Socialism: An Economic and Sociological Analysis

Ludwig von Mises
Mises, Ludwig von
(1881-1973)
CEE
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Editor/Trans.
J. Kahane, trans.
First Pub. Date
1922
Publisher/Editor
Indianapolis, IN: Liberty Fund, Inc.
Pub. Date
1981
Comments
Foreword by Friedrich A. Hayek not available online

PUBLISHER'S PREFACE TO THE Liberty Fund EDITION

Pub.1

Socialism, by Ludwig von Mises, was originally published in German under the title Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922). A few paragraphs and the appendix were added to the second German edition, published by the same firm in 1932, and a few more paragraphs were included in the first English translation—Socialism: An Economic and Sociological Analysis, translated by J. Kahane (London: Jonathan Cape, 1936).

Pub.2

An enlarged edition of the Kahane translation was published in 1951 (New Haven: Yale University Press). This edition included an epilogue originally published (and still available) under the title Planned Chaos (Irvington, New York: Foundation for Economic Education, 1947). This enlarged edition was reprinted by Jonathan Cape (London) in 1969, and is here reprinted again, in 1981, by Liberty Fund (Indianapolis).

Pub.3

This edition leaves the text as translated by Kahane in 1936 and added to by Mises in 1951 undisturbed. The present publisher has, however, undertaken to add certain features to aid the contemporary reader. Translations have been provided for all non-English expressions left untranslated in the Jonathan Cape edition. These translations appear in parentheses after the expressions or passages in question. Chapters have been numbered consecutively throughout the book.

Pub.4

All footnotes have been checked against the second German edition. When works in languages other than English are cited by Mises, information concerning versions in English has been provided when such versions could be located. The corresponding page references in the English versions are also provided insofar as location of these was possible. Complete information concerning the English version is provided at the first citation of a given work. Only the page references in the English are provided in later citations, but full information is easily located in the Index to Works Cited. All bibliographical information added to the footnotes is clearly labeled as a publisher's note.

Pub.5

Having been written in 1922 in Austria and ranging over many fields of learning, Socialism contains a number of references to individuals and events with which many readers will not be familiar. Brief explanations of such references are provided by asterisked footnotes printed below Mises' notes and clearly labeled as being added by the publisher. Such notes also offer explanations quoted from Mises of his special use of a few English terms.

Pub.6

In order to facilitate study of the book, two new indexes have been provided. An Index to Works Cited lists all books and authors cited in Socialism. This index also provides English versions of works cited by Mises in German. In cases where no English version has been found, a literal translation of the title has been provided. A general Subject and Name Index is also provided.

Pub.7

Socialism has been available in English for more than forty years and references to it abound in the scholarly literature. Since Liberty Fund editions are set in new type, the pagination of this new edition differs from the earlier ones. We have, therefore, indicated the pagination of the expanded edition of 1951 in the margins of the Liberty Fund edition.

Pub.8

The pagination of all previous English language editions was the same from pages 15 through 521. In the enlarged edition of 1951, a Preface was added as pages 13-14, and the Epilogue was added as pages 522-592. By placing the pagination of the 1951 edition in the margins of our edition, we provide a guide to the location of citations of all earlier English editions.

Pub.9

The publisher wishes to acknowledge with thanks the aid of several persons who helped with this edition. The many aids to study and understanding offered in this edition are due primarily to the work of Bettina Bien Greaves of the Foundation for Economic Education. She performed the monumental task of checking the footnotes against the second German edition. She also undertook the equally difficult task of providing most of the citations to English language versions of works cited in German. She provided most of the material for the asterisked explanations of unfamiliar references. She also did most of the work of preparing the new indexes. If this edition is more easily studied by contemporary readers, most of the credit should go to Mrs. Greaves.

Pub.10

For aid with translations from Greek, the publisher acknowledges the help of Professors Perry E. Gresham and Burton Thurston of Bethany College. For help with Latin translations, Professor Gresham must be acknowledged again along with Father Laut of Wheeling College. Percy L. Greaves, Jr., of Dobbs Ferry, New York, provided translations from French. Professor H. D. Brueckner of Pomona College provided aid with locating translations and citations of Kant.

FOREWORD

By F. A. Hayek

F.1

Not currently available.

PREFACE TO THE SECOND ENGLISH EDITION

P.1

The world is split today into two hostile camps, fighting each other with the utmost vehemence, Communists and anti-Communists. The magniloquent rhetoric to which these factions resort in their feud obscures the fact that they both perfectly agree in the ultimate end of their programme for mankind's social and economic organization. They both aim at the abolition of private enterprise and private ownership of the means of production and at the establishment of socialism. They want to substitute totalitarian government control for the market economy. No longer should individuals by their buying or abstention from buying determine what is to be produced and in what quantity and quality. Henceforth the government's unique plan alone should settle all these matters. 'Paternal' care of the 'Welfare State' will reduce all people to the status of bonded workers bound to comply, without asking questions, with the orders issued by the planning authority.

P.2

Neither is there any substantial difference between the intentions of the self-styled 'progressives' and those of the Italian Fascists and the German Nazis. The Fascists and the Nazis were no less eager to establish all-round regimentation of all economic activities than those governments and parties which flamboyantly advertise their anti-Fascist tenets. And Mr. Peron in Argentina tries to enforce a scheme which is a replica of the New Deal and the Fair Deal and like these will, if not stopped in time, result in full socialism.

P.3

The great ideological conflict of our age must not be confused with the mutual rivalries among the various totalitarian movements. The real issue is not who should run the totalitarian apparatus. The real problem is whether or not socialism should supplant the market economy.

P.4

It is this subject with which my book deals.

P.5

World conditions have changed considerably since the first edition of my essay was published. But all these disastrous wars and revolutions, heinous mass murders and frightful catastrophes have not affected the main issue: the desperate struggle of lovers of freedom, prosperity and civilization against the rising tide of totalitarian barbarism.

P.6

In the Epilogue I deal with the most important aspects of the events of the last decades. A more detailed study of all the problems involved is to be found in three books of mine published by the Yale University Press:

Omnipotent Government, the Rise of the Total State and Total War;*8
Bureaucracy;*9
Human Action, a Treatise on Economics.*10
LUDWIG VON MISES
New York, July 1950

Notes for this chapter


8.
French translation by M. de Hulster, Librairie de Médicis, Paris; Spanish translation by Pedro Elgoibar, Editorial Hermes, México.
9.
British edition by William Hodge & Company Limited, London; French translation by R. Florin and P. Barbier, Librairie de Médicis, Paris.
10.
British edition by William Hodge & Company Limited, London.

End of Notes


TRANSLATOR'S NOTE

T.1

The following work is translated from the second German edition (published 1932) of the author's Die Gemeinwirtschaft (originally published in 1922). The author, who has lent assistance at every stage, has inserted certain additions, notably on the problem of economic calculation and on unemployment (pp. 137 ff., 485 ff.), which are not to be found in the German edition, and certain changes have been made in terminology to meet the convenience of English readers.

PREFACE TO THE SECOND GERMAN EDITION

PG.1

It is a matter of dispute whether, prior to the middle of the nineteenth 15 century, there existed any clear conception of the socialist idea—by which is understood the socialization of the means of production with its corollary, the centralized control of the whole of production by one social or, more accurately, state organ. The answer depends primarily upon whether we regard the demand for a centralized administration of the means of production throughout the world as an essential feature in a considered socialist plan. The older socialists looked upon the autarky of small territories as 'natural' and on any exchange of goods beyond their frontiers as at once 'artificial' and harmful. Only after the English Free-Traders had proved the advantages of an international division of labour, and popularized their views through the Cobden movement, did the socialists begin to expand the ideas of village and district Socialism into a national and, eventually, a world Socialism. Apart from this one point, however, the basic conception of Socialism had been quite clearly worked out in the course of the second quarter of the nineteenth century by those writers designated by Marxism as "Utopian Socialists." Schemes for a socialist order of society were extensively discussed at that time, but the discussion did not go in their favour. The Utopians had not succeeded in planning social structures that would withstand the criticisms of economists and sociologists. It was easy to pick holes in their schemes; to prove that a society constructed on such principles must lack efficiency and vitality, and that it certainly would not come up to expectations. Thus, about the middle of the nineteenth century, it seemed that the ideal of Socialism had been disposed of. Science had demonstrated its worthlessness by means of strict logic and its supporters were unable to produce a single effective counter-argument.

PG.2

It was at this moment that Marx appeared. Adept as he was in Hegelian dialectic—a system easy of abuse by those who seek to dominate thought by arbitrary flights of fancy and metaphysical verbosity—he was not slow in finding a way out of the dilemma in which socialists found themselves. Since Science and Logic had argued against Socialism, it was imperative to devise a system which could be relied on to defend it against such unpalatable criticism. This was the task which Marxism undertook to perform. It had three lines of procedure. First, it denied that Logic is universally valid for all mankind and for all ages. Thought, it stated, was determined by the class of the thinkers; was in fact an "ideological superstructure" of their class interests. The type of reasoning which had refuted the socialist idea was "revealed" as "bourgeois" reasoning, an apology for Capitalism. Secondly, it laid it down that the dialectical development led of necessity to Socialism; that the aim and end of all history was the socialization of the means of production by the expropriation of the expropriators—the negation of negation. Finally, it was ruled that no one should be allowed to put forward, as the Utopians had done, any definite proposals for the construction of the Socialist Promised Land. Since the coming of Socialism was inevitable, Science would best renounce all attempt to determine its nature.

PG.3

At no point in history has a doctrine found such immediate and complete acceptance as that contained in these three principles of Marxism. The magnitude and persistence of its success is commonly underestimated. This is due to the habit of applying the term Marxist exclusively to formal members of one or other of the self-styled Marxist parties, who are pledged to uphold word for word the doctrines of Marx and Engels as interpreted by their respective sects and to regard such doctrines as the unshakable foundation and ultimate source of all that is known about Society and as constituting the highest standard in political dealings. But if we include under the term "Marxist" all who have accepted the basic Marxian principles—that class conditions thought, that Socialism is inevitable, and that research into the being and working of the socialist community is unscientific—we shall find very few non-Marxists in Europe east of the Rhine, and even in Western Europe and the United States many more supporters than opponents of Marxism. Professed Christians attack the materialism of Marxists, monarchists their republicanism, nationalists their internationalism; yet they themselves, each in turn, wish to be known as Christian Socialists, State Socialists, National Socialists. They assert that their particular brand of Socialism is the only true one—that which "shall" come, bringing with it happiness and contentment. The Socialism of others, they say, has not the genuine class origin of their own. At the same time they scrupulously respect Marx's prohibition of any inquiry into the institutions of the socialist economy of the future, and try to interpret the working of the present economic system as a development leading to Socialism in accordance with the inexorable demand of the historical process. Of course, not Marxists alone, but most of those who emphatically declare themselves anti-Marxists, think entirely on Marxist lines and have adopted Marx's arbitrary, unconfirmed and easily refutable dogmas. If and when they come into power, they govern and work entirely in the socialist spirit.

PG.4

The incomparable success of Marxism is due to the prospect it offers of fulfilling those dream-aspirations and dreams of vengeance which have been so deeply embedded in the human soul from time immemorial. It promises a Paradise on earth, a Land of Heart's Desire full of happiness and enjoyment, and—sweeter still to the losers in life's game—humiliation of all who are stronger and better than the multitude. Logic and reasoning, which might show the absurdity of such dreams of bliss and revenge, are to be thrust aside. Marxism is thus the most radical of all reactions against the reign of scientific thought over life and action, established by Rationalism. It is against Logic, against Science and against the activity of thought itself—its outstanding principle is the prohibition of thought and inquiry, especially as applied to the institutions and workings of a socialist economy. It is characteristic that it should adopt the name "Scientific Socialism" and thus gain the prestige acquired by Science, through the indisputable success of its rule over life and action, for use in its own battle against any scientific contribution to the construction of the socialist economy. The Bolshevists persistently tell us that religion is opium for the people. Marxism is indeed opium for those who might take to thinking and must therefore be weaned from it.

PG.5

In this new edition of my book, which has been considerably revised, I have ventured to defy the almost universally respected Marxian prohibition by examining the problems of the socialist construction of society on scientific lines, i.e., by the aid of sociological and economic theory. While gratefully recalling the men whose research has opened the way for all work, my own included, in this field, it is still a source of gratification to me to be in a position to claim to have broken the ban placed by Marxism on the scientific treatment of these problems. Since the first publication of this book, problems previously ignored have come into the foreground of scientific interest; the discussion of Socialism and Capitalism has been placed on a new footing. Those who were formerly content to make a few vague remarks about the blessings which Socialism would bring are now obliged to study the nature of the socialist society. The problems have been defined and can no longer be ignored.

PG.6

As might be expected, socialists of every sort and description, from the most radical Soviet Bolshevists to the "Edelsozialisten"*11 of western civilization, have attempted to refute my reasonings and conclusions. But they have not succeeded, they have not even managed to bring forward any argument that I had not already discussed and disproved. At the present time, scientific discussion of the basic problems of Socialism follows the line of the investigation of this book.

PG.7

The arguments by which I demonstrated that, in a socialist community, economic calculation would not be possible have attracted especially wide notice. Two years before the appearance of the first edition of my book I published this section of my investigations in the Archiv für Sozialwissenschaft (Vol. XLVII, No. I),*12 where it is worded almost exactly as in both editions of the present work. The problem, which had scarcely been touched before, at once roused lively discussion in German-speaking countries and abroad. It may truly be said that the discussion is now closed; there is today hardly any opposition to my contention.

PG.8

Shortly after the first edition appeared, Heinrich Herkner, chief of the Socialists of the Chair ("Kathedersozialisten") in succession to Gustav Schmoller, published an essay which in all essentials supported my criticism of Socialism.*13 His remarks raised quite a storm amongst German socialists and their literary followings. Thus there arose, in the midst of the catastrophic struggle in the Ruhr and the hyper-inflation, a controversy which speedily became known as the crisis of the "Social Reform Policy." The result of the controversy was indeed meagre. The "sterility" of socialist thought, to which an ardent socialist had drawn attention, was especially apparent on this occasion.*14 Of the good results that can be obtained by an unprejudiced scientific study of the problems of Socialism there is proof in the admirable works of Pohle, Adolf Weber, Röpke, Halm, Sulzbach, Brutzkus, Robbins, Hutt, Withers, Benn, and others.

PG.9

But scientific inquiry into the problems of Socialism is not enough. We must also break down the wall of prejudice which at present blocks the way to an unbiased scrutiny of these problems. Any advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity, and above all as a zealous and courageous seeker after truth. But let anyone measure Socialism by the standards of scientific reasoning, and he at once becomes a champion of the evil principle, a mercenary serving the egotistical interests of a class, a menace to the welfare of the community, an ignoramus outside the pale. For the most curious thing about this way of thinking is that it regards the question, whether Socialism or Capitalism will better serve the public welfare, as settled in advance—to the effect, naturally, that Socialism is considered as good and Capitalism as evil—whereas in fact of course only by a scientific inquiry could the matter be decided. The results of economic investigations are met, not with arguments, but with that "moral pathos," which we find in the invitation to the Eisenach Congress*15 in 1872 and on which Socialists and Etatists always fall back, because they can find no answer to the criticism to which science subjects their doctrines.

PG.10

The older Liberalism, based on the classical political economy, maintained that the material position of the whole of the wage-earning classes could only be permanently raised by an increase of capital, and this none but capitalist society based on private ownership of the means of production can guarantee to find. Modern subjective economics has strengthened and confirmed the basis of the view by its theory of wages. Here modern Liberalism agrees entirely with the older school. Socialism, however, believes that the socialization of the means of production is a system which would bring wealth to all. These conflicting views must be examined in the light of sober science: righteous indignation and jeremiads take us nowhere.

PG.11

It is true that Socialism is today an article of faith for many, perhaps for most of its adherents. But scientific criticism has no nobler task than to shatter false beliefs.

PG.12

To protect the socialist ideal from the crushing effects of such criticism, attempts have recently been made to improve upon the accepted definition of the concept "Socialism." My own definition of Socialism, as a policy which aims at constructing a society in which the means of production are socialized, is in agreement with all that scientists have written on the subject. I submit that one must be historically blind not to see that this and nothing else is what has stood for Socialism for the past hundred years, and that it is in this sense that the great socialist movement was and is socialistic. But why quarrel over the wording of it! If anyone likes to call a social ideal which retains private ownership in the means of production socialistic, why, let him! A man may call a cat a dog and the sun the moon if it pleases him. But such a reversal of the usual terminology, which everyone understands, does no good and only creates misunderstandings. The problem which here confronts us is the socialization of ownership in the means of production, i.e. the very problem over which a worldwide and bitter struggle has been waged now for a century, the problem Greek kat exochiov (above all others) of our epoch.

PG.13

One cannot evade this defining of Socialism by asserting that the concept Socialism includes other things besides the socialization of the means of production: by saying, for example, that we are actuated by certain special motives when we are socialists, or that there is a second aim—perhaps a purely religious concept bound up with it. Supporters of Socialism hold that the only brand worthy the name is that which desires socialization of the means of production for "noble" motives. Others, who pass for opponents of Socialism, will have it that nationalization of the means of production desired from "ignoble" motives only, has to be styled Socialism also. Religious socialists say that genuine Socialism is bound up with religion; the atheistical socialist insists on abolishing God along with private property. But the problem of how a socialistic society could function is quite separate from the question of whether its adherents propose to worship God or not and whether or not they are guided by motives which Mr. X from his private point of view would call noble or ignoble. Each group of the great socialist movement claims its own as the only true brand and regards the others as heretical; and naturally tries to stress the difference between its own particular ideal and those of other parties. I venture to claim that in the course of my researches I have brought forward all that need be said about these claims.

PG.14

In this emphasizing of the peculiarities of particular socialist tendencies, the bearing which they may have on the aims of democracy and dictatorship obviously plays a significant part. Here, too, I have nothing to add to what I have said on the subject in various parts of this book (Chapter 3, Chapter 15, and Chapter 31). It suffices here to say that the planned economy which the advocates of dictatorship wish to set up is precisely as socialistic as the Socialism propagated by the self-styled Social Democrats.

PG.15

Capitalist society is the realization of what we should call economic democracy, had not the term—according I believe, to the terminology of Lord Passfield and Mrs. Webb—come into use and been applied exclusively to a system in which the workers, as producers, and not the consumers themselves, would decide what was to be produced and how. This state of affairs would be as little democratic as, say, a political constitution under which the government officials and not the whole people decided how the state was to be governed—surely the opposite of what we are accustomed to call democracy. When we call a capitalist society a consumers' democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers' ballot, held daily in the market-place. Every child who prefers one toy to another puts its voting paper in the ballot-box, which eventually decides who shall be elected captain of industry. True, there is no equality of vote in this democracy; some have plural votes. But the greater voting power which the disposal of a greater income implies can only be acquired and maintained by the test of election. That the consumption of the rich weighs more heavily in the balance than the consumption of the poor—though there is a strong tendency to overestimate considerably the amount consumed by the well-to-do classes in proportion to the consumption of the masses—is in itself an 'election result', since in a capitalist society wealth can be acquired and maintained only by a response corresponding to the consumers' requirements. Thus the wealth of successful business men is always the result of a consumers' plebiscite, and, once acquired, this wealth can be retained only if it is employed in the way regarded by consumers as most beneficial to them. The average man is both better informed and less corruptible in the decisions he makes as a consumer than as a voter at political elections. There are said to be voters who, faced with a decision between Free Trade and Protection, the Gold Standard and Inflation, are unable to keep in view all that their decision implies. The buyer who has to choose between different sorts of beer or makes of chocolate has certainly an easier job of it.

PG.16

The socialist movement takes great pains to circulate frequently new labels for its ideally constructed state. Each worn-out label is replaced by another which raises hopes of an ultimate solution of the insoluble basic problem of Socialism—until it becomes obvious that nothing has been changed but the name. The most recent slogan is "State Capitalism." It is not commonly realized that this covers nothing more than what used to be called Planned Economy and State Socialism, and that State Capitalism, Planned Economy, and State Socialism diverge only in non-essentials from the "classic" ideal of egalitarian Socialism. The criticisms in this book are aimed impartially at all the conceivable forms of the socialistic community.

PG.17

Only Syndicalism, which differs fundamentally from Socialism, calls for special treatment (Chapter 16, Section 4).

PG.18

I hope that these remarks will convince even the cursory and superficial reader that my investigation and criticisms do not apply solely to Marxian Socialism. As, however, all socialistic movements have been strongly stimulated by Marxism I devote more space to Marxian views than to those of other varieties of Socialism. I think I have passed in review everything bearing essentially on these problems and made an exhausting criticism of the characteristic features of non-Marxist programmes too.

PG.19

My book is a scientific inquiry, not a political polemic. I have analysed the basic problems and passed over, as far as possible, all the economic and political struggles of the day and the political adjustments of governments and parties. And this will, I believe, prove the best way of preparing the foundation of an understanding of the politics of the last few decades and years: above all, of the politics of tomorrow. Only a complete critical study of the ideas of Socialism will enable us to understand what is happening around us.

PG.20

The habit of talking and writing about economic affairs without having probed relentlessly to the bottom of their problems has taken the zest out of public discussions on questions vital to human society and diverted politics into paths that lead directly to the destruction of all civilization. The proscription of economic theory, which began with the German historical school, and today finds expression notably in American Institutionalism, has demolished the authority of qualified thought on these matters. Our contemporaries consider that anything which comes under the heading of Economics and Sociology is fair game to the unqualified critic. It is assumed that the trade union official and the entrepreneur are qualified by virtue of their office alone to decide questions of political economy. "Practical men" of this order, even those whose activities have, notoriously, often led to failure and bankruptcy, enjoy a spurious prestige as economists which should at all costs be destroyed. On no account must a disposition to avoid sharp words be permitted to lead to a compromise. It is time these amateurs were unmasked.

PG.21

The solution of every one of the many economic questions of the day requires a process of thought, of which only those who comprehend the general interconnection of economic phenomena are capable. Only theoretical inquiries which get to the bottom of things have any real practical value. Dissertations on current questions which lose themselves in detail are useless, for they are too much absorbed in the particular and the accidental to have eyes for the general and the essential.

PG.22

It is often said that all scientific inquiry concerning Socialism is useless, because none but the comparatively small number of people who are able to follow scientific trains of thought can understand it. For the masses, it is said, they will always remain incomprehensible. To the masses the catchwords of Socialism sound enticing and the people impetuously desire Socialism because in their infatuation they expect it to bring full salvation and satisfy their longing for revenge. And so they will continue to work for Socialism, helping thereby to bring about the inevitable decline of the civilization which the nations of the West have taken thousands of years to build up. And so we must inevitably drift on to chaos and misery, the darkness of barbarism and annihilation.

PG.23

I do not share this gloomy view. It may happen thus, but it need not happen thus. It is true that the majority of mankind are not able to follow difficult trains of thought, and that no schooling will help those who can hardly grasp the most simple proposition to understand complicated ones. But just because they cannot think for themselves the masses follow the lead of the people we call educated. Once convince these, and the game is won. But I do not want to repeat here what I have already said in the first edition of this book, at the end of the last chapter.*16

PG.24

I know only too well how hopeless it seems to convince impassioned supporters of the Socialist Idea by logical demonstration that their views are preposterous and absurd. I know too well that they do not want to hear, to see, or above all to think, and that they are open to no argument. But new generations grow up with clear eyes and open minds. And they will approach things from a disinterested, unprejudiced standpoint, they will weigh and examine, will think and act with forethought. It is for them that this book is written.

PG.25

Several generations of economic policy which was nearly liberal have enormously increased the wealth of the world. Capitalism has raised the standard of life among the masses to a level which our ancestors could not have imagined. Interventionism and efforts to introduce Socialism have been working now for some decades to shatter the foundations of the world economic system. We stand on the brink of a precipice which threatens to engulf our civilization. Whether civilized humanity will perish forever or whether the catastrophe will be averted at the eleventh hour and the only possible way of salvation retraced—by which we mean the rebuilding of a society based on the unreserved recognition of private property in the means of production—is a question which concerns the generation destined to act in the coming decades, for it is the ideas behind their actions that will decide it.

Vienna, January 1932

Notes for this chapter


11.
"Edelsozialisten" means pure, or intellectual, socialists, "parlour socialists" of the world of culture, as one would say in colloquial English (Pub.).
12.
"Die Wirtschaftsrechnung im sozialistischen Gemeinwesen." This article was translated under the title "Economic Calculation in the Socialist Commonwealth" from the German by S. Adler and into English. It is included in the anthology edited by F. A. Hayek, Collectivist Economic Planning (London: Routledge and Kegan, 1935), on pp. 87-130. This collection was reprinted in 1967 by Augustus M. Kelley Publishers of New Jersey (Pub.).
13.
Herkner, "Sozialpolitische Wandlungen in der wissenschaftlichen Nationalökonomie" (Der Arbeitgeber, vol. 13, p. 35).
14.
Cassau, "Die sozialistische Ideenwelt vor und nach dem Kriege" in Die Wirtschaftswissenschaft nach dem Kriege, Festgabe für Lujo Brentano zum 80. Geburtstag (Munich, 1925), vol. 1, pp. 149 ff.
15.
The Eisenach Congress of German Economists was called by Gustav Schmoller and some of his German Historical School colleagues. This Congress led to the founding of the Verein für Sozialpolitik (Society for Social Policy), which advocated government intervention in economic affairs. "Socialists of the chair" who were members of this organization had considerable influence on German policy (Pub.).
16.
pp. 459 ff. of this edition.

End of Notes


INTRODUCTION

1 The Success of Socialist Ideas

I.1

Socialism is the watchword and the catchword of our day. The socialist idea dominates the modem spirit. The masses approve of it. It expresses the thoughts and feelings of all; it has set its seal upon our time. When history comes to tell our story it will write above the chapter "The Epoch of Socialism."

I.2

As yet, it is true, Socialism has not created a society which can be said to represent its ideal. But for more than a generation the policies of civilized nations have been directed towards nothing less than a gradual realization of Socialism.*17 In recent years the movement has grown noticeably in vigour and tenacity. Some nations have sought to achieve Socialism, in its fullest sense, at a single stroke. Before our eyes Russian Bolshevism has already accomplished something which, whatever we believe to be its significance, must by the very magnitude of its design be regarded as one of the most remarkable achievements known to world history. Elsewhere no one has yet achieved so much. But with other peoples only the inner contradictions of Socialism itself and the fact that it cannot be completely realized have frustrated socialist triumph. They also have gone as far as they could under the given circumstances. Opposition in principle to Socialism there is none. Today no influential party would dare openly to advocate Private Property in the Means of Production. The word "Capitalism" expresses, for our age, the sum of all evil. Even the opponents of Socialism are dominated by socialist ideas. In seeking to combat Socialism from the standpoint of their special class interest these opponents—the parties which particularly call themselves "bourgeois" or "peasant"—admit indirectly the validity of all the essentials of socialist thought. For if it is only possible to argue against the socialist programme that it endangers the particular interests of one part of humanity, one has really affirmed Socialism. If one complains that the system of economic and social organization which is based on private property in the means of production does not sufficiently consider the interests of the community, that it serves only the purposes of single strata, and that it limits productivity; and if therefore one demands with the supporters of the various "social-political" and "social-reform" movements, state interference in all fields of economic life, then one has fundamentally accepted the principle of the socialist programme. Or again, if one can only argue against socialism that the imperfections of human nature make its realization impossible, or that it is inexpedient under existing economic conditions to proceed at once to socialization, then one merely confesses that one has capitulated to socialist ideas. The nationalist, too, affirms socialism, and objects only to its Internationalism. He wishes to combine Socialism with the ideas of Imperialism and the struggle against foreign nations. He is a national, not an international socialist; but he, also, approves of the essential principles of Socialism.*18

I.3

The supporters of Socialism therefore are not confined to the Bolshevists and their friends outside Russia or to the members of the numerous socialist parties: all are socialists who consider the socialistic order of society economically and ethically superior to that based on private ownership of the means of production, even though they may try for one reason or another to make a temporary or permanent compromise between their socialistic ideal and the particular interests which they believe themselves to represent. If we define Socialism as broadly as this we see that the great majority of people are with Socialism today. Those who confess to the principles of Liberalism*19 and who see the only possible form of economic society in an order based on private ownership of the means of production are few indeed.

I.4

One striking fact illustrates the success of socialist ideas: namely, that we have grown accustomed to designating as Socialism only that policy which aims to enact the socialist programme immediately and completely, while we call by other names all the movements directed towards the same goal with more moderation and reserve, and even describe these as the enemies of Socialism. This can only have come about because few real opponents of Socialism are left. Even in England, the home of Liberalism, a nation which has grown rich and great through its liberal policy, people no longer know what Liberalism really means. The English "Liberals" of today are more or less moderate socialists.*20 In Germany, which never really knew Liberalism and which has become impotent and impoverished through its anti-liberal policy, people have hardly a conception of what Liberalism may be.

I.5

It is on the complete victory of the socialist idea in the last decades that the great power of Russian Bolshevism rests. What makes Bolshevism strong is not the Soviets' artillery and machine-guns but the fact that the whole world receives its ideas sympathetically. Many socialists consider the Bolshevists' enterprise premature and look to the future for the triumph of Socialism. But no socialist can fail to be stirred by the words with which the Third International summons the peoples of the world to make war on Capitalism. Over the whole earth is felt the urge towards Bolshevism. Among the weak and lukewarm sympathy is mixed with horror and with the admiration which the courageous believer always awakens in the timid opportunist. But bolder and more consistent people greet without hesitation the dawn of a new epoch.

2 The Scientific Analysis of Socialism

I.6

The starting-point of socialist doctrine is the criticism of the bourgeois order of society. We are aware that socialist writers have not been very successful in this respect. We know that they have misconceived the working of the economic mechanism, and that they have not understood the function of the various institutions of the social order which is based on division of labour and on private ownership of the means of production. It has not been difficult to show the mistakes socialistic theorists have made in analysing the economic process: critics have succeeded in proving their economic doctrines to be gross errors. Yet to ask whether the capitalist order of society is more or less defective is hardly a decisive answer to the question whether Socialism would be able to provide a better substitute. It is not sufficient to have proved that the social order based on private ownership of the means of production has faults and that it has not created the best of all possible worlds; it is necessary to show further that the socialistic order is better. This only a few socialists have tried to prove, and these have done so for the most part in a thoroughly unscientific, some even in a frivolous, manner. The science of Socialism is rudimentary, and just that kind of Socialism which calls itself "Scientific" is not the last to be blamed for this. Marxism has not been satisfied to present the coming of Socialism as an inevitable stage of social evolution. Had it done only this it could not have exerted that pernicious influence on the scientific treatment of the problems of social life which must be laid to its charge. Had it done nothing except describe the socialistic order of society as the best conceivable form of social life it could never have had such injurious consequences. But by means of sophistry it has prevented the scientific treatment of sociological problems and has poisoned the intellectual atmosphere of the time.

I.7

According to the Marxist conception, one's social condition determines one's way of thought. His membership of a social class decides what views a writer will express. He is not able to grow out of his class or to free his thoughts from the prescriptions of his class interests.*21 Thus the possibility of a general science which is valid for all men, whatever their class, is contested. It was only another step for Dietzgen to proceed to the construction of a special proletarian logic.*22 But truth lies with the proletarian science only: "the ideas of proletarian logic are not party ideas, but the consequences of logic pure and simple."*23 Thus Marxism protects itself against all unwelcome criticism. The enemy is not refuted: enough to unmask him as a bourgeois.*24 Marxism criticizes the achievements of all those who think otherwise by representing them as the venal servants of the bourgeoisie. Marx and Engels never tried to refute their opponents with argument. They insulted, ridiculed, derided, slandered, and traduced them, and in the use of these methods their followers are not less expert. Their polemic is directed never against the argument of the opponent, but always against his person. Few have been able to withstand such tactics. Few indeed have been courageous enough to oppose Socialism with that remorseless criticism which it is the duty of the scientific thinker to apply to every subject of inquiry. Only thus is to be explained the fact that supporters and opponents of Socialism have unquestioningly obeyed the prohibition which Marxism has laid on any closer discussion of the economic and social conditions of the socialist community. Marxism declares on the one hand that the socialization of the means of production is the end towards which economic evolution leads with the inevitability of a natural law; on the other hand it represents such socialization as the aim of its political effort. In this way he expounded the first principle of socialist organization. The purpose of the prohibition to study the working of a socialist community, which was justified by a series of threadbare arguments, was really intended to prevent the weaknesses of Marxist doctrines from coming clearly to light in discussions regarding the creation of a practicable socialist society. A clear exposition of the nature of socialist society might have damped the enthusiasm of the masses, who sought in Socialism salvation from all earthly ills. The successful suppression of these dangerous inquiries, which had brought about the downfall of all earlier socialistic theories, was one of Marx's most skillful tactical moves. Only because people were not allowed to talk or to think about the nature of the socialist community was Socialism able to become the dominant political movement of the late nineteenth and early twentieth centuries.

I.8

These statements can hardly be illustrated better than by a quotation from the writings of Hermann Cohen, one of those who, in the decades immediately preceding the world war,*25 exerted the strongest influence on German thought. "Today," says Cohen, "no want of understanding prevents us from recognizing the kernel of the social question and therefore, even if only furtively, the necessity of social reform policy, but only the evil, or the not sufficiently good, will. The unreasonable demand that it should unveil the picture of the future state for the general view, with which attempts are made to embarrass party Socialism, can be explained only by the fact that such defective natures exist. The state presupposes law, but these people ask what the state would look like rather than what are the ethical requirements of law. By thus reversing the concepts one confuses the ethics of Socialism with the poesy of the Utopias. But ethics are not poetry and the idea has truth without image. Its image is the reality which is only to arise according to its prototype. The socialist idealism can to-day be looked upon as a general truth of public consciousness, though as one which is still, nevertheless, an open secret. Only the egoism implicit in ideals of naked covetousness, which is the true materialism, denies it a faith."*26 The man who wrote and thought thus was widely praised as the greatest and most daring German thinker of his time, and even opponents of his teaching respected him as an intellect. Just for that reason it is necessary to stress that Cohen not only accepts without criticism or reserve the demands of Socialism and acknowledges the prohibition against attempts to examine conditions in the socialist community, but that he represents as a morally inferior being anyone who tries to embarrass "party-Socialism" with a demand for light upon the problems of socialist economies. That the daring of a thinker whose criticism otherwise spares nothing should stop short before a mighty idol of his time is a phenomenon which may be observed often enough in the history of thought—even Cohen's great exemplar, Kant, is accused of this.*27 But that a philosopher should charge with ill-will, defective disposition, and naked covetousness not merely all those of a different opinion but all who even touch on a problem dangerous to those in authority—this, fortunately, is something of which the history of thought can show few examples.

I.9

Anyone who failed to comply unconditionally with this coercion was proscribed and outlawed. In this way Socialism was able from year to year to win more and more ground without anyone being moved to make a fundamental investigation of how it would work. Thus, when one day Marxian Socialism assumed the reins of power, and sought to put its complete programme into practice, it had to recognize that it had no distinct idea of what, for decades, it had been trying to achieve.

I.10

A discussion of the problems of the socialist community is therefore of the greatest importance, and not only for understanding the contrast between liberal and socialist policy. Without such a discussion it is not possible to understand the situations which have developed since the movement towards nationalization and municipalization commenced. Until now economics—with a comprehensible but regrettable onesidedness—has investigated exclusively the mechanism of a society based on private ownership of the means of production. The gap thus created must be filled.

I.11

The question whether society ought to be built up on the basis of private ownership of the means of production or on the basis of public ownership of the means of production is political. Science cannot decide it; Science cannot pronounce a judgment on the relative values of the forms of social organization. But Science alone, by examining the effects of institutions, can lay the foundations for an understanding of society. Though the man of action, the politician, may sometimes pay no attention to the results of this examination, the man of thought will never cease to inquire into all things accessible to human intelligence. And in the long run thought must determine action.

3 Alternative Modes of Approach to the Analysis of Socialism

I.12

There are two ways of treating the problems which Socialism sets to Science.

I.13

The cultural philosopher may deal with Socialism by trying to place it in order among all other cultural phenomena. He inquires into its intellectual derivation, he examines its relation to other forms of social life, he looks for its hidden sources in the soul of the individual, he tries to understand it as a mass phenomena. He examines its effects on religion and philosophy, on art and literature. He tries to show the relation in which it stands to the natural and mental sciences of the time. He studies it as a style of life, as an utterance of the psyche, as an expression of ethical and aesthetic beliefs. This is the cultural-historical-psychological way. Ever trodden and retrodden, it is the way of a thousand books and essays.

I.14

We must never judge a scientific method in advance. There is only one touchstone for its ability to achieve results: success. It is quite possible that the cultural-historical-psychological method will also contribute much towards a solution of the problems which Socialism has set to Science. That its results have been so unsatisfactory is to be ascribed not only to the incompetence and political prejudices of those who have undertaken the work, but above all to the fact that the sociological*28-economical treatment of the problems must precede the cultural-historical-psychological. For Socialism is a programme for transforming the economic life and constitution of society according to a defined ideal. To understand its effects in other fields of mental and cultural life one must first have seen clearly its social and economic significance. As long as one is still in doubt about this it is unwise to risk a cultural-historical-psychological interpretation. One cannot speak of the ethics of Socialism before one has cleared up its relation to other moral standards. A relevant analysis of its reactions on religion and public life is impossible when one has only an obscure conception of its essential reality. It is impossible to discuss Socialism at all without having first and foremost examined the mechanism of an economic order based on public ownership of the means of production.

I.15

This comes out clearly at each of the points at which the cultural-historical-psychological method usually starts. Followers of this method regard Socialism as the final consequences of the democratic idea of equality without having decided what democracy and equality really mean or in what relation they stand to each other, and without having considered whether Socialism is essentially or only generally concerned with the idea of equality. Sometimes they refer to Socialism as a reaction of the psyche to the spiritual desolation created by the rationalism inseparable from Capitalism; sometimes again they assert that Socialism aims at the highest rationalization of material life, a rationalization which Capitalism could never attain.*29 Those who engulf their cultural and theoretical exposition of Socialism in a chaos of mysticism and incomprehensible phrases need not be discussed here.

I.16

The researches of this book are to be directed above all to the sociological and economic problems of Socialism. We must treat these before we can discuss the cultural and psychological problems. Only on the results of such research can we base studies of the culture and psychology of Socialism. Sociological and economic research alone can provide a firm foundation for those expositions—so much more attractive to the great public—which present a valuation of Socialism in the light of the general aspirations of the human race.


Notes for this chapter


17.
"It may now fairly be claimed that the socialist philosophy of today is but the conscious and explicit assertion of principles of social organization which have been already in great part unconsciously adopted. The economic history of the century is an almost continuous record of the progress of Socialism." (Sidney Webb, Fabian Essays [1889], p. 30.)
18.
Foerster points out particularly that the labour movement has attained its real triumph "in the hearts of the possessing classes"; through this "the moral force for resistance has been taken away from these classes." (Foerster, Christentum und Klassenkampf [Zurich, 1908], p. 111 ff.) In 1869 Prince-Smith had noted the fact that the socialist ideas had found supporters among employers. He mentions that amongst business men, "however strange this may sound, there are some who understand their own activity in the national economy with so little clarity that they hold the socialist ideas as more or less founded, and, consequently, have a bad conscience really, as if they had to admit to themselves that their profits were actually made at the cost of their workmen. This makes them timid and even more muddled. It is very bad. For our economic civilization would be seriously threatened if its bearers could not draw, from the feeling of complete justification, the courage to defend its foundations with the utmost resolution." (Prince-Smith's Gesammelte Schriften [Berlin, 1877], vol. 1, p. 362.) Prince-Smith, however, would not have known how to discuss the socialist theories critically.
19.
The term "liberalism" is used by Mises "in the sense attached to it everywhere in the nineteenth century and still today in the countries of continental Europe. This usage is imperative because there is simply no other term available to signify the great political and intellectual movement that substituted free enterprise and the market economy for the precapitalistic methods of production; constitutional representative government for the absolutism of kings or oligarchies; and freedom of all individuals for slavery, serfdom, and other forms of bondage." Mises, Human Action: A Treatise on Economics, 3rd ed. (Chicago: Regnery, 1966), p. v. (Pub.).
20.
This is shown clearly in the programme of present-day English Liberals: Britain's Industrial Future, being the Report of the Liberal Industrial Inquiry (London, 1928).
21.
"Science exists only in the heads of the scientists, and they are products of society. They cannot get out of it and beyond it" (Kautsky, Die soziale Revolution, 3rd ed. [Berlin, 1911], vol. 2, p. 39). Publisher's Note: In English, see The Social Revolution, trans. J. B. Askew (London, 1907).
22.
Dietzgen, "Briefe über Logik, speziell demokratisch-proletarische Logik," Internationale Bibliothek, 2d ed. (Stuttgart, 1903), vol. 22, p. 112: "Finally logic deserves the epithet 'proletarian' also for the reason that to understand it one must have overcome all the prejudices which hold the bourgeoisie."
23.
Ibid, p. 112.
24.
It is a fine irony of history that even Marx suffered this fate. Untermann finds that "even the mental life of typical proletarian thinkers of the Marxist school" contains "remains of past epochs of thought, if only in rudimentary form. These rudiments will appear all the stronger the more the thought stages lived through before the thinker became Marxist were passed in a bourgeois or feudal milieu. This was notoriously so with Marx, Engels, Plekhanov, Kautsky, Mehring, and other prominent Marxists" (Untermann, Die logischen Mängel des engeren Marxismus [Munich, 1910], p. 125). And De Man believes that to understand "the individuality and variety of the theories" one would have to consider, besides the thinker's general social background, also his own economic and social life—a "bourgeois" life ... "in the case of the college-trained Marx" (De Man, Zur Psychologie des Sozialismus, new ed. [Jena, 1927], p. 17).
25.
World War I (Pub.).
26.
Cohen, Einleitung mit kritischem Nachtrag zur neunten Auflage der Geschichte des Materialismus von Friedrich Albert Lange, 3rd extended ed. (Leipzig, 1914), P. 115. Also Natorp, Sozialpädagogik, 4th ed. (Leipzig, 1920), p. 201.
27.
Anton Menger, Neue Sittenlehre (Jena, 1905), pp. 45, 62.
28.
Throughout the 1920s, Mises continued to refer to the science of human action as "sociology." However, he later came to prefer the term "praxeology," derived from the Greek praxis, meaning action, habit or practice. In his "Foreword" to Epistemological Problems of Economics (Princeton: Van Nostrand, 1960; New York: NYU Press, 1981), he commented on his use of the term "sociology" in a 1929 essay included in that volume: "... in 1929, I still believed that it was unnecessary to introduce a new term to signify the general theoretical science of human action as distinguished from the historical studies dealing with human action performed in the past. I thought that it would be possible to employ for this purpose the term sociology, which in the opinion of some authors was designed to signify such a general theoretical science. Only later did I realize that this was not expedient and adopted the term praxeology." (Pub.)
29.
Muckle, Das Kulturideal des Sozialismus (Munich, 1918) even expects of socialism that it will bring about both "the highest rationalization of economic life" and "redemption from the most terrible of all barbarisms: capitalist rationalism."

End of Notes


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