The Online Library of Liberty

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• The Liberty Fund Library of the Works of Ludwig Von Mises
• Foreword to the Liberty Fund Edition
• Preface
• Omnipotent Government
• Introduction
• Part I: The Collapse of German Liberalism
• I: German Liberalism
• 1.: The Ancien Régime and Liberalism
• 2.: The Weakness of German Liberalism
• 3.: The Prussian Army
• 4.: The Constitutional Conflict In Prussia
• 5.: The “little German” Program
• 6.: The Lassalle Episode
• II: The Triumph of Militarism
• 1.: The Prussian Army In the New German Empire
• 2.: German Militarism
• 3.: The Liberals and Militarism
• 4.: The Current Explanation of the Success of Militarism
• Part II: Nationalism
• III: Etatism
• 1.: The New Mentality
• 2.: The State
• 3.: The Political and Social Doctrines of Liberalism
• 4.: Socialism
• 5.: Socialism In Russia and In Germany
• 6.: Interventionism
• 7.: Etatism and Protectionism
• 8.: Economic Nationalism and Domestic Monopoly Prices
• 9.: Autarky
• 10.: German Protectionism
• IV: Etatism and Nationalism
• 1.: The Principle of Nationality
• 2.: The Linguistic Group
• 3.: Liberalism and the Principle of Nationality
• 4.: Aggressive Nationalism
• 5.: Colonial Imperialism
• 6.: Foreign Investment and Foreign Loans
• 7.: Total War
• 8.: Socialism and War
• V: Refutation of Some Fallacious Explanations
• 1.: The Shortcomings of Current Explanations
• 2.: The Alleged Irrationality of Nationalism
• 3.: The Aristocratic Doctrine
• 4.: Misapprehended Darwinism
• 5.: The Role of Chauvinism
• 6.: The Role of Myths
• Part III: German Nazism
• VI: The Peculiar Characteristics of German Nationalism
• 1.: The Awakening
• 2.: The Ascendancy of Pan-germanism
• 3.: German Nationalism Within an Etatist World
• 4.: A Critique of German Nationalism
• 5.: Nazism and German Philosophy
• 6.: Polylogism
• 7.: Pan-germanism and Nazism
• VII: The Social Democrats In Imperial Germany
• 1.: The Legend
• 2.: Marxism and the Labor Movement
• 3.: The German Workers and the German State
• 4.: The Social Democrats Within the German Caste System
• 5.: The Social Democrats and War
• VIII: Anti-semitism and Racism
• 1.: The Role of Racism
• 2.: The Struggle Against the Jewish Mind
• 3.: Interventionism and Legal Discrimination Against Jews
• 4.: The “stab In the Back”
• 5.: Anti-semitism As a Factor In International Politics
• IX: The Weimar Republic and Its Collapse
• 1.: The Weimar Constitution
• 2.: The Abortive Socialization
• 3.: The Armed Parties
• 4.: The Treaty of Versailles
• 5.: The Economic Depression
• 6.: Nazism and German Labor
• 7.: The Foreign Critics of Nazism
• X: Nazism As a World Problem
• 1.: The Scope and Limitations of History
• 2.: The Fallacy of the Concept of “national Character”
• 3.: Germany’s Rubicon
• 4.: The Alternative
• Part IV: The Future of Western Civilization
• XI: The Delusions of World Planning
• 1.: The Term “planning”
• 2.: The Dictatorship Complex
• 3.: A World Government
• 4.: Planned Production
• 5.: Foreign Trade Agreements
• 6.: Monet Ary Planning
• 7.: Planning International Capital Transactions
• XII: Peace Schemes
• 1.: Armament Control
• 2.: A Critique of Some Other Schemes Proposed
• 3.: The Union of the Western Democracies
• 4.: Peace In Eastern Europe
• 5.: The Problems of Asia
• 6.: The Role of the League of Nations
• Conclusion

2.

The Abortive Socialization

The Social Democrats had put at the top of their party programs the demand for the socialization (Vergesellschaftung) of the means of production. This would have been clear and unambiguous if people had been ready to interpret it as forcible expropriation of the means of production by the state, and consequently as government management of all branches of economic activity. But the Social Democrats emphatically asserted that this was not at all the meaning of their basic claim. Nationalization (Verstaatlichung) and socialization, they insisted, were two entirely different things. The measures of nationalization and municipalization (Verstadtlichung) of various plants and enterprises, which the Reich and its member states had considered since the ’eighties of the past century an essential part of their socio-economic policies, were, they maintained, neither socialization nor the first steps toward it. They were on the contrary the outcome of a capitalist policy extremely detrimental to the interests of labor. The unfavorable experience with these nationalized and municipalized concerns, therefore, had no bearing on the socialist demand for socialization. However, the Marxians did not explain what socialization really means and how it differs from nationalization. They made some clumsy attempts but very soon they retired from the discussion of this awkward problem. The subject was tabooed. No decent German was rash enough to break this ban by raising the question.

The first World War brought about a trend toward war socialism. One branch of business after the other was centralized, i.e., forcibly placed under the management of a committee whose members—the entrepreneurs of the branch concerned—were nothing but an advisory board of the government’s commissary. Thus the government obtained full control of all vital branches of business. The Hindenburg program advocated an all-round application of this system for all branches of German trade and production. Its execution would have transformed Germany into a purely socialist commonwealth of the Zwangswirtschaft pattern. But the Hindenburg program was not yet completely realized when the German Empire collapsed.

War socialism was extremely unpopular in Germany. People even blamed it for what was not its fault. It was not exclusively to blame for German starvation. The blockade, the absence of millions of workers serving in the armed forces, and the fact that a good deal of the productive effort had to be directed to the production of armament and munitions contributed to the distress even more than the inadequacy of socialist methods of production. The Social Democrats should have pointed out these things as well. But they did not want to miss any opportunity which could be exploited for demagogic distortion of facts. They attacked the Zwangswirtschaft as such. The Zwangswirtschaft was the worst kind of capitalist exploitation and abuse, they contended; and it had demonstrated the urgent need for the substitution of socialism for capitalism.

The end of the war brought military defeat, revolution, civil war, famine, and desolation. Millions of demobilized soldiers, many of whom had retained their arms, flowed back to their homes. They robbed the military magazines. They stopped trains to search them for food. In company with workers, dismissed by plants which had been forced overnight to discontinue the production of munitions, they raided the open country for bread and potatoes. The villagers organized armed resistance. Conditions were chaotic. The inexperienced and ignorant socialists who had seized the government were helpless. They had no idea how to cope with the situation. Their orders and counterorders disintegrated the apparatus of administration. The starving masses called for food and were fed bombastic speeches.

In this emergency capitalism gave proof of its adaptability and efficiency. The entrepreneurs, at last defying the innumerable laws and decrees of the Zwangswirtschaft, tried to make their plants run again. The most urgent need was to resume production for export in order to buy food and raw materials in the neutral countries and in the Balkans. Without such imports Germany would have been doomed. The entrepreneurs succeeded in their efforts and thus saved Germany. People called them profiteers but scrambled for the goods brought to the market and were happy to acquire these badly needed necessities. The unemployed found jobs again. Germany began to return to normal.

The socialists did not worry much about the slackening of the Zwangswirtschaft. In their opinion this system, far from being socialist, was a capitalist evil that had to be abolished as soon as possible. Now real socialization had to start.

But what did socialization mean? It was, said the Marxians, neither the kind of thing represented by the nationalization of state railroads, state mines, and so on, nor the war socialism of Zwangswirtschaft. But what else could it be? Marxians of all groups had to admit that they did not know. For more than fifty years they had advocated socialization as the focal point of their party program. Now that they had seized power they must start to execute their program. Now they had to socialize. But at once it became apparent that they did not know what socialization meant. It was really rather awkward.

Fortunately the socialist leaders remembered that there is a class of men whose business it is to know everything—the omniscient professors. The government appointed a socialization committee. The majority of its members were Social Democrats; yet it was not from these that the solution of the riddle was expected but from the professors. The professors whom the government nominated were not Social Democrats. They were advocates of that Sozialpolitik which in earlier years had favored the nationalization and municipalization of various enterprises, and in recent years had supported the planned economy, the Zwangswirtschaft. They had always backed precisely the reformism that the orthodox Marxians denounced as capitalist humbug, detrimental to the interests of the proletarians.

The socialization committee deliberated many years, splitting hairs, distilling oversophisticated definitions, drafting spurious plans, and selling very bad economics. Its minutes and reports, collected in shelves of thick volumes, rest in the libraries for the edification of future generations. They are a token of the intellectual decay brought about by Marxism and etatism. But they failed to answer the question of what else socialization could mean besides nationalization (Verstaatlichung) or planning (Zwangswirtschaft).

There are only two methods of socialization, both of which had been applied by the German Imperial Government. There is on the one hand outright nationalization, today the method of Soviet Russia; and there is on the other hand central planning, the Zwangswirtschaft of the Hindenburg program and the method of the Nazis. The German Marxians had barred both ways to themselves through their hypocritical demagogy. The Marxians of the Weimar Republic not only did not further the trend toward socialization; they tolerated the virtual abandonment of the most effective socialization measures inaugurated by the imperial government. Their adversaries, foremost among them the regime of the Catholic Chancellor Bruening, later resumed the policy of planning, and the Nazis perfected these endeavors by establishing all-round planning, the German socialism of the Zwangswirtschaft type.

The German workers, both Social Democrats and communists, were not much concerned about socialization. For them, as Kautsky remarked, the revolution meant only an opportunity to raise wages. Higher wages, higher unemployment doles, and shorter hours of work meant more to them than socialization.

This situation was not the result of treason on the part of the socialist leaders but of the inherent contradictions in the Social Democratic creed. The Marxians advocated a program whose realization was bound to render the state omnipotent and totalitarian; but they also talked indefatigably about shaking off “this state rubbish in its entirety,” about “the withering away of the state.” They advocated socialization but rejected the only two methods available for its achievement. They talked of the frustration of trade unionism as a means of improving the conditions of the workers; but they made trade-union policies the focal point of their political action. They taught that socialism could not be attained before capitalism had reached its full maturity, and disparaged as petty bourgeois all measures designed to check or delay the evolution of capitalism. But they themselves vehemently and fanatically demanded such measures. These contradictions and inconsistencies, not machinations of capitalists or entrepreneurs, caused the downfall of German Marxism.

True, the leaders of the Social Democrats were incompetent; some were corrupt and insincere. But this was no accident. No intelligent man could fail to see the essential shortcomings of Marxian doctrine. Corruption is an evil inherent in every government not controlled by a watchful public opinion. Those who were prepared to take the demand for socialization seriously deserted the ranks of Marxism for those of Nazism. For the Nazis, although still more corrupt morally, aimed unambiguously at the realization of central planning.