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 Migration and Differences in National Conditions
The Problem of Migration Under Socialism
If trade were completely free, production would only take place under the most suitable conditions. Raw materials would be produced in those parts which, taking everything into account, would yield the highest product. Manufacture would be localized where the transport charges, including those necessary to place the commodities in the hands of the ultimate consumer, were at a minimum. As labour settles around the centres of production, the geographical distribution of population would necessarily adapt itself to the natural conditions of production.
Natural conditions, however, are unchanging only in a stationary economic system. The forces of change are continually transforming them. In a changing economy men migrate continually from the places where conditions are less favourable to places where they are more favourable for production. Under Capitalism the stress of competition tends to direct labour and capital to the most suitable places. In a closed socialist community the same result would have to be achieved by administrative decree. In both cases the principle would be the same: men would have to go where the conditions of life were most favourable.
These migrations have the closest bearing upon the condition of the different nations. They cause citizens of one nation, the natural conditions of which are less favourable, to move into the territory of other nations more favourably endowed. If the conditions under which migration takes place are such that the immigrants are assimilated to their new surroundings then the nation from which they came is, to that extent, weakened in numbers. If they are such that the immigrants preserve their nationality in their new home—still more if they assimilate the original inhabitants—then the nation receiving them will find immigration a menace to its national position.
To be a member of a national minority involves multitudinous political disadvantages.
*8 The wider the functions of the political authority the more burdensome are these disadvantages. They are smallest in the state which is founded upon purely liberal principles. They are greatest in the state which is founded upon Socialism. The more they are felt, the greater become the efforts of each nation to protect its members from the fate of belonging to a national minority. To wax in numbers, to be a majority in rich and extensive territories these become highly desirable political aims. But this is nothing but Imperialism.
*9 In the last decades of the nineteenth century, and the first decades of the twentieth, the favourite weapons of Imperialism were commercial weapons—protective tariffs, prohibitions of imports, premiums on exports, freight discriminations, and the like. Less attention was paid to the use of another powerful imperialistic weapon—limitations on emigration and immigration. This is becoming more significant now. The
ultima ratio of imperialism is, however, war. Beside war, all other weapons that it may use appear merely insufficient auxiliaries.
Nothing justifies us in assuming that under Socialism the disadvantages of belonging to a national minority would be diminished. On the contrary. The more the individual depended on the State—the more importance political decisions had for the life of the individual—the more would the national minority feel the political impotence to which it was condemned.
But when we are considering migration under Socialism we need not give special attention to the friction which would arise thereform between nations. For under Socialism there must arise, even between members of one and the same nation, points of difference which make the division of the surface of the earth—which is a matter of indifference to Liberalism—a problem of cardinal importance.
2 The Tendency Towards Decentralization Under Socialism
Under Capitalism, capital and labour move until marginal utilities are everywhere equal. Equilibrium is attained when the marginal productivity of all capital and labour is the same.
Let us leave the movement of capital on one side and consider first the movement of labour. The migrating workers depress the marginal productivity of labour wherever they betake themselves. The fact that wages, their income, sink, directly damages the workers who were employed in centres of migration before the incursion of new workers took place. They regard the “immigrants” as the enemy of high wages. The particular interest would be served by a prohibition of “immigration.” It becomes a cardinal point of the particularist policy of all such particular groups of workers to keep newcomers out.
It has been the task of Liberalism to show who bear the costs of such a policy. The first to be injured are the workers in the less favourably situated centres of production, who, on account of the lower marginal productivity of their labour in those centres, have to content themselves with lower wages. At the same time, the owners of the more favourably situated means of production suffer through not being able to obtain the product which they might obtain could they employ a larger number of workers. But this is not the end of the matter. A system that protects the immediate interests of particular groups limits productivity in general and, in the end, injures everybody—even those whom it began by favouring. How protection finally affects the individual, whether he gains or loses, compared with what he would have got under complete freedom of trade, depends on the degrees of protection to him and to others. Although, under protection, the total produce is lower than it would have been under free trade, so that the average income is necessarily lower, it is still quite possible that certain individuals may do better than they would under free trade. The greater the protection afforded to particular interests, the greater the damage to the community as a whole, and to that extent the smaller the probability that single individuals gain thereby more than they lose.
As soon as it is possible to forward private interests in this way and to obtain special privileges, a struggle for pre-eminence breaks out among those interested. Each tries to get the better of the other. Each tries to get more privileges so as to reap the greater private gain. The idea of perfectly equal protection for all is the fantasy of an ill-thought out theory. For, if all particular interests were equally protected, nobody would reap any advantage: the only result would be that all would feel the disadvantage of the curtailment of productivity equally. Only the hope of obtaining for himself a degree of protection, which will benefit him as compared with the less protected, makes protection attractive to the individual. It is always demanded by those who have the power to acquire and preserve especial privileges for themselves.
In exposing the effects of protection, Liberalism broke the aggressive power of particular interests. It now became obvious that, at best, only a few could gain absolutely by protection and privileges and that the great majority must inevitably lose. This demonstration deprived such systems of the support of the masses. Privilege fell because it lost popularity.
In order to rehabilitate protection, it was necessary to destroy Liberalism. This was attempted by a double attack: an attack from the point of view of nationalism, and an attack from the point of view of those special interests of the middle and working classes which were menaced by Capitalism. The one served to mature the movement towards territorial exclusiveness, the other the growth of special privileges for such employers and workmen as are not equal to the stress of competition. Once Liberalism has been completely vanquished, however, and no longer menaces the protective system, there remains nothing to oppose the extension of particular privilege. It was long thought that territorial protection was limited to national areas, that the re-imposition of internal tariffs, limitation of internal migration, and so on, was no longer conceivable. And this is certainly true so long as any regard at all is preserved for Liberalism. But, during the war, even this was abandoned in Germany and Austria, and there sprang up overnight all kinds of regional barriers. In order to secure a lower cost of living for their own population, the districts producing a surplus of agricultural produce cut themselves off from the districts that could support their population only by importing foodstuffs. The cities and industrial areas limited immigration in order to counteract the rise in the price of foodstuffs and rents. Regional particularism broke up that unity of economic area on which national neo-mercantilism had based all its plans.
Even granting that Socialism is at all practicable, the development of a unitary world socialism would encounter grave difficulties. It is quite possible that the workers in particular districts, or particular concerns, or particular factories, would take the view that the instruments of production which happened to lie within their area were their own property, and that no outsider was entitled to profit by them. In such a case World Socialism would split up into numerous self-independent socialist communities—if, indeed, it did not become completely syndicalized. For Syndicalism is nothing less than the principle of decentralization consistently applied.
Geschichte der sozialen Frage und des Sozialismus in der antiken Welt, Vol. I, pp. 110 ff.; 123 ff.
Der moderne Sozialismus in seiner geschichtlichen Entwicklung (Dresden, 1908), p. 136.
Théorie nouvelle d’Économie sociale et politique, p. 699.
Das Kommunistische Manifest, p. 26. Publisher’s Note: p. 325 of the Eastman anthology edition.
Fürst Bismarcks Reden, edited by Stein, Vol. VII, p. 34).
Die Nationalitätenfrage und die Sozialdemokratie (Vienna, 2907), p. 519.
Nation, Staat und Wirtschaft (Vienna, 1919), pp. 45 ff., and
Liberalismus (Jena, 1927), pp. 93 ff. Publisher’s Note:
Nation, Staat und Wirtschaft is not in English.
Liberalismus is in English as
The Free and Prosperous Commonwealth: An Exposition of the Ideas of Classical Liberalism. Translated by Ralph Raico. Edited by Arthur Goddard (Princeton, N.J.: D. Van Nostrand, 1962). This book was republished in 1978 under the title
Liberalism: A Socio-Economic Exposition. Foreword to the Second Edition by Louis M. Spadaro. (Kansas City: Sheed Andrews and McMeel, Inc., 1978). The pages in the German work referred to here (93 ff.) are pp. 105 ff. in both English editions.
Liberalismus, p. 107 ff. Publisher’s Note: pp. 121 ff. in both the 1962 and 1978 English editions of this work.
litterateurs of the “Tat” circle (Fried,
Das Ende des Kapitalismus, Jena 1931). Autarky would probably depress the standard of life of the German people incomparably more than could the Reparations burden multiplied a hundred-fold.
Die Akkumulation des Kapitals (Berlin, 1913), pp. 363 ff. reproaches the English and French that it was no heroic act to defeat with European weapons the Chinese, who were provided only with out of date arms. Ought the French and English also to have taken the field only with ancient guns and spears?
Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 299. Publisher’s Note: p. 385 in the English edition.
Das Erfurter Programm, 12th ed. (Stuttgart, 1914), p. 129.
Herrn Eugen Dührings Umwälzung der Wissenschaft, pp. 298 ff. Publisher’s Note: p. 385n in the English edition.
Das Erfurter Programm, p. 129.
Das Erfurter Programm, p. 130
Vorläufiger Bericht vom 15 Februar 1919 2nd ed. (Berlin, 1920), pp. 32 ff.
Vorläufiger Bericht vom 15 Februar 1919, 2nd ed. (Berlin, 1920), p. 37. 216 245
Ideen zu einer vollständigen landwirtschaftlichen Buchhaltung, 1805, p. vi (quoted by Waltz,
Vom Reinertrag in der Landwirtschaft, p. 20).
Ideen zu einer vollständigen landwirtschaftlichen Buchhaltung, 1805, p. 2 (quoted in Waltz,
op. cit., p. 21). See also Lenz,
Agrarlehre und Agrarpolitik der deutschen Romantik, Berlin, 1912, p. 84. See similar remarks of Prince Alois Liechtenstein, a leader of the Austrian Christian Socialists, quoted in Nitti,
Le Socialisme Catholique (Paris, 1894), pp. 370 ff.
Die Soziale Revolution, II, p. 33.
Die sozialistischen Systeme, pp. 62 ff.
Les Origines du Socialisme d’Etat en Allemagne, 2nd ed. (Paris, 1911), p. 2, specially stresses this character of state Socialism.
Geschichte der sozialen Frage und des Sozialismus in der antiken welt, Vol.I, pp. 44 ff.
(Jahrbücher für Nationalökonomie und Statistik, Vol. XXVIII, 1904, p. 445).
De bello Gallico, iv, 1.
Die Prinzipien der Soziologie, trans. Vetter, Vol. II (Stuttgart, 1899), pp. 720 ff. Publisher’s Note: In English,
The Principles of Sociology (New York: Appleton, 1897), Vol. II, Part V, pp. 610 ff.
Nation, Staat und Wirtschaft, pp. 115 ff.; 143 ff.
Essai sur les Institutions Politiques, Religieuses, Économiques et Sociales de l’Empire des Incas (Paris, 1874), pp. 64, 90 ff. attributes Pizarro’s easy conquest of Peru to the fact that communism had unnerved the people.
(Jahrbücher für Nationalökonomie und Statistik, Vol. XXVIII, 1904), p. 445.
Die Aufhebung des Befähigungsnachweises in Österreich (Leipzig, 1894), especially pp. 124 ff.
Nation, Staat und Wirtschaft, pp. 140 ff.
Chaos and Order in Industry (London, 1920), p. 58 ff.
Self-Government in Industry, 5th ed. (London, 1920), pp. 235 ff.; also Schuster, “Zum englischen Gildensozialismus”
(Jahrbücher für Nationalökonomie und Statistik, Vol. CXV), pp. 487 ff.
Self-Government in Industry, p. 255.
The Meaning of Industrial Freedom (London, 1918), p. 30.
The Acquisitive Society (London, 1921), p. 122, considers that the advantage of the Guild System for the worker is that it puts an end to “the odious and degrading system under which he is thrown aside like unused material whenever his services do not happen to be required.” But just this reveals the gravest defect of the system recommended. If one needs no more building because relatively sufficient buildings exist, yet must build so as to occupy the workers in the building trades who are unwilling to change over to other branches of production that suffer from a comparative scarcity of labour, the position is uneconomic and wasteful. The very fact that Capitalism forces men to change their occupations is its advantage from the standpoint of the General Best, even though it may directly disadvantage the special interests of small groups.
Lehrbuch der Nationalökonomie, Vol. I, 2nd ed. (Freiburg, 1914), pp. 392-438. In France there is a conflict between catholic and freethinking solidarists—about the relation of the Church to the State and to society, rather than about the real principles of social theory and policy—which makes Church circles suspicious of the term “solidarism.” See Haussonville, “Assistance publique et bienfaisance privée” (
Revue des Deux Mondes, Vol. CLXII, 1900, pp. 773-808); Bouglé,
Le Solidarisme (Paris, 2907), pp. 8 ff.
Solidarité, 6th ed. (Paris, 1907), pp. 115 ff.; Waha,
Die Nationalökonomie in Frankreich (Stuttgart, 1910), pp. 432 ff.
op. cit., Vol. I, p. 420.
Arbeiterfreund, 5 Year, 1867, pp. 129-154). A survey of the German literature on profit sharing is given in the memorandum of the German “Statistisches Reichsamt”:
Untersuchungen and Vorschläge zur Beteiligung der Arbeiter an dem Erträge wirtschaftlicher Unternehmungen, published as a supplement to the
Reichs-Arbeitsblatt of March 3, 1920.
Schriften des Vereins für Sozialpolitik, Vol. CLIX, pp. 132 ff.).
Nation, Staat und Wirtschaft, p. 164.
Kritik des Interventionismus, pp. 1 ff. Publisher’s Note: In English,
A Critique of Interventionism, trans. Hans F. Sennholz (New York: Arlington House, 1977), pp. 15 ff.