Socialism: An Economic and Sociological Analysis
By Ludwig Mises
Ludwig von Mises (1881-1973) first published
Socialism in German, in 1922. The edition presented here is that published by Liberty Fund in 1981. It follows the text, with correction and enlargement of footnotes, of the Jonathan Cape, Ltd., edition published in London in 1969. The edition was based on the 1951 edition by Yale University Press which slightly enlarged the first English edition published by Jonathan Cape in 1936, translated from the German by J. Kahane. Only a few corrections of obvious typos were made for this website edition. One character substitution has been made: the ordinary character “C” has been substituted for the “checked C” in the name Cuhel.
J. Kahane, trans.
First Pub. Date
Indianapolis, IN: Liberty Fund, Inc.
First published in German. Foreword by Friedrich A. Hayek not available online
The text of this edition is under copyright. Picture of Ludwig von Mises: file photo, Liberty Fund, Inc.
- Part I,Ch.1
- Part I,Ch.2
- Part I,Ch.3
- Part I,Ch.4
- Part II,Ch.5
- Part II,Ch.6
- Part II,Ch.7
- Part II,Ch.8
- Part II,Ch.9
- Part II,Ch.10
- Part II,Ch.11
- Part II,Ch.12
- Part II,Ch.13
- Part II,Ch.14
- Part II,Ch.15
- Part II,Ch.16
- Part III,Ch.17
- Part III,Ch.18
- Part III,Ch.19
- Part III,Ch.20
- Part III,Ch.21
- Part III,Ch.22
- Part III,Ch.23
- Part III,Ch.24
- Part III,Ch.25
- Part III,Ch.26
- Part IV,Ch.27
- Part IV,Ch.28
- Part IV,Ch.29
- Part IV,Ch.30
- Part IV,Ch.31
- Part IV,Ch.32
- Part V,Ch.33
- Part V,Ch.34
- Part V,Ch.35
1 Stationary Conditions
The Socialist Community Under Stationary Conditions
To assume stationary economic conditions is a theoretical expedient and not an attempt to describe reality. We cannot dispense with this line of thought if we wish to understand the laws of economic change. In order to study movement we must first imagine a condition where it does not exist. The stationary condition is that point of equilibrium to which we conceive all forms of economic activity to be tending and which would actually be attained if new factors did not, in the meantime, create a new point of equilibrium. In the imaginary state of equilibrium all the units of the factors of production are employed in the most economic way, and there is no reason to contemplate any changes in their number or their disposition.
Even if it is impossible to imagine a living—that is to say a
changing—socialist economic order, because economic activity without economic calculation seems inconceivable, it is quite easy to postulate a socialist economic order under stationary conditions. We need only avoid asking how this stationary condition is achieved. If we do this there is no difficulty in examining the statics of a socialist community. All socialist theories and Utopias have always had only the stationary condition in mind.
2 The Disutilities and Satisfactions of Labour
Socialist writers depict the socialist community as a land of heart’s desire. Fourier’s sickly fantasies go farthest in this direction. In Fourier’s state of the future all harmful beasts will have disappeared, and in their places will be animals which will assist man in his labours—or even do his work for him. An anti-beaver will see to the fishing; an anti-whale will move sailing ships in a calm; an anti-hippopotamus will tow the river boats. Instead of the lion there will be an anti-lion, a steed of wonderful swiftness, upon whose back the rider will sit as comfortably as in a well-sprung carriage. “It will be a pleasure to live in a world with such servants.”
*47 Godwin even thought that men might be immortal after property had been abolished.
*48 Kautsky tells us that under the socialist society “a new type of man will arise … a superman … an exalted man.”
*49 Trotsky provides even more detailed information: “Man will become incomparably stronger, wiser, finer. His body more harmonious, his movements more rhythmical, his voice more musical … The human average will rise to the level of an Aristotle, a Goethe, a Marx. Above these other heights new peaks will arise.”
*50 And writers of this sort of stuff are continually being reprinted and translated into other tongues, and made the subject of exhaustive historical theses!
Other socialist writers are more circumspect in their pronouncements but they proceed on essentially similar assumptions. Tacitly underlying Marxian theory is the nebulous idea that the natural factors of production are such that they need not be economized. Such a conclusion indeed follows inevitably from a system that reckons labor as the only element in costs, that does not accept the law of diminishing returns, rejects the Malthusian law of population and loses itself in obscure fantasies about the unlimited possibility of increasing productivity.
*51 We need not go further into these matters. It is sufficient to recognize that even in a socialist community the natural factors of production would be limited in quantity and would therefore have to be economized.
The second element which would have to be economized is labour. Even if we ignore differences in quality it is obvious that labour is available only to a limited extent: the individual can only perform a certain amount of labour. Even if labour were a pure pleasure it would have to be used economically, since human life is limited in time, and human energy is not inexhaustible. Even the man who lives at his leisure, untrammelled by monetary considerations, has to dispose of his time, i.e. choose between different possible ways of spending it.
It is clear, therefore, that in the world as we know it, human behaviour must be governed by economic considerations. For while our wants are unlimited, the goods of the first order bestowed by nature are scarce; and, with a given productivity of labour, goods of a higher order can serve to increase the satisfaction of needs only by increasing labour. Now, quite apart from the fact that labour cannot be increased beyond a certain point, an increase of labour is accompanied by increasing disutility.
Fourier and his school regard the disutility of labour as a result of perverse social arrangements. These alone in their view are to blame for the fact that in accepted usage the words “labour” and “toil” are synonymous. Labour in itself is not unpleasant. On the contrary, all men need to be active. Inactivity entails intolerable boredom. If labour is to be made attractive it must be carried on in healthy, clean workplaces; the joy of labour must be aroused by a happy feeling of union among the workers and cheerful competition between them. The chief cause of the repugnance which labour arouses is its continuity. Even pleasures pall if they last too long. Therefore the workers must be allowed to interchange their occupations at will; work will then be a pleasure and no longer create aversion.
It is not difficult to expose the error contained in this argument, though it is accepted by socialists of all schools. Man feels the impulse to activity. Even if need did not drive him to work he would not always be content to roll in the grass and bask in the sun. Even young animals and children whose nourishment is provided by their parents kick their limbs, dance, jump and run so as to exercise powers yet unclaimed by labour. To be stirring is a physical and mental need. Thus, in general, purposeful labour gives satisfaction. Yet only up to a certain point; beyond this it is only toil. In the following diagram the line 0 x along which the product of labour is
measured, marks the dividing line between the disutility of labour and the satisfaction the exercise of our powers affords, which may be called immediate satisfaction due to labour. The curve,
a, b, c, p represents labour disutility and immediate labour satisfaction in relation to the product. When labour commences it is found disagreeable. After the first difficulties have been overcome and body and mind are better adapted, then the disagreeableness declines. At
b neither disagreeableness nor satisfaction predominates. Between
c direct satisfaction prevails. After
c disagreeableness recommences. With other forms of labour the curve may run differently, as in 0
c1p1 or 0
p2. That depends on the nature of the work and the personality of the workers. It is different for ditchdiggers and for jockeys: it is different for dull and for energetic men.
Why is labour continued when the disutility which its continuance occasions exceeds the direct satisfaction deriving from it? Because something else beside direct labour satisfaction comes into account, namely the satisfaction afforded by the product of the labour; we call this indirect labour satisfaction. Labour will be continued so long as the dissatisfaction which it arouses is counterbalanced by the pleasure derived from its product. Labour will only be discontinued at the point at which its continuation would give rise to more disutility than utility.
The methods by which Fourier wished to deprive labour of its unattractiveness were indeed based upon correct observations, but he greatly overrated the bearing of his argument. It is clear that the amount of work which affords direct labour satisfaction supplies such a small fraction of the needs which men consider imperative that they readily undergo the hardship of performing irksome work. But it is a mistake to assume that any significant change would take place if workers were allowed to change occupations at short intervals. For in the first place the product of labour would be reduced because of the diminished skill acquired by the individual as a result of diminished practice in each of his various occupations; also because every changeover would cause loss of time, and labour would be expended in the shuffling. And in the second place only a very slight part of the excess of labour disutility over direct labour satisfaction is due to weariness with the particular job in hand. Hence the capacity to derive direct satisfaction from another form of labour is not what it would have been if the first job had not been performed. Clearly the greater part of the disutility is due to general fatigue of the organism and to a desire to be released from any further constraint. The man who has worked for hours at a desk will prefer to chop wood for an hour rather than spend another hour at the desk. But what made his labour unpleasant was not only the need for change but rather the length of the work. If the product is not to be diminished the length of the working day can be reduced only by increased productivity. The widespread opinion that there is labour which only tires the body and labour which only tires the mind is incorrect, as everyone can prove for himself. All labour affects the whole organism. We deceive ourselves on this point because in observing other forms of occupation we see only the direct labour satisfaction. The clerk envies the coachman, because he would like a little recreation in driving: but his envy would last only as long as the satisfaction exceeded the pain. Similarly hunting and fishing, mountain climbing, riding and driving are undertaken for sport. But sport is not work in the economic sense. It is the hard fact that men cannot subsist on the small amount of labour yielding direct labour satisfaction which compels them to suffer the irksomeness of toil, not the bad organization of labour.
It is obvious, that improvements in the conditions under which labour is performed may increase the product with unchanged irksomeness or lessen the irksomeness for the same product. But it would be impossible to improve these conditions more than actually occurs under capitalism without rising cost. That labour is less irksome when performed in company has been known from of old, and where it seems possible to let workers work together without reducing output, it is done.
There are, of course, exceptional natures that rise above the common level. The great creative genius who perpetuates himself in immortal works and deeds does not when working distinguish the pain from the pleasure. For such men creation is at once the greatest joy and the bitterest torment, an inner necessity. What they create has no value to them as a product: they create for the sake of creation, not for the result. The product costs them nothing because, when working, they forgo nothing dearer to them than their work. And their product only costs society what they could have produced by other labour. In comparison to the value of the service this cost is nothing. Genius is truly a gift of God.
Now the life history of great men is familiar to all. Thus the social reformer is easily tempted to regard what he has heard of them as common attributes. We continually find people inclined to regard the mode of life of the genius as the typical way of living of a simple citizen of a socialist community. But not every one is a Sophocles or a Shakespeare, and standing behind a lathe is not the same thing as writing Goethe’s poems or founding the Empire of Napoleon.
It is therefore easy to see the nature of the illusions entertained by Marxians with regard to the satisfactions and toil of the inhabitants of the socialist community. Here, as in everything else it has to say about the socialist community, Marxism moves along the lines set out by the Utopians. With express reference to Fourier’s and Owen’s ideas of restoring to work “the attractiveness lost through division of labour,” by arranging for each form of work to be performed for a short time only, Engels sees in Socialism an organization of production “in which productive labour will be not a means for enslaving but for liberating mankind, which will give every individual the opportunity to develop and to exercise all his capabilities, bodily and mental, in all directions, and will transform a bane into a boon.”
*54 And Marx talks of “a higher phase of communist society after having done away with the slavish subjection of the individual under the division of labour, a society in which the contrast between mental and physical work has disappeared” and “labour has become not only a means of life but the first need of life itself.”
*55 Max Adler promises that the socialist society will “at the very least” not assign to anyone any work “which must cause him pain.”
*56 These statements distinguish themselves from the utterances of Fourier and his school only by the fact that there is nowhere any attempt to provide them with a basis of proof.
Fourier and his school, however, had another device, apart from changes of occupation, for rendering work more attractive: competition. Men would be capable of the highest achievement if inspired by
un sentiment de rivalité joyeuse ou de noble émulation (a feeling of joyous rivalry or noble emulation). Here for once they recognize the advantages of competition, which everywhere else they describe as pernicious. If the workers show a deficiency in achievement it will be sufficient to divide them into groups: immediately a fierce competition will blaze up between the groups, which will double the energy of the individual and suddenly arouse in all
un acharnement passioné au travail (A passionate tenacity for work).
The observation that competition makes for greater accomplishment is of course correct enough, but it is superficial. Competition is not in itself a human passion. The efforts put forth by men in competition are not made for the sake of the competition but for the end attained thereby. The fight is waged not for its own sake, but for the prize which beckons the victor. But what prizes would spur to emulation the workers in a socialist community? Experience shows that titles and rewards of honour are not estimated too highly. Material goods to increase the satisfaction of wants could not be given as prizes since the principle of distribution would be independent of individual performance, and the increase per head through the increased effort of a single worker would be so insignificant that it would not count. The simple satisfaction from duty performed would not suffice: it is precisely because this incentive cannot be trusted that we seek others. And even if it were so, labour would still be irksome. It would not thereby become attractive in itself.
The Fourier school, as we have seen, regards it as the main point of their solution of the social problem that work will be made a joy instead of a toil.
*58 But unfortunately the means which it provides for this are quite impracticable. If Fourier had really been able to show the way to make work attractive he would have deserved the divine honours bestowed on him by his followers.
*59 But his much lauded doctrines are nothing but the fantasies of a man who was incapable of seeing clearly the world as it really is.
Even in a socialist community work will arouse feelings of pain and not of pleasure.
3 The “Joy of Labour”
If this is recognized, one of the main supports of socialist structure of thought collapses. It is therefore only too easy to understand why socialists try stubbornly to maintain that there is in man an innate impulse and striving to work, that work gives satisfaction
per se and that only the unsatisfactory conditions under which work is performed in capitalist society could restrict this natural joy of labour and transform it into toil.
In proof of this assertion they assiduously collect statements made by workers in modern factories on the pleasurability of the labour. They ask the workers leading questions and are extraordinarily satisfied when the answers are of the kind they want to hear. But because of their prepossession they omit to notice that between the actions and replies of those whom they cross-examine there is a contradiction which demands solution. If work gives satisfaction
per se why is the worker paid? Why does he not reward the employer for the pleasure which the employer gives him by allowing him to work? Nowhere else are people paid for the pleasure given to them, and the fact that pleasures are rewarded ought at least to give pause for reflection. By common definition, labour cannot give satisfaction directly. We define labour as just that activity which does not give any direct pleasurable sensations, which is performed only because the produce of the labour yields indirectly pleasurable sensations sufficient to counterbalance the primary sensations of pain.
The so-called “joy of labour” which is generally adduced in support of the view that labour awakens feelings of satisfaction, not of pain, is attributable to three quite separate sensations.
There is first the pleasure which can be obtained from the perversion of work. When the public official abuses his office, often while performing his function in a manner which is formally quite correct, so as to satisfy the instincts of power, or to give free rein to sadistic impulses, or to pander to erotic lusts (and in this one need not always think merely of things condemned by law or morals), the pleasures that follow are undoubtedly not pleasures of work but pleasures derived from certain accompanying circumstances. Similar considerations apply also to other kinds of work. Psychoanalytic literature has repeatedly pointed out how extensively matters of this sort influence the choice of occupation. In so far as these pleasures counterbalance the pain of labour they are reflected also in the rates of pay; the larger supply of labour in the occupations offering the greatest scope for this kind of perversion tending to lower the rate of pay. The worker pays for the “pleasure” with an income lower than he otherwise could have earned.
By “joy of labour” people mean also the satisfaction of completing a task. But this is pleasure in being free of work rather than pleasure in the work itself. Here we have a special kind of pleasure, which can be shown to exist everywhere, in having got rid of something difficult, unpleasant, painful, the pleasure of “I’ve done it.” Socialist Romanticism and romantic socialists praise the Middle Ages as a time when joy of labour was unrestricted. As a matter of fact we have no reliable information from medieval artisans, peasants, and their assistants about the “joy of labour,” but we may presume that their joy was in having performed their work and begun the hours of pleasure and repose. Medieval monks, who in the contemplative peace of their monasteries copied manuscripts, have bequeathed us remarks which are certainly more genuine and reliable than the assertions of our romantics. At the end of many a fine manuscript we read:
Laus tibi sit Christe, quoniam liber explicit iste.*63 (Praise be to you, O Christ, for this book is completed.) Not because the work itself has given pleasure.
But we must not forget the third and most important source of the joy of labour—the satisfaction the worker feels because his work goes so well that through it he can earn a living for himself and his family. This joy of labour is clearly rooted in the pleasure of what we have called the indirect enjoyment of labour. The worker rejoices because in his ability to work and in his skill he sees the basis of his existence and of his social position. He rejoices because he has attained a position better than that of others. He rejoices because he sees in his ability to work the guarantee of future economic success. He is proud because he can do something “good,” that is, something society values and consequently pays for on the labour market. Nothing raises self-respect higher than this feeling, which indeed is often exaggerated to the ridiculous belief that one is indispensable. To the healthy man, however, it gives the strength to console himself for the unalterable fact that he is able to satisfy his wants only by toil and pain. As people say: he makes the best of a bad job.
Of the three sources of that which we may call the “joy of labour” the first, arising from perversion of the true ends of the work, will undoubtedly exist in the socialist community. As under capitalist society it will naturally be restricted to a narrow circle. The other two sources of the joy of labour will presumably dry up completely. If the connection between the yield of labour and the income of the labourer is dissolved, as it must be in socialist society, the individual will always labour under the impression that proportionately
too much work has been piled on him. The over-heated, neurasthenic dislike of work will develop which nowadays we can observe in practically all government offices and public enterprises. In such concerns where the pay depends upon rigid schedules, everyone thinks he is overburdened, that just
he is being given too much to do and things which are too unpleasant—that his achievements are not duly appreciated and rewarded. Out of these feelings grows a sullen hate of work which stifles even the pleasure in completing it.
The socialist community cannot count on the “joy of labour.”
4 The Stimulus to Labour
It is the duty of the citizen of the socialist commonwealth to work for the community according to his powers and his ability: in return he has a claim against the community for a share in the social dividend. He who unjustifiably omits to perform his duty will be recalled to obedience by the usual methods of state coercion. The economic administration would exercise so great a power over individual citizens that it is inconceivable that anyone could permanently withstand it.
It is not sufficient however that citizens should arrive at their tasks punctually and spend the prescribed number of hours at their posts. They must really work while they are there.
In the capitalist system the worker receives the value of the product of his labour. The static or natural wage-rate tends to such a level that the worker receives the value of the product of his labour: i.e. all that is attributable to his work.
*64 The worker himself is therefore concerned that his productivity should be as great as possible. This does not apply to work done for piece rates only. The level of time rates is also dependent upon the marginal productivity of the particular kind of work concerned. The technical form of wage payment which is customary does not alter the level of wages in the long run. The wage rate has always a tendency to return to its static level, and time rates are no exception.
But even so work done for time wages gives us an opportunity of observing how work is carried on when the worker feels that he is not working for himself, because there is no connection between his output and his remuneration. Under time wages the more skilful worker has no inducement to do more than the minimum expected from every worker. Piece wages are an incentive to the maximum activity, time wages to the minimum. Under Capitalism the graduation of time wages for different kinds of work greatly mitigates these social effects of the system of payment by time. The worker has a motive in finding a position where the minimum work required is as great as he can perform, because the wage increases with the rise in the minimum requirements.
Only when we depart from the principle of graduating time wages according to the work required does the time wage begin to affect production adversely. This is particularly noticeable in the case of state and municipal employment. Here, in the last few decades, not only has the minimum required from the individual workers been continually reduced, but every incentive to better work—for example, different treatment of the various grades and rapid promotion of industrious and capable workers to better-paid posts—has been removed. The result of this policy has clearly vindicated the principle that the worker only puts forth his best efforts when he knows that he stands to gain by it.
Under Socialism the usual connection between work performed and its remuneration cannot exist. All attempts to ascertain what the work of the individual has produced and thereby to determine the wage rate, must fail because of the impossibility of calculating the productive contributions of the different factors of production. The socialist community could probably make distribution dependent upon certain external aspects of the work performed. But any such differentiation would be arbitrary. Let us suppose that the minimum requirement is determined for each branch of production. Let us suppose this is done on the basis of Rodbertus’ proposal for a “normal working day.” For each industry there is laid down the time which a worker with average strength and effort can continue to work and the amount of work which an average worker of average skill and industry can perform in this time.
*65 We will completely ignore the technical difficulties in the way of deciding, in any particular concrete example the question whether this minimum has been achieved or not. Nevertheless it is obvious that any such general determination can only be quite arbitrary. The workers of the different industries would never be made to agree on this point. Everyone would maintain that he had been overtasked and would strive for a reduction of the amount set to him. Average quality of the worker, average skill, average strength, average effort, average industry—these are all vague conceptions that cannot be exactly determined.
Now it is evident that the minimum performance calculated for the worker of average quality, skill, and strength will be achieved only by a part—say one-half—of the workers. The others will do less. How can the authorities ascertain whether a performance below the minimum is due to laziness or incapacity? Either the unfettered decision of the administration must be allowed free play, or certain general criteria must be established. Doubtless, as a result, the amount of work performed would be continually reduced.
Under Capitalism everybody who takes an active part in business life is concerned that labour should be paid the whole product. The employer who dismisses a worker who is worth his wage harms himself. The foreman who discharges a good worker and retains a bad one, adversely affects the business results of the department under his charge, and thereby indirectly himself. Here we do not need formal criteria to limit the decisions of those who have to judge the work performed. Under Socialism such criteria would have to be established, because otherwise the powers entrusted to persons in charge could be arbitrarily misused. And so then the worker would have no further interest in the actual performance of work. He would only be concerned to do as much as is prescribed by the formal criteria in order to avoid punishment.
What kind of results will be achieved by workers, who are not directly interested in the product of the work, can be learnt from the experience of a thousand years of slave labour. Officials and employees of state and municipal undertakings provide new examples. An attempt may be made to weaken the argumentative force of the first example by contending that these workers had no interest in the result of their labour because they did not share in the distribution; in the socialist community everyone would realize that he was working for himself and that would spur him on to the highest activity. But this is just the problem. If the worker exerts himself more at the work then he has so much the more labour disutility to overcome. But he will receive only an infinitesimal fraction of the result of his increased effort. The prospect of receiving a two thousand millionth part of the result of his increased effort will scarcely stimulate him to exert his powers any more than he needs.
Socialist writers generally pass over these ticklish questions in silence or with a few inconsequential remarks. They only bring forward a few moralistic phrases and nothing else.
*67 The new man of Socialism will be free from base self-seeking; he will be morally infinitely above the man of the frightful age of private property and from a profound knowledge of the coherency of things and from a noble perception of duty he will devote all his powers to the general welfare.
But closer examination shows that these arguments lead to only two conceivable alternatives: free obedience to the moral law with no compulsion save that of the individual conscience, or enforced service under a system of reward and punishment. Neither will achieve the end. The former supplies no sufficient incentive to persist in overcoming the disutility of labour even though it is publicly extolled on every possible occasion and proclaimed in all schools and churches; the latter can only lead to a formal performance of duty, never to performance with the expenditure of all one’s powers.
The writer who has occupied himself most thoroughly with this problem is John Stuart Mill. All subsequent arguments are derived from his. His ideas are to be encountered everywhere in the literature of the subject and in everyday political discussion; they have even become popular catchwords. Everyone is familiar with them even if he is totally unacquainted with the author.
*68 They have provided for decades one of the main props of the socialist idea, and have contributed more to its popularity than the hate-inspired and frequently contradictory arguments of socialist agitators.
One of the main objections, says Mill, that could be urged against the practicability of the socialist idea, is that each person would be incessantly occupied in evading his fair share of work. But those who urge this objection forget to how great an extent the same difficulty exists under the system under which nine-tenths of the business of society is now conducted. The objection supposes that honest and efficient labour is only to be had from those who are themselves individually to reap the benefit of their own exertions. But under the present system only a small fraction of all labour can do this. Time rates or fixed salaries are the prevailing forms of remuneration. Work is performed by people who have less personal interest in the execution of the task than the members of a socialist community, since, unlike the latter, they are not working for an enterprise in which they are partners. In the majority of cases they are not personally superintended and directed by people whose own interests are bound up with the results of the enterprise. For employees paid by time carry out even the supervisory, managing and technical work. It may be admitted that labour would be more productive in a system in which the whole or a large share of the product of extra exertion belongs to the labourer, but under the present system it is precisely this incentive which is lacking. Even if communistic labour might be less vigorous than that of a peasant proprietor, or a workman labouring on his own account, it would probably be more energetic than that of a labourer for hire, who has no personal interest in the matter at all.
One can easily see the cause of Mill’s mistake. The last representative of the classical school of economists, he did not survive to see the transformation of economics by the subjective theory of value, and he did not know the connection between wage rates and the marginal productivity of labour. He does not perceive that the worker has an interest in doing his utmost because his income depends upon the value of the work which he performs. Without the light of modern economic thought he sees only on the surface and not into the heart of things. Doubtless the individual working for a time wage has no interest in doing more than will keep his job. But if he can do more, if his knowledge, capability and strength permit, he seeks for a post where more is wanted and where he can thus increase his income. It may be that he fails to do this out of laziness, but this is not the fault of the system. The system does all that it can to incite everyone to the utmost diligence, since it ensures to everyone the fruits of his labour. That Socialism cannot do this is the great difference between Socialism and Capitalism.
In the extreme case of obstinate perseverance in not performing a due share of work, the socialist community, Mill thinks, would have reserve powers which society now has at its disposal: it could submit the workers to the rules of a coercive institution. Dismissal, the only remedy at present, is no remedy when no other labourer who can be engaged does any better than his predecessor. The power to dismiss only enables an employer to obtain from his workman the customary amount of labour; but that customary labour may be of any degree of inefficiency.
The fallacy of this argument is plain. Mill does not realize that the wage rate is adjusted according to this customary amount of labour, and that the worker who wishes to earn more must do more. It may be admitted straight away that wherever the time wage prevails the individual worker is obliged to seek elsewhere for a job in which the customary amount of labour is greater because he has no chance of increasing his income by doing more work if he remains where he is. In the circumstances he must change over to piece work, take up another occupation, or even emigrate. In this way millions have emigrated from those European countries, where the customary amount of labour is low, to Western Europe or to the United States, where they have to work more but earn more. The inferior workers remain behind, and are content to work less for less wages.
If this is kept in mind it is also easy to understand the case of supervisory and managerial work performed by employees. Their activities, too, are paid according to the value of the service: they, too, must do as much as they can if they wish to obtain the highest possible income. They can and must be given authority in the name of the entrepreneur to take on and dismiss workers without any fear that they will abuse the power. They perform the social task incumbent upon them of securing that the worker obtains only as much wages as his work is worth, apart from any other consideration whatever.
*69 The system of economic calculation supplies a sufficient test of the efficacy of their work. This distinguishes their work from the kind of control which could be exercised under Socialism. They harm themselves if from revengeful motives they treat a worker worse than he deserves. (Naturally “deserves” is not used here in any ethical sense.) This authority to dismiss workers and fix their wages which the employer possesses and delegates to subordinates, is considered by socialists to be dangerous in the hands of private individuals. But the socialists overlook the fact that the employer’s ability to exercise this power is limited, that he cannot dismiss and mistreat arbitrarily because the result would be harmful to himself. In endeavouring to purchase labour as cheaply as possible the employer is fulfilling one of his most important social tasks.
Mill admits that in the present state of society the neglect by the uneducated classes of labourers for hire of the duties which they engage to perform is flagrant. This, he thinks, can only be attributed to a low level of education. Under Socialism, with universal education, all citizens would undoubtedly fulfill their duty towards society as zealously as the majority of those members of the upper and middle classes who are in receipt of salaries, perform it today. It is clear that Mill’s thought repeatedly involves the same error. He does not see that in this case too, there is a correspondence between payment and performance. Finally he is compelled to admit that, there can be no doubt that remuneration by fixed salaries does not produce the maximum of zeal in any class of functionaries. To this extent, Mill says, objection could reasonably be made against the socialist organization of labour. It is, however, according to Mill, by no means certain that this inferiority will continue in a socialist community as is assumed by those whose imaginations are little used to range beyond the state of things with which they are familiar. It is not impossible that under Socialism the public spirit will be so general that disinterested devotion to the common welfare will take the place of self seeking. Here Mill lapses into the dreams of the Utopians and conceives it possible that public opinion will be powerful enough to incite the individual to increased zeal for labour, that ambition and self-conceit will be effective motives, and so on.
It need only be said that unfortunately we have no reason to assume that human nature will be any different under Socialism from what it is now. And nothing goes to prove that rewards in the shape of distinctions, material gifts, or even the honourable recognition of fellow citizens, will induce the workers to do more than the formal execution of the tasks allotted to them. Nothing can completely replace the motive to overcome the irksomeness of labour which is given by the opportunity to obtain the full value of that labour.
Many socialists of course think that this argument can be refuted by appeal to the labour which in the past has been performed without the incentive of a wage payment. They instance the case of the labours of scientists and artists, of the doctor who exhausts himself at the sickbed, the soldier who dies the death of a hero, the statesman who sacrifices all for his idea. But the artist and the scientist find their satisfaction in the work itself, and in the recognition which they hope to gain at some time, if only from posterity, even though material gains are not forthcoming. The doctor and the professional soldier are in the same position as many other workers whose work is associated with danger. The supply of workers for these professions reflects their lesser attractiveness, and the wage is adapted correspondingly. But if, in spite of the danger, a man enters the profession for sake of the higher remuneration and other advantages and honours, he cannot evade the dangers without the greatest prejudice to himself. The professional soldier who turned tail, the doctor who refused to treat an infectious case, would endanger their future careers to such an extent that they have virtually no choice in the matter. It cannot be denied that there are doctors who are concerned to do their utmost in cases where no one would detect remissness, and that there are professional soldiers who incur danger when no one would reproach them for avoiding it. But in these exceptional cases, as in the case of the staunch statesman who is ready to die for his principles, man raises himself, as is given to few to do, to the highest peak of manhood, to complete union of will and deed. In his exclusive devotion to a single purpose which sets aside all other desires, thoughts and feelings, removes the instinct of self-preservation and makes him indifferent to pain and suffering, such a man forgets the world, and nothing remains except the one thing to which he sacrifices himself and his life. Of such men it used to be said, according to the estimate set on their aims, that the spirit of the Lord moved them, or that they were possessed of the devil—so incomprehensible were their motives to the ordinary run of mankind.
It is certain that mankind would not have risen above the beasts if it had not had such leaders; but it is certain that mankind does not in the main consist of such men. The essential social problem is to make useful members of society out of the general masses.
Socialist writers have for a long time ceased to exercise their ingenuity on this insoluble problem. Kautsky can tell us nothing more than that habit and discipline will provide incentives to work in the future. “Capital has so accustomed the modern labourer to work day in and day out that he cannot endure to be without his work. There are even people who are so accustomed to work that they do not know what to do with their leisure time and are unhappy when they cannot work.” Kautsky does not seem to fear that this habit could be shaken off more easily than other habits such as eating and sleeping but he is not prepared to rely on this incentive alone, and freely admits that “it is the weakest.” He therefore recommends discipline. Naturally not “military discipline” nor “blind obedience to an authority imposed from above,” but “democratic discipline—the free subjection to elected leadership.” But then doubts arise and he endeavours to dispel them with the idea that under Socialism labour will be so attractive “that it will be a pleasure to work,” but finally admits that this will not be sufficient at first, and at last arrives at the conclusion that besides the attractiveness of the work some other incentive must be brought to bear, “that of the wages of labour.”
Thus even Kautsky, after many limitations and considerations, arrives at this result, that the irksomeness of labour will only be overcome if the product of labour, and only the product of his own labour, accrues to the worker, in so far as he is not also an owner or an employer. But this is to deny the feasibility of socialistic organization of labour, since private property in the means of production cannot be abolished without abolishing at the same time the possibility of remunerating the labourer according to the product of his labour.
5 The Productivity of Labour
The old “distributivist” theories were based on the assumption that it only needed equal distribution for everyone to have if not riches, at least a comfortable existence. This seemed so obvious, that hardly any trouble was taken to prove it. At the beginning Socialism took over this assumption in its entirety, and expected that comfort for all would be achieved by an equal distribution of the social income. Only when the criticisms of their opponents drew their attention to the fact that equal distribution of the income obtained by the whole economic society would scarcely improve the conditions of the masses at all, did they set up the proposition that capitalist methods of production restrict the productivity of labour, and that Socialism would remove these limitations and multiply production to ensure for everyone a life in comfortable circumstances. Without troubling about the fact that they had not succeeded in disproving the assertion of the liberal school that productivity under Socialism would sink so low that want and poverty would be general, socialist writers began to promulgate fantastic assertions about the increase in productivity to be expected under Socialism.
Kautsky mentions two ways of achieving increased production by a transition from capitalistic to socialistic methods of production. One is the concentration of all production in the best concerns and the closing down of the less efficient.
*71 That this is a means of increasing production cannot be denied, but it is a means which operates most effectively under the regime of an exchange-economy. Competition ruthlessly eliminates all inferior productive undertakings and concerns. That it does so is a constant source of complaint from those involved, and because of it the weaker undertakings demand State subsidies, special consideration in public contracts, and in general restriction of freedom of competition in every possible way. Kautsky is forced to admit that trusts formed by private enterprise exploit these means to the utmost, so as to obtain higher productivity, and in fact he frankly regards them as the forerunners of the social revolution. It is more than questionable whether the socialist State would feel the same necessity to carry out similar improvements in production. Would it not continue an unprofitable undertaking rather than provoke local prejudice by its discontinuance? The private entrepreneur closes down without much ado undertakings that no longer pay; and in this way he compels the worker to change his locality and sometimes even his occupation. Undoubtedly this involves initial hardships for the people concerned, but it is to the general advantage, since it makes possible a cheaper and better provisioning of the market. Would the Socialist State do likewise? Would it not, on the contrary, be constrained for political reasons to avoid local discontent? On most state railways all reforms of this kind are frustrated by the attempt to avoid the harm to particular districts which would result from the elimination of superfluous branch offices, workshops, and power stations. Even the army administration has encountered parliamentary opposition when for military reasons it has been desired to withdraw a garrison from a particular place.
His second method of achieving increased production, viz., “economies of every description,” on his own admission, Kautsky already finds operating under the trust of today. He particularly mentions economies of materials, transport charges, advertisements and publicity costs.
*72 As far as economies in materials and transport are concerned, experience shows that nothing is operated with less economy and with more waste of labour and material of every kind than public services and undertakings. Private enterprise on the other hand naturally induces the owner to work with the greatest economy in his own interest.
Of course the Socialist state would save all advertising expenses, all the costs of commercial travellers and agents. But it is more than probable that it would employ many more persons in the service of the apparatus of distribution. Wartime experience has taught us how cumbrous and expensive the social apparatus of distribution can be. Were the costs of bread, flour, meat, sugar, and other cards really less than the costs of advertisement? Has the enormous personnel required to run a rationing system been cheaper than the expenditure on commercial travellers and agents?
Socialism would eliminate the small retailers. But in their place it must set up distributive centers which would not be cheaper. Co-operative stores do not employ less hands than the retail stores organized on modern lines, and many of them, because of their large expenses, could not compete with the latter if they were not granted privileges of exemption from taxation.
Speaking generally, it must be said that it is inadmissible to pick out special costs in capitalist society, and then at once to infer from the fact that they would disappear in a socialist society, that the productivity of the latter would surpass that of the former. It is necessary to compare the
total costs and the
total yields of both systems. The fact that the electromobile needs no gasoline is no proof that it is cheaper to run than the gasoline-powered car.
The weakness of Kautsky’s argument is evident, when he asserts that “by the application of these two methods a proletarian regime could raise production to such a high level that it would be possible to increase wages considerably and at the same time reduce the hours of labour.” Here he is making an assertion for which he offers no proof whatever.
And it is no better with the other arguments that are often brought forward to prove the supposed higher productivity of a socialistic society. When for example people argue that under Socialism everyone capable of work will have to work, they are sadly mistaken as to the number of idlers under Capitalism.
So far as can be judged there is no convincing reason for supposing that labour under Socialism would be more productive than under Capitalism. On the contrary it can be asserted that under a system which provides no incentive to the worker to overcome the irksomeness of labour and to strive his utmost, the productivity of labour must inevitably decline. But the problem of productivity cannot be dealt with only within the limits of a study of static conditions. Incomparably more important than the question whether the transition to Socialism would increase productivity is the question whether, given the existence of a socialistic order, it would be able further to increase production and to achieve economic progress. This leads us to the problem of dynamics.
Sozialismus und Staat (Leipzig, 1923), pp. 11 ff. and pp. 20 ff.
Herrn Eugen Dührings Umwälzung der Wissenschaft, pp. 335 ff. Publisher’s Note: In the English edition,
Anti-Dühring: Herrn Eugen Dühring’s Revolution in Science, pp. 429 ff.
Das Kapital, Vol. 1, pp. 5 ff. Publisher’s Note: In English, see Marx, Karl.
Capital: A Critique of Political Economy. 3 volumes. Vol. I. The Process of Capitalist Production. Translated from the 3rd German edition by Samuel Moore and Edward Aveling. Edited by Frederick Engels. Revised and amplified according to the 4th German edition by Ernest Untermann. Chicago: Charles H. Kerr & Co., 1906. (Note: This Volume I also reprinted by Random House as a Modern Library Giant, with same paging as the Kerr edition.) Vol. II. The Process of Circulation of Capital. Vol. III. The Process of Capitalist Production as a Whole. Both Volumes II and III were translated by Ernest Untermann and edited by Frederick Engels. Both were published by the same Charles H. Kerr & Co. of Chicago in 1909. In this footnote, pp. 5 ff. refers to pp. 45 ff. in the English Vol. I.
Kapital und Kapitalzins, Vol. I, 3rd ed. (Innsbruck, 1914), p. 531. Publisher’s Note: Böhm-Bawerk’s three volume work in English is: Böhm-Bawerk, Eugen von.
Capital and Interest. 3 volumes. (South Holland, Illinois: Libertarian Press, 1959.) Volume I.
History and Critique of Interest Theories. Translated by George D. Huncke and Hans F. Sennholz.
Entwicklung der Gesetze des menschlichen Verkehrs, new ed., [Berlin, 1889] p. 231.) Pareto (
Cours d’Économie Politique, Vol. II, Lausanne, 1897, pp. 364 ff.) and Barone (“Il Ministro della Produzione nello Stato Coletivista” in
Giornale degli Economisti, Vol. XXXVII, 1908, pp. 409 ff.) did not penetrate to the core of the problem. Pierson clearly and completely recognized the problem in 1902. See his
Das Wertproblem in der sozialistischen Gesellschaft (German translation by Hayek,
Zeitschrift für Volkswirtschaft, New Series, Vol. IV, 1925, pp. 607 ff.) Publisher’s Note: Both the Barone article (“The Ministry of Production in the Collectivist State,” pp. 245-290) and the Pierson article (“The Problem of Value in the Socialist Society,” pp. 41-85) are included in the Hayek edited
Collectivist Economic Planning.
Archiv für Sozialwissenschaft, Vol. LI, pp. 488-500) and “Neue Schriften zum Problem der sozialistischen Wirtschaftsrechnung” (
Ibid., Vol. LX, pp. 187-90. Publisher’s Note: “Neue Beiträge zum Problem der sozialistischen Wirtschaftsrechnung” appears in part as the Appendix of this book on p. 473. The second essay mentioned by Mises in this footnote was published in 1928 and has not been translated into English. The essay was a review of recent literature on economic calculations under socialism.
Grundriss der Sozialökonomik, Vol. III), Tübingen, 1922, pp. 45-59; Adolf Weber,
Allgemeine Volkswirtschaftslehre, 4th ed., Munich and Leipzig, 1932, Vol. II, pp. 369 ff.; Brutzkus,
Die Lehren des Marxismus im Lichte der russischen Revolution, Berlin, 1928, pp. 21 ff.; C. A. Verrijn Stuart, “Winstbejag versus behoeftenbevrediging” (
Overdruk Economist, Vol, 76 No. 1), pp. 28 ff.; Pohle-Halm,
Kapitalismus und Sozialismus, 4th ed., Berlin, 1931, pp. 237 ff.
Planwirtschaft und Verkehrswirtschaft (Munich and Leipzig, 1931). Here the writer deals with the problem of economic calculation quite naively, at first by asserting that in a socialist society “the individual enterprises…could buy from each other, just as capitalist enterprises buy from each other” (p. 114). A few pages on he explains that “besides this” the socialist state will “have to set up a control accountancy in kind”; the state will be “the only one able to do this because in contrast to Capitalism it controls production itself” (p. 122). Landauer cannot understand that—and why—one is not permitted to add and subtract figures of different denominations. Such a case is, of course, beyond help.
Kapital und Kapitalzins, Vol. II, 3rd ed. (Innsbruck, 1912), p. 21. Publisher’s Note: The page in the English (Sennholz/Huncke) translation of Böhm-Bawerk, referred to here is page 14 in Volume II. Böhm-Bawerk, Eugen von.
Capital and Interest. 3 volumes. South Holland, Illinois: Libertarian Press, 1959. [Information re Vol. I above.] Volume II.
Positive Theory of Capital. Translated by George D. Huncke; Hans F. Sennholz, Consulting Economist. Volume III.
Further Essays on Capital and Interest. Translated by Hans F. Sennholz.
Kapitalismus und Sozialismus, pp. 12 ff.
An Inquiry into the Nature and Causes of the Wealth of Nations, Book II, Chap. V (London 1776, Vol. I, pp. 437 ff.).
Principles of Political Economy and Taxation, Chap. XXVI (
Works, ed. MacCulloch, 2nd ed. [London 1852] pp. 220 ff.).
Nouveaux Principes d’Économie Politique (Paris, 1819), Vol. ii, p. 331 footnote.
Versuch einer Kritik der Grande, die für grosses und kleines Grundeigentum angeführt werden (Petersburg, 1849), pp. 367 ff.; also Cronbach,
Das landwirtschaftliche Betriebsproblem in der deutschen Nationalökonomie bis zur Mitte des 19. Jahrhunderts (Vienna, 1907), pp. 292 ff.
Système des contradictions économiques ou philosophie de la misère (Paris, 1846), Vol. I, p. 270. In Proudhon’s language “Monopoly” means the same as Private Property.
Ibid., Vol. i, p. 236; also Landry,
L’utilité sociale de la propriété individuelle (Paris, 1901), p. 76.
Das Kapital, Vol. I, pp. 613-726. The arguments about “the theory of compensation for the workers displaced by machinery” (
ibid., pp. 403-12) are vain in view of the Marginal Utility Theory. Publisher’s Note: The page references cited here are pp. 738-821 and 478-488, respectively, in the English edition.
Agrarwesen und Agrarpolitik, 2nd ed. (Jena, 1904), p. 53; also Waltz,
Vom Reinertrag in der Landwirtschaft (Stuttgart and Berlin, 1904), pp. 27 ff. Goltz contradicts himself in his arguments, for, to the assertion mentioned above, he adds immediately: “Nevertheless the amount remaining as net profit from the gross product after deducting costs varies considerably. On the average it is greater with extensive than with intensive cultivation.”
op. cit. pp. 19 ff. on Adam Müller, Bülow-Cummerow and Phillipp
v. Arnim, and pp. 30 ff. on Rudolf Meyer and Adolf Wagner.
L’utilité sociale de la propriété individuelle, pp. 109, 127 ff.
L’utilité sociale de la propriété individuelle, pp. 109, 127 ff.
Das Kapital, Vol. I, p. 695.
Vom Reinertrag in der Landwirtschaft, p. 29.
A History of the Theories of Production and Distribution in English Political Economy from 1776 to 1848, 3rd ed. (London, 1917), pp. 183 ff. Also p. 294 of
in Théorie nouvelle d’Économie sociale et politique (Paris, 1842), pp. 613 ff. Pecqueur shows himself superior to Marx, who unhesitatingly indulges in the illusion that “In a higher stage of the communist society … the narrow bourgeois legal horizon could be completely surpassed and society could write on its banners: From each according to his abilities, to each according to his needs!” Marx,
Zur Kritik des sozialdemokratischen Parteiprogramms von Gotha, p. 17.
Staat und Revolution, p. 96. Publisher’s Note: pp. 305-306 in the English edition.
Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 302. Publisher’s Note: p. 389 in the English edition.
Oeuvres complètes, Vol. IV, 2nd ed. (Paris, 1841), pp. 254 ff.
Das Eigentum, Bahrfeld’s translation of that part of
Political Justice which deals with the problem of property (Leipzig, 1904), pp. 73 ff.
Die soziale Revolution, 3rd ed., (Berlin, 1911), II, p. 48.
Literatur und Revolution (Vienna, 1924), p. 179.
Die Frau und der Sozialismus, p. 308. Publisher’s Note: p. 427 in the English edition.) “Everywhere it is the social institution and the
methods of production and distribution connected with these which produce want and misery, and
not the number of people.” (
Ibid., p. 368. Publisher’s Note: p. 492 in the English edition.) “We suffer
not from a lack but from a superfluity of foodstuffs, just as we have a superfluity of industrial products.” (
Ibid., p. 368, p. 429 in the English. Also Engels,
Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 305. Publisher’s Note: pp. 390-391 in the English edition.) “We have …
not too many but rather too few people.” (Bebel,
op. cit., p. 370; p. 494 in the English edition.)
Exposition abrégee du Système Phalanstérien de Fourier, 4th Impression, 3rd ed. (Paris, 1846), pp. 29 ff.
The Theory of Political Economy, 3rd ed. (London, 1888), pp. 169, 172 ff.
Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 327. Publisher’s Note: p. 408 in the English edition.
Zur Kritik des sozialdemokratischen Parteiprogramms von Gotha, p. 27. Publisher’s Note: This passage can be found on p. 7 of the Eastman edited Modern Library edition and p. 10 of the International Publishers edition.
Die Staatsauffassung des Marxismus (Vienna, 1922), p. 287.
Exposition abrégée du Système Phalanstérien de Fourier, p. 33.
Fouriers System der sozialen Reform, translated by Kaatz, Leipzig 1906), pp. 55 ff. Fourier has the distinction of having introduced the fairies into social science. In his future state the children, organized in
“Petites Hordes” (small groups), will perform what the adults do not do. To them will be entrusted, amongst other things, maintenance of the roads.
“C’est à leur amour propre que l’Harmonie sera redevable d’avoir, par toute la terre, des chemins plus somptueux que les allées de nos parterres. Ils seront entretenus d’arbres et d’arbustes, même de fleurs, et arrosés au trottoir. Les Petites Hordes courent frénétiquement au travail, qui est exécuté comme oeuvre pie, acte de charité envers la Phalange, service de Dieu et de l’Unité.” (It is to their own self-esteem that “Harmony” will be indebted for having, everywhere, roads more magnificent than the walks in our flower gardens. They will be maintained with trees, shrubs, even flowers, and they will be irrigated along the footpaths. The small groups run frantically to their work, which will be carried out as a pious duty, an act of love [charity] for the Phalanx [community], a service for God and Unity.) By three o’clock in the morning they are up, cleaning the stables, attending to the cattle and horses, and working in the slaughter houses, where they take care that no animal is ever treated cruelly, killing always in the most humane manner.
“Elles ont la haute police du règne animal.” (They are the eminent police of the animal kingdom.) When their work is done they wash themselves, dress themselves, and appear triumphantly at the breakfast table. See Fourier,
Oeuvres complètes, Vol. V, 2nd Edition (Paris, 1841), pp. 141, 159.
Odes Phalanstériennes, Montreuil-sous-Bois 1900. Béranger and Victor Hugo also venerated Fourier. The first dedicated to him a poem, reprinted in Bebel (
Charles Fourier, Stuttgart 1890, pp. 294 ff.).
Die soziale Revolution, II, pp. 16 ff.) considers that the main task of a proletarian regime is “to make work, which today is a burden, into a pleasure, so that people will enjoy working and the workers go joyfully to work.” He admits that “this is not such a simple matter” and concludes that “it will hardly be possible to make work in factories and mines attractive quickly.” But he cannot naturally bring himself to abandon completely Socialism’s fundamental illusion.
The Instinct of Workmanship (New York, 1922), pp. 31 ff.; De Man,
Zur Psychologie des Sozialismus, pp. 45 ff.; De Man,
Der Kampf um die Arbeitsfreude (Jena, 2927), pp. 249 ff.
Das Schriftwesen in Mittelalter, 3rd ed. (Leipzig, 1896), p. 500. Amongst the many similiar sayings and verses quoted by Wattenbach is the still more drastic:
Libro completo saltat scriptor pede laeto (Once the book is finished, the author dances with joy).
Distribution of Wealth (New York, 1907), pp. 257 ff.
Briefe und sozialpolitische Aufsätze, ed. R. Meyer (Berlin, 1881), pp. 553 ff. We shall not enter here into Rodbertus’ other proposals for the normal working day. They are throughout based on the untenable view Rodbertus has formed about the problem of value.
Die Quintessenz des Sozialismus, 18th ed. (Gotha, 1919), pp. 30 ff.
Die Motive des volkswirtschaftlichen Handelns und der deutsche Marxismus (Tübingen, 1920), p. 80.
Principles, pp. 226 ff. We cannot here examine how far Mill took over these ideas from others. Their wide diffusion they owe to the brilliant exposition in which Mill has presented them in his much read work.
Die soziale Revolution, II, pp. 25 ff.
Die soziale Revolution, II, pp. 21 ff.
Die soziale Revolution, II, p. 26.