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 Selection of Personnel and Choice of Occupation
The Position of the Individual Under Socialism
The Socialist Community is a great authoritarian association in which orders are issued and obeyed. This is what is implied by the words “planned economy” and the “abolition of the anarchy of production.” The inner structure of a socialist community is best understood if we compare it with the inner structure of an army. Many socialists indeed prefer to speak of the “army of labour.” As in an army, so under Socialism, everything depends on the orders of the supreme authority. Everyone has a place to which he is appointed. Everyone has to remain in his place until he is moved to another. It follows that men become pawns of official action. They rise only when they are promoted. They sink only when they are degraded. It would be waste of time to describe such conditions. They are the common knowledge of every citizen of a bureaucratic state.
It is obvious that, in a state of this sort, all appointments should be based upon personal capacity. Each position should be held by the individual best fitted to hold it—always provided that he is not required for more important work elsewhere. Such is the fundamental principle of all systematically ordered authoritarian organizations—of the Chinese Mandarinate equally with modern bureaucracies.
In giving effect to this principle the first problem that arises is the appointment of the supreme authority. There are two ways to the solution of this problem, the oligarchical-monarchical and the democratic, but there can be only one solution—the charismatic solution. The supreme rulers (or ruler) are chosen in virtue of the grace with which they are endowed by divine dispensation. They have superhuman powers and capacities lifting them above the other mortals. To resist them is not only to resist the powers that be; it is to defy the commandments of the Deity. Such is the basis of theocracies—of clerical aristocracies of realms of “the Lord’s anointed.” But it is equally the basis of the Bolshevist dictatorship in Russia. Summoned by history to the performance of their sublime task, the Bolsheviks pose as the representatives of humanity, as the tools of necessity, as the consummators of the great scheme of things. Resistance to them is the greatest of all crimes. But against their adversaries they may resort to any expedients. It is the old aristocratic-theocratic idea in a new form.
Democracy is the other method of solving the problem. Democracy places everything in the hands of the majority. At its head is a ruler, or rulers, chosen by a majority decision. But the basis of this is as charismatic as any other. Only in this case grace is regarded as being granted in equal proportions to all and sundry. Everyone is endowed with it. The voice of the people is the voice of God. This is to be seen especially clearly in Tommaso Campanella’s
City of the Sun. The Regent chosen by the national assembly is also priest and his name is “Hoh,” that means “metaphysics.”
*74 In authoritarian ideology, democracy is valued not for its social functions, but only as a means for the ascertainment of the absolute.
According to charismatic theory, in appointing officials the supreme authority transmits to them the grace it possesses itself. An official appointment raises ordinary mortals above the level of the masses. They count for more than others. When on duty their status is especially enhanced. No doubt of their capacity, or of their fitness for office, is permissible. Office makes the man.
Apart from their polemical value, all these theories are purely formal. They do not tell us anything about how such appointments actually work. They are indifferent to origins. They do not inquire whether the dynasties and the aristocracies concerned attained to power by the chance of war. They give no idea of the mechanism of the party system which brings the leaders of a democracy to the helm. They tell nothing of the actual machinery for selecting officials.
But since only an omniscient ruler could do without them, special arrangements for the appointment of the officials must be made. Since the supreme authority cannot do everything, appointment to lesser positions at least must be left to subordinate authorities. To prevent this power from degenerating into mere license, it must be hedged about by regulations. In this way selection comes to be based not on genuine capacity but on compliance with certain forms, the passing of certain examinations, attendance at certain schools, having spent a certain number of years in a subordinate position, and so on. Of the shortcomings of such methods there can be only one opinion. The successful conduct of business demands qualities quite other than those necessary for passing examinations—even if the examinations deal with subjects bearing on the work of the position in question. A man who has spent a certain time in a subordinate capacity is far from being, for that reason, fitted for a higher post. It is not true that one learns to command by first learning to obey. Age is no substitute for personal capacity. In short, the system is deficient. Its only justification is that nothing better is known to put in its place.
Attempts have recently been made to invoke the aid of experimental psychology and physiology, and many promise therefrom results of the highest importance to Socialism. There can be no doubt that under Socialism, something corresponding to medical examination for military service would have to be employed on a larger scale and with more refined methods. Those who feigned bodily deformities to escape difficult and uncongenial work would have to be examined, as would those who attempted work for which they were not properly developed. But the warmest advocates of such methods could scarcely pretend that they could do more than impose a very loose curb upon the grossest abuses of officialdom. For all those kinds of work demanding something more than mere muscular strength and a good development of particular senses they are not applicable at all.
2 Art and Literature, Science and Journalism
Socialist society is a society of officials. The way of living prevailing in it, and the mode of thinking of its members, are determined by this fact. People who are always expecting promotion, people who had always a “chief” on whom they depend, people who, because they receive a fixed salary, never understand the connection between production and their own consumption—the last ten years has witnessed the rise of this type everywhere in Europe. It is in Germany, however, where it is especially at home. The whole psychology of our time derives from it.
Socialism knows no freedom of choice in occupation. Everyone has to do what he is told to do and to go where he is sent. Anything else is unthinkable. We shall discuss later and in another connection how this will affect the productivity of labour. Here we have to discuss the position of art and science, literature and the press under such conditions.
Under Bolshevism in Russia and Hungary, the artists, scientists and writers, who were recognized as such by the selectors appointed for this purpose, were exempted from the general obligation to work and given a definite salary. All such as were not recognized remained subject to the general obligation to work and received no support for other activity. The press was nationalized.
This is the simplest solution of the problem, and one which harmonizes completely with the general structure of socialist society. Officialdom is extended to the sphere of the spirit. Those who do not please the holders of power are not allowed to paint or to sculpt or to conduct an orchestra. Their works are not printed or performed. And if the decision does not depend directly upon the free judgment of the economic administration but is referred to the advice of an expert council the case is not materially altered. On the contrary, expert councils, which are inevitably composed of the old and the established, must be admitted to be even less competent than laymen to assist the rise of young talent with different views and perhaps greater mastery than their own. Even if the choice were referred to the whole nation the rise of independent spirits setting themselves against traditional technique and accepted opinions would not be facilitated. Such methods can only foster a race of epigones.
Icaria, only such books which please the republic are to be printed (
les ouvrages préférés [the preferred or favored works]). Writings of pre-socialistic times are to be examined by the Republic. Those which are partially useful are to be revised. Those which are regarded as dangerous or useless are to be burnt. The objection, that this would be to do what Omar did by burning the Alexandrian Library, Cabet held to be quite untenable. For, said he,
“nous faisons en faveur de l’humanité ce que ces oppresseurs faisaient contre elle. Nous avons fait du feu pour brûler les méchants livres, tandis que des brigands ou des fanatiques allumaient les bûchers pour brûler d’innocents hérétiques.” (“We do on behalf of society what oppressors do against it. We make fires to burn the evil books, while the brigands or fanatics light fires to burn innocent heretics at the stake.”)
*76 From a point of view such as this, solution of the problem of toleration is impossible. Mere opportunists excepted, everyone is convinced of the rightness of his opinions. But, if such a conviction by itself were a justification for intolerance, then everyone would have a right to coerce and persecute everyone else of another way of thinking.
*77 In these circumstances, the demand for toleration can only be a prerogative of the weak. With power comes the exercise of intolerance. In such a case there must always be war and enmity between men. Peaceful co-operation is out of the question. It is because it desires peace that Liberalism demands toleration for all opinions.
Under Capitalism the artist and the scientist have many alternatives open to them. If they are rich they can follow their own inclinations. They can seek out rich patrons. They can work as public officials. They can attempt to live on the sale of their creative work. Each of these alternatives has its dangers, in particular the two latter. It may well be that he who gives new values to mankind, or who is capable of so giving, suffers want and poverty. But there is no way to prevent this effectively. The creative spirit innovates necessarily. It must press forward. It must destroy the old and set the new in its place. It could not conceivably be relieved of this burden. If it were it would cease to be a pioneer. Progress cannot be organized.
*78 It is not difficult to ensure that the genius who has completed his work shall be crowned with laurel; that his mortal remains shall be laid in a grave of honour and monuments erected to his memory. But it is impossible to smooth the way that he must tread if he is to fulfil his destiny. Society can do nothing to aid progress. If it does not load the individual with quite unbreakable chains, if it does not surround the prison in which it encloses him with quite unsurmountable walls, it has done all that can be expected of it. Genius will soon find a way to win its own freedom.
The nationalization of intellectual life, which must be attempted under Socialism, must make all intellectual progress impossible. It is possible to deceive oneself about this because, in Russia, new kinds of art have become the fashion. But the authors of these innovations were already working, when the Soviet came into power. They sided with it because, not having been recognized hitherto, they entertained hopes of recognition from the new regime. The great question, however, is whether later innovators will be able to oust them from the position they have now gained.
In Bebel’s Utopia only physical labour is recognized by society. Art and science are relegated to leisure hours. In this way, thinks Bebel, the society of the future “will possess scientists and artists of all kinds in countless numbers.” These, according to their several inclinations, will pursue their studies and their arts in their spare time.
*79 Thus Bebel allows himself to be swayed by the manual labourer’s philistine resentment against all those who are not hewers of wood and drawers of water. All mental work he regards as mere dilettantism, as can be seen from the fact that he groups it with “social intercourse.”
*80 But nevertheless we must inquire whether under these conditions the mind would be able to create that freedom without which it cannot exist.
Obviously all artistic and scientific work which demands time, travel, technical education and great material expenditure, would be quite out of the question. But we will assume that it is possible to devote oneself to writing or to music, after the day’s work is done. We will assume further that such activities will not be hindered by malicious intervention on the part of the economic administration—by transferring unpopular authors to remote localities, for instance—so that with the aid perhaps of devoted friends, an author or a composer is able to save enough to pay the fee demanded by the state printing works for the publication of a small edition. In this way he may even succeed in bringing out a little independent periodical—perhaps even in procuring a theatrical production.
*81 But all this would have to overcome the overwhelming competition of the officially supported arts, and the economic administration could at any time suppress it. For we must not forget that as one could not ascertain the cost of printing, the economic administration would be free to decide the business conditions under which publication could take place. No censor, no emperor, no pope, has ever possessed the power to suppress intellectual freedom which would be possessed by a socialist community.
3 Personal Liberty
It is customary to describe the position of the individual under Socialism by saying that he would be unfree, that the socialist community would be a “prison state.” This expression contains a judgment of value which, as such, lies outside the sphere of scientific thought. Science cannot decide whether freedom is a good or an evil or a mere matter of indifference. It can only inquire wherein freedom consists and where freedom resides.
Freedom is a sociological concept. It is meaningless to apply it to conditions outside society: as can be well seen from the confusions prevailing everywhere in the celebrated free-will controversy. The life of man depends upon natural conditions that he has no power to alter. He lives and dies under these conditions and, because they are not subject to his will, he must subordinate himself to them. Everything he does is subject to them. If he throws a stone it follows a course conditioned by nature. If he eats and drinks the processes within his body are similarly determined. We attempt to exhibit this dependence of the process of events upon definite and permanent functional relationship, by the idea of the conformity of all natural occurrences to unerring and unchangeable laws. These laws dominate man’s life; he is completely circumscribed by them. His will and his actions are only conceivable as taking place within their limits. Against nature and within nature there is no freedom.
Social life, too, is a part of nature and, within it, unalterable laws of nature hold their sway. Action, and the results of action, are conditioned by these laws. If, with the origin of action in will, and its working out in societies, we associate an idea of freedom, this is not because we conceive that such action takes place independently of natural laws: the meaning of this concept of freedom is quite different.
It is not here a question of the problem of internal freedom. It is the problem of external freedom with which we are concerned. The former is a problem of the origin of willing, the latter of the working out of action. Every man is dependent upon the attitude of his fellow men. He is affected by their actions in a multitude of ways. If he has to suffer them to treat him as if he had no will of his own, if he cannot prevent them from riding roughshod over his wishes, he must feel a one-sided dependence upon them and will say that he is unfree. If he is weaker, he must accommodate himself to coercion by them.
Under the social relations that arise from co-operation in common work this one-sided dependence becomes reciprocal. In so far as each individual acts as a member of society he is obliged to adapt himself to the will of his fellows. In this way no one depends more upon others than others depend upon him. This is what we understand by external freedom. It is a disposition of individuals within the framework of social necessity involving, on the one side, limitation of the freedom of the individual in relation to others, and, on the other, limitation of the freedom of others in relation to him.
An example should make this clear. Under Capitalism the employer appears to have great power over the employee. Whether he engages a man, how he employs him, what wages he gives him, whether he dismisses him—all depend upon his decision. But this freedom on his part and the corresponding unfreedom of the other are only apparent. The conduct of the employer to the employee is part of a social process. If he does not deal with the employee in a manner appropriate to the social valuation of the employee’s service, then there arise consequences which he himself has to bear. He can, indeed, deal badly with the employee, but he himself must pay the costs of his arbitrary behaviour. To this extent therefore the employee is dependent upon him. But this dependence is not greater than the dependence of each one of us upon our neighbour. For even in a state where the laws are enforced everybody of course who is willing to bear the consequences of his action, is free to break our windows or do us bodily harm.
Strictly speaking, of course, on this view there can be no social action which is entirely arbitrary. Even the oriental despot, who to all appearances is free to do what he likes with the life of the enemy he captures, must consider the results of his action. But there are differences of degree in the way in which the costs of arbitrary action are related to the satisfactions arising therefrom. No laws can afford us protection against the assaults of men whose enmity is such that they are willing to bear all the consequences of their action. But if the laws are sufficiently severe to ensure that, as a general rule, our peace is not disturbed, then we feel ourselves independent of the evil intentions of our fellows, at any rate to a certain extent. The historical relaxation of the penal laws is to be attributed, not to an amelioration of morals, or to decadence on the part of legislators, but simply to the fact that so far as men have learnt to check resentment by considering the consequences of action it has been possible to abate the severity of punishments without weakening their deterrent power. To-day the menace of a short term of imprisonment is more effective protection against crimes against the person than the gallows were at one time.
There is no place for the arbitrary, where exact money reckoning enables us completely to calculate action. If we allow ourselves to be carried away by the current laments over the stony-heartedness of an age which reckons everything in terms of shillings and pence, we overlook that it is precisely this linking up of action with considerations of money profit which is society’s most effective means of limiting arbitrary action. It is precisely arrangements of this kind which make the consumer, on the one hand, the employer, the capitalist, the landowner and the worker on the other—in short, all concerned in producing for demands other than their own—dependent upon social cooperation. Only complete failure to understand this reciprocity of relationship can lead anyone to ask whether the debtor is dependent on the creditor, or the creditor on the debtor. In fact, each is dependent on the other, and the relationship between buyer and seller, employer and employee, is of the same nature. It is customary to complain that, nowadays, personal considerations are banished from business life and that money. rules everything. But what really is here complained of is simply that, in that department of activity which we call purely economic, whims and favours are banished and only those considerations are valid which social co-operation demands.
This, then, is freedom in the external life of man—that he is independent of the arbitrary power of his fellows. Such freedom is no natural right. It did not exist under primitive conditions. It arose in the process of social development and its final completion is the work of mature Capitalism. The man of pre-capitalistic days was subject to a “gracious lord” whose favour he had to acquire. Capitalism recognizes no such relation. It no longer divides society into despotic rulers and rightless serfs. All relations are material and impersonal, calculable and capable of substitution. With capitalistic money calculations freedom descends from the sphere of dreams to reality.
When men have gained freedom in purely economic relationships they begin to desire it elsewhere. Hand in hand with the development of Capitalism, therefore, go attempts to expel from the State all arbitrariness and all personal dependence. To obtain legal recognition of the subjective rights of citizens, to limit the arbitrary action of officials to the narrowest possible field—this is the aim and object of the liberal movement. It demands not grace but rights. And it recognizes from the outset that there is no other way of realizing this demand than by the most rigid suppressing of the powers of the State over the individual. Freedom, in its view, is freedom from the State.
For the State—the coercive apparatus worked by the persons forming the government—is scathless to freedom only when its actions have to conform to certain clear, unequivocal, universal norms, or when they obey the principles governing all work for profit. The former is the case when it functions judicially; for the judge is bound by laws allowing small play for personal opinion. The latter is the case when under Capitalism the State functions as an entrepreneur working under the same conditions and subject to the same principles as other entrepreneurs working for a profit. What it does beyond this can neither be determined by law or in any other way limited sufficiently to guard against arbitrary action. The individual then has no defence against the decision of officials. He cannot calculate what consequences his actions will have because he cannot tell how they will be regarded by those on whom he depends. This is the negation of freedom.
It is customary to regard the problem of external freedom as a problem of the greater or less dependence of the individual upon society.
*82 But political freedom is not the whole of freedom. In order that a man may be free it is not sufficient that he may do anything unharmful to others without hindrance from the government or from the repressive power of custom. He must also be in the position to act without fearing unforeseen social consequences. Only Capitalism guarantees this freedom by explicitly referring all reciprocal relations to the cold impersonal principle of exchange
du ut des (I give as you give, or colloquially, give and take).
Socialists usually attempt to refute the argument for freedom by contending that under Capitalism only the possessor is free. The proletarian is unfree because he must work for his livelihood. It is impossible to imagine a cruder conception of freedom. That man must work, because his desire to consume is greater than that of the beasts of the field, is part of the nature of things. That the possessor is able to live without conforming to this rule is a gain derived from the existence of society which injures no one—not even the possessionless. And the possessionless themselves benefit from the existence of society, in that co-operation makes labour more productive. Socialism could only lessen the dependence of the individual upon natural conditions by increasing this productivity. If it cannot do that, if on the contrary it diminishes productivity, then it will diminish freedom.
Geschichte des Sozialismus und Kommunismus (Leipzig, 1899), pp. 185 ff.
Voyage en Icarie (Paris, 1848), p. 127.
Briefe, Sendschreiben und Bedenken, ed. de Wette, Part IV (Berlin, 1827), pp. 93 ff.; Paulus,
Protestantismus und Toleranz im 16. Jahrhundert (Freiburg, 1911), p. 23.
Begabung und Studium (Leipzig, 1917), p. 8. See also Mill,
On Liberty, 3rd ed. (London, 1864), pp. 114 ff.
Die Frau und der Sozialismus, p. 284. Publisher’s Note: p. 395 in the English edition. See Index to Works Cited for complete citation.
op. cit., p. 342). Publisher’s Note: pp. 466-467 in English edition.
Ein Rückblick, translated by Hoops in Meyers Volksbücher, pp. 230 ff.) Publisher’s Note: In English,
Looking Backward: If Socialism Comes, 2000-1887 (Boston, 1889); chapter 15; and (W. Foulsham, London), pp. 92-99.
On Liberty, p. 7.
Essentials of Economic Theory (New York, 1907), pp. 131 ff.
Die Frau und der Sozialismus, p. 340. Bebel quotes therewith the well-known verse of Heine. Publisher’s Note: p. 463 in the English edition.
Die Stellung der Sozialisten zur Malthusschen Bevölkerungslehre (Berlin, 1886), pp. 33 ff.; 52 ff.; 85 ff.
An Essay on the Principle of Population, 5th ed. (London, 1817), Vol. II, pp. 245 ff.
Die Sozialen Gesetze, German translation by Hammer (Leipzig, 1908), p. 99. Also the numerous examples in Roscher,
Ansichten der Volkswirtschaft vom geschichtlichen Standpunkt, 3rd ed. (Leipzig, 1878), Vol. I, pp. 112 ff. Publisher’s Note: The Tarde book in English is
Social Laws. Translated by Howard C. Warren, with preface by James Mark Baldwin (New York: Macmillan, 1899).
Technischer Fortschritt und Freiheit der Wirtschaft (Bonn and Leipzig, 1922), pp. 47 ff.
Volkswirtschaftliche Schriften (Berlin, 1873), Vol. II, pp. 3 ff., and by Petritsch,
Zur Lehre von der Überwälzung der Steuern mir besonderer Beziehung auf den Börsenverkehr (Graz, 1903), pp. 28 ff. Of Adolf Wagner, Petritsch says that “although he likes to call economic life an ‘organism’ and wants to have it considered as such, and although he always stresses the interest of the community against that of individuals, yet in concrete economic problems he does not get beyond the individuals and their more or less moral aims, and wilfully overlooks the organic connection between these and other economic phenomena. Thus he ends where, strictly speaking, should be the starting point, not the end, of every economic investigation” p. 59). The same is true of all writers who have thundered against speculation.
Der Strukturwandel der Aktiengesellschaft im Lichte der Wirtschaftsenquete (Jena, 1930), pp. 1 ff.
Staat und Revolution, p. 94. Publisher’s Note: p. 304 in the English edition.
Die nächsten Aufgaben der Sowjetmacht (Berlin, 1918), pp. 16 ff.