Socialism derives its strength from two different sources. On the one hand it is an ethical, political, and economico-political challenge. The socialist order of society, fulfilling the claims of higher morality, is to replace the ‘immoral’ capitalist economy; the ‘economic rule’ of the few over the many is to give way to a co-operative order which alone can make true democracy possible; planned economy, the only rational system working according to uniform principles, is to sweep away the irrational private economic order, the anarchical production for profit. Socialism thus appears as a goal towards which we ought to strive because it is morally and rationally desirable. The task therefore of men of good will is to defeat the resistance to it which is inspired by misunderstanding and prejudice. This is the basic idea of that Socialism which Marx and his school call Utopian.

On the other hand, however, Socialism is made to appear as the inevitable goal and end of historical evolution. An obscure force from which we cannot escape leads humanity step by step to higher planes of social and moral being. History is a progressive process of purification, with perfection, in the form of Socialism, at the end. This train of thought does not run counter to the ideas of Utopian Socialism. Rather it includes them, for it presupposes, as obviously self-evident, that the socialist condition would be better, nobler, and more beautiful than the non-socialist. But it goes farther; it sees the change to Socialism — envisioned as progress, an evolution to a higher stage — as something independent of human will. A necessity of Nature, Socialism is the inevitable outcome of the forces underlying social life: this is the fundamental idea of evolutionary socialism, which, in its Marxist form, has taken the proud name of ‘Scientific’ Socialism.

In recent times scholars have been at pains to prove that the main notions of the materialist or economic conception of history had been set forth by pre-marxian writers, among them some of those whom Marx and his supporters contemptuously call Utopians. These researches and the critique of the materialist conception of history which accompany them, however, tend to set the problem in much too narrow a perspective. They concentrate on the peculiarities of the Marxist theory of evolution, its specifically economic nature, and the importance it gives to the class war, and they forget that it is also a doctrine of perfection, a theory of progress and evolution.

The materialist conception of history contains three elements, which, though they combine to form a closed system, have each a special significance for the marxian theory. First, it involves a special method of historical and sociological research. As such it tries to explain the relation between the economic structure and the whole life of a period. Secondly, it is a sociological theory, since it sets up a definite concept of class and class war as a sociological element. Finally, it is a theory of progress, a doctrine of the destiny of the human race, of the meaning and nature, purpose and aim of human life. This aspect of the materialist conception of history has been less noticed than the other two, yet this alone concerns socialist theory as such. Merely as a method of research, an heuristic principle for the cognition of social evolution, the materialist conception of history is obviously in no position to talk about the inevitability of a socialistic order of society. The conclusion that our evolution is tending towards Socialism does not of necessity follow from the study of economic history. The same is true of the theory of the class-war. Once the view has been adopted that the history of all previous society is the history of class struggles, it becomes difficult to see why the struggle of classes should suddenly disappear. Might it not be supposed that what had always been the substance of history will continue to be so to the very end? Only as a theory of progress can the materialist conception of history concern itself with the final goal of historical evolution and assert that the decay of Capitalism and the victory of the proletariat are alike inevitable. Nothing has helped the spread of socialist ideas more than this belief that Socialism is inevitable. Even the opponents of Socialism are for the most part bewitched by it: it takes the heart out of their resistance. The educated person is afraid of appearing unmodern if he does not show that he is actuated by the ‘social’ spirit, for already the age of Socialism, the historic day of the Fourth Estate, is supposed to have dawned and everyone who still clings to Liberalism is in consequence a reactionary. Every triumph of the socialist idea which brings us nearer to the socialist way of production is counted as progress; every measure which protects private property is a setback. The one side looks on with sadness or an even deeper emotion, the other with delight, as the age of private property passes with the changing times, but all are convinced that history has destined it to irrevocable destruction.

Now as a theory of progress, going beyond experience and what can be experienced, the materialist conception of history is not science but metaphysics. The essence of all metaphysics of evolution and history is the doctrine of the beginning and end, the origin and purpose of things. This is conceived either cosmically, embracing the whole universe, or it is anthropocentric and considers man alone. It can be religious or philosophic. The anthropocentric metaphysical theories of evolution are known as the philosophy of history. The theories of evolution which are of a religious character must always be anthropocentric, for the high significance religion attaches to mankind can be justified only by an anthropocentric doctrine. These theories are based generally on the assumption of a paradisiac origin, a Golden Age, from which man is moving farther and farther away, only to return finally to an equally good, or, if possible, even better, age of perfection. This generally includes the idea of Salvation. The return of the Golden Age will save men from the ills which have befallen them in an age of evil. Thus the whole doctrine is a message of earthly salvation. It must not be confused with that supreme refinement of the religious idea of Salvation developed in those doctrines which transfer salvation from Man’s earthly life into a better world Beyond. According to these doctrines the earthly life of the individual is never the final end. It is merely preparation for a different, better and painless existence which may even be found in a state of non-existence, in dissolution in the All, or in Destruction.

For our civilization the message of salvation of the Jewish prophets came to have a special importance. The Jewish Prophets promise no salvation in a better world beyond, they proclaim a Kingdom of God on Earth. ‘Behold, the days come, saith the Lord, that the plowman shall overtake the reaper, and the treader of grapes him that soweth the seed; and the mountains shall drop sweet wine, and all the hills shall melt.’1  ‘The wolf also shall dwell with the lamb, and the leopard shall lie down with the kid; and the calf and the young lion and the fatling together; and a little child shall lead them. And the cow and the bear shall feed, their young ones shall lie down together: and the lion shall eat straw like the ox. And the suckling child shall play on the hole of the asp, and the weaned child shall put his hand on the cockatrice’s den. They shall not hurt or destroy in all my holy mountain, for the earth shall be full of the knowledge of the Lord, as the waters cover the sea’.2  Only when such a message of salvation is promised for the immediate future will it be joyfully accepted. And in fact Isaiah says that only ‘yet a little while’ separates men from the promised hour.3  But the longer they have to wait the more impatient must the faithful become. What good to them is a Kingdom of Redemption which they will not live to enjoy! The promise of salvation therefore, must necessarilv expand into a doctrine of the Resurrection of the Dead, a Resurrection that brings every individual before the Lord, to be judged good or evil. Judaism is full of these ideas at the time when Jesus appears among his people as the Messiah. He comes not only to proclaim an imminent salvation but also, in fulfilment of the prophecy, as the bringer of the Kingdom of God.4  He walks among the people and preaches, but the world goes its way as of old. He dies on the cross, but everything remains at it was. At first this shakes the faith of the disciples profoundly. For the time being they go all to pieces and the first little congregation scatters. Only belief in the Resurrection of Christ crucified reinspires them, filling them with fresh enthusiasm and giving them the strength to win new adherents to their doctrine of salvation.5  The message of salvation they preach is the same that was preached by Christ: the Lord is near and with him the great Day of Judgment, when the world shall be renewed and the Kingdom of God founded in place of the Kingdoms of the world. But as expectation of an imminent Return of Christ vanished and the growing congregations began to settle down to a longer period of waiting, the belief in salvation had also to undergo a change. No lasting world-religion could have been built up on the belief that the Kingdom of God was imminent. Each day that left the prophecy unfulfilled would have impaired the Church’s prestige. The fundamental idea of primitive Christianity that the Kingdom of God was at hand had to be transformed into the Christian cult: into the belief that the heavenly presence of their risen Lord entered into the congregation, and into belief in the salvation of the sinful world by Him. Only thus could the Christian Religious Community be founded. From the moment of this transformation Christian doctrine ceases to expect a Kingdom of God on Earth. The idea of salvation is sublimated into the doctrine that by baptism the faithful become part of the Body of Christ. ‘Already in Apostolic times the Kingdom of God becomes merged in the Church, and all that is left for the Coming of the Kingdom is the glorification of the Church, the shattering of the earthly vessel, and the liberation of the shining treasure from its mortal frame. For the rest, the Kingdom of God is replaced by the eschatology of Heaven, Hell and Purgatory, Immortality and the Beyond — a contrast to the Gospels which is of the highest significance. But even this end recedes, until at last the Millennium came to mean the Church.’6

There was, however, another way of meeting the difficulties which arose when fulfilment of the promise had been postponed longer than was originally expected. The faithful could take refuge in the belief which had once sustained the Prophets. According to this doctrine an earthly Kingdom of Salvation lasting one thousand years would be set up. Condemned by the Church as heresy, this doctrine of the Visible Return of Christ is continually revived not only as a religious and political belief, but above all as an idea of social and economic revolution.

From Christian Chiliasm, which runs through the centuries constantly renewing its strength, a single step leads to the philosophic Chiliasm which in the eighteenth century was the rationalist re-interpretation of Christianity; and thence, through Saint Simon, Hegel, and Weitling to Marx and Lenin.7  Curiously enough, it is this particular Socialism, derived in this way from mystical ideas whose origin is lost in the darkness of history, which has called itself scientific Socialism, while it has tried to disqualify as ‘Utopian’ the Socialism that is derived from the rational considerations of the philosophers.

The philosophical anthropocentric metaphysics of evolution resembles the religious in every essential. In its prophecy of salvation is found the same strange mixture of ecstatically extravagant phantasy with uninspired commonplace and coarse materialism as is found in the most ancient messianic prophecies. Like Christian literature which seeks to interpret the apocalypse, it tries to prove itself applicable to life by interpreting concrete historical events. In these attempts it often makes itself ridiculous, rushing in on every great occasion with a doctrine which both meets the case and embraces the history of the universe. How many of these philosophies of history arose during the World War!

• 1Amos ix, 13.
• 2Isaiah xi, 6-9.
• 3Isaiah xxix, 17.
• 4Whether or not Jesus held Himself to be the Messiah we need not discuss here. The only important thing for us is that He announced the immediate coming of the Kingdom of God and that the first congregation looked on Him as the Messiah.
• 5Pfleiderer, Das Urchristentum, 2nd Edition, Berlin 100a, Vol. I, p. 7 et seq.
• 6Troeltsch, Die Soziallehren der christlichen Kitchen und Gruppen (Gesammelte Schriften, Tubingen 1912, Vol. I, p. II0).
• 7Gerlich, Der Kommunismus als Lehre vom tausendjährigen Reich, München 1920, p. 17 et seq.

The metaphysical philosophy of history must be clearly distinguished from the rational. The latter is built up solely on experience, seeking results which are based on logic and empiricism. Wherever rational philosophy has to go beyond this, it tries hypotheses, but it never forgets where experience ceases and hypothetical interpretations begin. Where experience is possible it avoids using conceptual fictions; it never tries to supplant experimental science. Its only aim is to unify our view of social events and of the course of historical evolution. Only thus is it able to establish a law which governs changes in social conditions. By indicating, or attempting to indicate, the force which determines the growth of society, it endeavours to reveal the principle determining social evolution. This principle is assumed to be eternally valid, that is, it is active so long as there is any society at all. Were it otherwise, a second principle would have to be placed next to this one, and it would be necessary to show under which conditions the first ruled and under which the second. But this only means that the law governing the interchange of the two principles would be the ultimate Law of Social Life.

To define a principle according to which society grows, and changes in social conditions take place, is a different thing from defining the course which social evolution takes. Such a course is necessarily limited. It has a beginning and an end. The reign of a law is necessarily unlimited, without beginning or end. It is continuity, not an occurrence. The law is imperfect if it defines only a part of social evolution and leaves us in the lurch after a certain point. In this case it would cease to be a law. The end of social evolution can be no other than that of society itself.

The teleological view describes the course of evolution in all its windings and deviations. Thus it is typically a theory of stages. It shows us the successive stages of civilization until one is reached which must necessarily be the last, because no other follows it. When this point has been reached it is impossible to see how history is to proceed.1

The chiliastic philosophy of history takes the ‘standpoint of Providence, which lies beyond all human wisdom’; it aims at prophesying as only ‘the eye of a God’ could prophesy.2  Whether we call its teaching Poetry, Prophecy, Faith, Hope or anything else whatever, there are two things it can never be: Science or Knowledge. Nor may it be called hypothesis, any more than the utterances of a clairvoyant or a fortune-teller may be called hypotheses. It was an unusually clever trick on the part of the Marxists to call their chiliastic teachings science. Such a step was bound to be effective in an age when people relied on nothing but science, and rejected metaphysics (though, admittedly, only to surrender themselves uncritically to the naive metaphysics of Büchner and Moleschott).

The law of social evolution tells us much less than the metaphysics of evolution. It limits its statements a priori in admitting that its sway can be frustrated by the co-existence of forces other than those it describes. On the other hand, it admits no limits to its applicability. It claims eternal validity, it is without beginning and without end. But it does not evoke a dark fate whose ‘will-less and impotent bearers’ we are. It discloses only the inner driving power of our own will, revealing how it conforms to natural laws and why its existence is necessary. This is insight, not into man’s destiny, but into man’s doings.

In so far as ‘scientific’ Socialism is metaphysics, a chiliastic promise of salvation, it would be vain and superfluous to argue scientifically against it. It serves no useful purpose to fight mystical dogmas with reason. There is no teaching fanatics. They must break their heads against the wall. But Marxism is not merely chiliasm. It is sufficiently influenced by the scientific spirit of the nineteenth century to attempt to justify its doctrine rationally. With these attempts, and these only, we shall deal in the following chapters.

• 1Wundt, Ethik, 4th Edition, Stuttgart, Vol. II, p. 246. One sees in Engels’ survey of the history of warfare a characteristic example of how ready the representatives of this movement are to see the end of all evolution attained. Engels there — 1878 — expresses the opinion that, with the Franco-German war, ‘a turning point of quite other importance than all previous ones had occurred’ in the history of warfare. ‘Weapons are so perfected that a fresh process of any revolutionary influence is no longer possible. When one has guns which can hit a battalion as far as the eye can see and rifles which can do the same with a single person as aim, with which loading takes less time than firing, then all further advances are more or less indifferent in field war. Thus the era of evolution on this side is essentially closed.’ (Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 176.) In judging other views, Marx understands well how to find out the weaknesses of the theory of stages. According to their teachings, says Marx, ‘a history has existed but none exists any longer’. (Das Elend der Philosophic, German translation by Bernstein und Kautsky, 8th Edition, Stuttgart 1920, p. 104). He merely does not notice that the same will be true of his teachings on the day when the means of production will have been socialized.
• 2Kant, Der Streit der Fakultäten (Collected Works, Vol. I), p. 636.

The idea of human destiny dominates all the more ancient views of social existence. Society progresses towards a goal fore-ordained by the deity. Whoever thinks in this way is logically correct if, in speaking of progress and retrogression, of revolution and counterrevolution, of action and reaction he lays on these concepts the emphasis adopted by so many historians and politicians. History is judged according as it brings mankind nearer to the goal or carries it farther away.

Social science, however, begins at the point where one frees oneself from such habits, and indeed from all valuation. Social science is indeed teleological in the sense in which every causal study of the will must be. But its concept of purpose is wholly comprised in the causal explanation. For social science causality remains the fundamental principle of cognition, the maintenance of which must not be impaired even by teleology.1  Since it does not evaluate purposes, it cannot speak of evolution to a higher plane, in the sense let us say, of Hegel and Marx. For it is by no means proved that all evolution leads upwards, or that every later stage is a higher one. No more, of course, can it agree with the pessimistic philosophers of history, who see in the historical process a decline, a progressive approach to a bad end. To ask what are the driving forces of historical evolution is to ask what is the nature of society and the origin and causes of the changes in social conditions. What society is, how it originates, how it changes — these alone can be the problems which scientific sociology sets itself.

That the social life of men resembles the biological process is an observation of ancient date. It lies at the basis of the famous legend of Menenius Agrippa, handed down to us by Livy. Social science did itself little good when, inspired by the triumph of Biology in the nineteenth century, voluminous works developed this analogy to the point of absurdity. What is the use of calling the products of human activity ‘social intercellular substance’?2  Who was enlightened when scholars disputed which organ of the social body corresponded to the central nervous system? The best comment on this form of sociological study was the remark of an economist, to the effect that anyone who compared money with blood and the circulation of money with the circulation of blood would be making the same contribution to economics as would be made to biology by a man who compared blood with money and the blood-circulation with the circulation of money. Modern biology has borrowed from social science some of its most important concepts — that of evolution, of the division of labour, and of the struggle for existence. But it has not stopped short at metaphorical phrases and conclusions by analogy; rather has it proceeded to make profitable use of what it had gained. On the other hand biological-sociology did nothing but play a futile word-spinning game with the ideas it borrowed back. The romantic movement, with its ‘organic’ theory of the state has done even less to clear up our knowledge of social interrelations. Because it deliberately cold-shouldered the most important achievement of social science up to that date — the system of classical Political Economy — it was unable to utilize the doctrine of the division of labour, that part of the classical system which must be the starting point of all sociology, as it is of modern biology.3

Comparison with the biological organism should have taught sociology one thing: that the organism can only be conceived as a system of organs. This, however, merely means that the essence of the organism is the division of labour. Only division of labour makes the parts become members; it is in the collaboration of the members that we recognize the unity of the system, the organism.4  This is true of the life of plants and animals as well as of society. As far as the principle of the division of labour is concerned, the social body may be compared with the biological. The division of labour is the tertium comparationis of the old simile.

The division of labour is a fundamental principle of all forms of life.5  It was first detected in the sphere of social life when political economists emphasized the meaning of the division of labour in the social economy. Biology then adopted it, at the instigation in the first place of Milne Edwards in 1827. The fact that we can regard the division of labour as a general law must not, however, prevent us from recognizing the fundamental differences between division of labour in the animal and vegetable organism on the one hand and division of labour in the social life of human beings on the other. Whatever we imagine to be the origin, evolution, and meaning of the physiological division of labour, it clearly does not shed any light on the nature of the sociological division of labour. The process that differentiates and integrates homogeneous cells is completely different from that which led to the growth of human society out of self-sufficient individuals. In the second process, reason and will play their part in the coalescence, by which the previously independent units form a larger unit and become parts of a whole, whereas the intervention of such forces in the first process is inconceivable.

Even where creatures such as ants and bees come together in ‘animal communities’, all movements and changes take place instinctively and unconsciously. Instinct may very well have operated at the beginning and in the earliest stages of social formation also. Man is already a member of a social body when he appears as a thinking, willing creature, for the thinking man is inconceivable as a solitary individual. ‘Only amongst men does man become a man’ (Fichte). The development of human reason and the development of human society are one and the same process. All further growth of social relations is entirely a matter of will. Society is the product of thought and will. It does not exist outside thought and will. Its being lies within man, not in the outer world. It is projected from within outwards.

Society is co-operation; it is community in action.

To say that Society is an organism, means that society is division of labour.6  To do justice to this idea we must take into account all the aims which men set themselves and the means by which these are to be attained. It includes every inter-relation of thinking and willing man. Modern man is a social being, not only as one whose material needs could not be supplied in isolation, but also as one who has achieved a development of reason and of the perceptive faculty that would have been impossible except within society. Man is inconceivable as an isolated being, for humanity exists only as a social phenomenon and mankind transcended the stage of animality only in so far as co-operation evolved the social relationships between the individuals. Evolution from the human animal to the human being was made possible by and achieved by means of social cooperation and by that alone. And therein lies the interpretation of Aristotle’s dictum that man is the ζѽου πσλιτιχόυ

• 1Cohen, Logik der reinen Erkenntnis, 2nd Edition, Berlin 1914, p. 359.
• 2As is done by Lilienfield (La pathologie sociale, Paris 1896, p. 95). When a government takes a loan from the House of Rothschild organic sociology conceives the process as follows: ‘La maison Rothschild agit, dans cette occasion, parfaitement en analogie avec l’action d’un groupe de cellules qui, dans le corps humain, cooperent a la production du sang nécessaire à l’alimentation du cerveau dans l’espoir d’en être indemnisées par une réaction des cellules de la substance grise dont ils ont besoin pour s’activer de nouveau et accumuler de nouvelles énergies.’ (Ibid. p. 104.) This is the method which claims that it stands on ‘firm ground’ and explores ‘the Becoming of Phenomena step by step, proceeding from the simpler to the more complex.’ (See Lilienfield, Zur Verteidigung der organischen Methode in der Soziologie, Berlin 1898, p. 75).
• 3It is characteristic that just the romantics stress excessively society’s organic character, whereas liberal social philosophy has never done so. Quite understandably. A social theory which was genuinely organic did not need to stress obtrusively this attribute of its system.
• 4Cohen, Logik der reinen Erkenntnis, p. 349.
• 5Hertwig, Allgemeine Biologie, 4th Edition, Jena 1913, p. 500 et seq.; Hertwig, Zur Abwehr des ethischen, des sozialen und des politischen Darwinismus, Jena 1918, p. 69 et seq.
• 6Izoulet, La cite moderne, Paris 1894, p. 35 et seq.

We are still far from understanding the ultimate and most profound secret of life, the principle of the origin of organisms. Who knows whether we shall ever discover it? All we know to-day is that when organisms are formed, something which did not exist before is created out of individuals. Vegetable and animal organisms are more than conglomerations of single cells, and society is more than the sum of the individuals of which it is composed. We have not yet grasped the whole significance of this fact. Our thoughts are still limited by the mechanical theory of the conservation of energy and of matter, which is never able to tell us how one can become two. Here again, if we are to extend our knowledge of the nature of life, understanding of the social organization will have to precede that of the biological.

Historically division of labour originates in two facts of nature: the inequality of human abilities and the variety of the external conditions of human life on the earth. These two facts are really one: the diversity of Nature, which does not repeat itself but creates the universe in infinite, inexhaustible variety. The special nature of our inquiry, however, which is directed towards sociological knowledge, justifies us in treating these two aspects separately.

It is obvious that as soon as human action becomes conscious and logical it must be influenced by these two conditions. They are indeed such as almost to force the division of labour on mankind.1  Old and young, men and women co-operate by making appropriate use of their various abilities. Here also is the germ of the geographical division of labour; man goes to the hunt and woman to the spring to fetch water. Had the strength and abilities of all individuals and the external conditions of production been everywhere equal the idea of division of labour could never have arisen. Man would never of himself have hit upon the idea of making the struggle for existence easier by co-operation in the division of labour. No social life could have arisen among men of equal natural capacity in a world which was geographically uniform.2  Perhaps men would have joined together to cope with tasks which were beyond the strength of individuals, but such alliances do not make a society. The relations they create are transient, and endure only for the occasion that brings them about. Their only importance in the origin of social life is that they create a rapproachement between men which brings with it mutual recognition of the difference in the natural capacities of individuals and thus in turn gives rise to the division of labour.

Once labour has been divided, the division itself exercises a differentiating influence. The fact that labour is divided makes possible further cultivation of individual talent and thus co-operation becomes more and more productive. Through co-operation men are able to achieve what would have been beyond them as individuals, and even the work which individuals are capable of doing alone is made more productive. But all this can only be grasped fully when the conditions which govern increase of productivity under co-operation are set out with analytical precision.

The theory of the international division of labour is one of the most important contributions of Classical Political Economy. It shows that as long as — for any reasons — movements of capital and labour between countries are prevented, it is the comparative, not the absolute, costs of production which govern the geographical division of labour.3  When the same principle is applied to the personal division of labour it is found that the individual enjoys an advantage in co-operating not only with people superior to himself in this or that capacity but also with those who are inferior to himself in every relevant way. If, through his superiority to B, A needs three hours’ labour for the production of one unit of commodity p compared with B’s five, and for the production of commodity q two hours against B’s four, then A will gain if he confines his labour to producing q and leaves B to produce p. If each gives sixty hours to producing both p and q, the result of A’s labour is 20p + 30q, of B’s 12p + 15q, and for both together 32p + 45q. If however, A confines himself to producing q alone he produces sixty units in 120 hours, whilst B, if he confines himself to producing p, produces in the same time twenty-hour units. The result of the activity is then 24p + 60q, which, as p has for A a substitution value of 3:2q and for B one of 5:4q, signifies a larger production than 32p + 45q. Therefore it is obvious that every expansion of the personal division of labour brings advantages to all who take part in it. He who collaborates with the less talented, less able, and less industrious individuals gains an advantage equally as the man who associated with the more talented, more able, and more industrious. The advantage of the division of labour is mutual; it is not limited to the case where work is done which the solitary individual could never have carried out.

The greater productivity of work under the division of labour is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare, rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals.4

• 1Durkheim (De la division du travail social, Paris 1893, p. 294 et seq.) endeavours (following Comte and against Spencer) to prove that the division of labour prevails not because, as the economists think, it increases output but as a result of the struggle for existence. The denser the social mass the sharper the struggle for existence. This forces individuals to specialize in their work, as otherwise they would not be able to maintain themselves. But Durkheim overlooks the fact that the division of labour makes this possible only because it makes labour more productive. Durkheim comes to reject the theory of the importance of the greater productivity in the division of labour through a false conception of the fundamental idea of utilitarianism and of the law of the satiation of wants (op. cit., 218 et seq., 257 et seq.). His view that civilization is called forth by changes in the volume and density of society is untenable. Population grows because labour becomes more productive and is able to nourish more people, not vice versa.
• 2On the important part played by the local variety of productive conditions in the origin of the division of labour see von der Steinen, Unter den Naturvölkern Zentralbrasiliens, 2nd Edition, Berlin 1897, p. 196 et seq.
• 3Ricardo, Principles of Political Economy and Taxation, p. 76 et seq.; Mill, Principles of Political Economy, p. 348 et seq.; Bastable, The Theory of International Trade, 3rd Edition, London 1900, p. 16 et seq.
• 4‘Trade makes the human race, which originally has only the unity of the species, into a really unitary society’ (Steinthal, Allgemeine Ethik, Berlin 1885, p. 208). Trade, however, is nothing more than a technical aid of the division of labour. On the division of labour in the sociology of Thomas Aquinas see Schreiber. Die volkwirtschaftlichen Anschauungen der Scholastik seit Thomas von Aquin, Jena 1913, p. 19 et seq.

Organism and organization are as different from each other as life is from a machine, as a flower which is natural from one which is artificial. In the natural plant each cell lives its own life for itself while functioning reciprocally with the others. What we call living is just this self-existence and self-maintenance. In the artificial plant the separate parts are members of the whole only as far as the will of he who united them, has been effective. Only to the extent to which this will is effective are the part within the organization inter-related. Each part occupies only the place given to it, and leaves that place, so to speak, only on instructions. Within this framework the parts can live, that is, exist for themselves, only in so far as the creator has put them alive into his creation. The horse which the driver has harnessed to the cart lives as a horse. In the organization, the ‘team’, the horse is just as foreign to the vehicle as is an engine to the car it drives. The parts may use their life in opposition to the organization, as, for instance, when the horse runs away with the carriage or the tissue out of which the artificial flower is made disintegrates under chemical action. Human organization is no different. Like society it is a result of will. But in this case the will no more produces a living social organism than the flower-maker produces a living rose. The organization holds together as long as the creating will is effective, no longer. The parts which compose the organization merge into the whole only so far as the will of the creator can impose itself upon them and their life can be fixed in the organization. In the battalion on parade there is one will, the will of the commander. Everything else so far as it functions within the organization is lifeless machinery. In this destruction of the will, or that portion of it which does not serve the purposes of the body of troops, lies the essence of military drill. The soldier in the phalangial order, fighting in line, in which the body of troops must be nothing more than an organization — is drilled. Within the mass there is no life. Whatever life the individual lives is by the side of, or outside the body of troops — against it perhaps, but never in it. Modern warfare, based on the skirmisher’s personal enterprise, has to make use of the individual soldier, of his thought and his will. So the army no longer simply drills the soldier. It seeks to educate him.

Organization is an association based on authority, organism is mutuality. The primitive thinker always sees things as having been organized from outside, never as having grown themselves, organically. He sees the arrow which he has carved, he knows how it came into existence and how it was set in motion. So he asks of everything he sees, who made it and who sets it in motion. He inquires after the creation of every form of life, the authors of every change in nature, and discovers an animistic explanation. Thus the Gods are born. Man sees the organized community with its contrast of rulers and ruled, and, accordingly, he tries to understand life as an organization, not as an organism. Hence the ancient conception of the head as the master of the body, and the use of the same term ‘head’ for the chief of the organization.

In recognizing the nature of the organism and sweeping away the exclusiveness of the concept of organization, science made one of its great steps forward. With all deference to earlier thinkers one may say that in the domain of Social Science this was achieved mainly in the eighteenth century, and that Classical Political Economy and its immediate precursors played the chief part. Biology took up the good work, flinging off all animistic and vitalistic beliefs. For modern biology the head is no longer the crown, the ruler of the body. In the living body there is no longer leader and followers, a contrast of sovereign and subjects, of means and purpose. There are only members, organs.

To seek to organize society is just as crazy as it would be to tear a living plant to bits in order to make a new one out of the dead parts. An organization of mankind can only be conceived after the living social organism has been killed. The collectivist movements are therefore fore-doomed to failure. It may be possible to create an organization embracing all mankind. But this would always be merely an organization, side by side with which social life would continue. It could be altered and destroyed by the forces of social life, and it certainly would be destroyed from the moment it tried to rebel against these forces. To make Collectivism a fact one must first kill all social life, then build up the collectivist state. The Bolshevists are thus quite logical in wishing to dissolve all traditional social ties, to destroy the social edifice built up through countless centuries, in order to erect a new structure on the ruins. Only they overlook the fact that isolated individuals, between whom no kind of social relations exist, can no longer be organized.

Organizations are possible only as long as they are not directed against the organic or do it any injury. All attempts to coerce the living will of human beings into the service of something they do not want must fail. An organization cannot flourish unless it is founded on the will of those organized and serves their purposes.

Society is not mere reciprocity. There is reciprocity amongst animals, for example when the wolf eats the lamb or when the wolf and she-wolf mate. Yet we do not speak of animal societies or of a society of wolves. Wolf and lamb, wolf and she-wolf, are indeed members of an organism —the organism of Nature. But this organism lacks the specific characteristic of the social organism: it is beyond the reach of will and action. For the same reason, the relation between the sexes is not, as such, a social relation. When a man and a woman come together they follow the law which assigns to them their place in Nature. Thus far they are ruled by instinct. Society exists only where willing becomes a co-willing and action co-action. To strive jointly towards aims which alone individuals could not reach at all, or not with equal effectiveness — that is society.1

Therefore, Society is not an end but a means, the means by which each individual member seeks to attain his own ends. That society is possible at all is due to the fact that the will of one person and the will of another find themselves linked in a joint endeavour. Community of work springs from community of will. Because I can get what I want only if my fellow citizen gets what he wants, his will and action become the means by which I can attain my own end. Because my willing necessarily includes his willing, my intention cannot be to frustrate his will. On this fundamental fact all social life is built up.2

The principle of the division of labour revealed the nature of the growth of society. Once the significance of the division of labour had been grasped, social knowledge developed at an extraordinary pace, as we see from a comparison between Kant and those who came after him. The doctrine of the division of labour as put foward by eighteenth-century economists, was far from fully developed when Kant wrote. It had yet to be made precise by the Ricardian Theory of International Trade. But the Doctrine of the Harmony of Interests had already anticipated its far-reaching application to social theory. Kant was untouched by these ideas. His only explanation of society, therefore, is that there is an impulse in human beings to form a society, and a second contrary impulse that seeks to split up society. The antagonism of these two tendencies is used by Nature to lead men towards the ultimate goal to which it wishes to lead them.3  It is difficult to imagine a more threadbare idea than such an attempt to explain society by the interplay of two impulses, the impulse ‘to socialize oneself and the impulse ‘to isolate oneself. Obviously it goes no farther than the attempt to explain the effects of opium from the virtus dormitiva, cuius est natura sensus assupire.

Once it has been perceived that the division of labour is the essence of society, nothing remains of the antithesis between individual and society. The contradiction between individual principle and social principle disappears.

• 1Therefore, too, one must reject the idea of Guyau, which derives the social bond directly from bi-sexuality. (Guyau, Sittlichkeit ahne Pflicht, translated by Schwarz, Leipzig 1909, p. 113 et seq.)
• 2Fouillée argues as follows against the utilitarian theory of society, which calls society a ‘moyen universal’ (Belot): ‘Tout moyen n’a qu’une valeur provisoire; le jour ou un instrument dont je me servais me devient inutile ou nuisible, je le mets de côté. Si la société n’est qu’un moyen, le jour òu, exceptionellement, elle se trouvera contraire À mes fins, je me delivrerai des lois sociales et moyens sociaux.... Aucune considération sociale ne pourra empêcher la revolte de l’individu tant qu’on ne lui aura pas montré que la societé est établie pour des fins qui sont d’abord et avant tout ses vraies fins à lui-même et qui, de plus, ne sont pas simplement des fins de plaisir ou d’intérêt, I’intérêt n’étant que le plaisir différé et attendu pour l’avenir... L’idée d’intérêt est précisément ce qui divise les hommes, malgré les rapprochements qu’elle peut produire lorsqu’il y a convergence d’intérêts sur certains points.’ Fouillée, Humanitaires et libertaires au point de vue sociologique et moral, Paris 1914, p. 146 et seq.; see also Guyau, Die englische Ethik der Gegenwart, translated by Peusner, Leipzig 1914, p. 372, et seq. Fouillée does not see that the provisional value which society gets as a means, lasts as long as the conditions of human life, given by nature, continue unchanged and as long as man continues to recognize the advantages of human co-operation. The ‘eternal’, not merely provisional, existence of society follows from the eternity of the conditions on which it is built up. Those in power may demand of social theory that it should serve them by preventing the individual from revolting against society, but this is by no means a scientific demand. Besides no social theory could, as easily as the utilitarian, induce the social individual to enrol himself voluntarily in the social union. But when an individual shows that he is an enemy of society there is nothing left for society to do but make him harmless.
• 3Kant, Idee zu einer allgemeinen Geschichte in weltbürgerlicher Absicht (collected works, Vol. I), p. 227 et seq.

In so far as the individual becomes a social being under the influence of blind instinct, before thought and will are fully conscious, the formation of society cannot be the subject of sociological inquiry But this does not mean that Sociology must shift the task of explaining the origins of society on to another science, accepting the social web of mankind as a given fact. For if we decide — and this is the immediate consequence of equating society and division of labour — that the structure of society was incomplete at the appearance of the thinking and willing human being and that the constructive process is continuous throughout history, then we must seek a principle which makes this evolution intelligible to us. The economic theory of the division of labour gives us this principle. It has been said that the happy accident which made possible the birth of civilization was the fact that divided labour is more productive than labour without division. The division of labour extends by the spread of the realization that the more labour is divided the more productive it is. In this sense the extension of the division of labour is economic progress: it brings production nearer to its goal — the greatest possible satisfaction of wants, and this progress is sociological progress also, for it involves the intensification of the social relation.

It is only in this sense, and if all teleological or ethical valuation is excluded, that it is legitimate to use the expression ‘progress’ sociologically in historical inquiry. We believe that we can observe a certain tendency in the changes of social conditions and we examine each single change separately, to see whether and how far this assumption is compatible with it. It may be that we make various assumptions of this kind, each of which corresponds in like measure to experience. The problem next arises of the relations between these assumptions, whether they are independent of each other or whether they are connected internally. We should then have to go further, and define the nature of the connection. But all that this amounts to is a study, free from valuation and based on a hypothesis, of the course of successive changes.

If we disregard those theories of evolution that are naively built up on value judgments, we shall find, in the majority of the theories claiming to interpret social evolution, two outstanding defects which render them unsatisfactory. The first is that their evolutionary principle is not connected with society as such. Neither Comte’s law of the three stages of the human mind nor Lamprecht’s five stages of social-psychical development gives any clue to the inner and necessary connection between evolution of the mind and evolution of society. We are shown how society behaves when it has entered a new stage, but we want to know more, namely by what law society originates and transforms itself. The changes which we see as social changes are treated by such theories as facts acting on society from outside; but we need to understand them as the workings of a constant law. The second defeat is that all these theories are ‘stage’ theories (Stufentheorien). For the stage-theories there is really no such thing as evolution, that is, no continuous change in which we can recognize a definite trend. The statements of these theories do not go beyond establishing a definite sequence of events; they give no proof of the causal connection between the stages constituting the sequence. At best they succeed in establishing parallels between the sequence of events in different nations. But it is one thing to divide human life into childhood, youth, maturity, and old age, it is another to reveal the law which governs the growth and decay of the organism. A certain arbitrariness attaches to every theory of stages. The delimitation of the stages always fluctuates.

Modern German economic history has undoubtedly done right in making the division of labour the basis of its theory of evolution. But it has not been able to free itself from the old traditional scheme of development by stages. Its theory is still a stage-theory. Thus Bücher distinguishes the stage of the closed domestic economy (pure production for one’s own use, barterless economy), the stage of town economy (production for clients, the stage of direct exchange), and the stage of national economy (production for markets, the stage of the circulation of goods).1  Schmoller differentiates the periods of village economy, town economy, territorial economy, and state economy.2  Philippovich distinguishes closed domestic economy and trade economy, and within trade economy he finds the period of the locally limited trade, the period of trade controlled by the state and limited to the state area, and the period of free trade (developed national economy, Capitalism).3  Against these attempts to force evolution into a general scheme many grave objections have been raised. We need not discuss what value such classification may have in revealing the characteristics of clearly defined historical epochs and how far they may be admitted as aids to description. At any rate they should be used with great discretion. The barren dispute over the economic life of the nations of antiquity shows how easily such classifying may lead to our mistaking the shadow of scholastic word-splitting for the substance of historical reality. For sociological study the stage-theories are useless.4  They mislead us in regard to one of the most important problems of history — that of deciding how far historical evolution is continuous. The solution of this problem usually takes the form either of an assumption, that social evolution — which it should be remembered is the development of the division of labour — has moved in an uninterrupted line, or by the assumption that each nation has progressed step-by-step over the same ground. Both assumptions are beside the point. It is absurd to say that evolution is uninterrupted when we can clearly discern periods of decay in history, periods when the division of labour has retrogressed. On the other hand, the progress achieved by individual nations by reaching a higher stage of the division of labour is never completely lost. It spreads to other nations and hastens their evolution. The fall of the ancient world undoubtedly put back economic evolution for centuries. But more recent historical research has shown that the ties connecting the economic civilization of antiquity with that of the Middle Ages were much stronger than people used to assume. The Exchange Economy certainly suffered badly under the storm of the great migration of peoples, but it survived them. The towns on which it depended, were not entirely ruined, and a link was soon made between the remnants of town-life and the new development of traffic by barter.5  In the civilization of the towns a fragment of the social achievements of antiquity was preserved and carried over into the life of the Middle Ages.

Progress in the division of labour depends entirely on a realization of its advantages, that is, of its higher productivity. The truth of this first became fully evident through the free-trade doctrines of the physiocrats and the classical eighteenth-century political economy. But in rudiments it is found in all arguments favouring peace, wherever peace is praised, or war condemned. History is a struggle between two principles, the peaceful principle, which advances the development of trade, and the militarist-imperialist principle, which interprets human society not as a friendly division of labour but as the forcible repression of some of its members by others. The imperialistic principle continually regains the upper hand. The liberal principle cannot maintain itself against it until the inclination for peaceful labour inherent in the masses shall have struggled through to full recognition of its own importance as a principle of social evolution. Wherever the imperialistic principle is in force peace can only be local and temporary: it never lasts longer than the facts which created it. The mental atmosphere with which Imperialism surrounds itself is little suited to the promotion of the growth of the division of labour within state frontiers; it practically prohibits the extension of the division of labour beyond the political-military barriers which separate the states. The division of labour needs liberty and peace. Only when the modern liberal thought of the eighteenth century had supplied a philosophy of peace and social collaboration was the basis laid for the astonishing development of the economic civilization of that age — an age branded by the latest imperialistic and socialistic doctrines as the age of crass materialism, egotism and capitalism.

Nothing could be more perverted than the conclusions drawn in this connection by the materialistic conception of history, which represents the development of social ideology as dependent on the stage of technical evolution which has been attained. Nothing is more erroneous than Marx’s well-known saying: ‘The handmill produces a society with feudal lords, the steam-mill a society with industrial capitalists.’6  It is not even formally correct. To try and explain social evolution through the evolution of technique is merely to side-track the problem without in any way solving it. For on such a conception, how are we to explain technical evolution itself?

Ferguson showed that the development of technique depends on social conditions, and that each age gets as far in technique as is permitted by the stages it has reached in the social division of labour.7  Technical advances are possible only where the division of labour has prepared the way for their application. The mass manufacturing of shoes presupposes a society in which the production of shoes for hundreds of thousands or millions of human beings can be united in a few enterprises. In a society of self-sufficing peasants there is no possible use for the steam mill. Only the division of labour could inspire the idea of placing mechanical forces at the service of manufacture.8

To trace the origin of everything concerned with society in the development of the division of labour has nothing in common with the gross and naive materialism of the technological and other materialistic theories of history. Nor does it by any means signify, as disciples of the idealistic philosophy are apt to maintain, an inadmissible limitation of the concept of social relations. Neither does it restrict society to the specifically material. That part of social life which lies beyond the economic is indeed the ultimate aim, but the ways which lead to it are governed by the law of all rational action; wherever they come into question there is economic action.

• 1Bücher, Die Entstehung der Volkswirtschaft, Erste Sammlung, 10th Edition, Tubingen 1917, p. 91.
• 2Schmoller, Grundriss der allgemeinen Volkswirtschaftslehre, 13, u. 14 Tausend, München 1920, Vol. II, p. 760 et seq.
• 3Philippovich, Grundriss der politischen Ökonormie, Vol I, 11th Edition, Tubingen 1916, p. II et seq.
• 4On the stages theory see also my Grundprobleme der Nationalökonomie, Jena 1933, p. 106 et seq.
• 5Dopsch, Wirtschaftliche und soziale Grundlagen der europäischen Kulturentwicklung, Vienna 1918, Vol. I, p. 91 et seq.
• 6Marx, Das Elend der Philosophie, p. 91. In the formulations which Marx later on gave to his conception of history he avoided the rigidity of this earliest version. Behind such indefinite expressions as ‘productive forces’ and ‘conditions of production’ are hidden the critical doubts which Marx may meanwhile have experienced. But obscurity, opening the way to multitudinous interpretations, does not make an untenable theory tenable.
• 7Ferguson, Abhandlung über die Geschichte der bürgerlichen Gesellschaft, translated by Dorn, Jena 1904, p. 237 et seq.; also Barth, Die Philosophie der Geschichte als Soziologie, 2nd Edition, Leipzig 1915, Part I, p. 578 et seq.
• 8All that remains of the materialist conception of history, which appeared with the widest possible claims, is the discovery that all human and social action is decisively influenced by the scarcity of goods and the disutility of labour. But the Marxists can least admit just this, for all they say about the future socialist order of society disregards these two economic conditions.

The most important effect of the division of labour is that it turns the independent individual into a dependent social being. Under the division of labour social man changes, like the cell which adapts itself to be part of an organism. He adapts himself to new ways of life, permits some energies and organs to atrophy and develops others. He becomes one-sided. The whole tribe of romantics, the unbending laudatores temporis acti, have deplored this fact. For them the man of the past who developed his powers ‘harmoniously’ is the ideal: an ideal which alas no longer inspires our degenerate age. They recommend retrogression in the division of labour, hence their praise of agricultural labour, by which they always mean the almost self-sufficing peasant.1

Here, again the modern socialist outdoes the rest. Marx promises that in the higher phase of the communist society ‘the enslaving subjection of individuals under the division of labour, and with this also the contrast between mental and bodily labour, shall have disappeared.’2  Account will be taken of the human ‘need for change’. ‘Alternation of mental and bodily labour’ will ‘safeguard man’s harmonious development.’3

We have already dealt with this illusion.4  Were it possible to achieve all human aims with only that amount of labour which does not itself cause any discomfort but at the same time relieves the sensation of displeasure that arises from doing nothing, then labour would not be an economic object at all. To satisfy needs would not be work but play. This, however, is not possible. Even the self-sufficient worker, for the most part, must labour far beyond the point where the effort is agreeable. One may assume that work is less unpleasant to him than to the worker who is tied to a definite task, as he finds at the beginning of each job he tackles fresh sensations of pleasure in the activity itself. If, nevertheless, man has given himself up more and more to the division of labour, it is because he has recognized that the higher productivity of labour thus specialized more than repays him for the loss of pleasure. The extent of the division of labour cannot be curtailed without reducing the productivity of labour. This is true of all kinds of labour. It is an illusion to believe that one can maintain productivity and reduce the division of labour.

Abolition of the division of labour would be no remedy for the injuries inflicted on the individual, body and soul, by specialized labour, unless we are prepared to set back social development. It is for the individual himself to set about becoming a complete human being. The remedy lies in reforming consumption, not in ‘reforming’ labour. Play and sport, the pleasure of art, reading are the obvious way of escape.

It is futile to look for the harmoniously developed man at the outset of economic evolution. The almost self-sufficient economic subject as we know him in the solitary peasant of remote valleys shows none of that noble, harmonious development of body, mind, and feeling which the romantics ascribe to him. Civilization is a product of leisure and the peace of mind that only the division of labour can make possible. Nothing is more false than to assume that man first appeared in history with an independent individuality and that only during the evolution which led to the Great Society did he lose, together with material freedom, his spiritual independence. All history, evidence and observation of the lives of primitive peoples is directly contrary to this view. Primitive man lacks all individuality in our sense. Two South Sea Islanders resemble each other far more closely than two twentieth-century Londoners. Personality was not bestowed upon man at the outset. It has been acquired in the course of evolution of society.5

• 1Adam Müller says about ‘the vicious tendency to divide labour in all branches of private industry and in government business too,’ that man needs ‘an all round, I might say a sphere-round field of activity.’ If the ‘division of labour in large cities or industrial or mining provinces cuts up man, the completely free man, into wheels, rollers, spokes, shafts, etc., forces on him an utterly one-sided scope in the already one-sided field of the provisioning of one single want, how can one then demand that this fragment should accord with the whole complete life and with its law, or with legality; how should the rhombuses, triangles, and figures of all kinds accord separately with the great sphere of political life and its law?’ (See Adam Muller, Ausgewählte Abhandlungen, edited by Baxa, Jena 1921, p. 46 et seq.)
• 2Marx, Kritik des sozialdemokratischen Programms, ibid, p. 17. Innumerable passages in his writings show how falsely Marx conceived the nature of labour in industry. Thus he thought also that ‘the division of labour in the mechanical factory’ is characterized by ‘having lost every specialized character... The automatic factory abolishes the specialist and the one-track mind.’ And he blames Proudhon, ‘who did not understand even this one revolutionary side of the automatic factory.’ (Marx, Das Elend der Philosophie, p. 129.)
• 3Bebel, Die Frau und der Sozialismus, p. 283 et seq.
• 4See above p. 166 et seq.
• 5Durkheim, De la division du travail social, p. 452 et seq.

Social evolution — in the sense of evolution of the division of labour — is a will-phenomenon: it depends entirely on the human will. We do not consider whether one is justified in regarding every advance in the division of labour and hence in the intensification of the social bond, as a rise to a higher stage; we must ask whether such a development is a necessary phenomenon. Is an ever greater development of society the content of history? Is it possible for society to stand still or retrogress?

We must reject a priori any assumption that historical evolution is provided with a goal by any ‘intention’, or ‘hidden plan’ of Nature, such as Kant imagined and Hegel and Marx had in mind; but we cannot avoid the inquiry whether a principle might not be found to demonstrate that continuous social growth is inevitable. The first principle that offers itself to our attention is the principle of natural selection. More highly developed societies attain greater material wealth than the less highly developed; therefore they have more prospect of preserving their members from misery and poverty. They are also better equipped to defend themselves from the enemy. One must not be misled by the observation that richer and more civilized nations were often crushed in war by nations less wealthy and civilized. Nations in an advanced stage of social evolution have always been able at least to resist a superior force of less developed nations. It is only decaying nations, civilizations inwardly disintegrated, which have fallen a prey to nations on the up grade. Where a more highly organized society has succumbed to the attack of a less developed people, the victors have in the end been culturally submerged, accepting the economic and social order, and even the language and faith of the conquered race.

The superiority of the more highly developed societies lies not only in their material welfare but also quantitatively in the number of their members and qualitatively in the greater solidity of their internal structure. For this, precisely, is the key to higher social development: the widening of the social range, the inclusion in the division of labour of more human beings and its stronger grip on each individual. The more highly developed society differs from the less developed in the closer union of its members; this precludes the violent solution of internal conflict and forms externally a closed defensive front against any enemy. In less developed societies, where the social bond is still weak, and between the separate parts of which there exists a confederation for the purposes of war rather than true solidarity based on joint work and economic co-operation — disagreement breaks out more easily and more quickly than in highly developed societies. For the military confederation has no firm and lasting hold upon its members. By its very nature it is merely a temporary bond which is upheld by the prospect of momentary advantage, but dissolves as soon as the enemy has been defeated and the scramble for the booty sets in. In fighting against the less developed societies the more developed ones have always found that their greatest advantage lay in the lack of unity in the enemy’s ranks. Only temporarily do the nations in a lower state of organization manage to co-operate for great military enterprises. Internal disunity has always dispersed their armies quickly. Take for example the Mongol raids on the Central European civilization of the thirteenth century or the efforts of the Turks to penetrate into the West. The superiority of the industrial over the military type of society, to use Herbert Spencer’s expression, consists largely in the fact that associations which are merely military always fall to pieces through internal disunity.1

But there is another circumstance which advances further social development. It has been shown that it is to the interest of all members of society that the social range should be extended. For a highly developed social organism it is by no means a matter of indifference whether or not nations outside its range continue to lead a self-sufficient existence on a lower plane of social evolution. It is to the interest of the more advanced organism to draw the less advanced into the area of its economic and social community, even though its persistence in remaining on a lower plane makes it politically and militarily innocuous, and even though no immediate advantages are likely to accrue from the occupation of its territory, in which, presumably, the natural conditions of production are unfavourable. We have seen that it is always an advantage to widen the range of workers in a society that divides labour, so that even a more efficient people may have an interest in co-operating with a less efficient. This is what so often drives nations of a high social development to expand their field of economic activity by absorbing hitherto inaccessible territories. The opening up of the backward regions of the Near and Far East, of Africa and America, cleared the way for a world-wide economic community, so that shortly before the World War we were in sight of realizing the dream of an oecumenical society. Has the war merely interrupted this development for a brief period or has it utterly destroyed it? Is it conceivable that this development can cease, that society can even retrogress?

This problem cannot be approached except in connection with another: the problem of the death of nations. It is customary to talk of nations ageing and dying, of young and old communities. The comparison is lame — as are all comparisons — and in discussing such things we are well advised to discard metaphorical phrases. What is the core of the problem that here presents itself?

It is clear that we must not confuse it with another not less difficult problem, the problem of the changes of the national quality. A thousand or fifteen hundred years ago the Germans spoke a different language from that of to-day, but we should not think of saying, on that account, that German medieval culture was ‘dead’. On the contrary we see in the German culture an uninterrupted evolutionary chain, stretching (without mentioning lost monuments of literature) from the ‘Heliand’, and Otfried’s Gospels to the present day. We do indeed say of the Pomeranians and Prussians, who in the course of centuries have been assimilated by the German colonists, that they have died out, yet we shall hardly maintain that as nations they grew ‘old’. To carry through the simile one would have to talk of nations that had died young. We are not concerned with national transformation; our problem is different. Neither does the decay of states come into the question, for this phenomenon sometimes appears as a sequence to the ageing nations and sometimes independently of it. The fall of the ancient state of Poland had nothing to do with any decay of Polish civilization or of the Polish people. It did not stop the social development of Poland.

The facts which are present in practically all the examples brought forward of the ageing of a culture are: a decline in population, a diminution of welfare, and the decay of the towns. The historical significance of all these phenomena becomes clear as soon as we conceive of the ageing of nations as the retrogression of the social division of labour and of society. The decline of the ancient world for instance, was a social retrogression. The decline of the Roman Empire was only a result of the disintegration of ancient society which after reaching a high level of division of labour sank back into an almost moneyless economy. Thus towns were depopulated and thus, also, did the population of the countryside diminish and want and misery set in simply because an economic order working on a lower level in respect of the social division of labour is less productive. Technical skill was gradually lost, artistic talent decayed, scientific thought was slowly extinguished. The word which most aptly describes this process is disintegration. The Classical culture died because Classical society retrogressed.2

The death of nations is the retrogression of the social relation, the retrogression of the division of labour. Whatever may have been the cause in individual cases, it has always been the cessation of the disposition to social co-operation which actually effected the decline. This may once have seemed an incomprehensible riddle to us, but now that we watch with terror the process at work in our own experience we come nearer to understanding it, though we still fail to recognize the deepest, most ultimate causes of the change.

It is the social spirit, the spirit of social co-operation, which forms, develops, and upholds societies. Once it is lost, the society falls apart again. The death of a nation is social retrogression, the decline from the division of labour to self-sufficiency. The social organism disintegrates into the cells from which it began. Man remains, but society dies.3

There is no evidence that social evolution must move steadily upwards in a straight line. Social standstill and social retrogression are historical facts which we cannot ignore. World history is the graveyard of dead civilizations, and in India and Eastern Asia we see large-scale examples of civilization at a standstill.

Our literary and artistic cliques whose exaggerated opinion of their own trifling productions contrast so vividly with the modesty and self-criticism of the really great artists, say that it does not matter much whether economic evolution continues so long as inner culture is intensified. But all inner culture requires external means for its realization, and these external means can be attained only by economic effort. When the productivity of labour decays through the retrogression of social co-operation the decay of inner culture follows.

All the older civilizations were born and grew up without being fully conscious of the basic laws of cultural evolution and the significance of division of labour and co-operation. In the course of their development they had often to combat tendencies and movements inimical to civilization. Often they triumphed over these, but sooner or later they fell. They succumbed to the spirit of disintegration. Through the social philosophy of Liberalism men became conscious of the laws of social evolution for the first time, and for the first time clearly recognized the basis of civilization and cultural progress. Those were days when hopes for the future ran high. Unimagined vistas seemed to be opening up. But it was not to be. Liberalism had to meet the opposition of militaristic-nationalist and, above all, of socialist-communist doctrines which tended to bring about social dissolution. The nationalist theory calls itself organic, the socialist theory calls itself social, but in reality both are disorganizing and anti-social in their effect.

Of all accusations against the system of Free Trade and Private Property, none is more foolish than the statement that it is antisocial and individualistic and that it atomizes the body social. Trade does not disintegrate, as romantic enthusiasts for the autarky of small portions of the earth’s surface assert; it unites. The division of labour is what first makes social ties: it is the social element pure and simple. Whoever advocates the economic self-sufficiency of nations and states, seeks to disintegrate the oecumenical society; whoever seeks to destroy the social division of labour within a nation by means of class war is anti-social.

A decline of the oecumenical society, which has been slowly forming itself during the last two hundred years under the influence of the gradual germination of the liberal idea, would be a world catastrophe absolutely without parallel in history as we know it. No nation would be spared. Who then would rebuild the shattered world?

• 1The romantic-militarist notion of the military superiority of the nations which have made little progress in Capitalism, completely refuted afresh by the World War, arises from the view that what tells in a fight is man’s physical strength alone. This, however, is not completely true, even of the fights of the Homeric Age. Not physical but mental power decides a fight. On these mental powers depend the fighters’ tactics and the way he is armed. The A B C of the art of warfare is to have the superiority at the decisive moment, though otherwise one may be numerically weaker than the enemy. The A B C of the preparation for war is to set up armies as strong as possible and to provide them with all war materials in the best way. One has to stress this only because people are again endeavouring to obscure these connections, by trying to differentiate between the military and economic-political causes of victory and defeat in war. It always has been and always will be the fact, that victory or defeat are decided by the whole social position of the combatants before their armies meet in battle.
• 2On the decline of Ancient Greek Civilization see Pareto, Les Systèmes Socialistes, Paris 1902, Vol. I, p. 155 et seq.
• 3Izoulet, La Cité moderne, p. 488 et seq.

The division of individuals into owners and non-owners is an outcome of the division of labour.

The second great sociological achievement of Classical Political Economy and the ‘individualistic’ social theory of the eighteenth century was to recognize the social function of private property. From the older point of view property was always considered more or less a privilege of the Few, a raid upon the common stock, an institution regarded ethically as an evil, if sometimes as an inevitable one. Liberalism was the first to recognize that the social function of private ownership in the means of production is to put the goods into the hands of those who know best how to use them, into the hands, that is, of the most expert managers. Nothing therefore is more foreign to the essence of property than special privileges for special property and protection for special producers. Any kind of constraint such as exclusive rights and other privileges of producers, are apt to obstruct the working of the social function of property. Liberalism fights such institutions as vigorously as it opposes every attempt to limit the freedom of the worker.

The owner takes nothing away from anyone. No one can say that he goes short because of another’s abundance. It is flattering the envious instincts of the masses to give them a calculation of how much more the poor man would have to dispose of, if property were equally distributed. What is overlooked is the fact that the volume of production and of the social income are not fixed and unchangeable but depend essentially upon the distribution of property. If this is interfered with, there is danger that property may fall into the hands of those not so competent to maintain it, those whose foresight is less, whose disposal of their means is less productive; this would necessarily reduce the amount produced.1  The ideas of distributive Communism are atavistic, harking back to the times before social relations existed or reached their present stage of development, when the yield of production was correspondingly much lower. The landless man of an economic order based on production without exchange is quite logical in making the redistribution of fields the goal of his ambition. But the modern proletarian misunderstands the nature of social production when he hankers after a similar redistribution.

Liberalism combats the socialist ideal of transferring the means of production to the hands of organized society with the argument that socialist production would give a lower yield. Against this the Socialism of the Hegelian school seeks to prove that the evolution of history leads inevitably to the abolition of private ownership in the means of production.

It was the view of Lassalle that ‘the course of all legal history consists, generally speaking, in an ever greater limitation of the property of the individual, and in placing more and more objects outside private ownership.’ The tendency to enlarge the freedom of property which is read into historical evolution is only apparent. However much the ‘idea of the increasingly rapid reduction of the sphere of private property as a principle working in the cultural and historical development of law could be held to be paradoxical’, yet, according to Lassalle it survived the most detailed examination. Unfortunately Lassalle produced no details of the examination of this idea. According to his own words he ‘honoured it (the idea) with a few very superficial glances instead’.2 Neither has anyone since Lassalle’s time undertaken to provide a proof. But even if the attempt had been made, this fact would by no means have demonstrated the necessity of the development in question. The conceptual constructions of speculative jurisprudence steeped in the Hegelian spirit serve at best to exhibit historical tendencies of evolution in the past. That the evolutionary tendency thus discovered must necessarily continue to develop is a thoroughly arbitrary assumption. Only if it could be shown that the force behind evolution was still active would the hypothetical proof which is needed be adduced. The Hegelian Lassalle did nothing of the kind. For him, the matter is disposed of when he realizes ‘that this progressive reduction of the sphere of private property is based on nothing else than the positive development of human liberty’.3  Having fitted his law of evolution into the great Hegelian scheme of historical evolution, he had done all that his school could ask.

Marx saw the faults in the Hegelian scheme of evolution. He too holds it to be an indisputable truth that the course of history leads from private property to common property. But unlike Hegel and Lassalle he does not deal with the idea of property and the juristic concept of property. Private property ‘in its political-economic tendencies’ is drifting towards its dissolution, ‘but only by a development independent of it, of which it is unconscious, which is taking place against its will, and is conditioned by the nature of the question; only by creating the proletariat qua proletariat, the misery that is conscious of its spiritual and physical misery, the dehumanization that is conscious of its dehumanization’.4  Thus the doctrine of the class struggle is introduced as the driving element of historical evolution.

• 1‘The laws, in creating property, have created wealth, but with respect to poverty, it is not the work of the laws — it is the primitive condition of the human race. The man who lives only from day to day, is precisely the man in a state of nature.... The laws, in creating property, have been benefactors to those who remain in the original poverty. They participate more or less in the pleasures, advantages and resources of civilized society.’ Bentham, Principles of the Civil Code (Works edited by Bowring, Edinburgh 1843, Vol. I), p. 309.
• 2Lassalle, Das System der erworbenen Rechte, 2nd Edition, Leipzig 1880, Vol. I, p. 217 et seq.
• 3Lassalle, op. cit., Vol. I, p. 222 et seq.
• 4Marx, Die Heilige Familie (Am dem literarischen Nachlass von Karl Marx, Friedrich Engels und Ferdinand Lassalle, edited by Mehring, Vol. II, Stuttgart 1902, p. 132).

The simplest way to depict the evolution of society is to show the distinction between two evolutionary tendencies which are related to each other in the same way as intension and extension. Society develops subjectively and objectively; subjectively by enlarging its membership, objectively by enlarging the aims of its activities. Originally confined to the narrowest circles of people, to immediate neighbours, the division of labour gradually becomes more general until eventually it includes all mankind. This process, still far from complete and never at any point in history completed, is finite. When all men on earth form a unitary system of division of labour, it will have reached its goal. Side by side with this extension of the social bond goes a process of intensification. Social action embraces more and more aims; the area in which the individual provides for his own consumption becomes constantly narrower. We need not pause at this stage to ask whether this process will eventually result in the specialization of all productive activity.

Social development is always a collaboration for joint action; the social relationship always means peace, never war. Death-dealing actions and war are anti-social.1  All those theories which regard human progress as an outcome of conflicts between human groups have overlooked this truth.

• 1‘La guerre est une dissociation.’ See Novicow, i, Paris 1910, p. 124. See also the refutation of the struggle theories of Gumplowicz, Ratzenhofer, and Oppenheimer by Holsti, The Relation of War to the Origin of the State, Helsingfors 1913, p. 276 et seq.

The individual’s fate is determined unequivocally by his Being. Everything that is has necessarily proceeded from his Becoming, and everything that will be results necessarily from that which is. The situation at any given moment is the consummation of history.1  He who understood it completely would be able to foresee the whole future. For a long time it was thought necessary to exclude human volition and action from the determination of events, for the special significance of ‘imputation’ — that thought-process peculiar to all rational action — had not been grasped. It was believed that causal explanation was incompatible with imputation. This is no longer so. Economics, the Philosophy of Law, and Ethics have cleared up the problem of imputation sufficiently to remove the old misunderstandings.

If, to simplify our study, we analyse the unity we call the individual into certain complexes it must be clearly understood that only the heuristic value of the division can justify our doing so. Attempts to separate, according to external characteristics, what is essentially similar can never survive ultimate examination. Only subject to this admission can we proceed to group the determinants of individual life.

That which man brings into the world at birth, the innate, we call racial inheritance or, for short, the race.2  The innate in man is the precipitate of the history of all his ancestors, their fate, and all their experiences. The life and fate of the individual do not start at birth, but stretch back into the infinite, unimaginable past. The descendant inherits from the ancestors; this fact is outside the sphere of the dispute over the inheritance of acquired characteristics.

After birth, direct experience begins. The individual begins to be influenced by his environment. Together with what is innate, this influence produces the individual’s Being in each moment of his life. The environment is natural in the form of soil, climate, nourishment, fauna, flora, in short, external natural surroundings. It is social in the shape of society. The social forces acting on the individual are language, his position in the process of work and exchange, ideology and the forces of compulsion: unrestrained and ordered coercion. The ordered organization of coercion we call the State.

Since Darwin we have been inclined to regard the dependence of human life on natural environment as a struggle against antagonistic forces. There was no objection to this as long as people did not transfer the figurative expression to a field where it was quite out of place and was bound to cause grave errors. When the formulas of Darwinism, which had sprung from ideas taken over by Biology from Social Science, reverted to Social Science, people forgot what the ideas had originally meant. Thus arose that monstrosity, sociological Darwinism, which, ending in a romantic glorification of war and murder, was peculiarly responsible for the overshadowing of liberal ideas and for creating the mental atmosphere which led to the World War and the social struggles of to-day.

It is well known that Darwin was under the influence of Malthus’s Essay on the Principle of Population. But Malthus was far from believing struggle to be a necessary social institution. Even Darwin, when he speaks of the struggle for existence, does not always mean the destructive combat of living creatures, the life or death struggle for feeding places and females. He often uses the expression figuratively to show the dependence of living beings on each other and on their surroundings.3  It is a misunderstanding to take the phrase quite literally, for it is a metaphor. The confusion is worse confounded when people equate the struggle for existence with the war of extermination between human beings, and proceed to construct a social theory based on the necessity of struggle.

The Malthusian Theory of Population is — what its critics, ignorant of sociology, always overlook — merely a part of the social theory of Liberalism. Only within such a framework can it be understood. The core of liberal social theory is the theory of the division of labour. Only side by side with this can one make use of the Law of Population to interpret social conditions. Society is the union of human beings for the better exploitation of the natural conditions of existence; in its very conception it abolishes the struggle between human beings and substitutes the mutual aid which provides the essential motive of all members united in an organism. Within the limits of society there is no struggle, only peace. Every struggle suspends in effect the social community. Society as a whole, as organism, does fight a struggle for existence against forces inimical to it. But inside, as far as society has absorbed individuals completely, there is only collaboration. For society is nothing but collaboration. Within modern society even war cannot break all social ties. Some remain, though loosened, in a war between states which acknowledge the binding force of International Law. Thus a fragment of peace survives even in wartime.

Private ownership in the means of production is the regulating principle which, within society, balances the limited means of subsistence at society’s disposal with the less limited ability of the consumers to increase. By making the share in the social product which falls to each member of society depend on the product economically imputed to him, that is, to his labour and his property, the elimination of surplus human beings by the struggle for existence, as it rages in the vegetable and animal kingdom, is replaced by a reduction in the birth-rate as a result of social forces. ‘Moral restraint’, the limitations of offspring imposed by social positions, replaces the struggle for existence.

In society there is no struggle for existence. It is a grave error to suppose that the logically developed social theory of liberalism could lead to any other conclusion. Certain isolated phrases in Malthus’s essay, which might be interpreted otherwise, are easily accounted for by the fact that Malthus composed the original incomplete draft of his famous first work before he had completely absorbed the spirit of Classical Political Economy. As proof that his doctrine permits of no other interpretation, it may be pointed out that, before Spencer and Darwin, no one thought of looking on the struggle for existence (in the modern sense of the expression) as a principle active within human society. Darwinism first suggested the theories which regard the struggle of individuals, races, nations, and classes as the basic social element; and it was in Darwinism, which had originated in the intellectual circle of liberal social theory, that people now found weapons to fight the Liberalism they abhorred. In Darwin’s hypothesis, long regarded as irrefutable scientific fact, Marxism,4  Racial Mysticism,5  and Nationalism found, as they believed, an unshakable foundation for their teachings. Modern Imperialism especially relies on the catchwords coined by popular science out of Darwinism.

The Darwinian — or more correctly, pseudo-Darwinian-social theories have never realized the main difficulty involved in applying to social relations their catchwords about the struggle for existence. In Nature it is individuals who struggle for existence. It is exceptional to find in Nature phenomena which could be interpreted as struggles between animal groups. There are, of course, the fights between groups of ants — though here we may be one day obliged to adopt explanations very different from those hitherto accepted.6  A social theory that was founded on Darwinism would either come to the point of declaring that the war of all against all was the natural and necessary form of human intercourse, thus denying that any social bonds were possible; or it would have, on the one hand, to show why peace does and must reign within certain groups and yet, on the other, to prove that the principle of peaceful union which leads to the formation of these associations is ineffective beyond the circle of the group, so that the groups among themselves must struggle. This is precisely the rock on which all non-liberal social theories founder. If one recognizes a principle which results in the union of all Germans, all Dolichocephalians or all Proletarians and forms a special nation, race, or class out of individuals, then this principle cannot be proved to be effective only within the collective groups. The anti-liberal social theories skim over the problem by confining themselves to the assumption that the solidarity of interests within the groups is so self-evident as to be accepted without further discussion, and by taking pains only to prove the existence of the conflict of interests between groups and the necessity of conflict as the sole dynamic force of historical development. But if war is to be the father of all things, the fruitful source of historical progress, it is difficult to see why its fruitful activity should be restricted within states, nations, races, and classes. If Nature needs war, why not the war of all against all, why merely the war of all groups against all groups? The only theory which explains how peace is possible between individuals and how society grows out of individuals is the liberal social theory of the division of labour. But the acceptance of this theory makes it impossible to believe the enmity of collective groups to be necessary. If Brandenburghers and Hanoverians live in society peacefully side by side, why cannot Germans and Frenchmen do so too?

Sociological Darwinism is unable to explain the phenomenon of the rise of society. It is not a social theory, but ‘a theory of unsociability’.7

A fact which clearly exposes the decay of sociological thought in recent decades, is that people now begin to combat sociological Darwinism by pointing to examples of mutual aid (symbiosis) which, Biology has only lately discovered in the vegetable and animal kingdoms. Kropotkin, a defiant antagonist of liberal social theory, who never understood what he rejected and combated, found among animals the rudiments of social ties and set these up in opposition to conflict, contrasting the beneficial principle of mutual aid with the harmful principle of war-to-the-knife.8  Kammerer, a biologist enslaved by the ideas of Marxist Socialism, demonstrated that in addition to conflict the principle of aid dominates life in Nature.9  At this point Biology returns to its starting-point, Sociology. It hands back the principle of divided labour given it by Sociology. It teaches Sociology nothing new, nothing essential that had not been included in the theory of the division of labour as defined by the despised Classical Political Economy.

• 1Taine, Histoire de la littèrature anglaise, Paris 1863, Vol. I, p. xxv.
• 2Ibid. p. xxiii: ‘Ce qu’on appelle la race, ce sont ces dispositions innées et héréditaires que l’homme apporte avec lui à la lumière.’
• 3Hertwig, Zur Abwehr des ethischen, des sozialen und des politischen Darwinismus p. 10 et seq.
• 4Ferri, Sozialismus und moderne Wissenschaft, translated by Kurella, Leipzig 1895, p. 65 et seq.
• 5Gumplowicz, Der Rassenkampf, Innsbruck 1883, p. 176. On Gumplowicz’s dependence on Darwinism see Barth, Die Philosophie der Geschichte ah Soziologie, p. 253. The ‘liberal’ Darwinism is a badly thought out product of an epoch which could no longer grasp the meaning of the liberal social philosophy.
• 6Novicow, La critique du Darwinisme social, p. 45.
• 7Barth, Die Philosophie der Geschichte als Soziologie, p. 243.
• 8Kropotkin, Gegenseitige Hilfe in der Tierund Menschenwelt, German Edition by Landauer, Leipzig 1908, p. 69 et seq.
• 9Kammerer, Genossenschaften von Lebewesen auf Grund gegenseitiger Vorteile, Stuttgart 1913; Kammerer, Allgemeine Biologie, Stuttgart 1915, p. 306; Kammerer, Einzeltod, Völkertod, biologische Unsterblichkeit, Wien 1918, p. 29 et seq.

The social theories which are based on natural law start from the dogma that human beings are equal. Since all men are equal, they are supposed to have a natural claim to be treated as members of society with full rights, and, because everybody has a natural right to live, it would be a violation of right to try to take his life. Thus are formulated the postulates of the all-inclusiveness of society, of equality within society, and of peace. Liberal theory, on the other hand, deduces these principles from utility. To Liberalism the concepts man and social man are the same. Society welcomes as members all who can see the benefit of peace and social collaboration in work. It is to the personal advantage of every individual that he should be treated as a citizen with equal rights. But the man who, ignoring the advantages of peaceful collaboration, prefers to fight and refuses to fit himself into the social order, must be fought like a dangerous animal. It is necessary to take up this attitude against the anti-social criminal and savage tribes. Liberalism can approve of war only as a defence. For the rest it sees in war the anti-social principle by which social co-operation is annihilated.

By confusing the fundamental difference between fighting and competition, the anti-liberal social theories sought to discredit the liberal principle of peace. In the original sense of the word, ‘fight’ means the conflict of men and animals in order to destroy each other. Man’s social life begins with the overcoming of instincts and considerations which impel him to fight to the death. History shows us a constant retreat from conflict as a form of human relations. Fights become less intense and less frequent. The defeated opponent is no longer destroyed; if society can find a way of absorbing him, his life is spared. Fighting itself is bound by rules and is thus somewhat mitigated. Nevertheless war and revolution remain the instruments of destruction and annihilation. For this reason Liberalism never ceases to stress the fact that they are anti-social.

It is merely a metaphor to call competition competitive war, or simply, war. The function of battle is destruction; of competition, construction. Economic competition provides that production shall be carried on in the most rational manner. Here, as everywhere else, its task is the selection of the best. It is a fundamental principle of social collaboration which cannot be thought out of the picture. Even a socialist community could not exist without it in some form, though it might be necessary to introduce it in the guise, say, of examinations. The efficiency of a socialist order of life would depend on its ability to make the competition sufficiently ruthless and keen to be properly selective.

There are three points of comparison which serve to explain the metaphorical use of the word ‘fight’ for competition. In the first place it is clear that enmity and conflict of interests exist between the opponents in a fight as they do between competitors. The hate which a small shopkeeper feels for his immediate competitor may be no less in degree than the hate which a Moslem inspired in a Montenegrin. But the feelings responsible for men’s actions have no bearing on the social function of these actions. What the individual feels does not matter as long as the limits set by the social order inhibit his actions.

The second point of comparison is found in the selective function of both fighting and competition. To what extent fighting is capable of making the best selection is open to question; later we shall show that many people ascribe anti-selective effects to wars and revolutions.1  But because they both fulfil a selective function one must not forget that there is an essential difference between fighting and competition.

The third point of comparison is sought in the consequences which defeat lays on the vanquished. People say that the vanquished are destroyed, not reflecting that they use the word destruction in the one case only figuratively. Whoever is defeated in fight is killed; in modern war, even where the surviving vanquished are spared, blood flows. People say that in the competitive struggle, economic lives are destroyed. This, however, merely means that those who succumb are forced to seek in the structure of the social division of labour a position other than the one they would like to occupy. It does not by any means signify that they are to starve. In the capitalist society there is a place and bread for all. Its ability to expand provides sustenance for every worker. Permanent unemployment is not a feature of free capitalism.

Fighting in the actual original sense of the word is anti-social. It renders co-operation, which is the basic element of the social relation, impossible among the fighters, and where the co-operation already exists, destroys it. Competition is an element of social collaboration, the ruling principle within the social body. Viewed sociologically, fighting and competition are extreme contrasts.

The realization of this provides a criterion for judging all those theories which regard social evolution as a fight between conflicting groups. Class struggle, race conflicts, and national wars cannot be the constructive principle. No edifice will ever rise from a foundation of destruction and annihilation.

• 1See p. 326 of this work.

The most important medium for social co-operation is language. Language bridges the chasm between individuals and only with its help can one man communicate to another something at least of what he is feeling. We need not discuss at this point the wider significance of language in relation to thought and will: how it conditions thought and will and how, without it, there could be no thought but only instinct, no will but only impulse.1  Thought also is a social phenomenon; it is not the product of an isolated mind but of the mutual stimulus of men who strive towards the same aims. The work of the solitary thinker, brooding in retirement over problems which few people trouble to consider, is talk too, is conversation with the residue of thought which generations of mental labour have deposited in language in everyday concepts, and in written tradition. Thought is bound up with speech. The thinker’s conceptual edifice is built on the elements of language.

The human mind works only in language; it is by the Word that it first breaks through from the obscurity of uncertainty and the vagueness of instinct to such clarity as it can ever hope to attain. Thinking and that which is thought cannot be detached from the language to which they owe their origin. Some day we may get a universal language, but certainly not by means of the method employed by the inventors of Volapuk, Esperanto, and other similar devices. The difficulties of a universal language and of the mutual understanding of peoples are not to be solved by hatching out identical combinations of syllables for the terms of every day life and for use by those who speak without overmuch thinking. The untranslatable element in ideas, which vibrates in the words expressing them, is what separates languages quite as much as the variety of sounds in words, which can be transposed intact. If everyone, all the world over, used the same words for ‘waiter’ and ‘doorstep’ we should still not have bridged the gap between languages and nations. But suppose everything expressed in one language could be translated into other languages without losing anything in the process, we should then have achieved unity of language, even though we had not found identical sounds for the syllables. Different languages would then be only different tongues, and our inability to translate a word would no longer impede the passage of thought from nation to nation.

Until that day comes — and it is possible that it never will come — political friction is bound to arise among members of different nations living together with mixed languages, friction that may lead to serious political antagonism.2  Directly or indirectly, these disputes are responsible for the modern ‘hate’ between nations, on which Imperialism is based.

Imperialist theory simplifies its task when it limits itself to proving that conflicts between nations exist. To clinch its arguments it would have to show also that there is a solidarity of interests within the nations. The nationalist-imperialist doctrine made its appearance as a reaction against the oecumenical-solidarism of the Free Trade doctrine. At its advent the cosmopolitan idea of world-citizenship and the fraternity of the nations dominated men’s minds. All that seemed necessary, therefore, was to prove that there were conflicting interests between the various nations. The fact that all the arguments it used to prove the incompatibility of national interests could with equal justification be used to prove the incompatibility of regional interests and finally even of the individual’s personal interests, was quite overlooked. If the Germans suffer from consuming English cloth and Russian corn, the inhabitants of Berlin must, presumably, suffer from consuming Bavarian beer and Rhine wine. If it is not well to let the division of labour pass the frontiers of the state, it would no doubt be best in the end to return to the self-sufficiency of the closed domestic economy. The slogan ‘Away with foreign goods!’ would lead us, if we accepted all its implications, to abolish the division of labour altogether. For the principle that makes the international division of labour seem advantageous is precisely the principle which recommends division of labour in any circumstances.

It is no accident, that of all nations the German people has least sense of national cohesion, and that among all European nations it was the last to understand the idea of a political union in which one state comprises all members of the nation. The idea of national union is a child of Liberalism, of free trade, and of laissez-faire. The German nation, of which important parts are living as minorities in areas settled by people of different tongues, was among the first to learn the disadvantages of nationalistic oppression. This experience led to a negative attitude to Liberalism. But without Liberalism, it lacked the intellectual equipment necessary to overcome the regional particularism of separate groups. It is no accident that the sentiment of national cohesion is in no other people so strongly developed as among the Anglo-Saxons, the traditional home of Liberalism.

Imperialists delude themselves fatally when they suppose it possible to strengthen the cohesion of members of a nation by rejecting cosmopolitanism. They overlook the fact that the basic anti-social element of their doctrine must, if logically applied, split up every community.

• 1Cohen, Ethik des reinen Willens, Berlin 1904, p. 183 et seq.
• 2See my Nation, Staat und Wirtschaft, p. 31 et seq.

Scientific knowledge of the innate qualities of man is still in its infancy. We cannot really say any more about the inherited characteristics of the individual than that some men are more gifted from birth than others. Where the difference between good and bad is to be sought we cannot say. We know that men differ in their physical and psychic qualities. We know that certain families, breeds, and groups of breeds reveal similar traits. We know that we are justified in differentiating between races and in speaking of the different racial qualities of individuals. But so far, attempts to find somatic characteristics of racial relationships have had no result. At one time it was thought that a racial characteristic had been discovered in the cranial index, but now it is clear that those relations between the cranial index and the psychic and mental qualities of the individual on which Lapouge’s anthroposociological school based its system do not exist. More recent measurements have shown that long-headed men are not always blond, good, noble, and cultured, and that the short-headed are not always black, evil, common and uncultured. Amongst the most long-headed races are the Australian aborigines, the Eskimos, and the Kaffirs. Many of the greatest geniuses were round-heads. Kant’s cranial index was 88.1 We have learnt that changes in the cranial index very probably can take place without racial mixture — as the result of the mode of life and geographical environment.2

It is impossible to condemn too emphatically the procedure of the ‘race experts’. They set up criteria of race in an entirely uncritical spirit. More anxious to coin catchwords than to advance knowledge, they scoff at all the standards demanded by scientific thought. But the critics of such dilettantism take their job too lightly in directing their attention solely to the concrete form which individual writers give their theories and to the content of their statements about particular races, their physical characteristics and psychic qualities. Though Gobineau and Chamberlain’s arbitrary and contradictory hypotheses are utterly without foundation and have been pooh-poohed as empty chimeras, there still remains a germ of the race theory which is independent of the specific differentiation between noble and ignoble races.

In Gobineau’s theory the race is a beginning; originating in a special act of creation, it is fitted out with special qualities.3  The influence of environment is estimated to be low: mixture of races creates bastards, in whom the good hereditary qualities of the nobler races deteriorate or are lost. To contest the sociological importance of the race theories, however, it will not suffice to prove that this view is untenable, or to show that race is the outcome of an evolution that has proceeded under the most varied influences. This objection might be overruled by asserting that certain influences, operating over a long period, have bred one race or several, with specially favourable qualities, and that the members of these races had by means of these advantages obtained so long a lead that members of other races could not overtake them within a limited time. In its most modern variations the race theory does, in fact, put forward arguments of this kind. It is necessary to study this form of the race theory and to ask how it stands in relation to the theory of social co-operation which has here been developed.

We see at once that it contains nothing directly inimical to the doctrine of the division of labour. The two are quite compatible. It may be assumed that races do differ in intelligence and will power, and that, this being so, they are very unequal in their ability to form society, and further that the better races distinguish themselves precisely by their special aptitude for strengthening social co-operation. This hypothesis throws light on various aspects of social evolution not otherwise easily comprehensible. It enables us to explain the development and regression of the social division of labour and the flowering and decline of civilizations. We leave it open whether the hypothesis itself and the hypothesis erected on it are tenable. At the moment this does not concern us. We are solely concerned to show that the race theory is easily compatible with our theory of social co-operation.

When the race theory combats the natural law postulate of the equality and equal rights of all men, it does not affect the free trade argument of the liberal school. For Liberalism does not advocate the liberty of the workers for reasons of natural law but because it regards unfree labour — the failure to reward the labourer with the whole produce economically imputed to his labour, and the divorce of his income from the productivity of his labour — as being less productive than free labour. In the race theory there are no arguments to refute free trade theory as to the effects of the expanding social division of labour. It may be admitted that the races differ in talent and character and that there is no hope of ever seeing those difference resolved. Still, free trade theory shows that even the more capable races derive an advantage from associating with the less capable and that social co-operation brings them the advantage of higher productivity in the total labour process.4

The race theory begins to conflict with the liberal social theory at the point where it begins to preach the struggle between races. But it has no better arguments to advance in this connection than those of other militaristic social theories. The saying of Heraclitus that war is the father of all things remains unproven dogma. It, too, fails to demonstrate how the social structure could have grown out of destruction and annihilation. Nay, the race theorists too — in so far as they try to judge unbiased and not simply to follow their sympathy for the ideology of militarism and conflict — have to admit that war has to be condemned precisely from the point of view of selection. Lapouge has pointed out that only in the case of primitive peoples does war lead to the selection of the stronger and more gifted, and that among civilized peoples it leads to a deterioration of the race by unfavourable selection.5  The fit are more likely to be killed than the unfit, who are kept longer, if not altogether, away from the front. Those who survive the war find their power to produce healthy children impaired by the various injuries they have received in the fight.

The results of the scientific study of races cannot in any way refute the liberal theory of social development. Rather they confirm it. The race theories of Gobineau and many others originated in the resentment of a defeated military and noble caste against bourgeois democracy and capitalist economy. For use in the daily politics of modern Imperialism they have taken a form which re-embodies old theories of violence and war. But their critical strictures are applicable only to the catchwords of the old natural law philosophy. They are irrelevant so far as Liberalism is concerned. Even the race theory cannot shake the assertion that civilization is a work of peaceful-co-operation.

• 1Oppenheimer, Die rassentheoretische Geschichtsphilosophie (Verhandlungen des, Zweiten Deutschen Soziologentages, Tubingen 1913), p. 106; also Hertz, Rasse und Kultur 3rd Edition, Leipzig 1925, p. 37; Weidenreich, Rasse und Körperbau, Berlin 1927, p. 133 et seq.
• 2Nystrom, Über die Formenveränderungen des menschlichen Schädels und deren Ursachen (Archiv für Anthropologic, Vol. XXVII, p. 321 et seq.; p. 630 et seq.).
• 3Oppenheimer, Die rassentheoretische Geschichtspilosophie, p. 110 et seq.
• 4See above, p. 294.
• 5‘Chez les peuples modernes, la guerre et le militarisme sont de véritables fléaux dont le résultat définitif est de déprimer la race’ (Lapouge, Les sélections sociales, Paris 1896, p. 230).

At any given moment the position of the individual in the social economy determines his relation to all other members of society. He is related to them in respect of exchange, as giver and receiver, as seller and buyer. His position in the society need not necessarily tie him down to one and the same activity. One man may be simultaneously landlord, wage-earner, and capitalist; another simultaneously entrepreneur, employee, and landlord; a third entrepreneur, capitalist, and landlord, etc. One may produce cheese and baskets and hire himself out occasionally as a day labourer. But even the situation of those who find themselves in approximately equal positions differs according to the special circumstances in which they appear on the market. Even as a buyer for his own consumption every man is situated differently from others according to his special needs. On the market there are always only single individuals. In a free economy the market permits the emergence of individual differences: it ‘atomizes’ as is sometimes said — usually somewhat regretfully. Even Marx had to make a point of explaining that ‘As purchases and sales are made only between single individuals, it is not admissible to look to them for relations between whole social classes.’1

If we use the term class to denote all those in approximately equal social positions, it is important to remember that the problem whether classes have any special importance in social life is not thereby solved. Schematization and classification per se have no cognitive value. The scientific significance of a concept arises out of its function in the theories to which it belongs; outside the context of these theories it is no more than an intellectual plaything. The usefulness of the class theory is not proved when it is pointed out that since men find themselves in different social positions, the existence of social classes is undeniable. What matters is not the social position of the individual but the significance of this position in the life of society. It has long been recognized that the contrast between rich and poor, like all economic contrasts, plays a great part in politics. Equally well known is the historical importance of differences in rank and caste, that is, differences in legal position, or inequality before the Law. Classical Political Economy did not contest this. But it undertook to show that all these contrasts derived from wrong political institutions. According to Classical Political Economy, correctly understood, the interests of individuals are never incompatible. Belief in conflicts of interest, which formerly was very important, really sprang from ignorance of the natural laws of social life. Once men recognized that, rightly understood, all interests were identical, these issues would cease to influence political discussion.

But Classical Political Economy, which taught the solidarity of interests, itself laid the foundation stone for a new theory of class conflict. The mercantilists had placed goods in the centre of economics, which in their eyes was a theory of objective wealth. It was the great achievement of the Classics in this respect that beside the goods they set up economic man. They thus prepared the way for modern Economics which puts man and his subjective valuations into the centre of its system. A system in which man and goods are placed, so to speak, on an equal footing falls inevitably into two parts, the one treating of the production of wealth, the other of its distribution. The more Economics becomes a strict science, a system of catallactics, the more this conception tends to recede. But the idea of distribution remains for a time. And this gives rise in turn to the idea of a division between the process of production and that of distribution. The goods are first produced, then distributed. However clear it is that, in the capitalist economy. Production and ‘distribution’ are indissolubly interconnected, this unhappy conception tends to confuse the issue.2

Such misunderstandings are indeed inevitable as soon as this term ‘distribution’ is adopted and the problem of imputation is considered as a problem of distribution. For such a theory of imputation or, to use a term corresponding more closely to the classic setting of the problem, a theory of income, must distinguish between the various categories of factors of production, though in fact the same fundamental principle of value formation are to be applied to all of them. ‘Labour’ is separated from ‘Capital’ and from ‘Land’. Nothing is easier in such a context, than to regard labourers, capitalists, and landowners as separate classes, as Ricardo first did in the preface to his Principles. The fact that the classic economists do not split up ‘profit’ into its components parts, only increased this tendency and gave us the picture of society divided into three great classes.

But Ricardo goes still further. By showing how ‘in different stages of society’3  the proportions of the total produce which will be allotted to each of the three classes are different, he extends the class conflict to dynamics. His successors follow him here. And it is here that Marx steps in with the economic theory that he puts forward in Das Kapital. In his earlier writings, especially in the introductory words of the Communist Manifesto, Marx still conceives class and class conflict in the old sense of a contrast in legal position and the size of fortune. The link between the two notions is provided by a view of modern industrial relations as the domination of capitalists over workers. But even in Das Kapital Marx does not delimit precisely the concept of class, although it is of fundamental importance for his theory. He does not define what class is, but limits himself to enumerating the ‘great classes’ into which modern capitalist society is divided.4  Here he follows Ricardo’s division, neglecting the fact that for Ricardo the division of classes is only of importance for the theory of catallactics.

The success of the Marxist theory of class and class conflicts has been tremendous. To-day the marxian distinction of classes within society and the theory of the irreconcilable conflict between these classes is almost universally accepted. Even those who desire, and work for, peace between classes do not as a rule contest the view that there are class contrasts and class struggles. But the concept of class remains as uncertain as before. For the followers of Marx, as for Marx himself, the concept corruscates in all the colours of the rainbow.

If, following the system of Das Kapital, this concept is based on the classical division of the factors of production, then a classification that was invented only for purposes of the theory of exchange and is only justifiable there, is transformed into the basis of general sociological knowledge. The fact is overlooked that the assembling of the factors of production into two, three or four large groups is merely a problem of the arrangement of economic theory, and that it can be valid within this context only. The classification of the factors of production is not a classification of men or groups of men, but of functions; the rationale of the division lies solely in the purpose of the theory of catallactics it is intended to serve. The separation of ‘Land’ for example, owes its special position to the Classical theory of ground-rent. According to this theory, land is that requisite of production which, under certain assumptions, can yield a rent. Similarly, the position of capital as the source of profit, and of labour as the source of wages, is due to the peculiarities of the classical system. In subsequent solutions of the problem of distribution which divided the ‘profit’ of the classical School into entrepreneur’s profit and interest on capital, the grouping of the factors of production was entirely different. In the modern imputation theory on the contrary, the grouping of the factors of production according to the scheme of the classical theory is no longer of any importance. What was formerly called the problem of distribution is now the problem of the formation of prices of goods of higher orders. Only conservatism of scientific classification has tended to retain the old terminology. A grouping more in accordance with the spirit of imputation theory would have to proceed on an entirely different basis — for example, the separation of static and dynamic branches of income.

But — and this is the essential point — in no system is the basis for the grouping of factors determined by their natural characteristics. It is the failure to perceive this that constitutes the gravest error of the theory of economic classes. This theory began by naively assuming an inner relation (created by natural economic conditions) between those factors of production which have been grouped together for analytical reasons. It constructs a uniform land, which can be used for at least all kinds of agriculture, and a uniform labour, which can work at anything. It makes a concession, an attempt to conform to reality, when it distinguishes between land to be used agriculturally, land to be used for mining, and urban land, and when it differentiates between skilled and unskilled labour. But this concession does not improve matters. Skilled labour is just as much an abstraction as ‘labour’ pure and simple, and agricultural land is just as much an abstraction as ‘land’ pure and simple. And — what is important here — they are abstractions which leave out just those characteristics essential to sociological study. When dealing with the peculiarities of price formation we may, in certain circumstances, be permitted to make the contrast between the three groups: land, capital, and labour. But this does not prove at all that such grouping is permissible when we are dealing with a quite different problem.

• 1Marx, Das Kapital, Vol. I, p. 550. The passage from which the above quotation is taken was not in the first edition, published 1867. Marx first inserted it in the French version, published 1873, whence Engels took it over into the fourth German edition. Masaryk (Die philosopischen und soziologischen Grundlagen des Marxismus, Vienna 1899, p. 299) justly remarks that the alteration is presumably connected with the change Marx made in his theory in Vol. III of Das Kapital. It can be regarded as a recantation of the Marxist class theory. Significantly the third volume breaks off after a few sentences in the chapter headed ‘The Classes’. In treating the problem of class Marx got only as far as setting up a dogma without proof, and no further.
• 2On the history of the concept of distribution, see Cannan, A History of the Theories of Production and Distribution, p. 183 et seq.
• 3Ricardo, Principles of Political Economy and Taxation, p. 5.
• 4Marx, Das Kapital, Vol. III, Part 2, 3rd Edition, p. 421.

The theory of the class war constantly confuses the notions of Estate (‘Stand’) and class.1  Estates were legal institutions, not economically determined facts. Every man was born into an estate and generally remained in it until he died. All through life one possessed estate-membership, the quality of being a member of a certain estate. One was master or serf, freeman or slave, lord of the land or tied to it, patrician or plebeian, not because one occupied a certain position in economic life, but because one belonged to a certain estate. Admittedly the estates were in their origins an economic institution, in the sense that, like every social order, they had arisen ultimately from the need to safeguard social co-operation. But the social theory underlying this institution was fundamentally different from the liberal theory, for human co-operation was conceived only as a ‘taking’ by some and a ‘giving’ by others. That the give and take could be mutual and all parties gain thereby was utterly incomprehensible to such a theory. A later epoch, seeking to justify the estate system which, in the light of the liberal ideas then slowly dawning in the world, had begun to appear unsocial and also unjust, based on a one-sided burdening of the lower orders, fabricated an artificial reciprocity in the relationship: the higher orders gave the lower protection, sustenance, the use of the land, and so on. But the very existence of this doctrine reveals that the decay of the estate ideology had already begun. Such ideas were alien to the institution in its heyday, when the relationship was frankly one of violence, as may be clearly seen in the first essential distinction drawn by estate — the distinction between free and unfree. The reason why the slave looked on slavery as natural, resigning himself to his lot instead of continuing to rebel and run away as long as there was breath in his body, was not that he believed slavery to be a just institution, equally advantageous to master and slave, but simply that he did not want to endanger his life by insubordination.

By stressing the historical role of slavery it has been sought to refute the liberal view of subjection and of the institution of the estate also. Slavery was said to mark an advance in civilization, when men taken in battle were enslaved instead of being killed. Without slavery a society dividing labour, in which trades are separated from primary production, could not have developed until all free soil had been disposed of; for everyone would have preferred to be free master of his own land rather than a landless worker on raw materials produced by others, let alone a propertyless labourer on someone else’s land. On this view slavery has a historical justification, as higher civilization is inconceivable without the division of labour which gives part of the population a life of leisure, freed from common worries over daily bread.2

It is only for those who study history with the eyes of the moralist that the question of whether an historical institution can be justified or not can arise at all. The fact that it has appeared in history shows that forces were active to bring it about. The only question that can be asked scientifically is whether the institution actually fulfilled the function ascribed to it. In this instance the answer is definitely in the negative. Slavery did not prepare the way for division of labour. On the contrary it blocked the way. Indeed modern industrial society, with its highly developed division of labour, could not begin to grow until slavery had been abolished. Free, ownerless land has continued to exist for settlement without preventing the rise of special trades or of a class of free wage-earners. For the free land had first to be made cultivable. Before it yielded its fruits it needed stock and improvements. Often in its fertility and nearly always in its situation, it was worse than land already under culvitation.3  Private ownership in the means of production is the only necessary condition for the extensive development of the division of labour. The enslavement of the worker was not necessary to create it.

In the relation between estates, two types are characteristic. One is the relation between feudal lord and the cultivator. The feudal lord stands quite outside the process of production. He appears on the stage only when the crop has been harvested and the process of production has been completed. Then he takes his share. To understand the nature of this relationship we do not need to know whether it originated in the subjection of formerly free peasants or in the settlement of people on land owned by the lord. The one relevant fact is that the relationship is outside production and cannot, therefore, be dissolved through an economic process, such as commutation of rent and tithes by the cultivator. As soon as the rent is commutable it ceases to be a dependent relationship and becomes a property right. The second typical relation is that of master to slave. Here the master demands labour, not goods, and receives what he demands without any counter-service to the slave. For giving food, clothing, and shelter is not a counter-service, but a necessary expenditure unless he is to lose the slave’s labour. Under the strictly developed institution of slavery the slave is fed only so long as his labour brings in a surplus over his subsistence costs.

Nothing is less reasonable than to compare these two relationships with that of entrepreneur and worker in a free economy. Historically, free wage labour grew to a certain extent out of the labour of slaves and serfs, and it was a long time before it cast off all trace of its origin and became what it is in the capitalist economy. But it is a complete misunderstanding of the capitalist economy to equate economically free labour for wages with the work done by the unfree. One may draw sociological comparisons between the two systems. For both involve division of labour and social co-operation, and in this reveal common features. But sociological study must not overlook the fact that the economic character of the two systems is quite different. Analysis of the economic character of free labour with arguments derived from the study of slave labour is bound to be worthless. The free worker receives in wages what is economically imputed to his labour. The slave owner expends the same amount — by providing for the sustenance of the slave and by paying the slave dealer a price for the slave that corresponds to the present value of the amounts by which the wages of free labour are or would be higher than the slave’s sustenance costs. The surplus of the wages of labour over the workers’ sustenance costs thus goes to the man who transforms free men into slaves — to the slave hunter, not to the slave dealer or the slave owner. These two do not derive any specific income in the slave economy. It is clear, therefore, that anyone who tries to support the exploitation theory by referring to conditions of a slave economy completely misunderstands the problem.4

In a society divided into estates all members of the estates who lack complete rights before the law have one interest in common with other members: they struggle to improve the legal position of their estate. All who are bound to the soil strive to have the burden of rent lightened; all slaves strive for freedom, that is, for a condition under which they can use their labour for themselves. The community of interest of all the members of an estate is stronger, the less the individual is able to raise himself above the legal sphere of his estate. It does not matter very much here that in some rare cases, especially gifted individuals, aided by happy accidents, are able to rise into higher estates. No mass movements are born of the unsatisfied wishes and hopes of isolated individuals. Desire to renew their own strength rather than a wish to smother social discontent is what causes the privileged estates to clear the way for the rise of the talented. Gifted individuals who have been prevented from rising can become dangerous only if their call to violent action finds an echo in wide strata of discontented men.

• 1Cunow (Die Marxsche Geschichts-, Gesellschafts-und Staatstheorie, Vol. II, Berlin 1921, p. 61 et seq.) tried to protect Marx from the accusation that he has mixed up the concepts class and ‘Stand’ (‘Estate’). But his own remarks and the passages he quotes from Marx and Engels show how justified is this accusation. Read, for example, the first six paragraphs of the first part of the Communist Manifesto, headed ‘Bourgeois and Proletarians’ and you will be convinced that there at least the expressions ‘Stand’ and class are used indiscriminately. We have already said that when, later on in London, Marx became familiar with the Ricardian system, he separated his concept class from the concept ‘stand’ and connected it with the three Factors of Production of the Ricardian system. But he never developed this new concept of class. Neither has Engels or any other Marxist tried to show what really welds the competitors — for these are the people of whom the ‘uniformity of incomes and of sources of incomes’ makes a conceptual unit — into a class inspired by the same special interests.
• 2Bagehot, Physics and Politics, London 1872, p. 71 et seq.
• 3Even to-day there is plenty of ownerless land which anyone who wishes can appropriate. Yet the European proletarian does not migrate to the interior of Africa or Brazil, but remains a wage labourer at home.
• 4‘The source of the slave owner’s profits,’ says Lexis (in discussing Wicksell’s ‘Über Wert, Kapital, und Rente’ in Schmoller’s Jahrbuch, Vol. XIX, p. 335 et seq.) ‘is unmistakable, and this is probably still true of the “sweater”. In the normal relationship between entrepreneur and worker there is no such exploitation, but rather an economic dependence on the part of the worker, which undeniably influences the distribution of the produce of labour. The propertyless worker must absolutely procure “present goods” for himself; otherwise he dies. He can generally realize his labour only by collaborating in the production of “future goods”. But this is not the decisive factor, for even though he produces, like the baker’s labourer, a commodity to be consumed on the day of its production, yet his share in the yield is conditioned by the circumstances disadvantageous to him, that he cannot make an independent use of his labour, but is forced to sell it against more or less sufficient means of life, renouncing his claim to its product. These are trivial propositions, but I believe that they will always have a convincing force for unprejudiced observers because of their direct self-evidence.’ One agrees with Böhm-Bawerk (Einige strittige Fragen der Kapitalstheorie, Vienna and Leipzig 1900, p. 112) and Engels (Preface to the third volume of Das Kapital, p. xii) that in these ideas, which, by the way, only reproduce the views dominant in German ‘Popular Economics’, is to be found a recognition dressed up in careful words, of the socialist theory of exploitation. The economic fallacies of the exploitation theory are nowhere exposed more clearly than in this attempt of Lexis to find a basis for it.

The settlement of particular conflicts between estates could not remove the distinction between estates, as long as the idea of dividing society in this way remained. Even when the oppressed shook off the yoke, all differences in status were not abolished. Liberalism alone could overcome the fundamental conflict of estates. It did so by abolishing slavery — on the ground that free labour was more productive than unfree — and by proclaiming freedom of movement and choice of occupation as the fundamental desiderata of a rational policy. Nothing exposes more clearly the inability of anti-liberalism to grasp the historical significance of Liberalism than its attempt to represent this achievement as the product of special group ‘interests’.

In the struggle between estates all members of an estate stand together because they have a common aim. However much their interests otherwise diverge they meet on this one ground. They want a better legal position for their estate. Economic advantages usually accompany this, for the reason why legal differences are maintained between estates is precisely that they confer economic advantages on some to the economic prejudice of others.

But the ‘class’ of the theory of the class-war is a different matter altogether. The theory of irreconcilable class conflict is illogical when it stops short at dividing society into three or four large classes. Carried to its logical conclusions, the theory would have to go on dissolving society into groups of interests till it reached groups whose members fulfilled precisely the same function. It is not enough to separate owners into landowners and capitalists. The differentiation must proceed until it reaches such groups as cotton spinners who manufacture the same count of yarn, or the manufacturers of black chevreau leather, or the brewers of light beer. Such groups have, it is true, one common interest as against the mass of others: they are vitally interested in the favourable sale of their products. But this common interest is narrowly limited. In a free economy a single branch of production cannot in the long run obtain more than an average profit and cannot, on the other hand, work at a loss. The common interest of members of a trade does not extend, therefore, beyond the trend of the market within a limited space of time. For the rest, competition, not immediate solidarity of interest, operates between them. This competition is suspended by special interests only when economic liberty is limited in some way. But if the scheme is to retain its usefulness for the critique of the theory of the solidarity of class interests, evidence must be produced that this competition is suspended under a free economy. The class struggle theory cannot be proved to be sound by a reference to the common interests of landowners as being in conflict with the urban population on tariff policy, or to the conflict between landowners and town dwellers on the matter of political government. Liberal theory does not deny that state interference in trade creates special interests, nor that by this means particular groups can extract privileges for themselves. It merely says that such special favours, when they are exceptional privileges of small groups, lead to violent political conflict, to revolts of the non-privileged many against the privileged few, which by constantly disturbing the peace, hold up social development. It explains further that where these special privileges constitute a general rule, they injure everyone, for they take on the one hand what they give on the other, and leave behind, as a permanent result, only a general decline in the productivity of labour.

In the long run the community of interests among the members of a group and the contrast between their interests and the interests of other groups arise always from limitations of the right of ownership, of the freedom of trade, of the choice of occupation. Only in the short run can they arise from the condition of the market as such. But if among the groups whose members occupy the same position in the economy there is no community of interest which would place them in opposition to all other groups, there can certainly be no such community within the larger groups whose members occupy not the same but merely a similar position. If there is no community of special interests between the cotton-spinners among themselves, neither is there any within the cotton industry or between the spinners and the machine makers. Between spinner and weaver, machine maker and machine user, the direct contrast of interests is as marked as it can possibly be. A community of interests exists only where competition is ruled out, for example, between the owners of land of a certain quality or situation.

The theory that the population is divided into three or four large groups, each with a common interest, errs in regarding land owners as a class with unitary interests. No special common interest unites the owners of arable land, of forests, of vineyards, of mines, or of urban real estate, unless it be that they defend the right of private property in land. But that is not the special interest of the owners. Whoever has recognized the significance of private ownership in the means of production must, whether he possesses property or not, advocate the principle in his own as well as the owner’s interest. Landowners have genuine special interests only where the liberty of acquiring property and of trading has been limited.

There are no common interests among labourers either. Homogeneous labour is as non-existent as the universal worker. The work of the spinner is different from the work of the miner and the work of the doctor. The theorists of Socialism and of irreconcilable class conflict talk as though there was some kind of abstract labour which everyone was qualified to perform and as though skilled labour hardly came into the question. In reality no such ‘absolute’ labour exists. Nor is unskilled labour homogeneous. A scavenger is different from a porter. Moreover the role of unskilled labour is much smaller, considered purely numerically, than orthodox class theory assumes.

In deducing the laws of the theory of imputation we are justified in speaking simply of ‘land’ and ‘labour’. For from this point all goods of the higher order are significant only as economic objects. The reason for simplifying the infinite variety of goods of higher orders into a few large groups is convenience in working out the theory which is of course directed towards a definite aim. It is often complained that economic theory works with abstractions; but precisely those who make this complaint themselves forget that the concepts ‘labour’ and ‘worker’, ‘capital’ and ‘capitalist’, and so on, are abstract; and do not hesitate to transplant the ‘worker’ of theoretical Economics into a picture of what is supposed to be actual social life.

The members of a class are competitors. If the number of workers diminishes, and if the marginal productivity of labour grows accordingly, wages rise, and with them the income and standard of living of the worker. Trade unions cannot alter this. When they, who were supposed to be called into being to fight the entrepreneurs, close their membership like guilds, they implicitly recognize the fact.

Competition operates among the workers when they compete for higher positions and for promotion to higher ranks. Members of other classes can afford to remain indifferent as to the precise persons who are numbered among the relative minority which rises from the lower to the higher strata, so long as these are the most capable. But for the workers themselves this is an important matter. Each is in competition with the others. Of course each is interested to see that every other foreman’s job shall be occupied by the most suitable man and the best. But each is anxious that that one job which comes within his reach shall fall to him, even though he is not the most suitable man for the job; and the advantage to him outweighs the fraction of the general disadvantages which may eventually also come his way.

The theory of the solidarity of the interests of all members of society is the only theory which shows how society is possible; and if it is dropped, the social unity dissolves not only into classes, but into individuals confronting each other as opponents. Conflict between individual interests is overcome in society but not in the class. Society knows no components other than individuals. The class united by a community of special interests does not exist; it is the invention of a theory incompletely articulated. The more complicated society is, and the further differentiation has progressed within it, so much the more numerous are the groups of persons similarly placed within the social organism; though necessarily, the number of members in each group diminishes as the number of groups increase. The fact that the members of each group have certain immediate interest in common does not, of itself, create universal equality of interests between them. The equality of position makes them competitors, not people with common aspirations. Nor can any absolute community of interests arise from the incomplete similarity between the positions of allied groups. As far as their positions are similar, competition will operate between them.

The interests of all cotton mill owners may run parallel in certain directions, but in so far as this is the case, the more are they competitors among themselves. In other respects only those owners of mills who produce the same count of yarn will be in exactly parallel positions. Here again to this extent they are in competition with each other. In other respects however, the common interests are similar over a much wider field; they may comprise all workers in the cotton industry, then, again, all cotton producers, including planters and workers, or further, all industrialists of any kind, etc.: the grouping varies perpetually according to the aim and interests to be pursued. But complete similarity there is rare, and, where it does exist, it leads not only to common interests vis-a-vis third parties but, simultaneously, to competition between the parties within the group.

A theory which made all social development proceed from class struggles would have to show that the position of each individual in the social organism was unequivocally determined by his class position, that is, by his membership of a certain class and the relation of this class to other classes. The fact that in all political struggles certain social groups are in conflict with each other is by no means a proof of this theory. To be correct it must be capable of demonstrating that the grouping is necessarily directed into a certain path and cannot be influenced by ideologies which are independent of the class position; that the way in which the smaller groups combine to form larger groups, and these again form classes which divide the whole of society, is not a way of compromises and alliances formed for temporary co-operation but results from facts created by social necessities, from an unequivocal community of interests.

Let us consider, for example, the different elements of which an Agrarian Party is composed. In Austria, the wine-growers, the cereal-growers, and the stock-breeders unite to form a common party. But it certainly cannot be asserted that similarity of interest has brought them together. For each of these three groups has different interests. Their fusion with a view to securing certain protective policies is a compromise between conflicting interests. Such a compromise is, however, only possible on the basis of an ideology that goes beyond the interests of the class. The class interest of each of these three groups is opposed to that of the other groups. They can meet only be setting certain special interests wholly or partly aside, though they do this so as to fight all the more effectively for other special interests.

It is the same with the workers, who are contrasted with the owners of the means of production. The special interests of the separate workers’ groups are also not unitary. They have quite different interests according to the knowledge and skill of their members. It is certainly not in virtue of its class position that the proletariat is that homogeneous class the socialist parties imagine it to be. Only adherence to the socialist ideology, which obliges every individual and every group to give up his or its special interests, brings it about that it is so. The daily work of the trade unions consists precisely in effecting compromises between these conflicts of interest.1

Coalitions and alliances between group interests, other than existing coalitions and alliances, are always possible. And those which actually exist depend on the ideology, not on the class position, of the groups. Political aims, not identity of interests, is what determines the coherence of the group. The community of special interests is always restricted to a narrow field and is obliterated or counter-vailed by the conflict of other special interests, unless a certain ideology makes the community of interests seem stronger than the conflict of interests.

The community of class interests does not exist independently of class consciousness, and class consciousness is not merely additional to a community of special interests; it creates such a community. The proletarians are not a special group within the framework of modern society, whose attitude is unequivocally determined by their class position. Individuals are brought together for common political action by the socialist ideology; the unity of the proletariat comes, not from its class position, but from the ideology of the class-war. As a class the proletariat does not exist before Socialism: the socialist idea first created it by combining certain individuals to attain a certain political end. There is nothing in Socialism which makes it especially appropriate to forwarding the real interests of the proletarian classes.

In principle class ideology is no different from national ideology. In fact there is no contrast between the interests of particular nations and races. It is national ideology which first creates the belief in special interests and turns nations into special groups which fight each other. Nationalist ideology divides society vertically; the socialist ideology divides society horizontally. In this sense the two are mutually exclusive. Sometimes the one has the upper hand, sometimes the other. In Germany in 1914 the nationalist ideology shouldered the socialist ideology into the background — and suddenly there was a nationalist united front. In 1918 the socialist triumphed over the nationalist.

In a free society no classes are separated by irreconcilably contrasted interests. Society is the solidarity of interests. The union of special groups has always as its safe aim the destruction of this cohesion. Its aim is anti-social. The special community of proletarian interests extends only so far as they pursue one aim — to break up society. It is the same with the special community of interests which is supposed to exist for a whole nation.

Because Marxian theory does not define its notion of class more closely, people have been able to use it for the expression of the most diverse ideas. When they define the decisive conflict as that between owners and non-owners, or between urban and rural interests, or between bourgeois, peasant, and worker; when they speak of the interests of ‘armament capital’, of ‘alcohol capital’, of ‘finance capital’;2  when at one moment they talk about the Golden International and in the next breath explain that Imperialism is due to the conflicts of capital, it is easy to see that these are the merest catchwords of the demagogue, devoid of any real sociological interest Thus in its most fundamental contentions Marxism has never risen above the level of a doctrine for the soap box orator.3

• 1Even the Communist Manifesto has to admit: ‘The organization of the proletarians into a class, and thus into a political party, is ever and again broken up by competition among the workers themselves.’ (Marx and Engels: Das Kommunistische Manifest, p. 300). See also Marx, Das Elend der Philosophic, 8th Edition, Stuttgart 1920, p. 161.
• 2At which point people quite illogically overlook the fact that the wage-earner too is interested in the prosperity of the branch of production and of the plant in which he is engaged.
• 3Even Cunow (Die Marxsche Geschichts-, Gesellschafts-und Staatstheorie, Vol. II, p. 53) in his uncritical Marx apology has to admit that Marx and Engels in their political writings speak not only of the three main classes but differentiate between a whole series of minor and side classes.

The total national product is divided into wages, rent, interest, and profits. All economic theory considers it definitely settled that this division proceeds, not according to the extra-economic power of the individual classes, but according to the importance which the market imputes to individual factors of production. Classical Political Economy and the modem theory of marginal value agree in this. Even Marxian doctrine, which has borrowed its theory of distribution from classical theory, agrees. By deducing in this way the laws according to which the value of labour is determined, it, too, sets up a theory of distribution in which economic elements alone are decisive. The Marxian theory of distribution seems to us full of contradictions and absurdities. Nevertheless it is an attempt to find a purely economic explanation for the way in which the prices of the factors of production are formed. Later on, when Marx was moved for political reasons to recognize the advantages of the trade union movement, he did make certain slight concessions on this point. But the fact that he stuck to his system of economics shows that these were only concessions which left his fundamental views untouched.

If we were to describe as a ‘struggle’ the effort of all parties on the market to get the best price obtainable, then we might say that there is a constant war of each against each throughout economic life; but not by any means that there is a class-war. The fight is not between class and class but between individuals. When groups of competitors come together for joint action, class does not confront class, but group opposes group. What a single workers’ group has obtained for itself does not benefit all workers; the interests of the workers of different branches of production are as conflicting as those of entrepreneurs and workers. When it speaks of class war, socialist theory cannot have in mind this opposition of the interests of buyers and sellers in the market.1  What it means by class war takes place outside economic life, though as a result of economic motives. When it considers the class war as being analogous to the war between estates it can only refer to a political fight which takes place outside the market. After all this was the only kind of conflict possible between masters and slaves, landowners and serfs; on the market they had no dealings with each other.

But Marxism goes beyond this. It assumes it to be self-evident that only the owners are interested in maintaining private ownership in the means of production, that the proletarians have the contrary interest, and that both know their interests and act accordingly. We have already seen that this view is only acceptable if we are prepared to swallow the Marxian theory whole. Private ownership in the means of production serves equally the interests of owners and non-owners. It is certainly by no means true that the members of the two great classes into which according to Marxian theory society is divided, are naturally conscious of their interest in the class struggle. The Marxians had to work hard to awaken the class consciousness of the workers, that is, to make the workers support Marxian plans for the socialization of property. What joins the workers for co-operative action against the bourgeois class is precisely the theory of irreconcilable class conflict. Class consciousness, created by the ideology of the class conflict, is the essence of the struggle, and not vice versa. The idea created the class, not the class the idea.

The weapons of the class struggle are no more economic than its origins. Strikes, sabotage, violent action and terrorism of every kind are not economic means. They are destructive means, designed to interrupt the movement of economic life. They are weapons of war which must inevitably lead to the destruction of society.

• 1See Marx’s words quoted on p. 328.

From the theory of the class-war, Marxians argue that the socialist order of society is the inevitable future of the human race. In any society based on private property, says Marxism, there must of necessity be an irreconcilable conflict between the interests of separate classes: exploiters oppose the exploited. This contrast of interests, it is assumed, determines the historical position of the classes; it prescribes the policy they must follow. Thus history becomes a chain of class struggles, until finally, in the modern proletariat, there appears a class which can free itself from class rule only by abolishing all class conflicts and all exploitation generally.

The Marxist theory of class war has extended its influence far beyond socialist circles. That the liberal theory of the solidarity of the ultimate interests of all members of society has been thrust into the background was, of course, not due to this theory only, but also to the revival of imperialist and protectionist ideas. But as the liberal idea lost its glamour, the fascinations of the Marxian promises were bound to be more widely felt. For it has one thing in common with the liberal theory which the other anti-liberal theories lack: it affirms the possibility of social life. All other theories which deny the solidarity of interests deny also by implications social life itself. Whoever argues with the nationalists, the race dogmatists, and even the protectionists, that the conflict of interests between nations and races cannot be reconciled, denies the possibility of peaceful co-operation between nations and thereby the possibility of international organization. Those who, with the implacable champions of peasant or petty bourgeois interests, consider the unflinching pursuit of class interests as the essence of politics, would be only logical if they were to deny all advantages of social co-operation. Compared with these theories, which necessarily lead to very pessimistic views of the future of society, Socialism seems to be an optimistic doctrine. At least for the desired coming social order, it claims the solidarity of the interests of all members of society. The desire for a philosophy, which does not altogether deny the advantages of social co-operation is so intensive, that many people have been driven into the arms of Socialism who would otherwise have avoided it altogether. The only oasis they find in the desert of anti-liberal theories is Socialism.

But in their readiness to accept the Marxian dogmas, such people overlook the fact that its promise of a classless future for society rests entirely on the assertion, presented as irrefutable, that the productivity of socialistically organized labour would be higher — indeed, limitless. The argument is well known: ‘The possibility of giving all members of society, by social production, an existence which shall be not merely materially adequate, increasing in wealth from day to day, but which shall guarantee them also the complete freedom to develop and practice their physical and mental abilities — this possibility now exists for the first time, but it exists’.1  Private ownership in the means of production is the Red Sea which bars our path to this Promised Land of general well-being. From being an ‘evolutionary form of the forces of production’ it became their ‘chains’.2  The liberation of the productive forces from the shackles of capitalism is the ‘sole presupposition to an uninterrupted development at an ever-increasing pace of the productive forces and, thus, to a practically unlimited increase in production itself’3 . ‘As the development of modern technique makes possible a sufficient, even abundant, satisfaction of wants for all, on condition that production is directed economically by and for the country, the class conflict now appears, for the first time, not as a condition of social development but as the obstacle to its conscious and planned organization. In the light of this knowledge the class interest of the oppressed proletarians is directed towards abolishing all class interests and setting up a classless society. The old, apparently eternal law of the class struggle practically necessitates by its own logic, by the interest of the last and most numerous class — the proletariat — the abolition of all class contrasts and the creation of a society in which interests are unitary and which is humanly solidary’.4  Ultimately, therefore, the Marxian demonstration is this: Socialism must come, because the socialist way of production is more rational than the capitalist. But in all this the alleged superiority of socialist production is simply taken for granted. Except for a few casual remarks no attempt to prove anything is made.5

If one assumes that production under Socialism would be higher than under any other system, how can one limit the assertion by saying that it is true only under certain historical conditions and has not always been so? Why must time ripen for Socialism? It would be understandable if the Marxians were to explain why, before the nineteenth century, people did not hit upon this happy idea or why even if it had been conceived earlier, it could not have been realized. But why must a community, to attain Socialism, go through all the stages of evolution, although it is already familiar with the idea of Socialism? One can understand that ‘a nation is not ripe for Socialism as long as the majority of the masses oppose Socialism and want to have nothing to do with Socialism’. But it is not easy to see why ‘one cannot say definitely’ that the time is ripe ‘when the proletariat forms the majority of the nation and when the latter in its majority manifests the will to Socialism’.6  Is it not quite illogical, to maintain that the World War has put back our evolution and thus retarded the coming of the right moment for Socialism? ‘Socialism, that is, general well-being within modern civilization, becomes possible only through the enormous development of the productive forces brought about by Capitalism, through the enormous wealth Capitalism has created and concentrated in the hands of the capitalist class. A state which has wasted this wealth in senseless policy, such as an unsuccessful war, offers no favourable opportunity for the quickest spread of well-being amongst all classes’.7  But surely those who believe that Socialism will multiply productivity should see in the fact that war has impoverished us one reason the more for hastening its coming.

To this Marx answers: ‘a social order never succumbs until all the productive forces of which it is capable are developed, and new and higher conditions of production never replace it until the old society itself has conceived within its womb the material conditions of their existence’.8 But this answer assumes that what needs to be demonstrated is proved already: that socialist production would be more productive and that socialist production is a ‘higher’ one, that is, on a higher stage of social development.

• 1Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 305.
• 2Marx, Zur Kritik der Politischen Ökonomie, edited by Kautsky, Stuttgart 1897, p. xi.
• 3Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 304.
• 4Max Adler, Marx als Denker, 2nd Edition, Wien 1921, p. 68.
• 5On Kautsky’s attempted proofs, see above, p. 182 et seq.
• 6Kautsky, Die Diktatur des Proletariats, and Edition, Vienna 1918, p. 12.
• 7Ibid. p. 40.
• 8Marx, Zur Kritik der Politischen Ökonomie, p. xii.

The opinion that history leads to Socialism is almost universal to-day. From Feudalism through Capitalism to Socialism, from the rule of the aristocracy through the rule of the bourgeoisie to proletarian democracy — thus, approximately, people conceive the inevitable evolution. The gospel that Socialism is our inescapable destiny is acclaimed by many with joy, accepted by others with regret. doubted by only the courageous few. This scheme of evolution was known before Marx, but Marx developed it and made it popular. Above all Marx managed to fit it into a philosophic system.

Of the great systems of German idealist philosophy only those of Schelling and Hegel have had a direct and lasting influence on the formation of the individual sciences. Out of Schelling’s Natural Philosophy grew a speculative school whose achievements, once so much admired, have long been forgotten. Hegel’s Philosophy of History mesmerized the German historians of a whole generation. People wrote Universal History, History of Philosophy, History of Religion, History of Law, History of Art, History of Literature according to the Hegelian scheme. These arbitrary and often eccentric evolutionary hypotheses have also vanished. The disrespect into which the schools of Hegel and Schelling brought philosophy led Natural Science to reject everything that went beyond laboratory experiment and analysis, and caused the Moral Sciences to reject everything except the collection and sifting of sources. Science limited itself to mere facts and rejected all synthesis as unscientific. The impulse to permeate science once more with the philosophic spirit had to come from elsewhere — from biology and sociology.

Of all the creations of the Hegelian School only one was fated to a longer lease of life — the Marxian Social Theory. But its place was outside scholarship. Marxian ideas have proved utterly useless as guides to historical research. All attempts to write history according to the Marxian scheme have failed lamentably. The historical works of the orthodox Marxists, such as Kautsky and Mehring, made no progress at all in original and exhaustive research. They produced only expositions based on the researches of others, expositions whose only original feature was an effort to see everything through Marxist spectacles. But the influence of Marxist ideas extends far beyond the circle of orthodox disciples. Many historians, by no means to be classed politically as Marxian socialists, approach them closely in their views on the philosophy of history. In their works the Marxian influence is a disturbing element. The use of such indefinite expressions as ‘exploitation’, ‘the striving of capital for surplus value’, and ‘proletariat’ dulls the vision that should be kept clear for the impartial scrutiny of the material and the idea that all history is merely a preliminary to the socialist society prompts the historian to use violence in his interpretation of the sources.

The notion that the rule of the proletariat must replace the rule of the bourgeoisie is largely based on that grading of the estates and classes which has become general since the French Revolution. People call the French Revolution and the movement it introduced into the various states of Europe and America the emancipation of the Third Estate and think that now the Fourth Estate must have its turn. We may overlook here the fact that a view which regards the victory of liberal ideas as a class triumph of the bourgeoisie and the Free Trade Period as an epoch of the rule of the bourgeoisie, presupposes that all elements of the socialist theory of society are already proved. But another question immediately occurs to us. Must this Fourth Estate, whose turn is now supposed to come, be sought in the proletariat? Might not one look for it with equal or greater justice in the peasantry? Marx, of course, could have no doubts on the subject. In his view it was a settled thing that in agriculture big-scale concerns would oust small-scale enterprises and the peasant make way for the landless labourer of the latifundia. Now, when the theory of the inability of medium and small-scale agricultural enterprise to compete has long been buried, a problem arises which Marxism cannot answer. The evolution which is going on before our eyes would permit us to suppose that domination was passing into the hands of the peasants rather than that of the proletarians.1

But here, too, our decision must rest on our judgment of the efficiency of the two social orders, the capitalist and the socialist. If Capitalism is not the diabolical scheme shown in socialist caricature, if Socialism is not the ideal order which socialists assert it to be, then the whole doctrine collapses. The discussion always returns to the same point — the fundamental question whether the socialist order of society promises a higher productivity than Capitalism.

• 1Gerhard Hildebrand, Die Erschütterung der Industrieherrschaft und des Industriesozialismus, Jena 1910, p. 213 et seq.

Race, nationality, citizenship, estate-rights: these things directly affect action. It does not matter whether a party ideology unites all those belonging to the same race or nation, the same state or estate. The fact that races, nations, states or estates exist determines human action even when there is no ideology to guide members of a group in a certain direction. A German’s thought and actions are influenced by the kind of mind he has acquired as a member of the German language community. Whether or not he is influenced by nationalist party ideology is here unimportant. As a German he thinks and acts differently from the Roumanian whose thought the history of the Roumanian, and not the German, language determines.

The nationalist party ideology is a factor quite independent of one’s membership of any given nation. Various mutually contradictory nationalist party ideologies can exist concurrently and fight for the individual’s soul; on the other hand there may be no sort of nationalist party ideology in existence. A party ideology is always something specially introduced from outside into the already established membership of a certain social group, and for which it thereafter forms a special source of action. Mere living in a society does not create party doctrine in one’s mind. Party attitudes always arise from a theory of what is and is not advantageous. Social life may, under certain circumstances, predispose one to accept a certain ideology, and occasionally party doctrines are so formed that they specially attract members of a particular social group. But the ideology must always be kept separate from the actual social and natural being.

Social being itself is ideological in so far as society is a product of human will, and so of human thought. The materialistic conception of history errs profoundly when it regards social life as independent of thought.

If the position of the individual in the co-operative organism of economic life is considered to be his class position, then what we have said above applies also to the class. But again, one has to differentiate here, too, between the influences to which his class position exposes the individual and the political ideologies which influence him. The fact that he occupies his particular position in society has its influence on the life of the bank clerk. Whether he deduces from this that he ought to advocate the capitalist or the socialist policy depends on the ideas which dominate him.

But if one conceives ‘class’ in the marxist sense, as a tripartite division of society into capitalists, land owners, and workers, it loses all definiteness. It becomes nothing more than a fiction to justify a concrete party-political ideology. Thus the concepts Bourgeoisie, Working Class, Proletariat are fictions, the cognitive value of which depends on the theory in the service of which they are applied. This theory is the Marxian doctrine that class conflict is irreconcilable. If we consider this theory inadmissible, then no class differences and no class conflicts in the Marxian sense exist. If we prove that, correctly understood, the interests of all members of society are not in conflict, we have shown not merely that the Marxian idea of a conflict of interests is untenable: we have discarded as valueless the very concept of class as it figures in socialist theory. For only within the framework of this theory has the attempt to classify society into capitalists, landowners, and workers any meaning. Outside this theory it is as purposeless as, for example, any attempt to lump together all fair or all dark people — unless indeed we propose, with certain race theorists, to give special importance to the colour of the hair, whether as an external characteristic or as a constitutive element. The position of the individual in the division of labour influences his whole way of living, his thought, and his attitude towards the world. This is true in some respects also of the differences in the situations which individuals occupy in social production. Entrepreneurs and workers think differently because the habits of their daily work give them different points of view. The entrepreneur always has in mind the large and the whole, the worker only the near and the small.1  The first learns to think and act on a large scale, the other remains stuck in the groove of small preoccupations. These facts are certainly of importance in a knowledge of social conditions, but it does not follow that to introduce the concept of the class in the sense of socialist theory would serve any useful purpose. For these differences do not derive simply and solely from differences of position in the process of production. The small entrepreneur’s way of thinking is nearer to that of the worker than to that of the large-scale entrepreneur; the salaried manager of large undertakings is more closely allied to the entrepreneur than to the worker. The difference between poor and rich is, in many respects, more helpful to our understanding of the social conditions we are studying than the difference between worker and entrepreneur. The level of income, rather than the individual’s relation to the factors of production, determines a man’s standard of life. His position as producer becomes important only in so far as it affects the grading of his income.

• 1Ehrenberg, Der Gesichtskreis eines deutschen Fabrikarbeiters (Thünen-Archiv, Vol. I), p. 320 et seq.

It was said by Feuerbach: ‘thought proceeds from being, but not being from thought’.1  This remark, which was intended to express merely the renunciation of Hegelian Idealism, becomes in the famous aphorism, ‘Man is what he eats’ (‘Der Mensch ist was er isst’)2 , the watchword of Materialism, as represented by Büchner and Moleschott. Vogt stiffened the materialist thesis by defending the statement ‘that thoughts stand in about the same relation to the brain as the gall to the liver or urine to the kidneys’.3  The same naive materialism, which, ignoring all the difficulties, attempts to solve the basic problem of philosophy simply and completely by referring everything concerned with the mind to a physical phenomenon, is revealed also in the economic conception of history of Marx and Engels. The title ‘Materialist Conception of History’ is true to the nature of the theory; it emphasizes, in the striking manner intended by its founders, the epistemological homogeneity between their belief and the materialism of their time.4

According to the materialist conception of history thought depends on social being. This doctrine has two different versions fundamentally contradictory to each other. The one explains thought as a simple and direct development of the economic environment, of the conditions of production, under which men live. According to this version there is no history of science and no history of the individual sciences as independent evolutionary sequences because the setting of problems and their solutions do not represent a progressive intellectual process, but merely reflect the momentary conditions of production. Descartes, says Marx, regarded the animal as a machine, because he ‘sees with the eyes of the manufacturing period, as distinguished from the eyes of the Middle Ages, when the animal was regarded as the assistant of man — a position assigned to it also at a later date by Herr von Haller in his Restauration der Staatswissenschaft.’5  In such a passage it is clear that the conditions of production are regarded as facts independent of human thought. They ‘correspond’ in turn to a ‘definite stage of development’ in the ‘material productive forces’,6  or, what is only another way of putting the same thing, to ‘a definite stage in the development of the means of production and of transport’.7  The productive forces, the means of work, ‘result in’ a definite order of society.8  ‘Technology reveals the active conduct of man towards nature, the direct productive process of his life, and consequently his social conditions of life and the spiritual ideas which arise from them’.9  It never seems to have occurred to Marx that the productive forces are themselves a product of human thought, so that one merely moves in a circle when one tries to derive thought from them. He was completely bewitched by the word-fetish, ‘material production’. Material, materialistic, and materialism were the fashionable philosophic catch-words in his time, and he could not escape their influence. He felt that his foremost task as a philosopher was to remove the ‘deficiencies of the abstract natural-science materialism which exclude the historical process’; those deficiencies which he thought he could perceive ‘in the abstract and ideological theories of its spokesmen, as soon as they venture beyond their special sphere’. And that is why he called his procedure ‘the only materialistic, hence the only scientific method’.10

According to the second version of the materialist conception of history, class interest determines thought. Marx says of Locke that he ‘represented the new bourgeoisie in all its forms: the industrialists versus the working classes and paupers, the merchants versus the old-fashioned usurers, high finance versus state debtors, and in one of his own works he even demonstrated the bourgeois intelligence to be the normal human intellect’.11  For Mehring, the most prolific of the Marxian historians, Schopenhauer is ‘the philosopher of the terrified philistines... in his sneaking, selfish, and slandering way the spiritual image of the bourgeoisie which, frightened by the clash of arms, trembling like the aspen, retired to live on its revenues and foreswore the ideals of its epoch like the plague’.12  In Nietzsche he sees ‘the philosopher of the Upper Bourgeoisie’.13

His judgments in economics represent this point of view most clearly. Marx was the first to divide economists into bourgeois and proletarian, a division which etatism afterwards made its own. Held explains Ricardo’s theory of rent as ‘dictated simply by the hate of the moneyed capitalists against the landed proprietors’, and thinks that Ricardo’s whole theory of value can only be looked upon ‘as the attempt to justify, under the semblance of an endeavour to secure natural rights, the domination and profits of Capitalism’.14  The best way to disprove this view is to point out the obvious fact that Marx’s economic theory is nothing more than a product of the Ricardo school. All its essential elements are taken from the Ricardian system, from which it derives also the methodological principle of the separation of theory and politics and the exclusion of the ethical point of view.15  Politically, classical economics was employed both for defending and for attacking Capitalism, for advocating as well as for rejecting Socialism.

Marxism makes use of the same method with regard to modern subjective economics. Unable to oppose it by a single word of reasonable criticism, the marxian tries to dispose of it by denouncing it as ‘bourgeois economies’.16  To show that subjective economics is not ‘capitalist apologetics’ it should be sufficient, surely, to point out that there are socialists who stand firmly by the theory of subjective value.17  The evolution of economics is a process of the mind, independent of the supposed class interests of economists, and has nothing to do with supporting or condemning any particular social institutions. Every scientific theory can be misused for political purpose; the politician does not need to construct a theory to support the aims he happens to pursue.18  The ideas of modern Socialism have not sprung from proletarian brains. They were originated by intellectuals, sons of the bourgeoisie, not of wage-earners.19  Socialism has captured not only the working class; it has supporters, open and secret, even amongst the propertied classes too.

• 1Feuerbach, Vorläufige Thesen zur Reform der Philosophie, 1842 (Collected Works, Vol. II, Stuttgart 1904, p. 239).
• 2Feuerbach, Die Naturwssenschaft und die Revolution, 1850 (op. cit., Vol. X, Stuttgart 1911, p. 22).
• 3Vogt, Köhlerglaube und Wissenschaft, 2nd Edition, Giessen 1855, p. 32.
• 4Max Adler, who tries to reconcile Marxism with the Kantian New Criticism, vainly tries to prove that Marxism and philosophic materialism have nothing in common (see especially Marxistische Probleme, Stuttgart 1913, p. 60 et seq., 216 et seq.), in which he conflicts sharply with other Marxists. See, for example, Plechanow, Grundprobleme des Marxismus, Stuttgart 1910.
• 5Marx, Das Kapital, Vol. I, p. 354, note. But between Descartes and Haller stands de la Mettrie, with his ‘homme machine’, whose philosophy Marx has unfortunately omitted to interpret genetically.
• 6Marx, Zur Kritik der politischen Ökonomie, p. xi.
• 7Marx and Engels, Das Kommunistische Manifest, p. 27.
• 8Marx, Das Elend der Philosophie, ibid, p. 91. See also p. 303 of the present work.
• 9Marx, Das Kapital, Vol. I, p. 336.
• 10Ibid.
• 11Marx, Zur Kritik der politischen Ökonomie, p. 62. — Barth (Die Philosophie der Geschichte als Soziologie, Vol. I, p. 658 et seq) says rightly that the comparison between the innate privileges of the nobility and the presumably innate ideas can be considered as at most a joke. But the first part of Marx’s Characterisation of Locke is no less untenable than the second.
• 12Mehring, Die Lessing-Legende, 3rd Edition, Stuttgart 1909, p. 422.
• 13Ibid., p. 423.
• 14Held, Zwei Bücher zur sozialen Geschichte Englands, Leipzig 1881, pp. 176, 183.
• 15Schumpeter, Epochen der Dogmen und Methodengeschichte (‘Grundriss der Sozialökonomik’, Vol. I, Tübingen 1914), p. 81.
• 16Hilferding, Böhm-Bawerks Marx-Kritik, Vienna 1904, pp. 1, 61. For the Catholic Marxist Hohoff (Warenwert und Kapitalprofit, Paderborn 1902, p. 57) Bdhm-Bawerk is ‘an indeed well gifted, ordinary economist who could not lift himself out of the capitalistic prejudices among which he grew up.’ See my Grundprobleme der National-ökonomie, Jena 1933, p. 170 et seq.
• 17See Bernard Shaw, for example, Fabian Essays (1889), p. 16 et seq. In the same way, in sociology and political science, natural law and contract theory have served both to advocate and fight Absolutism.
• 18If one wants to credit the materialist conception of history with having stressed the fact that social relations are dependent on the natural conditions of life and production, one must remember that this can appear as a special merit only in contrast to the excesses of the Hegelian historians and philosophers of history. The liberal philosophy of society and history and the writing of history since the end of the XVIIIth Century (even the German, see Below, Die Deutsche Geschicktsschreibung von den Befreiungskriegen bis zu unseren Tagen, Leipzig 1916, p. 124 et seq.) were beforehand with this knowledge.
• 19Of the chief representatives of French and Italian Syndicalism, Sombart says (Sozialismus und soziale Bewegung, 7th Edition, Jena 1919. p. 110): ‘So far as I know them personally — amiable, fine, educated people. Cultured people with clean linen, good manners and elegant wives, whom one meets as gladly as one’s own kind of people, and who certainly do not look as if they represented a movement which turns above all against the increasingly bourgeois nature of Socialism and wants to help the wealed fist, the genuine and true only-manual-workers to their rights.’ And De Man says (Zur Psychologie des Sozialismus, p. 16 et seq): ‘If one accepted the misleading Marxist expression which connects every social ideology with a definite class attachment, one would have to say that Socialism as a doctrine, even Marxism, is of bourgeois origin.’

Abstract thought is independent of the wishes which move the thinker and of the aims for which he strives.1  Only this independence qualifies it as thought. Wishes and purposes regulate action. When it is said that economic life influences thought the facts are reversed. Economy as rational action is dependent on thought, not thought on economy.

Even if it were wished to admit that thought is determined by class-interest, it could only be done by considering recognized class interests. But the recognition of class interest is already a result of thought. Whether such thought shows that special class interests exist or that the interests of all classes in society harmonize, the process of thought itself has taken place before the idea of class influenced thought.

For proletarian thought, it is true, Marxism assumes a truth and eternal value, free of all limitations of class interest. Though itself admittedly a class, the proletariat must, transcending class interests, guard the interests of humanity by abolishing the division of society into classes. In the same way, proletarian thought contains in place of the relativity of class-determined thought, the absolute truth content of the pure science which will come to fruition in the future socialist society. In other words, Marxism alone is science. What preceded Marx historically, may be reckoned the pre-history of science. Marxism gives philosophers before Hegel about the same place which Christianity gives to the prophets, and grants Hegel the same position which Christianity assigns to the Baptist in relation to the Redeemer. Since the appearance of Marx, however, all truth is with the Marxist, and everything else is lies, deception, and capitalist apologetics.

This is a very simple and clear philosophy, and in the hands of Marx’s successors it becomes still simpler and clearer. To them science and Marxian Socialism are identical. Science is the exegesis of the words of Marx and Engels. Proofs are demonstrated by the quotation and interpretation of these words. The protagonists exchange accusations of ignorance of the ‘Writ’. Thus a real cult of the proletariat arises. Engels says: ‘Only in the working class does the German theoretic mind persist unstunted. Here it is not to be exterminated. Here no regard is paid to career, profit-making, gracious patronage from above. On the contrary, the more regardlessly and disinterestedly science proceeds the more it finds itself in unison with the workers’ interests and strivings’.2  According to Tönnies ‘only the proletariat, i.e. its literary spokesmen and leaders’, subscribe, ‘on principle, to the scientific view and all its consequences’.3

To reveal these presumptuous assertions in their proper light we have only to recall the socialist attitude towards all scientific achievements during recent decades. When about a quarter of a century ago, a number of Marxian writers tried to cleanse the party doctrine of its grossest errors, a heresy hunt was instituted to preserve the purity of the system. Revisionism succumbed to Orthodoxy. Within Marxism there is no place for free thought.

• 1The wish is father to the thought, says a figure of speech. What it means is that the wish is the father of faith.
• 2Engels, Ludwig Fauerbach und der Ausgang der klassischen deutschen Philosophie, 5th Edition, Stuttgart 1910, p. 58.
• 3Tönnies, Der Nietzsche-Kultus, Leipzig 1897, p. 6.

According to Marxism, the proletariat in capitalist society necessarily think socialistically. But why is this the case? It is easy to see why the socialist idea could not arise before there was large scale enterprise in industry, transport, and mining. As long as one could look forward to redistributing the actual physical property of the wealthy, it occurred to no one to devise any other way of securing equality of income. Only when the development of the division of labour had created large scale enterprise, unmistakably indivisible, did it become necessary to invoke the socialistic way of achieving equality. But although this explains why in the capitalist system there can no longer be any question of ‘dividing up’, it by no means explains why the policy of the proletariat must be Socialism.

In our day we take it for granted that the workman must think and act socialistically. But we arrive at this conclusion only by assuming that the socialist order of society is either the form of social life most advantageous to the proletariat or, at least, that the proletariat thinks it so. The first alternative has already been discussed in these pages. In view of the undoubted fact that Socialism, though it counts numerous supporters in other classes, is most wide spread amongst the workers, there remains only the question why the worker, because of the position he occupies, tends to be the more receptive to the socialist ideology.

The demagogic toadyism of the socialist parties praises the worker of modern Capitalism as a being distinguished by every excellency of mind and character. A sober and less biased study might perhaps arrive at a very different opinion. But this kind of inquiry may safely be left to the party hacks of the various movements. For knowledge of social conditions in general and the sociology of the party system in particular it is quite valueless. Our problem is simply to discover why the worker’s position in production should incline him to the view that the socialist method of production is not only possible in principle, but that it would be more rational than the capitalist method.

The answer is not difficult. The workman in the large or medium scale capitalist enterprise sees and knows nothing of the connections uniting the individual parts of the work to the economic system as a whole. His horizon as worker and producer does not extend beyond the process which is his task. He holds that he alone is a productive member of society, and thinks that everyone, engineer and overseer equally well as entrepreneur, who does not, like himself, stand at the machine or carry loads, is a parasite. Even the bank clerk believes that he alone is actively productive in banking, that he earns the profit of the undertaking, and that the manager who concludes transactions is a superfluity, easily replaceable without loss. Now from where he stands, the worker cannot see how things hang together. He might find out by means of hard thinking and the aid of books, never from the facts of his own working environment. Just as the average man can only conclude from the facts of daily experience that the earth stands still and the sun moves from east to west, so the worker, judging by his own experience can never arrive at a true knowledge of the nature and functioning of economic life.

But when the socialist ideology comes to this economically ignorant man and shouts:

     Working man, awake, awake!

     Of thy strength full measure take,

     All the wheels must needs stand still

     If thy strong arm so doth will,                     (Herwegh)

is it any wonder if, dizzy with dreams of power, he follows this invitation? Socialism is the expression of the principle of violence crying from the workers’ soul, just as Imperialism is the principle of violence speaking from the soul of the official and the soldier.

The masses incline towards Socialism, not because it really tends to their interests but because they believe that it does so.

Marx seeks to establish an economic foundation for the thesis that the evolution towards Socialism is inevitable, by demonstrating the progressive concentration of capital. Capitalism has succeeded in depriving the worker of private ownership in the means of production; it has consummated the ‘expropriation of the direct producers’. As soon as this process is completed ‘the further socialization of labour and the further transformation of land and other agents into socially exploited and therefore collective means of production, together with the ensuing expropriation of private owners, assume a new form. That which is now to be expropriated is no longer the worker labouring independently but the capitalist exploiting the worker. This expropriation is carried out by the play of the inherent forces of capitalist production itself; by the centralization of capital, each individual capitalist deals the death-blow to a number of others’. Hand in hand with this goes the socialization of production. The number of the ‘capitalist magnates’ is continually decreasing. ‘The centralization of the means of production and the socialization of labour reach a point where they become incompatible with their capitalist framework. They burst it. The last hour of capitalist private property has arrived. The expropriators are expropriated.’ This is the ‘expropriation of the few usurpers by the mass of the people’, through the ‘transformation of capitalist ownership, which actually rests already on social production, into social ownership’, a process much less ‘lengthy, hard, and difficult’ than was, in its own time, the process that transformed the private ownership of individuals doing their own work into capitalist ownership.1

Marx gives a dialectical turn to his contentions. ‘Capitalist private ownership is the first negation of the individual private ownership created by the workers’ toil. But, with the inevitability of a natural process, capitalist production brings forth its own negation. It is the negation of the negation. This does not re-establish private ownership, but only individual ownership based on the achievements of the capitalist era: co-operation and the collective ownership of land and of the means or production produced by labour.’2  Strip these statements of the dialectic accessories and there remains the fact that the concentration of establishments, enterprises, and fortunes is inevitable. (Marx does not distinguish between these three and obviously regards them as identical.) This concentration would eventually lead to Socialism, as the world, once it was transformed into one single gigantic enterprise, could be taken over by society with perfect ease; but before that stage has been reached, the result will have been achieved by ‘the revolt of the ever-expanding working class which has been schooled, united, and organized by the very mechanism of the capitalist production.’3

To Kautsky it is clear that ‘capitalist production tends to unite the means of production, which have become the monopoly of the capitalist class, into fewer and fewer hands. This evolution finally makes all the means of production of a nation, indeed of the whole world economy, the private property of a single individual or company, which disposes of them arbitrarily. The whole economy will be drawn together into one colossal undertaking, in which everything has to serve one master. In capitalist society private ownership in the means of production ends with all except one person being propertyless. It thus leads to its own abolition, to the lack of property by all and to the enslavement of all’. This is a condition towards which we are rapidly advancing ‘more rapidly than most people believe’. Of course, we are told, the matter will not go so far. ‘For the mere approach to this condition must increase the sufferings, conflicts, and contradictions in society to such an extent, that they become intolerable and society bursts its bounds and falls to pieces’ unless evolution has previously been given a different direction.4

It should be observed that, according to this view, the transition from ‘High’ Capitalism to Socialism is to be effected only by the deliberate action of the Masses. The Masses believe that certain evils are to be ascribed to private ownership in the means of production. They believe that socialist production is likely to improve their condition. It is therefore a theoretical insight which guides them. According to the materialist conception of history, however, this theory must itself be the inevitable result of a certain organization of production. Here we observe once more how Marxism moves in a circle when it tries to demonstrate its propositions. A certain condition must arise because evolution leads to it; evolution leads there because thought demands it; but thought is determined by being. This being, however, can be nothing more than that of the existing social condition. From the thinking determined by the existing condition the necessity of another condition follows.

There are two objections against which this whole chain of reasoning has no defence. It is unable to refute the contention of anyone who, though arguing on the same lines, regards thought as the cause, and society as that which is caused. And it has similarly no reply to the objection that future conditions may very well be misconceived, and that that which now seems so desirable may prove to be less tolerable than existing conditions. This, however, re-opens discussion on the advantages and disadvantages of types of societies, those existing and those sketched out by would-be reformers. But this is the very discussion which Marxism desired to suppress.

Let no one suppose that the Marxian doctrine of the concentration of capital can be verified by the simple method of consulting the statistics of establishments, incomes, and fortunes. The statistics of incomes and fortunes utterly contradict it. This can be definitely asserted in spite of all the imperfections of present statistical methods and all the difficulties which fluctuations in the value of money place in the way of using the material. With equal confidence one can say that the counterpart of the theory of concentration, the much discussed theory of increasing poverty — in which even orthodox marxists can hardly continue to believe — is incompatible with the results of statistical investigation,5  The statistics of agricultural holdings also contradict the Marxian assumptions. Those giving the number of the establishments in industry, mining and transport appear to confirm it. But figures that indicate a particular evolution during a limited period cannot be conclusive. The development in this brief span might run contrary to the long term trend. We shall do better, therefore, to leave statistics on both sides, both for and against. For it must not be forgotten that there is a theory underlying every statistical demonstration. Figures alone prove or disprove nothing. Only the conclusions drawn from the collected material can do this. And these are theoretical.

• 1Marx, Das Kapital, Vol. I, p. 726 et seq.
• 2Marx, Das Kapital, Vol. I, p. 728 et seq.
• 3Ibid., p.. 728.
• 4Kautsky, Das Erfurter Programm, p. 83.
• 5Wolf, Sozialismus und kapitalistische Gesellschaftsordnung, Stuttgart 1893, p. 149 et seq.

The theory of monopoly goes deeper than the Marxian theory of concentration. According to it, free competition, the life blood of a society based on private ownership in the means of production, is weakened by the steady growth of monopoly. The disadvantages bred within the economy by the unlimited rule of private monopolies are, however, so great that society has no choice but to transform private monopoly by socialization into state ownership. However great an evil Socialism might be, it would be less harmful than private monopoly. Should it prove impossible to counteract the tendency towards monopoly in ever widening fields of production, then private ownership in the means of production is already doomed.1

It is clear that this doctrine calls for a searching investigation: first, as to whether evolution is really in the direction of monopoly control, and secondly as to what are the economic effects of such monopoly. Here one has to proceed with special care. The time at which this doctrine was first expounded was generally not favourable to the theoretical study of such problems. The emotional judgment of appearances rather than the cool examination of the essence of things was the order of the day. Even the arguments of such an outstanding economist as J. B. Clark are imbued with the popular hatred of the trusts. Utterances typical of contemporary politicians are to be found in the report of the German Socialization Commission of February 15th, 1919, where it was affirmed as ‘indisputable’ that the monopolistic position of the German coal industry ‘constitutes an independent power which is incompatible with the nature of the modern state, and not merely the socialist one’. It was, in the opinion of the Commission, ‘unnecessary to discuss anew the question whether and to what degree this power is misused to the detriment of the remaining members of society, those to whom it is raw material, the consumers, and the workers; its existence suffices to make evident the necessity for completely abolishing it’.2

• 1Clark, Essentials of Economic Theory, p. 374 et seq., 397.
• 2Report of the Sozialisierungskommission über die Frage der Sozialisierung des Kohlenbergbaus vom 31 Juli 1920 (Appendix: Vorläufiger Bericht vom 15 Februar 1919), op. cit. p. 33.

The concentration of establishments comes automatically with the division of labour. In the shoemaker’s workshop the production of footwear, formerly carried on in each individual household, is united in one single establishment. The shoemaking village, the shoe-manufactory become the manufacturing centre for a large area. The shoe factory that is organized for the mass-production of footwear represents a still wider union of establishments, and the basic principle of its internal organization is on the one side, division of labour, and, on the other side, concentration of similar work in special departments. In short, the more the work is split up, the more must similar labour processes be concentrated.

Neither from the results of the census undertaken in various countries to verify the doctrine of the concentration of productive units, nor from other statistical evidence of changes in the number of establishments, can we learn all there is to be known about them. For what appears in these enumerations as a unit is always, in a certain sense, a unit of business, not a unit of production. Only in certain cases do these investigations count separately works which, whilst united in locality, are conducted separately inside a single enterprise. The conception of the establishment and its evolution has to be elaborated from a point of view other than that which lies at the basis of trade statistics.

The higher productivity of the division of labour results, above all, from the specialization of processes which it makes possible. The more often a process has to be repeated the more does it pay to install a specially adapted tool. The splitting up of labour goes farther than the specialization of occupations, or at least than the specialization of enterprises. In the shoe factory shoes are produced by various part processes. It is quite conceivable that each part process might take place in a special establishment and in a special enterprise. In fact, there are factories which make only-parts of shoes and supply them to the shoe factories. Nevertheless, we usually consider as one productive unit the sum of part processes combined in a single shoe factory which itself produces all the component parts of shoes. If to the shoe factory is joined also a leather factory or a department for producing the boxes in which the shoes are packed, we speak of the union of several productive units for a common enterprise. This is a purely historical distinction which neither the technical circumstances of production nor the peculiarities of business enterprise suffice by themselves to explain.

When we regard as an establishment that totality of process involved in economic activity which businessmen regard as a unity, we must remember that this unit is by no means an indivisible thing. Each productive unit is itself composed of technical processes already horizontally and vertically combined. The concept of an establishment, therefore, is economic, not technical. Its delimitation in individual cases is determined by economic, not by technical, considerations.

The size of the productive unit is determined by the complementary quality of the factors of production. The aim is the optimal combination of these factors, i.e. that combination by which the greatest return can be produced economically. Economic development drives industry to ever greater division of labour, involving at once an increase in the size and a limiting of the scope of the unit of production. The actual size of the unit is the result of the interaction of these two forces.

The Law of Proportionality in combining the factors of production was first formulated in connection with agricultural production, as the Law of Diminishing Returns. For a long time its general character was misunderstood, and it was regarded as a law of agricultural technique. It was contrasted with a Law of Increasing Returns, which was thought to be valid for industrial production. These errors have since been corrected.1

The Law of the Optimal Combination of the factors of production indicates the most profitable size of the establishment. Net profit is greater according to the degree to which its size permits all factors of production to be employed without residue. In this way alone is to be estimated the superiority which the size of one particular establishment gives it over another establishment — at the given level of productive technique. It was a mistake to think that enlargement of the industrial establishment must always lead to an economy of costs, a mistake of which Marx and his school have been guilty, although occasional remarks betray the fact that he recognized the true state of affairs. For here, too, there is a limit beyond which enlargement of the establishment does not result in a more economical application of the factors of production. In principle, the same may be said of agriculture and mining; the concrete data only differ. It is merely certain peculiarities of the conditions of agricultural production which cause us to regard the Law of Diminishing Returns as primarily affecting land.

The concentration of establishments is primarily concentration in space. As the land suitable to agriculture and forestry extends in space, every effort to enlarge the establishment increases the difficulties that spring from distance. Thus an upper limit is set for the size of the agricultural unit of exploitation. Because agriculture and forestry extend in space it is possible to concentrate the establishment only up to a definite point. It is superfluous to enter into the question — often raised in discussion of this problem — whether large or small scale production is the more economical in agriculture. This has nothing to do with the Law of the Concentration of Establishments. Even supposing large scale production to be superior, one cannot deny that there could be no question of a Law of the Concentration of Establishments in agriculture or forestry. The fact that land is owned on a large scale does not mean that it is worked on a large scale. The great estates are always composed of numerous farms.

This appears even more clearly in a different branch of primary production, mining. Mining enterprise is tied to the place where the ore is found. The establishments are as large as these separate places permit. They can be concentrated only to the degree in which the geographical position of the separate beds of ore make concentration seem profitable. In short, one can see nowhere in primary production any tendency to concentrate productive units. This is equally true of transport.

• 1Vogelstein, Die finansielle Organization der kapitalistischen Industrie und die Monopolbildungen. (Grundriss der Sozialökonomik, VI. Abteilung, Tübingen 1914), p. 203 et seq. Weiss Art. Abnehmender Ertrag in ‘Handwörterbuch der Staatswissenschaften’ 4th Edition, Vol. I, p. 11 et seq.

The process of manufacture out of raw materials is to a certain extent free from the limitations of space. The working of cotton plantations cannot be concentrated, but the spinning and weaving works may be united. But, here too, it would be rash to derive without further consideration a Law of the Concentration of Establishments from the fact that the larger plant generally proves superior to the smaller.

For in industry too localization is of importance, quite apart from the fact that (other things being equal, i.e. at a given level of the division of labour) the economic superiority of the larger productive unit exists only in so far as the Law of the Optimal Combination of Factors of Production demands it and that consequently no advantage is to be gained by enlarging the establishment beyond the point where the instruments are most efficiently utilized. Each type of production has a natural location, which depends ultimately on the geographical distribution of primary production. The fact that primary production cannot be concentrated must influence the subsequent process of manufacture. The power of this influence varies with the importance attaching to the transport of raw materials and finished products in the separate branches of production.

A Law of the Concentration of Establishments operates therefore only in so far as the division of labour leads to progressive division of production into new branches. This concentration is really nothing more than the reverse side of the division of labour. As a result of the division of labour numerous dissimilar establishments, within which uniformity is the rule, replace numerous similar establishments within which various different processes of production are carried out. It causes the number of similar plants to decrease, whilst the circle of persons, for whose needs they work directly or indirectly, grows. If the production of raw materials was not geographically fixed, a circumstance which acts counter to the process initiated by the division of labour, one single plant only would exist for every branch of production.1

• 1The remaining factors of localization (Afred Weber, Industrielle Standortslehre in the ‘Grundriss der Sozialökonomik’ VI Abt, Tübingen 1914, p. 54 et seq) can be passed over, as the present, or the historically transmitted, distribution of primary production ultimately determines them.

The merger of several similar independent establishments into one enterprise may be called horizontal concentration of production. Here we follow broadly the usage of writers on cartels, though their definition is not in complete accord with ours. If the separate establishments do not remain completely independent, if, for example the management or some departments are amalgamated, there is concentration of establishments. A mere concentration of enterprises occurs only when the individual units remain independent in everything except the taking of decisive economic decisions. The typical example of this is a cartel or a syndicate. Everything stays as it was, but, according to whether it is a buying cartel or a selling cartel or both, decisions about purchases and sales are taken unitarily.

When it is not merely the preliminary step to an amalgamation of establishments, the purpose of these unions is monopolistic domination of the market. Horizontal concentration originates only in the efforts of separate entrepreneurs to derive those advantages enjoyed under certain circumstances by the monopolist.

Vertical concentration is the union into one unitary enterprise of independent enterprises, some of which use the products of the others. This terminology follows the usage of modern economic literature. Examples of vertical concentration are the union of weaving, spinning, bleaching and dyeing works; a printing works to which a paper factory and a newspaper enterprise are joined; the mixed works of the iron industry and of coal mining, etc.

Each productive unit is a vertical concentration of part processes and of apparatus. Unity of production is created by the fact that part of the means of production — certain machines, buildings, the direction of the works — is jointly held. Such joint holding is lacking in the vertical union of enterprises. Here the essence of the union lies in the will of the entrepreneur to make one enterprise serve another. The mere fact that one man owns two enterprises is not in itself sufficient if this will does not exist. Where a chocolate manufacturer owns also an iron works there is no vertical concentration. Vertical concentration is usually considered to aim at ensuring an outlet for the product or safeguarding the source of raw materials and half finished goods. This is what entrepreneurs reply when questioned as to the advantages of such combinations. Many economists accept it without question, for apparently they do not think it is their job to scrutinize what is said by ‘practical men’; and after accepting the statement as final they proceed to examine it from the ethical point of view. Still, even if they avoid thinking about it, closer research into facts should show them the truth. There is the fact that managers of plants attached to a vertical combination often have to make complaints. The manager of the paper-mill says: ‘I could get much better value for my paper if I did not have to supply it to “our” printing works’. The manager of the weaving-mill: ‘If I didn’t have to get the yarn from “our” spinning works I could get it cheaper’. Such complaints are the order of the day, and it is not difficult to understand why they must accompany every vertical concentration.

If the amalgamated establishments were individually so efficient that they did not have to shun competition, vertical combination would serve no special purpose. A paper factory of the best type never needs to ensure its market. A printing works which is on a level with its competitors does not need to ensure its paper supply. The efficient enterprise sells where it gets the best prices, buys where it can do so most economically. Hence, it does not follow that two enterprises, working at different stages of the same branch of production and held by one owner, must necessarily unite in vertical combination. Only when one or other of them shows itself less able to sustain competition does the entrepreneur conceive the idea of supporting it by tying it to the strong one. He looks to the profits of the prosperous business for a fund to cover the deficits of the non-prosperous. Apart from tax remissions and other special advantages, such as those which the mixed works in the German iron industry were able to derive from cartel agreements, union achieves nothing but an apparent profit in one enterprise and an apparent loss in the other.

The number and importance of vertical concentrations is extraordinarily overestimated. In modern capitalist economic life on the contrary, new branches of enterprise are constantly forming and parts of those existing are constantly breaking away to become independent.

The progressive tendency to specialization in modern industry shows that development is moving away from vertical concentration, which, except where it is demanded by considerations of productive technique, is always an exceptional phenomenon, generally to be explained by regard for the legal and other political conditions of production. But even here the break-up of such unions and the re-establishment of individual enterprise is to be witnessed over and over again.

Atendency to the concentration of establishments or to the concentration of enterprises is not by any means equivalent to a tendency to the concentration of fortunes. In the same degree in which establishments and enterprises became bigger and bigger modern capitalism has developed forms of enterprise which enable people with small fortunes to undertake big businesses. The proof that there is no tendency to concentrate fortunes lies in the number of these types of enterprises that have come up and are growing daily in importance, while the individual merchant has almost disappeared from large scale industry, mining, and transport. The history of forms of enterprise, from the societas unius acti to the modern joint stock company, is a wholesale contradiction of the doctrine of the concentration of capital so arbitrarily set up by Marx.

If we wish to prove that the poor are becoming ever more numerous and poorer, and the rich ever less numerous and richer, it is useless to point out that in a period of remote antiquity, as elusive to us as the Golden Age to Ovid and Virgil, the differences of wealth were less than they are to-day. We must prove that there is an economic cause which leads imperatively to the concentration of fortunes. The Marxians have not even attempted this. Their theory which ascribes to the capitalist age a special tendency towards the concentration of fortunes, is pure invention. The attempt to give it some sort of historical foundation is hopeless and adduces just the contrary of that which Marx asserts to be demonstrable.

The desire for an increase of wealth can be satisfied through exchange, which is the only method possible in a capitalist economy, or by violence and petition as in a militarist society, where the strong acquire by force, the weak by petitioning. In the feudal society ownership of the strong endures only so long as they have the power to hold it; that of the weak is always precarious, for having been acquired by grace of the strong it is always dependent on them. The weak hold their property without legal protection. In a militarist society, therefore, there is nothing but power to hinder the strong from extending their wealth. They can go on enriching themselves as long as no stronger men oppose them.

Nowhere and at no time has the large scale ownership of land come into being through the working of economic forces in the market. It is the result of military and political effort. Founded by violence, it has been upheld by violence and by that alone. As soon as the latifundia are drawn into the sphere of market transactions they begin to crumble, until at last they disappear completely. Neither at their formation nor in their maintenance have economic causes operated. The great landed fortunes did not arise through the economic superiority of large scale ownership, but through violent annexation outside the area of trade. ‘And they covet fields’ complains the prophet Micah,1  ‘and take them by violence; and houses, and take them away.’ Thus comes into existence the property of those who, in the words of Isaiah, ‘join house to house... lay field to field, till there be no place, that they may be placed alone in the midst of the earth’.2

The non-economic origin of landed fortunes is clearly revealed by the fact that, as a rule, the expropriation by which they have been created in no way alters the manner of production. The old owner remains on the soil under a different legal title and continues to carry on production.

Land ownership may be founded also on gifts. It was in this way that the Church acquired its great possessions in the Frankish kingdom. Not later than the eighth century, these latifundia fell into the hands of the nobility; according to the older theory this was the result of secularizations by Charles Martel and his successors, but recent research is inclined to make ‘an offensive of the lay aristocrats’ responsible.3

That in a market economy it is difficult even now to uphold the latifundia, is shown by the endeavours to create legislation institutions like the ‘Fideikommiss’ (feoffment in trust) and related legal institutions such as the English ‘entail’. The purpose of the ‘Fideikommiss’ was to maintain large-scale landed proprietorship, because it could not be kept together otherwise. The Law of Inheritance is changed, mortgaging and alienation are made impossible, and the State is appointed guardian of the indivisibility and inalienability of the property, so that the prestige of family tradition shall not be impaired. If economic circumstances had tended towards the continuous concentration of land ownership such laws would have been superfluous. Legislation would have been enacted against the formation of estates rather than for their protection. But of such laws legal history knows nothing. The regulations against ‘Bauernlegen’, against enclosing arable land, etc., are directed against movements outside the area of trade, that is, against force. The legal restrictions of mortmain are similar. The lands of the mortmain, which, incidentally, are legally protected in much the same way as the ‘Fideikommiss’, do not increase by force of economic development but through pious donations.

Now the highest concentration of fortunes is to be found just in agriculture, where concentration of establishments is impossible and the concentration of enterprises economically purposeless, where the large property appears to be economically inferior to the small and unable to withstand it in free competition. Never was the ownership of the means of production more closely concentrated than at the time of Pliny, when half the province of Africa was owned by six people, or in the days of the Merovingians, when the Church possessed the greater part of all French soil. And in no part of the world is there less large-scale land ownership than in capitalist North America.

• 1Micah, II, 2.
• 2Isaiah, v, 8.
• 3Schröder, Lehrbuch der deutschen Rechtsgeschichte, p. 159 et seq., Dopsch, Wirtschaftliche und soziale Grundlagen der europäischen Kulturentwicklung, Part 2, Vienna 1920, p. 289 et seq.

The assertion that wealth on the one hand and poverty on the other are ever increasing was maintained at first without any conscious connection with an economic theory. Its supporters think they have derived it from an observation of social relations. But the observer’s judgment is influenced by the idea that the sum of wealth in any society is a given quantity, so that if some possess more others must possess less.1  As, however, in every society the growth of new riches and the coming into existence of new poverty are always to be found in a conspicuous manner whilst the slow decline of ancient fortunes and the slow enrichment of less propertied classes easily escape the eye of the inattentive student, it is easy to arrive at the premature conclusion summed up in the socialist catchword ‘the rich richer, the poor poorer’.

No protracted argument is required to prove that the evidence completely fails to substantiate this assertion. It is quite an unfounded hypothesis that in a society based on the division of labour the wealth of some implies the poverty of others. Under certain assumptions it is true of militarist societies, where there is no division of labour. But of a capitalist society it is untrue. Moreover an opinion formed on the basis of casual observations of that narrow section with which the individual is personally acquainted is quite insufficient proof of the theory of concentration.

The foreigner who visits England equipped with good recommendations has opportunities for learning something of the noble and wealthy families, and their manner of living. If he wants to know more or feels it his duty to make his visit more than a mere pleasure trip, he is allowed to make a flying tour of the works of great enterprises. For the layman, there is nothing particularly attractive about this. At first the noise, the bustle, the activity astonish the visitor, but after inspecting two or three factories the spectacle grows monotonous. Such a study of social relations, on the other hand, as can be undertaken during a short visit to England, is more stimulating. A walk through the slums of London or any other large city produces more vivid impressions, and the effect on the traveller who, when not occupied in this study, will be hurrying from one entertainment to another, is twice as powerful. Thus visits to the slums have become a popular item in the itinerary of the Continental’s obligatory tour of England. In this way the future statesman and economist gathered an impression of the effects of industry on the masses, which became a basis for the social views of a lifetime. He went home firm in the opinion that industry makes few rich and many poor. When later he wrote or spoke about industrial conditions he never forgot to describe the misery he had found in the slums, elaborating the most painful details, often with more or less conscious exaggeration. All the same his picture tells us nothing more than that some people are rich and some poor. But to know this, we do not need the report of people who have seen the suffering with their own eyes. Before they wrote we knew that Capitalism has not yet abolished all misery in the world. What they have to set about proving is that the number of wealthy people is decreasing, while the wealthy individual grows richer, and that the number and the poverty of the poor is steadily on the increase. It would, however, take a theory of economic evolution to prove this.

Attempts to demonstrate by statistical research the progressive increase of the misery of the masses and the growth of wealth among a numerically diminishing rich class are no better than these mere appeals to emotion. The estimates of money incomes at the disposal of statistical inquiry are unusable because the purchasing power of money alters. This fact alone is enough to show that we lack any basis for comparing arithmetically the distribution of income over a number of years. For where it is not possible to reduce to a common denominator the various goods and services of which incomes are composed, one cannot form any series for historical comparison from known statistics of income and capital.

The attention of sociologists is often drawn to the fact that mercantile and industrial wealth, that is, wealth not invested in land and mining property, seldom maintains itself in one family for a long period. The bourgeois families rise steadily from poverty to wealth, sometimes so quickly that a man who has been in want a few years previously becomes one of the richest of his time. The history of modern fortunes is full of stories of beggar boys who have made themselves millionaires. Little is said of the decay of fortunes among the well-to-do. This does not usually take place so quickly as to strike the casual observer; closer examination, however, will reveal how unceasing the process is. Seldom does mercantile and industrial wealth maintain itself in one family for more than two or three generations, unless, by investment in land, it has ceased to be wealth of this nature.2  It becomes property in land, no longer used in the business of active acquisition.

Fortunes invested in capital do not, as the naive economic philosophy of the common man imagines, represent eternal sources of income. That capital yields a profit, that it even maintains itself at all, is by no means a self-evident fact following a priori from the fact of its existence. The capital goods, of which capital is concretely composed, appear and disappear in production; in their place come other goods, ultimately consumption goods, out of the value of which the value of the capital mass must be reconstituted. This is possible only when the production has been successful, that is when it has produced more value than it absorbed. Not only profits of capital, but the reproduction of capital presupposes a successful process of production. The profits of capital and the maintenance of capital are always the result of successful enterprise. If this enterprise fails, the investor loses not only the yield on the capital, but his original capital fund as well. One ought carefully to distinguish between produced means of production and the primary factors of production. In agriculture and forestry the original and indestructible forces of the soil are maintained even though production fails, for faulty management cannot dissipate them. They may become valueless through changes in demand, but they cannot lose their inherent capacity to yield produce. This is not so in manufacturing production. There everything can be lost, root and branch. Production must continually replenish capital. The individual capital goods which compose it have a limited life; the existence of capital is prolonged only by the manner in which the owner deliberately reinvests it in production. To own capital one must earn it afresh day by day. In the long run a capital fortune is not a source of income which can be enjoyed in idleness.

To combat these arguments by pointing to the steady yield from ‘good’ capital investments would be wrong. The point is that the investments must be ‘good’, and to be that, they must be the result of successful speculation. Arithmetical jugglers have calculated the amount to which a penny, invested at compound interest at the time of Christ, would have grown by now. The result is so striking that one might very well ask why nobody was clever enough to reap a fortune this way. But quite apart from all the other obstacles to such a course of action, there is the crowning disability that to every capital investment is attached the risk of a total or partial loss of the original capital sum. This is true not only of the entrepreneur’s investment, but also of the investment the capitalist makes in lending to the entrepreneur, for his investment naturally depends completely on the entrepreneur’s. His risk is smaller, because the entrepreneur offers him as security that part of his own wealth which is outside the immediate undertaking, but qualitatively the two risks are the same. The moneylender too can, and often does, lose his wealth.3

An eternal capital investment is as non-existent as a secure one. Every capital investment is speculative; its success cannot be foreseen with absolute assurance. Not even the idea of an ‘eternal and secure’ capital yield could have arisen if the concepts of capital investment had been taken from the sphere of business and capital enterprise. The ideas of eternity and security come from rents secured on landed property and from the related government securities. It corresponds to actual conditions when the law recognizes as trustee investments only those which are in land or in incomes secured on land or afforded by the State or by other public corporations. In capitalist enterprise there is no secure income and no security of wealth. It is obvious that an entail invested in enterprises outside agriculture, forestry, and mining would be senseless.

If, then, capital sums do not grow of themselves, if for their maintenance alone, quite apart from their fructification and increase, successful speculation is constantly required, there can be no question whatever of a tendency for fortunes to grow bigger and bigger. Fortunes cannot grow; someone has to increase them.4  For this the successful activity of an entrepreneur is needed. The capital reproduces itself, bears fruit and increases only so long as a successful and lucky investment endures. The more rapid the change in economic environment the shorter the time in which an investment is to be considered as good. For the making of new investments, for reorganization of production, for innovations in technique, abilities are needed which only a few possess. If under exceptional circumstances these are inherited from generation to generation, the successors are able to maintain the wealth left by their ancestors, even perhaps to increase it, despite the fact that it may have been split up on inheritance. But if, as is generally the case, the heirs are not equal to the demands which life makes on an entrepreneur, the inherited wealth rapidly vanishes.

When rich entrepreneurs wish to perpetuate their wealth in the family they take refuge in land. The descendants of the Fuggers and the Welsers live even to-day in considerable affluence, if not luxury, but they have long since ceased to be merchants and have transformed their wealth into landed property. They became members of the German nobility, differing in no way from other South German noble families. Numerous merchant families in other countries have undergone the same development; having become rich in trade and industry they have ceased to be merchants and entrepreneurs and have become landowners, not to increase their fortunes but to maintain them and transmit them to their children and their children’s children. The families which did otherwise soon disappeared in obscure poverty. There are few banking families whose business has existed for a hundred years or more, and a closer glance at the affairs of these few will show that they are generally commercially active only in administering fortunes really invested in land and mines. There are no ancient fortunes which thrive in the sense that they continually increase.

• 1Michels, Die Verelendungstheorie, Leipzig 1929, p. 19 et seq.
• 2Hansen, Die drei Bevölkerungsstufen, München 1889, p. 181 et seq.
• 3This is quite apart from the effects of currency depreciation.
• 4Considerant tries to prove the theory of concentration with a metaphor borrowed from mechanics: ‘Les capitaux suivent anjourd’hui sans contrepoids la loi de leur propre gravitation; c’est que, s’attirant en raison de leurs masses, les richesses sociales se concentrent de plus en plus entre les mains des grands possesseurs’. Quoted by Tugan-Baranowsky, Der moderne Sozialismus in seiner geschichtlichen Entwicklung, p. 62. That is word play, nothing more.

The theory of increasing poverty among the masses stands at the centre of Marxist thought as well as of older socialist doctrines. The accumulation of poverty parallels the accumulation of capital. It is the ‘antagonistic character of capitalist production’ that ‘the accumulation of wealth at one pole’ is simultaneously ‘accumulation of misery, work torture, slavery, ignorance, brutalization, and moral degeneracy at the other’.1  This is the theory of the progressive increase in the absolute poverty of the masses. Based on nothing but the tortuous processes of an abstruse system of thought, it need occupy us all the less in that it is gradually receding into the background, even in the writings of orthodox Marxian disciples and the official programmes of the social-democratic parties. Even Kautsky, during the revisionism quarrel, was reduced to conceding that, according to all the facts, it was precisely in the most advanced capitalist countries that physical misery was on the decline, and that the working classes had a higher standard of life than fifty years ago.2  The Marxians still cling to the theory of increasing poverty purely on account of its propaganda value, and exploit it to-day just as much as during the youth of the now aged Party.

But intellectually the theory of the relative growth of poverty, developed by Rodbertus, has replaced the theory of absolute growth. ‘Poverty’, says Rodbertus, ‘is a social, that is, a relative, concept. Now, I maintain that the justifiable needs of the working classes, since these have attained a higher social position, have become considerably more numerous. It would be as wrong, now that they have attained this position, not to speak, even with unchanged wages, of a deterioration in their material condition as it would have been at an earlier stage when their wages fell, and they had not yet attained this position.’3  This thought is derived entirely from the point of view of the State Socialist, which considers a raising of the workers’ claims to be ‘justified’ and assigns them a ‘higher position’ in the social order. Against arbitrary judgments of this kind, no argument is possible.

The Marxians have taken over the doctrine of the relative growth of poverty. ‘If in the course of evolution the grandson of a small master weaver, who had lived with his own journeymen, comes to inhabit a palatial, magnificently furnished villa, while the journeyman’s grandson lives in lodgings, which though more comfortable, no doubt, than his grandfather’s garret in the master weaver’s house, yet serves to widen the social gulf between the two, then the journeyman’s grandson will feel his poverty all the more for seeing the comforts that are within his employer’s reach. His own position is better than his ancestor’s, his standard of living has risen, but relatively his situation has become worse. Social misery becomes greater... the workers relatively more wretched.’4  Assuming that this were true, it would be no indictment against the capitalist system. If Capitalism improves the economic position all round, it is of secondary importance that it does not raise all to the same level. A social order is not bad simply because it helps one more than another. If I am doing better, what can it harm me that others are doing better still? Must one destroy Capitalism which satisfies better from day to day the wants of all people, merely because some individuals become rich and a few of them very rich? How, then, can it be asserted as ‘logically unassailable’ that ‘a growth in the relative poverty of the masses... must finally end in catastrophe.’5

Kautsky tries to make his conception of the Marxian theory of increasing poverty different from that which emerges from an unprejudiced reading of Das Kapital. ‘The word poverty’, he says, ‘may mean physical poverty, but it may also mean social poverty. In the first sense it is measured by man’s physiological needs. These are indeed not everywhere and at all times the same, still they do not show differences nearly so great as the social needs, non-satisfaction of which produces social poverty.’6  It is social poverty, says Kautsky, that Marx had in mind. Considering the clarity and precision of Marx’s style this interpretation is a masterpiece of sophistry, and it was accordingly rejected by the revisionists. To the person who does not take Marx’s words as revelation it may, indeed, be a matter of indifference whether the theory of increasing social poverty is contained in the first volume of Das Kapital or is taken from Engels or was first put forward by the neo-marxists. The important questions are whether it is tenable and what conclusions follow from it.

Kautsky holds that the growth of poverty in the social sense is ‘attested by the bourgeoisie themselves, only they have given the matter a different name; they call it covetousness... The decisive fact is that the contrast between the wage-earners’ needs and the possibility of satisfying them out of wages, the contrast therefore between wage-earning and capital, is becoming greater and greater’.7  Covetousness has always existed, however; it is no new phenomenon. We may even admit that it is more prevalent now than formerly; the general striving after improvement of economic position is a peculiarly characteristic mark of capitalist society. But how one can conclude from this that the capitalist order of society must necessarily change into the socialist is inexplicable.

The fact is, that the doctrine of increasing relative social poverty is nothing more than an attempt to give an economic justification to policies based on the resentment of the masses. Growing social poverty means merely growing envy.8  Mandeville and Hume, two of the greatest observers of human nature, have remarked that the intensity of envy depends on the distance between the envier and the envied. If the distance is great one does not compare oneself with the envied, and, in fact, no envy is felt. The smaller the distance, however, the greater the envy.9  Thus one can deduce from the growth of resentment in the masses that inequalities of income are diminishing. The increasing ‘covetousness’ is not, as Kautsky thinks, a proof of the relative growth of poverty; on the contrary, it shows that the economc distance between the classes is becoming less and less.

• 1Marx, Das Kapital, Vol. I, p. 611.
• 2Kautsky, Bernstein und das Sozialdemokratische Programm, Stuttgart 1899, p. 116.
• 3Rodbertus, Erster sozialer Brief an v. Kirchmann (Ausgabe von Zeller, Zur Erkenntnis unserer staatwirtschaftlichen Zustände, 2nd Edition, Berlin 1885), p. 273 n.
• 4Hermann Müller, Karl Marx und die Gewerkschaften, Berlin 1918, p. 82 et seq.
• 5As is done by Ballod, Der Zukunftsstaat, 2nd Edition, Stuttgart 1919, p. 12.
• 6Kautsky, Bernstein und das Sozialdemokratische Programm, p. 116.
• 7Ibid., p. 120.
• 8Compare the remarks of Weitling, quoted in Sombart (Derproletarische Sozialismus, Jena 1924. Vol. I, p. 106).
• 9Hume, A Treatise of Human Nature (Philosophical Works, ed. by Green and Grose, London 1873), Vol. II, p. 162 et seq.; Mandeville, Bienenfabel, edited by Bobertag, Munchen 1914, p. 123; Schatz (L’Individualisme économique et social, Paris 1907, p. 73, n. 2) calls this an ‘idée fondamentale pour bien comprendre la cause profonde des antagonismes sociaux’.

No other part of economic theory has been so much misunderstood as the theory of monopoly. The mere mention of the word monopoly usually stirs up emotions which make clear judgment impossible and provokes, instead of economic arguments, the usual moral indignation evinced in etatistic and other anti-capitalist literature. Even in the United States the controversy raging over the trust problem has supplanted all impartial discussion of the problem of monopoly.

The widespread view that the monopolist can fix prices at will, that — in common phrase — he can dictate prices, is as erroneous as the conclusion, derived from this view, that he has in his hands the power to do whatever he likes. This could only be the case if the commodity monopolized were, by its very essence, completely outside the range of other goods. A man who could monopolize the atmosphere or drinking water could undoubtedly force all other human beings to obey him blindly. Such a monopoly would be unhampered by any competing economic agency. The monopolist would be able to dispose freely of the lives and property of his fellow-men. Such monopolies, however, do not come under our theory of monopoly. Water and air are free goods, and where they are not free — as in the case of water on a mountain top — one can evade the effect of monopoly by moving to a different place. Perhaps the nearest approach to such a monopoly was the power to administer grace to believers, exercised by the medieval Church. Excommunication and interdict were no less terrible than death from thirst or suffocation. In a socialist community the State as organized society would form such a monopoly. All economic goods would be united in its hands and it would therefore be in a position to force the citizen to fulfil its commands, would in fact confront the individual with a choice between obedience and starvation.

The only monopolies which concern us here are trade monopolies. They affect only economic goods which, however important and indispensable they may seem, do not of themselves exert any decisive power over human life. When a commodity of which a definite minimum is essential to everyone who wishes to go on living, falls under a monopoly, then indeed do all those consequences popularly assigned to monopolies inevitably follow. But we need not discuss this hypothesis. It is of no practical importance as it lies outside the range of economics, and therefore of price theory — except in the case of strikes in certain enterprises.1  A distinction between goods which are essential to life and those which are not, is sometimes made when the effects of monopoly are being considered. But these supposedly indispensable commodities are, strictly speaking, not what they seem. As the whole argument is based on the strict concept indispensability, we have first of all to consider whether we have to deal with indispensability in the exact and full meaning of the word. Actually we can dispense with the commodities in question, either by renouncing the services we obtain from them or by procuring those services from some alternative commodity. Bread is certainly an important commodity. Yet one can live without it, by living on potatoes, cakes made from maize, and so on. Coal, so important to-day that it might be called the bread of industry, is not, in the strict sense of the word, indispensable, for power and heat can be produced without coal too. And this is all that matters. The concept ‘monopoly’ which alone concerns us here is that contained in the theory of price monopoly and is the only one which contributes materially to an understanding of economic conditions; it does not demand that a monopolized commodity shall be indispensable, unique, and without substitute. It assumes only the absence of perfect competition on the side of supply.2

Such loose concepts of monopoly are, moreover, not merely inappropriate; they are also theoretically misleading. They lead to the supposition that price phenomena can be explained without further investigation by demonstrating a monopolistic condition. Having once laid it down that the monopolist ‘dictates’ prices, that his attempt to raise prices as high as possible could only be restrained by a ‘power’ influencing the market from outside, such theorists proceed to render the concept of monopoly so elastic as to include all commodities not increasable or only increasable with increasing costs. As this already comprises most price phenomena, they are able to avoid the necessity of working out a theory of prices themselves. As a result many come to speak of the monopoly ownership of land and believe that they have solved the problem of rent by pointing out that this monopolistic relation exists. Others go further and seek to explain interest, profit, and even wages as monopoly prices and monopoly profits. Quite apart from other defects in these ‘explanations’, their authors fail to perceive that, while alleging that a monopoly exists, they say nothing at all about the nature of price formation and that therefore the catchword monopoly is no substitute for a properly developed theory of prices.3

The laws determining monopoly prices are the same as those which determine other prices. The monopolist cannot ask any price he fancies. The price offers with which he enters the market influence the attitude of the buyers. Demand expands or contracts according to the price he demands, and he has to reckon with this like any other seller. The one and only peculiarity of monopoly is that, assuming a certain shape for the demand curve, the maximum net profit lies at a higher price than would have been the case in competition between sellers.4  If we assume these conditions and if the monopolist cannot so discriminate as to exploit the purchasing power of each class of buyers, it pays him better to sell at the higher monopoly price than at the lower competitive price, even though sales are thereby diminished. Therefore, monopoly under such conditions has three results: the market price is higher, the profit is greater, both the quantity sold and the consumption are smaller than they would have been under free competition.

The last of these results must be examined more closely. If there is more of the monopolized commodity than can be placed at the monopoly price the monopolist must lock up or destroy so many surplus units that the remainder may attain the price needed. Thus the Dutch East India Company, which monopolized the European coffee market in the seventeenth century, destroyed some of its stocks. Other monopolists have done likewise: the Greek Government, for instance, destroyed currants in order to raise the price. Economically only one verdict on these proceedings is possible: they diminish the stock of wealth which serves to satisfy needs, they reduce welfare, they diminish riches. That goods which could have satisfied wants, and foodstuffs which could have stilled the hunger of the many, should be destroyed is a state of things which the outraged populace and the discerning economist unite, for once, in condemning.

Even in monopolistic undertakings, however, destruction of economic goods is rare. The far-sighted monopolist does not produce goods for the incinerator. If he wishes to place fewer goods on the market he takes steps to reduce his output. The problem of monopoly must be considered, not from the point of view of goods destroyed, but from that of production restricted.

• 1See p. 483 of this work.
• 2As there cannot be any question here of giving a theory of monopoly price, the monopoly of supply alone is examined.
• 3Ely, Monopolies and Trusts, New York 1900, p. 11 et seq. – Vogelstein (Die finanzielle Organisation der kapitalistischen Industrie und die Monopolbildungen, op. cit., p. 231) too, and following him the German Socialization Commission (op. cit., p. 31 et seq.), start from a concept of monopoly which comes very close to the views criticized by Ely and generally abandoned by the price theory of modern science.
• 4Carl Menger, Grundsätze der Volkswirtschaftslehre, Wien 1871, p. 195, further Forchheimer, Theoretisches zum unvollständigen Monopole (Schmoller’s Jahrbuch XXXII) p. 3 et seq.

Whether the monopolist can exploit his position at all depends on the shape of the demand curve of the monopolized commodity and on the costs of producing the marginal unit of the commodity at the existing scale of production. Only when the conditions are such that the sale of a smaller quantity at higher prices yields a greater net profit than the sale of a larger quantity at lower prices, is it possible to apply the specific principle of monopolistic policy.1  But even then it is applied only if the monopolist fails to find a method of securing still higher profits. The monopolist serves his interests best if he can separate buyers into classes according to their purchasing power, for he can then exploit the purchasing power of each class separately and exact the highest prices from its members. Railways and other transport undertakings, which grade their tariffs according to what the traffic will bear are in this class. If, following the general method of monopolists, they treated all users of transport uniformly, those less able to pay would be excluded from transport and for those able to stand higher charges transport would be cheapened. The effect of this on the local distribution of industry is clear; amongst the factors determining the localization of individual industries the transport factor would make itself felt in a different way.

In examining the economic effect of monopoly, we must limit investigation to the type which restricts the production of its commodity. Now the result of this restriction is not that less is produced quantitively. Capital and labour, set free by the restriction of production, must find employment in other production. For in the long run in the free economy there is neither unemployed capital nor unemployed labour. Thus against the smaller production of the monopolized goods one must set the increased production of other goods. But these, of course, are less important goods, which would not have been produced and consumed if the more pressing demands for a larger quantity of the monopolized commodity could have been satisfied. The difference between the value of these goods and the higher value of the quantity of the monopolized commodity not produced represents the loss of welfare which the monopoly has inflicted on the national economy. Here private profit and social productivity are at variance. A socialist society under such circumstances would act differently from a capitalist society.

It has often been pointed out that although the monopoly can prove harmful to the consumer it might, on the other hand, be turned to his advantage. Monopoly could produce more cheaply because it eliminates all the expenses of competition and because, being adapted to large scale operations it enjoys all advantages of the division of labour. But this in no wise alters the fact that monopoly deflects production from more important products to less important ones. It may be, as the defender of trusts is fond of repeating, that the monopolist, unable to increase his profit otherwise, endeavours to improve productive technique, but it is difficult to understand why the urge to this should be greater in him than in the competitive producer. Even if this be admitted, however, it does not alter what we have said about the social effects of monopoly.

• 1Compare on this important principle the large literature on the monopoly price. For example, Wieser, Theorie der gesellschaftlichen Wirtschaft, (Grundriss für Sozialökonomik, Part I, Tübingen 1914), p. 276.

The possibility of monopolizing the market varies radically with different goods. Even the producer who is protected from competition need not necessarily be in a position to sell at monopoly prices and obtain monopoly profits. If the quantity sold falls so steeply with the rise of prices that the extra sum obtained does not cover the deficiency in the number sold, then the monopolist is forced to content himself with the price which would have emerged under competitive selling.1

Apart from the enjoyment of artificial support — the grant of special legal privileges, for example — we shall find that a monopoly can, as a rule, maintain itself only by the exclusive power to dispose of certain natural factors of production. Similar power over reproduceable means of production does not as a rule allow permanent monopolization. New enterprises may always spring up. As already pointed out, the progressive division of labour tends towards a condition in which, at the highest specialization of production, everyone will be the sole producer of one or several articles. But this would by no means necessarily involve a monopolized market for all these articles. The attempts of manufacturers to extract monopoly prices would, apart from other circumstances, be checked by the appearance of new competitors.

Experience of cartels and trusts during the last generation completely confirms this. All enduring monopolistic organizations are built up on the power of the monopoly to dispose of natural resources or of particular land sites. A man who tried to become a monopolist without the control of such resources — and without special legal aids such as tariffs, patents, etc. — had to resort to all sorts of tricks and artifices to secure even a temporary success. The complaints raised against cartels and trusts and investigated by the commissions of inquiry whose published records are so voluminous, deal almost exclusively with these tricks and practices, which aim at creating monopolies artificially where the conditions for them do not exist. Most cartels and trusts would never have been set up had not the governments created the necessary conditions by protectionist measures. Manufacturing and commercial monopolies owe their origin not to a tendency immanent in capitalist economy but to governmental interventionist policy directed against free trade and laisserfaire.

Without the special power to dispose of natural resources, or of advantageously situated land, monopolies could arise only where the capital required to erect a competing enterprise was not able to count on an adequate return. A railway company can achieve a monopoly where it would not pay to build a competing line, the traffic being too small for two lines to be profitable. The same may be true in other cases. But while this shows that a few monopolies of this kind are possible it does not reveal a general tendency to their formation.

The effect of such monopolies, e.g. the railway company or the electric power plant, is that the monopolist may be able, according to the circumstances of the case, to absorb a greater or smaller quantity of the ground rents of adjoining properties. The result of this may be a change in the distribution of income and property which is felt to be disagreeable — at least, by those directly affected.

• 1According to Wieser (ibid.) this is ‘perhaps even the rule’.

In an economy based on private ownership in the means of production, specific primary production is the only field liable to monopolization without special protection from the State. Monopolies in certain branches of primary production are possible. Mining, in the widest sense of the word, is their true domain. Where to-day we have monopolistic structures which do not spring from government intervention, they are — apart from such instances as the railway company and the power works — almost exclusively organizations built up on a power to dispose of certain kinds of natural resources. These natural resources must be such as are found in relatively few places, for this alone makes the monopoly possible. A world monopoly of potato farmers or milk producers is unthinkable.1  Potatoes and milk, or at least substitutes for them, can be produced over the greater part of the earth’s surface. World monopolies of oil, mercury, zinc, nickel, and other materials can occasionally be formed if the owners of the rare places where they exist can combine; examples of this are found in the history of recent years.

When such a monopoly is formed the higher monopoly price replaces the competitive price. The income of mine owners rises, production and consumption of their product fall. A quantity of capital and labour which would otherwise have been active in this branch of production is diverted to other fields. If we consider the effects of monopoly from the standpoint of the separate branches of world economy we see only the rise in the monopolists’ income and the corresponding decline in the income of all other branches. Considered, however, from the standpoint of world economy and sub-specie aeternitatis, monopolies would appear to economize consumption of irreplaceable natural resources. People come to deal more thriftily with these precious resources when as in mining, the monopoly price occasionally replaces the competitive price and they are driven to do less digging and more working up. Since in every mine in operation nature’s irreplaceable gift to man is being used up, the less we touch this stock the better we provide for the supply of coming generations. We see now what it means when people detect in monopoly a conflict between social productivity and private profit. True, a socialist community would have no occasion to restrict production as Capitalism does under monopolies, but this would only mean that Socialism would deal less thriftily with irreplaceable natural treasures, that it would sacrifice the future to the present.

When we find that monopoly causes a conflict between profit and productivity which is not to be found anywhere else, we do not necessarily say that the effects of monopoly are pernicious. The naive assumption that the behaviour of the socialist community — as typifying the idea of productivity — constitutes the Absolute Good is quite arbitrary. We have no standard on which to base a valid decision between what is good and what is evil in this context.

If, then, we consider the effects of monopoly without being biased by popular writers on cartels and trusts, we can discover nothing which could justify the assertion that growing monopolization makes the capitalist system intolerable. The monopolist’s scope in a capitalist economy free from state interference is much smaller than this type of writer commonly assumes; and the consequences of monopoly must be judged by other standards than the mere catchwords Price Dictation and the Rule of the Trust Magnates.

• 1It is different, perhaps, with agricultural productions which flourish only on relatively restricted soils; for example, coffee growing.