Arbeitslohn und Arbeitszeit zur Arbeitsleistung, pp. 11, 23 ff.; Brentano, Arbeitszeit und Arbeitslohn nach dem Kriege (Jena, 1919), p. 10; Stucken, “Theorie der Lohnsteigerung” (Schmollers Jahrbuch, 45th year, pp. 1152 ff.).
[10. ]Die Inauguraladresse der Internationalen Arbeiterassoziation, ed. Kautsky (Stuttgart, 1922), p. 27.
[11. ]Engels, Die Lage der arbeitenden Klasse in England, 2nd ed. (Stuttgart, 1892), p. 178. Publisher’s Note: In English, The Condition of the Working Class in England in 1844, with a Preface written in 1892 (London, George Allen & Unwin, Ltd., 1892), p. 177.
[12. ]Ibid., p. 297. Publisher’s Note: In English edition, p. 295.
[13. ]Engels, “Die englische Zehnstundenbill” in Aus dem literarischen Nachlass von Karl Marx, Friedrich Engels und Ferdinand Lassalle, Vol. III (Stuttgart, 1902), p. 393.
[14. ]Liek, Der Arzt und seine Sendung, 4th ed. (Munich, 1927), p. 54; Liek, Die Schaden der sozialen Versicherung, 2nd ed. (Munich, 1928), pp. 17 ff., and a steadily growing mass of medical writings.
[15. ]The Kapp Putsch (March 13, 1920) was both symptom and product of the post World War I revolutionary turmoil in Germany. Gustav Noske’s (1868-1946) new army, organized by the post-war Majority Socialist government to crush the left, revolted against the government and Wolfgang Kapp (1868-1922), founder of the Fatherland Party, was placed in office. Karl Legien (1861-1920) leader of the right wing German trade unions, then called a general strike. Response to this rightwing move was tremendous and the Putsch promptly collapsed. The two competing Socialist Parties then came to terms and formed a coalition administration in April 1920, which excluded the extreme leftists and Communists from political power (Pub.).
[16. ]The speech, translated into German, has been published by Bernstein under the title Lohn, Preis und Profit. I quote from the third edition, which appeared in Frankfurt in 1910. Publisher’s Note: The speech by Marx was published originally in English as Value, Price and Profit, ed. Eleanor Marx Aveling (Chicago: Charles H. Kerr & Co., 1910).
[17. ]Ibid., p. 46. Publisher’s Note: In English edition, pp. 126-128.
[18. ]Adolf Weber, Der Kampf zwischen Kapital und Arbeit, 3rd and 4th eds. (Tüyingen, 1921), pp. 384 ff.; Robbins, Wages (London, 1926), pp. 58 ff.; Hutt, The Theory of Collective Bargaining (London, 1930), pp. 1 ff.; also my Kritik des Interventionismus (Jena, 1929), pp. 12 ff.; 79 ff.; 133 ff. Publisher’s Note: Hutt’s The Theory of Collective Bargaining was reprinted in 1954 by the Free Press of Glencoe, Illinois. Preface to the American edition is by Ludwig von Mises. Please also note that in the English edition of Mises’ A Critique of Interventionism, the page references are pp. 26 ff., 95 ff., and 148 ff., respectively.
[19. ]Kautsky, quoted by Dietzel, “Ausbeutung der Arbeiterklasse durch Arbeitergruppen” (Deutsche Atbeit, vol. 4, 1929), PP. 145 ff.
[20. ]Technische Nothilfe, established September 1919 to help provide essential services during strikes, lock-outs and natural cataclysms. A voluntary politically neutral association, under the German Ministry of Interior, with 260,000 members in 1928, converted into a public agency in 1939, dissolved by the Allied Occupational Forces in 1945, then replaced by a government institution, Technisches Hilfswerk, in 1953 to give assistance during catastrophes (Pub.).
[21. ]Millar, “The Evils of State Trading as Illustrated by the Post Office” in A Plea for Liberty, ed. Mackay, 2nd ed. (London, 1891), pp. 305 ff.
[22. ]Goldscheid, Staatssozialismus oder Staatskapitalismus (Vienna, 1917); Sozialisierung der Wirtschaft oder Staatsbankerott (Vienna, 1919); against: Schumpeter, Die Krise des Steuerstaates (Graz and Leipzig, 1918).
[23. ]On the negative attitude of the liberals to the idea of progressive taxes see Thiers, De la Propriété(Paris, 1848), pp. 352 ff.
[24. ]See my Nation, Staat und Wirtschaft, pp. 134 ff.
[25. ]Mengelberg, Die Finanzpolitik der sozialdemokratischen Partei in ihren Zusammenhängen mit dem sozialistischen Staatsgedanken (Mannheim, 1919), pp. 30 ff.
[26. ]Marx-Engels, Gesammelte Schriften, 1852-62 (Collected Writings, 1852-62), ed. Rjasanoff (Stuttgart,1917), Vol. I, p. 127.
[27. ]See my Nation, Staat und Wirtschaft, pp. 129 ff.
[28. ]See my Theory of Money and Credit (London, 1934), pp. 339 ff.; also my Geldwertstabilisierung und Konjunkturpolitik (Jena, 1928), pp. 43 ff. Publisher’s Note: Mises’ Theory of Money and Credit has been reprinted since the 1934 edition cited here (Yale, 1953), (FEE, 1971), and (Liberty Press, 1981). Mises’ Geldwertstabilisierung und Konjunkturpolitik is included in the anthology, On the Manipulation of Money and Credit, edited by Percy L. Greaves, Jr., translated by Bettina Bien Graves, under the title “Monetary Stabilization and Cyclical Policy,” pp. 57-171. This particular citation is to pp. 118 ff. of the English translation.
[29. ]For a criticism of National Socialist doctrine see my Kritik des Interventionismus (Jena, 1929), pp. 91 ff.; also Karl Wagner, “Brechung der Zinsknechtschaft?” in Jahrbücher für Nationalökonomie und Statistik, Third Series, Vol. LXXIX, pp. 790 ff. Publisher’s Note: In the English edition of Kritik des Interventionismus, p. 107.
[31. ]Thus by Kautsky, quoted by Georg Adler, Grundlagen der Karl Marxschen Kritik der bestehenden Volkswirtschaft (Tübingen, 1887), p. 511
[32. ]“Beaucoup d’ouvriers, et non les meilleurs, préférent le travail payé à la journée au travail à tache. Beaucoup d’entrepreneurs, et non les meilleurs, préféraient les conditions qu’ils espèrent pouvoir obtenir d’u,i État socialiste à celles que leur fait un régime de libre concurrence. Sous ce régime les entrepreneurs sont des ’fonctionnaires’ payés a la tâche; avec une organisation socialiste ils déviendraient des ’fonctionnaires’ payés à la journée.” (Many workers, and not the best, prefer to be paid by the day and not by the work completed. Many entrepreneurs, and not the best, prefer what they can hope to obtain from a socialist state to that which a free competitive system would award them. Under such a competitive system, entrepreneurs are the “officials” paid for the work completed; under a socialist organization, they would become “officials” paid by the day.) Pareto, Cours d’Economie Politique, Vol. II, p. 97n.
[33. ]Hutt, The Theory of Collective Bargaining, pp. 25 ff.
[34. ]The Junker is not concerned with the maintenance of private property as disposal over the means of production, but rather with maintaining it as title to a special source of income. Therefore State Socialism has easily won him over. It is to secure him his privileged income.
[35. ]This, for example, was Bismarck’s view. See his speech in the Landtag of June 15th, 1847 in Fürst Bismarcks Reden, edited by Stein, Vol. I, p. 24.
[36. ]Cathrein, Der Sozialismus, 12th and 13th eds. (Freiburg, 1920), pp. 347 ff.
[37. ]MacIver, Community, London, 1924, pp. 79 ff.
[38. ]This, of course, is true also of the German nation. Almost the whole intelligentsia of Germany is socialistic: in national circles it is State or, as one usually says today, National Socialism, in Catholic circles, Church Socialism, in other circles, Social-Democracy or Bolshevism.