Socalist policy employs two methods to accomplish its purposes: the first aims directly at converting society to Socialism; the second aims only indirectly at this conversion by destroying the social order which is based on private ownership. The parties of social reform and the evolutionary wings of the socialist parties prefer the first means; the second is the weapon of revolutionary Socialism, which is primarily concerned to clear the ground for building up a new civilization by liquidating the old one. To the first category belong municipalization and nationalization of enterprises; to the second, sabotage and revolution.

The importance of this division is lessened materially by the fact that the effects achieved by both groups do not greatly differ. As we have shown, even the direct method which aims at the creation of a new society can only destroy; it cannot create. Thus the beginning and end of the socialist policy, which has dominated the world for decades, is destruction. In the policy of the communists the will to destroy is so clear that no one can overlook it. But although destructionism is more easily recognized in the actions of the Bolshevists than in other parties, it is essentially just as strong in all other socialist movements. State interference in economic life, which calls itself ‘economic policy’, has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness. Already during the war period this policy had gained so much ground that practically all economic action of the entrepreneur was branded as violation of the law. That production is still being carried on, even semi-rationally, is to be ascribed only to the fact that destructionist laws and measures have not yet been able to operate completely and effectively. Were they more effective, hunger and mass extinction would be the lot of all civilized nations to-day.

Our whole life is so given over to destructionism that one can name hardly a field into which it has not penetrated. ‘Social’ art preaches it, schools teach it, the churches disseminate it. In recent decades the legislation of civilized states has created hardly one important law in which at least a few concessions have not been made to destructionism; some laws it completely dominates. To give a comprehensive account of destructionism one would have to write the history of the years in which the catastrophic World War and the Bolshevist Revolution were prepared and consummated. This cannot be undertaken here. We must content ourselves with a few remarks which may contribute to an understanding of destructionist development.

Amongst the means destructionist policy has employed, the legal protection of labour is, in its direct effects, the most harmless. Yet this aspect of social policy is specially important as an outcome of destructionist thought.

The advocates of the protection of labour like to consider the problem as analogous to the situation which led to the measures taken in the eighteenth and the first half of the nineteenth century to protect tied labourers under the manorial system. Just as at that time the peasant’s labour obligations were continually reduced by State intervention in an attempt to free the serf step by step, so labour legislation at the present day is supposed to be no more than the attempt to raise the modern proletarian from wage slavery to an existence worthy of a human being. But this comparison is quite invalid. The restriction of the labour duties of the serf did not diminish, but rather increased the amount of work done in the country. Forced labour, poor in quality and in quantity, was reduced so that the peasant would be free to improve his own bit of land or work for hire. Most of the measures taken in favour of the unfree peasant aimed, on the one hand, at increasing the intensity of agricultural work, and, on the other, at freeing labour power for industrial production. When the peasant-policy finally abolished the forced labour of agricultural workers it did not abolish work but increased its opportunities. The effect is quite different when modern social policy ‘regulates’ working time by restricting the working day to ten, nine, and eight hours a day, or, as in various categories of public officials, to six hours or even less. For this reduces the amount of work done and thus the yield of production.

The effect of such measures for the limitation of labour have been too obvious to he overlooked. This is why all efforts to extend the legal protection of labour in calling for a radical reconstruction of conditions of work have encountered strong resistance. Etatist writers generally talk as though the general shortening of working time, the gradual elimination of women’s and children’s labour, and the limitation of night work were to be ascribed exclusively to legislative intervention and the activity of trade unions.1  This attitude shows that they are still influenced by the views on the character of industrial wage labour held in circles unsympathetic to modern capitalist industry. According to these views factory industry has a peculiar aversion to using fully trained labour. It is supposed to prefer the unskilled labourer, the weak woman, and the frail child to the all-round trained expert. For on the one hand it wishes to produce only inferior mass commodities, in the manufacture of which it has no use for the skilled employee; on the other, the simplicity of the movements involved in mechanical production enables industry to employ the undeveloped and the physically weak. As the factories are supposed to be profitable only if they under-pay the workers, it is natural that they should employ unskilled workers, women, and children and try to extend the working day as much as possible. It is supposed that this view can be substantiated by referring to the evolution of large scale industry. But in its beginnings large scale industry had to be content with such labour because at that time it could only employ labour outside the guild organization of handicrafts. It had to take the untrained women and children because they were the only ones available, and was forced to arrange its processes so as to manage with inferior labour. Wages paid in the factories were lower than the earnings of handicraft workers because the labour yield was lower. For the same reason the working-day was longer than in the handicrafts. Only when in time these conditions changed, could large scale industry change the conditions of its labour. The factory had no other alternative than to employ women and children in the beginning, fully trained workers not being available; but when, by competition, it had vanquished the older labour systems and had attracted to itself all the workers there employed, it altered its processes so that skilled male workers became the main labour factor and women and children were forced more and more out of industry. Wages rose, because the production of the efficient worker was higher than the production of the factory girl or child. The worker’s family found that the wife and the children did not need to earn. Working hours lessened because the more intensive labour of the efficient worker made possible a better exploitation of the machinery than could be achieved with the sluggish and unskilled work of inferior labour.2

The shorter working day and the limitation of woman and child labour, in so far as these improvements were in operation in Germany about the outbreak of the War, were by no means a victory won by the champions of the legal protection of labour from selfish entrepreneurs. They were the result of an evolution in large scale industry which, being no longer compelled to seek its workers on the fringe of economic life, had to transform its working conditions to suit the better quality of labour. On the whole, legislation has only anticipated changes which were maturing, or simply sanctioned those that had already taken place. Certainly it has always tried to go further than the development of industry allowed, but it has not been able to maintain the struggle. It has been obstructed, not so much by the resistance of entrepreneurs, as by the resistance of the workers themselves, a resistance not the less effective for being unvocal and little advertised. For the workers themselves had to pay for every protective regulation, directly as well as indirectly. A restriction on female and child labour burdened the workers’ budget just as much as a limitation of employment in adult labour. The reduction in the supply of labour achieved by such measures does indeed raise the marginal productivity of labour and thus the wage rate corresponding to one unit of production. Whether this rise is sufficient to compensate the worker for the burden of rising commodity prices is questionable. One would have to examine the data of each individual example before forming any conclusions about this. It is probable that the decline of production cannot bring an absolute rise of real income to the worker. But we need not go into this in detail. For one could only speak of a considerable reduction in the supply of labour, brought about by labour laws, if these laws were valid beyond a single country. As long as this was not so, as long as every state proceeded on its own lines, and those countries, whose recently developed industry took every opportunity to supplant the industry of the older industrial states, were backward in promulgating labour-protection, then the worker’s position in the market could not be improved by labour protection. Efforts to generalize labour protection by international treaties were intended to remedy this. But of international labour protection, even more truly than of the national movement, one may say that the process has not gone beyond the stage which would have been reached in the normal evolution of industry.

This attitude of destructionism emerges more clearly from the theory than from the execution of labour protection, for the danger to industrial development implied in the regulations has to a certain extent limited attempts to carry theory into practice. That the theory of the exploitation of wage earners has spread and been so rapidly accepted is due above all to destructionism, which has not hesitated to use a technique for describing industrial working conditions which can only be called emotional. The popular figures, the hard-hearted entrepreneur and the grasping capitalist on the one side, and the noble poor, the exploited worker on the other side, have, so to speak, been introduced into the presuppositions of the legal system. Legislators have been taught to see in every frustration of the plans of an entrepreneur a victory of public welfare over the selfish interests of parasitic individuals. The worker has been taught to believe that he is toiling thanklessly for the profit of capital, and that it is his duty to his class and to history to perform his work as sluggishly as possible.

The theory of wages assumed by the advocates of legal labour protection has many defects. They treat Seniors’ arguments against the legal regulation of working hours with contempt, but they produce nothing relevant in refutation of the conclusions he reaches on the assumption of stationary conditions. The inability of the ‘Socialists of the Chair’ (‘Katheder-socialist’) school to understand economic problems is particularly evident in Brentano. The idea that wages correspond to the efficiency of labour is so far beyond his comprehension that he actually formulates a ‘law’ that a high wage increases the product of labour, whilst a low wage reduces it, although nothing could be more clear than the fact that good work is paid for at a higher rate than bad.3  This mistake is again obvious when he goes on to say that the shortening of working hours is a cause and not a result of greater efficiency of labour.

Marx and Engels, the fathers of German Socialism, well understood how fundamentally important to the spread of destructionist ideas was the fight for labour legislation. The ‘Inaugural Address of the International Association of Workers’ says that the English ten-hour day was ‘not only a great practical success; it was the victory of a principle. For the first time the political economy of the bourgeoisie was openly vanquished by the political economy of the working class’.4  Over twenty years before, Engels had made an even more candid admission of the destructionist nature of the Ten Hour Day Bill. He could not help admitting that the counter-arguments of the entrepreneurs were half true. The Bill would, he thought, depress wages and make English industry unable to compete. But this did not alarm him. ‘Naturally,’ he added, ‘were the Ten Hour Day Bill a final measure, England would be ruined, but because it necessarily involves the passing of subsequent measures, which must lead England into a path quite different from that she has travelled up till now, it will mean progress.’5  If English industry were to succumb to foreign competition the revolution would be unavoidable.6  In a later essay he said of the Ten Hour Day Bill: ‘It is no longer an isolated attempt to lame industrial development. It is one link in a long chain of measures which will transform the whole present form of society and gradually destroy the former class conflicts. It is not a reactionary but a revolutionary measure.’7

The fundamental importance of the fight for labour legislation cannot be overestimated. But Marx and Engels and their liberal opponents both overestimated the immediate destructive effects of the particular measures. Destructionism advanced on other fronts.

• 1See the criticism of this legend by Hutt, Economica, Vol. IV, p. 91 et seq.
• 2This even Brentano has to admit, who otherwise boundlessly overvalues the effects of labour legislation. ‘The imperfect machine had replaced the family father with child labour... the perfected machine makes the father again the nourisher of family and gives the child back to the school... Grown-up workers are now needed again and only those can be used who, by their higher standard of living, are equal to the heightened claims of the machines.’ (Brentano, Über das Verhältnis von Arbeitslohn und Arbeitszeit zur Arbeitsleistung, 2nd Edition, Leipzig 1893, p. 43.)
• 3Brentano, op. cit., pp. II, 23 et seq.; Brentano, Arbeitszeit und Arbeitslohn nach dent Kriege, Jena 1919, p. 10; Stucken, Theorie der Lohnsteigerung (Schmollers Jahrbuch, 45. Jahrg., p. 1152 et seq.).
• 4Die Inauguraladresse der Internationalen Arbeiterassoziation, edited by Kautsky, Stuttgart 1922, p. 27.
• 5Engels, Die Lage der arbeitenden Klasse in England, 2nd Edition, Stuttgart 1892, p. 178.
• 6Ibid., p. 297.
• 7Engels, Die englische Zehnstundenbill (Aus dem literarischen Nachlass von Karl Marx, Friedrick Engels und Ferdinand Lassalle, Vol. III, p. 393).

The essence of the programme of German etatism is social insurance. But people outside the German Empire have also come to look upon social insurance as the highest point to which the insight of the statesman and political wisdom can attain. If some praise the wonderful results of these institutions, others can only reproach them for not going far enough, for not including all classes and for not giving the favoured all that, in their opinion, they should have. Social insurance, it was said, ultimately aimed at giving every citizen adequate care and the best medical treatment in sickness and adequate sustenance if he should become incapable of work through accident, sickness or old age, or if he should fail to find work on conditions he considered necessary.

No ordered community has callously allowed the poor and incapacitated to starve. There has always been some sort of institution designed to save from destitution people unable to sustain themselves. As general well-being has increased hand in hand with the development of Capitalism, so too has the relief of the poor improved. Simultaneously the legal basis of this relief has changed. What was formerly a charity on which the poor had no claim is now a duty of the community. Arrangements are made to ensure the support of the poor. But at first people took care not to give the individual poor a legally enforceable claim to support or sustenance. In the same way they did not at once think of removing the slight stigma attaching to all who were thus maintained by the community. This was not callousness. The discussions which grew out of the English Poor Law in particular show that people were fully conscious of the great social dangers involved in every extension of poor relief.

German social insurance and the corresponding institutions of other states are constructed on a very different basis. Maintenance is a claim which the person entitled to it can enforce at law. The claimant suffers no slur on his social standing. He is a State pensioner like the king or his ministers or the receiver of an insurance annuity, like anyone else who has entered into an insurance contract. There is also no doubt that he is entitled to look on what he receives as the equivalent of his own contributions. For the insurance contributions are always at the expense of wages, immaterial of whether they are collected from the entrepreneur or from the workers. What the entrepreneur has to pay for the insurance is a charge on labour’s marginal productivity, it thus tends to reduce the wages of labour. When the costs of maintenance are provided out of taxes the worker clearly contributes towards them, directly or indirectly.

To the intellectual champions of social insurance, and to the politicians and statesmen who enacted it, illness and health appeared as two conditions of the human body sharply separated from each other and always recognizable without difficulty or doubt. Any doctor could diagnose the characteristics of ‘health’. ‘Illness’ was a bodily phenomenon which showed itself independently of human will, and was not susceptible to influence by will. There were people who for some reason or other simulated illness, but a doctor could expose the pretence. Only the healthy person was fully efficient. The efficiency of the sick person was lowered according to the gravity and nature of his illness, and the doctor was able, by means of objectively ascertainable physiological tests, to indicate the degree of the reduction of efficiency in percentages of normal efficiency.

Now every statement in this theory is false. There is no clearly defined frontier between health and illness. Being ill is not a phenomenon independent of conscious will and of psychic forces working in the subconscious. A man’s efficiency is not merely the result of his physical condition; it depends largely on his mind and will. Thus the whole idea of being able to separate, by medical examination, the unfit from the fit and from the malingerers, and those able to work from those unable to work, proves to be untenable. Those who believed that accident and health insurance could be based on completely effective means of ascertaining illnesses and injuries and their consequences were very much mistaken. The destructionist aspect of accident and health insurance lies above all in the fact that such institutions promote accidents and illness, hinder recovery, and very often create, or at any rate intensify and lengthen, the functional disorders which follow illness or accident.

A special disease, traumatic neurosis, which had already appeared in some cases as a result of the legal regulation of claims for compensation for injury, has been thus turned into a national disease by compulsory social insurance. No one any longer denies that traumatic neurosis is a result of social legislation. Overwhelming statistics show that insured persons take much longer time to recover from their injuries than other persons, and that they are liable to more extensions and permanent functional disturbances than those of the uninsured. Insurance against diseases breeds disease. Individual observation by doctors as well as statistics prove that recovery from illnesses and injuries is much slower in officials and permanent employees and people compulsorily insured than in members of the professions and those not insured. The desire and the necessity of becoming well again and ready for work as soon as possible assist recuperation to a degree so great as to be capable of demonstration.1

To feel healthy is quite different from being healthy in the medical sense, and a man’s ability to work is largely independent of the physiologically ascertainable and measurable performances of his individual organs. The man who does not want to be healthy is not merely a malingerer. He is a sick person. If the will to be well and efficient is weakened, illness and inability to work is caused. By weakening or completely destroying the will to be well and able to work, social insurance creates illness and inability to work; it produces the habit of complaining — which is in itself a neurosis — and neuroses of other kinds. In short, it is an institution which tends to encourage disease, not to say accidents, and to intensify considerably the physical and psychic results of accidents and illnesses. As a social institution it makes a people sick bodily and mentally or at least helps to multiply, lengthen, and intensify disease.

The psychic forces which are active in every living thing, including man, in the form of a will to health and a desire to work, are not independent of social surroundings. Certain circumstances strengthen them, others weaken them. The social environment of an African tribe living by hunting is decidedly calculated to stimulate these forces. The same is true of the quite different environment of the citizens of a capitalist society, based on division of labour and on private property. On the other hand a social order weakens these forces when it promises that if the individual’s work is hindered by illness or the effects of a trauma he shall live without work or with little work and suffer no very noticeable reduction in his income. Matters are not so simple as they appear to the naive pathology of the army or prison doctor.

Social insurance has thus made the neurosis of the insured a dangerous public disease. Should the institution be extended and developed the disease will spread. No reform can be of any assistance. We cannot weaken or destroy the will to health without producing illness.

• 1Liek, Der Arzt und seine Sendung, 4th Edition, Munich 1927, p. 54; Liek, Die Schaden der sozialen Versickerung, 2nd Edition, Munich 1928, p. 17 et seq., and a steadily growing mass of medical writings.

The fundamental problem for the appreciation of the economic and social consequences of trade unionism is the question whether labour can succeed, within a market economy, by association and by collective bargaining, in getting high wages lastingly and for all workers. To this question, economic theory — both the classic (including its marxist wing), and the modern (including its socialist wing too) — answers categorically in the negative. Public opinion believes that the facts have proved the efficiency of trade unionism to improve the conditions of labour, because the standard of living of the masses has been steadily rising in the last hundred years. But economists explain this fact in an absolutely different way. According to them, this improvement is due to the progress of capitalism, to the progressive accumulation of capital and to its corollary, the increase of the marginal productivity of labour. And there is no doubt that we must give more credit to the views of the economists, substantiated as they are by the actual course of events, than to the naive belief of men who simply argue post hoc ergo propter hoc. It is true that this fundamental point has been entirely misunderstood by many thousands of worthy labour leaders, who have devoted their life work to the organization of trade unions, and by many eminent philanthropists who have advocated trade unionism as the cornerstone of future society. It was the true tragedy of the age of capitalism that this attitude was wrong and that trade unionism developed into the most important weapon of destructionist policy. Socialist ideology has so successfully obscured the nature and peculiarity of the trade union that nowadays it is difficult to envisage what trade unions are and what they do. People are still inclined to treat the problem of workers’ associations as if it were a question of the freedom to combine and the right to strike. But there has been no question for decades now of whether the workers shall be granted liberty to form associations or whether they shall have the right to cease work, even in violation of a labour contract. No legislation denies them this right, for the legal damages which might devolve upon individual workers for stopping work in breach of contract have no importance in practice. Thus even the most extreme advocates of destructionism have hardly bothered to claim for the worker the right to break contractual obligations at will. When in recent years some countries, and among them Great Britain, the cradle of modern trade unionism, tried to limit the power of trade union policy, it was not part of their purpose to do away with what they considered the non-political action of trade unionism. The Act of 1927 attempted to outlaw general strikes and sympathetic strikes, but did not in any way interfere either with the freedom of association or with the strike for the sake of obtaining better rates of pay.

The general strike has always been considered, both by its supporters and by its opponents, as a revolutionary measure, or even as the essence of revolution itself. The vital element in the general strike is the more or less complete paralysis of the economic life of the community in order to bring about certain desired ends. How successful a general strike can be was proved when the Kapp Putsch, supported both by the German legal army and by a great illegal armed force which had compelled the Government to flee from the capital, was defeated in a few days by the general strike. In this case the weapon of the general strike was used to defend democracy. But whether one finds the political attitude of organized labour sympathetic or not, is of no consequence. The fact is that in a country where trade unionism is strong enough to set in motion a general strike, the supreme power is in the hands of trade unions and not in the hands of parliament and the government dependent on it. It was the comprehension of the real meaning of trade unionism and its working which inspired the French Syndicalists with their basic idea that violence is the means which political parties must use if they want to come to power. It should never be forgotten that the philosophy of violence, which replaced the conciliatory teaching of liberalism and democracy, started as a philosophy of trade unionism. Syndicalism is nothing else but the French word for trade unionism. The glorification of violence which characterizes the policy of Russian Sovietism, of Italian Fascism and of German Nazism, and which to-day seriously threatens all democratic governments, sprang from the teachings of revolutionary syndicalists. The essence of the trade union problem is the compulsion to coalesce and to strike. The unions claim the right to force out of employment all those who refuse to combine with them or those to whom they have refused membership. They claim the right to stop work at will, and to prevent anyone from taking the place of the strikers. They claim the right to prevent and punish by violence the contravention of their decisions, and to take all steps to organize this violent action so that its success shall be assured.

Every association becomes more cumbrous and prudent when the men at its head have grown old. Fighting associations lose the desire to attack and the ability to overcome their opponents by swift action. The armies of military powers, above all the armies of Austria and Prussia have learned over and over again that victory is difficult under old leaders. The Unions are no exception to the rule. So it may come about that some of the older and fully developed trade unions have temporarily lost some of their destructionist lust for attack and readiness for battle. Thus when the aged resist the destructive policy of impetuous youth, an instrument of destruction becomes for the moment an instrument which supports the status quo. It is just on this ground that the radicals have continually reproached the trade unions, and it is just this plea which the trade unions have themselves put forward when they have wanted help from the non-socialist classes of the community in their work of extending compulsory unionism. These pauses for breath in the trade unions’ destructive fights have always been short. Over and over again those who triumphed were those who advocated an uninterrupted continuation of the fight against the capitalist social order. The violent elements have either pushed out the old trade union leaders or erected new organizations in the place of the old. It could not be otherwise. For, consistently with the idea on which they have developed, the associations of workers in trade unions are only imaginable as a weapon of destruction. We have shown that the solidarity of the members of the trade union can be founded only on the idea of a war to destroy the social order based on private ownership in the means of production. The basic idea and not merely the practice of the trades unions is destructionist.

The cornerstone of trade unionism is compulsory membership. The workers refuse to work with men who belong to an organization not recognized by themselves. They exclude the non-union men by threatening to strike or, ultimately, by striking. Those who refuse to join the union are sometimes compelled to do so by rough handling. It is not necessary to dilate upon the drastic violation of the liberty of the individual which this implies. Even the sophistries of advocates of trade union destructionism have not succeeded in reassuring public opinion on this point. When from time to time specially gross examples of violence against a non-union worker get publicity, even those newspapers which otherwise stand more or less on the side of the destructionist parties are moved to protest.

The weapon of the trade union is the strike. It must be borne in mind that every strike is an act of coercion, a form of extortion, a measure of violence directed against all who might act in opposition to the strikers’ intentions. For the purpose of the strike would be defeated if the entrepreneur were able to employ others to do the work of the strikers, or if only a section of the workers joined the strike. The long and the short of trade union rights is in fact the right to proceed against the strike-breaker with primitive violence, and this right the workers have successfully maintained. How this right was established by the trade unions in various countries does not concern us here. It is sufficient to say that in the last decades it has been established everywhere, less by explicit legislative sanction than by the tacit toleration of public authority and the law. For years it has hardly been possible to break a strike in any part of Europe by employing strike-breakers. For a long time it was at least possible to avoid strikes on railways, lighting and water services, and the most important urban food supply enterprises. But here, too, destructionism has at last carried the day.

No one has seriously contested the destructionist function of trade unionism. There has never yet been a wage-theory from which one could deduce that association by means of trade unions led to a permanent increase in the real income of the workers. Certainly Marx was far from allowing that trade unions had any effect on wages. In a speech made in 1865 before the General Council of the ‘International’1  Marx tried to win over his comrades to joint action with the trade unions. His introductory words reveal his object in doing so. The view that increase of wages could not be obtained by strikes — a view represented in France by the Prudhonists, in Germany by the Lassallians — was, he said, ‘most unpopular with the working class’. But his great qualities as a tactician, which a year before had enabled him in his ‘Inaugural Address’ to weld into one unitary programme the most diverse opinions upon the nature, aims, and tasks of the labour movement, were now again brought into play, and as he was anxious to link up the trade union movement with the International, he produced everything that can be said in favour of trade unions. Nevertheless he is careful not to commit himself to a statement that the workers’ economic position could be directly improved through the trade unions. As he sees it, the foremost task of the trade unions is to lead the fight against Capitalism. The position he assigns to trade unions admits of no doubt as to the results he expects from their intervention. ‘In place of the conservative motto: ‘A just day’s wage for a just day’s work’ they ought to print on their banners, ‘Abolition of the wage system’ — They generally miss their aim because they limit themselves to carrying on a guerilla war against the consequences of the present system, instead of working at the same time for its transformation and employing their organized power as a lever for the final emancipation of the working classes; that is, for the final abolition of the wage system.’2  Marx could hardly have said more plainly that he could see nothing more in the trade unions than tools for the destruction of the capitalist social order. It remained for the ‘realistic’ economists and revisionist Marxians to assert that the trade unions were able to maintain wages permanently above the level at which they would have stood without trade unionism. There is no need to argue the point, for no attempt was made even to develop a theory from it. It remains an assertion which is always made without any reference to the interdependence of economic factors and without any sort of proof.

The policy of strike, violence, and sabotage can claim no merit whatever for any improvement in the workers’ position.3  It has helped to shake to the foundations the skilfully constructed edifice of the capitalist economy, in which the lot of everyone down to the poorest worker has been continually rising. And it has operated not in the interests of Socialism but in that of Syndicalism.

If workers in the so-called non-vital industries succeed in their demand for wages above the level given by the situation on the market, there ensues a dislocation which sets in motion forces that lead finally to a readjustment of the market’s disturbed equilibrium. If, however, the workers in vital industries are able to enforce by strikes or threat of strikes their demands for higher wages, and to claim all those rights claimed in the wage struggle by other workers, the position is altogether different. It would be misleading to say that those workers were then virtually monopolists, for the question here lies outside the concept of economic monopoly. If the employees of all transport undertakings strike and circumvent action which might weaken the intended effect of their strike, they are absolute tyrants of the territories under their dominion. One may say, of course, that they make a sober use of their power, but this does not alter the fact that they have the power. That being so, there are only two classes in the country: members of the trade unions for the branches of production essential to life, and the remainder of the people, who are slaves without rights. We arrive at a position where ‘the indispensable workers dominate the remaining classes by the rule of violence’.4

And, speaking once again of power it may be well to inquire at this point on what this power, in common with all other power, is based. The power of the workers organized in trade unions, before which the world now trembles, has precisely the same foundations as the power of any other tyrants at any time; it is nothing more than the product of human ideologies. For decades it was impressed upon people that the association of workers in trade unions was necessary and useful to the individual as well as to the community, that only the wicked selfishness of exploiters could think of combating the unions, that in strikes the strikers were always right, that there could hardly be a worse infamy than strike-breaking, and that attempts to protect those willing to work were anti-social. The generations which grew up in the last decades have been taught from childhood that membership of a trade union was a worker’s most important social duty. A strike came to mean a sort of holy action, a social ordinance. On this ideology rests the power of the workers’ association. It would break down if the theory of its social utility were superseded by other views on the effects of trade unionism. Plainly, therefore, it is precisely the most powerful unions which are obliged to use their power sparingly, since, by putting an undue strain on society, they might cause people to reflect upon the nature and effect of trade unionism and so lead to a re-examination and rejection of these theories. This, of course, is and always has been true of all holders of power and is no peculiarity of the trade unions.

For this surely is clear: that should there ever be a thorough discussion upon the right of the workers in vital industries to strike, the whole theory of trade unionism and compulsory strikes would soon collapse and such strike-breaking associations as the ‘Technische Nothilfe’ would receive the applause which to-day goes to the strikers. It is possible that in the ensuing conflict society would be destroyed. On the other hand, it is certain that a society which aims at preserving trade unionism on its present lines is in a fair way towards destroying itself.

• 1The speech, translated into German, has been published by Bernstein under the title Lohn Preis und Profit. I quote from the 3rd Edition, which appeared in Frankfurt in 1910.
• 2Ibid., p. 46.
• 3Adolf Weber Der Kmapf zwischen Kapital und Arbeit, 3rd and 4th Editions, Tübingen 1921, p. 384 et seq.; Robbins, Wages, London 1926, p. 58 et seq.; Hutt, The Theory of Collective Bargaining, London 1930, p. 1 et seq.; also my Kritik des Interventionismus, Jena 1929, p. 12, et seq.; 79 et seq.; 133 et seq.
• 4Kautsky, quoted by Dietzel, Ausbeutung der Arbeiterklasse durch Arbeitergruppen (‘Deutsche Arbeit’, 4. Jahrg., 1919), p. 145 et seq.

Assistance of the unemployed has proved to be one of the most effective weapons of destructionism.

The reasoning which brought about unemployment insurance was the same as that which led to the setting up of insurance against sickness and accident. Unemployment was held to be a misfortune which overwhelmed men like an avalanche. It occurred to no one that lack of wages would be a better term than lack of employment, for what the unemployed person misses is not work but the remuneration of work. The point was not that the ‘unemployed’ could not find work, but that they were not willing to work at the wages they could get in the labour market for the particular work they were able and willing to perform.

The value of health and accident insurance becomes problematic by reason of the possibility that the insured person may himself bring about, or at least intensify, the condition insured against. But in the case of unemployment insurance, the condition insured against can never develop unless the insured persons so will. If they did not act as trade unionists, but reduced their demands and changed their locations and occupations according to the requirements of the labour market, they could eventually find work. For as long as we live in the real world and not in the Land of Heart’s Desire, labour will be a scarce good, that is, there will be an unsatisfied demand for labour. Unemployment is a problem of wages, not of work. It is just as impossible to insure against unemployment as it would be to insure against, say, the unsaleability of commodities.

Unemployment insurance is definitely a misnomer. There can never be any statistical foundation for such an insurance. Most countries have acknowledged this by dropping the name ‘insurance’, or at least by ignoring its implications. It has now become undisguised ‘assistance’. It enables the trade unions to keep wages up to a rate at which only a part of those seeking work can be employed. Therefore, the assistance of the unemployed is what first creates unemployment as a permanent phenomenon. At present many European states are devoting to the purpose sums that considerably exceed the capacity of their public finances.

The fact that there exists in almost every country permanent mass unemployment is considered by public opinion as conclusive proof that Capitalism is incapable of solving the economic problem, and that therefore government interference, totalitarian planning and Socialism are necessary. And this argument is regarded as irrefutable when people realize that the only big country which does not suffer from the evils of unemployment is communist Russia. The logic of this argument however, is very weak. Unemployment in the capitalist countries is due to the fact that the policy both of the governments and of the trade unions aims at maintaining a level of wages which is out of harmony with the existing productivity of labour. It is true that as far as we can see there is no large scale unemployment in Russia. But the standard of living of the Russian worker is much lower than the standard of living even of the unemployed dole receiver in the capitalist countries of the West. If the British or Continental workers were ready to accept wages which would indeed be lower than their present wages but which would still be several times higher than the wages of the Russian worker, unemployment would disappear in these countries too. Unemployment in the capitalist countries is not a proof of the insufficiency of the capitalist system, nor is the absence of unemployment in Russia a proof of the efficiency of the communist system. But the fact that there is unemployment as a mass phenomenon in almost every capitalist country is nevertheless the most formidable menace to the continuance of the capitalist system. Permanent mass unemployment destroys the moral foundations of the social order. The young people who, having finished their training for work, are forced to remain idle, are the ferment out of which the most radical political movements are formed. In their ranks the soldiers of the coming revolutions are recruited.

This indeed is the tragedy of our situation. The friends of trade unionism and of the policy of unemployment doles honestly believe. that there is no way to ensure the maintenance of fair conditions of life for the masses other than the policy of the trade unions. They do not see that in the long run all efforts to raise wages above a level corresponding to the market reflection of the marginal productivity of the labour concerned must lead to unemployment, and that in the long run unemployment doles can have no other effect than the perpetuation of unemployment. They do not see that the remedies which they recommend for the relief of the victims — doles and public works — lead to consumption of capital, and that finally capital consumption necessitates a lowering of the wage level still further. Under present conditions it is clear that it would not be feasible to abolish the dole and the other less important provisions for the relief of the unemployed, public works and so on, at one single stroke. It is indeed one of the principal drawbacks of every kind of interventionism that it is so difficult to reverse the process — that its abolition gives rise to problems which it is almost impossible to solve in a completely satisfactory way. At the present day the great problem of statesmanship is how to find a way out of this labyrinth of interventionist measures. For what has been done in recent years has been nothing else than a series of attempts to conceal the effects of an economic policy which has lowered the productivity of labour. What is now needed is first of all a return to a policy which ensures the higher productivity of labour. This includes clearly the abandonment of the whole policy of protectionism, import duties and quotas. It is necessary to restore to labour the possibility to move freely from industry to industry and from country to country.

It is not Capitalism which is responsible for the evils of permanent mass unemployment, but the policy which paralyses its working.

Under Liberalism, state-owned factories and production by the State were abolished. The postal service was practically the only exception to the general principle that the means of production should be left to private ownership and every economic activity made over to the private citizen. The advocates of etatism have gone to a lot of trouble to set forth the reasons which they suppose to favour the nationalization of the postal and the related telegraph service. In the first place they put forward political arguments. But in such discussions of the pros and cons of state control of the post and telegraph system, two things are generally lumped together which ought to be considered separately: the questions of unifying the service and of transferring it exclusively to the State. No one denies that the post and telegraph systems afford excellent facilities for unification, and that, even if they were left perfectly free, trusts would inevitably be formed, leading to a de facto monopoly of individuals over whole territories at least. With no other enterprises are the advantages of concentration more obvious. But to admit this is not by any means to decide whether the State is to be granted a legally assured monopoly for all branches of such services. It could easily be demonstrated that State management works uneconomically, that it is slow to extend the facilities for the transmission of letters and parcels in accordance with business requirements, and that it can only with difficulty be persuaded to introduce practical improvements. The great progress in this sphere of economic life has been achieved by private enterprise. We owe largely to private enterprise the development on a large scale of overland telegraphy: in England this was nationalized only in 1869, in the U.S.A. it is still in the hands of joint stock companies. Submarine cables are mostly in the hands of private enterprise. Even German etatism showed hesitation in ‘freeing’ the State from collaboration with private enterprise in deep sea telegraphy. The liberals of that time also advocated the principle of full freedom in post and telegraph services and attempted with great success to expose the inadequacy of State enterprise.1  That nevertheless these branches of production have not been denationalized is to be ascribed only to the fact that those holding political power need the post and telegraph to control public opinion.

The military powers, everywhere ready to hinder the entrepreneur, have acknowledged his superiority by handing over to him the production of arms and munitions. The great advances in war technique date from the moment when private enterprise began to produce war material. The State has had to recognize that the entrepreneur produces better arms than the civil servant; this was proved on the battlefields in a way that enlightened even the most stubborn advocate of state production. In the nineteenth century arsenals and state shipyards disappeared almost completely, or were transformed into mere magazines, and their place was taken by private enterprises. Literary and parliamentary supporters of the nationalization of industry had scant success with their demand for the nationalization of the armaments industry, even in the most flourishing days of etatism in the years immediately preceding the World War. The general staffs knew well the superiority of the private undertaking.

For reasons of public finance, certain revenue monopolies which had existed from a distant past were not abolished even during the epoch of Liberalism. They remained because they were looked upon as a convenient way of collecting a tax on consumption. But people had no illusions about the uneconomic nature of state enterprise — in the administration of the tobacco monopolies, for example. But before Liberalism could carry its victorious principle into this field, Socialism had already introduced a retrograde movement.

The ideas from which sprang the first modern nationalizations and municipalizations were not altogether inspired by modern Socialism. In the origins of the movement, ideas of the old police state and purely military and political considerations played a great part. But soon the socialist ideology became dominant. It was a conscious socialization that was carried out by states and municipalities. The slogan was: away with uneconomic private enterprise, away with private ownership.

At first the economic inferiority of socialist production did not hinder the progress of nationalization and municipalization. The voice of caution was not heard. It was lost in the shouting of etatists, socialists, and all the elements whose interests were at stake. People did not choose to see the faults of government enterprise, and so overlooked them. Only one circumstance restricted the excessive zeal of the enemies of private property — the financial difficulties with which a large number of public undertakings had to contend. For political reasons the government could not completely pass on to consumers the higher costs of State management, and working losses were therefore frequent. Its supporters consoled themselves by stating that the general economic and social political advantages of state and municipal enterprise were well worth the sacrifice. All the same, it became necessary to proceed cautiously with the etatistic policy. The embarrassment in which economists writing on these problems found themselves became evident from their reluctance to ascribe the financial failure of public enterprises to the uneconomic methods of this kind of enterprise. They tried instead to account for it by some special circumstance, such as personal mistakes in the management and errors in organization. And they pointed repeatedly to the Prussian State railways as the most brilliant model of a good administration. Of course the Prussian State railways have yielded good working surpluses. But there were special reasons. Prussia acquired the most important part of its State railway system in the first half of the ‘eighties, that is at a time of specially low prices, and the whole system was equipped and expanded to a large extent before the rapid growth of German industrial prosperity which set in during the second half of the ‘nineties. Thus there was nothing particularly remarkable in the fact that these railways paid well, for their loads grew from year to year without any solicitation, they ran mostly through plains, they had coal on every hand, and could count on favourable running conditions. Their situation was such that they could yield profits for a while although run by the State. It was the same with the gas, water, and electricity works and with the tramway systems of several large cities. The conclusions generally drawn from this were, however, far from accurate.

Generally speaking, the result of nationalization and municipalization was that taxation had to contribute to running costs. So it may be said that no catchword has ever been made public at so inappropriate a moment as Goldscheid’s slogan of ‘the suppression of the taxation state’. Goldscheid thinks that the financial troubles into which the World War and its consequences have landed the State can no longer be remedied by the old methods of public finance. The taxation of private enterprise is failing. Therefore, one must start to ‘repropriate’ the State by expropriating capitalist enterprises, so that the State will be able to cover its expenses out of the profits of its own undertakings.2  Here we have the cart before the horse. The financial difficulties result from the fact that taxation can no longer pay the large contributions required by socialist enterprises. Were all enterprises socialized, the form of the evil would indeed be changed, but far from being abolished it would be intensified. The smaller yield of the public enterprises would no longer be visible in a budget deficit, it is true, but the population would be worse off. Distress and misery would increase, not diminish. To remove the State’s financial troubles Goldscheid proposes to carry socialization to the bitter end. But this financial trouble has come about because socialization has already gone too far. It will vanish only when socialized enterprises are returned to private ownership. Socialism has arrived at a point where the impossibility of carrying out its technique is apparent to all, where even the blind begin to see that it is hastening the decline of all civilization. The effort made in Central Europe to socialize completely at a single stroke was wrecked not by the resistance of the bourgeoisie, but by the fact that further socialization was quite impossible from a financial point of view. The systematic, cool and deliberate socialization practised by states and municipalities up to the war, came to a standstill because the result to which it was leading became all too clear. The attempt to pass it off under a different name, as the socialization commission in Germany and Austria tried to do, could have no success in these circumstances. If the work of socialization had to be carried on, it was not possible to do so by the old methods. The voice of reason which warned men not to venture any further on this path must be silenced, criticism must be obliterated by the intoxication of enthusiasm and fanaticism, opponents must be killed, as there was no other way of refuting them. Bolshevism and Spartacism were the last weapons of Socialism. In this sense they are the inevitable outcome of the policy of destructionism.

• 1Millar, The Evils of State Trading as illustrated by the Post Office. (A Plea for Liberty, edited by Mackay, and Edition, London 1891, p. 305 et seq.)
• 2Goldscheid, Staatssozialismus oder Staatskapitalismus, Vienna 1917; Sozialisierung der Wirtschaft oder Staatsbankerott, Vienna 1919; against: Schumpeter, Die Krise des Steurstaates, Graz and Leipzig 1918.

For classical nineteenth-century Liberalism, which assigns to the State the sole task of safeguarding the citizen’s property and person, the problem of raising the means needed for public services is a matter of small importance. The expenditure caused by the apparatus of a liberal community is so small, compared with the total national income, that there is little appreciable difference between meeting it one way or another. If the liberal writers of that period have been concerned to find the best form of taxation, they have done so because they wish to arrange every detail of the social system in the most effective way, not because they think that public finance is one of the main problems of society. They have of course to take into account the fact that nowhere in the world have their ideas been realized, and that the hope of seeing them completely realized in the near future is slender. They see clear evidence of liberal development everywhere, they believe that the distant future belongs to Liberalism; but the forces of the past still seem sufficiently strong to inhibit its progress, though no longer strong enough to stop it completely, let alone suppress it. There still exist schemes for violence and conquest, there are standing armies, secret diplomatic treaties, wars, tariffs, State interference in trade and industry — in short, interventionism of every kind in home and foreign policy. So, for a considerable time to come, the nations must be prepared to allow considerable sums for governmental expenditure. Though questions of taxation would be of minor importance in the purely liberal state, they call for increased attention in the authoritarian state in which liberal politicians of their time have to work. In the first place, therefore, they recommend that State expenditure shall be restricted. But if they do not completely succeed in this they must decide how the necessary funds are to be raised without more harm than is absolutely necessary.

Liberal taxation proposals must necessarily be misunderstood unless it is realized that liberal politicians look on every tax as an evil — though up to a point an unavoidable one — and that they proceed from the supposition that one must try to keep State expenditure down to a minimum. When they recommend a certain tax, or, to speak more correctly, call it less harmful than other taxes, they always have in mind the raising of only a relatively small sum. A low rate of taxation is an integral part of all liberal 1 programmes of taxation. This alone explains their attitude towards the income tax, which they were the first to introduce into serious discussions on public finance, and their willingness to agree that a modest minimum of subsistence shall be free from taxation and the rate of taxation on small incomes lowered.

The socialist financial policy also is only a temporary one, its validity being limited to the period of transition. For the Socialist State, where all means of production belong to society and all income finds its way in the first place to the State coffers, questions of finance and taxation do not exist at all in the sense in which the social order based on private property has to deal with them. Those forms of the socialist community which, like State Socialism, intend to allow private property to continue in name and in outward form, would not really need to levy taxes either, although they might retain the name and legal form of taxation. They would simply decree how much of the social income obtained in the individual enterprises should remain with the nominal owner and how much should be handed over to the State. There would not be any question here of a taxation which imposes certain obstacles in individual businesses, but leaves the market to deal with its effect upon the prices of commodities and wages, on profits, interest, and rents. Questions of public finance and the policy of taxation exist only where there is private ownership in the means of production.

But for socialists, too, the public finance problems of capitalist society increase in importance as the period of transition becomes more and more prolonged. This is inevitable, seeing that they are continually trying to expand the area of the State’s tasks and that there is consequently an increase in expenditure. They thus take over the responsibility of increasing the income of the State. The socialist policy has become the decisive factor in the development of government expenditure, socialist demands regulate the policy of taxation and in the socialist programme itself public finance comes more and more into the foreground. Whilst in the liberal programme the basic principle is a low rate of taxation, the socialists think a tax is better the heavier it is.

Classical economics achieved much in the theory of the incidence of taxes. This must be admitted in spite of all the faults of its basic theory of value. When liberal politicians criticized existing conditions and proposed reforms they started from the masterly propositions of Riccardo’s admirable investigations on this subject. Socialist politicians have taken things much more easily. They had no new opinions of their own, and from the classical writers they took merely what they needed for the politics of the moment — isolated remarks, torn from their context and dealing mainly with the incidence of taxes on consumption. They improvized a rough system which nowhere penetrated to the main problem, but had the virtue of being so simple that the masses could understand it. Taxes were to be paid by the rich, the entrepreneurs, the capitalists, in short, by ‘the others’; the workers, that is the electors whose votes were what mattered at the moment, should remain tax free. All taxes on mass consumption, even on alcoholic drinks, were to be rejected, because they burdened the people. Direct taxes could be as high as the government wished to make them, as long as the incomes and possessions of the workers were left alone. Not for one moment does it occur to the advocates of this popular taxation policy that direct taxes and taxes on trade may start a chain of events that will force down the standard of living of the very classes whose alleged special interests they claim to represent. Seldom does anyone ask whether the restriction of capital formation which results from the taxation of property may not harm the non-propertied members of society as well. More and more the policy of taxation evolves into a policy of confiscation. The aim on which it concentrates is to tax out of existence every kind of fortune and income from property, in which process property invested in trade and industry, in shares and bonds, is generally treated more ruthlessly than property in land. Taxation becomes the favourite weapon of interventionism. Taxation laws no longer aim exclusively or predominantly at increasing State revenues; they are intended to serve other purposes besides fiscal requirements. Sometimes their relation to public finance vanishes completely and they fulfil an entirely different function. Some taxes seem to be inflicted as punishment for behaviour that is considered injurious; the tax on big stores is intended to make it more difficult for big stores to compete with small shops; the taxes on stock exchange transactions are designed to restrict speculation. The dues become so numerous and varied that in making business transactions a man must first of all consider what the effect on his taxation will be. Innumerable economic projects lie fallow because the load of taxation would make them unprofitable. Thus in many states the high duties on founding, maintaining, amalgamating, and liquidating joint stock companies seriously restrict the development of the system.

Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxes on the rich. Capital levies and high income taxes on the larger incomes are extraordinarily popular with the masses, who do not have to pay them. The assessors and collectors go about their business with positive enthusiasm; they are intent upon increasing the taxpayer’s liability by the subtleties of legal interpretation.

The destructionist policy of taxation culminates in capital levies. Property is expropriated and then consumed. Capital is transformed into goods for use and for consumption. The effect of all this should be plain to see. Yet the whole popular theory of taxation to-day leads to the same result.

Confiscations of capital through the legal form of taxation are neither socialistic nor a means to Socialism. They lead, not to socialization of the means of production, but to consumption of capital. Only when they are set within a socialist system, which retains the name and form of private property, are they a part of Socialism. In ‘War Socialism’ they supplemented the compulsory economic system and were instrumental in determining the evolution of the whole system towards Socialism.2  In a socialist system where the means of production are totally and formally socialized, there could in principle be no more taxes on property or income from property. When the socialist community levies dues from its members this in no way alters the disposal of the means of production.

Marx has spoken unfavourably of efforts to alter the social order by measures of taxation. He emphatically insisted that taxation reform alone could not replace Socialism.3  His views on the effect of taxes within the capitalist order were also different from those of the ordinary run of socialists. He said on one occasion, that to assert that ‘the income tax does not affect the workers’ was ‘truly absurd’. ‘In our present social order, where entrepreneurs and workers stand opposed, the bourgeoisie generally compensates itself for higher taxation by reducing wages or raising prices’.4  But the communist manifesto had already demanded ‘a heavy progressive tax’ and the social democratic party’s demands in taxation have always been the most radical. In that field also, therefore, it is moving towards destructionism.

• 1On the negative attitude of the liberals to the idea of progressive taxes see Thiers, De la propriété, Paris 1848, p. 352 et seq.
• 2See my Nation, Staat und Wirtschaft, p. 134 et seq.
• 3Mengelberg, Die Finanzpolitik der sozialdemokratischen Partei in ihren Zusammenhängen mit dent sozialistischen Staatsgedanken, Mannheim 1919, p. 30 et seq.
• 4Marx-Engels, Collected Writings, 1852-62, edited by Rjasanoff, Stuttgart 1917, Vol. I, p. 127.

Inflation is the last word in destructionism. The Bolshevists, with their inimitable gift for rationalizing their resentments and interpreting defeats as victories, have represented their financial policy as an effort to abolish Capitalism by destroying the institution of money. But although inflation does indeed destroy Capitalism, it does not do away with private property. It effects great changes of fortune and income, it destroys the whole finely organized mechanism of production based on division of labour, it can cause a relapse into an economy without trade if the use of metal money or at least of barter trade is not maintained. But it cannot create anything, not even a socialist order of society.

By destroying the basis of reckoning values — the possibility of calculating with a general denominator of prices which, for short periods at least, does not fluctuate too wildly — inflation shakes the system of calculations in terms of money, the most important aid to economic action which thought has evolved. As long as it is kept within certain limits, inflation is an excellent psychological support of an economic policy which lives on the consumption of capital. In the usual, and indeed the only possible, kind of capitalist book-keeping, inflation creates an illusion of profit where in reality there are only losses. As people start off from the nominal sum of the erstwhile cost price, they allow too little for depreciation on fixed capital, and since they take into account the apparent increases in the value of circulating capital as if these increases were real increases of value, they show profits where accounts in a stable currency would reveal losses.1  This is certainly not a means of abolishing the effects of an evil etatistic policy, of war and revolution; it merely hides them from the eye of the multitude. People talk of profits, they think they are living in a period of economic progress, and finally they even applaud the wise policy which apparently makes everyone richer.

But the moment inflation passes a certain point the picture changes. It begins to promote destructionism not merely indirectly by disguising the effects of destructionist policy; it becomes in itself one of the most important tools of destructionism. It leads everyone to consume his fortune; it discourages saving, and thereby prevents the formation of fresh capital. It encourages the confiscatory policy of taxation. The depreciation of money raises the monetary expression of commodity values and this, reacting on the book values of changes in capital — which the tax administration regard as increases in income and capital — becomes a new legal justification for confiscation of part of the owners’ fortune. References to the apparently high profits which entrepreneurs can be shown to be making, on a calculation assuming that the value of money remains stable, offers an excellent means of stimulating popular frenzy. In this way, one can easily represent all entrepreneurial activity as profiteering, swindling, and parasitism. And the chaos which follows, the money system collapsing under the avalanche of continuous issues of additional notes, gives a favourable opportunity for completing the work of destruction.

The destructionist policy of interventionism and Socialism has plunged the world into great misery. Politicians are helpless in the face of the crisis they have conjured up. They cannot recommend any way out except more inflation or, as they call it now, reflation. Economic life is to be ‘cranked up again’ by new bank credits (that is, by additional ‘circulation’ credit) as the moderates demand, or by the issue of fresh government paper money, which is the more radical programme.

But increases in the quantity of money and fiduciary media will not enrich the world or build up what destructionism has torn down. Expansion of credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must land the nation in profounder catastrophe. For the damage such methods inflict on national well-being is all the heavier, the longer people have managed to deceive themselves with the illusion of prosperity which the continuous creation of credit has conjured up.2

• 1See my Nation, Staat und Wirtschaft, p. 129 et seq.
• 2See my Theory of Money and Credit, London 1934, P- 339 et seq.; also my Geldwertstabilisierung und Konjunkturpolitik, Jena 1928, p. 43 et seq.

Socialism has not consciously willed the destruction of society. It believed it was creating a higher form of society. But since a socialist society is not a possibility every step towards it must destroy society.

It is the history of Marxian Socialism which shows most clearly that every socialist policy must turn into destructionism. Marxism described Capitalism as the inevitable preliminary to Socialism, and looked forward to the new society only as the result of Capitalism’s fruition. If we take our stand on this part of Marx’s theory — it is true that he has put forward other theories with which this is completely incompatible — then the policy of all the parties that claim Marx’s authority is quite non-marxian. The Marxians ought to have combated everything that could in any way hinder the development of Capitalism. They should have protested against the trade unions and their methods, against laws protecting labour, against compulsory social insurance, against the taxation of property; they should have fought laws hindering the full working of the stock and produce exchanges, the fixation of prices, the policy which proceeds against cartels and trusts; they should have resisted inflationism. But they have done the reverse of all this, have been content to repeat Marx’s condemnation of the ‘petty bourgeois’ policy, without however drawing the inevitable conclusions. The Marxians who, in the beginning, wished to dissociate themselves definitely from the policy of all parties looking to the pre-capitalist economic idea, arrived in the end at exactly the same point of view.

The fight between Marxists and the parties calling themselves emphatically anti-marxists is carried on by both sides with such a violence of expression that one might easily be led into supposing them irreconcilable. But this is by no means the case. Both parties, Marxism and National-Socialism, agree in opposing Liberalism and rejecting the capitalist social order. Both desire a socialist order of society. The only difference in their programme lies in slight variations in their respective pictures of the future socialist State; nonessential variations, as we could easily show. The foremost demands of the national-socialist agitation are different from those of the marxists. While the Marxists speak of abolishing the commodity character of labour, the national socialists speak of breaking the slavery of interest (Brechung der Zinsknechtschaft). While the Marxists hold the ‘capitalists’ responsible for every evil, the national-socialists think to express themselves more concretely by shouting ‘Death to the Jews’ (Juda verrecke).1

Marxism, National-Socialism, and other anti-capitalist parties are indeed separated, not only by clique enmities, and personal resentments, but also by problems of metaphysics and the conduct of life. But they all agree on the decisive problem of reshaping the social order: they reject private ownership in the means of production and desire a socialist order of society. It is true that the paths by which they hope to reach the common goal run parallel only for short stretches, but even where they diverge they remain on adjacent territories.

It is not surprising that in spite of this close relationship they fight out their feud with consuming bitterness. In a socialist community the fate of the political minorities would necessarily become unbearable. How would national socialists fare under a bolshevist rule or bolshevists under National Socialism?

The results of the destructionist policy are not affected by the different slogans and banners employed. Whether the protagonists of the ‘right’ or of the ‘left’ happen to be in power, ‘to-morrow’ is always unhesitatingly sacrificed to ‘to-day’. The supporters of the system continue to feed it on capital — as long as crumb is left.2

• 1For a criticism of National-Socialist doctrine see my Kritik des Interventionismus, Jena 1929, p. 91 et seq.; also Karl Wagner, ‘Brechung der Zinsknechtschaft?’ (Jahrbücher für Nationalökonomie und Statistik, Third Series, Vol. LXXIII, p. 790 et seq.)
• 2The best characterization of destructionism is in the words with which Stourm tried to describe the financial policy of the Jacobins: ‘L’esprit financier des jacobins consista exclusivement en ceci: epuiser à outrance le présent, en sacrifiant l’avenir. Le lendemain ne compta jamais pour eux: les affaires furent menées chaque jour comme s’il s’agissait du dernier: tei fut ie caractère distinctif de tous ies actes de la Révolution. Tel est aussi le secret de son étonnante durée: la déprédation quotidienne des réserves accumulées chez une nation riche et puissante fit surgir des ressources inattendues, dépassant toute prévision.’ And it applies word for word to the German inflation policy of 1923 when Stourm goes on: ‘Les assignats, tant qu’ils valurent quelque chose, si peu que ce fût, inondèrent le pays en quantités sans cesse progressives. La perspective de la faillite n’arrêta pas un seul instant les émissions. Elles ne cessèrent que sur le refus absolu du public d’accepter, méme à vil prix, n’importe quelle sorte de papier-monnaie.’ Stourm, Les Finances de l’Ancien Régime et de la Révolution, Paris 1885, Vol. II, p. 388.