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.