Socialism: A Study Guide and Reader


This Study Guide examines the long-standing clash between Socialism and Marxism, and Classical Liberalism over the past 200 years or so. It provides a brief history of the  tradition, some of its main criticisms of the free market, the classical liberal response to these criticisms, extensive quotes from some of these texts, and links to them in the OLL collection.

For additional reading see the following groups of people and collections of texts:

See also:

Table of Contents

I. Classical Liberalism vs. Socialism/Marxism: Critique and Counter-Critique

The Fundamental Antagonism between Classical Liberalism and Socialism/Marxism

There is a fundamental antagonism between Classical Liberalism and Socialism/Marxism concerning many aspects of their social, political, and economic views.

CLs believe in individual liberty, free markets, voluntary exchange, the division of labour, laissez-faire economic policies, free trade, limited government, property rights, and the rule of law. The primary focus is on the individual who has the right to dispose of themselves and their property as they see fit, without the intervention of government or other bodies, so long as they do not initiate the use of force against other individuals and thereby violate their rights to life, liberty, and property. If a government or other body takes an individual’s property or restricts their liberty, that individual should have consented to this (either individually or through their elected representative).

Socialists/Marxists on the other hand reject most of the above and believe that “society” (or the “working class”, or “the nation”) should be the primary concern of the government, which should have the power and the duty to remake or reform society in order to serve the needs of the community (however they define it) rather than to allow individuals to pursue their own (“selfish”) interests. They believe that the government or the people’s representatives have the right to use “die Gewalt” (the force or power of the government) to override the interests of private individuals in the name of “the people” or “the workers.”

In his “Critique of the Gotha Program” (1875) of the newly formed German Social Democratic Party, Marx encapsulated the socialist program as

“Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen!” (to each according to their need, from each according to their ability!).

In 1851 the French socialist Louis Blanc said much the same thing in Plus de Girondins (No More Girondins!):

“De chacun selon ses facultés, à chacun selon ses besoins” (from each according to their capacity, to each according tot their needs)

A CL or libertarian version might go something like:

“to each according to/with the consent of others, from each according to/with their own consent.”

Furthermore, socialists and Marxists believe that, if left “unchecked,” the fee market would lead inevitably to inequality, an unjust distribution of profits and wealth, an increase in the number of monopolies, and catastrophic economic recessions or depressions. Socialist differ on how best to achieve their goals. Some advocate voluntary socialist experiments, others working within the democratic parliamentary system to achieve incremental reforms, while others advocate the violent revolutionary overthrow of the "capitalist” system and the seizure of power by a “dictatorship of the proletariat.”

In spite of these stark differences, there are several areas in which CLs and S&Ms do agree, such as the desire for peace between nation states, an end to exploitation of one class by another (they differ of course on what a “class” and “exploitation” is), the use of economic resources for productive activity which will benefit all people, and confidence that progress is possible if impediments to it are removed.

The Changing Face of Socialism/Marxism

From the beginning of the emergence of socialist thinking and organisation in the early 19th century up until the present, classical liberals, political economists, and radical individualists have opposed the changing forms taken by socialism. These forms include the following:

  1. voluntary socialist communities proposed by people such as Robert Owen and Charles Fourier and whose followers set up model communities in the U.S. (e.g. New Harmony in Indiana); property is communally owned and there is no wage labour or profit taking (also known as “utopian socialism”); conceivably possible on a small scale with very committed members;
  2. the classic form of S&M, namely supposedly "temporary" state ownership of the means of production under the control of a “dictatorship of the proletariat” (die Diktatur des Proletariats) before a pure form of communism would eventually emerge (as advocated by Marx in the Communist Manifesto (1848)) and when the state would "wither away" (Engels); Lenin attempted to put this into practice after the Bolshevik Revolution of 1917
  3. state socialism (Staatssozialismus, Socialisme d’état) - although Marx thought the state would eventually “wither away” (absterben) after the workers had seized control of the means of production there were some socialists in the late 19th century who advocated a permanent form of state ownership of the means of production and distribution (such as Ferdinand Lassalle and perhaps also Otto von Bismarck in Germany, and Claudio Jennet in France)
  4. war socialism (Kriegssozialismus) which emerged during WW1 to reorganize the German economy in order to fight the war and which provided Lenin and the Bolsheviks with a model for their own version of central planning under communism
  5. national socialism which is a combination of vigorous nationalism and state intervention and regulation of the economy in the name of the “nation” and “the people” (das Volk), in contrast to late 19thC socialism which was supposed to be “internationalist” in its outlook (working classes of all nations); the links between “fascism” and socialism are strong and not commonly recognised; need to remember that Adolph Hitler headed the “Nationalsozialistische Deutsche Arbeiterpartei” (NSDAP) (the National Socialist German Workers Party, or Nazi Party) from 1920–1945
  6. various forms of social democracy which allow considerable private property and business activity but funds the social democratic agenda though heavy taxation and regulation of the economy; state ownership of the economy’s “commanding heights” (Lenin’s phrase from 1922) — heavy industry (e.g., steel), mining, railroads, telecommunications, etc. This includes
    1. the Fabian socialism (“labourism”, the Labour Party) which emerged in England in the 1880s and 1890s
    2. the socialist parties which emerged in western Europe before WW1 (the Social Democratic Party of Germany)
    3. the welfare state socialism which emerged in Europe and America after WW2; comprehensive economic regulation by the administrative state (obviating the need for nationalization of economic sectors) and government redistribution of wealth and provision of Health, Education, and Welfare (HEW)
    4. a new contemporary form of Green Socialism (The Greens) where the “environment” has replaced “the workers” or the “nation state” or “the people” as the reason for state regulation and intervention in the economy
  7. Interventionism was a term coined by Ludwig von Mises to describe the kinds of governments which emerged in the post-war period which were neither fully free market nor fully socialist but a mixture of the two. The key feature was the extensive controls and regulation (i.e. “intervention”) the government imposed on private economic activity in order to achieve national or social goals. The intervention could be for social purposes - the welfare state - or for national and military purposes - the warfare state. Thus the modern American interventionist state might now be called a hybrid welfare-warfare state.

A Summary of the S&M Critique of the Free Market

The socialists’s critique of free market and wage labour which emerged during the 1840s in France, England, and Germany and continues to this day (in various versions), included the following points. We have categorised them as follows:

  • economic criticism
  • moral and philosophical criticism
  • political criticism

Economic Criticism

  1. the free market and bourgeois society is based upon private property - this is unjust; it prevents others from accessing the resources they need to survive; it was originally acquired by force (conquest, slavery)
  2. wage labour leads to the “exploitation” of workers - according to the labour theory of value (from Adam Smith and David Ricardo) labour was the main source of the creation of value, workers were not given the full value of their labour, hence the profits going to the owners were therefore "unearned”; profit comes from “surplus value” extracted from workers, (“absolute SV” = longer working day; “relative SV” = more intense exploitation by capital invested in production)
  3. alienation of the workers (die Entfremdung) - wage labour (especially factory work) “alienates” the workers from both the things they create and their full potential which is realizable only under socialism, and leads to exploitation, overwork, boredom, injury; workers demoralized by division of labour, being bought and sold as “mere commodities”; the “fetish” of money
  4. the injustice of profit, interest, and land rent - they are all “unearned” income from surplus value extracted from workers
    1. workers did not receive the full value of their labour in the wages they were paid, the profits made by the “capitalist” or factory owner came at the expence of the workers, thus the workplace had to be “re-orgnised” so that workers received the full value of their labour
    2. the interest charged on loans was unjust as the capitalist did no labour, thus the state should abolish interest or strictly regulate it
    3. rent from land was “a gift of the soil” and therefore rent was also “unearned” by the land owner, thus it was unjust and should be eliminated or reduced, or land should be redistributed to propertyless
  5. competition has disastrous consequences for the workers; ruthless completion and the pursuit of “profits” causes companies and individuals to behave like predators to their own and society’s great harm - it leads to
  • competition between workers leading to decreasing wages for workers (to starvation level); “the immiserisation of the workers”
  • increasing concentration of capital and domination of the economy by monopolies
  • periodic economic crises of “overproduction”
  1. the immiserisation of the workers - there was an inevitable impoverishment of the working class due to population pressure (Malthusianism) which led to unemployment in the short term, starvation in the long term, and a tendency for wages to fall to substance level “das eiserne und grausame Gesetz” (the iron hard and cruel law of wages) of Lassalle
  2. the tendency towards the formation of monopolies - that inherent in the free market system was the tendency of large firms to get even larger, to take over smaller firms, reduce competition, and thus raise prices and exert greater control over labor
  3. periodic economic crises were an inherent part of the unstable capitalist system which suffered periodic crises (overproduction) which caused unemployment and misery for the workers; the political economists were “heartless” in not guaranteeing workers jobs (especially during economic recessions) and state-welfare for the poor, sick, and old
  4. the emergence of international capitalism leads to “free trade”, global competition, and the destruction of national industry and domestic unemployment; increasing international rivalry leads to imperialism and war between the capitalist powers (Lenin’s theory of Imperialism as “highest stage of capitalism”)

Moral and Philosophical Criticism

  1. increasing inequality - the free market and wage labour leads to increasing inequality among individuals
  2. the heartlessness of capitalism and selfish individualism - as a result of the pursuit of profit and selfish individualism, the weak, the sick, and the old are left to die
  3. the destruction of community - the pursuit of individual self-interest (“individualism”) destroys the fabric of society and community

Political Criticism

  1. the growing power and wealth of the “capitalist class” (the bourgeoisie) - this included both political and economic power; the working class was excluded from politics and decision-making; the courts, police, and army served the needs of the ruling class; all opposition or criticism is crushed (censorship)
  2. the unequal relationship between employers and labor - that given their size, power, and control over capital, employers faced labor in a very unequal relationship concerning bargaining power over conditions and wages; therefore workers had to organise themselves so they could bargain for better conditions in the work place (trade unions) and lobby government for legislation to improve the condition of the working class (labour party, socialist party)
  3. the traditional “nuclear family” perpetuates bourgeois thought and behaviour; it needs to be replaced by state run institutions in order to inculcate more socially responsible behaviour and allow the full potential of all individuals (not just the wealthy) to develop

A Summary of CL Criticisms of S&M

The following is a list of some common arguments used by economists and CLs against their socialist critics. The economists argued that the socialists ignored or misunderstood the following problems which have been organised into the following categories (some of which are theoretical and others historical):

  1. economic arguments
  2. moral and philosophical arguments
  3. political arguments
  4. sociological/historical arguments

Economic Arguments

  1. the myth of the labour theory of value - the amount of labour needed to make something has nothing to do with its “value” to the end consumer (labour can be wasted in making things people do not want; individuals subjectively value things according to their time, circumstance, and place); there are some things of value that no human labour has gone into creating (diamonds)
  2. the scarcity problem - S&Ms assume away the key economic problem, that is that resources are scarce, that here are multiple uses for these scarce resources, and that resources have to be found, created, exchanged, and put to their most productive use. Since S&Ms believed that capitalism was inherently wasteful, once it had been abolished or drastically reformed there would be abundance for all. The problem of scarcity would simply disappear.
  3. the price problem - changing prices tell people about relative scarcities, the intensity of supply and demand, changing consumer preferences, etc; without free market prices (especially for capital goods) the cannot be rational economic planning (Mises on “planned chaos)
  4. both parties benefit from exchange - exchange (goods, services, labour) is not a zero sum game; both sides benefit if voluntary; there is no “class struggle” between the bourgeoisie and the proletariat: nobody is exploited in a voluntary exchange
  5. the incentive problem - S&Ms do not recognize the importance of incentives and disincentives in human behaviour. A common slogan was “from each according to his ability; to each according to his need” (Louis Blanc and Karl Marx), with the idea of the payment of equal wages for any work done. S&Ms have a mistaken view of the role of “profit” (and losses) in economic decision-making; profit is not exploitation but incentive/reward for satisfying consumer needs; key indicator that resources are being used efficiently; losses indicate opposite
    1. communally organised living and working arrangements destroy incentives for individuals to work hard (or harder than anyone else) since all profits go to the community (society) to be equally distributed
    2. there is also no incentive for businesses to economise on their use of scarce (and hence expensive) resources (since there are no free market prices, or profits to gain and losses to avoid)
    3. without secure property rights there is no guarantee that an individual can keep what they have earned; anything can be taken by “society” and be given to someone else deemed more “deserving” or “needy”
  6. the division of labour problem - massively increases productivity of labour; the myth of the “alienation of labour” in factories (compared to what?)
    1. people with key skills (managerial, financial, technical, organisational, entrepreneurial) need to be paid for their extra contribution to the productive process;
    2. not all labour is “equal” in value and needs to be compensated accordingly
  7. the risk problem - one of the functions of the entrepreneur is to asses and assume the risk in starting and running an enterprise. Marx has no understanding of the important role played by the entrepreneur in taking risks and organizing all the factors of production in order to anticipate consumer demand for goods and services
    1. all economic activity involves risks (loss, miscalculation, natural disaster) which needs to be rewarded;
    2. business owners in particular advance money to their employees before final sales are made and if they have miscalculated consumer demand they will make losses
  8. the human action - socialists deny the fact that humans choose from the alternatives before them and take action to achieve their goals; that they prioritize their choices given the fact of their scarce time and resources; and attempt to balance the costs of benefits of their acts and choices
  9. the problem of ignoring economic laws -
    1. socialists ignore the fact that the economy (i.e. human behaviour) is governed by economic laws (such as law of supply and demand) which cannot be ignored or wished away either by well meaning people or by economic predators;
    2. the problem of “scarcity”, that resources have competing uses and that there are “opportunity costs’ for every economic choice which is made
  10. the accumulation of capital problem - Marxists believe that capital can only be accumulated in two ways, by seizing the “surplus value” created by workers’ labour or by plundering others by outright theft or enslavement. They have no concept of the role played by saving from current consumption in order to set aside money and/or goods for future productive use (also the concept of the preference)
  11. the economy (“capitalism”) does not run itself - businesses have to adjust everyday to changing consumer demand, changing (relative) prices, technological change, natural disasters, etc.
    1. Marx seemed to think that once capitalism had reached a certain stage in its development (size of industries, technological sophistication) it could have its exploiting “capitalist” class of owners and mangers “removed” (i.e. dispossessed), replaced by the workers or their “representatives,” and that industries would continue to function in much the same way producing wealth, which would now be diverted to the workers.
    2. Welfare state socialists similarly believe that capitalists will continue to produce wealth in spite of disincentives to do so (high taxes, stifling regulation, labour regulations).
    3. Thomas Piketty has a similar view about how wealth (capital) tends to grow automatically over time without the need for entrepreneurial supervision. Very naive view about how industry works. Schumpeter’s idea of creative destruction; constant change brought about by changing consumer tastes, technological change/innovation
  12. ignoring the role consumers play - there is no place for consumers in the socialist economy. In a free market consumer demand is what drives entrepreneurs to take risks, invest their money, and seek profits in satisfying that demand. In many ways, the future socialist economy is unchanging and has no need to satisfy consumer demand (changing or otherwise).
  13. the myth of the crisis of over-production - periodic crises (the business cycle) are caused by governments inflating the money supply and distorting investment of capital, not something which is inherent in the free market system
  14. ignoring the importance of ideas - Marx’s theory of “historical materialism” ignores the important role played by ideas; he believed that ideas were part of the "superstructure" of society which was based upon and hence "determined" by the "means of production" which any given society depended upon for wealth creation. In fact the ideas people hold determine what they consider to be their "material interests” (Mises) and how they rank their preferences concerning how different goods and services will satisfy their needs and interests.

Moral and Philosophical Arguments

  1. the private ownership of property is one of the foundation stones of individual liberty - all individuals have a right to “self-ownership*, i.e. the right to their own person (body) and to use it as they see fit (i.e. their “labour”) so long as they respect the equal right of others to this as well; thus workers are “traders” or “merchants” of their own labour (Molinari); individuals also have a right to own the things they have created and to trade/exchange these with others (subject to any contracts they may have entered into with others, and the justly aquired property of others).
  2. the individual liberty problem - Marx was attracted to the idea of “Gewalt” (power, force, coercion by the state) and the “dictatorship of the proletariat” for S&Ms to achieve their goals:
    1. socialists envisaged that the new communal institutions would be organised like an army or a government bureaucracy which implies hierarchical structures, command from above, communal eating and sleeping arrangements; all of which would violate individual choice and liberty
    2. the injustice of expropriation: to create a socialist system existing justly owned property has to be confiscated and given to the new communally organised groups
    3. under central planning workers have to be allocated to particular occupations and locations according to social and economic needs by the planning agency
    4. in order to prevent the perpetuation of “bourgeois” or “individualist” modes of thinking and behaviour, the state needs to educate all children in new ways of “socialist” thinking and behaviour in state run schools
  3. the human nature problem:
    1. socialists assumed human nature is not fixed but malleable, that it is possible to create a "new socialist man";
    2. economists believed humans were social and cooperative but not communist, that they have strong ties to the family and local communities which are (can be) more powerful than their ties to the “collective” (social class); that they were self-interested (broadly understood) and not willing to sacrifice their interests to the community's;
    3. humans have vastly different tastes, preferences, skills, and interests which the free market can cater to
    4. they cannot be made in a “new socialist man” by coercion
  4. inequality in wealth is not immoral i - the problem is how that wealth was acquired (justly or unjustly); mutually beneficial exchange between individuals who have acquired their property justly is not immoral or unjust and the outcomes of such exchanges, if they result in “unequal” results, are likewise not immoral or unjust
  5. voluntary vs. coerced forms of community (fraternity) - “True” (or natural) community comes from voluntary cooperation with others, productive activity, and exchanging with others the fruit of this activity. “False” (or artificial) community (fraternity) is the result of coercion and government (central) planning. (Bastiat)
  6. who exploits who? - “capitalists” do not exploit the workers or the consumers unless they have access to state power to gain privileges at consumers/taxpayers expence (crony capitalism, plutocracy (Sumner)); the injustice of expropriation/regulation by the state/party

Political Arguments

  1. the “public choice” problem - government officials, party members, and state-appointed factory “managers” are not disinterested parties but have own their own personal and “selfish” agendas which they pursue (power over others, promotion within the bureaucracy, and other political rewards)
  2. the class problem - a socialist/communist society is not (and never has been) a classless society; whoever controls the reins of power and uses it to their own advantage are the new “ruling class” of exploiters; Marx’s inability to predict the existence of class rule in communists society (managers, party bosses, charismatic leaders, secret police, the military) is a fundamental flaw in his thinking; many CLs also had their own theory of class, class exploitation, and class rule which was based upon who had access to the power of the state which they could use to get benefits for themselves at ordinary tax-payer and consumer expense.
  3. who is the real “utopian”? - Marx denounced French socialists like Fourier and Considerant for being “utopian” and considered that since he had discovered the “laws of capitalist development” his version of socialism was therefore “scientific. But since neither he, Engels, or Lenin ever explained in any detail what a future socialist/communist society would look like and how it would function they were in the the real “utopians”.

Historical Arguments

In addition to the above listed theoretical problems in socialism there are a number of historical facts which undermine the socialist position:

  1. the laws of history identified by Marx which would force capitalism to inevitably evolve into a “higher stage” of socialism are not true; the myth of the inevitable progress through stages from feudalism, capitalism, to communism; falsified by communism not happening in Germany but peasant Russia. Marx’s “scientific laws” of capitalism included the following:
    1. The “Law of Capitalist Accumulation” - investing in capital to increase productivity will lead to a falling rate of profit
    2. the “Law of the Concentration of Capital” - brutal competition will force many capitalists out of business and concentrate capital in fewer and fewer hands
    3. the “Law of Increasing Misery” - as capital and machinery replaces human workers they will be forced into unemployment and poverty
  2. the spread of free markets has not led to the “immiseration of the workers” but the contrary, what McCloskey has called the “Great Enrichment”
  3. the spread of free markets has not led to the creation of more and more monopolies, but the contrary - the constant “creative destruction” (Schumpeter) of old firms and the creation of new ones; the extraordinary turnover among successful corporations over decades (Fortune 500 (Dan Mitchell and Don Boudreaux)) disproves Picketty’s thesis; monopolies only exist because of government privileges and the lack of competition (free entry into industry)
  4. as the wealth of ordinary workers has increased they have become capitalists in their own right through retirement investments
  5. in countries where socialism has been tried or where extensive welfare programs has been created there has not been any withering away of the state (“das Absterben des Staates” - Engels 1878) or the disappearance or “abolition” of classes, rather there has been the creation of a new kind of class rule by senior party members, bureaucrats and managers, and the military
  6. the failure of communism to provide prosperity to ordinary people - Communism failed miserably in the 20thC to provide their citizens with the basic comforts of life. Their economies, although (or rather because) they were “centrally planned,” suffered from shortages of consumer goods (especially food), lack of innovation, and heavy pollution of the environment.
  7. the failure of welfare states to be economically sustainable in the long run, especially as their populations age. They suffer from bloated and inefficient bureaucracies, inefficient services, high levels of unionization of the public sector (susceptible to strikes - e.g. public transport), high levels of taxation, high unemployment (especially youth), and high levels of debt. They have created a virtually permanent class of welfare recipients who find it hard to escape their situation.
  8. time and time again it has been shown by historical experience that individuals (whether "producers" or "consumers", or "bureaucrats" and "politicians" do respond to the incentives and disincentives they face, whether these be material, financial, intellectual, or "spiritual."
  9. ignoring the actual choices faced by workers - in the early phase of industrialisation, as contemporaries noted at the time, conditions in the factories could be harsh (see Engels’s book on The Condition of the Working Class in England (1845)) with long hours and poor working conditions.
    1. Critics need to ask themselves what alternatives these immigrants from rural areas faced when they decided to move to the city in search of work in the factories: did they consider the move to be in their interest; were their alternatives (such as staying put) worse;
    2. Economists argue that their “demonstrated preference” was that they thought they would be (and often were) better off working in a factory in a city that working in agriculture (seasonal, low paid, physically hard). See Ben Powell’s work on “sweatshops” in industrializing countries today.
    3. what other reasons might there be to explain their poverty? The latter concerned several French political economists such as Charles Dunoyer, Gustave de Molinari, and Bastiat who argued that many regulations and taxes imposed by the state hindered the free movement of people, the number of careers/jobs that were available to poor people, and raised the cost of food and accommodation.


II. A Brief History of CL opposition to S&M


Modern socialism emerged in the 1830s and 1840s in France and England at a time when classical liberalism was beginning to have an impact with reforms such as the First Electoral Reform Act of 1832 and the success of the Anti-Corn Law League (1846). The spread of socialist ideas before and during the revolutions of 1848 meant that classical liberals increasingly had to turn their attention to combatting calls for government intervention in the economy from the “Left” as Frederic Bastiat did in the last few years of his life.

As classical liberalism began to decline in the late 19th century it fell to a handful of radical individualists like Thomas Mackay and Herbert Spencer to oppose the gradualist, Fabian school of socialism in Britain, and to strict laissez-faire advocates like Eugen Richter in the German parliament to oppose the growing influence of the Social Democratic Party (i.e. a Marxist party). It was only after the rise of the Bolsheviks to power in Russia after the First World War that the most coherent and devastating critique of socialism appeared in the work of Ludwig von Mises and later in that of Friedrich Hayek.

We can thus identify four broad historical periods when socialism and CL clashed:

  1. 1840s France when organised socialism first made an appearance in the 1848 Revolution
  2. 1870s, 1880s and 1890s in western Europe when organised socialist parties began to emerge
  3. 1920s and 1930s: when Mises first exposed the serious economic weaknesses in Marxist/Bolshevik central planning
  4. 1980s and 1990s: a new younger generation of Austrian economists (Don Lavoie and Peter Boettke) examined weakness of planned economies on the eve of their collapse

Many of the works we have in the OLL collection were written to oppose the different forms of socialism which were being advocated at these times. In addition, we also have a number of socialist works online in order to better understand the intellectual and political context of these debates.

French Socialism during the 1840s and 1850s

The Rise of Socialism in France

Louis Blanc (1811–1882)

The decades between 1830–1860 were a key period in the development of political ideology when CL began to form as a distinct “worldview” which applied basic ideas about individual liberty, private property, free markets, limited government to a full range of problems (economic, political, social). The culmination of this was the formation of the Liberal Party in England in 1859.

The 1830s and 1840s were also a key period in the development of socialism as a distinct “worldview” and French socialists played a very important part in this, such as the following individuals and texts:

  • the utopian socialism of Charles Fourier and Victor Considerant
    • Charles Fourier, Le Nouveau monde industriel et sociétaire (1829–30)
    • Victor Considerant, Droit de propriété et du droit au travail (1848)
  • the electoral or political socialism of Louis Blanc (“socialism from below”)
    • Louis Blanc, Organisation du travail. Association universelle. Ouvriers (1841)
    • Louis Blanc, Le Socialisme. Droit au travail, réponse à M. Thiers (1848)
  • the anarchist socialism of Proudhon (1809–1865)
    • Proudhon, Qu’est-ce que la propriété? ou Recherches sur le principe du Droit et du Gouvernement (1840)
    • Proudhon, Système des contradictions économiques, ou philosophy de la misère (1846)
    • Pierre Joseph Proudhon, Le droit au travail et le droit de propriété (1850)
  • the revolutionary and so-called “scientific” socialism of Karl Marx (1818–1883) who lived and worked in Paris 1843–45, Brussels 1845–48 (where he attended a meeting of the free market Congress of Economists in 1847 to deliver a speech critical of free trade), and Paris 1848–49
    • Economic and Philosophic Manuscripts of 1844 (The Paris Manuscripts) written while he was living in Paris
    • Wage Labour and Capital (1847)
    • Undelivered speech in Brussels to the Congress of Economists attacking free trade, “The Protectionists, the Free Traders and the Working Class” (16 and 18 September 1847)
    • Manifesto of the Communist Party (1848) presented to the German Workers Association in Paris in February 1848
    • these early writings would be consolidated into his more mature works such as Grundrisse (Sketch of a Criticism of Political Economy (1857); A Contribution to the Critique of Political Economy (1859); and Capital, Vol. I (Das Kapital) (1867)
  • the bureaucratic or state socialism of Napoleon III ("socialism from above”), which was later continued under Otto von Bismarck in the Second German Reich (1871–1918) between 1883–89 when the foundations of the modern welfare state were laid down
    • Louis Napoléon Bonaparte had been influenced by the socialist ideas of Saint-Simon as he shows in his books Des idées napoléoniennes ( 1839) and L’Extinction du paupérisme (1844).

What is important for our purposes here is that is was during this period that the basic socialist criticisms of the free market were first expressed at some length and with some coherence, and solutions proposed (usually involving state ownership, regulation or economic activity, and transfer payments to the poor and unemployed) which would remain essentially the same for the next hundred years or so.

The French socialists had an opportunity in the early months of the February Revolution of 1848 to put some of their ideas into practice with the National Workshops scheme run by Louis Blanc. This was the first attempt to create a modern welfare state, and was the precursor of what would emerge after WW2 in western Europe, UK, and later USA. The idea was for the state to provide tax-payer funded employment for those who were out of work as the first step towards a universal state-guaranteed "right to a job” (droit au travail), a measure which they also tried to make part of the new French constitution which was debated over the summer of 1848.

This is how Louis Blanc in 1841 conceived the role of government in running the “ateliers sociaux” (social workshops) which would replace private firms operating in a free market and which he attempted to put into practice in 1848:

Le gouvernement serait considéré comme le régulateur suprême de la production, et investi, pour accomplir sa tâche, d’une grande force.
Cette tâche consisterait à se servir de l’arme même de la concurrence, pour faire disparaître, la concurrence.
Le gouvernement lèverait un emprunt, dont le produit serait affecté à la création d’ateliers sociaux dans les branches les plus importantes de l’industrie nationale.
Cette création exigeant une mise de fonds considérable, le nombre des ateliers originaires serait rigoureusement circonscrit; mais, en vertu de [103] leur organisation même, comme on le verra plus bas, ils seraient doués d’une force d’expansion immense.
Le gouvernement étant considéré comme le fondateur unique des ateliers sociaux, ce serait lui qui rédigerait les statuts. Cette rédaction, délibérée et votée par la représentation nationale, aurait forme et puissance de loi.
Seraient appelés à travailler dans les ateliers sociaux, jusqu’à concurrence du capital primitivement rassemblé pour l’achat des instruments de travail, tous les ouvriers qui offriraient des garanties de moralité.
The government ought to be considered as the supreme regulator of production, and ought to be invested with great coercive powers in order to carry out its task.
This task would entail using the weapon of competition itself in order to make competition disappear.
The government would raise a loan the proceeds of which would be used to create social workshops in the most important sectors of national industry.
This creation (of workshops) would require the investment of considerable funds and the number of of workshops would at first be strictly limited; but in virtue of the fact of their very organisation, as one will see below, they would be endowed with a huge power of expansion.
Since the government would be considered to be the sole founder of these social workshops,it would be it (the government) which would draw up the statutes. This document, deliberated and voted upon by the national representative body would have the form and power of the law.
All workers who could offer guarantees of their moral (uprightness) would be called upon to work in the social workshops, until (enough) primitive capital had been gathered to purchase the tools of work.

Source: “Conclusion. De quelle manière on pourrait, selon nous, organiser le travail” in Louis Blanc, Organisation du travail. Association universelle. Ouvriers. - Chefs d’ateliers. - Hommes de lettres. (Paris: Administration de librairie, 1841. First edition 1839), pp. 76–93.

In the same year of 1848 Karl Marx was in Paris when the revolution broke out, distributing copies of his newly written Communist Manifesto to a group of German workers who lived in Paris. Here is his list of reforms he wanted to see introduced in order to begin building a communist society:

Diese Maaßregeln werden natürlich je nach den verschiedenen Ländern verschieden sein.
Für die fortgeschrittensten Länder werden jedoch die folgenden ziemlich allgemein in Anwendung kommen können:
1) Expropriation des Grundeigenthums und Verwendung der Grundrente zu Staatsausgaben.
2) Starke Progressiv-Steuer.
3) Abschaffung des Erbrechts.
4) Konfiskation des Eigenthums aller Emigranten und Rebellen.
5) Centralisation des Kredits in den Händen des Staats durch eine Nationalbank mit Staatskapital und ausschließlichem Monopol.
6) Centralisation alles Transportwesens in den Händen des Staats.
7) Vermehrung der Nationalfabriken, Produktions-Instrumente, Urbarmachung und Verbesserung der Ländereien nach einem gemeinschaftlichen Plan.
8) Gleicher Arbeitszwang für Alle, Errichtung industrieller Armeen besonders für den Ackerbau.
9) Vereinigung des Betriebs von Ackerbau und Industrie, Hinwirken auf die allmählige Beseitigung des Gegensatzes von Stadt und Land.
10) Oeffentliche und unentgeltliche Erziehung aller Kinder. Beseitigung der Fabrikarbeit der Kinder in ihrer heutigen Form. Vereinigung der Erziehung mit der materiellen Produktion u. s. w., u. s. w.
These measures will, of course, be different in different countries.
Nevertheless, in most advanced countries, the following will be pretty generally applicable.
1 Abolition of property in land and application of all rents of land to public purposes.
2 A heavy progressive or graduated income tax.
3 Abolition of all rights of inheritance.
4 Confiscation of the property of all emigrants and rebels.
5 Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
6 Centralisation of the means of communication and transport in the hands of the State.
7 Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8 Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
9 Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10 Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c.

Source: Marx und Engels, “Manifest der Kommunistischen Partei” (1848) /pages/marx-manifest#Maaßregeln.

Source: Manifesto of the Communist Party. By Karl Marx and Frederick Engels. Authorized English translation: Edited and Annotated by Frederick Engels (Chicago: Charles H. Kerr & Company, 1888, 1910) in PDF < /titles/2753 > and /pages/marx-manifesto#measures.

The French economists and classical liberals responded to the socialist critique throughout the 1840s and early 1850s with the following works:

  • Charles Dunoyer, La Liberté du travail (1845): literally on “the liberty of working” as opposed to the socialist notion of “the right to work (or to a job)”
  • F. Bastiat, Economic Sophisms I (1846) and II (1848)
  • Adolphe Thiers, De la propriété (1848)
  • Léon Faucher, Du droit au travail (1848)
  • Michel Chevalier, Lettres sur l’Organisation du travail (1848)
  • Frédéric Bastiat’s series of 12 anti-socialist pamphlets (1848–1850)
  • Molinari, Les Soirées de la rue Saint-Lazare (1849)
  • Bastiat and Proudhon, Gratuité du crédit (Oct. 1849 - Feb. 1850)
  • Dictionnaire de l’économie politique (1852–53): many articles on socialism and socialist theorists

Frédéric Bastiat’s Anti-Socialist Pamphlets (1848–1850)

Frédéric Bastiat (1801–1850)

Frédéric Bastiat (1801–1850) was one of the leading advocates of free markets and free trade in the mid–19 century. He was inspired by the activities of Richard Cobden and the organization of the Anti-Corn Law League in Britain in the 1840s and tried to mimic their success in France. Bastiat was an elected member of various French political bodies and opposed both protection and the rise of socialist ideas in these forums. His writings for a broader audience were very popular and were quickly translated and republished in the U.S. and throughout Europe. His incomplete magnum opus, Economic Harmonies, is full of insights into the operation of the market and is still of great interest to economists. He died at a young age from cancer of the throat.

In his brilliant Economic Sophisms (1845–50) Bastiat focussed mainly on debunking protectionist fallacies and sophisms but he also occasionally referred to the socialists of his day. After the February Revolution of 1848 he turned his attention to the socialists and over a period of two years wrote over 12 major anti-socialist pamphlets in order to directly refute their ideas. In a very comprehensive critique of socialist ideas over the previous one hundred years Bastiat addressed the criticisms of Rousseau, Robespierre and several other 18th century thinkers, along with his contemporaries Charles Fourrier, Pierre Leroux, Louis Blanc, Victor Considerant, Proudhon, and Alexandre Ledru-Rollin.

  1. “Property and Law” (15 May 1848) in CW2, pp. 43–59 - directed at Louis Blanc and critiques of property in general /titles/2450#lf1573-02_label_134
  2. “Justice and Fraternity” (15 June 1848) in CW2, pp. 60–81 - directed against Pierre Leroux /titles/2450#lf1573-02_label_153
  3. “Individualism and Fraternity” (June 1848), in CW2, pp. 82–92 - directed against Blanc and the Montagnard socialist faction /titles/2450#lf1573-02_label_171
  4. “Property and Plunder” (24 July 1848, in CW2, pp. 147–184 - directed against Blanc, Considerant, Proudhon /titles/2450#lf1573-02_label_218
  5. “The State” (June 1848, September 1848, and c. July 1849), in CW2, pp. 105–6, 93–104 - directed against the radical socialist Montagnard faction /titles/2450#lf1573-02_label_183. See the revised translation with additional notes about the socialists FB was attacking /pages/state-lf.
  6. “Protectionism and Communism” (January 1849), in CW2, pp. 235–65 - directed at the conservative protectionist Mimerel committee accusing them of adopting “communist” policies to protect their interests /titles/2450#lf1573-02_label_308
  7. Capital and Rent (February 1849) , in CW4 (forthcoming) - directed at Proudhon
  8. “Damned Money” (April 1849), in CW4 (forthcoming) - directed at general misperceptions about nature of money, especially socialists who wanted the state to provide “free credit” to workers
  9. Free Credit. A Discussion between M. Fr. Bastiat and M. Proudhon (Oct. 1849 - Feb. 1850), in CW4 (forthcoming) - directed again at Proudhon
  10. “Private Property and Communal Property” Chap. VIII of Harmonies économiques (written mid 1849 and published in first edition of EH in Jan. 1850), in CW5 (forthcoming) - a direct appeal to socialists by FB, explicitly mentions Proudhon’s maxim “propriété, c’est le vol” (property is theft)
  11. “Baccalaureate and Socialism” (early 1850), in CW2, pp. 185–234 - to oppose a bill before the Chamber in early 1850 on education reform which was supported by Thiers, argued that studying the classics encouraged a belief in socialist ideas /titles/2450#lf1573-02_label_246
  12. “Plunder and Law” (May 1850), in CW2, pp. 266–76 - against Louis Blanc and the Luxembourg Commission /titles/2450#lf1573-02_label_331
  13. The Law (July 1850), in CW2, pp. 107–46 - against Louis Blanc and his 18th century predecessors /titles/2450#lf1573-02_label_197. See the revised translation with additional notes about the socialists FB was attacking /pages/bastiat-the-law-revised-lf-edition.
  14. Ce qu’on voit et ce qu’on ne voit pas (July 1850), in CW3, pp. 401–52 - directed against all those who misunderstood the operation of the free market /titles/956#lf0181_label_033

The following quotes comes from Bastiat’s essay “Individualism and Fraternity” (June 1848) in which he attacks Louis Blanc and the Montagnard group of socialists:

Aussi, quand ils arrivent à proposer quelque chose qui ressemble à de la pratique, on les voit toujours diviser l’humanité en deux parts. D’un côté l’État, le pouvoir dirigeant, qu’ils supposent infaillible, impeccable, dénué de tout sentiment de personnalité ; de l’autre le peuple, n’ayant plus besoin de prévoyance ni de garanties.
Pour réaliser leurs plans, ils sont réduits à confier la direction du monde à une puissance prise, pour ainsi dire, en dehors de l’humanité. Ils inventent un mot : l’État. Ils supposent que l’État est un être existant par lui-même, possédant des richesses inépuisables, indépendantes de celles de la société ; qu’au moyen de ces richesses, l’État peut fournir du travail à tous, assurer l’existence de tous. Ils ne prennent pas garde que l’État ne peut jamais que rendre à la société des biens qu’il a commencé par lui prendre ; qu’il ne peut même lui en rendre qu’une partie ; que de plus l’État est composé d’hommes, et que ces hommes portent aussi en eux-mêmes le sentiment de la personnalité, enclin chez eux, comme chez les gouvernés, à dégénérer en abus ; qu’une des plus grandes tentations pour que la personnalité d’un homme froisse celle de ses semblables, c’est que cet homme soit puissant, en mesure de vaincre les résistances. Les socialistes, à la vérité, espèrent sans doute, quoiqu’ils ne s’expliquent guère à ce sujet, que l’État sera soutenu par des institutions, par les lumières, la prévoyance, la surveillance assidue et sévère des masses. Mais, s’il en est ainsi, il faut que ces masses soient éclairées et prévoyantes ; et le système que j’examine tend précisément à détruire la prévoyance dans les masses, puisqu’il charge l’État de pourvoir à toutes les nécessités, de combattre tous les obstacles, de prévoir pour tout le monde.
For this reason, when they (the socialists) come to propose something which appears to be practical, we always see them dividing humanity into two parts: on the one hand, the state, the ruling power which they take to be infallible, impeccable, and free from any egoistic character; on the other, the people who no longer need plans for the future or any guarantees as to their security.
To carry out their plans, they are reduced to entrusting the ruling of the world to a power that is drawn, so to speak, from outside humanity. They invent a word: the state. They suppose that the state is a being that exists in itself, that possesses an inexhaustible amount of wealth independent from society’s wealth, and that by means of this wealth the state can provide work for everyone and ensure everyone’s existence. They take no heed of the fact that the state can only give back to society goods that it started off taking from it, and that it can actually give back only a part of these; nor furthermore, that the state is made up of men endowed with the sense of self, which in them just as in those being governed is inclined to degenerate into abuse; nor that one of the greatest temptations enticing one personality to offend others occurs when the man concerned is powerful and able to overcome resistance. In truth, although they have never expressed many views on this subject, the socialists probably hope that the state will be supported by institutions, by education, by foresight, and by close and severe supervision of the masses. However, if this is to be so, the masses have to be enlightened and farsighted, and the system of governance that I am examining tends precisely to destroy the foresight of the masses since it makes the state responsible for supplying all necessities, combating all obstacles, and providing for everyone.

Source: Frédéric Bastiat, The Collected Works of Frédéric Bastiat. Vol. 2: The Law, The State, and Other Political Writings, 1843–1850 (2012). /titles/2450#Bastiat_1573-02_631.

In one of the last things Bastiat wrote, “The Law” (June 1850) , he attacks socialism more extensively as the following quotes indicate:

Or, remarquons-le bien : organiser la Justice par la Loi, c’est-à-dire par la Force, exclut l’idée d’organiser par la Loi ou par la Force une manifestation quelconque de l’activité humaine : Travail, Charité, Agriculture, Commerce, Industrie, Instruction, Beaux-Arts, Religion ; car il n’est pas possible qu’une de ces organisations secondaires n’anéantisse l’organisation essentielle. Comment imaginer, en effet, la Force entreprenant sur la Liberté des citoyens, sans porter atteinte à la Justice, sans agir contre son propre but ?
Ici je me heurte au plus populaire des préjugés de notre époque. On ne veut pas seulement que la Loi soit juste ; on veut encore qu’elle soit philanthropique. On ne se contente pas qu’elle garantisse à chaque citoyen le libre et inoffensif exercice de ses facultés, appliquées à son développement physique, intellectuel et moral ; on exige d’elle qu’elle répande directement sur la nation le bien-être, l’instruction et la moralité. C’est le côté séduisant du Socialisme.
Well, we should note this clearly: to organize justice by (means of the) law, that is to say, by (the use of coercive) force, excludes the idea of organizing by law or by (the use of) force any expression of human activity: (such as) labor, charity, agriculture, trade, industry, education, the fine arts, or religion, for it is impossible for any of these secondary organizations (organised by force in this way) not to destroy the (primary and) essential organization (which is society itself). In effect, how can we imagine (the use of) force impinging on the freedom of citizens without undermining justice or acting against its own purpose?
Here I am coming up against the most popular preconception of our age. Not only do we want the law to be just, we also want it to be philanthropic. We are not content for it to guarantee each citizen the free and harmless exercise of his faculties as they apply to his physical, intellectual, and moral development; we require it to spread well-being, education, and morality directly across the nation. This is the seductive side of socialism.


Au bout de ses systèmes et de ses efforts, il semble que le Socialisme, quelque complaisance qu’il ait pour lui-même, ne puisse s’empêcher d’apercevoir le monstre de la Spoliation légale. Mais que fait-il ? Il le déguise habilement à tous les yeux, même aux siens, sous les noms séducteurs de Fraternité, Solidarité, Organisation, Association. Et parce que nous ne demandons pas tant à la Loi, parce que nous n’exigeons d’elle que Justice, il suppose que nous repoussons la fraternité, la solidarité, l’organisation, l’association, et nous jette à la face l’épithète d’individualistes.
Qu’il sache donc que ce que nous repoussons, ce n’est pas l’organisation naturelle, mais l’organisation forcée.
Ce n’est pas l’association libre, mais les formes d’association qu’il prétend nous imposer.
Ce n’est pas la fraternité spontanée, mais la fraternité légale.
Ce n’est pas la solidarité providentielle, mais la solidarité artificielle, qui n’est qu’un déplacement injustede Responsabilité.
Le Socialisme, comme la vieille politique d’où il émane, confond le Gouvernement et la Société. C’est pourquoi, chaque fois que nous ne voulons pas qu’une chose soit faite par le Gouvernement, il en conclut que nous ne voulons pas que cette chose soit faite du tout. Nous repoussons l’instruction par l’État ; donc nous ne voulons pas d’instruction. Nous repoussons une religion d’État ; donc nous ne voulons pas de religion. Nous repoussons l’égalisation par l’État ; donc nous ne voulons pas d’égalité, etc. C’est comme s’il nous accusait de ne vouloir pas que les hommes mangent, parce que nous repoussons la culture du blé par l’État.
For all its theories about systems and (all) its efforts it appears that socialism, however indulgent it is toward itself, cannot avoid catching a glimpse of the monster which is legal plunder. But what does it do? It cleverly shrouds it from all eyes, even its own, under the seductive names of fraternity, solidarity, organization, and association.64 And because we do not ask so much of the law since we require only justice from it, (socialism) presumes that we are rejecting fraternity, solidarity, organization, and association and hurls the epithet “Individualist!” at us.
It ought to know, therefore, that what we are rejecting is not natural organization, but coerced organization.
It is not free association, but the forms of association that it wants to impose on us.
It is not spontaneous fraternity, but legally (imposed) fraternity.
It is not providential solidarity, but artificial solidarity, which is only an unjust displacement of responsibility.
Socialism, like the old politics from which it stems, confuses government with society. For this reason, each time we do not want something to be done by the government, it concludes that we do not want this thing to be done at all. We reject education by the state; therefore we do not want education. We reject a state (established) religion; therefore we do not want religion. We reject equality established by the state; therefore we do not want equality, etc. It is as though it was accusing us of not wanting men to eat because we reject the growing of wheat by the state.

Source: Revised translation of “The Law” /pages/bastiat-the-law-revised-lf-edition.

Gustave de Molinari

Gustave de Molinari (1819-1912)

Gustave de Molinari was born in Liège on March 3, 1819 and died in Adinkerque on January 28, 1912. He was the leading representative of the laissez-faire school of classical liberalism in France in the second half of the 19th century and was still campaigning against protectionism, statism, militarism, colonialism, and socialism into his 90s on the eve of the First World War. As he said shortly before his death, his classical liberal views had remained the same throughout his long life but the world around him had managed to turn full circle in the meantime.

In his 1849 book Evenings on Saint Lazarus Street: Discussions on Economic Laws and the Defence of Property (1849) he pits a “Conservative” and a “Socialist” against an “Economist” who defends the free market against all their criticisms. In each “soirée” or chapter Molinari argues for a policy of complete laissez faire,” exposes the folly of socialism and other forms of government intervention in the economy, and supports the idea of the private provision of all public goods. See especially the 11th conversation in which Molinari argues for the first time that public goods such as police and defence services, might be provided voluntarily by the free market.

In the very first Soirée Molinari has the Economist have this conversation with the Socialist on the issue of the ownership of property:

le Socialiste.
Une observation encore. J’admets volontiers la propriété comme souverainement équitable et utile dans l’état d’isolement. Un homme vit et travaille seul. Il est parfaitement juste que cet homme jouisse seul du fruit de son travail. Il n’est pas moins utile que cet homme soit assuré de conserver sa propriété. Mais ce régime de propriété individuelle peut-il se maintenir équitablement et utilement dans l’état de société?
Je veux bien admettre encore que la Justice et l’Utilité commandent de reconnaître à chacun, dans cet état comme dans l’autre, l’entière propriété de sa personne et de cette portion de ses forces qu’il sépare de lui-même en travaillant. Mais les individus pourraient-ils véritablement jouir de cette double propriété, si la société n’était pas organisée de manière à la leur garantir? Si cette organisation indispensable n’existait point; si, par un mécanisme quelconque, la société ne distribuait point à chacun l’équivalent de son travail, le faible ne se trouverait-il pas à la merci du fort, la propriété des uns ne serait-elle pas perpétuellement envahie par la propriété des autres? Et si l’on commettait l’imprudence d’affranchir pleinement la propriété, avant que la société fût dotée de ce mécanisme distributif, ne verrions-nous pas se multiplier encore les empiétements des forts sur la propriété des faibles? Le complet affranchissement de la propriété n’aggraverait-il pas le mal au lieu de le corriger?
Si l’objection était fondée, s’il était nécessaire de construire un mécanisme pour distribuer à chacun l’équivalent de son travail, le socialisme aurait pleinement sa raison d’être, et je serais socialiste comme vous. Mais ce mécanisme que vous voulez établir artificiellement, il existe naturellement et il fonctionne. La société est organisée. Le mal que vous attribuez à son défaut d’organisation vient des entraves apportées au libre jeu de son organisation.
One further observation. I readily accept property as supremely equitable and useful in the state of isolation. A man lives and works alone. It is entirely fair that this man should have sole enjoyment of the fruits of his labor. It is equally useful that he be assured of holding on to his property. Can this regime of individual property be maintained fairly and usefully, however, in the social state? [p. 38]
I am also happy to admit that Justice and Utility prescribe, in this common state as much as in the other, that the entire property of each individual and that portion of his powers that he has alienated from his person by working, be recognized as his. Would individuals really, however, be able to enjoy these two forms of property, if society were not organized in such a way as to guarantee them this satisfaction? If this indispensable organization did not exist; if by some mechanism or other, society did not distribute to each person the equivalent of his labor, would not the weak man find himself at the mercy of the strong, would not some people’s property be perpetually intruded on by the property of others? And if we were so imprudent as to emancipate property fully, before society was fully empowered with this distributive mechanism, would we not be witness to increasing encroachments of the strong on the property of the weak? Would not the complete emancipation of property aggravate the ill rather than correcting it?
If the objection were sound, if it were necessary to construct a mechanism for the distribution to each person of the equivalent of his labor, then clearly socialism would clearly have its raison d’être and I like you would be a socialist. In fact, this mechanism you wish to establish artificially, exists naturally and it works. Society has been organized: the evil which you attribute to its lack of organization, derives from obstacles preventing the free play of that organization.
le socialiste.
Vous osez affirmer qu’en permettant à tous les hommes de disposer librement de leurs propriétés, dans le milieu [39] social où nous sommes, les choses s’arrangeraient d’elles-mêmes de manière à rendre le travail de chacun le plus productif possible, et la distribution des fruits du travail de tous pleinement équitable?…
J’ose l’affirmer.
le socialiste.
Vous croyez qu’il deviendrait superflu d’organiser sinon la production du moins la distribution, l’échange, de désobstruer la circulation…
Are you so bold as to claim that, by allowing all men to manage their property as they see fit, in the social circumstances [p. .39] we live in, we would find things working out by themselves in such a way as to render each man’s labor as productive as possible, and the distribution of the fruits of the labor of all, fully equitable? …
I am bold enough to claim this.
So you think it would become unnecessary, leaving aside production, to plan at least distribution and exchange, to free up circulation…
J’en suis sûr. Laissez faire les propriétaires, laissez passer les propriétés et tout s’arrangera pour le mieux.
Mais on n’a jamais laissé faire les propriétaires; on n’a jamais laissé passer les propriétés.
S’agit-il du droit de propriété de l’homme sur lui-même; du droit qu’il possède d’utiliser librement ses facultés, en tant qu’il ne cause aucun dommage à la propriété d’autrui? Dans la société actuelle les fonctions les plus élevées et les professions les plus lucratives ne sont pas libres; on ne peut exercer librement les fonctions de notaire, de prêtre, de juge, d’huissier, d’agent de change, de courtier, de médecin, d’avocat, de professeur; on ne peut être librement imprimeur, boucher, boulanger, entrepreneur de pompes funèbres; on ne peut fonder librement aucune association commerciale, aucune banque, aucune compagnie d’assurances, aucune grande entreprise de transport, construire librement aucun chemin, établir librement aucune institution de charité, vendre librement du tabac, de la poudre, du salpêtre, transporter [40] des lettres, battre monnaie; on ne peut librement se concerter avec d’autres travailleurs pour fixer le prix du travail. La propriété de l’homme sur lui-même, la propriété intérieure, est de toutes parts entravée.
La propriété de l’homme sur les fruits de son travail, la propriété extérieure ne l’est pas moins. La propriété littéraire ou artistique et la propriété des inventions ne sont reconnues et garanties que pendant une courte période. La propriété matérielle est généralement reconnue à perpétuité, mais elle est soumise à une multitude de restrictions et de charges. Le don, l’héritage et le prêt ne sont pas libres. L’échange est lourdement grevé tant par les impôts de mutation, d’enregistrement et de timbre, les octrois et les douanes, que par les priviléges accordés aux agents servant d’intermédiaires à certains marchés; parfois aussi l’échange est complétement prohibé hors de certaines limites. Enfin, la loi d’expropriation pour cause d’utilité publique menace incessamment la faible portion de Propriété que les autres restrictions ont épargnée.
I am sure of it. Let property owners freely go about their business. Let property circulate and everything will work out for the best.
In fact, property owners have never been left to go freely about their business and property has never been allowed to circulate freely.
Judge for yourself.
Is it a matter of the property rights of the individual man; of the right he has to use his abilities freely, insofar as he causes no damage to the property of others? In the present society, the highest posts and the most lucrative professions are not open; one cannot practice freely as a solicitor, a priest, a judge, bailiff, money-changer, broker, doctor, lawyer or professor. Nor can one straightforwardly be a printer, a butcher, baker or entrepreneur in the funeral business. We are not free to set up a commercial organization, a bank, an insurance company, or a large transport company, nor free to build a road or establish a charity, nor to sell tobacco or gunpowder, or saltpeter, nor to carry [p. .40] mail, or print money, 78 nor to meet freely with other workers to establish the price of labor. 79 The property a man holds in himself, his internal property , is in every detail shackled.
Man’s ownership of the fruits of his labor, his external property , is equally impeded. Literary and artistic property and the ownership of inventions are recognized and guaranteed only for a short period. Material property is generally recognized in perpetuity, but it is subject to a multitude of restrictions and charges. Gifts, inheritance and loans are restricted too. Trade is heavily encumbered as much by capital transfer taxes, registration charges and stamp duty, by licensing and by customs duties, as by the privileges granted to agents working as intermediaries in certain markets. Sometimes, in addition, trade is completely prohibited outside certain limits. Finally, the law of expropriation on grounds of public utility, endlessly threatens such weak remnants of Property as the other restrictions have spared.

le conservateur.
Toutes les restrictions que vous venez d’énumérer ont été établies dans l’intérêt de la société.
C’est possible; mais ceux qui les ont établies ont eu la main malheureuse, car toutes agissent, à différents degrés, et quelques-unes avec une puissance considérable, comme causes d’injustices et de dommages pour la société.
le conservateur.
De sorte qu’en les détruisant, nous jouirions d’un véritable paradis sur la terre.
Je ne dis pas cela. Je dis que la société se trouverait dans la situation la meilleure possible, eu égard au degré actuel d’avancement des arts et des sciences.

All the restrictions you have just listed were established in the interests of society.
That may be true. Those who brought them in, however, brought about a pernicious result, for all these restrictions act, in different degrees, and some with considerable impact, as causes of injustice and harm to society.
So that by destroying them we would come to enjoy a veritable paradise on earth. [p. .41]
I do not say that. What I do say is that society would find itself in the best possible situation, in terms of the present state of development in the arts and science.

Source: Gustave de Molinari, Les Soirées de la Rue Saint-Lazare: Entretiens sur les lois économiques et défense de la propriété (Paris: Guillaumin, 1849). /titles/1344#Molinari_0383_186.

Source: From the Draft English translation /pages/gdm-soirees

See also:

The Ambivalent Position of John Stuart Mill (1806–1873)

John Stuart Mill (1806–1873)

The English classical liberal and political economist John Stuart Mill (1806–1873) wrote one of the basic works of classical political economy in 1848 with the Principle son Political Economy (1848). He was the precocious child of the Philosophical Radical and Benthamite James Mill. Taught Greek, Latin, and political economy at an early age, He spent his youth in the company of the Philosophic Radicals, Benthamites and utilitarians who gathered around his father James. J.S. Mill went on to become a journalist, Member of Parliament, and philosopher and is regarded as one of the most significant English classical liberals of the 19th century.

He was sympathetic to many arguments of the socialists of his day and thus had a soft spot for their conception of an ideal society. In an unpublished draft of a book on socialism (c. 1869) he points out many of “The Difficulties of Socialism” but nevertheless believes it should be given a chance to prove its viability.

On sharing the benefits of communal work equally he notes:

It is a simple rule, and under certain aspects a just one, to give equal [744] payment to all who share in the work. But this is a very imperfect justice unless the work also is apportioned equally. Now the many different kinds of work required in every society are very unequal in hardness and unpleasantness. To measure these against one another, so as to make quality equivalent to quantity, is so difficult that Communists generally propose that all should work by turns at every kind of labour. But this involves an almost complete sacrifice of the economic advantages of the division of employments, advantages which are indeed frequently over-estimated (or rather the counter-considerations are under-estimated) by political economists, but which are nevertheless, in the point of view of the productiveness of labour, very considerable, for the double reason that the co-operation of employment enables the work to distribute itself with some regard to the special capacities and qualifications of the worker, and also that every worker acquires greater skill and rapidity in one kind of work by confining himself to it. The arrangement, therefore, which is deemed indispensable to a just distribution would probably be a very considerable disadvantage in respect of production. But further, it is still a very imperfect standard of justice to demand the same amount of work from every one. People have unequal capacities of work, both mental and bodily, and what is a light task for one is an insupportable burthen to another. It is necessary, therefore, that there should be a dispensing power, an authority competent to grant exemptions from the ordinary amount of work, and to proportion tasks in some measure to capabilities. As long as there are any lazy or selfish persons who like better to be worked for by others than to work, there will be frequent attempts to obtain exemptions by favour or fraud, and the frustration of these attempts will be an affair of considerable difficulty, and will by no means be always successful. These inconveniences would be little felt, for some time at least, in communities composed of select persons, earnestly desirous of the success of the experiment; but plans for the regeneration of society must consider average human beings, and not only them but the large residuum of persons greatly below the average in the personal and social virtues. The squabbles and ill-blood which could not fail to be engendered by the distribution of work whenever such persons have to be dealt with, would be a great abatement from the harmony and unanimity which Communists hope would be found among the members of their association. That concord would, even in the most fortunate circumstances, be much more liable to disturbance than Communists suppose. The institution provides that there shall be no quarrelling about material interests; individualism is excluded from that department of affairs. But there are other departments from which no institutions can exclude it: there will still be rivalry for reputation and for personal power. When selfish ambition is excluded from the field in which, with most men, it chiefly exercises itself, that of riches and pecuniary interest, it would betake itself with greater [745] intensity to the domain still open to it, and we may expect that the struggles for pre-eminence and for influence in the management would be of great bitterness when the personal passions, diverted from their ordinary channel, are driven to seek their principal gratification in that other direction. For these various reasons it is probable that a Communist association would frequently fail to exhibit the attractive picture of mutual love and unity of will and feeling which we are often told by Communists to expect, but would often be torn by dissension and not unfrequently broken up by it.

Source: “Chapters on Socialism” (1879) in John Stuart Mill, The Collected Works of John Stuart Mill, Volume V - Essays on Economics and Society Part II, ed. John M. Robson, introduction by Lord Robbins (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1967). /titles/232#lf0223-05_head_048.

Yet he is willing to accept the fact that with proper education men might be able to live and prosper in a communist society:

From these various considerations I do not seek to draw any inference against the possibility that Communistic production is capable of being at some future time the form of society best adapted to the wants and circumstances of mankind. I think that this is, and will long be, an open question, upon which fresh light will continually be obtained, both by trial of the Communistic principle under favourable circumstances, and by the improvements which will be gradually effected in the working of the existing system, that of private ownership. The one certainty is, that Communism, to be successful, requires a high standard of both moral and intellectual education in all the members of the community—moral, to qualify them for doing their part honestly and energetically in the labour of life under no inducement but their share in the general interest of the association, and their feelings of duty and sympathy towards it; intellectual, to make them capable of estimating distant interests and entering into complex considerations, sufficiently at least to be able to discriminate, in these matters, good counsel from bad. Now I reject altogether the notion that it is impossible for education and cultivation such as is implied in these things to be made the inheritance of every person in the nation; but I am convinced that it is very difficult, and that the passage to it from our present condition can only be slow. I admit the plea that in the points of moral education on which the success of Communism depends, the present state of society is demoralising, and that only a Communistic association can effectually train mankind for Communism. It is for Communism, then, to prove, by practical experiment, its power of giving this training. Experiments alone can show whether there is as yet in any portion of the population a sufficiently high level of moral cultivation to make Communism succeed, and to give to the next generation among themselves the education necessary to keep up that high level permanently. If Communist associations show that they can be durable and prosperous, they will multiply, and will probably be adopted by successive portions of the population of the more advanced countries as they become morally fitted for that mode of life. But to force unprepared populations into Communist societies, even if a political revolution gave the power to make such an attempt, would end in disappointment. /titles/232#Mill_0223-05_1347.

But to be fair to JS Mill, he did believe that when comparing the system of Communism with that of the free market and ownership of private property the true comparison should be between “Communism at its best” and classical liberalism at its best, not the ideal of an unrealized and untested communism compared with the flawed practices of contemporary European society in 1848.

If (therefore) the choice were to be made between Communism with all its chances, and the present state of society with all its sufferings and injustices; … if this or Communism were the alternative, all the difficulties, great or small, of Communism would be but as dust in the balance. But to make the comparison applicable, we must compare Communism at its best, with the régime of individual property, not as it is, but as it might be made. The principle of private property has never yet had a fair trial in any country; and less so, perhaps, in this country than in some others. … To judge of the final destination of the institution of property, we must suppose everything rectified, which causes the institution to work in a manner opposed to that equitable principle, of proportion between remuneration and exertion, on which in every vindication of it that will bear the light, it is assumed to be grounded. We must also suppose two conditions realized, without which neither Communism nor any other laws or institutions could make the condition of the mass of mankind other than degraded and miserable. One of these conditions is, universal education; the other, a due limitation of the numbers of the community. With these, there could be no poverty, even under the present social institutions: and these being supposed, the question of Socialism is not, as generally stated by Socialists, a question of flying to the sole refuge against the evils which now bear down humanity; but a mere question of comparative advantages, which futurity must determine. We are too ignorant either of what individual agency in its best form, or Socialism in its best form, can accomplish, to be qualified to decide which of the two will be the ultimate form of human society. /titles/102#lf0223-02_footnote_nt_843_ref

Source: JSM, PPE, Book II Distribution, Chap. 1: Of Property” in John Stuart Mill, The Collected Works of John Stuart Mill, Volume II - The Principles of Political Economy with Some of Their Applications to Social Philosophy (Books I-II), ed. John M. Robson, introduction by V.W. Bladen (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1965). /titles/102#lf0223-02_label_1329. Quote <>.

See the following works:

  • John Stuart Mill, The Collected Works of John Stuart Mill, Volume II - The Principles of Political Economy with Some of Their Applications to Social Philosophy (Books I-II), ed. John M. Robson, introduction by V.W. Bladen (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1965). /titles/102
  • John Stuart Mill, The Collected Works of John Stuart Mill, Volume III - The Principles of Political Economy with Some of Their Applications to Social Philosophy (Books III-V and Appendices), ed. John M. Robson, Introduction by V.W. Bladen (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1965). /titles/243 - especially CHAPTER VII: “On the Probable Futurity of the Labouring Classes”.
  • “Chapters on Socialism” (1879) in John Stuart Mill, The Collected Works of John Stuart Mill, Volume V - Essays on Economics and Society Part II, ed. John M. Robson, introduction by Lord Robbins (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1967). /titles/232#lf0223-05_head_048.

The Emergence of Organised Socialist Parties in Europe from 1860s to 1900

Socialist Parties

In chronological order the following socialist parties appeared in Europe during this period:

  1. Social Democratic Party in Germany: Ferdinand Lassalle founded “Allgemeiner Deutscher Arbeiterverein” (ADAV, General German Workers’ Association) in 1863; August Bebel and Wilhelm Liebknecht founded the “Sozialdemokratische Arbeiterpartei” (SDAP, Social Democratic Workers’ Party of Germany - 1869) which merged with the ADAV at a conference held in Gotha in 1875, taking the name Socialist Workers’ Party of Germany (SAPD);
  2. “Parti Ouvrier Français” (French Workers Party - 1879);
  3. Australian Labor Party (1891)
  4. English Social Democratic Federation (1884); Labour Party (1900)
  5. Bolshevik Party was founded by Vladimir Lenin in 1912 by a faction (Bolshevik = majority) of the Russian Social Democratic Labour Party (RSDLP)

Key Works

Some important socialist texts from this period:

  1. Germany:
    1. theoretical work of Karl Marx in 1840s (in Paris) culminating in Communist Manifesto (Feb. 1848); “Zur Kritik” (1857), Das Kapital vol. 1 (1867)
    2. Ferdinand Lassalle, Arbeiterprogramm (1863)
    3. August Bebel, Die Frau und der Sozialismus (1879)
  2. France:
    1. Alfred Jourdan, Du rôle de l’état dans l’ordre économique: ou, Économie politique et socialisme (1882).
    2. Edmond Villey, Du rôle de l’état dans l’ordre économique (1882).
    3. Claudio Jannet, Le Socialisme d’état et la reforme sociale (1889).
    4. Charles Gide, Principes d’économie politique (1883); “L’École nouvelle" (28 March, 1890); L’idée de solidarité (1893)
    5. Claudio Jannet, Le Socialisme d’état et la reforme sociale (1889).
  3. England: George Bernard Shaw, Fabian Essays (1884)
  4. USA: Edward Bellamy Looking Backward, 2000–1887 (1888)

German Socialism in the 1860s to the 1890s

The Work of Karl Marx

Karl Marx (1818–1883)

The major theorist of socialist ideas in the mid- and late–19th century was Karl Marx (1818–1883). Marx prided himself on having discovered the “laws” which governed the operation of the capitalist system, laws which would inevitably lead to its collapse. His form of socialism, in which the socialist party leaders would guide the working class in a “dictatorship of the proletariat” (die Diktatur des Proletariats) in order to destroy the capitalist system by means of a revolution, should be distinguished from the “utopian socialists” (like Charles Fourier, Louis Blanc, and Proudhon), who wanted to create small, voluntary communities where socialism could be put into practise, and the “social democrats” or “labour parties”, which planned to work peacefully within the parliamentary system in order to bring about piecemeal socialist reform.

Marx was born in Trier in Germany and studied philosophy at the universities of Bonn and Berlin. He first worked as a journalist in the early 1840s but was forced to flee to Paris and then to London in order to escape the censors. Ironically, it was only in the liberal political environment of London that Marx was able to write his most famous critique of the capitalist system.

His first writings on political economy were written when he lived in Paris 1843–44 and are known as The Paris Manuscripts (which are not online). In late 1847 he wrote a “manifesto” for the Communist League of the Just which was published in February 1848 as The Communist Manifesto. An English and German version of this classic work can be found online here /pages/marx-manifest.

After a hiatus when Marx worked as a journalist for the New York Herald Tribune Marx published the first volume of what would become a three volume criticism of the capitalist system. Only vol. 1 appeared in Marx’s lifetime (1867); the other two vols. were published posthumously by Engels (1885, 1894). We have these works in both German and English versions.

Of the many passages we could cite in his voluminous writings this one on the extraction of “Mehrwert” (surplus value) by the capitalist from the worker gives a good sense of Marx’s hostility to wage labour, or the “capitalist system” (des kapitalistischen Systems) as he called it:

Andrerseits aber verengt sich der Begriff der produktiven Arbeit. Die kapitalistische Produktion ist nicht nur Produktion von Ware, sie ist wesentlich Produktion von Mehrwert. Der Arbeiter produziert nicht für sich, sondern für das Kapital. Es genügt daher nicht länger, daß er überhaupt produziert. Er muß Mehrwert produzieren. Nur der Arbeiter ist produktiv, der Mehrwert für den Kapitalisten produziert oder zur Selbstverwertung des Kapitals dient. Steht es frei, ein Beispiel außerhalb der Sphäre der materiellen Produktion zu wählen, so ist ein Schulmeister produktiver Arbeiter, wenn er nicht nur Kinderköpfe bearbeitet, sondern sich selbst abarbeitet zur Bereicherung des Unternehmers. Daß letztrer sein Kapital in einer Lehrfabrik angelegt hat, statt in einer Wurstfabrik, ändert nichts an dem Verhältnis. Der Begriff des produktiven Arbeiters schließt daher keineswegs bloß ein Verhältnis zwischen Tätigkeit und Nutzeffekt, zwischen Arbeiter und Arbeitsprodukt ein, sondern auch ein spezifisch gesellschaftliches, geschichtlich entstandnes Produktionsverhältnis, welches den Arbeiter zum unmittelbaren Verwertungsmittel des Kapitals stempelt. Produktiver Arbeiter zu sein ist daher kein Glück, sondern ein Pech.

Die Verlängrung des Arbeitstags über den Punkt hinaus, wo der Arbeiter nur ein Äquivalent für den Wert seiner Arbeitskraft produziert hätte, und die Aneignung dieser Mehrarbeit durch das Kapital - das ist die Produktion des absoluten Mehrwerts. Sie bildet die allgemeine Grundlage des kapitalistischen Systems und den Ausgangspunkt der Produktion des relativen Mehrwerts. Bei dieser ist der Arbeitstag von vornherein in zwei Stücke geteilt: notwendige Arbeit und Mehrarbeit. Um die Mehrarbeit zu verlängern, wird die notwendige Arbeit verkürzt durch Methoden, vermittelst deren das Äquivalent des Arbeitslohns in weniger Zeit produziert wird. Die Produktion des absoluten Mehrwerts dreht sich nur um die Länge des Arbeitstags; die Produktion des relativen Mehrwerts revolutioniert durch <533> und durch die technischen Prozesse der Arbeit und die gesellschaftlichen Gruppierungen.

Sie unterstellt also eine spezifisch kapitalistische Produktionsweise, die mit ihren Methoden, Mitteln und Bedingungen selbst erst auf Grundlage der formellen Subsumtion der Arbeit unter das Kapital naturwüchsig entsteht und ausgebildet wird. An die Stelle der formellen tritt die reelle Subsumtion der Arbeit unter das Kapital.

Capitalist production is not merely the production of commodities, it is essentially the production of surplus-value. The labourer produces, not for himself, but for capital. It no longer suffices, therefore, that he should simply produce. He must produce surplus-value. That labourer alone is productive, who produces surplus-value for the capitalist, and thus works for the self-expansion of capital. If we may take an example from outside the sphere of production of material objects, a schoolmaster is a productive labourer, when, in addition to belabouring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation. Hence the notion of a productive labourer implies not merely a relation between work and useful effect, between labourer and product of labour, but also a specific, social relation of production, a relation that has sprung up historically and stamps the labourer as the direct means of creating surplus-value. To be a productive labourer is, therefore, not a piece of luck, but a misfortune. …

The prolongation of the working day beyond the point at which the labourer would have produced just an equivalent for the value of his labour-power, and the appropriation of that surplus-labour by capital, this is production of absolute surplus-value. It forms the general groundwork of the capitalist system, and the starting point for the production of relative surplus-value. The latter presupposes that the working day is already divided into two parts, necessary labour, and surplus-labour. In order to prolong the surplus-labour, the necessary labour is shortened by methods whereby the equivalent for the wages is produced in less time. The production of absolute surplus-value turns exclusively upon the length of the working day; the production of relative surplus-value, revolutionises out and out the technical processes of labour, and the composition of society.

It therefore presupposes a specific mode, the capitalist mode of production, a mode which, along with its methods, means, and conditions, arises and developes itself spontaneously on the foundation afforded by the formal subjection of labour to capital. In the course of this development, the formal subjection is replaced by the real subjection of labour to capital. …

Wir sahen im vierten Abschnitt bei Analyse der Produktion des relativen Mehrwerts: innerhalb des kapitalistischen Systems vollziehn sich alle Methoden zur Steigerung der gesellschaftlichen Produktivkraft der Arbeit auf Kosten des individuellen Arbeiters; alle Mittel zur Entwicklung der Produktion schlagen um in Beherrschungs- und Exploitationsmittel des Produzenten, verstümmeln den Arbeiter in einen Teilmenschen, entwürdigen ihn zum Anhängsel der Maschine, vernichten mit der Qual seiner Arbeit ihren Inhalt, entfremden ihm die geistigen Potenzen des Arbeitsprozesses im selben Maße, worin letzterem die Wissenschaft als selbständige Potenz einverleibt wird; sie verunstalten die Bedingungen, innerhalb deren er arbeitet, unterwerfen ihn während des Arbeitsprozesses der kleinlichst gehässigen Despotie, verwandeln seine Lebenszeit in Arbeitszeit, schleudern sein Weib und Kind unter das Juggernaut-Rad des Kapitals. Aber alle Methoden zur Produktion des Mehrwerts sind zugleich Methoden der Akkumulation, und jede Ausdehnung der Akkumulation wird umgekehrt <675> Mittel zur Entwicklung jener Methoden. Es folgt daher, daß im Maße wie Kapital akkumuliert, die Lage des Arbeiters, welches immer seine Zahlung, hoch oder niedrig, sich verschlechtern muß. Das Gesetz endlich, welches die relative Übervölkerung oder industrielle Reservearmee stets mit Umfang und Energie der Akkumulation in Gleichgewicht hält, schmiedet den Arbeiter fester an das Kapital als den Prometheus die Keile des Hephästos an den Felsen. Es bedingt eine der Akkumulation von Kapital entsprechende Akkumulation von Elend. Die Akkumulation von Reichtum auf dem einen Pol ist also zugleich Akkumulation von Elend, Arbeitsqual, Sklaverei, Unwissenheit, Brutalisierung und moralischer Degradation auf dem Gegenpol, d.h. auf Seite der Klasse, die ihr eignes Produkt als Kapital produziert. We saw in Part IV., when analysing the production of relative surplus-value: within the capitalist system all methods for raising the social productiveness of labour are brought about at the cost of the individual labourer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers; they mutilate the labourer into a fragment of a man, degrade him to the level of an appendage of a machine, destroy every remnant of charm in his work and turn it into a hated toil; they estrange from him the intellectual potentialities of the labour-process in the same proportion as science is incorporated in it as an independant power; they distort the conditions under which he works, subject him during the labour-process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the Juggernaut of capital, But all methods for the production of surplus value are at the same time methods of accumulation; and every extension of accumulation becomes again a means for the development of those methods. It follows therefore that in proportion as [709] capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. The law, finally, that always equilibrates the relative surplus-population, or industrial reserve army, to the extent and energy of accumulation, this law rivets the labourer to capital more firmly than the wedges of Vulcan did Prometheus to the rock. It establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.

Source: </pages/marx-k1-1890>

Source: /titles/965#Marx_0445-01_1214

See also:

  • Capital, vol. 1 , Part V. The Production of Absolute and Relative Suplius-Value, chap. XVI “Absolute and Relative Surplus-Value”. Karl Marx, Capital: A Critique of Political Economy. Volume I: The Process of Capitalist Production, by Karl Marx. Trans. from the 3rd German edition, by Samuel Moore and Edward Aveling, ed. Frederick Engels. Revised and amplified according to the 4th German ed. by Ernest Untermann (Chicago: Charles H. Kerr and Co., 1909). /titles/965#Marx_0445-01_944
  • Karl Marx, Capital: A Critique of Political Economy. 3 vols. Edited and translated by Frederick Engels and Ernest Untermann (Chicago: Charles H. Kerr and Co., 1909–1910).
    • Volume I: The Process of Capitalist Production (1909) /titles/965
    • Volume II: The Process of Circulation of Capita (1910) /titles/966
    • Volume III: The Process of Capitalist Production as a Whole (1909). /titles/967
  • Das Kapital is also available here in German at /pages/marx-works.

The CL Critique of German Socialism Eugen von Böhm-Bawerk (1851–1914)

Eugen von Böhm-Bawerk (1851–1914)

When Friedrich Engels published posthumously the third and final volume of Karl Marx’s Das Kapital in 1894 the the Austrian economist Eugen von Böhm-Bawerk wrote a devastating review of Marx’s magnum opus. It should be read in its entirety as it it a very important and ultimately unanswerable critique of the most advanced and thoughtful socialist theorist.

See Böhm-Bawerk, “On the Completion of Marx’s System (of Thought)” (1896, 1898) /pages/completion.

Böhm-Bawerk cut to the heart of Marxist economic theory by rejecting the validity (both theoretical and in practice) of his theory of “surplus value”. As he stated in the opening paragraph of his review of the final volume:

This faith (of Marx’s followers) was, moreover, in one case put to an unusually severe test. Marx had taught in his first volume that the whole value of commodities was based on the labor embodied in them, and that by virtue of this “law of value” they must exchange in proportion to the quantity of labor which they contain; that, further, the profit or surplus value falling to the capitalist was the fruit of extortion practiced on the worker; that, nevertheless, the amount of surplus value was not in proportion to the whole amount of the capital employed by the capitalist, but only to the amount of the “variable” part—that is, to that part of capital paid in wages—while the “constant capital,” the capital employed in the purchase of the means of production, added no surplus value. In daily life, however, the profit of capital is in proportion to the total capital invested; and, largely on this account, the commodities do not as a fact exchange in proportion to the amount of work incorporated in them. Here, therefore, there was a contradiction between system and fact which hardly seemed to admit of a satisfactory explanation. Nor did the obvious contradiction escape Marx himself. He says with reference to it, “This law” (the law, namely, that surplus value is in proportion only to the variable part of capital), “clearly contradicts all prima facie experience.” But at the same time he declares the contradiction to be only a seeming one, the solution of which requires many missing links, and will be postponed to later volumes of his work. Expert criticism thought it might venture to prophesy with certainty that Marx would never redeem this promise, because, as it sought elaborately to prove, the contradiction was insoluble. Its reasoning, however, made no impression at all on the mass of Marx’s followers. His simple promise outweighed all logical refutations.

He also takes Marx to task for deliberately excluding from his analysis valuable things which are not the product of labour, such as “gifts of nature” which are valuable but upon which no human labour has been expended:

From the beginning he only puts into the sieve those exchangeable things which contain the property which he desires finally to sift out as “the common factor,” and he leaves all the others outside. He acts as one who urgently desiring to bring a white ball out of an urn takes care to secure this result by putting in white balls only. That is to say he limits from the outset the field of his search for the substance of the exchange value to “commodities,” and in doing so he forms a conception with a meaning narrower than the conception of “goods” (though he does not clearly define it), and limits it to products of labor as against gifts of nature. Now it stands to reason that if exchange really means an equalization, which assumes the existence of a “common factor of the same amount,” this common factor must be sought and found in every species of goods which is brought into exchange, not only in products of labor but also in gifts of nature, such as the soil, wood in trees, water power, coal beds, stone quarries, petroleum reserves, mineral waters, gold mines, etc. To exclude the exchangeable goods which are not products of labor in the search for the common factor which lies at the root of exchange value is, under the circumstances, a great error of method. It is just as though a natural philosopher, desiring to discover a property common to all bodies—weight, for instance—were to sift the properties of a single group of bodies—transparent bodies, for instance—and after passing in review all the properties common to transparent bodies were to declare that transparency must be the cause of weight, for the sole reason that he could demonstrate that it could not be caused by any of the other properties.

Eugen Richter (1838–1906)

Eugen Richter (1838–1906)

Eugen Richter (1838–1906) was one of the very few radical liberals in late 19th century Germany. As a member of the Reichstag, he consistently opposed the growing budget, German militarism and imperialism, and the rise of socialism. His book Pictures of the Socialistic Future (1893) /titles/295 is a satire of what would happen to Germany if the socialism espoused by the trade unionists, social democrats, and Marxists was actually put into practice. It is thus a late 19th century version of Orwell’s 1984, minus the extreme totalitarianism which Orwell had witnessed in Nazi Germany and Stalinist Russia but which was still inconceivable to 19th century liberals. The main point of the book is to show that government ownership of the means of production and centralised planning of the economy would not lead to abundance as the socialists predicted would happen when capitalist “inefficiency and waste” were “abolished”. The problem of incentives in the absence of profits, the free rider problem, the public choice insight about the vested interests of bureaucrats and politicians, the connection between economic liberty and political liberty, were all wittily addressed by Richter, much to the annoyance of his socialist opponents.

In his satire about what would happen to Germany if a socialist revolution was successful Richter describes a speech the new socialist Chancellor gave to the Parliament on how the socialist regime was coping with the economic collapse the introduction of socialism produced, by cutting food rations and limiting consumer expenditure on “frivolous” items:

The Chancellor—“It is a well-known fact that there are many estimable persons—I allude to those persons who are styled vegetarians—who hold not only that meat may very well be dispensed with altogether, but that it is positively injurious to the human system. (Uproar from the Right.)
“One of the main sources, however, from which we calculate upon effecting economy, is the placing of narrower bounds to individual caprice as manifested in the purchase of articles. A measure of this nature is a necessary and logical step in the direction of social equality, and we hope, by its means, to put an end to the irrational rule of supply and demand which even nowadays to a great extent obtains, and which so much tends to place obstacles in the way of production, and to raise the price of things correspondingly. The Community produces, let us say, articles of consumption, furniture, clothes, and so on. But the demand for these articles is regulated by the merest freak or caprice—call it fashion, taste, or whatever you like.”
The Chancellor’s lady—“Oh, oh.”
The Chancellor hesitated a moment, and sought by means of a glass of water to calm his evident irritation at this interruption. He then continued—
“I repeat, the caprice of fashion is directed only too frequently, not to those articles which are already [105] in stock, but to some new-fangled thing which takes the fancy of the moment. As a result of this, those goods which are manufactured and exposed for sale by the Community become often so-called shop-veterans, or they spoil—in short, fail to fulfil the purpose for which they were produced; and all this, forsooth, just because these goods do not quite take the fancy of Mr. and Mrs. X. Y. Z. Now I put the question to you: are we justified in so far yielding to the caprices of such persons, that we offer them a choice of various goods to one and the same identical end—such as nourishment, furnishing, and attire—in order that Mr. and Mrs. X. may live, and dress, and furnish their house differently from Mr. and Mrs. Y.? Just reflect how vastly all processes of manufacture would be cheapened if, in place of having any variety in goods which are destined to fulfil the same purpose, all such articles were limited to a few patterns, or, better still, if they were all made on one single pattern. All losses arising from goods being left on hand as unsaleable, would be avoided if it were, once for all, definitely understood that Mr. and Mrs. X. Y. Z. had to dine, and attire themselves, and furnish their houses in that manner which had been prescribed by the State.
“Hence, lady and gentlemen, the Government contemplates shortly submitting to your consideration plans for regulating your other meals in a manner similar to that which was adopted from the first for the regulation of the chief meal of the day. It will also tend to promote more real social equality if all household goods and chattels, such as bedding, tables, chairs, wardrobes, linen, etc. etc., be declared the property of the State. By means of each separate dwelling being furnished by the State with these various requisites, [106] all after one identical pattern, and all remaining as a permanent part of each dwelling, the trouble and expense of removal are done away with. And only then, when we shall have advanced thus far, shall we be in a position to approach, at least approximately, the principle of equality as respects the question of dwelling-houses, no matter how different their situations and advantages. This problem we propose to solve by a universal fresh drawing of lots from quarter to quarter. In this way, the chances which everybody has to win a nice suite of apartments on the first-floor front are renewed every quarter of a year. (Laughter from the Left. Applause here and there from the Right.)
“As an additional aid to the promotion of equality, we propose that in future all persons shall attire themselves in garments whose cut, material, and colour, it will be the province of this House to determine beforehand. The length of time during which all garments are to be worn will also be fixed with precision.”

Source: Eugen Richter, Pictures of the Socialistic Future (Freely adapted from Bebel), trans. Henry Wright, Introduction by Thomas Mackay (London: Swan Sonnenschein & Co., 1907). /titles/295#Richter_0160_319.

English Socialism in the 1880s

George Bernard Shaw and the Fabian Society

George Bernard Shaw (1856-1950)

In the late 19th century the classical liberal, free market orthodoxy was beginning to be challenged by socialists like the Irish playwright George Bernard Shaw (GBS) (1856-1950), along with the writers and educators Sidney and Beatrice Webb, the feminist Emmeline Pankhurst, and the novelist H. G. Wells, who founded the Fabian Society in England in In 1884. Its aim was to bring about a socialist society by means of intellectual debate, the publication of books and pamphlets, and the “permeation” of socialist ideas into the universities, the press, government institutions, and political parties. Unlike the Marxists, who desired revolutionary change, the “Fabian socialists” advocated incremental change through the parliamentary system.

GBS wrote the “manifesto” for the Fabian Society in 1884 and edited a collection of essays about their ultimate aims.

Some of the main points in the fabian manifesto are the following:

THE FABIANS are associated for the purpose of spreading the following opinions held by them, and discussing their practical consequences.

  • That the most striking result of our present system of farming out the national Land and Capital to private individuals has been the division of Society into hostile classes, with large appetites and no dinners at one extreme, and large dinners and no appetites at the other.
  • That the practice of entrusting the Land of the nation to private persons in the hope that they will make the best of it has been discredited by the consistency with which they have made the worst of it; and that the Nationalization of the Land in some form is a public duty.
  • That the pretensions of Capitalism to encourage Invention, and to distribute its benefits in the fairest way attainable, have been discredited by the experience of the nineteenth century.
  • That, under the existing system of leaving the National Industry to organize itself, Competition has the effect of rendering adulteration, dishonest dealing, and inhumanity compulsory.
  • That since Competition among producers admittedly secures to the public the most satisfactory products, the State should compete with all its might in every department of production.
  • That such restraints upon Free Competition as the penalties for infringing the Postal monopoly, and the withdrawal of workhouse and prison labour from the markets, should be abolished.
  • That no branch of Industry should be carried on at a profit by the central administration.
  • That the Public Revenue should be raised by a direct Tax; and that the central administration should have no legal power to hold back for the replenishment of the Public Treasury any portion of the proceeds of the Industries administered by them.
  • That the State should compete with private individuals—especially with parents—in providing happy homes for children, so that every child may have a refuge from the tyranny or neglect of its natural custodians.


  • George Bernard Shaw, A Manifesto. Fabian Tracts No. 2 (London: George Standring, 1884).
  • George Bernard Shaw, Fabian Essays in Socialism, ed. G. Bernard Shaw, American Edition Ed. by H.G. Wilshire, (New York: The Humboldt Publishing Co., 1891). First published 1889. /titles/298.

The CL Critique of English/Fabian Socialism in the 1880s and 1890s

Shaw’s anthology provoked a reply by supporters of private property and laissez-faire economics led by Thomas Mackay. See the Debate: “Fabian Socialism vs. Radical Liberalism” /collections/76.

These writers were followers of the sociologist and political theorist Herbert Spencer (1820–1903) who was one of the leading 19th century English radical individualists. He began working as a journalist for the laissez-faire magazine The Economist in the 1850s. Much of the rest of his life was spent working on an all-encompassing theory of human development based upon the ideas of individualism, utilitarian moral theory, social and biological evolution, limited government, and laissez-faire economics. See in particular ”The Man versus the State” (1884) and “From Freedom to Bondage” (1891) in The Man versus the State (1884), with Six Essays on Government, Society and Freedom (LF ed.) /titles/330.

Herbert Spencer (1820-1903)

Herbert Spencer (1820-1903) wrote the Introduction to Mackay’s collection of essays “A Plea for Liberty” which was entitled “From Freedom to Bondage.” in it he contrasted the “voluntary co-operation” of the free market with the “compulsory co-operation” which would result from a socialist form of economic organisation. He argued that what the socialists don’t tell the people is the sheer number of regulators they would need to run such a system, or what he called the “regulative apparatus” which would control the new “régime of industrial obedience”:

Beyond the regulative apparatus such as in our own society is required for carrying on national defence and maintaining public order and personal safety, there must, under the régime of socialism, be a regulative apparatus everywhere controlling all kinds of production and distribution, and everywhere apportioning the shares of products of each kind required for each locality, each working establishment, each individual. … Suppose now that this industrial régime of willinghood, acting spontaneously, is replaced by a régime of industrial obedience, enforced by public officials. Imagine the vast administration required for that distribution of all commodities to all people in every city, town and village, which is now effected by traders! Imagine, again, the still more vast administration required for doing all that farmers, manufacturers, and merchants do; having not only its various orders of local superintendents, but its sub-centres and chief centres needed for apportioning the quantities of each thing everywhere needed, and the adjustment of them to the requisite times. Then add the staffs wanted for working mines, railways, roads, canals; the staffs required for conducting the importing and exporting businesses and the administration of mercantile shipping; the staffs required for supplying towns not only with water and gas but with locomotion by tramways, omnibuses, and other vehicles, and for the distribution of power, electric and other. Join with these the existing postal, telegraphic, and telephonic administrations; and finally those of the police and army, by which the dictates of this immense consolidated regulative system are to be everywhere enforced. Imagine all this and then ask what will be the position of the actual workers! Already on the [23] continent, where governmental organizations are more elaborate and coercive than here, there are chronic complaints of the tyranny of bureaucracies—the hauteur and brutality of their members. What will these become when not only the more public actions of citizens are controlled, but there is added this far more extensive control of all their respective daily duties? What will happen when the various divisions of this army of officials, united by interests common to officialism—the interests of the regulators versus those of the regulated—have at their command whatever force is needful to suppress insubordination and act as ‘saviours of society’? Where will be the actual diggers and miners and smelters and weavers, when those who order and superintend, everywhere arranged class above class, have come, after some generations, to inter-marry with those of kindred grades, under feelings such as are operative in existing classes; and when there have been so produced a series of castes rising in superiority; and when all these, having everything in their own power, have arranged modes of living for their own advantage: eventually forming a new aristocracy far more elaborate and better organized than the old? How will the individual worker fare if he is dissatisfied with his treatment—thinks that he has not an adequate share of the products, or has more to do than can rightly be demanded, or wishes to undertake a function for which he feels himself fitted but which is not thought proper for him by his superiors, or desires to make an independent career for himself? This dissatisfied unit in the immense machine will be told he must submit or go. The mildest penalty for disobedience will be industrial excommunication. And if [24] an international organization of labour is formed as proposed, exclusion in one country will mean exclusion in all others—industrial excommunication will mean starvation.

Source: Thomas Mackay, A Plea for Liberty: An Argument against Socialism and Socialistic Legislation, consisting of an Introduction by Herbert Spencer and Essays by Various Writers, edited by Thomas Mackay (Indianapolis: Liberty Fund, 1981). Foreword by Jeffrey Paul. /titles/313#Mackay_0071_121.

Thomas Mackay (1849–1912)

[We do not have an image of Mackay]

Thomas Mackay (1849–1912) was a successful Scottish wine merchant who retired early from business so he could devote himself entirely to the study of economic issues such as the Poor Laws, growing state intervention in the economy, and the rise of socialism. Mackay was asked by the individualist and laissez-faire lobby group, the Liberty and Property Defense League, to put together a collection of essays by leading classical liberals to rebut the socialist ideas contained in Fabian Essays in Socialism edited by George Bernard Shaw in 1889. The result was A Plea for Liberty (1891) and A Policy of Free Exchange (1894).
1. A Plea for Liberty: An Argument against Socialism and Socialistic Legislation (1891) /titles/313. This collection of essays was originally published in 1891 in response to a collection of Fabian Essays on Socialism which advocated policies which would eventually lead to the modern welfare state. The theoretical and empirical contributions are fine examples of the classical liberal tradition in British thought.
2. A Policy of Free Exchange (1894) /titles/314. The companion volume to A Plea for Liberty which continued the argument against the Fabian Socialists and for a policy of strict non-intervention in the economy by the government.

Mackay took a great interest in the condition of the working class and in his essay on “The Interest of the Working Class in Free Exchange” in the second collection he attempted to show the average worker why he should be interested in a full free market society rather than a socialist one. This view was based on the notion that all workers were property owners, especially of their own bodies and the labour they could accomplish with their own body, and like any other property owner they had an interest in a system of property ownership in which their property was protected from theft, fraud, and coercion:

‘THE property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable.’ Such is the axiom in which Adam Smith proclaims the charter of human freedom. It is a pregnant phrase, and the corollaries which follow from it are far-reaching and important. A man’s property in himself gives him a right of exclusive use in his own labour, and, as under the present subdivision of labour its principal use will consist in being exchanged for wages, it gives him also a right of Free Exchange. To argue that exchange should be other than free is to countenance slavery. This monopoly, or exclusive power of sale over his own labour, is sacred and inviolable. It can only be exercised by the free will of the seller, that is to say, in Free Exchange. This universal right vested in every seller of labour does not confer on any one man a right to compel others to purchase his labour, for such a forced exchange would be a violation of our axiom, in that it compelled other men to part with their labour, or the results of their labour, against their will. The axiom gives, therefore, no guarantee of employment, no droit au travail; it merely affirms each man’s exclusive right to take his own labour and services to market. Further, if the greater may be held to include the less, each man has the same right of property over all that he obtains in exchange for his labour. In other words, within the limits set by an enlightened jurisprudence, a man is entitled to dispose of his wages as he thinks fit. In the infinite series of exchanges here foreshadowed, labour is ‘the original foundation of all other [214] property.’ To complete our view of the organizing influence of exchange, another deduction must be drawn, which seems to follow naturally from the axiom above stated. It is, that if a man has a right of sale he has also a right of gift. Hence the jurisprudence of the civilized world, recognizing that economically as well as physiologically the life of the child is a continuation of the life of the parent, has sanctioned, what it is probably powerless to forbid, the right of inheritance and bequest, as being on the whole the simplest and most equitable method of passing property from one generation to another. Every man, then, has property in his own labour, his own mental efforts, and in the values which neighbours freely give him in exchange for these. Liberty and Property, or, as relatively to an industrial society it may more suggestively be stated, Free Exchange and Property are two inseparable ideas.

Source: Thomas Mackay, A Policy of Free Exchange. Essays by Various Writers on the Economical and Social Aspects of Free Exchange and Kindred Subjects, edited by Thomas Mackay (New York: D. Appleton and Co., 1894)./titles/314#Mackay_0135_446.

Wordsworth Donisthorpe (1847–1914) and Bruce Smith (1851–1937)

Two other radical individualists contributed to this critique of Fabian socialism., the Englishman Wordsworth Donisthorpe (1847–1914) and the Australian Bruce Smith (1851–1937).

Wordsworth Donisthorpe (1847–1914)

Very little is known about Wordsworth Donisthorpe (1847–1914) other than his father was a prosperous textile manufacturer, that he was a barrister, and that he also had a private income income which enabled him to be active in promoting chess, inventing an early moving picture camera, and radical libertarian politics. The latter included membership in the “Liberty and Property Defence League” (1882) founded by Lord Elcho and whose weekly newsletter “Jus: A Weekly Organ of Individualism” was edited by him. His main writings include Principles of Plutology (1876), Individualism, a System of Politics (1889), and Law in a Free State (1895).
1. Individualism: A System of Politics (1889) /titles/291. Donisthorpe provides a theory of politics from the individualist standpoint in the tradition of Herbert Spencer and Auberon Herbert. He also attacks the rise of socialism which he regards as the greatest threat to social progress.
2. Law in a Free State (London: Macmillan and Co., 1895). /titles/290. A collection of essays by a radical individualist political thinker on a range of topics which he called “the hardest nuts to crack”, in other words, topics which pushed the theory of individual liberty to its limits. He discusses questions of libel, of cruelty to animals, of copyright, of adulteration, of the relation of the sexes, of rights over land, and of nuisance

In his book Individualism: A System of Politics (1889) the second last chapter is devoted to exposing the errors of socialism, Chap. XI. An Analysis of Socialism” in which he examines a pamphlet by the socialist James Leigh Joynes, The Socialist Catechism (1885). Among its many faults he identifies the false distinction between the “use value” and the “exchange value” of an object which was a central concept for many socialists:

As for the term “use value”, it is almost meaningless, and absolutely without either use or value as an economic expression! It is impossible to measure the amount of pleasure which anything is capable of affording. Such amount varies with the individual enjoying it. Moreover the different kinds of pleasure enjoyed by a single individual are, inter sc, incommensurable. How many times does the pleasure of eating cheese-cakes go into the pleasure of gazing on a lovely landscape, or listening to a grand symphony? Let us clear our heads of all these cobwebs. The elements of plutology are not really very difficult or mysterious. Most of the dust has been kicked up by the economists themselves. Let us see. Wealth is everything which affords pleasure to man. Part of it is found ready to hand, contributed, so to speaic, by nature: and part of it is due (in part) to the labour of man. But even this latter is not, as a rule, wholly the product of labour. If the raw material had value before it was operated upon, that part of the manufactured article’s value is due not to labour but to nature. The value of a thing is simply the amount (according to any standard of measurement) of other things for which it can be exchanged. And this of course varies in different localities. In London a spectroscope is wortth a good deal more than a handful of glass beads; on the Gold Coast, a good deal less. The expression ” use value “should be abolished altogether. Then value stands for exchange value, and that alone. The following statement, therefore, amounts to nothing more than that a loaf is more useful to a hungry man than to one who is satiated. This is quite true, but not very original or profound. ” Its use value to a starving man is infinitely great, as it is a question of life and death with him to obtain it; it is nothing at all to a turtle-fed alderman, sick already with excessive eating; but its exchange value remains the same in all cases.”

Source: Wordsworth Donisthorpe, Individualism: A System of Politics (London: Macmillan and Co., 1889). /titles/291#Donisthorpe_1233_673.

Donsithorpe also wittily debunks the socialist idea of “surplus value” and the nature of exploitation (plunder):

We are next introduced to “surplus value,” which is defined as the difference between a bare subsistence and the fruits of labour. “Necessary labour is that which would feed and clothe and keep in comfort the nation if all took their part in performing it.” It is already evident that Mr. Joynes, like all socialists, is a member of the “Daniel Lambert” school of politics. To exist is necessary; to be fat is necessary: but to be educated, cultured, something above the mere brute-that is not necessary, it is a luxury.
What do we mean by necessary labour? I mean nothing by it. I never use the expression. The labour which results in a noble work of art is in my opinion quite as necessary as the labour which results in a pair of corduroy trousers. …
No individual employer, we are told, is responsible for the exploitation of the labourers; the blame applies to the whole class. Individual employers may be ruined, but the employing class continue to appropriate the surplus value. And the reason of this is because competition is as keen amongst the capitalists as among the labourers. It determines the division of [339] the spoil; different sets of people struggling to get a share in the surplus value. It does not affect the labourers at all. It is assumed that the plunder is to be shared among the “upper classes,” and the only question is in what proportion this shall be done. All this may be quite true without justifying the language used when we are told that that which the employers take from the employed is spoil and plunder. It is nothing of the sort. It is merely the fruits of a bargain which, from the labourers’ point of view, is a very foolish and bad bargain. We may admit that, without accusing those who get the best of the bargain of being plunderers.
But in what follows it is not the language only which is censurable, it is the gross fallacy on which the whole socialist argument rests. “This plunder is labelled by many names, such as rent, brokerage, fees, profits, wages of superintendence, reward of abstinence, insurance against risk, but above all, interest on capital. They are all deducted from the labourers’ earnings. There is no other fund from which they could possibly come, and they are simply taken for nothing, just as a thief accumulates his stolen goods.” Here is the socialist fallacy in its nakedness. “There is no other fund from which they could possibly come!” i.e. wages of superintendence, fees for medical attendance, and legal advice and such like; as if all these payments were not for hard work and skilled work done. To say that a man who adds more to production by working with his head than perhaps one hundred men do by-working with their hands is paid necessarily out of the fruits of their labour is simply transparent nonsense.

Source: Individualism: A System of Politics (1889), /titles/291#Donisthorpe_1233_689.

Bruce Smith (1851–1937)

Bruce Smith (1851–1937) was an Australian Barrister and a Member of the Parliament of New South Wales in the late 19th and early 20th centuries. Smith was one of the very few (perhaps the only one) Spencerite liberals in the Australian colonies. He was influenced by the writings of the English “Liberty and Property Defence League” which was a group of radical individualists and free traders who had among their members Thomas Mackay and Auberon Herbert.

In his book Liberty and Liberalism (1888) Smith defends what he calls “True Liberalism” from the “Socialist school” which was gaining influence in Britain and the Australian colonies. The True Liberal sought only “equal opportunities” from the state, whereas the Socialists demanded “equal wealth or social conditions” as well:

The principles which I have classed under the title of “True Liberalism” are almost identical with those which an advocate of laissez faire (according to the proper meaning of the term) would approve. The only difference, of any consequence, among the advocates of that principle is as to where that limit should be placed, beyond which state interference should not go. Socialism is, in effect, a struggling for equal or, at [434] least, approximately equal wealth and social conditions. It is none the less so because of the impossibility of attaining to the extreme point desired, viz., absolute equality. That that attainment is impossible has been admitted by Mr. Chamberlain himself, but he nevertheless advocates, as I have shown in my opening chapter, the attempt at an approximation. The fundamental distinction which appears to be unobserved by the advocates of Socialistic legislation is that which exists between equal wealth or social conditions on the one hand, and equal opportunities on the other. No one now-a-days would seriously contend that one citizen should possess better opportunities than another. It is admitted, on all hands, that all should be equal in that respect, that is to say, that every citizen should be free to attempt anything which his fellow-citizens are allowed to do. But Socialists claim that every citizen should have or possess anything which his fellow-citizens possess. There is a great difference between giving a man the liberty to do anything, and supplying him with the means with which to do it. This distinction has been clearly stated by Hobbes in his own quaint way. He says, in the chapter of his “Leviathan,” entitled “The Liberty of Subjects:” “When the impediment of motion is in the constitution of the thing itself, we use not to say, it wants the liberty, but the power to move, as when a stone lieth still, or a man is fastened to his bed by sickness.” True Liberalism would give to every man the liberty to do anything which his fellow-citizens are allowed to do; but Socialism is not content with liberty only: it wants the state to confer the power also, that is to say the means. If a man is incapable now-a-days of living as he would wish, it is not by reason of the existence of any aristocratic privileges. There is now no law of any kind, which restricts the liberty of the poor man, without also equally affecting the rich. There is, now, no legislative or enforcible social restriction which will dictate to the poorest citizen [435] the quality of clothes he may wear, the amount of wages he may receive, the number and nature of the courses of which his meals may be constituted, the distances he may travel for work, or the nature of the arrangements for combination which he may enter into with his fellow-workmen. He may wear apparel as elaborate and as gaudy as that of Oliver Goldsmith in his most prosperous moments—if he possess it; he is at liberty to receive wages as large as the income of a Vanderbilt—if only he can earn them; he can live in true epicurean style—if only he be possessed of the viands; and he can, by combination with his fellow-workmen, lift his wages to unprecedented levels—if only the laws of supply and demand will admit of it. The state, far from interfering with him in the enjoyment of these liberties, has secured that enjoyment to him—provided he obtain for himself, and that lawfully, the material which is essential to such enjoyment. But while the state thus secures him that liberty of enjoyment of his own possessions, it stops short, or should stop short at that stage at which he asks for the material itself. This is where Individualism and Socialism diverge; and it requires, I think, only a moment’s reflection to see which is the only possible policy of the two. Socialism practically says, “We have the liberty to dress and eat as we like, to be educated and to lift our wages as high as economic laws will allow—but we want you to supply us with the clothes, the food, the education, and the work itself even, out of that apparently inexhaustible fund known as the general revenue.”

Source: Smith, Liberty and Liberalism (1888) /titles/296#SmithB_0306_960.


  • Liberty and Liberalism: A Protest against the Growing Tendency toward undue Interference by the State, with Individual Liberty, Private Enterprise and the Rights of Property (1888) /titles/296. Smith was a follower of Herbert Spencer and the English Liberty and Property Defence League. His book is a critique of the growing intervention of the state in economic and civil matters in Australia and elsewhere in the late 19th century. Chap. X deals with “Socialism and Communism.”

Auberon Herbert (1838–1906)

Auberon Herbert (1838–1906)

One of the last of the Spencerites in the 1890s and early 20th century was Auberon Herbert (1838–1906). With a group of other late Victorian classical liberals he was active in such organizations as the Personal Rights and Self-Help Association and the Liberty and Property Defense League. He formulated a system of “thorough” individualism that he described as “voluntaryism.” During the 1890s, Herbert engaged in lengthy published exchanges with two prominent socialists of his day, E. Belfort Bax and J. A. Hobson, as in “Salvation by Force” (1898).

  1. “The True Line of Deliverance” in Thomas Mackay, A Plea for Liberty: An Argument against Socialism and Socialistic Legislation, consisting of an Introduction by Herbert Spencer and Essays by Various Writers, edited by Thomas Mackay (Indianapolis: Liberty Fund, 1981). Foreword by Jeffrey Paul. /titles/313#lf0071_head_025.
  2. ”The Right and Wrong of Compulsion by the State (1895) and “Salvation by Force” (1898) in Auberon Herbert, The Right and Wrong of Compulsion by the State (1895), and Other Essays, ed. Eric Mack (Indianapolis: Liberty Fund, 1978). /titles/591

Whatever other objections Herbert had to socialism, the one that concerned him the most was the socialist’s willingness to use force in order to achieve his social agenda.

Now let us get to business and see how the matter stands. Mr. Hobson justifies socialism—or the compulsory organization of all human beings—by the fact of our social interdependence. In many forms of words he returns again and again to the same point of view. Psychology brings, he tells us, “a cloud of witnesses to prove the direct organic interaction of mind upon mind”; society is “an organic system of the relations between individuals”; “the familiar experience of everyone exhibits thoughts, emotions, character as elaborate social products”; “minds breathe a common atmosphere, and habitually influence one another by constant interferences.” We are not, as he says, to look at “numbers,” but rather at “the action of the social will.” Without examining critically these metaphors, that he employs, we need not so far have any quarrel. We are all agreed probably that we are subject to innumerable influences, that we all act and react upon each other in the great social whole, that the environment constantly affects and modifies the individual. Marvelous indeed is the great subtle web of relations in which we are all bound together—man and nature, man and man, body and mind, nation and nation, each forever interacting on the other. But what in the name of good logic and plain common sense have this universal interaction and interdependence to do with the fundamental dogmas of socialism? Socialism rests upon the assumed right of some men to constrain other men. It naturally exhibits several varieties; but all the thoroughgoing forms of it are so far alike that they depend upon universal compulsory organization. It must be always borne in mind that socialism differs from other systems in this essential, that it recognizes, and, so to speak, sanctifies compulsion as a universally true and proper method; and the compulsion, which it sanctifies, must for practical reasons, as well as for the assumed virtues in compulsion itself, be left undefined and unlimited in extent. It represents the belief that prosperity, happiness, and morality are to be conferred upon the world by force—the force of some men applied to other men.
That may be, or may not be. Force may be the greatest and most far-reaching thing in the world; or it may be the weakest and most contemptible. But before we discuss the strength or the weakness of force as a reforming instrument, before we decide what force can or cannot do on our behalf, we have to consider, first of all, if we have a moral right to employ force. The socialist assumes—he is obliged to assume for the sake of his system—that men have a right to use force for any purpose and to any extent that he desires, in order that he may be enabled to restrain men from using their faculties for their own individual advantage. If you ask which men are to be the depositories of force, he can only answer, the biggest number of men; or if not the biggest number, then such a number of men as by efficient organization can succeed in obtaining possession of power and in retaining it.
I need not spend time in proving this point. Every thoroughgoing socialist, who is willing to deal frankly in the matter, will admit that socialism rests on the cornerstone of force. Private property is by force to be turned into common property; and when that has taken place, no individual will be allowed to acquire private property or to employ it for his own purposes, except to a very small extent, and under strict regulations. John Smith could not be allowed to work for Richard Parker, as this would be a return to the system of free labor, and must necessarily endanger the system of state labor. Richard Parker could not be allowed to open a shop and sell his wares to John Smith, for this would be to allow free enterprise and the individual acquisition of wealth once more to reappear in the world. The whole meaning of socialism is force, applied in restraint of faculties. For good or for evil, it is the attempt to place all men and all human affairs under a compulsory system; and to allow no free system to exist by the side of its own system, which would be necessarily endangered by such rivalry. It differs from every free system in this essential particular: that under liberty, you may give away your own liberty, if you think good, and be socialist, or anything else you like; under socialism, you must be socialist, and may not make a place for yourself in any free system. …
I have dwelt at some length on this question of force, because it is the test question, by which socialism has to be tried. Socialism undertakes to save the world from all its sorrows by a greatly extended use of force, a use of force, far exceeding the force which even emperors and despotic governments employ; and what the philosophical and literary defenders of socialism—I do not mean the mere promisers of prize money—have to do is to convince us first of all that force is a right weapon in itself—that we are morally justified in using it against each other; and second, that it is likely—as far as we can judge by past experience—when applied in this new universal fashion, to make men better and happier. Socialism intends to found itself upon force; and therefore we stand upon the threshold, and call upon it, before it goes any further, to justify force. Does Mr. Hobson do this? Does he lay any moral foundations for the use of force? Does he satisfy us that three men may rightly do whatever they please with the minds, bodies and property of two men? Does he satisfy us that the three men can produce any lawful commission for saying to the two men: “Henceforth your faculties belong to us and not to you; henceforth you are forbidden to employ those faculties for your own advantage, and in such fashion as you choose; henceforth they are to be employed for what we are pleased to call the public good.” In another paper, I hope to follow Mr. Hobson’s argument, and see how far it is suited to remove the hesitations and scruples of those who believe that every man and woman is the true owners of his or her own faculties, and that every forcible annexation of these faculties by others has prevented the world from discovering the ways of true happiness.

Source: Auberon Herbert, The Right and Wrong of Compulsion by the State, and Other Essays, ed. Eric Mack (Indianapolis: Liberty Fund, 1978). /titles/591#Herbert_0146_271.

French Socialism from the 1880s to WW1

The Critique of Frédéric Passy (1822–1912)

Frédéric Passy (1822–1912)

One of the last representatives of the radical free market “Paris School” of political economists, Frédéric Passy (1822–1912), was asked to give a lecture at a conference surveying the state of political economy in the French-speaking world in Geneva in 1890. He was the sole defender of the free market and was confronted by three other hostile speakers who defended three different forms of socialism and state intervention, Claudio Jannet who defended state socialism, Gaston Stiegler who defended the communism of Ferdinand Lassalle, and Charles Gide who defended a form of “cooperative socialism” based upon the ideas of the socialist Charles Fourier.

See my translation of Passy’s lecture for a good summary of the state of free market thinking at this time and his criticism of these growing and influential socialist groups.

  • Quatre écoles d’économie sociale. Conférences données à l’aula de l’Université de Genève sous les auspices de la Société chrétienne suisse d’économie sociale. L’École Le Play (Claudio Jannet), L’École collectiviste (G. Stiegler), L’École nouvelle (Charles Gide), L’École de la Liberté (Frédéric Passy). (Genève: Librairie Stapelmohr, éditeur, 1890). Frédéric Passy’s lecture on “L’École de la Liberté” can be found on pp. 157–231.
  • David M. Hart, “For Whom the Bell Tolls: The School of Liberty and the Rise of Interventionism in French Political Economy in the Late 19thC,” Journal of Markets and Morality, vol. 20, Number 2 (Fall 2017), pp. 383–412.

See the critique of “state socialism”:

  • Ludwig Bamberger, “Socialisme d’état” (State Socialism), in Nouveau Dictionnaire d’Économie Politique, publié sur la direction de M. Léon Say et de M. Joseph Chailley. Deuxième édition (Paris: Librairie de Guillaumin et Cie, 1900). 1st ed. 1890. Vol. 2, pp. 866–882.

In his lecture to the other socialist economists at the Conference Passy warned them of the dangers France would face if it adopted socialism. He believed that, whatever the intentions of the socialists reformers were, it would be the state itself not the people would be the ultimate beneficiary of any expanded powers:

Et c’est là. Messieurs, une considération qui devrait faire réfléchir à la fois et les gouvernements et les gouvernés. En étendant ses attributions, l’État, c’est-à-dire le gouvernement qui le représente, étend, comme le remarque justementRobespierre, ses empiétements sur la libertés des citoyens. C’est un grand dommage pour ceux-ci, car il diminue d’autant pour eux le champ de leur activité [202] et les moyens de développer leur valeur personnelle. Mais ce n’est pas un moindre dommage pour lui, car il élargit d’autant ses responsabilités, et augmente avec ses chances d’erreurs les causes de mécontentement. Plus il exagère son action, plus, en la compliquant, il la rend hasardeuse, et plus il multiplie du même coup ses côtés vulnérables. En même temps qu’il offre plus de prise à l’arbitraire, pour reprendre encore l’observation de Robespierre, il en offre davantage à l’ambition. Plus il est puissant ou plus il semble l’être, et plus il est attaqué, et par conséquent fragile. Vous enfaites le dispensateur des faveurs, le régulateur des fortunes, le bienfaiteur des uns, et le proscripteur des autres. Mais chacun voudra être l’État, ou avoir tout au moins un État à sa guise ; et alors c’est la lutte perpétuelle des factions et des compétitions; c’est l’incessante bascule de ceux qui tiennent la queue de la poêle et de ceux qui veulent la prendre ; c’est, comme le dit Bastiat, la loi cessant d’être le bouclier commun, l’impartial et solide rempart de la liberté contre les entreprises qui la menacent, la justice en un mot, et devenant ce qu’elle n’est que trop déjà, hélas ! le champ de bataille de toutes les cupidités, de toutes les convoitises et de toutes les illusions. And herein, gentlemen, lies a consideration that should give pause to both the governments and the people they govern. By expanding its functions, the State, that is to say the government that represents (them), expands its infringements upon the freedoms of the citizens, as Robespierre correctly noted. This comes at a hefty price to them as it thus reduces the scope of their activities and the means to develop their personal worth. It can also prove damaging to the government because as the scope of its responsibilities widen, likewise the chances of errors increase and with them causes for disaffection. As its action becomes more complex, the risks increase and make it more vulnerable. It becomes more prone to arbitrary rule and, to use Robespierre’s observation again, offers greater opportunities for ambitious men. The more powerful it becomes, or appears to become, the more it will come under attack, and thus (become) (more) fragile. You turn it into a dispenser of favors, the regulator of wealth, to some a benefactor and to others a “giver of orders” (prescripteur). But then everyone wants to become the state, or at least have the state at its beck and call; and then you have the perpetual struggle between factions and and those competing (for power); the unceasing back and forth between those who are holding the handle of the frying pan and those who want to get hold of it. As Bastiat puts it, the law stops being the common protective shield, the impartial and solid rampart of liberty against the organisations that threaten it, in one word, justice, and becomes instead what it has already unfortunately become far too much, the battlefield for all kinds of greed, covetousness, and illusions.

Source: Frédéric Passy, “L’École de la Liberté” in Quatre écoles d’économie sociale (1890), p. 201–2.

Source: My paper on Passy for Acton Institute: David M. Hart, “For Whom the Bell Tolls: The School of Liberty and the Rise of Interventionism in French Political Economy in the Late 19thC,” and Passy, “The School of Liberty” in Journal of Markets and Morality, vol. 20, Number 2 (Fall 2017), pp. 383–412. Online and

The Critique of Yves Guyot (1843–1928)

Yves Guyot (1843–1928)

Yves Guyot (1843–1928) was one of the leading French laissez-faire economists at the end of the 19th and in the early 20th century. He began his career as editor of several Republican newspapers and journals in the late 1860s and early 1870s when France was wracked by the turmoil of the Paris Commune and Franco-Prussian War. In the Third Republic he was elected to the Paris Municipal Council and in 1885 to the national Chamber of Deputies. In 1889 he was appointed Minister of Public Works. He was active in classical liberal economic circles as editor of the Journal des Économistes, president of the Paris Société des Économistes, a member of the British Cobden Club and the Royal Statistical Society, and also a member of the American Academy of Political and Social Sciences. Among his many interests were taxation policy and opposition to socialism in all its forms.

In his book The Tyranny of Socialism (1893) Guyot taunted the socialists of his day by saying they were no better than the wealthy landowners and capitalists who wanted “protection” from foreign imports.

Yes, large and small proprietors alike, those of you are Socialists, who beg for customs duties. For what is it you ask, if not for the intervention of the State to guarantee the revenue of your property? What is it you ask for, tradesmen and manufacturers of every kind, who seek the imposition of import duties, if not for the intervention of the State to guarantee your profits? And what is it the Socialists ask, if not for the intervention of the State to guarantee to the workman a maximum of work, a minimum of wage? In a word, what is it you all ask, if not for the intervention of the State to protect you all against competition? The Protectionist asks for protection from the competition of progress from without—the Socialist asks for protection from the competition of activity within—and in aid of what? To throw political interference into the scale so as to violate the Law of Supply and Demand for the arbitrary benefit of such and such a class of producers or workmen, and to the detriment of all consumers and ratepayers, which means—everybody.
This conception of the economic duties of the State is the same for the large landowner who calls himself “conservative,” for the large manufacturer who scorns the Socialists, and for the miserable Socialist who flings his scornful invectives against property and manufactures. They all make the same mistake. They are all victims of the same illusion. Those who look upon one another as enemies are brothers in doctrine. Hence it is that every recrudescence of [244] Protection engenders a revival of Socialism. The Socialists of 1848 were the true sons of the Protectionist copyholders of the Restoration and of Louis-Philippe’s Government. If Protectionists deny this intimate relationship, I will introduce them to a Socialist who will say to them:
“You ask for customs duties so that your revenues and profits may be guaranteed. You appeal to the superior interests of agriculture and national labour. So be it. You have even asked me to join you for this purpose.1 But what share will you give to me—to me, the working man? You demand the aid of “society.” I, too, claim a share in it, and with so much the more right that in society I hold, at least in point of numbers, a larger place than yours.”

Source: Chap. VI. “Militarism, Protectionism, and Socialism” in Yves Guyot, The Tyranny of Socialism, ed. J.H. Levy (London: Swan Sonnenschein and Co., 1894). 7/19/2018. /titles/91#Guyot_0166_891

  1. The Tyranny of Socialism (1893) /titles/91: In this volume, in the tradition of Bastiat, he criticises what he calls “socialistic sophisms,” socialistic legislation, strikes, subsidies to business, and the connection between militarism, protectionism, and socialism.
  2. Socialistic Fallacies (1910) /titles/1166: One of several books Guyot wrote attacking socialism in the late 19th and early 20th centuries. In this volume he provides a brief history of socialist ideas, especially socialist utopian thinking from Plato to Paraguay, and an extensive critique of modern socialist ideas in France (Saint-Simon and Proudhon) and Germany (Marx). In the tradition of Frédéric Bastiat, he criticises what he calls socialistic “sophisms” and “fallacies” such as the immiseration of the working class, the social class war, and the future of socialism under democracy.
  3. Where and Why Public Ownership has Failed (1912) /titles/326: In this volume, drawing upon his experience as the French Minister for Public Works, Guyot discusses the differences between public and private trading, with reference to railways, trams, public housing, and various government monopolies, and examines the negative financial, administrative, political, and social consequences, such as disorder, corruption, and waste.

Paul Leroy-Beaulieu (1843–1916)

We do not currently have any works by Paul Leroy-Beaulieu online but he is another strong anti-socialist voice in France in the late 19thC.

Paul Leroy-Beaulieu (1843–1916)

Paul Leroy-Beaulieu (1843–1916) came from a well-connected Orléanist family in Paris and became an influential economist and journalist. He studied law in Paris before doing further study in Bonn and Berlin. In 1872 he was appointed a professor at the École libre des sciences politiques and later went on to the Collège de France where he was made a professor of political economy in 1880. It was during this period that he founded L’Économiste française in 1873 which came to rival the more orthodox classical liberal Journal des Économistes (founded 1842).

Leroy-Beaulieu made a name for himself with a number of works during the late 1860s and 1870s on social questions, such as the working class, De l’État moral et intellectual des populations ouvrières (1868) and La Question ouvrière au XIXe siècle (1872), and women, Le Travail des femmes au XIXe siècle (1873). But much more controversial was his prize-winning work De la Colonisation chez les peuples modernes (1874) which alienated mainstream political economists with its support for French colonial expansion. In two later works he returned to a more anti-statist position in his critique of socialism, Le Collectivisme: Examen critique du nouveau socialisme (1884), and the expanding bureaucratic state, L’État moderne et ses fonctions (1890).

Some of his work has been translated into English:

  • Paul Leroy-Beaulieu, Collectivism; a study of some of the leading social questions of the day. Tr. and abridged by Sir Arthur Clay (London, J. Murray, 1908).
  • Paul Leroy-Beaulieu, The modern state in relation to society and the individual (London, S. Sonnenschein & co., 1891).
  • Paul Leroy-Beaulieu, Liberty and property: the two main factors of human progress (London, Liberty & Property Defence League, 1897).

In the conclusion to his book on Collectivism (1884, 3rd. ed 1893) Leroy-Beaulieu argues that there is no real different between the “moderate” socialists working within the Parliamentary system and the radical, revolutionary socialists (Marxists, communists) who wanted to seize power in a revolution. Their goals were the same in his view, only the means to achieve the goals differed:

It has been shown that there is no real difference between the various sects of socialists, whether they call themselves “Socialistes réformistes,” “Solidaristes,” or “Collectivists.” Complete collectivism is the ideal which, consciously or unconsciously, they all pursue. Some would advance rapidly and directly, others would follow a less direct course, which, however, would affect but little the distance to be traversed or the real rate of approach. Under the proposed regime,individual liberty and dignity must disappear, either abruptly, as proposed by the Marxists, or gradually, as proposed by the “Socialistes réformistes” and the “Solidaristes.” It is astonishing to see the number of socialist publications which actually claim that their regime would secure the development of individual liberty and dignity! How could liberty exist in a society in which everyone would be an employee of the state brigaded in squadrons from which there would be no escape, dependent upon a system of official classification for promotion, and for all the amenities of life! Even now, the commands issued by ministers, especially at election time, and the arbitrary dismissals of employees, constitute an eloquent commentary upon the liberty and [327] dignity of state employees; and this subjection of the individual to those in authority would be greatly increased if the competition of private administration were abolished. The employee (and all will be employees) would be the slave, not of the state, which is merely an abstraction, but of the politicians who possessed themselves of power. A heavy yoke would be imposed upon all, and since no free printing presses would exist, it would be impossible to obtain publicity for criticism or for grievances without the consent of the government. The press censure exercised in Russia would be liberty itself compared to that which would be the inevitable accompaniment of collectivism. However numerous the dissentients, they would be condemned to silence and subjected to injustice under this régime; and a tyranny such as has never been hitherto experienced, would close all mouths and bend all necks. Again, what dignity could exist in a society when state obligations would be substituted for all moral duties?

Source: Paul Leroy-Beaulieu, Collectivism; a study of some of the leading social questions of the day. Tr. and abridged by Sir Arthur Clay (London, J. Murray, 1908). Quote pp. 326–27.

War Socialism and Bolshevism in WW1 and the 1920s

The length and “total” nature of WW1 led many nations to introduce extensive controls of their economies which in many ways amounted to a form of “war socialism.” This was most pronounced in Germany where “Kriegssozialismus” (war socialism) was openly discussed and implemented by the conservative military controlled by Generals Erich Ludendorf and Paul von Hindenburg. To a lesser extent war socialism was also adopted in Great Britain and the United States (the War Industries Board).

Vladimir Lenin (1870-1924)

It was also during WW1 that the communist Bolshevik Party under Vladimir Lenin seized control in November 1917 and attempted to implement the first Marxist-inspired communist revolution. Lenin himself had thought little about how exactly a communist system would look like and how it would be organised (neither did Marx for that matter as he regarded it as unnecessary as the final stage of capitalism would “prepare” the ground for its own eventual replacement). For some idea of what Lenin had in mind see his pamphlet The State and Revolution (Aug.-Sept. 1917) especially the extraordinary sections where he talks about modeling the administration of complex economic entities such as factories and even the entire economy on that of the postal service.

“Capitalist culture has created large-scale production, factories, railways, the postal service, telephones, etc., and on this basis the great majority of the functions of the old “state power” have become so simplified and can be reduced to such exceedingly simple operations of registration, filing, and checking that they can be easily performed by every literate person, can quite easily be performed for ordinary “workmen’s wages”, and that these functions can (and must) be stripped of every shadow of privilege, of every semblance of “official grandeur”.”

“A witty German Social-Democrat of the seventies of the last century called the postal service an example of the socialist economic system. This is very true. At the present the postal service is a business organized on the lines of state-capitalist monopoly. Imperialism is gradually transforming all trusts into organizations of a similar type, in which, standing over the “common” people, who are overworked and starved, one has the same bourgeois bureaucracy. But the mechanism of social management is here already to hand. Once we have overthrown the capitalists, crushed the resistance of these exploiters with the iron hand of the armed workers, “and smashed the bureaucratic machinery of the modern state, we shall have a splendidly-equipped mechanism, freed from the “parasite”, a mechanism which can very well be set going by the united workers themselves, who will hire technicians, foremen and accountants, and pay them all, as indeed all “state” officials in general, workmen’s wages. Here is a concrete, practical task which can immediately be fulfilled in relation to all trusts, a task whose fulfilment will rid the working people of exploitation, a task which takes account of what the Commune had already begun to practice (particularly in building up the state).

To organize the whole economy on the lines of the postal service so that the technicians, foremen and accountants, as well as all officials, shall receive salaries no higher than “a workman’s wage”, all under the control and leadership of the armed proletariat–that is our immediate aim. This is what will bring about the abolition of parliamentarism and the preservation of representative institutions. This is what will rid the laboring classes of the bourgeoisie’s prostitution of these institutions.”

Source: “4. The Higher Phase of Communist Society” in Lenin, The State and Revolution (Aug.-Sept. 1917). Online:

Ludwig von Mises’s Critique of Central Planning under Communism

The Bolshevik experiment was closely observed by Ludwig von Mises who wrote Nation, State, and Economy (1919) immediately after the war and then the second devastating critique of Marxism, Die Gemeinwirtschaft (Socialism) (1922), in which he discussed the insoluble problem of the impossibility of rational economic calculation under socialism (since there were no free market prices, especially for capital goods, to tell factory owners what to produce and where).

Ludwig von Mises (1881–1973)

Ludwig von Mises (1881–1973) was the acknowledged leader of the Austrian School of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’ writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science which Mises called “praxeology”. He taught at the University of Vienna and later at New York University. Mises wrote many works on two related economic themes: 1. monetary economics, inflation, and the role of government, and 2. the differences between government-controlled economies and free trade. His influential work on economic freedoms, their causes and consequences, brought him to highlight the interrelationships between economic and non-economic freedoms in societies, and the appropriate role for government.

Mises’s key insight was to realize that rational economic calculation would be impossible under complete socialism. In addition to the incentive problem of getting workers to work harder if all were paid the same, there was the problem of apportioning the contribution of many of the factors of production their correct share of the final product, especially for the different quality of skilled or unskilled labour , or hardworking or lazy workers. Mises would later apply this same insight into the much more problematic issue of the price of capital goods and the longer period of time it would take for capital owners to be rewarded for their contribution:

In der sozialistischen Gesellschaftsordnung kann zwischen Arbeitsleistung und Arbeitsentgelt keine derartige Beziehung bestehen. An der Unmöglichkeit, rechnerisch die produktiven Beitrage der einzelnen Produktionsfaktoren zu ermitteln, müßten alle Versuche scheitern, den Ertrag der Arbeit des Einzelnen festzustellen und danach den Lohn zu bestimmen. Das sozialistische Gemeinwesen kann wohl die Verteilung von gewissen äußerlichen Momenten der Arbeitsleistung abhängig machen; aber jede derartige Differenzierung beruht auf Willkür. Nehmen wir an, es werde für jeden Produktionszweig das Mindestmaß der Leistungen festgesetzt. Nehmen wir an, daB das in der Weise geschähe, [151] wie es Rodbertus als ,,normalen Werkarbeitstag" vorschlägt. Für jedes Gewerbe werden die Zeit, die ein Arbeiter mit mittlerer Kraft und Anstrengung dauernd arbeiten kann, und dann die Leistung, die ein mittlerer Arbeiter bei mittlerer Geschicklichkeit und mittlerem Fleiß wahrend dieser Zeit vollbringen kann, festgesetzt. Von den technischen Schwierigkeiten, die dann in jedem einzelnen konkreten Falle der Beurteilung der Frage, ob dieses Mindestmaß tatsachlich erreicht wurde oder nicht, entgegenstehen, wollen wir dabei ganz absehen. Doch es ist klar, daß eine derartige allgemeine Festsetzung nicht anders als willkürlich sein kann. Eine Einigung darüber wird zwischen den Arbeitern der einzelnen Gewerbe nie zu erzielen sein. Jeder wird behaupten, durch die Festsetzung überbürdet worden zu sein, und nach Herabminderung der ihm auferlegten Aufgaben streben. Mittlere Qualität des Arbeiters, mittlere Geschicklichkeit, mittlere Kraft, mittlere Anstrengung, mittlerer Fleiß sind vage Begriffe, die nicht exakt festgestellt werden können.

Nun aber ist es klar, daB ein Mindestmaß an Leistung, das auf die Arbeiter von mittlerer Qualität, mittlerer Geschicklichkeit und mittlerer Kraft berechnet ist, nur von einem Teil, sagen wir, von der Hälfte der Arbeiter, erreicht werden kann. Die anderen werden weniger leisten. Wie soil dann geprüft werden, ob einer aus Unfleiß oder aus Unvermögen hinter der Mindestleistung zurückgeblieben ist ? Auch hier muß entweder dem freien Ermessen der Organe ein weiter Spielraum gelassen werden, oder man muß sich entschließen, gewisse allgemeine Merkmale festzulegen. Zweifellos wird aber der Erfolg der sein, daB die Menge der geleisteten Arbeit immer mehr und mehr sinkt.

Under Socialism the usual connection between work performed and its remuneration cannot exist. All attempts to ascertain what the work of the individual has produced and thereby to determine the wage rate, must fail because of the impossibility of calculating the productive contributions of the different factors of production. The socialist community could probably make distribution dependent upon certain external aspects of the work performed. But any such differentiation would be arbitrary. Let us suppose that the minimum requirement is determined for each branch of production. Let us suppose this is done on the basis of Rodbertus’ proposal for a “normal working day.” For each industry there is laid down the time which a worker with average strength and effort can continue to work and the amount of work which an average worker of average skill and industry can perform in this time. We will completely ignore the technical difficulties in the way of deciding, in any particular concrete example the question whether this minimum has been achieved or not. Nevertheless it is obvious that any such general determination can only be quite arbitrary. The workers of the different industries would never be made to agree on this point. Everyone would maintain that he had been overtasked and would strive for a reduction of the amount set to him. Average quality of the worker, average skill, average strength, average effort, average industry—these are all vague conceptions that cannot be exactly determined.

Now it is evident that the minimum performance calculated for the worker of average quality, skill, and strength will be achieved only by a part—say one-half—of the workers. The others will do less. How can the authorities ascertain whether a performance below the minimum is due to laziness or incapacity? Either the unfettered decision of the administration must be allowed free play, or certain general criteria must be established. Doubtless, as a result, the amount of work performed would be continually reduced.

In der kapitalistischen Gesellschaftsordnung ist jeder einzelne in der Wirtschaft Tätige darauf bedacht, daß jeder Arbeit ihr voller Ertrag zufalle. Der Unternehmer, der einen Arbeiter, der seinen Lohn wert ist, entlaßt, schädigt sich selbst. Der Zwischenvorgesetzte, der einen guten Arbeiter entlaßt und einen schlechten behalt, schädigt das Geschäftsergebnis sich selbst. Hier ist die Aufstellung formaler Merkmale zur Einschränkung des Ermessens derer, die die Arbeitsleistungen zu beurteilen haben, nicht erforderlich. In der sozialistischen Gesellschaftsordnung müssen solche aufgestellt werden, weil sonst die den Vorgesetzten eingeräumten Rechte [152] willkürlich mißbraucht werden konnten. Dann aber hat kein Arbeiter ein Interesse mehr, wirklich etwas zu leisten. Er hat nur noch das Interesse, die formalen Bedingungen zu erfüllen, die er erfüllen muß, wenn er nicht straffällig werden will.

Was für Ergebnisse Arbeiter, die am Ertrag der Arbeit nicht interessiert sind, erzielen, lehrt die Erfahrung, die man in Jahrtausenden mit der unfreien Arbeit gemacht hat. Ein neues Beispiel bieten die Beamten und Angestellten der staats- und kommunalsozialistischen Betriebe. Man mag die Beweiskraft dieser Beispiele damit abzuschwächen suchen, daß man darauf hinweist, diese Arbeiter hätten kein Interesse am Erfolg ihrer Arbeit, weil sie selbst bei der Verteilung leer ausgehen; im sozialistischen Gemeinwesen werde jeder wissen, daß er für sich arbeitet, und das werde ihn zu höchstem Eifer anspornen. Doch darin liegt ja gerade das Problem: Wenn der Arbeiter sich bei der Arbeit mehr anstrengt, dann hat er um so viel mehr Arbeitsleid zu überwinden. Von dem Erfolg der Mehranstrengung kommt ihm aber nur ein verschwindender Bruchteil zu. Die Aussicht darauf, ein halbes Milliardstel dessen, was durch seine Mehranstrengung erzielt wurde, auch wirklich für sich behalten zu dürfen, kann keinen genügenden Anreiz zur Anspannung der Kräfte bieten.

Die sozialistischen Schriftsteller pflegen über diese heiklen Fragen mit Stillschweigen oder mit einigen nichtssagenden Bemerkungen hinwegzugleiten. Sie wissen nichts anderes vorzubringen als einige moralisierende Sentenzen. Der neue Mensch des Sozialismus werde von niedriger Selbstsucht frei sein, er werde sittlich unendlich hoch über dem Menschen der bösen Zeit des Sondereigentums stehen und aus vertiefter Erkenntnis des Zusammenhanges der Dinge und aus edler Auffassung seiner Pflicht seine Kräfte in den Dienst des allgemeinen Besten stellen. Sieht man aber naher zu, dann bemerkt man unschwer, daß sich ihre Ausführungen nur um jene beiden allein denkbaren Alternativen drehen: Freie Befolgung des Sittengesetzes ohne jeden anderen Zwang als den des eigenen Gewissens oder Erzwingung der Leistungen durch ein System von Belohnungen und Strafen. Keine von beiden kann zum Ziele führen. Jene bietet, auch wenn sie tausendmal öffentlich gepriesen und in alien Schulen und Kirchen verkündet wird, keinen genügenden Antrieb, immer wieder das Arbeitsleid zu überwinden; diese kann nur [153] eine formale Erfüllung der Pflicht, niemals eine Erfüllung mit höchstem Einsatz der eigenen Kraft erzielen.

Under Capitalism everybody who takes an active part in business life is concerned that labour should be paid the whole product. The employer who dismisses a worker who is worth his wage harms himself. The foreman who discharges a good worker and retains a bad one, adversely affects the business results of the department under his charge, and thereby indirectly himself. Here we do not need formal criteria to limit the decisions of those who have to judge the work performed. Under Socialism such criteria would have to be established, because otherwise the powers entrusted to persons in charge could be arbitrarily misused. And so then the worker would have no further interest in the actual performance of work. He would only be concerned to do as much as is prescribed by the formal criteria in order to avoid punishment.

What kind of results will be achieved by workers, who are not directly interested in the product of the work, can be learnt from the experience of a thousand years of slave labour. Officials and employees of state and municipal undertakings provide new examples. An attempt may be made to weaken the argumentative force of the first example by contending that these workers had no interest in the result of their labour because they did not share in the distribution; in the socialist community everyone would realize that he was working for himself and that would spur him on to the highest activity. But this is just the problem. If the worker exerts himself more at the work then he has so much the more labour disutility to overcome. But he will receive only an infinitesimal fraction of the result of his increased effort. The prospect of receiving a two thousand millionth part of the result of his increased effort will scarcely stimulate him to exert his powers any more than he needs.

Socialist writers generally pass over these ticklish questions in silence or with a few inconsequential remarks. They only bring forward a few moralistic phrases and nothing else. The new man of Socialism will be free from base self-seeking; he will be morally infinitely above the man of the frightful age of private property and from a profound knowledge of the coherency of things and from a noble perception of duty he will devote all his powers to the general welfare.
But closer examination shows that these arguments lead to only two conceivable alternatives: free obedience to the moral law with no compulsion save that of the individual conscience, or enforced service under a system of reward and punishment. Neither will achieve the end. The former supplies no sufficient incentive to persist in overcoming the disutility of labour even though it is publicly extolled on every possible occasion and proclaimed in all schools and churches; the latter can only lead to a formal performance of duty, never to performance with the expenditure of all one’s powers.

Source: Mises, Die Gemeinwirtschaft. (1932), pp. 150-53.

Source: Mises, Socialism (LF ed.), pp. 115–16.

§ 2. Die Theorie der Wirtschaftsrechnung zeigt, daB im sozialistischen Gemeinwesen Wirtschaftsrechnung nicht möglich ist.

In jedem größeren Unternehmen sind die einzelnen Betriebe oder Betriebsabteilungen in der Verrechnung bis zu einem gewissen Grade selbständig. Sie verrechnen gegenseitig Materialien und Arbeit, und es ist jederzeit möglich, für jede einzelne Gruppe eine besondere Bilanz aufzustellen, und die Ergebnisse ihrer Tätigkeit rechnerisch zu erfassen. Man vermag auf diese Weise festzustellen, mit welchem Erfolg jede einzelne Abteilung gearbeitet hat, und darnach Entschlüsse über die Umgestaltung, Einschränkung oder Erweiterung bestehender Gruppen und über die Einrichtung neuer zu fassen. Gewisse Fehler sind bei solchen Berechnungen freilich unvermeidlich. Sie rühren zum Teil von den Schwierigkeiten her, die sich bei der Aufteilung der Generalunkosten ergeben. Andere Fehler wieder entstehen aus der Notwendigkeit, in mancher Hinsicht mit nicht genau ermittelbaren Daten zu rechnen, z. B. wenn man bei Ermittlung der Rentabilität eines Verfahrens die Amortisation der verwendeten Maschinen unter Annahme einer bestimmten Dauer ihrer Verwendungsfähigkeit berechnet. Doch alle derartige Fehler können innerhalb gewisser enger Grenzen gehalten werden, so daß sie das Gesamtergebnis der Rechnung nicht stören. Was an Ungewißheit übrig bleibt, kommt auf Rechnung der Ungewißheit künftiger Verhältnisse, die in keinem denkbaren System behoben werden könnte.

Es scheint nun nahezuliegen, in analoger Weise es auch im sozialistischen Gemeinwesen mit selbständiger Verrechnung der einzelnen Produktionsgruppen zu versuchen. Das ware jedoch unmöglich, denn jene selbständige Verrechnung der einzelnen Zweige eines und desselben [111] Unternehmens beruht ausschließlich darauf, daß im Marktverkehr für alle Arten von verwendeten Gütern und Arbeitern Marktpreise gebildet werden, die zur Grundlage der Rechnung genommen werden können. Wo der Marktverkehr fehlt, gibt es keine Preisbildung; ohne Preisbildung gibt es keine Wirtschaftsrechnung.

The theory of economic calculation shows that in the socialistic community economic calculation would be impossible.

In any large undertaking the individual works or departments are partly independent in their accounts. They can reckon the cost of materials and labour, and it is possible at any time for an individual group to strike a separate balance and to sum up the results of its activity in figures. In this way it is possible to ascertain with what success each separate branch has been operated and thereby to make decisions concerning the reorganization, limitations or extension of existing branches or the establishment of new ones. Some mistakes are of course unavoidable in these calculations. They arise partly from the difficulty of allocating overhead costs. Other mistakes again arise from the necessity of calculating from insufficiently determined data, as, e.g. when in calculating the profitability of a certain process, depreciation of the machinery employed is determined by assuming a certain working life for the machine. But all such errors can be confined within certain narrow limits which do not upset the total result of the calculation. Whatever uncertainty remains is attributed to the uncertainty of future conditions inevitable in any imaginable state of affairs.

It seems natural then to ask why individual branches of production in a socialistic community should not make separate accounts in the same manner. But this is impossible. Separate accounts for a single branch of one and the same undertaking are possible only when prices for all kinds of goods and services are established in the market and furnish a basis of reckoning. Where there is no market there is no price system, and where there is no price system there can be no economic calculation.

Source: Mises, Die Gemeinwirtschaft. (1932), pp. 110-11.

Source: “Economic Calculation in the Socialist Community”, in Ludwig von Mises, Socialism: An Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981). /titles/1060#lf0069_label_349.


  • Ludwig von Mises, Nation, State, and Economy: Contributions to the Politics and History of Our Time, trans. Leland B. Yeager, ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006). /titles/1819 (1919). Nation, State, and Economy, published less than a year after Austria’s defeat in World War I, examines and compares prewar and postwar economic conditions and explicates Mises’s theory that each country’s prosperity supports rather than undercuts the prosperity of other countries. Two sections of the book deal with socialism: the policy of “war socialism” adopted by Germany during the war, and “Socialism and Imperialism” in which he discusses socialist utopianism, different kinds of socialism, and socialism’s connection with imperialism.
  • Ludwig von Mises, Die Gemeinwirtschaft. Untersuchungen über den Sozialismus. Zweite, umgearbeitete Auflage (Jena: Gustave Fischer, 1932). 1st ed. 1922.
  • Ludwig von Mises, Socialism: An Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981). /titles/1060 (1922). See especially “Appendix . A Contribution To The Critique Of Attempts To Construct A System Of Economic Calculation For The Socialist Community” /titles/1060#lf0069_head_216. “This book must rank as the most devastating analysis of socialism yet penned… . An economic classic in our time.” (Henry Hazlitt). More than thirty years ago F. A. Hayek said of Socialism: “It was a work on political economy in the tradition of the great moral philosophers, a Montesquieu or Adam Smith, containing both acute knowledge and profound wisdom… . To none of us young men who read the book when it appeared was the world ever the same again.” This is a newly annotated edition of the classic first published in German in 1922. It is the definitive refutation of nearly every type of socialism ever devised. Mises presents a wide-ranging analysis of society, comparing the results of socialist planning with those of free-market capitalism in all areas of life. Friedrich Hayek’s foreword (not available online for copyright reasons) comments on the continuing relevance of this great work: “Most readers today will find that Socialism has more immediate application to contemporary events than it had when it first appeared.”
  • Ludwig von Mises, Selected Writings of Ludwig von Mises, vol. 2: Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, edited and with an Introduction by Richard M. Ebeling (Indianapolis: Liberty Fund, 2002). /titles/2665. See in particular
    • Part VII: Economic Calculation under Socialism (1923–1932). Vol. 2 of a three volume collection of Mises’ essays found in Moscow in 1996. Vol. 2 contains essays on inflation, interventionism, the great depression, Austrian economic policy, autarchy, the theory of Austrian economics, and economic calculation under socialism.

War Socialism, Interventionism, and Bureaucracy in WW2

Ludwig von Mises (again)

Ludwig von Mises (1881–1973)

Mises continued his attack on socialism, central planning of the economic, and what he called “interventionism” in several works, including:

  • Ludwig von Mises, Interventionism: An Economic Analysis, Edited with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011). /titles/2394 (1940) . Interventionism provides Mises’s analysis of the problems of government interference in business from the Austrian School perspective. Written in 1940, before the United States was officially involved in World War II, this book offers a rare insight into the war economies of Hitler’s Germany and Mussolini’s Italy. Mises criticizes the pre-World War II democratic governments for favoring socialism and interventionism over capitalist methods of production. Mises contends that government’s economic role should be limited because of the negative political and social consequences of the economic policy of interventionism.
  • Ludwig von Mises, Bureaucracy, edited and with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007). /titles/1891 (1944). Originally published by Yale University Press in 1944, Bureaucracy is a classic fundamental examination of the nature of bureaucracies and free markets in juxtaposition to various political systems. Bureaucracy contrasts the two forms of economic management—that of a free market economy and that of a bureaucracy. In the market economy entrepreneurs are driven to serve consumers by their desire to earn profits and to avoid losses. In a bureaucracy, the managers must comply with orders issued by the legislative body under which they operate; they may not spend without authorization and they may not deviate from the path prescribed by law. Writing in an age of exuberant socialism, Ludwig von Mises here lucidly demonstrates how the efficiencies of private ownership and control of public good production ultimately trump the guesswork of publicly administered “planning” through codes and “officialdom.” Although Mises aptly critiques bureaucracy and expounds thoroughly upon the immense power of law-like codes of commissions and administrations, he does not condemn nor dismiss bureaucracy but rather frames its proper bounds within constitutional democratic governments.
  • Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War, edited with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011). /titles/2399 (1944). Published in 1944, during World War II, Omnipotent Government was Mises’s first book written and published after he arrived in the United States. In this volume Mises provides in economic terms an explanation of the international conflicts that caused both world wars. Although written more than half a century ago, Mises’s main theme still stands: government interference in the economy leads to conflicts and wars. According to Mises, the last and best hope for peace is liberalism—the philosophy of liberty, free markets, limited government, and democracy.
  • Ludwig von Mises, Human Action: A Treatise on Economics, in 4 vols., ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007). Vol. 3. /titles/1895 (1949). In volume three of his magnum opus on economic theory Mises discusses socialism in some detail.
    • Part 5: Social Cooperation Without a Market
    • Part 6: The Hampered Market Economy
  • Ludwig von Mises, The Anti-capitalist Mentality, edited and with a preface by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2006). /titles/1889 (1956). In The Anti-capitalistic Mentality, the respected economist Ludwig von Mises plainly explains the causes of the irrational fear and hatred many intellectuals and others feel for capitalism. In five concise chapters, he traces the causation of the misunderstandings and resultant fears that cause resistance to economic development and social change. He enumerates and rebuts the economic arguments against and the psychological and social objections to economic freedom in the form of capitalism. Written during the heyday of twentieth-century socialism, this work provides the reader with lucid and compelling insights into human reactions to capitalism.
  • Ludwig von Mises, Economic Freedom and Interventionism: An Anthology of Articles and Essays, selected and edited by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007). /titles/1887 (1990). Economic Freedom and Interventionism is both a primer of the fundamental thought of Ludwig von Mises and an anthology of the writings of perhaps the best-known exponent of what is now known as the Austrian School of economics. This volume contains forty-seven articles edited by Mises scholar Bettina Bien Greaves. Among them are Mises’s expositions of the role of government, his discussion of inequality of wealth, inflation, socialism, welfare, and economic education, as well as his exploration of the “deeper” significance of economics as it affects seemingly noneconomic relations between human beings. These papers are essential reading for students of economic freedom and the science of human action.

In his magnum opus Human Action (1949) Mises discusses a third kind of economic system which called “interventionism”:

Private ownership of the means of production (market economy or capitalism) and public ownership of the means of production (socialism or communism or “planning”) can be neatly distinguished. Each of these two systems of society’s economic organization is open to a precise and unambiguous description and definition. They can never be confounded with one another; they cannot be mixed or combined; no gradual transition leads from one of them to the other; they are mutually incompatible. With regard to the same factors of production there can only exist private control or public control. If in the frame of a system of social cooperation only some means of production are subject to public ownership while the rest are controlled by private individuals, this does not make for a mixed system combining socialism and private ownership. The system remains a market society, provided the socialized sector does not become entirely separated from the non-socialized sector and lead a strictly autarkic existence. (In this latter case there are two systems independently coexisting side by side—a capitalist and a socialist.) Publicly owned enterprises operating within a system in which there are privately owned enterprises and a market, and socialized countries, exchanging goods and services with nonsocialist countries, are integrated into a system of market economy. They are subject to the law of the market and have the opportunity of resorting to economic calculation. … /titles/1895#Mises_3843-03_119

The first pattern (we may call it the Lenin or the Russian pattern) is purely bureaucratic. All plants, shops, and farms are formally nationalized (verstaatlicht); they are departments of the government operated by civil servants. Every unit of the apparatus of production stands in the same relation to the superior central organization as does a local post office to the office of the postmaster general.
The second pattern (we may call it the Hindenburg or German pattern) nominally and seemingly preserves private ownership of the means of production and keeps the appearance of ordinary markets, prices, wages, and interest rates. There are, however, no longer entrepreneurs, but only shop managers (Betriebsführer in the terminology of the Nazi legislation). These shop managers are seemingly instrumental in the conduct of the enterprises entrusted to them; they buy and sell, hire and discharge workers and remunerate their services, contract debts and pay interest and amortization. But in all their activities they are bound to obey unconditionally the orders issued by the government’s supreme office of production management. This office (the Reichswirtschaftsministerium in Nazi Germany) tells the shop managers what and how to produce, at what prices and from [718] whom to buy, at what prices and to whom to sell. It assigns every worker to his job and fixes his wages. It decrees to whom and on what terms the capitalists must entrust their funds. Market exchange is merely a sham. … /titles/1895#Mises_3843-03_123

It is necessary to point out this fact in order to prevent a confusion of socialism and interventionism. The system of interventionism or of the hampered market economy differs from the German pattern of socialism by the very fact that it is still a market economy. The authority interferes with the operation of the market economy, but does not want to eliminate the market altogether. It wants production and consumption to develop along lines different from those prescribed by an unhampered market, and it wants to achieve its aim by injecting into the working of the market orders, commands, and prohibitions for whose enforcement the police power and its apparatus of violent compulsion and coercion stand ready. But these are isolated acts of intervention. It is not the aim of the government to combine them into an integrated system which determines all prices, wages and interest rates and thus places full control of production and consumption into the hands of the authorities.
The system of the hampered market economy or interventionism aims at preserving the dualism of the distinct spheres of government activities on the one hand and economic freedom under the market system on the other hand. What characterizes it as such is the fact that the government does not limit its activities to the preservation of private ownership of the means of production and its protection against violent or fraudulent encroachments. The government interferes with the operation of business by means of orders and prohibitions.
The intervention is a decree issued directly or indirectly, by the authority in charge of society’s administrative apparatus of coercion and compulsion which forces the entrepreneurs and capitalists to employ some of the factors of production in a way different from what they would have resorted to if they were only obeying the [719] dictates of the market. Such a decree can be either an order to do something or an order not to do something. It is not required that the decree be issued directly by the established and generally recognized authority itself. It may happen that some other agencies arrogate to themselves the power to issue such orders or prohibitions and to enforce them by an apparatus of violent coercion and oppression of their own. If the recognized government tolerates such procedures or even supports them by the employment of its governmental police apparatus, matters stand as if the government itself had acted. If the government is opposed to other agencies’ violent action, but does not succeed in suppressing it by means of its own armed forces, although it would like to suppress it, anarchy results.
It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom. /titles/1895#Mises_3843-03_125

Source: /titles/1895#lf3843-03_label_322

Friedrich Hayek on Intellectuals on the Road to Serfdom

Friedrich Hayek (1899-1992)

From his position at the London School of Economics Friedrich Hayek also could observe the economic and political problems caused by central planning under the Bolsheviks and the British government’s efforts to run the British economy during WW2.

Unfortunately, we do not have the electronic rights to the books by Hayek which LF publishes. See the University of Chicago press The Collected Works of F.A. Hayek, ed. Bruce Caldwell


  • The Road to Serfdom. The Definitive Edition. Edited by Bruce Caldwell In The Collected Works of F.A. Hayek (University of Chicago Press, 1944, 2007). From the publisher’s blurb: “An unimpeachable classic work in political philosophy, intellectual and cultural history, and economics, The Road to Serfdom has inspired and infuriated politicians, scholars, and general readers for half a century. Originally published in 1944—when Eleanor Roosevelt supported the efforts of Stalin, and Albert Einstein subscribed lock, stock, and barrel to the socialist program—The Road to Serfdom was seen as heretical for its passionate warning against the dangers of state control over the means of production. For F. A. Hayek, the collectivist idea of empowering government with increasing economic control would lead not to a utopia but to the horrors of Nazi Germany and Fascist Italy.”
  • CW1: The Fatal Conceit: The Errors of Socialism, ed. W.W. Bartley III (University of Chicago Press, 1989). From the publisher’s blurb: “Hayek gives the main arguments for the free-market case and presents his manifesto on the “errors of socialism.” Hayek argues that socialism has, from its origins, been mistaken on factual, and even on logical, grounds and that its repeated failures in the many different practical applications of socialist ideas that this century has witnessed were the direct outcome of these errors. He labels as the “fatal conceit” the idea that “man is able to shape the world around him according to his wishes.””
  • CW10: Socialism and War: Essays, Documents, Reviews. Edited by Bruce Caldwell (Indianapolis: Liberty Fund, 2009). In the essays in this volume Hayek contributed to economic knowledge in the context of socialism and war, while providing an intellectual defense of a free society. The connection between the two topics is illuminated through essays containing some of Hayek’s contributions to the socialist-calculation debate, writings pertaining to war, and the cult of scientific economic planning from the late 1930s and 1940s.
  • “The Intellectuals and Socialism,” The University of Chicago Law Review (Spring 1949), pp. 417–433, The University of Chicago Press; George B. de Huszar ed., The Intellectuals: A Controversial Portrait (Glencoe, Illinois: the Free Press, 1960) pp. 371–84. Also an edition by the Institute for Humane Studies, 1990.

In 1950 Hayek pondered why so many intellectuals (or what he termed “the professional secondhand dealers in ideas”) of his era were attracted to socialism. He concluded that they are drawn to the “visionary” ideal of the possibility of an “entire reconstruction of society” along socialist lines, something which he believed classical liberalism was sorely lacking.

The selection of the personnel of the intellectuals is also closely connected with the predominant interest which they show in general and abstract ideas. Speculations about the possible entire reconstruction of society give the intellectual a fare much more to his taste than the more practical and short-run considerations of those who aim at a piecemeal improvement of the existing order. In particular, socialist thought owes its appeal to the young largely to its visionary character; the very courage to indulge in Utopian thought is in this respect a source of strength to the socialists which traditional liberalism sadly lacks. This difference operates in favor of socialism, not only because speculation about general principles provides an opportunity for the play of the imagination of those who are unencumbered by much knowledge of the facts of present-day life, but also because it satisfies a legitimate desire for the understanding of the rational basis of any social order and gives scope for the exercise of that constructive urge for which liberalism, after it had won its great victories, left few outlets. The intellectual, by his whole disposition, is uninterested in technical details or practical difficulties. What appeal to him are the broad visions, the spacious comprehension of the social order as a whole which a planned system promises.

This fact that the tastes of the intellectual were better satisfied by the speculations of the socialists proved fatal to the influence of the liberal tradition. Once the basic demands of the liberal programs seemed satisfied, the liberal thinkers turned to problems of detail and tended to neglect the development of the general philosophy of liberalism, which in consequence ceased to be a live issue offering scope for general speculation. Thus for something over half a century it has been only the socialists who have offered anything like an explicit program of social development, a picture of the future society at which they were aiming, and a set of general principles to guide decisions on particular issues. Even though, if I am right, their ideals suffer from inherent contradictions, and any attempt to put them into practice must produce something utterly different from what they expect, this does not alter the fact that their program for change is the only one which has actually influenced the development of social institutions. It is because theirs has become the only explicit general philosophy of social policy held by a large group, the only system or theory which raises new problems and opens new horizons, that they have succeeded in inspiring the imagination of the intellectuals.

Source: Hayek, “The Intellectuals and Socialism” (IHS ed.), pp. 19–20.

Post WW2 Communism

The Experience of Ljubo Sirc (1920–2016)

To get some idea of what life was like under communism see this interesting interview with a free market economist who lived in Yugoslavia.








Ljubo Sirc (1920–2016) was trained in both economics and law, and was thus able to unite the perspective of a scholar with personal experience to observe firsthand the dangers of communist regimes. Born in Kranj, Slovenia, he participated in the Resistance and served in the Yugoslav Army between 1941 and 1945. In 1947, due to his political opposition and friendship with Western diplomats, he was sentenced to death. His sentence was ultimately commuted to twenty years in prison, of which he served seven, much of it in solitary confinement. In his various teaching posts since then, including twenty years at the University of Glasgow, Sirc has been a leading expert on socialist economics and communist regimes. Since 1983, he has served as Director of the Centre for Research into Post-Communist Economies in London. He is the author of numerous books and articles in a variety of languages. His autobiography, Between Hitler and Tito, was published in 1989.

See an interview with him done in 2003: The Intellectual Portrait Series: A Conversation with Ljubo Sirc /titles/sirc-the-intellectual-portrait-series-a-conversation-with-ljubo-sirc.


Revelations of the true Horrors of Communism
















Aleksandr Solzhenitsyn (1918–2008)



The Russian novelist Aleksandr Solzhenitsyn (1918–2008) brought the crimes of the communist regime in Russia to the attention of intellectuals in the west (many of whom were socialist sympathizers) in his history of the labour camps, The Gulag Archipelago (1973).

These were more fully documented in The Black Book of Communism: Crimes, Terror, Repression (1997) by Stéphane Courtois, Nicolas Werth, Andrzej Paczkowski.


Revisiting the Systemic Economic problems of Communism in the 1980s and 1990s: Lavoie and Boettke
















Don Lavoie (1951–2001)



A new younger generation of Austrian economists, Don Lavoie (1951–2001) and Peter Boettke, re-examined the weakness of planned economies on the eve of their collapse in 1991 in a series of works in the mid–1980s and early 1990s:

  • Don Lavoie, Rivalry and Central Planning (1985) and National Economic Planning: What Is Left? (1985)
  • Peter Boettke, The Political Economy of Soviet Socialism: The Formative Years, 1918–1928 (1990), Why Perestroika Failed: The Economics and Politics of Socialism Transformation (1993) , and Calculation and Coordination: Essays on Socialism and Transitional Political Economy (2001)





III. Modern Interpretations and Critiques of S&M

In the OLL Collection

H. B. Acton and John Passmore

The following books do not look at S&M from an economic perspective but from a broader philosophical one.

Harry Burrows Acton (1908–1974) was an English academic who taught at the London School of Economics, the University of Edinburgh, and the University of Chicago. His book on Marxism as The Illusion of the Epoch (1949) focused on the philosophical incoherence of Marxist thought.

  • H.B. Acton, The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed (Indianapolis: Liberty Fund, 2003). /titles/877.

The Australian philosopher John Passmore (1914 - 2004), who taught for many years at the Australian National University in Canberra, explores the history of the idea of perfectibility - manifest in the ideology of perfectibilism - and its consequences, which have invariably been catastrophic for individual liberty and responsibility in private, social, economic, and political life. He situates socialist and Marxist ideas of the possibility of the perfectibility of the new “socialist man” in the historical context of other failed utopian views.

  • John Passmore, The Perfectibility of Man (3rd ed.) (Indianapolis: Liberty Fund, 2000). /titles/670.

H.B. Acton in the conclusion of his book makes the excellent point that, in spite of all his protests to the contrary, Marx’s view of a future communist society was indeed a utopian one.

My second and last point concerns the Marxist objection to Utopianism. Lenin, in State and Revolution, recognized that the Marxist views about the future communist society might be criticized as Utopian. In rebutting this charge he says that “the great Socialists” did not promise that communism would come but foresaw its arrival; and in foreseeing communism, he goes on, they “presupposed both a productivity [[233]] of labour unlike the present and a person unlike the present man in the street… .” Marxists, then, according to Lenin, do not say that they will inaugurate a communist society of abundance and freedom, but, like astronomers predicting the planetary movements, say that it will and must come. To promise to do something is Utopian, to foresee that it must come is not. And I think that he is arguing that “the great Socialists” also foresaw a greatly increased productivity and a new type of human being, whereas Utopians merely hoped for these things and called upon people to bring them about. Lenin’s objections are based on the discussion of Utopian socialism in Engels’ Anti-Dühring. According to Engels, Saint-Simon, Fourier, and Owen, the Utopian socialists whose views paved the way for Marx’s scientific socialism, regarded socialism as “the expression of absolute truth, reason, and justice,” thought that it was a mere accident that it had not been discovered earlier, and assumed that it needed only to be discovered “to conquer the world by virtue of its own power.” “What was required,” they held, “was to discover a new and more perfect social order and to impose this on society from without, by propaganda and where possible by the example of model experiments.” They imagined the outlines of a new society “out of their own heads, because within the old society the elements of the new were not yet generally apparent; for the basic plan of the new edifice they could only appeal to reason, just because they could not as yet appeal to contemporary history.” Hence they produced “phantasies of the future, painted in romantic detail.” Their inadequacy in this regard was due, according to Engels, to the fact that they lived at a time when capitalism was still immature and did not yet allow the lineaments of the new society to be discerned within it.

Utopians, then, make promises rather than predictions. (It is not relevant to our present point, but surely promising is a guarantee that the promissee may make a prediction about the future behavior of the [[234]] promissor.) They appeal to reason and justice, and imagine reasonable and just societies “out of their own heads,” instead of observing the first beginnings of a new society within the existing one. They think it is sufficient to advocate a new society of the sort they have imagined, or to try to bring it into being on a small scale, for the world to be convinced by their scheme.

Now this last point is important. It is a defect of Utopias of most sorts that they leave vague the means of transition from the existing state of affairs to the future ideal. This means that two things are left vague, viz., who are to bring the changes about, and how they are to proceed in doing it. Marxists claim that there is no vagueness in their view on these particulars. It is the proletariat, under suitable leadership, who will bring the changes about, and they will do so by a revolutionary dictatorship under which the bourgeoisie are expropriated and suppressed. But of course this very precision (such as it is) may turn many influential people against Marxist scientific socialism. But according to the Marxists this does not matter in the long run, because the already existing proletariat is the first beginning of the new society. When a party has been formed to lead it, socialism is no longer an aspiration but an actual movement. But although Marxists are right in pointing out that Utopians often fail to show how the transition from the actual to the ideal is to be effected, and although Marxists do have a theory and policy about this, this is not enough to show that their view is at all adequate. The first difficulty in it is this. Marxists claim that their view of the future society is not invented out of their heads, but is based on the first beginnings of the new society already apparent within capitalism. These first beginnings must be the proletarian class beginning to be organized by and in a party. But what is there here that certainly foreshadows a condition in which there is no force and no domination? Nothing, it seems to me, except the fact that Communists, if they get the chance, are going to put an end to private property, unless it be the increase in productivity that capitalism has brought with it—that other forms of organization will increase it still further is mere aspiration. Lenin, in the passage I have just quoted, says that men in communist society will not be like the present man in the street. Let us see what Engels says about this. We may look forward, he says, following Saint-Simon, to “the transformation of political government [[235]] over men into the administration of things and the direction of productive processes.” “The seizure of the means of production by society,” he goes on, “puts an end to commodity production, and therewith to the domination of the product over the producer. Anarchy in social production is replaced by conscious organization on a planned basis. The struggle for individual existence comes to an end. And at this point, in a certain sense, man finally cuts himself off from the animal world, leaves the condition of animal existence behind him and enters conditions which are really human… . Men’s own social organization which has hitherto stood in opposition to them as if arbitrarily decreed by Nature and history, will then become the voluntary act of men themselves… . It is humanity’s leap from the realm of necessity into the realm of freedom.”50 Anarchy, then, is replaced by plan, politics by “administration” (whatever this may be), the struggle for existence by peace, the animal by something “really human,” divided mankind by unified mankind, specialization by universal adaptability.

I feel sure that anyone who reflects on these contrasts must conclude that, for all that Marxists say about their views being based on observed facts in the capitalist world, in fact their future communism is even more out of touch with human realities than are the speculations of the Utopians whom they criticize. Furthermore, the future they depict is extremely vague, and they refuse to make it more precise on the ground that such precision is Utopian, that detailed specification of not yet developed societies are romantic fantasies. (We may compare this with the exponents of Negative Theology who can only say what God is not, but never what he is.) But if they are right in this last contention, then surely they are wrong in claiming that their view differs from Utopianism in being predictive in any important sense. Very vague predictions are of even less practical value than are detailed wishes. I do not think that the “predictions” about communist society have much more content in them than the more baffling among the utterances of the Delphic Oracle. What is this “administration” that is so different from “government,” and this “planning” and “direction” that are consistent with the full development of each individual [[236]] and can be made effective without the use of force? They are so different from anything that we have had experience of in developed societies, where administrators (generally) have the law behind them, where planning and direction meet with opposition, and where all must reconcile themselves to some limited and specialized career, that it is hard to attach any definite meaning to them at all. And what scientific prediction can it be that says we shall leave the condition of animal existence behind us? This is something that even Fourier might have repudiated, and that Owen would have taken seriously only during that period of his life when he was in communication with departed spirits. It is difficult to see how any attentive reader of their works could have taken at their face value the Marxists’ profession of being scientific socialists rather than Utopians. They do in some manner fill in the gap between present conditions and the future society they look forward to—they insert between the two a real and active movement, but this has the function, not of making their system a scientific one, but of being a seat of authority which can give unquestioned guidance to any doubter within it. Marxism is Utopianism with the Communist Party as a visible and authoritative interpreter of the doctrine striving to obtain supreme power. The scientific part of Marxist politics concerns the methods by which the Communist Party maintains itself and aims to spread its power, and here Marxism and Realpolitik go hand in hand. But the alleged goal of the Marxist activities is a society in which there is administration without law, planning without miscalculation, direction without domination, high productivity without property or toil, and, it would seem, unrepressed men who nevertheless have left the condition of animal existence behind them.

Source: /titles/877#Acton_6844_294, pp. 233–37.


Not in the OLL collection

Alexander Gray

Alexander Gray, The Socialist Tradition: Moses to Lenin (London: Spottiswoode, Ballantyne & Co., 1963). 1st ed. 1946.

Typical of Gray’s witty and engaging style is this commentary of the French Socialist Louis Blanc with whom Bastiat clashed in 1848:

The significance of Louis Blanc lies in the fact that in a sense he represents the transition from Utopian socialism to what, for convenience, may be termed proletarian socialism. We have left behind the wild imaginings of Fourier, the revelations of Saint-Simon and the parallelograms of Owen. For Louis Blanc claims to have a sense of reality, and he would like to be regarded as moderate. ‘To prepare for the future without breaking violently with the past,’ as he once described his purpose, is an excellent ideal. Doubtless, with Fourier and Owen, he is an ‘associationist,’ but the form of association at which he aims has a more modern flavour; nor is it expected that some generous millionaire will by his touch heal and renew this putrescent world.

For, among much that is nebulous, Louis Blanc sees with extreme clarity just exactly whence our salvation must come: Our safety cometh from the State. Blanc may or may not have been original in this, but at least no one before had so clearly taught that the State, with which we are familiar here and now, such as it is, must be used to establish a new social order. Social and political reform are intertwined; if the former is the aim and object, the latter is the means. For it is not enough to decide, according to the rules of reason, justice and humanity, where you want to get to in this matter of the organisation of labour. You must be in a position to give effect to the principles decided upon. Power is needed; and power is ultimately a matter of laws, tribunals and soldiers—in a word, the State. In a somewhat famous sentence he adds the warning that if you do not make use of the State as an instrument, you will encounter it as an obstacle. Moreover, the magnitude of the task of emancipating the proletarians is such that all the power of the State is needed. What is required is that they should be given the necessary tools of production; and here precisely is the function of the government. In a definition, more arresting than just, ‘the State is, or ought to be, the Banker of the Poor.”

Thus the State must intervene; there is indeed no other authority to whom appeal can be made. Authority is invoked, it should be observed, in the name of Liberty itself; for Liberty, in the world as seen by Blanc, is but an affair of theoretical rights which cannot be enforced. There can be no liberty where an ‘immense weakness’ confronts an ‘immense strength’. The State must make these rights a reality, and for this purpose it must be a strong State, since there are those who in their weakness need its protection.

Source: “Chap. IX. Louis Blanc”, pp. 219–20.

Murray N. Rothbard

  • of his many writings on “war socialism” see Rothbard’s “ War Collectivism in World War I,” in A New History of Leviathan: Essays on the Rise of the American Corporate State. Edited by Ronald Radosh and Murray N. Rothbard (New York: E.P. Dutton, 1972), pp. 66–110. Online at the Mises Institute:
  • “Egalitarianism as a Revolt against Nature” (1973) in Egalitarianism as a Revolt Against Nature, ed. Roy A. Childs, Jr. (Washington, D.C.: Libertarian Review Press, 1974), pp. 1–13. Online at Mises institute:
  • Rothbard provides a comprehensive critique of Marxism in the second volume of his An Austrian Perspective on the History of Economic Thought. Vol. 2: Classical Economics (Auburn, Alabama: Mises Institute, 2006). (HET) See these five chapters:
    • Roots of Marxism: messianic communism 297
    • Marx’s vision of communism
    • Alienation, unity, and the dialectic 347
    • The Marxian system, I: historical materialism and the class struggle 369
    • The Marxian system, II: the economics of capitalism and its inevitable demise 407

In the essay “Egalitarianism as a Revolt against Nature” (1973) Rothbard attacks the “absurd fantasies” of the utopian Marxist views of equality under communism:

Nowhere is the Left Wing attack on ontological reality more apparent than in the Utopian dreams of what the future socialist society will look like. In the socialist future of Charles Fourier, according to Ludwig von Mises:
“all harmful beasts will have disappeared, and in their places will be animals which will assist man in his labors—or even do his work for him. An antibeaver will see to the fishing; an antiwhale will move sailing ships in a calm; an antihippopotamus will tow the river boats. Instead of the lion there will be an antilion, a steed of wonderful swiftness, upon whose back the rider will sit as comfortably as in a well-sprung carriage. “It will be a pleasure to live in a world with such servants.”

Furthermore, according to Fourier, the very oceans would contain lemonade rather than salt water.

Similarly absurd fantasies are at the root of the Marxian utopia of communism. Freed from the supposed confines of specialization and the division of labor (the heart of any production above the most primitive level and hence of any civilized society), each person in the communist utopia would fully develop all of his powers in every direction. As Engels wrote in his Anti-Dühring, communism would give “each individual the opportunity to develop and exercise all his faculties, physical and mental, in all directions.” And Lenin looked forward in 1920 to the “abolition of the division of labor among people … the education, schooling, and training of people with an all-around development and an all-around training, people able to do everything. Communism is marching and must march toward this goal, and will reach it.

In his trenchant critique of the communist vision, Alexander Gray charges:
“That each individual should have the opportunity of developing all his faculties, physical and mental, in all directions, is a dream which will cheer the vision only of the simple-minded, oblivious of the restrictions imposed by the narrow limits of human life. For life is a series of acts of choice, and each choice is at the same time a renunciation.
Even the inhabitant of Engels’s future fairyland will have to decide sooner or later whether he wishes to be Archbishop of Canterbury or First Sea Lord, whether he should seek to excel as a violinist or as a pugilist, whether he should elect to know all about Chinese literature or about the hidden pages in the life of a mackerel.”

Of course one way to try to resolve this dilemma is to fantasize that the New Communist Man of the future will be a superman, superhuman in his abilities to transcend nature. William Godwin thought that, once private property was abolished, man would become immortal. The Marxist theoretician Karl Kautsky asserted that in the future communist society, “a new type of man will arise … a superman … an exalted man.” And Leon Trotsky prophesied that under communism:
“man will become incomparably stronger, wiser, finer. His body more harmonious, his movements more rhythmical, his voice more musical. … The human average will rise to the level of an Aristotle, a Goethe, a Marx. Above these other heights new peaks will arise.”

Source: pp. 11–12

Here are two snippets from his thorough demolition of Marxian economics, the first on the “immiseration of the workers” and the second his final summing up:

Now here is a critical and crucial point in the Marxian argument. The increasing impoverishment of the working class is a key to the Marxian system, because on it rests the allegedly inevitable doom of capitalism and its replacement by the proletariat. If there is no increasing impoverishment, there is no reason for the working class to react against their intensifying exploitation and burst asunder their ‘capitalist integument’, those fetters on the technological mode of production. So how does Marx demonstrate the increasing poverty of the proletariat?

At this point, Marx seems to grow desperate, and to come up with a number of varied and contrasting arguments, some of which are mutually contradictory. It’s as if Marx wildly tries to multiply the arguments, however feeble, in the hope that at least one will stick, and that he will demonstrate the inevitability of the next, proletarian communist, stage of history. But all of these attempts to prove increasing misery come up, first and foremost, against an insuperable obstacle, an obstacle that only Ludwig von Mises has clearly demonstrated. For if workers’ wages are already and at all times at the means of subsistence, kept there by the iron law, how can they get any worse off! They have been at maximum poverty level, so to speak, for a long time. But if for that reason they cannot get worse off, where is the dynamic that will lead them to rise up and overthrow the system? We can concede, of course, that the new proletarians, so rudely tossed into the ranks of the working class by their triumphant fellow-capitalists, will be particularly edgy and disgruntled at their new lot in life. But surely Marx would not be content to confine his revolutionary workers to the relatively limited ranks of recently declasse capitalists. Especially since the bulk of the workers simply remain where they have always been: at the margin of subsistence.

Setting aside for the moment this grave inner contradiction with the iron law of wages, how does Marx propose to establish his alleged law of the increasing impoverishment of the proletariat? In one answer, the eternally falling rate of profits puts a severe pressure on capitalists to find more profit by sweating and exploiting the proletariat more intensively, making them work harder and for longer hours. But aside from the problem of the ever-present iron law, Marx is faced with the problem: why did capitalists allow their rate of exploitation to grow slack until finally spurred on by a falling rate of profit? Don’t capitalists always and at all times try to maximize their rates of profit? And if so, and unless we are to assume a sudden intensification of greed, or of eagerness for profit among capitalists, they are never slack or lax in squeezing the greatest possible amount of profit from the workers. But then, how can a falling rate of profit spur them on to ever-greater heights? Surely, it is not simply a desire for profit.

Source: HET, vol. 2, pp. 423–24.

And his conclusion about “the Marxian system”:

Thus, Karl Marx created what seems to the superficial observer to be an impressive, integrated system of thought, explaining the economy, world history, and even the workings of the universe. In reality, he created a veritable tissue of fallacies. Every single nodal point of the theory is wrong and fallacious, and its ‘integument’ – to use a good Marxian term – is a web of fallacy as well. The Marxian system lies in absolute tatters and ruin; the ‘integument’ of Marxian theory has ‘burst asunder’ long before its predicted ‘bursting’ of the capitalist system. Far from being a structure of ‘scientific’ laws, furthermore, the jerry-built structure was constructed and shored up in desperate service to the fanatical and crazed messianic goal of destruction of the division of labour, and indeed of man’s very individuality, and to the apocalyptic creation of an allegedly inevitable collectivist world order, an atheized variant of a venerable Christian heresy.

During the 1960s, messianic and romantic Marxists liked to make a sharp separation between the earlier lovable, idealistic, ‘humanist’ Marx, and the later, mean, hard-core, proto-Stalinist ‘economist’ Marx. But we now know that there is no such division. There is only one Marx, whether early or late, once he adopted Marxism in the 1840s. There is even a good case for seeing one lifelong Marx, including his crazed, demonic poems calling for universal destruction in his still earlier graduate school years at Berlin. In fact, the humanist Marx is scarcely a relief from the later economist – quite the contrary. All Marxes-in-one were in service to his fanatical and destructive messianic vision of communism. A convincing case can be made, indeed, that the well-known horrors of twentieth century communism: of Lenin, Stalin, Mao and Pol Pot, can be considered the logical unfolding, the embodiment, of the nineteenth century vision of their master, Karl Marx.

Source: HET, vol. 2, p. 433.


Richard Ebeling

Richard Ebeling has written extensively on S&M, especially in the anniversary years of 2017 (the centenary of the Bolshevik Revolution) and 2018 (the 200th anniversary of the birth of Karl Marx. See his numerous essays on Marxism for the Future of Freedom Foundation (FFF) and Foundation for Economic Education (FEE):

David Prytchitko

The Austrian economist David Prytchitko has written some important pieces for Econlib: