3. Liberalism and Social Liberalism

Names are unimportant; what matters is substance. The term “social liberalism” sounds strange indeed as socialism and liberalism are mutually exclusive. But we are accus­tomed to such terminology. Also, socialism and democracy are irreconcilable in the final analysis, and yet there is the old concept of “Social Democracy,” which is a contradictio in adjecto. If today the Brentano School, which adopted syndical­ism, and some “moderate” etatists designate their move­ment as “social liberalism,” no terminological objection need be raised. But we must object—not for political rea­sons, but in the interest of scientific clarity and logical thought—that this designation erases the differences be­tween liberalism and socialism. It permits calling “liberal” that which is the very opposite of what history and social science define as liberal. The fact that in Great Britain, the home of liberalism, this semantic confusion prevails is no excuse for us to accede to the practice.

Herkner is correct when he observes that the sanctity of private property is not a dogmatically anchored objective for liberalism, but a means for the attainment of ultimate goals. He is mistaken, however, when he states that this is so “only temporarily.”12 In their highest and ultimate goal liberalism and socialism are in agreement. They differ pre­cisely in that liberalism views private property in the means of production as the most suitable means to attain the goal, while socialism looks upon public property as the most suit­able means. This difference in the two programs, and this alone, corresponds to the history of thought during the nineteenth century. Their different positions on the prob­lem of property in production separates liberalism from so­cialism. It is confusing to present this in any other way.

Socialism, according to Herkner, “is an economic system in which society organized in a state directly assumes re­sponsibility for the existence of all its members. As an eco­nomic system based on satisfying the national needs rather than gleaning profits, the whole production and distribu­tion process becomes the task of public authority, replacing private property in the means of production and their use for profit.”13 This is not very precise, but is stated clearly enough. Herkner then continues, “If this system could be realized with liberal means, that is, without force and viola­tion of law, and if it could not only improve the material conditions of the people, but also assure a greater measure of individual freedom, then no objection could be raised against it from the liberal point of view.”14 Thus, when Par­liament discusses the question of nationalization, the liber­als, according to Herkner, could vote for the common weal if it is introduced “without force and violation of law” and if it were not for their doubts about the material well-being of the people.

Herkner seems to believe that the older liberalism advo­cated private property for its own sake and not for its social consequences. Like Wiese and Zwiedineck, he construes a difference between the older and the contemporary liberal­ism. According to Herkner, “While the older liberalism viewed private property as an institution of natural law whose protection besides that of individual freedom was the first duty of the state, contemporary liberalism is em­phasizing ever more strongly the social factor in prop­erty. ... Private property is no longer defended with indi­vidualistic reasons, but with considerations of social and economic suitability.”15 In a similar vein, Zwiedineck ob­serves that there is reason for optimism “that a private prop­erty order for its own sake and in the interest of owners only, would be of brief duration.” Modern liberalism, too, is advocating private property on grounds of “social suit­ability.”16

It cannot be our task here to examine how nonliberal theories of natural law meant to defend private property as a natural phenomenon. But it should be common knowledge that the older liberals were utilitarians (they are frequently criticized for it), and that it was self-evident to them that no social institution and no ethical rule can be advocated for its own sake or for reasons of special interest, but can be de­fended only on grounds of social suitability. It is no indica­tion that liberalism is moving toward socialism if modern liberalism demands private property in the means of pro­duction because of its social utility, and not for its own sake or for the interests of owners.

“Private property and inheritance,” Herkner continues, “give rise to unearned income. Liberalism sympathizes with the efforts of socialists to oppose this unearned income in the interest of justice and equal opportunity for all mem­bers of society.”17 The fact that unearned income flows from property is as obvious as that poverty comes from pauvreté. In fact, unearned income flows from control over the means of production. He who opposes unearned income must op­pose private property in the means of production. There­fore, a liberal cannot sympathize with such efforts. If he does so nevertheless, he is no longer a liberal.

What in Herkner’s view, then, is liberalism? His answer is this:

Liberalism is a world view, a kind of religion, a faith. It is a faith in the natural dignity and goodness of man, in his great destiny, in his ability to grow through his powers of natural reason and freedom, in the victory of justice and truth. Without freedom there is no truth. Without truth there can be no triumph of justice, no progress, thus no develop­ment, later stages of which are always more desirable than the preceding stages. What sunlight and oxygen mean to organic life, reason and freedom mean to in­tellectual development. Neither individuals, classes, nations, nor races must be viewed as mere means for the purposes of other individuals, classes, nations or races.18

This is all very fine and noble, but unfortunately so general and vague that it equally applies to socialism, syndicalism, and anarchism. His definition of liberalism lacks the deci­sive ingredient, namely, a social order that is built on pri­vate property in the means of production.

It cannot surprise us that with such ignorance about liberalism Herkner also subscribes to practically all miscon­ceptions that are in vogue today. Among others: “In contrast to the older liberalism which aimed mainly at the elimina­tion of hampering restrictions, modern liberalism [that is, social liberalism] has a positive, constructive program.”19 If Herkner had discovered private property in the means of production as the basic ingredient of liberalism, he would have known that the liberal program is no less positive and constructive than any other. It is the mentality of officialdom—which, according to Brentano, was “the only sounding-board of the Association for Social Policy”20 —that considers as constructive and positive only that ideology which calls for the greatest number of offices and offi­cials. And he who seeks to reduce the number of state agents is decried as a “negative thinker” or an “enemy of the state.”

Both Herkner and Wiese21 expressly emphasize that liber­alism has nothing to do with capitalism. Passow tried to show that the ambiguous terms “capitalism,” “capitalistic economic order,” et cetera, are political slogans that, with but few exceptions, are not used objectively to classify and comprehend the facts of economic life. Instead, they are used to criticize, accuse, and condemn phenomena that are more or less misunderstood.22 If this position is taken, it is clear that he who appreciates liberalism, no matter how he defines it, seeks to protect it from labels that are felt to be derogatory, defamatory, and abusive. However, if we agree with Passow’s observation that for most writers who have given the term “capitalism” a definite meaning, its essence is the development and expansion of larger enterprises,23 we must admit that liberalism and capitalism are closely re­lated. It was liberalism that created the ideological condi­tions that gave rise to modern large-scale industrial produc­tion. If we should use the term capitalism to identify an economic method that arranges economic activity according to capital calculation,24 we must come to the same conclu­sion. But no matter how we define capitalism, the develop­ment of capitalistic methods of production was and is possi­ble only within the framework of a social order built on private property in the means of production. Therefore, we cannot agree with Wiese’s contention that the essence of liberalism was obscured by “its historical coincidence with large-scale capitalism.”25

That which makes capitalism appear “unliberal,” accord­ing to Wiese, is “its insensitivity toward suffering, the bru­tal use of elbows, and the struggle to overpower and enslave fellow men.”26 These expressions come from the old register of socialistic complaints about the corruption and wicked­ness of capitalism. They reveal the socialistic misinterpreta­tion of the nature and substance of a social order that is based on private property. If, in a capitalistic society, the buyer seeks to buy an economic good wherever it is least ex­pensive, without regard for other considerations, he does not act with “insensitivity toward suffering.” If the superior enterprise successfully competes with one working less economically, there is no “brutal use of elbows,” or “strug­gle to overpower and enslave fellow men.” The process in this case is no undesirable concomitant effect, or “out­growth” of capitalism, and unwanted by liberalism. On the contrary! The sharper the competition, the better it serves its social function to improve economic production. That the stagecoach driver was replaced by the railroad, the hand weaver by mechanical weaving, the shoemaker by the shoe factory, did not happen contrary to the intentions of liberal­ism. And when small shipowners with sailing vessels were replaced by a large steamship company, when a few dozen butchers were replaced by a slaughterhouse, a few hundred merchants by a department store, it signifies no “over­powering and enslaving of fellow men.”

Wiese remarks correctly that “in reality, liberalism has never existed on a large scale, and that the community of liberals still needs to be created and brought along.”27 Thus, the picture of what fully developed capitalism can achieve is incomplete at best, even if we reflect upon British society at the zenith of capitalism when liberalism was leading the way. It is popular today to blame capitalism for anything that displeases. Indeed, who is still aware of what he would have to forego if there were no “capitalism”? When great dreams do not come true, capitalism is charged imme­diately. This may be a proper procedure for party politics, but in scientific discussion it should be avoided.

• 12Herkner, “Socialpolitischer Liberalismus” [Social liberalism], vol. I, p. 41.
• 13Ibid., vol. I, p. 43.
• 14Ibid., p. 44.
• 15Ibid., p. 49.
• 16Zwiedineck-Südenhorst, “Zur Eigentums- und Produktionsverfassung” [On the organization of property and production], vol. II, p. 447.
• 17Herkner, vol. I, p. 49.
• 18Ibid., p. 39.
• 19Ibid., p. 47.
• 20Brentano, op. cit., p. 19.
• 21See Herkner, vol. I, p. 38; Wiese, “Gibt es noch Liberalismus?” [Is there still liberalism?], vol. I, p. 22.
• 22See Passow, Kapitalismus [Capitalism], Jena, 1918, p. 1 et seq.
• 23Ibid.,p. 132 et seq.
• 24>See my Gemeinwirtschaft, Jena, 1922, p. 110 et seq. [English-language edition: Socialism (London: Jonathan Cape, 1936), p. 111 et seq.]
• 25Wiese, op. cit., vol. I, p. 23.
• 26Ibid.
• 27Ibid., p. 16.