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 The Categorical Imperative as a Foundation for Socialism
Ethical Socialism, Especially That of the New Criticism
Engels called the German Labour Movement the heir to the German classical philosophy.
*41 It would be more correct to say that German (not only Marxian) Socialism represents the decadence of the school of idealist philosophy. Socialism owes the dominion it won over the German mind to the idea of society as conceived by the great German thinkers. Out of Kant’s mysticism of duty and Hegel’s deification of the State it is easy to trace the development of socialist thought; Fichte is already a socialist.
In recent decades the revival of Kantian criticism, that much praised achievement of German philosophy, has benefited Socialism also. The Neo-Kantians, especially Friedrich Albert Lange and Hermann Cohen, have declared themselves socialists. Simultaneously Marxians have tried to reconcile Marxism with the New Criticism. Ever since the philosophical foundations of Marxism have shown signs of cracking, attempts to find in critical philosophy support for socialist ideas have multiplied.
The weakest part of Kant’s system is his ethics. Although they are vitalized by his mighty intellect, the grandeur of individual concepts does not blind us to the fact that his starting-point is unfortunately chosen and his fundamental conception a mistaken one. His desperate attempt to uproot Eudaemonism has failed. In ethics, Bentham, Mill, and Feuerbach triumph over Kant. The social philosophy of his contemporaries, Ferguson and Adam Smith, left him untouched. Economics remained foreign to him. All his perception of social problems suffers from these deficiencies.
In this respect, Neo-Kantians have made no better progress than their master. They, too, lack insight into the fundamental social law of the division of labour. They only see that the distribution of income does not correspond to their ideal, that the largest incomes do not go to those whom they consider the most deserving, but to a class they despise. They see people poor and in want, but do not try to discover whether this is due to the institution of private property or to attempts to restrict it. And they promptly condemn the institution of private ownership itself, for which they—living far away from the troubles of business—never had any sympathies. In social cognition they remain bound to the external and symptomatic. They tackle all other problems without a qualm, but here timidity restrains them. In their embarrassment, they betray their underlying bias. In social philosophy it is often difficult for thinkers who are otherwise quite open-minded to avoid all resentment. Into their thoughts obtrudes the recollection of those more prosperous than themselves; they make comparisons between their own value and the lack of it in others on the one hand, and their own poverty and the wealth of others on the other. In the end anger and envy, rather than reason, guide their pen.
This alone explains why such lucid thinkers as the Neo-Kantians have not yet clearly thought out the only salient problems in social philosophy. Not even the rudiments of a comprehensive social philosophy are to be found in their works. They make numerous unfounded criticisms of certain social conditions, but omit to discuss the most important systems of sociology. They judge, without having first made themselves familiar with the results of economic science.
The starting-point of their Socialism is generally the sentence: “Act in such a way that you use your being, equally with the being of anyone else, always as a purpose, never merely as a means.” In these words, says Cohen, “the most profound and powerful meaning of the categoric imperative is expressed;
they contain the moral programme of the modern age and of all future world history.”
*42 And from that to Socialism, he seems to infer, is no great distance. “The idea of the purpose preference of humanity becomes transformed into the idea of Socialism by the definition of every individual as ultimate purpose, an end in himself.”
It is evident that this ethical argument for Socialism stands or falls by the assertion that in the economic order based on private ownership in the means of production all men, or some men, are means and not purpose. Cohen considers this to be completely proved. He believes that in such a social order two classes of men exist, owners and non-owners, of whom only the first lead an existence worthy of a human being, while the second merely serve. It is easy to see where this notion comes from. It rests on popular ideas on the relations of rich and poor, and is supported by the Marxian social philosophy, for which Cohen professes great sympathy without, however, making his views about it clear.
*44 Cohen completely ignores the liberal social theory. He takes it for granted that this is untenable, and thinks that it would be a waste of time to criticize it. Yet only by refuting the liberal views of the nature of society and the function of private property could he justify the assertion that in a society based on private ownership in the means of production men serve as means, not as ends. For liberal social theory proves that each single man sees in all others, first of all, only means to the realization of his purposes, while he himself is to all others a means to the realization of their purposes; that finally, by this reciprocal action, in which each is simultaneously means and end, the highest aim of social life is attained—the achievement of a better existence for everyone. As society is only possible if everyone, while living his own life, at the same time helps others to live, if every individual is simultaneously means and end; if each individual’s well-being is simultaneously the condition necessary to the well-being of the others, it is evident that the contrast between I and thou, means and end, automatically is overcome. This, after all, is just what the simile of the biological organism is supposed to make us perceive. In the organic structure no parts are to be regarded only as means and none only as ends. According to Kant the organism is a being “in which everything is end and reciprocally also means.”
*45 Now Kant was thoroughly familiar with the nature of the organic, but he did not see—and in this he lagged far behind the great sociologists who were his contemporaries—that human society is formed according to the same principle.
The teleological view, which differentiates means and end, is permissible only in so far as we make the will and action of individual men or individual human associations the subject of investigation. It ceases to have any meaning as soon as we go further and look at the effects of this action in society. For every individual who acts there exists an ultimate purpose, the purpose which Eudaemonism enables us to understand; in this sense one may say that every man is an end to himself and an end in himself. But as an observation applied to the whole of society, this mode of expression is without any cognitive value. Here we cannot speak of purpose with more justification than of any other phenomenon of nature. When we ask whether, in society, this or that is end or means, we mentally substitute for society—that is, for the structure of human co-operation held together by the superiority of the division of labour over isolated labour—a structure welded together by
one will, and then ask what is the aim of this will. This is animistic thought, it is not in any way sociological or scientific.
Cohen’s special argument for the abolition of private property reveals the obscurity in which he still labours with regard to this fundamental problem of social life. Things, he says, have value. Persons, however, have no value. They have dignity. The market price of the value of labour is incompatible with the dignity of the person.
*46 This leads us into the abyss of Marxian phraseology and the doctrine of the “commodity-character” of labour and its objectionableness. This is the phrase which found its way into the treaties of Versailles and St. Germain in the form of a demand for the acceptance of the basic principle; “that labour should not be regarded merely as an article of commerce.”
*47 Enough, however, of these scholastic trivialities.
After this we need not be surprised to find repeated in Cohen all those catchwords which for thousands of years have been brought to bear against the institution of private property. He rejects property because the owner, by getting control over an isolated action, becomes in fact the owner of the person.
*48 He rejects property because it withdraws from the worker the produce of his labour.
Clearly the argument for Socialism presented by the Kantian school always leads us back to the economic concepts of the various socialistic writers; above all to Marx and the “academic” socialists who followed in his steps. They have no arguments other than economic and sociological arguments, and these prove to be untenable.
2 The Duty of Work as a Foundation for Socialism
“If any would not work, neither should he eat,” says the Second Epistle of the Thessalonians, which was ascribed to the Apostle Paul.
*50 This admonition to work is directed to those who want to live on their Christianity at the expense of the working members of the congregation; they are to support themselves without burdening their fellows.
*51 Torn out of its context, this has long been interpreted as a rejection of unearned income.
*52 It contains a most succinctly expressed moral precept which is continually being advocated with great vigour.
The train of thought which has led people to this principle can be followed in a saying of Kant: “Man may be as ingenious as he will, yet he cannot force Nature to accept other laws. Either he must work himself or others for him, and his labour will rob others of as much of their happiness as he needs to increase his own above the mean.”
It is important to note that Kant cannot base the indirect rejection of private property which lies in these words otherwise than on a utilitarian or eudaemonistic view. The conception from which he proceeds is that through private property more work is laid on some, while others are allowed to idle. This criticism is not proof against the objection that private ownership and the differences in the amount of property do not take anything from anyone, that, rather, in a social order where neither were permitted so much less would be produced, that the per capita quota of the product of labour would amount to less than what the propertyless worker receives as income in a social order based on private property. It collapses as soon as one disproves the statement that the leisure of the possessors is bought by the extra efforts of those without possessions. Such ethical judgments against private property also show clearly that all moral evaluation of economic functions rests ultimately on a view of their economic achievements—on that and nothing else. To reject on “moral grounds” only an institution not considered objectionable from the utilitarian standpoint is, if we look more closely, not the aim of ethical considerations. Actually, in all such cases the only difference of opinion is a difference of opinion about the economic function of such institutions.
That this fact has been overlooked is because those who tried to refute ethical criticism of private property have used the wrong arguments. Instead of pointing out its social significance they have usually been content to demonstrate the right of ownership or to prove that the owner, too, is not inactive, since he has worked to acquire his property and works to maintain it, and other arguments of this nature. The unsoundness of all this is obvious. It is absurd to refer to existing law when the problem is what the law should be; to refer to work which the owner does or has done when the problem is, not whether a certain kind of work should or should not be paid for, but whether private property in the means of production is to exist at all, and, if it exists, whether inequality of such ownership can be tolerated.
Therefore, from the ethical point of view, one is not permitted to ask whether a certain price is justified or not. Ethical judgment has to choose between a social order resting on private ownership in the means of production and one based on common ownership. Once it has arrived at this decision—which, for eudaemonistic ethics, can be based only upon an opinion of what each of the two imagined forms of society would achieve—it cannot proceed to call immoral single consequences of the order it has selected. That which is necessary to the social order it has chosen is moral, and everything else is immoral.
3 The Equality of Incomes as an Ethical Postulate
Against the assertion that all men should have equal incomes, as little can be said scientifically as can be said in support of it. Here is an ethical postulate which can only be evaluated subjectively. All science can do is to show what this aim would cost us, what other aims we should have to forgo in striving to attain this one.
Most people who demand the greatest possible equality of incomes do not realize that what they desire would only be achieved by sacrificing other aims. They imagine that the sum of incomes will remain unchanged and that all they need to do is to distribute it more equally than it is distributed in the social order based on private property. The rich will give as much as they receive over and above the average, and the poor receive as much as is needed to make up their incomes to the average. But the average income itself will remain unchanged. It must be clearly understood, however, that this idea rests on a grave error. It has been shown that, in whatever way one envisages the equalization of incomes this must always and necessarily lead to a very considerable reduction of the total national income and, thus, also, of the average income. On this showing, the matter takes on quite a different complexion. For we have then to decide whether we are in favor of an equal distribution of income at a lower average income, or inequality of incomes at a higher average income.
The decision will depend, of course, essentially, on how high one estimates the reduction which alteration in the social distribution of income will cause. If we conclude that the average income will be lower than that received today by the poorest, our attitude will probably be quite different from the attitude of most socialists of the sentimental type. If we accept what has been said in the second part of the book about how low productivity under Socialism and especially the contention that economic calculation would be quite impossible, then this argument of ethical Socialism also collapses.
It is untrue that some are poor because others are rich.
*54 If an order of society in which incomes were equal replaced the capitalist order, everyone would become poorer. Paradoxical though it may sound, the poor receive what they do because rich people exist.
And if we reject the argument for the general conscription of labour and for equality of wealth and incomes which is based on the statement that some have their leisure and fortune at the expense of the increased labour and poverty of others, then there remains no basis for these ethical postulates except resentment. No one shall be idle if I have to work; no one shall be rich if I am poor. Thus we see, again and again, that resentment lies behind all socialist ideas.
4 The Ethical-Aesthetic Condemnation of the Profit-Motive
Another reproach which philosophers level against the capitalist economic order is that it encourages rank over-development of the acquisitive instinct. Man, they say, is no longer lord of the economic process, but its slave. That economic activity exists merely to satisfy wants and is a means, not an end in itself, has been forgotten. Life wears itself out in the perpetual hurry and scurry to get rich, and men have no time left for inner composure and real enjoyment. They lay waste their best powers in the exhausting daily struggle of free competition. And the ideologists look back into a distant past, where all is romantically transfigured. They see the Roman patrician at his country seat, meditating peacefully on the problems of the stoa, the medieval monk dividing his hours between devotion and the classics; the prince of the Renaissance at whose court artists and scholars meet, the Rococo lady in whose salon the encyclopedists develop their ideas—marvellous pictures, these, which produce in us a deep longing for the past. And our loathing for the present deepens when we turn from these visions to the life led by those who lack culture in our own time.
The weakness of this argument, which appeals to the feelings rather than to the mind, is not only that it contrasts the brightest flowers of all times and peoples with the weeds of modern life. It is clear that one cannot compare the life of a Pericles or Maecenas with the life of the ordinary man in the street. But it is still quite untrue that the haste of modern business life has killed man’s sense of the beautiful and the sublime. The wealth of the “bourgeois” civilization is not spent on base enjoyments alone. If argument be necessary, one need only point to the way in which serious music has become popular in the last decades, particularly among that class of the population which is caught in the whirl of business life. There never has been a time when art was closer to the heart of large circles of the people. It is no phenomenon peculiar to our time that coarse and vulgar amusements appeal more to the great mass of the people than nobler forms of enjoyment. It was always so. And we may take it that in the socialist community good taste will not always predominate.
Modern man has always before his eyes the possibility of growing rich by work and enterprise. In the more rigid economy of the past this was less easy. People were rich or poor from birth, and remained so through their lives unless they were given a change of position through some unforeseen accident, which their own work or enterprise could not have caused or avoided. Accordingly, we had the rich walking on the heights and the poor who stayed in the depths. It is not so in capitalistic society. The rich can more easily become poor and the poor can more easily become rich. And because every individual is not born with, as it were, his own or his family fate sealed, he tries to rise as high as he can. He can never be rich enough, because in capitalist society no wealth is eternal. In the past nobody could touch the feudal landlord. When his lands became less fertile he had less to consume, but as long as he did not get into debt he stayed on his property. The capitalist who lends out his capital and the entrepreneur who produces must stand the test of the market. Whoever invests unwisely, or produces too dearly, is ruined. Unhampered seclusion from the market no longer exists. Even landed fortunes cannot escape its influences; agriculture, too, must produce capitalistically. Today a man must earn or become poor.
Let those who wish to eliminate this coercion to work and enterprise understand quite clearly that they are proposing to undermine the foundations of our well-being. That in 1914 the earth nourished far more human beings than ever before, and that they all lived far better than their ancestors, was due entirely to the acquisitive instinct. If the diligence of modern industry were replaced by the contemplative life of the past, unnumbered millions would be doomed to death by starvation.
In the socialist society the lordly ease of government offices will take the place of the keen activity of modern financial houses and factories. The civil servant will supplant the energetic entrepreneur. Whether civilization will gain by it, we leave to the self-constituted judges of the world and its institutions to deride. Is the bureaucrat really the ideal human type, and must we aspire to fill the world with his kind at any price?
Many socialists describe with great enthusiasm the advantages of a society of civil servants over a society of profit-seekers.
*55 In a society of the latter kind (the Acquisitive Society), every one pursues only his own advantage; in the society of those devoted to their profession (the Functional Society) everyone does his duty in the service of the whole. This higher evaluation of officialdom, in so far as it does not rest on a misconception of the social order based on private ownership in the means of production, is merely a new form of that contempt for the work of the painstaking citizen in which feudal landowners, soldiers, literary men, and bohemians have always indulged.
5 The Cultural Achievements of Capitalism
The inexactness and untruthfulness of ethical Socialism, its logical inconsistencies and its lack of scientific criticism, characterize it as the philosophic product of a period of decay. It is the spiritual expression of the decline of European civilization at the turn of the nineteenth and twentieth centuries. Under its sway the German people and with them the whole of humanity were swept from the height of their culture to their deepest degradation. It created the mental premises for the World War and for Bolshevism. Its theories of violence were triumphant in the carnage of 1914-18, which brought to a close the finest flowering of civilization that world history has ever known.
In Ethical Socialism imperfect understanding of human social co-operation is combined with the resentment of the ne’er-do-well. It is the inability to understand the difficult problems of social life which renders ethical socialists so unsophisticated and so certain that they are competent to solve social problems offhand. Resentment strengthens that indignation which is always sure of a response from those of like mind. But the fire of their language comes from a romantic enthusiasm for unrestraint. In every man there is a deep-rooted desire for freedom from social ties; this is combined with a longing for conditions which fully satisfy all imaginable wishes and needs. Reason teaches us not to give way to the first unless we are prepared to sink back into the deepest misery, and reminds us further that the second cannot be fulfilled. Where reason ceases to function the way to romanticism is open. The anti-social in man triumphs over the mind.
The romantic movement, which addresses itself above all to the imagination, is rich in words. The colourful splendour of its dreams cannot be surpassed. Its praises awaken infinite longing, its curses breed loathing and contempt. Its longing is directed towards a past envisaged not soberly, but as a trans figured image, and towards a future which it paints with all the bright colours of desire. Between the two it sees the sober, everyday working life of bourgeois society and for this it feels only hatred and abhorrence. In the bourgeois it sees embodied everything that is shameful and petty. It roams the world at will, praises all ages and all lands; but for the conditions of the present day it has neither understanding nor respect.
The great creative minds, whom we honour above all others as Classics, understood the profound significance of the bourgeois order. The romanticists lack this insight. They are too small to sing the song of bourgeois society. They deride the citizen, despise “shopkeepers’ ethics,” laugh at the law. They are extraordinarily quick to see all the faults of everyday life and as quick to trace them back to defects in social institutions. No romantic has perceived the grandeur of capitalist society. Compare the results achieved by these “shopkeepers’ ethics” with the achievements of Christianity! Christianity has acquiesced in slavery and polygamy, has practically canonized war, has, in the name of the Lord, burnt heretics and devastated countries. The much abused “shopkeepers” have abolished slavery and serfdom, made woman the companion of man with equal rights, proclaimed equality before the law and freedom of thought and opinion, declared war on war, abolished torture, and mitigated the cruelty of punishment. What cultural force can boast of similar achievements? Bourgeois civilization has created and spread a well-being, compared with which all the court life of the past seems meagre. Before the War, even the less favoured classes of the urban population could not only clothe and nourish themselves respectably but could enjoy genuine art and undertake journeys into distant lands. The romantics, however, saw only those who were not so well-off; the reason for their comparative poverty being that bourgeois civilization had not yet created sufficient wealth to make everybody comfortable. The same romantics had no eyes for those who were already comfortably circumstanced.
*56 What they saw was always only invariably the dirt and the misery capitalist civilization had inherited from the past, not the values which it had already achieved.
Ludwig Feuerbach und der Ausgang der klassischen deutschen Philosophie, 5th ed. (Stuttgart, 1910), p. 58.
Ethik des reinen Willens, Berlin, 1904, pp. 303 ff.
Theorien über den Mehrwert (Stuttgart, 1905), Part 2, pp. 333 ff. That the workers play a role in the economic process as consumers also, Marx never understood. Publisher’s Note: Only a part of the work by Marx,
Theorien über den Mehrwert (Stuttgart, 1905) has been translated into English in the book titled
Theories of Surplus Value: Selections, translated from the German by G. A. Bonner and Emile Burns (New York: International Publishers, 1952), 432 pp.
Kritik der Urteilskraft (Works, Vol. VI), p. 265. Publisher’s Note: In English,
Critique of Judgment. In Immanuel Kant,
The Critique of Judgement. Part II. Critique of Teleological Judgement, trans. James Creed Meredith (Oxford: Clarendon Press, 1952).
Ethik des reinen Willens, p. 305. See also Steinthai,
Allgemeine Ethik, pp. 266 ff.
Ethik des reinen Willens, p. 572.
Das Urchristentum, Vol. I, PP. 95 ff.
(Der radikale deutsche Sozialismus und die christliche Gesellschaft, 2nd ed. (Wittenberg, 2878), pp. 306—19, is a good example of how, out of this and similar passages, people try to justify from the New Testament modern catchwords of the anti-liberal movement.
Die voikswirtschaftlichen Anschauungen der Scholastik seit Thomas yon Aquin (Jena, 1913), p. 18.
Unto this last (Tauchnitz-Ed.), pp. 19 ff.; Steinbach,
Erwerb und Beruf (Vienna, 1896), pp.13 ff.; Otto Conrad,
Volkswirtschaftspolitik oder Erwerbspolitik? (Vienna, 1918), pp. 5 ff.; Tawney,
The Acquisitive Society, p. 38.
in Economica, Vol. VI, 1926, p. 78 ff.; Clapham,
An Economic History of Modern Britain, 2nd ec. (Cambridge, 1930), pp. 548 ff. Publisher’s Note: The Hutt article, “The Factory System of the Early 19th Century,” was reprinted in
Capitalism and the Historians, ed. F. A. Hayek, essays by T. S. Ashton, L. M. Hacker, W. H. Hutt, B. de Jouvenel (Chicago: University of Chicago Press, 1954), pp. 160-188.
A Constitution for the Socialist Commonwealth of Great Britain (London, 1920), pp. xiii ff. See also Cole,
Guild Socialism Re-stated (London, 1920), pp. 12 ff.
The Principles of Economics, pp. 394, 410. See also Schumpeter,
Theorie der wirtschaftlichen Entwicklung (Leipzig, 1912), pp. 32 ff. Nothing is more topsy-turvy than a saying such as: “Who is less questioned at the building of a house in a large city than its future tenants?” Lenz,
Macht unt Wirtshaft (Munich, 1915), p. 32. Every buider tries to build in a way that best suits the wishes of the future tenants, so that he may be able to let the buildings as quickly and profitably as possible. See also the striking remarks in Withers,
The Case for Capitalism (London, 1920), pp. 41 ff.
A Constitution for the Socialist Commonwealth of Great Britain, p. xii, they say that the workers have to obey the orders “of irresponsible masters intent on their own pleasure or their own gain.”
Ethik (Leipzig, 1918), pp. 111 ff.; Natorp,
Sozialidealismus (Berlin, 1920), p. 13.
Die neue Wirtschaft (Berlin, 1918), pp. 41 ff.; also the critique of Wiese,
Freie Wirtschaft (Leipzig, 1918).