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Capitalism, Socialism
and Democracy

JOSEPH A. SCHUMPETER

PROFESSOR OF ECONOMICS IN HARVARD UNIVERSITY

HARPER & BROTHERS PUBLISHERS

New fork and London

CAPITALISM, SOCIALISM, AND DEMOCRACY

No part of the book may be reproduced in any
manner whatsoever without written permission
except in the case of brief quotations embodied
in critical articles and reviews. For information
address Harper & Brothers

SECOND EDITION
L-S

This book is complete and unabridged
in contents, and is manufactured in strict
conformity with Government regulations
for saving paper.

COXl ENTS

Preface ix

Part I: THE MARXIAN DOCTRINE i

Prologue 3

1. Marx the Prophet 5

11. Marx the Sociologist 9

III. Marx the Economist 21

IV. Marx the Teacher 45

Part II: CAN CAPITALISM SURVIVE? 59

Prologue 61

V. The Rate of Increase of Total Output 63

VI. Plausible Capitalism 72

' VII. The Process of Creative Destruction 81

VIII. Monopolistic Practices 87

IX. Closed Season 107

iK. The Vanishing of Investment Opportunity in

The Civilization of Capitalism 12 1

XII. , Crumbling Walls 131

I. The Obsolescence of the Entrepreneurial Function 131^

II. The Destruction of the Protecting Strata 134

III. The Destruction of the Institutional Framework of

Capitalist Society 13^

XIII. Growing Hostility 143

The Social Atmosphere of Capitalism I43

H. The Sociology of the Intellectual 145

XIV. Decomposition 156

Part III: CAN SOCIALISM WORK? 165

XV. Clearing Decks 167

XVI . The Socialist Blueprint 172

XVII. Comparison of Blueprints 1B7 *

I. A Preliminary Point ^^7

11. A Discussion of Comparative EfEcicncy iBB

III. The Case for the Superiority of the Socialist Blueprint 193

Contents

XVIIL ThcHuman Element
A Warning

I. The Historical Relativity of the Argument

II. About Demigods and Archangels

III. The Problem of Bureaucratic Management

IV, Saving and Discipline

V. Authoritarian Discipline in Socialismj a Tesson from
Russia

XIX. Transition

I. Two Different Problems Distinguished

II. Socialization in a State of Maturity

III. Socialization in a State of Immaturity

IV. Socialist Policy Before the Act; the English Example

Part IV: SOCIALISM AND DEMOCRACY

XX. The Setting of the Problem

I. The Dictatorship of the Proletariat

II. The Record of Socialist Parties

III. A Mental Experiment

IV. In Search of a Definition

XX^. The Classical Doctrine of Democracy

The Common Good and the Will of the People
Jk. The Will of the People and Individual Volition
Eli. Human Nature in Politics

rV. Reasons for the Survival of the Classical Doctrine
XXirriAnother Theory of Democracy

I. Competition for Political Leadership

11 . The Principle Applied
XXIII. The Inference

I. Some Implications of the Preceding Analysis
II. Conditions for the Success of the Democratic Method

III. Democracy in the Socialist Order

200

202

205

210

212

219

221

222

228

232

235

237

240

243

250

252.

256

264

269

273

284

289

2961

Part V: A HISTORICAL SKETCH OF
PARTIES

SOCIALIST

^IV.

/XXV.

XXVI.

Prologue
The Nonage

The Situation that Marx Faced
From 1875 to 1914

I. English Developments and the Spirit of Fabianism
II. Sweden on the One Hand and Russia on the Other
HI. Socialist Groups in the United States

303

305

306

3I2v

320

325

331

Contents vii

IV. The French Case; Analysis of Syndicalism 33®

V. The German Party and Revisionism; the Austrian
Socialists 34^

VI. The Second International 349

XXVII. From the First to the Second World War 352

I. The “Gran Rifiuto” 35^

II. The Effects of the First World War on the Chances of the

Socialist Parties of Europe 354

III. Communism and the Russian Element 35®

IV. Administering Capitalism? 3®3

V. The Present War and the Future of Socialist Parties 373

Index 377

PREFACE

T his volume is the result of an effort to weld into a readable form
the bulk of almost forty years’ thought, observation and research
on the subject of socialism. The problem of democracy forced its way
into the place it now occupies in this volume because it proved impos-
sible to state my views on the relation between the socialist order of
society and the democratic method of government without a rather
extensive analysis of the latter.

My task turned out more difficult than I thought it would be. Part
of the heterogeneous material that had to be marshaled reflected the
views and experiences of an individual who at various stages of his life
had more opportunity for observation that non-socialists usually have
and who reacted to what he saw in an unconventional manner. I had no
wish to obliterate the traces of this: much of such interest as this book
may command would have gone if I had tried to smooth them away.

Moreover, this material also reflected the analytic efforts of an in-
dividual who, while always honestly trying to probe below the surface,
never made the problems of socialism the principal subject of his pro-
fessional research for any length of time and therefore has much more
to say on some topics than on others. In order to avoid creating the im-
pression that I aimed at writing a well-balanced treatise I have thought
it best to group my material around five central themes. Links and
bridges between them have been provided of course and something
like systematic unity of presentation has, I hope, been achieved. But
in essence they are — though not independent — almost self-contained
pieces of analysis.

The first part sums up, in a non-technical manner, what I have to say
— and what, as a matter of fact, I have been teaching for some decades —
on the subject of the Marxian doctrine. To preface a discussion of the
main problems of socialism by an exposition of the Gospel would be the
natural thing for a Marxist to do. But what is the purpose of this exposi-
tion in the hall of a house built by onj^ who is not a Maw^t? It stands
there to bear witness to this non-Marxist’s belief in the unique impor-
tance of that message, an importance that is completely independent of
acceptance or rejection. But it makes difficult reading. And no Marxian
tools are used in the subsequent work. Though the results of the
latter are again and again compared with the tenets of the one great
socialist thinker, readers who are not interested in Marxism may hence
start with Part 11.

In the second part — Can Capitalism Survive? — I have tried to show
that a socialist form of society will inevitably emerge from an equally
inevitable decomposition of capitalist society. Many readers will wonder
why I thought so laborious and complex an analysis necessary in order

Preface

to establish what is rapidly becoming the general opinion, even among
conservatives. The reason is that, while most of us agree as to the result,
we do not agree as to the nature of the process that is killing capitalism
and as to the precise meaning to be attached to the word ‘‘inevitable/'
Believing that most of the arguments offered — both on Marxian and on
more popular lines — are wrong, I felt it my duty to take, and to in-
flict upon the reader, considerable trouble in order to lead up effec-
tively to my paradoxical conclusion: capitalism is being killed by its
, achievements.

Having seen, as I think we shall see, that socialism is a practical
proposition that may become immediatelf practical in consequence of
the present war, we shall in the third part — Can Socialism Work? —
survey a large expanse of problems that bear upon the conditions in
which the socialist order may be expected to be an economic success.
This part comes nearest to being a balanced treatment of its various
topics including the “transitionaF' problems. Love and hate have so
blurred the results of such serious work as has so far been done on this
question — it is not much — that even mere restatement of widely ac-
cepted views seemed justified here and there.

The fourth part — Socialism and Democracy — is a contribution to a
controversy that has been going on in this country for some time. But
it should be noted that only a question of principle is dealt with in this
part. Facts and comments relevant to the subject are scattered all over
the book particularly in Parts III and V.

The fifth part is what it purports to be, a sketch. More than in the
other parts, I wished to confine myself to what I had to say from
personal observation and from very fragmentary research. Therefore
the material that went into this part is no doubt woefully incomplete.
But what there is of it, is alive.

No part of the contents of this volume has ever appeared in print.
An early draft of the argument of Part II has however provided the
basis for a lecture delivered at the U. S. Department of Agriculture
Graduate School on January i8, 1936, and has been mimeographed by
that School. I wish to thank Mr. A. G. Edwards, chairman of the Ar-
rangements Committee, for permission to include an extended version
in this volume.

Joseph A. Schumpeter.

Taconic^ Conn.

March 1^42

PART I

The Marxian Doctrine

PROLOGUE

M ost of the creations of the intellect or fancy pass away for good
after a time that varies between an after-dinner hour and a gen-
eration. Some, however, do not. They suffer eclipses but they come back
again, and they come back not as unrecognizable elements of a cul-
tural inheritance, but in their individual garb and with their personal
scars which people may see and touch. These we may well call the great
ones — it is no disadvantage of this definition that it links greatness to
vitality. Taken in this sense, this is undoubtedly the word to apply to
the message of Marx. But there is an additional advantage to defining
greatness by revivals: it thereby becomes independent of our love or
hate. We need not believe that a great achievement must necessarily be
a source of light or faultless in either fundamental design or details. On
the contrary, we may believe it to be a power of darkness; we may think
it fundamentally wrong or disagree with it on any number of particular
points. In the case of the Marxian system, such adverse judgment or
even exact disproof, by its very failure to injure fatally, only serves to
bring out the power of the structure.

The last twenty years have witnessed a most interesting Marxian re-
vival. That the great teacher of the socialist creed should have come into
his own in Soviet Russia is not surprising. And it is only characteristic
of such processes of canonization that t here is, between the true mean -t
ing of Marx's message and bolshevist practice and ideology, at least as|
great a gulf as there was between the religion of humble Galileans andi
the practice and ideology of the princes of the church or the warlords ]
of the Mid dle Age s. .

But another revival is less easy to explain — the Marxian revival in
the United States. This phenomenon is so interesting because until the
twenties there was no Marxian strain of importance in either the Ameri-
can labor movement or in the thought of the American intellectual.
What Marxism there was always had been superficial, insignificant and
without standing. Moreover, the bolshevist type of revival produced no
similar spurt in those countries which had previously been most steeped
in Marxology. In Germany notably, which of all countries had the
strongest Marxian tradition, a small orthodox sect indeed kept alive
during the post-war socialist boom as it had during the previous depres-
sion. But the leaders of socialist thought (not only those allied to the
Social Democratic party but also those who went much beyond its
cautious conservatism in practical questions) betrayed little taste for
reverting to the old tenets and, while worshiping the deity, took good

3 ^

The Marxian Doctrine

care to keep it at a distance and to reason in economic matters exactly
like other economists. O utside of Russia, therefor e, the American phe-
nomenon stands alone. We are not concerned with its clhTeC’But it is
woHITwEIeT^^ contours and the meaning of the message so

many Americans have made their own.^

^ References to Marx’s writings will be confined to a minimum, and no data about
his life will be given. This seems unnecessary because any reader who wishes for
a list of the former and a general outline of the latter finds all he needs for our
purposes in any dictionary, but especially in the Encyclopedia Britannica or the
Encyclopaedia of the Social Sciences, A study of Marx begins most conveniently
with the first volume of Das Kapital (first English translation by S. Moore and
E. Aveling, edited by F. Engels, 1886). In spite of a huge amount of more recent
work, I still think that F. Mehring’s biography is the best, at least from the stand--
point of the general reader.

CHAPTER I

MARX THE PROPHET

I T WAS not by a slip that an analogy from the world of religion was
permitted to intrude into the title of this chapter. There is more
than analogy. I n one important sense, Marxism is a religion . To the
believer it presents7Srst> ultimate^ends that embody th e

meaning of life and are absolute standards by which to judge even ts
a i^ actions ;"and, secondlyTa^ those endswhkhim^^

p rsaTvaB and the indicat ion^^ o^^^^ which" mankii^ a

c hosen section of mankind, is to be saved . We may specify still further:
M arxist socialism also belongs to that subgroup which promises paradise
on this sid e of the grave . I believe that a formulation of tEeseTEafacter-
istlcsTy^n hierologist would give opportunities for classification and
comment which might possibly lead much deeper into the sociological
essence of Marxism than anything a mere economist can say.

The least important point about this is that it explains the success
of Marxism.^ Purely scientific achievement, had it even been much
more perfect than it was in the case of Marx, would never have won the
immortality in the historical sense which is his. Nor would his arsenal
of party slogans have done it. Paft of his success, although a very minor
part, is indeed attributable to the barrelful of white-hot phrases, of im-
passioned accusations and wrathful gesticulations, ready for use on any
platform, that he put at the disposal of his flock. All that needs to be
said about this aspect of the matter is that this ammunition has served
and is serving its purpose very well, but that the production of it carried
a disadvantage; in order to forge such weapons for the arena of social
strife Marx had occasionally to bend, or to deviate from, the opinions
that would logically follow from his system. However, if Marx had not
been more than a purveyor of phraseology, he would be dead by now.
Mankind is not grateful for that sort of service and forgets quickly the
names of the people who write the librettos for its political operas.

But he was a prophet, and in order to understand the nature of this
achievement we must visualize it in the setting of his own time. It was
the zenith o f bourgeois realization and the nadir of bourgeois civiliza-
tionTtE Fdn^of mechanistic materiallsniTbTaTuTtura^^

^The religious quality of Marxism also explains a characteristic attitude of the
orthodox Marxist toward opponents. To him, as to any believer in a Faith, the
opponent is not merely in error but in sin. Dissent is disapproved of not only
intellectually but also morally. There cannot be any excuse for it once the Message
has been revealed.

The Marxian Doctrine

as yet betrayed no sign that a ne w art and a new mode of life were in its
womb, and which rioted in most repulsive banality. F aith in any real
sensTws r apidly falling away from all classes of society, and with it
only ray of ligl^ t (apart from what may have been derived from
Rochdale attitudes and saving banks) d ied from the workman's world,
while intellectuals professed themselves highly satisfied with MllFs
Logic and the Poor Law.

Now, to millions of human hearts the Marxian ^ the

terrestrM paradise j),f socialism m eant a new ray of light a nd a new
meaning^f life. Call Marxist religion a counterfeit if you like, or a
caricature of faith — there is plenty to be said for this view — ^but do not
overlook or fail to admire the greatness of the achievement. Never
mind that nearly all of those millions were unable to understand and
appreciate the message in its true significance. That is the fate of all
messages. The important thing is that the message was framed and
conveyed in such a way as to be acceptable to the positivistic mind of
its time — which was essentially bourgeois no doubt, but there is no
paradox in saying that Marxism is essentially a product of the bour-
geois mind. This was done, on the one hand, by formulating with un-
surpassed force that feeling of being ‘thwarted and ill treated which is
the auto-therapeutic attitude of the unsuccessful many, and, on the
other hand, by proclaiming that socialistic deliverance from those ills
was a certainty amenable to rational proof.

Observe how supreme art here succeeds in weaving together those
extra-rational cravings which receding religion had left running about
like masterless dogs, and the rationalistic and materialistic tendencies
of the time, ineluctable for the moment, which would not tolerate any
creed that had no scientific or pseudo-scientific connotation. Preaching
the goal would have been ineffectual; analyzing a social process would
have interested only a few hundred specialists. But preaching in the
garb of analysis and analyzing with a view to heartfelt needs, this is
what conquered passionate allegiance and gave to the Marxist that
supreme boon which consists in the conviction that what one is and
stands for can never be defeated but must conquer victoriously in the
end. This, of course, does not exhaust the achievement. Personal force
and the flash of prophecy work independently of the contents of the
creed. No new life and no new meaning of life can be effectively re-
vealed without. But this does not concern lis here.

Something will have to be said about th e cogency and co rrectness of
M arx's attempt to prove th e i nev it ability o f „the_ sociali$r goal. One
remark, however, suffices as to what has been called above his formula-
tion of the feelings of the unsuccessful many. It was, of course, not a
true formulation of actual feelings, conscious or subconscious. Rather
we could call it an attempt at replacing actual feelings by a true or false
revelation of the logic of social evolution. By doing this and by at-

Marx the Prophet 7

tributing — quite unrealistically — to the masses his own shibboleth of
‘‘class consciousness/^ he undoubtedly falsified the true psychology of
the workman (which centers in the wish to become a small bourgeois
and to be helped to that status by political force), but in so far as his
teaching took effect he also expanded and ennobled it. He did notj
weep any sentimental tears about the beauty of the socialist idea. This*
is one of his claims to superiority over what he called the Utopian
Socialists. Nor did he glorify the workmen into heroes of daily toil as
bourgeois love to do when trembling for their dividends. He was per-
fectly free from any tendency, so conspicuous in some of his weaker
followers, toward licking the workman’s boots. He had probably a clear
perception of what the masses are and he looked far above their heads
toward social goals altogether beyond what they thought or wanted.
Also, he never taught any ideals as set by himself. Such vanity was quite
foreign to him. As every true prophet styles himself the humble mouth-
piece of his deity, so Marx pretended no more than to speak the logic
of the dialectic process of history. There is dignity in all this which
compensates for many pettinesses and vulgarities with which, in his'
work and in his life, this dignity formed so strange an alliance.

Another point, finally, should not go unmentioned. M arx was per-
so nally much too civilized to fall in with those vulgar professors of so-
cia lism who do not reco.fi^nize a temple when they see it. He was perfectly
able to understand a civilization and the “relatively absolute” value of
its values, however far removed from it he may have felt himself to be.
In this respect no better testimony to his broad-mindedness can be of-
fered than th e Communist Manifesto which is an account nothing sh ort
of glowing^ of the achievements of capitalism; and even in pronounci ng j
pro futuro Ke^ sentence on it. He never failed to recognize its hi s- i
to rical necessity . This^attitude, of course, implies quite a lot of things
Marx himself would have been unwilling to accept. But he was un-
doubtedly strengthened in it, and it was made more easy for him to
take, because of that perception of the organic logic of things to which

2 This may seem to be an exaggeration. But let us quote from the authorized
English translation: *‘The bourgeoisie . . . has been the first to show what man’s
activity can bring about. It has accomplished wonders far surpassing Egyptian
pyramids, Roman aqueducts and Gothic cathedrals. . . . The bourgeoisie . . .
draws all nations . . . into civilization. ... It has created enormous cities . . .
and thus rescued a considerable part of the population from the idiocy [sic!] of rural
life. . . . The bourgeoisie, during its rule of scarce one hundred years, has created
more massive and more colossal productive forces than have all preceding gen-
erations together.” Observe that all the achievements referred to are attributed
to the bourgeoisie alone which is more than many thoroughly bourgeois economists
would claim. This is all I meant by the above passage — and strikingly different
from the views of the vulgarized Marxism of today or from the Veblenite stuff of
the modern non-Marxist radical. Let me say at once: not more than that is im-
plied in anything I shall say in the second part about the performance of capi-
talism.

The Marxian Doctrine

his theory of history gives one particular expression. Things social fell
into order for him, and however much of a coffeehouse conspirator he
may have been at some junctures of his life, his true self despised that
sort of thing. Soci alism for him was no ob s ession which blots out all
ot her colors of life and creates an unhealthy and stupid hatr ed or con-
t empt for other civilizations. And there is, in more senses than one,
justification for the title claimed for his type of socialist thought and of
socialist volition which are welded together by virtue of his funda-
mental position: Scientific Socialism.

CHAPTER II

MARX THE SOCIOLOGIST

W E HAVE now to do a thing which is very objectionable to the faith-
ful. They naturally resent any application of cold analysis to what
for them is the very fountain of truth. But one of the things they re-
sent most is cutting Marx’s work into pieces and discussing them one by
one. They would say that the very act displays the incapacity of the
bourgeois to grasp the resplendent whole, all parts of w^hich complement
and explain one another, so that the true meaning is missed as soon as
any one part or aspect is considered by itself. We have no choice, how-
ever. By committing the offense and next taking up Marx the sociologist
after Marx the prophet, I do not mean to deny either the presence of a
unity of social vision which succeeds in giving some measure of analytic
unity, and still more a semblance of unity, to the Marxian work, or the
fact that every part of it, however independent intrinsically, has been
correlated by the author with every other. Enough independence re-
mains nevertheless in every province of the vast realm to make it pos-
sible for the student to accept the fruits of his labors in one of them
while rejecting those in another. Much of the glamour of the faith is
lost in the process but something is gained by salvaging important and
stimulating truth which is much more valuable by itself than it would
be if tied to hopeless wreckage.

This applies first of all to Marx’s philosophy which we may as well get
out of our way once and for all. German-trained and speculative-minded
as he was, he had a thorough grounding and a passionate interest
in philosophy. Pure philosophy of the German kind was his starting
point and the love of his youth. For a time he thought of it as his true
vocation. He was a Neo-Hegelian , which roughly means that while ac-
cepting the master’TIundamental attitudes and methods he and his
group eliminated, and replaced by* pretty much their opposites, the
conservative interpretations put upon HegeFs philosophy by many of
its other adherents. This background shows in all his writings wherever
the opportunity offers itself. It is no wonder that his German and Rus-
sian readers, by bent of mind and training similarly disposed, should
seize primarily upon this element and make it the master key to the
system.

I believe this to be a mistake and an injustice to Marx’s scientific
powers. He retained his early love during the whole of his lifetime. He
enjoyed certain formal analogies which may be found between his and

The Marxian Doctrine

Hegel’s argument. He liked to testify to his Hegelianism and to use
Hegelian phraseology. But this is all. Nowhere did he betray positive
science to metaphysics. He says himself as much in the preface to the
second edition of the first volume of Das Kapital, and that what he says
there is true and no self-delusion can be proved by analyzing his argu-
ment, which everywhere rests upon social fact, and the true sources of
his propositions none of which lies in the domain of philosophy. Of
course, those commentators or critics who themselves started from the
philosophic side were unable to do this because they did not know
enough about the social sciences involved. The propensity of the philo-
sophic system-builder, moreover, made them averse to any other inter-
pretation but the one which proceeds from some philosophic principle.
So they saw philosophy in the most matter-of-fact statements about eco-
nomic experience, thereby shunting discussion on to the wrong track,
misleading friends and does alike.

Marx the sociologist brought to bear on his task an equipment which
|consisted primarily of an extensive command over historical and con-
temporaneous fact. His knowledge of the latter was always somewhat
antiquated, for he was the most bookish of men and therefore funda-
mental materials, as distinguished from the material of the newspapers,
always reached him with a lag. But hardly any historical work of his time
that was of any general importance or scope escaped him, although
4nuch of the monographic literature did. While we cannot extol the
completeness of his information in this field as much as we shall his
erudition in the field of economic theory, he was yet able to illustrate
his social visions not only by large historical frescoes but also by many
details most of which were as regards reliability rather above than be-
low the standards of other sociologists of his time. These facts he em-
braced with a glance that pierced through the random irregularities of
the surface down to the grandiose logic of things historical. In this
there was not merely passion. There was not merely analytic impulse.
There were both. And the outcome of his attempt to formulate that \
logic, the so-called Economic Interpretation of History,^ is doubtless I
one of the greatest individual achievements of sociology to this day. /
Before it, the question sinks into insignificance whether or not this
achievement was entirely original and how far credit has in part to be
given to predecessors, German and French.

T he economic interpretation of history does not mean tha t..jaeiL are,
co ns^usIForln^ wholly or primarily, actuated bv eco-

n omic motives. On the contrary, the explanation of the role and
mechanism of non-economic motives and the analysis of the way in
which social reality mirrors itself in the individual psyches is an es-

1 First published in that scathing attack on Froudhon^s Philosophie de ia MMre»
entitled Das Elend der Philosophies 1847. Another version was included in the
Communist Manifestd, 1848.

Marx the Sociologist

sential element of the theory and one of its most significant contribu-
tions. Marx did not hold that religions, metaphysics, schools of art,
ethical ideas and political volitions were either reducible to economic
motives or of no importance. He only tried to unveil the economic
conditions which shape them and which account for their rise and fall.
The whole of Max Weber's^ facts and arguments fits perfectly into
Marx's system. Social groups and classes and the ways in which these
groups or classes explain to themselves their own existence, location
and behavior were of course what interested him most. He poured the
vials of his most bilious wrath on the historians who took those atti-
tudes and their verbalizations (the ideologies or, as Pareto would have
said, derivations) at their face value and who tried to interpret social
reality by means of them. But if ideas or values were not for him the
prime movers of the social process, neither were they mere smoke. If
I may use the analogy, they had in the social engine the role of trans-
mission belts. We cannot touch upon that most interesting post-war de-
velopment of these principles which would afford the best instance by
which to explain this, the Sociology of Knowledge.^ But it was neces-
sary to say this much because Marx has been persistently misunderstood
in this respect. Even his friend Engels, at the open grave of Marx, de-
fined the theory in question as meaning precisely that individuals and
groups are swayed primarily by economic motives, which in some im-
portant respects is wrong and for the rest piteously trivial.

While we are about it, we may as well defend Marx against another
misunderstanding: the economic interpretation of history has often
been called the materialistic interpretation. It has been called so by
Marx himself. This phrase greatly increased its popularity with some,
and its unpopularity with other people. But it is entirely .meaningless.
Marx’s philosophy is no more materialistic than is Hegel’s, and his
theory of history is not more materialistic than is any other attempt
to account for the historic process by the means at the command of
empirical science. It should be clear that this is logically compatible
with any metaphysical or religious belief — exactly as any physical
picture of the world is. Medieval theology itself supplies metlxods by
which it is possible to establish this compatibility.^

What the theory really says may be put into two propositions: (i)

2 The above refers to Weber’s investigations into the sociology of religions and
particularly to his famous study. Die protestantische Ethik und der Geist des
Kapitalismus, republished in his collected works.

® The German word is Wissenssoziologie, and the best names to mention are
those of Max Schelcr and Karl Mannheim. The latter’s article on the subject in
the German Dictionary of Sociology (Handwdrterbuch der Soziologie) can serve as
an imroduction.

I have met several Catholic radicals, a priest among them, all devout Catholics,
who took this view and in fact declared themselves Marxists in everything except
in matters relating to their faith.

The Marxian Doctrine

The forms or conditions of production are the fundamental determi-
nant of social structures which in turn breed attitudes, actions and civ-
ilizations. Marx illustrates his meaning by the famous statement that
the “hand-mill” creates feudal, and the “steam-mill,” capitalist societies.
This stresses the technological element to a dangerous extent, but may
be accepted on the understanding that mere technology is not all of it.
Popularizing a little and recognizing that by doing so we lose much of
the meaning, we may say that it is our daily work which forms ourl
minds, and that it is our location within the productive process which *

determines our outlook on things' — or the sides of things we see and

the social elbowroom at the command of each of us. (2) “The forms of
production themselves have a logic of their own; that is to say, they
change according to necessities inherent in them so as to produce their
successors merely by their own working. To illustrate by the same
Marxian example: the system characterized by the “hand-mill” creates
an economic and social situation in which the adoption of the mechani-
cal method of milling becomes a practical necessity that individuals or
p-oups are powerless to alter. The rise and working of the “steam-mill”
in turn creates new social functions and locations, new groups and views,
which develop and interact in such a way as to outgrow their own
frame. Here, then, we have the propeller which is responsible first of
all for economic and, in consequence of this, for any other social change,
a propeller the action of which does not itself require any impetus ex-
ternal to it. ’ ^

Both propositions undoubtedly contain a large amount of truth and
are, as we shall find at several turns of our way, invaluable working hy-
potheses. Most of the current objections completely fail, all those for
instance which in refutation point to the influence of ethical or reli-
gious factors, or the one already raised by Eduard Bernstein, which
with delightful simplicity asserts that “men have heads” and can hence
act as they choose. After what has been said above, it is hardly neces-
sary to dwell on the weakness of such arguments: of course men
choose their course of action which is not directly enforced by the
objective data of the environment; but they choose from standpoints,
views and propensities that do not fom another set of independent
d«tt^ but are themselves molded by the objective set.

Nevertheless, the question arises whether the economic interpreta-
tion of history is more than a convenient approximation which must be
expeaed to work less satisfactorily in some cases than it does in others.
An obvious qualification occurs at the outset. Social structures, types
and attitudes are coins that do not readily melt. Once they are formed
they persist, possibly for centuries, and since different structures and
types d«play different degrees of this ability to survive, we almost
always find that actual group and national behavior more or less de-
parts from what we should expect it to be if we tried to infer it from

Marx the Sociologist 13

the dominant forms of the productive process. Though this applies
quite generally, it is most clearly seen when a highly durable structure
transfers itself bodily from one country to another. The social situa-
tion created in Sicily by the Norman conquest will illustrate my mean-
ing. Such facts Marx did not overlook but he hardly realized all their
implications.

A related case is of more ominous significance. Consider the emer-
gence of the feudal type of landlordism in the kingdom of the Franks
during the sixth and seventh centuries. This was certainly a most im-
portant event that shaped the structure of society for many ages and
also influenced conditions of production, wants and technology in-
cluded. But its simplest explanation is to be found in the function of
military leadership previously filled by the families and individuals
who (retaining that function however) became feudal landlords after
the definitive conquest of the new territory. This does not fit the
Marxian schema at all well and could easily be so construed as to point
in a different direction. Facts of this nature can no doubt also be
brought into the fold by means of auxiliary hypotheses but the neces-
sity of inserting such hypotheses is usually the beginning of the end of
a theory.

Many other difficulties that arise in the course of attempts at histori-
cal interpretation by means of the Marxian schema could be met by ad-
mitting some measure of interaction between the sphere of production
and other spheres of social life.® But the glamour of fundamental truth
that surrounds it depends precisely on the strictness and simplicity of
the one-way relation which it asserts. If this be called in question, the
economic interpretation of history will have to take its place among
other propositions of a similar kind — as one of many partial truths —
or else to give way to another that does tell more fundamental truth.
However, neither its rank as an achievement nor its handiness as a
working hypothesis is impaired thereby.

To the faithful, of course, it is simply the master key to all the secrets
of human history. And if we sometimes feel inclined to smile at rather
naive applications of it, we should remember what sort of arguments it
replaced. Even the crippled sister of the economic interpretation of his-
tory, the Marxian Theory of Social Classes, moves into a more favorable
light as soon as we bear this in mind.

V Again, it is in the first place an important contribution that we have
to record. Economists have been strangely slow in recognizing the phe-
nomenon of social classes. Of course they always classified the agents
whose interplay produced the processes they dealt with. But these classes
were simply sets of individuals that displayed some common character:

5 In his later life, Engels admitted that freely, Plekhanov went still further in
this direction.

14 The Marxian Doctrine

thus, some people were classed as landlords orj^orkmen because they
owned land or sold the services of their labor.'^ocial classes, however,
are not the creatures of the classifying observer but live entities that
exist as such. And their existence entails consequences that are entirely
missed by a schema which looks upon society as if it were an amor-
phous assemblage of individuals or families. It is fairly open to ques-
tion precisely how important the phenomenon of social classes is for
research in the field of purely economic theory. That it is very im-
portant for many practical applications and for all the broader aspects
of the social process in general is beyond doubt.

.Roughly speaking, we may say that the social classes made their en-
;trance in the famous statement contained in the Communist Manifesto
that the history of society is the history of class struggles. Of course, this
is to put the claim at its highest. But even if we tone it down to the
proposition that historical events may often be interpreted in terms of
class interests and class attitudes and that existing class structures are
always an important factor in historical interpretation, enough remains
to entitle us to speak of a conception nearly as valuable as was the
economic interpretation of history itself."-

Clearly, success on the line of advance opened up by the principle of
class struggle depends upon the validity of the particular theory of
classes we make our own. Our picture of history and all our interpreta-
tions of cultural patterns and the mechanism of social change will differ
according to whether we choose, for instance, the racial theory of classes
and like Gobineau reduce human history to the history of the struggle
of races or, say, the division of labor theory of classes in the fashion of
Schmoller or of Durkheim and resolve class antagonisms into antago-
nisms between the interests of vocational groups. Nor is the range of
possible differences in analysis confined to the problem of the nature of
classes.^ Whatever view we may hold about it, different interpretations
will result from different definitions of class interest^ and from different
opinions about how class action manifests itself. The subject is a hot-
bed of prejudice to this day, and as yet hardly in its scientific stage.

Curiously enough, Marx has never, as far as we know, worked out
systematically what it is plain was one of >the pivots of his thought. It
is possible that he deferred the task until it was too late, precisely be-
cause 'his thinking ran so much in terms of class concepts that he did
not feel it necessary to bother about definitive statement at all. It is

®The reader will perceive that one's views about what classes are and about
what calls them into existence do not uniquely determine what the interests of
those classes are and how each class will act on what '*it’' — its leaders for instance
or the rank and file — considers or feels, in the long run or in the short, erroneously
or correctly, to be its interest or interests. The problem of group interest is full of
thorns and pitfalls of its own, quite irrespective of the nature of the groups under
study.

Marx the Sociologist 15

equally possible that some points about it remained unsettled in his
own mind, and that his way toward a full-fledged theory of classes
was barred by certain difficulties he had created for himself by insist-
ing on a purely economic and over-simplified conception of the
phenomenon. He himself and his disciples both offered applications
of this under-developed theory to particular patterns of which his
own History of the Class Struggles in France is the outstanding ex-
ample.'^ Beyond that no real progress has been achieved. The theory
of his chief associate, Engels, was of the division of labor type and
essentially un-Marxian in its implications. Barring this we have only
the sidelights and apergus — some of them of striking force and bril-
liance — that are strewn all over the writings of the master, particularly
in Das Kapital and the Communist Manifesto,

The task of piecing together such fragments is delicate and cannot
be attempted here. The basic idea is clear enough, however. The strati-
fying principle consists in the ownership, or the exclusion from owner-
ship, of means of production such as factory buildings, machinery, raw
materials and the consumers' goods that enter into the workman's
budget. We have thus, fundamentally, two and only two classes, those
owners, the capitalists, and those have-nots who are compelled to sell
their labor, the laboring class or proletariat. The existence of inter-
mediate groups, such as are formed by farmers or artisans who employ
labor but also do manual work, by clerks and by the professions is of
course not denied; but they are treated as anomalies which tend to dis-
appear in the course of the capitalist process. The two fundamental
classes are, by virtue of the logic of their position and quite independ-
ently of any individual volition, essentially antagonistic to each other.
Rifts within each class and collisions between subgroups occur and may
even have historically decisive importance. But in the last analysis, such
rifts or collisions are incidental. The one antagonism that is not inci-
dental but inherent in the basic design of capitalist society is founded
upon the private control over the means to produce: the very nature of
the relation between the capitalist class and the proletanat is strife —
class war.

As we shall see presently, Marx tries to show how in that class war
capitalists destroy each other and eventually will destroy the capitalist
system too. He also tries to show how the ownership of capital leads
to further accumulation. But this way of arguing as well as the very
definition that makes the ownership of something the constituent char-

^Another example is the socialist theory of imperialism which will be noticed
later on. O. Bauer’s interesting attempt to interpret the antagonisms between the
various races that inhabited the Austro-Hungarian Empire in terms of the class
struggle between capitalists and workers (Die Nationalitatenfrage, 1905) also de-
serves to be mentioned, although the skill of the analyst only serves to show up
the inadequacy of the tool*

The Marxian Doctrine

acteristic of a social class only serves to increase the importance of the
question of “primitive accumulation,” that is to say, of the question
how capitalists came to be capitalists in the first instance or how they
acquired that stock of goods which according to the Marxian doctrine
was necessary in order to enable them to start exploiting. On this ques-
tion Marx is much less explicit.^ He contemptuously rejects the bour-
geois nursery tale (Kinderfibel) that some people rather than others
became, and are still becoming every day, capitalists by superior intel-
ligence and energy in working and saving. Now he was well advised to
sneer at that story about the good boys. For to call for a guffaw is no
doubt an excellent method of disposing of an uncomfortable truth, as
every politician knows to his profit. Nobody who looks at historical and
contemporaneous fact with anything like an unbiased mind can fail
to observe that this children’s tale, while far from telling the whole
truth, yet tells a good deal of it. Supernormal intelligence and energy
account for industrial success and in particular for the founding of in-
dustrial positions in nine cases out of ten. And precisely in the initial
stages of capitalism and of every individual industrial career, saving was
and is an important element in the process though not quite as ex-
plained in classic economics. It is true that one does not ordinarily at-
tain the status of capitalist (industrial employer) by saving from a wage
or salary in order to equip one’s factory by means of the fund thus as-
sembled. The bulk of accumulation comes from profits and hence pre-
supposes profits — this is in fact the sound reason for distinguishing
saving from accumulating. The means required in order to start enter-
prise are typically provided by borrowing other people’s savings, the
presence of which in many small puddles is easy to explain or the de-
posits which banks create for the use of the would-be entrepreneur.
Nevertheless the latter does save as a rule: the function of his saving is
to raise him above the necessity of submitting to daily drudgery for
the sake of his daily bread and to give him breathing space in order
to look around, to develop his plans and to secure cooperation. As a
matter of economic theory, therefore, Marx had a real case — though
he overstated it — ^when he denied to saving the role that the classical
authors attributed to it. Only his inference does not follow. And the
guffaw is hardly more justified than it would be if the classical theory
were correct.^

8 See Das Kapital, vol. i, ch. xxvi: *‘The Secret of Primitive Accumulation.'*

8 1 will not stay to stress, though I must mention, that even the classical theory
is not as wrong as Marx pretendeff it was. ^‘Saving up" in the most literal sense
has been, especially in earlier stages of capitalism, a not unimportant method of
‘^original accumulation," Moreover, there was another method that was akin to
it though not identical with ’ Many a factory in the seventeenth and eighteenth
centuries was just a shed that a man was able to put up by the work of his hands,
and required only the simplest equipment to work it. In such cases the manual
work of the prospective capitalist plus a quite small fund of savings was all that
was needed — and brains, of course.

Marx the Sociologist 17

The guffaw did its work, however, and helped to clear the road for
Marx's alternative theory of primitive accumulation. But this alterna-
tive theory is not as definite as we might wish. Force — ^robbery — sub-
jugation of the masses facilitating their spoliation and the results of
the pillage in turn facilitating subjugation — this was all right of course
and admirably tallied with ideas common among intellectuals of all
types, in our day still more than in the day of Marx. But evidently it
does not solve the problem, which is to explain how some people ac-
quired the power to subjugate and to rob. Popular literature does not
worry about it. I should not think of addressing the question to the
writings of John Reed. But we are dealing with Marx.

Now at least the semblance of a solution is afforded by the historical
quality of all the major theories of Marx. For him, it is essential for the
logic of capitalism, and not only a matter of fact^ that it grew out of a
feudal state of society. Of course the same question about the causes
and the mechanism of social stratification arises also in this case, but
Marx substantially accepted the bourgeois view that feudalism was a
reign of force^® in which subjugation and exploitation of the masses
were already accomplished facts. The class theory devised primarily for
the conditions of capitalist society was extended to its feudal prede-
cessor — as was much of the conceptual apparatus of the economic
theory of capitalisms^ — and some of the most thorny problems were
stowed away in the feudal compound to reappear in a settled
state, in the form of data, in the analysis of the capitalist pattern.
The feudal exploiter was simply replaced by the capitalist exploiter.
In those cases in which feudal lords actually turned into indus-
trialists, this alone would solve what is thus left of the problem.
Historical evidence lends a certain amount of support to this view:
many feudal lords, particularly in Germany, in fact did erect and rufi
factories, often providing the financial means from their feudal rents
and the labor from the agricultural population (not necessarily but
sometimes their serfs).^^ In all other cases the material available to
stop the gap is distinctly inferior. The only frank way of expressing
the situation is that from a Marxian standpoint there is no satisfactory
Many socialist writers besides Marx have displayed that uncritical confidence
in the explanatory value of the element of force and of the control over the
physical means with which to exert force. Ferdinand Lassalle, for instance, has little
beyond cannons and bayonets to offer by way of explanation of governmental au-
thority. It is a source of wonder to me that so many people should be blind to the
weakness of such a sociology and to the fact that it would obviously be much truer
to say that power leads to control over cannons (and men willing to use them)
than that control over cannons generates power.

u This constitutes one of the affinities of the teaching of Marx to that of K.
Rodbertus.

12 W. Sombart, in the first edition of his Theorie des modernen Kapitalismusp
tried to make the most of those cases. But the attempt to base primitive accumu-
lation entirely on the accumulation of ground rent showed its hopelessness as
Sombart himself eventually recognized.

iS The Marxian Doctrine

explanation, that is to say, no explanation without resorting to non-
Marxian elements suggestive of non-Marxian conclusions*^^

This, however, vitiates the theory at both its historical and its logical
source. Since most of the methods of primitive accumulation also ac-
count for later accumulation — ^primitive accumulation, as it were, con-
tinues throughout the capitalist era — it is not possible to say that
Marx’s theory of social classes is all right except for the difficulties about
processes in a distant past. But it is perhaps superfluous to insist on the
shortcomings of a theory which not even in the most favorable instances
goes anywhere near the heart of the phenomenon it undertakes to ex-
plain, and which never should have been taken seriously. These in-
stances are to be found mainly in that epoch of capitalist evolution
which derived its character from the prevalence of the medium-sized
owner-managed firm. Beyond the range of that type, class positions,
though in most cases reflected in more or less corresponding economic
positions, are more often the cause than the consequence of the latter:
business achievement is obviously not everywhere the only avenue to
social eminence and only where it is can ownership of means of pro-
duction causally determine a group's position in the social structure.
Even then, however, it is as reasonable to make that ownership the de-
fining element as it would be to define a soldier as a man who happens
to have a gun. The water-tight division between people who (together
with their descendants) are supposed to be capitalists once for all and
others who (together with their descendants) are supposed to be prole-
tarians once for all is not only, as has often been pointed out, utterly
unrealistic but it misses the salient point about social classes — the in-
cessant rise and fall of individual families into and out of the upper
strata. The facts I am alluding to are all obvious and indisputable. If
they do not show on the Marxian canvas, the reason can only be in their
un-Marxian implications.

It is not superfluous, however, to consider the role which that theory
plays within Marx’s structure and to ask ourselves what analytic inten-
tion — as distinguished from its use as a piece of equipment for the
agitator — he meant it to serve.

On the one hand, we must bear in mind that for Marx the theory of
Social Classes and the Economic Interpretation of History were not
what they are for us, viz., two independent doctrines. With Marx, the
former implements the latter in a particular way and thus restricts^ —

^®This holds true even if we admit robbery to the utmost extent to which it is
possible to do so without trespassing upon the sphere of the intellectuars folk-
lore. Robbery actually entered into the building up of commercial capital at many
times and. places. Phoenician as well as English wealth offers familiar examples.
But even then the Marxian explanation is inadequate because in the last resort
successful robbery must rest on the personal superiority of tlte robbers. And as
soon as this is admitted, a very different theory of social stratification suggests
itself.

Marx the Sociologist 19

makes more definite — the modus opemndi o£ the conditions or forms
of production. These determine the social structure and, through the
social structure, all manifestations of civilization and the whole march
of cultural and political history. But the social structure is, for all non-
socialist epochs, defined in terms of classes — those two classes — ^which
are the true dramatis personae and at the same time the only imme-
diate creatures of the logic of the capitalist system of production which
affects everything else through them. This explains why Marx was
forced to make his classes purely economic phenomena, and even
phenomena that were economic in a very narrow sense: he thereby
cut himself off from a deeper view of them, but in the precise spot of
his analytic schema in which he placed them he had no choice but to
do so.

On the other hand, Marx wished to define capitalism by the same
trait that also defines his class division. A little reflection will convince
the reader that this is not a necessary or natural thing to do. In fact it
was a bold stroke of analytic strategy which linked the fate of the class
phenomenon with the fate of capitalism in such a way that socialism,
which in reality has nothing to do with the presence or absence of
social classes, became, by definition, the only possible kind of classless
society, excepting primitive groups. This ingenious tautology could not
equally well have been secured by any definitions of classes and of
capitalism other than those chosen by Marx — the definition by private
ownership of means of production. Hence there had to be just two
classes, owners and non-owners, and hence all other principles of di-
vision, much more plausible ones among them, had to be severely neg-
lected or discounted or else reduced to that one.

The exaggeration of the definiteness and importance of the dividing
line between the capitalist class in that sense and the proletariat was
surpassed only by the exaggeration of the antagonism between them.
To any mind not warped by the habit of fingering the Marxian rosary
it should be obvious that their relation is, in normal times, primarily
one of cooperation and that any theory to the contrary must draw
largely on pathological cases for verification. In social life, antagonism
and synagogism are of course both ubiquitous and in fact inseparable
except in the rarest of cases. But I am almost tempted to say that there
was, if anything, less of absolute nonsense in the old harmonistic view —
full of'nonscnse though that was too — than in the Marxian construc-
tion of the impassable gulf between tool owners and tool users. Again,
however, he had no choice, not because he wanted to arrive at revo-
lutionary results — these he could have derived just as well from dozens
of other possible schemata — but because of the requirements of his own
analysis. If class struggle was the subject matter of history and also the
means of bringing about the socialist dawn, and if there had to be just

The Marxian Doctrine

those two classes, then their relation had to be antagonistic on principle
or else the force in his system of social dynamics would have been lost.

Now, though Marx defines capitalism sociologically, i.e., by the insti-
tution of private control over means of production, the mechanics of
capitalist society are provided by his economic theory. This economic
theory is to show how the sociological data embodied in such concep-
tions as class, class interest, class behavior, exchange between classes,
work out through the medium of economic values, profits, wages, in-
vestment, etc., and how they generate precisely the economic process
that will eventually break its own institutional framework and at the
same time create the conditions for the emergence of another social
world. This particular theory of social classes is the analytic tool
which, by linking the economic interpretation of history with the con-
cepts of the profit economy, marshals all social facts, makes all phenom-
ena confocal. It is therefore not simply a theory of an individual phe-
nomenon which is to explain that phenomenon and nothing else. It
has an organic function which is really much more important to the
Marxian system than the measure of success with which it solves its
immediate problem. This function must be seen if we are to under-
stand how an analyst of the power of Marx could ever have borne
with its shortcomings.

There are, and always have been, some enthusiasts who admired the
Marxian theory of social classes as such. But far more understandable
are the feelings of all those who admire the force and grandeur of that
synthesis as a whole to the point of being ready to condone almost any
number of shortcomings in the component parts. We shall try to ap-
praise it for ourselves (Chapter IV). But first we must see how Marx's
economic mechanics acquits itself of the task that his general plan im-
poses upon it.

CHAPTER III

MARX THE ECONOMIST

AS AN economic theorist Marx was first of all a very learned man. It
may seem strange that I should think it necessary to give such
prominence to this element in the case of an author whom I have called
a genius and a prophet. Yet it is important to appreciate it. Geniuses
and prophets do not usually excel in professional learning, and their
originality, Jf any, is often due precisely to the fact that they do not.
But nothing in Marx’s economics can be accounted for by any want of
scholarship or training in the technique of theoretical analysis. He was
a voracious reader and an indefatig abl e worker. He missed very few con-
tributions of significance. And whatever he read he digested, wrestling
with every fact or argument with a passion for detail most unusual in
one whose glance habitually encompassed entire civilizations and secu-
lar developments. Criticizing and rejecting or accepting and coordinat-
ing, he always went to the bottom of every matter. The outstanding
proof of this is in his work. Theories of Surplus Value, which is a monu-
ment of theoretical ardor. This incessant endeavor to school himself and
to master whatever there was to master went some way toward freeing
him from prejudices and extra-scientific aims, though he certainly
worked in order to verify a definite vision. To his powerful intellect,
the interest in the problem as a problem was paramount in spite of
himself; and however much he may have bent the import of his final
results, while at work he was primarily concerned with sharpening the
tools of analysis proffered by the science of his day, with straightening
out logical difficulties and with building on the foundation thus
acquired a theory that in nature and intent was truly scientific what-
ever its shortcomings may have been.

It is easy to see why both friends and foes should have misunderstood
the nature of his performance in the purely economic field. For the
friends, he was so much more than a mere professional theorist that it
would have seemed almost blasphemy to them to give too much promi-
nence to this aspect of his work. The foes, who resented his attitudes
and the setting of his theoretic argument, found it almost impossible to
admit that in some parts of his work he did precisely the kind of thing
which they valued so highly when presented by other hands. Moreover,
the cold metal of economic theory is in Marx’s pages immersed in such
a wealth of steaming phrases as to acquire a temperature not naturally
its own. Whoever shrugs his shoulders at Marx’s claim to be considered

The Marxian Doctrine

an analyst in the scientific sense thinks of course of those phrases and
not of the thought, of the impassioned language and of the glowing in-
dictment of ''exploitation'' and “immiserization” (this is probably the
best way to render the word Verelendungy which is no more good Ger-
man than that English monster is good English. It is irnmiserirnento in

Italian). To be sure, all these things and many others, such as his s pite -

ful innuendoe s or his vulgar comment on Lady Orkney^ arc important
p^rts of the show, were important to Marx himself and are so both for
the faithful and for the unbelievers. They explain in part why many
people insist on seeing in Marx's theorems something more than, and
even something fundamentally different from, the analogous proposi-
tions of his master. But they do not affect the nature of his analysis.

Marx had a master then? Yes. Real understanding of his economics
begins with recognizing that, as a theorist,' he was a pupil of Ricardo.
He was his pupil not only in the sense that his own argument evidently
starts from Ricardo's propositions but also in the much more significant
sense that he had learned the art of theorizing from Ricardo. He always
used Ricardo's tools, and every theoretical problem presented itself to
him in the form of difficulties which occurred to him in his profound
study of Ricardo and of suggestions for further work which he gleaned
from it. Marx himself admitted much of this, although of course he
would not have admitted that his attitude toward Ricardo was typically
that of a pupil who goes to the professor, hears him speak several times
in almost successive sentences of redundancy of population and of popu-
lation that is redundant and again of machinery making population re-
dundant, and then goes home and tries to work the thing out. That
both parties to the Marxian controversy should have been averse to ad-
mitting this is perhaps understandable.

Ricardo's is not the only influence which acted on Marx's economics,
but no other than that of Quesnay, from whom Marx derived his fiin-
damental conception of the economic process as a whole, need be men-
tioned in a sketch like this. The group of English writers who between
i8oo and 1840 tried to develop the labor theory of value may have
furnished many suggestions and details, but this is covered for our pur-
pose by the reference to the Ricardian current of thought. Several au-
thors, to some of whom Marx was unkind in inverse proportion to their
distance from him and whose work ran in many points parallel to his
(Sismondi, Rodbertus, John Stuart Mill), must be left out of account,
as must everything not directly pertaining to the main argument— so,
for instance, Marx's distinctly weak performance in the field of money,
in which he did not succeed in coming up to the Ricardian standard.

Now for a desperately abbreviated outline of the Marxian argument,
unavoidably unjust on many counts to the structure of Das Kapital

rXhe friend of William III — the Icing who, so unpopular In his own day, had
by that time become an idol of the English bourgeoisie.

Marx the Economist 23

which, partly unfinished, partly battered by successful attack, still
stretches its mighty skyline before us!

1 . Marx fell in with the ordinary run of the theorists of his own and
also of a later epoch by making a theory of value the corner stone of his
theoretical structure. His theory of value is the Ricardian one. I believe
that such an outstanding authority as Professor Taussig disagreed with
this and always stressed the differences. There is plenty of difference in
wording, method of deduction and sociological implication, but there
is none in the bare theorem, which alone matters to the theorist of
today.2 Both j ^icardo and Mar x say that th e value of every co mmodity
is (in perfect equilibrium and perfect competition) proport ional to the
quanti ty of labor co ntained in the commodity, provided this labor i s
in accordance with the eSfing standard^ (the

**sdaally necessary quantity of labor”). Both measure this quantity in
hours of work and use the same method in order to reduce different
qualities of work to a single standard. Both encounter the threshold
dfficulties incident to this approach similarly (that is to say, Marx en-
counters them as he had learned to do from Ricardo). Neither has any-
thing useful to say about monopoly or what we now call imperfect com-
petition. Both answer critics by the same arguments. Marx’s arguments
are merely less polite, more prolix and more “philosophical” in the
worst sense of this word.

Everybody knows that this theory of value is unsatisfactory. In the
voluminous discussion that has been carried on about it, the right is
not indeed all on one side and many faulty arguments have been used
by its opponents. The essential point is not whether labor is the true
“source” or “cause” of economic value. This question may be of pri-
mary interest to social philosophers who want to deduce from it ethical
claims to the product, and Marx himself was of course not indifferent to
this aspect of the problem. For economics as a positive science, how-
ever, which has to describe or explain actual processes, it is much more

2 It may, however, be open to question whether this is all that mattered to
Marx himself. He was under the same delusion as Aristotle, viz., that value, though
a factor in the determination of relative prices, is yet something that is different
from, and exists independently of, relative prices or exchange relations. The
proposition that the value of a commodity is the amount of labor embodied in it
can hardly mean anything else. If so, then there is a difference between Ricardo and
Marx, since Ricardo’s values are simply, exchange values or relative prices. It is
worth while to mention this because, if we could accept this view of value, much
of his theory that seems to us untenable or even meaningless would cease to be so.
Of course we cannot. Nor would the situation be improved if, following some
Marxologists, we took the view that whether a distinct “substance” or not, Marx’s
labor-quantity values are merely intended to serve as tools by which to display
the division of total social income into labor income and capital income (the theory
of individual relative prices being then a secondary matter). For, as we shall see
presently, Marx’s theory of value also fails at this task (granted that we can
divorce that task from the problem of individual prices).

The Marxian Doctrine

important to ask how the labor theory o£ value works as a tool of
analysis, and the real trouble with it is that it does so very badly.

To begin with, it does not work at all outside of the case of perfect
competition. Second, even with perfect competition it never works
smoothly except if labor is the only factor of production and, more-
over, if labor is all of one kind.^ If either of these two conditions is
not fulfilled, additional assumptions must be introduced and analytical
difficulties increase to an extent that soon becomes unmanageable.
Reasoning on the lines of the labor theory of value is hence reasoning
on a very special case without practical importance, though something
might be said for it if it be interpreted in the sense of a rough approxi-
mation to the historical tendencies of relative values. The theory which
replaced it — in its earliest and now outmoded form, known as the
theory of marginal utility — ^may claim superiority on many counts but
the real argument for it is that it is much more general and applies
equally well, on the one hand, to the cases of monopoly and imperfect
competition and, on the other hand, to the presence of other factors
and of labor of many different kinds and qualities. Moreover, if we in-
troduce into this theory the restrictive assumptions mentioned, propor-
tionality between value and quantity of labor applied follows from it.^
It should be clear, therefore, not only that it was perfectly absurd for
Marxists to question, as at first they tried to do, the validity of the
marginal utility theory of value (which was what confronted them),

®The necessity for the second assumption is particularly damaging. The labor
theory of value may be able to deal with differences in quality of labor that are
due to training (acquired skill): appropriate quota of the work that goes into the
process of training would then have to be added to every hour of skilled work
so that we might, without leaving the range of the principle, put the hour of
work done by a skilled workman equal to a determined multiple of an hour of
unskilled work. But this method fails in the case of “natural’* differences in quality
of work due to differences in intelligence, will power, physical strength or agility.
Then recourse must be had to the difference in value of the hours respectively
worked by the naturally inferior and the naturally superior workmen— a value that
is not itself explainable on the labor-quantity principle. In fact Ricardo does pre-
cisely this: he simply says that those different qualities will somehow be put into
their right relation by the play of the market mechanism so that we may after all
speak of an hour’s work done by workman A being equivalent to a definite multiple
of the work done by workman B. But he completely overlooks that in arguing
in this way he appeals to another principle of valuation and really surrenders
the labor-quantity principle which thus fails from the start, within its own pre-
cincts, and before it has the chance to fail because of the presence of factors other
than labor.

^ In fact, it follows from the marginal utility theory of value that for equilibrium
to exist each factor must be so distributed over the productive uses open to it that
the last unit allocated to any use produces the same value as the last unit allocated
to each of the other uses. If there be no other factors except labor of one kind
and quality, this obviously means that the relative values or prices of all commodi-
ties must be proportional to the numbers of man-hours contained in them, pro-
vided there is perfect competition and mobility.

Marx the Economist 25

but also that it is incorrect to call the labor theory of value ‘‘wrong/'
In any case it is dead and buried.

2. Though neither Ricardo nor Marx seems to have been fully aware
of all the weaknesses of the position in which they had placed them-
selves by adopting this starting point, they perceived some of them
quite clearly. In particular, they both grappled with the problem of
eliminating the element of Services of Natural Agents which of course
are deprived of their proper place in the process of production and dis-
tribution by a theory of value that rests upon quantity of labor alone.
The familiar Ricardian theory of the rent of land is essentially an at-
tempt to accomplish that elimination and the Marxian theory is an-
other, As soon as we are in possession of an analytical apparatus which
takes care of rent as naturally as it does of wages, the whole difficulty
vanishes. Hence nothing more need be said about the intrinsic merits
or demerits of Marx’s doctrine of absolute as distinguished from dif-
ferential rent, or about its relation to that of Rodbertus.

But even if we let that pass we are still left with the difficulty arising
out of the presence of capital in the sense of a stock of means of pro-
duction that are themselves produced. To Ricardo it presented itself
very simply: in the famous Section IV of the first chapter of his Prin-
ciples he introduces and accepts as a fact, without attempting to ques-
tion it, that, where capital goods such as plant, machinery and raw
materials are used in the production of a commodity, this commodity
will sell at a price which will yield a net return to the owner of those
capital goods. He realized that this fact has something to do with the
period of time that elapses between the investment and the emergence
of salable products and that it will enforce deviations of the actual
values of these from proportionality to the man-hours “contained” in
them — including the man-hours that went into the production of the
capital goods themselves — ^whenever these periods are not the same in
all industries. To this he points as coolly as if it followed from, instead
of contradicting, his fundamental theorem about value, and beyond
this he does not really go, confining himself to some secondary prob-
lems that arise in this connection and obviously believing that his
theory still describes the basic determinant of value.

Marx also introduced, accepted and discussed that same fact and
never questioned it as a fact. He also realized that it seems to give the
lie to the labor theory of value. But he recognized the inadequacy
of Ricardo’s treatment of the problem and, while accepting the prob-
lem itself in the shape in which Ricardo presented it, set about to
attack it in earnest, devoting to it about as many hundreds of pages
as Ricardo devoted sentences.

3. In doing so he not only displayed much keener perception of
the nature of the problem involved, but he also improved the con-
ceptual apparatus he received. For instance, he replaced to good

The Marxian Doctrine

purpose Ricardo's distinction between fixed and circulating capital
by the distinction between constant and variable (wage) capital, and
Ricardo's rudimentary notions about duration of the processes of
production by the much more rigorous concept of “organic structure
of capital" which turns on the relation between constant and variable
capital. He also made many other contributions to the theory of capi-
tal. We will however confine ourselves now to his explanation of the
net return to capital, his Theory of Exploitation.

The masses have not always felt themselves to be frustrated and
exploited. But the intellectuals that formulated their views for them
have always told them that they were, without necessarily meaning by
it anything precise. Marx could not have done without the phrase even
. if he had wanted to. His merit and achievement were that he perceived
the weakness of the various arguments by which the tutors of the
mass mind before him had tried to show how exploitation came about
and which even today supply the stock in trade of the ordinary radical.
None of the usual slogans about bargaining power and cheating satis-
fied him. What he wanted to prove was that exploitation did not
arise from individual situations occasionally and accidentally; but
that it resulted from the very logic of the capitalist system, unavoid-
ably and quite independently of any individual intention.

This is how he did it. The brain, muscles and nerves of a laborer
constitute, as it were, a fund or stock of potential labor (Arbeitskraft,
usually translated not very satisfactorily by labor power). This fund
or stock Marx looks upon as a sort of substance that exists in a definite
quantity and in capitalist society is a commodity like any other. We
may clarify the thought for ourselves by thinking of the case of slav-
ery: Marx's idea is that there is no essential difference, though there
are many secondary ones, between the wage contract and the pur-
chase of a slave — ^what the employer of “free" labor buys is not indeed,
as in the case of slavery, the laborers themselves but a definite quota of
the sum total of their potential labor.

Now since labor in that sense (not the labor service or the actual
man-hour) is a commodity the law of value must apply to it. That
is to say, it must in equilibrium and perfect competition fetch a wage
proportional to the number of labor hours that entered into its **pro-
duction." But what number of labor hours enters into the ^produc-
tion" of the stock of potential labor that is stored up within a work-
man's skin? Well, the number of labor hours it took and takes to
rear, feed, clothe and house the laborer.® This constitutes the value
of that stock, and if he sells parts of it — expressed in days or weeks

® That is, prring the distinction between *"labor power"* and labor, the solution
which S. Bailey (A Ctitical Discourse on the Nature ^ Measure and Causes of
Value. 1825) by anticipation voted absurd, as Marx himself did not fail to notice
{Das Kapital. vol. i, ch. xix).

Marx the Economist

or years — he will receive wages that correspond to the labor value of
these parts, just as a slave trader selling a slave would in equilibrium
receive a price proportional to the total number of those labor hours.
It should be observed once more that Marx thus keeps carefully clear
of all those popular slogans which in one form or another hold that
in the capitalist labor market the workman is robbed or cheated or
that, in his lamentable weakness, he is simply compelled to accept
any terms imposed. The thing is not as simple as this: he gets the full
value of his labor potential.

But once the '‘capitalists'' have acquired that stock of potential
services they are in a position to make the laborer work more hours —
render more actual services — than it takes to produce that stock or
potential stock. They can exact, in this sense, more actual hours of
labor than they have paid for. Since the resulting products also sell
at a price proportional to the man-hours that enter into their pro-
duction, there is a difference between the two values — arising from
nothing but the modus operandi of the Marxian law of values —
which necessarily and by virtue of the mechanism of capitalist markets
goes to the capitalist. This is the Surplus Value (Mehrwert),^ By ap-
propriating it the capitalist "exploits" labor, though he pays to the
laborers not less than the full value of their labor potential and re-
ceives from consumers not more than the full value of the products he
sells. Again it should be observed that there is no appeal to such things
as unfair pricing, restriction of production or cheating in the markets
for the products. Marx did of course not mean to deny the existence of
such practices. But he saw them in their true perspective and hence
never based any fundamental conclusions upon them.

Let us admire, in passing, the pedagogics of it: however special and
removed from its ordinary sense the meaning might be which the
word Exploitation now acquires, however doubtful the support which
it derives from the Natural Law and the philosophies of the school-
men and the writers of the Enlightenment, it is received into the pale
of scientific argument after all and thus serves the purpose of comfort-
ing the disciple marching on to fight his battles.

As regards the merits of this scientific argument we must carefully
distinguish two aspects of it, one of which has been persistently
neglected by critics. At the ordinary level of the theory of a stationary
economic process it is easy to show that under Marx's own assumptions
the doctrine of surplus value is untenable. The labor theory of value,
even if we could grant it to be valid for every other commodity, can
never be applied to the commodity labor, for this would imply that
workmen, like machines, are being produced according to rational
cost calculations. Since they are not, there is no warrant for assuming

®The rate of surplus value (degree of exploitation) is defined as the ra tio ^-
tween surplus value and the variable (wage) cap ital. CZZII — — -

The Marxian Doctrine

that the value of labor power will be proportional to the man-hours
that enter into its ''production/' Logically Marx would have improved
his position had he accepted Lassalle’s Iron Law of Wages or simply
argued on Malthusian lines as Ricardo did. But since he very wisely
refused to do that, his theory of exploitation loses one of its essential
props from the start.'^

Moreover, it can be shown that perfectly competitive equilibrium
cannot exist in a situation in which all capitalist-employers make ex-
ploitation gains. For in this case they would individually try to ex-
pand production, and the mass effect of this would unavoidably tend
to increase wage rates and to reduce gains of that kind to zero. It
would no doubt be possible to mend the case somewhat by appealing
to the theory of imperfect competition, by introducing friction and
institutional inhibitions of the working of competition, by stressing
all the possibilities of hitches in the sphere of money and credit and
so on. Only a moderate case could be made out in this manner, how-
ever, one that Marx would have heartily despised.

But there is another aspect of the matter. We need only look at
Marx's analytic aim in order to realize that he need not have accepted
battle on the ground on which it is so easy to beat him. This is so
easy only as long as we see in the theory of surplus value nothing but
a proposition about stationary economic processes in perfect equilib-
rium. Since what he aimed at analyzing was not a state of equilibrium
which according to him capitalist society can never attain, but on
the contrary a process of incessant change in the economic structure,
criticism along the above lines is not completely decisive. Surplus
values may be impossible in perfect equilibrium but can be ever
present because that equilibrium is never allowed to establish itself.
They may always tend to vanish and yet be always there because they
are constantly recreated. This defense will not rescue the labor theory
of value, particularly as applied to the commodity labor itself, or the
argument about exploitation as it stands. But it will enable us to
put a more favorable interpretation on the result, although a satis-
factory theory of those surpluses will strip them of the specifically
Marxian connotation. This aspect proves to be of considerable im-
portance. It throws a new light also on other parts of Marx's apparatus
of economic analysis and goes far toward explaining why that ap-
p^atus was not more fatally damaged by the successful criticisms
directed against its very fundaments.

4. If, however, we go on at the level on which discussion of Marxian
doctrines ordinarily moves, we get deeper and deeper into difficulties
or rather we perceive that the faithful do when they try to follow
the master on his way. To begin with, the doctrine of surplus value
does not make it any easier to solve the problems, alluded to above,

^ We shall see later how Marx tried to replace that prop.

Marx the Economist

which are created by the discrepancy between the labor theory of value
and the plain facts of economic reality. On the contrary it accentuates
them because, according to it, constant capital — that is, non-wage capi-
tal — does not transmit to the product any more value than it loses
in its production; only wage capital does that and the profits earned
should in consequence vary, as between firms, according to the organic
composition of their capitals. Marx relies on the competition between
capitalists for bringing about a redistribution of the total “mass'"
of surplus value such that each firm should earn profits proportional
to its total capital, or that individual rates of profits should be equal-
ized. We readily see that the difficulty belongs to the class of spurious
problems that always result from attempts to work an unsound theory,^
and the solution to the class of counsels of despair. Marx, however,
believed not only that the latter availed to establish the emergence
of uniform rates of profits and to explain how, because of it, relative
prices of commodities will deviate from their values in terms of labor
but also that his theory offered an explanation of another “law"
that held a great place in classical doctrine, namely, the statement
that the rate of profit has an inherent tendency to fall. This follows
in fact fairly plausibly from the increase in relative importance of
the constant part of the total capital in the wage-good industries:
if the relative importance of plant and equipment increases in those
industries, as it does in the course of capitalist evolution, and if the

8 There is, however, one element in it which is not unsound and the percep-
tion of which, however dim, should be recorded to Marx’s credit. It is not, as
almost all economists believe even today, an unquestionable fact that produced
means of production would yield a net return in a perfectly stationary economy.
If they in practice normally do seem to yield net returns, that may well be due
to the fact that the economy never is stationary. Marx’s argument about the net
return to capital might be interpreted as a devious way of recognizing this.

8 His solution of that problem he embodied in manuscripts from which his
friend Engels compiled the posthumous third volume of Das Kapital. Therefore
we have not before us what Marx himself might ultimately have wished to say.
As it was, most critics felt no hesitation in convicting him of having by the third
volume flatly contradicted the doctrine of the first. On the face of it that ver-
dict is not justified. If we place ourselves on Marx’s standpoint, as it is our duty
in a question of this kind, it is not absurd to look upon surplus value as a
*'mass” produced by the social process of production considered as a unit and to
make the rest a matter of the distribution of that mass. And if that is not absurd,
it is still possible to hold that the relative prices of commodities, as deduced in
the third volume, follow from the labor-quantity theory in the first volume. Hence
it is not correct to assert, as some writers from Lexis to Cole have done, that Marx’s
theory of value is completely divorced from, and contributes nothing to, his theory
of prices. But Marx stands to gain little by being cleared of contradiction. The
remaining indictment is quite strong enough. The best contribution to the whole
question of how values and prices are related to each other in the Marxian sys-
tem, that also refers to some of the better performances in a controversy that was
not exactly fascinating, is L. von Bortkiewicz, ‘‘Wertrechnung und Preisrechnung
im Marxschen System,” Archiv fur Soziahoissenschaft und Sozialpolitik, 1907.

go The Marxian Doctrine

rate of surplus value or the degree of exploitation remains the same,
then the rate of return to total capital will in general decrease. This
argument has elicited much admiration, and was presumably looked
upon by Marx himself with all the satisfaction we are in the habit
of feeling if a theory of ours explains an observation that did not
enter into its construction. It would be interesting to discuss it on its
own merits and independently of the mistakes Marx committed in de-
riving it. We need not stay to do so, for it is sufficiently condemned
by its premises. But a cognate though not identical proposition pro-
vides both one of the most important ‘‘forces'' of Marxian dynamics
and the link between the theory of exploitation and the next story
of Marx's analytic structure, usually referred to as the Theory of
Accumulation.

The main part of the loot wrung from exploited labor (according
to some of the disciples, practically all of it) capitalists turn into capi-
tal — means of production. In itself and barring the connotations
called up by Marx's phraseology, this is of course no more than a state-
ment of a very familiar fact ordinarily . described in terms of saving
and investment. For Marx however this mere fact was not enough: if
the capitalist process was to unfold in inexorable logic, that fact had
to be part of this logic which means, practically, that it had to be
necessary. Nor would it have been satisfactory to allow this necessity
to grow out of the social psychology of the capitalist class, for instance
in a way similar to Max Weber's who made Puritan attitudes — and
abstaining from hedonist enjoyment of one's profits obviously fits well
into their pattern — a causal determinant of capitalist behavior. Marx
, did not despise any support he felt able to derive from this method.^^
But there had to be something more substantial than this for a sys-
tem designed as his was, something which compels capitalists to ac-
cumulate irrespective of what they feel about it, and which is powerful
enough to account for that psychological pattern itself. And fortu-
nately there is.

In setting forth the nature of that compulsion to save, I shall for
the sake of convenience accept Marx's teaching on one point: that
is to say, I shall assume as he does that saving by the capitalist class
ipso facto implies a corresponding increase in real capitaL^^ This

10 For instance, in one place {Das Kapitah vol. i, p, 654, of the Everyman edi-
tion) he surpasses himself in picturesque rhetoric on the subject— going, I think,
further than is proper for the author of the economic interpretation of history.
Accumulating may or may not be *‘Moses and all the prophets'XO for the capitalist
class and such flights may or may not strike us as ridiculous — with Marx, argu-
ments of that type and in that style are always suggestive of some weakness that
must be screened.

11 For Marx, saving or accumulating is identical with conversion of '^surplus value
into capital.'’ With that I do not propose to take issue, though individual attempts
at saving do not necessarily and automatically increase real capital. Marx’s view

Marx the Economist

movement will in the first instance always occur in the variable part
of total capital, the wage capital, even if the intention is to increase
the constant part and in particular that part which Ricardo called
fixed capital — mainly machinery.

When discussing Marx’s theory of exploitation, I have pointed out
that in a perfectly competitive economy exploitation gains would
induce capitalists to expand production, or to attempt to expand
it, because from the standpoint of every one of them that would
mean more profit. In order to do so they would have to accumulate.
Moreover the mass effect of this would tend to reduce surplus values
through the ensuing rise in wage rates, if not also through an en-
suing fall in the prices of products — a very nice instance of the con-
tradictions inherent in capitalism that were so dear to Marx’s heart.
And that tendency itself would, also for the individual capitalist, con-
stitute another reason why he should feel compelled to accumulate,^^
though again that would in the end make matters worse for the capi-
talist class as a whole. There would hence be a sort of compulsion to
accumulate even in an otherwise stationary process which, as I men-
tioned before, could not reach stable equilibrium until accumulation
had reduced surplus value to zero and thus destroyed capitalism it-
self.13

Much more important and much more drastically compelling i?^
something else, however. As a matter of fact, capitalist economy is
not and cannot be stationary. Nor is it merely expanding in a steady
manner. It is incessantly being revolutionized from within by new
enterprise, i.e., by the intrusion of new commodities or new methods
of production or new commercial opportunities into the industrial ;
structure as it exists at any moment. Any existing structures and all
the conditions of doing business are always in a process of change.

seems to me to be so much nearer the truth than the opposite view sponsored by
many of my contemporaries that I do not think it worth while to challenge it here.

^2 Less would of course in general be saved out of a smaller than out of a bigger
income. But more will be saved out of any given income if it is not expected to
last or if it is expected to decrease than would be saved out of the same income
if it were known to be at least stable at its current figure.

To some extent Marx recognizes this. But he thinks that if wages rise and
thereby interfere with accumulation, the rate of the latter will decrease “because
the stimulus of gain is blunted” so that “the mechanism of the process of capi-
talist production removes the very obstacles it temporarily creates.” {Das Kapitah
vol. i, ch. XXV, section 1.) Now this tendency of the capitalist mechanism to equili-
brate itself is surely not above question and any assertion of it would require,
to say the least, careful qualification. But the interesting point is that we should
call that statement most un-Marxian if we happened to come across it in the
work of another economist and that, as far as it is tenable, it greatly weakens the
main drift of Marx’s argument. In this point as in many others, Marx displays to
an astonishing degree the shackles of the bourgeois economics of his time which
he believed himself to have broken.

§2 The Marxian Doctrine

Every situation is being upset before it has had time to work itself
out. Economic progress, in capitalist society, means turmoil. And,
as we shall see in the next part, in this turmoil competition works
in a manner completely different from the way it would work in a
stationary process, however perfectly competitive. Possibilities of gains
to be reaped by producing new things or by producing old things
'more cheaply are constantly materializing and calling for new in-
vestments. T ^liese n e w prod ucp and new methods,j:pmpete with the
old product^nd old methq(|s3®1>nTq5^^ ”m^^ but at a decisive
la^^^taeeThat may mean death ta the latter. This is how “progress”
f^mes about m soae^ to escape being undersold,

compeTled tolollow suit, to invest in its turn
knd, in order to be able to do so, to plow back part of its proiSts,
te., to accumulate.^^ Thus, everyone else accumulates.

Now Marx saw this process of industrial change more clearly and
he realized its pivotal importance more fully than any other economist
of his time. This does not mean that he correctly understood its
nature or correctly analyzed its mechanism. With him, that mecha-
nism resolves itself into mere mechanics of masses of capital. He had
no adequate theory of enter prise and his failure to distinguish., the
E ^'epr^n gtx r'TfQli^ :api talist> together with a faultji tlieoj::e.tical
I'ffechnique, accqung for m any cd-se soTrion l eq u^^ for many mis-

take?.“^ nuTTEe mere vTslon of the process was Tm “itself sufficient for
many of the purposes that Marx had in mind. The non sequitur
ceases to be a fatal objection if what does not follow from Marxes
argument can be made to follow from another one; and even down-
right mistakes and misinterpretations are often redeemed by * the
substantial correctness of the general drift of the argument in the
course of which they occur — in particular they may be rendered in-
nocuous for the further steps of the analysis which, to the critic who
fails to appreciate this paradoxical situation, seem condemned be-
yond appeal.

We had an example of this before. Taken as it stands, Marx's theory
of surplus value is untenable. But since the capitalist process does
produce recurrent waves of temporary surplus gains over cost which,
though in a very un-Marxian way, other theories can account for all
right, Marx's next step, inscribed to accumulation, is not completely
vitiated by his previous slips. Similarly, Marx himself did not satis-
factorily establish that compulsion to accumulate, which is so essential

^^That is of course not the only method of financing technological improvement.
But it is practically the only method that Marx considered. Since it actually is a
very important one, we may here follow him in this, though other methods, par-
ticularly that of borrowing from banks, i.e., of creating deposits, produce conse-
quences of their own, insertion of which would really be necessary in order to
draw a correct picture of the capitalist process.

Marx the Economist

to his argument. But no great harm results from the shortcomings of
his explanation because, in the way alluded to, we can readily supply
a more satisfactory one ourselves, in which among other things the
fall of profits drops into the right place by itself. The aggregate rate
of profit on total industrial capital need not fall in the long run,
either for the Marxian reason that the constant capital increases
relatively to the variable capital^® or for any other. It is sufficient that,
as we have seen, the profit of every individual plant is incessantly
being threatened by actual or potential competition from new com-
modities or methods of production which sooner or later will turn
it into a loss. So we get the driving force required and even an
analogon to Marx’s proposition that constant capital does not pro-
duce surplus value — ^for no individual assemblage of capital goods
remains a source of surplus gains forever — ^without having to rely
on those parts of his argument which are of doubtful validity.

Another example is afforded by the next link in Marx’s chain, his
Theory of Concentration, that is, his treatment of the tendency of
the capitalist process to increase the size both of industrial plants
and of units of control. All he has to offer in explanation,^^ when
stripped of his imagery, boils down to the unexciting statements that
“the battle of competition is fought by cheapening commodities”
which “depends, caeteris paribus, on the productiveness of labor”;
that this again depends on the scale of production; and that “the
larger capitals beat the smaller. This is much like what the current
textbook says on the matter, and not very deep or admirable in itself.
In particular it is inadequate because of the exclusive emphasis placed
on the size of the individual “capitals” while in his description of effects
Marx is much hampered by his technique which is unable to deal ef-
fectively with either monopoly or oligopoly.

According to Marx, profits can of course also fall for another reason, i.e.,
because of a fall in the rate of surplus value. That may be due either to in-
creases in wage rates or to reductions, by legislation for instance, of the daily
hours of work. It is possible to argue, even from the standpoint of Marxian theory,
that this will induce ‘'capitalists” to substitute labor-saving capital goods for
labor, and hence also increase investment temporarily irrespective of the impact
of new commodities and of technological progress. Into these questions we can-
not enter however. But we may note a curious incident. In 1837, Nassau W.
Senior published a pamphlet entitled Letters on the Factory Act, in which he tried
to show that the proposed reduction of the duration of the working day would
result in the annihilation of profits in the cotton industry. In Das Kapital, vol. i,
ch. vii, section 3. Marx surpasses himself in fierce indictments against that per-
formance. Senior's argument is in fact little short of foolish. But Marx should have
been the last person to say so for it is quite in keeping with his own theory of
exploitation.

See Das Kapital, vol. i, ch. xxv, section a.

^’'This conclusion, often referred to as the theory of expropriation, is with Marx
the only purely economic basis of that struggle by which capitalists destroy one
another.

3^ The Marxian Doctrine

Yet the admiration so many economists outside the fold profess to
feel for this theory is not unjustified. For one thing, to predict the
advent of big business was, considering the conditions of Marx's day,
an achievement in itself. But he did more than that. He neatly hitched
concentration to the process of accumulation or rather he visualized
the former as part of the latter, and not only as part of its factual
pattern but also of its logic. He perceived some of the consequences
correctly — for instance that “the increasing bulk of individual masses
of capital becomes the material basis of an uninterrupted revolution
in the mode of production itself" — and others at least in a one-sided or
distorted manner. He electrified the atmosphere surrounding the
phenomenon by all the dynamos of class war and politics — that alone
would have been enough to raise his exposition of it high above the
dry economic theorems involved, particularly for people without any
imagination of their own. And, most important of all, he was able to
go on, almost entirely unhampered by the inadequate motivation of
individual traits of his picture and by what to the professional appears
to be lack of stringency in his argument, for after all the industrial
giants actually were in the offing and so was the social situation which
they were bound to create.

5. Two more items will complete this sketch: Marx's theory of
Verelendung or, to use the English equivalent I have ventured to
adopt, of immiserization, and his (and Engels') theory of the trade
cycle. In the former, both analysis and vision fail beyond remedy;
both show up to advantage in the latter.

Marx undoubtedly held that in the course of capitalist evolution
real wage rates and the standard of life of the masses would fall in
the better-paid, and fail to improve in the worst-paid, strata and
that this w6uld come about not through any accidental or environ-
mental circumstances but by virtue of the very logic of the capitalist
process.^® As a prediction, this was of course singularly infelicitous
and Marxists of all types have been hard put to it to make the best
of the clearly adverse evidence that confronted them. At first, and
in some isolated instances even to our day, they displayed a remarkable
tenacity in trying to save that “law" as a statement of an actual
tendency borne out by wage statistics. Then attempts were made to
read into it a different meaning, that is to say, to make it refer not

There is a first-line defense which Marxists, like most apologists, are wont
to set against the critical intention lurking behind any such dear-cut statement.
It is that Marx did not entirely fail to see the other side of the medal and that
he very often ''recognized'' cases of rising wages and so on — as indeed nobody
could possibly fail to do — the implication being that he fully anticipated whatever
a critic might have to say. So prolix a writer who interlards his argument with such
rich layers of historical analysis naturally gives more scope for such defense than
any of the fathers of the church did. But what is the good of “recognizing*' re-
calcitrant fact if it is not allowed to influence conclusions?

Marx the Economist 35

to rates of real wages or to the absolute share that goes to the working
class but to the relative share of labor incomes in total national in-
come. Though some passages in Marx will in fact bear interpretation
in this sense, this clearly violates the meaning of most. Moreover, little
would be gained by accepting this interpretation, because Marx's main
conclusions presuppose that the absolute per capita share of labor
should fall or, at the very least, not increase: if he really had been
thinking of the relative share that would only add to Marxian troubles.
Finally the proposition itself would still be wrong. For the relative
share of wages and salaries in total income varies but little from year
to year and is remarkably constant over time — it certainly does not
reveal any tendency to fall.

There seems, however, to be another way out of the difficulty. A
tendency may fail to show in our statistical time series — ^which may
even show the opposite one as they do in this case — and yet it might
be inherent in the system under investigation, for it might be sup-
pressed by exceptional conditions. This is in fact the line that most
modern Marxists take. The exceptional conditions are found in
colonial expansion or, more generally, in the opening up of new
countries during the nineteenth century, which is held to have brought
about a '‘closed season” for the victims of exploitation.^^ In the next
part we shall have occasion to touch upon this matter. Meanwhile, let
us note that facts lend some prima facie support- to this argument
which is also unexceptionable in logic and therefore might resolve the
difficulty if that tendency were otherwise well established.

But the real trouble is that Marx's theoretical structure is anything
but trustworthy in that sector: along with the vision, the analytic
groundwork is there at fault. The basis of the theory of immiseriza-
tion is the theory of the “industrial reserve army,” i.e., of the unem-
ployment created by the mechanization of the process of production.^^
And the theory of the reserve army is in turn based upon the doctrine
expounded in Ricardo's chapter on machinery. Nowhere else — ex-
cepting of course the theory of value — does Marx's argument so com-
pletely depend on that of Ricardo without adding anything essential.^i

This idea was suggested by Marx himself, though it has been developed by the
Neo-Marxists.

29 This kind of unemployment must of course be distinguished from others. In
particular, Marx notices the kind which owes its existence to the cyclical variations
in business activity. Since the two are not independent and since in his argument
he often relies on the latter type rather than on the former, difficulties of interpre-
tation arise of which not all critics seem to be fully aware.

21 To any theorist this must be obvious, from a study not only of the sedes
materiae, Das Kapital, voL i, ch. xv, sections 3, 4, 5, and especially 6 (where Marx
deals with the theory of compensation, to be noted above), but also of chs. xxiv
and XXV where, in a partially different garb, the same things are repeated and
elaborated.

g6 The Marxian Doctrine

I am speaking of course of the pure theory of the phenomenon only.
Marx did add, as always, many minor touches such as the felicitous
generalization by which the replacement of skilled by unskilled work-
ers is made to enter into the concept of unemployment; also he added
an infinite wealth of illustration and phraseology; and, most impor-
tant of all, he added the impressive setting, the wide backgi'ounds of
his social process.

Ricardo had at first been inclined to share the view, very common at
all times, that the introduction of machines into the productive process
could hardly fail to benefit the masses. When he came to doubt that
opinion or, at all events, its general validity, he with characteristic
frankness revised his position. No less characteristically, he leaned
backwards in doing so and, using his customary method of “imagin-
ing strong cases,” produced a numerical example, well known to all
economists, to show that things could also turn out the other way.
He did not mean to deny, on the one hand, that he was proving no
more than a possibility — a not unlikely one though — or, on the
other hand, that in the end net benefit to labor would result from
mechanization through its ulterior effects on total output, prices
and so on.

The example is correct as far as it goes.^^ The somewhat more re-
fined methods of today support its result to the extent that they
admit the possibility it aimed at establishing as well as the opposite
one; they go beyond it by stating the formal conditions which de-
termine whether the one or the other consequence will ensue. That
is of course all that pure theory can do. Further data are necessary
in order to predict the actual effect. But for our purpose, Ricardo’s
example presents another interesting feature. He considers a firm
owning a given amount of capital and employing a given number of
workmen that decides to take a step in mechanization. Accordingly, it
assigns a group of those workmen to the task of constructing a ma-
chine which when installed will enable the firm to dispense with part
of that group. Profits may eventually remain the same (after the
competitive adjustments which will do away with any temporary
gain) but gross revenue will be destroyed to the exact amount of the
wages previously paid to the workmen that have now been "set
free.” Marx’s idea of the replacement of variable (wage) capital by
constant capital is almost the exact replica of this way of putting it.
Ricardo’s emphasis upon the ensuing redundancy of population is
likewise exactly paralleled by Marx’s emphasis upon surplus popula-
tion which term he uses as an alternative to the term “industrial re-

22 Or it can be made conect without losing its significance. There are a few
doubtful points about the argument that are probably due to its lamentable
technique — ^which so many economists would love to perpetuate.

Marx the Economist 37

serve aimy/' Ricardo’s teaching is indeed being swallowed hook, line
and sinker.

But what may pass muster as long as we move within the restricted
purpose Ricardo had in view becomes utterly inadequate — in fact the
source of another non sequitur, not redeemed this time by a correct
vision of ultimate results — as soon a^ we consider the superstructure
Marx erected on that slender foundation. Some such feeling he seems
to have had himself. For with an energy that has something desperate
about it he clutched the conditionally pessimistic result of his teacher
as if the latter’s strong case were the only possible one, and with
energy even more desperate he fought those authors who had de-
veloped the implications of Ricardo’s hint at compensations that the
machine age might hold out to labor even where the immediate effect
of the introduction of machinery spelled injury (theory of compensa-
tion, the pet aversion of all Marxists).

He had every reason for taking this course. For he badly needed a
firm foundation for his theory of the reserve army which was to serve
two fundamentally important purposes, besides some minor ones.
First, we have seen that he deprived his doctrine of exploitation of
what I have called an essential prop by his aversion, quite understand-
able in itself, to making use of the Malthusian theory of population.
That prop was replaced by the ever-present, because ever-recreated^^
reserve army. Second, the particularly narrow view of the process of
mechanization he adopted was essential in order to motivate the re-
sounding phrases in Chapter XXXII of the first volume of Das
Kapital which in a sense are the crowning finale not only of that
volume but of Marx’s whole work. I will quote them in full — more
fully than the point under discussion requires — in order to give my
readers a glimpse of Marx in the attitude which accounts equally well
for the enthusiasm of some and for the contempt of others. Whether
a compound of things that are not so or the very heart of ^ prophetic
truth, here they are:

‘'Hand in hand with this centralization, or this expropriation of
many capitalists by few, develops . . . the entanglement of all nations
in the net of the world market, and with this, the international char-
acter of the capitalist regime. Along with the constantly diminishing
number of the magnates of capital, who usurp and monopolize all ad-
vantages of this process of transformation, grows the mass of misery,
oppression, slavery, degradation, exploitation; but with this too grows

is of course necessary to stress the incessant creation- It would be quite
unfair to Marx’s words as well as meaning to imagine, as some critics have done,
that he assumed that the introduction of machinery threw people out of work who
then would remain individually unemployed ever after. He did not deny ab-
sorption, and criticism that is based on the proof that any unemployment created
will each time be absorbed entirely misses the target.

g8 The Marxian Doctrine

the revolt of the working class, a class always increasing in numbers,
and disciplined, united, organized by the very mechanism of the
process of capitalist production itself. The monopoly of capital be-
comes a fetter upon the mode of production, which has sprung up
and flourished along with it, and under it. Centralization of the means
of production and socialization of labor at last reach a point where
they become incompatible with their capitalist integument This
integument bursts. The knell of capitalist private property sounds.
The expropriators are expropriated.’'

6. Marx’s performance in the field of business cycles is exceedingly
difiicult to appraise. The really valuable part of it consists of dozens
of observations and comments, most of them of a casual nature, which
are scattered over almost all his writings, many of his letters included.
Attempts at reconstruction from such membra disjecta of a body that
nowhere appears in the flesh and perhaps did not even exist in Marx’s
own mind except in an embryonic form, may easily yield different
results in different hands and be vitiated by the understandable tend-
ency of the admirer to credit Marx, by means of suitable interpreta-
tion, with practically all those results of later research of which the
admirer himself approves.

The common run of friends and foes never realized and does not
realize now the kind of task which confronts the commentator be-
cause of the nature of Marx’s kaleidoscopic contribution to that sub-
ject. Seeing that Marx so frequently pronounced upon it and that
it was obviously very relevant to his fundamental theme, they took
it for granted that there must be some simple and clear-cut Marxian
cycle theory which it should be possible to make grow out of the
rest of his logic of the capitalist process much as, for instance, the
theory of exploitation grows out of the labor theory. Accordingly
they set about finding such a theory, and it is easy to guess what It
was that occurred to them.

On the one hand, Marx no doubt extols — though he does not quite
adequately motivate — the tremendous power of capitalism to develop
society's capacity to produce. On the other hand, he incessantly places
emphasis on the growing misery of the masses. Is it not the most
natural thing in the world to conclude that crises or depressions are
due to the fact that the exploited masses cannot buy what that ever-
expanding apparatus of production turns out or stands ready to turn
out, and that for this and also other reasons which we need not re-
peat the rate of profits drops to bankruptcy level? Thus we seem indeed
to land, according to which element we want to stress, at the shores of
either an under-consumption or an over-production theory of the
most contemptible type.

The Marxian explanation has in fact been classed with the undbr-

Marx the Economist

consumption theories of crises.^^ There are two circumstances that may
be invoked in support. First, in the theory of surplus value and also in
other matters, the aj0&nity of Marx’s teachings with that of Sismondi
and Rodbertus is obvious. And these men did espouse the under-
consumption view. It was not unnatural to infer that Marx might have
done the same. Second, some passages in Marx’s works particularly
the brief statement about crises contained in the Communist Mani-
festo undoubtedly lend themselves to this interpretation, though
Engels’ utterances do so much more.^^ But this is of no account since
Marx, showing excellent sense, expressly repudiated it.^^

The fact is that he had no simple theory of business cycles. And
none can be made to follow logically from his 'laws” of the capitalist
process. Even if we accept his explanation of the emergence of sur-
plus value and agree to allow that accumulation, mechanization (rela-
tive increase of constant capital) and surplus population, the latter
inexorably deepening mass misery, do link up into a logical chain that
ends in the catastrophe of the capitalist system — even then we are
left without a factor that would necessarily impart of cyclical fluctua-
tion to the process and account for an immanent alternation of pros-
perities and depressions.^’’ No doubt plenty of accidents and incidents

24 Though this interpretation has become a fashion, I will mention two authors

only, one of whom is responsible for a modified version of it, while the other may
testify to its persistence: Tugan-Baranowsky, Theoretische Grundlagen des Marxis-
mus, 1905, who condemned Marx’s theory of crises on that ground; and M. Dobb,
Political Economy and Capitalism, 1937, more sympathetic toward it.

25 Engels’ somewhat commonplace view of the matter is best expressed in his
polemical book entitled Herrn Eugen Diihrings Umwdlzung der WissenschafU
1878, in what has become one of the most frequently quoted passages in socialist
literature. He presents there a very graphic account of the morphology of crises
that is good enough no doubt for the purposes of popular lectures, but also the
opinion, standing in the place in which one would look for an explanation, that
**the expansion of the market cannot keep pace with the expansion of production.”
Also he approvingly refers to Fourier’s opinion, conveyed by the self-explanatory
phrase, crises pUthoriques, It cannot be denied however that Marx wrote part of
ch. X and shares responsibility for the whole book.

I observe that the few comments on Engels that are contained in this sketch
are of a derogatory nature. This is unfortunate and not due to any intention to
belittle the merits of that eminent man. I do think however that it should be
frankly admitted that intellectually and especially as a theorist he stood far below
Marx. We cannot even be sure that he always got the latter’s meaning. His inter-
pretations must therefore be used with care,

2« Das Kapital, voL ii, p. 476, of the English translation of 1907. See, however,
also Theorien uher den Mehrwert, vol. ii, ch. iii.

27 To the layman, the opposite seems so obvious that it would not be easy to
establish this statement, even if we had all the space in the world. The best way
for the reader to convince himself of its truth is to study Ricardo’s argument on
machinery. The process there described might cause any an^unt of unemployment
and yet go on indefinitely without causing a breakdown other than the final one
of the system itself. Marx would have agreed with this.

The Marxian Doctrine

are always at hand for us to draw upon in order to make up for the
missing fundamental explanation. There are miscalculations, mis-
taken expectations and other errors, waves of optimism and pessimism,
speculative excesses and reactions to speculative excesses, and there
is the inexhaustible source of “external factors/' All the same, Marx's
mechanical process of accumulation going on at an even rate — and
there is nothing to show why, on principle, it should not — the process
he describes might also go on at even rates; as far as its logic is con-
cerned, it is essentially prosperityless and depressionless.

Of course this is not necessarily a misfortune. Many other theorists
have held and do hold simply that crises happen whenever something
of sufficient importance goes wrong. Nor was it altogether a handicap
because it released Marx, for once, from the thralldom of his system
and set him free to look at facts without having to do violence to
them. Accordingly, he considers a wide variety of more or less relevant
elements. For instance, he uses somewhat superficially the interven-
tion of money in commodity transactions — and nothing else — in order
to invalidate Say's proposition about the impossibility of a general
glut; or easy money markets in order to explain disproportionate
developments in the lines characterized by heavy investment in durable
capital goods; or special stimuli such as the opening of markets or the
emergence of new social wants in order to motivate sudden spurts in
“accumulation." He tries, not very successfully, to turn the growth of
population into a factor making for fluctuations.^^ He observes, though
he does not really explain, that the scale of production expands “by
fits and starts" that are “the preliminary to its equally sudden con-
traction." He aptly says that “the superficiality of Political Economy
shows itself in the fact that it looks upon expansion and contraction
of credit, which is a mere symptom of the periodic changes of the in-
dustrial cycle, as their cause."^^ And the chapter of incidents and acci-
dents he of course lays under heavy contribution.

All that is common sense and substantially sound. We find prac-
tically all the elements that ever entered into any serious analysis of
business cycles, and on the whole very little error. Moreover, it must
not be forgotten that the mere perception of the existence of cyclical
movements was a great achievement at the time. Many economists
who went before him had an inkling of it In the main, however, they
focused their attention on the spectacular breakdowns that came

In this also he does not stand alone. However it is but fair to him to expect
that he would eventually have seen the weaknesses of this approach, and it is rele-
vant to note that his remarks on the subject occur in the third volume and cannot
be trusted to render what might have been his final view.

Das Kapitah vol. i, ch. xxv, section 3. Immediately after this passage he takes
a step in a direction feat is also very familiar to the student of modern business
cycle theories: '^Effects, in their turn become causes, and the varying accidents of tlie
whole proce^ss, w/iich always reproduces Us own conditions [my italia], take on the
form of periodicity.’**

Marx the Economist 41

to be referred to as ‘'crises/' And those crises they failed to see in
their true light, that is to say, in the light of the cyclical process of
which they are mere incidents. They considered them, without looking
beyond or below, as isolated misfortunes that will happen in con-
sequence of errors, excesses, misconduct or of the faulty working of
the credit mechanism. Marx was, I believe, the first economist to rise
above that tradition and to anticipate — barring the statistical com-
plement — the work of Clement Juglar. Though, as we have seen, he
did not offer an adequate explanation of the business cycle, the
phenomenon stood clearly before his eyes and he understood much
of its mechanism. Also like Juglar, he unhesitatingly spoke of a
decennial cycle “interrupted by minor fluctuations."^*^ He was in-
trigued by the question of what the cause of that period might be
and considered the idea that it might have something to do with the
life of machinery in the cotton industry. And there are many other
signs of preoccupation with the problem of business cycles as dis-
tinguished from that of crises. This is enough to assure him high rank
among the fathers of modern cycle research.

Another aspect must be mentioned. In most cases Marx used the
term crisis in its ordinary sense, speaking of the crisis of 1825
of 1847 as other people do. But he also used it in a different sense.
Believing that capitalist evolution would some day disrupt the insti-
tutional framework of capitalist society, he thought that before the
actual breakdown occurred, capitalism would begin to work with in-
creasing friction and display the symptoms of fatal illness. To this
stage, to be visualized of course as a more or less prolonged historical
period, he applied the same term. And he displays a tendency to link
those recurrent crises with this unique crisis of the capitalist order.
He even suggests that the former may in a sense be looked upon as
previews of the ultimate breakdown. Since to many readers this might
look like a clue to Marx's theory of crises in the ordinary sense, it is
necessary to point out that the factors which according to Marx will
be responsible for the ultimate breakdown cannot, without a good
dose of additional hypotheses, be made responsible for the recurrent
depressions,^^ and that the clue does not get us beyond the trivial
Engels went further than this. Some of his notes to Marx’s third volume reveal
that he suspected also the existence of a longer swing. Though he was inclined
to interpret the comparative weakness of prosperities and the comparative intensity
of depressions in the seventies and eighties as a structural change rather than as
the effect of the depression phase of a wave of longer span (exactly as many modern
economists do with respect to the post-war developments and especially to those of
the last decade) some anticipation of Kondratieff’s work on Long Cycles might be
seen in this.

Si In order to convince himself of this, the reader need only glance again at the
quotation on p. 37. In fact, though Marx so often plays with the idea, he avoids
committing himself to it, which is significant because it was not his way to miss the
opportunity for a generalization.

^2 The Marxian Doctrine

proposition that the ‘‘expropriation of the expropriators^^ may be an
easier matter in a depression than it would be in a boom.

7. Finally, the idea that capitalist evolution will burst — or out-
— the institutions of capitalist society (Zusammenbruchstheorie^
the theory of the inevitable catastrophe) affords a last example of the
combination of a non sequitur with profound vision which helps to
rescue the result,

Based as Marx’s “dialectic deduction” is on the growth of misery
and oppression that will goad the masses into revolt, it is invalidated
by the non sequitur that vitiates the argument which was to establish
that inevitable growth of misery. Moreover, otherwise orthodox Marx-
ists have long ago begun to doubt the validity of the proposition that
concentration of industrial control is necessarily incompatible with
the “capitalist integument.” The first of them to voice this doubt
by means of a well-organized argument was Rudolf Hilferding,^^ one
of the leaders of the important group of Neo-Marxists, who actually
inclined toward the opposite inference, viz., that through concentra-
tion capitalism might gain in stability.^^ Deferring to the next part
what I have to say upon the matter, I will state that Hilferding seems
to me to go too far although there is, as we shall see, no foundation
for the belief, at present current in this country, that big business
“becomes a fetter upon the mode of production,” and although Marx’s
conclusion does in fact not follow from his premises.

However, even though Marx’s facts and reasoning were still more at
fault than they are, his result might nevertheless be true so far as
it simply avers that capitalist evolution will destroy the foundations
of capitalist society. I believe it is. And I do not think I am ex-
aggerating if I call profound a vision in which that truth stood re-
vealed beyond doubt in 1847. It is a commonplace now. The first to
make it that was Gustav Schmoller. His Excellency, Professor Von
Schmolier, Prussian Privy Councellor and Member of the Prussian
House of Lords, was not much of a revolutionary or much given to agi-

FimnzkapHal, igio. Doubts based on a number of secondary circumstances
that were held to show that Marx made too much of the tendencies he thought he
had established and that social evolution was a much more complex and a much
less consistent process than he made out, had of course often arisen before. It is
sufficient to mention E. Bernstein; see ch. xxvi. But Hilferding's analysis does not
plead extenuating circumstances, but fights that conclusion on principle and on
Marxes own ground.

S 3 This proposition has often (even by its author) been confused with the proposi-
tion that business fluctuations tend to become milder as time goes on. Tltat may or
may not be so (1929-52 would not disprove it) but greater stability of the capitalist
system, i.e., a somewhat less temperamental behavior of our time scries of prices
and quantities, does not necessarily imply, nor is it necessarily implied by, greater
stability, i.e., a greater ability of the capitalist order to withstand attack. Both thingi
are related, of course, but they are not the same.

Marx the Economist 43

tatorial gesticulations. But he quietly stated the same truth. The
Why and How of it he likewise left unsaid.

It is hardly necessary to sum up elaborately. However imperfect,
our sketch should suffice to establish: first, that nobody who cares at
all for purely economic analysis can speak of unqualified success;
second, that nobody who cares at all for bold construction can speak
of unqualified failure.

In the court that sits on theoretical technique, the verdict must
be adverse. Adherence to an analytic apparatus that always had been
inadequate and was in Mai^x's own day rapidly becoming obsolete;
a long list of conclusions that do not follow or are downright wrong;
mistakes which if corrected change essential inferences, sometimes into
their opposites — all this can be rightfully charged against Marx, the
theoretical technician.

Even in that court, however, qualification of the verdict will be
necessary on two grounds.

First, though Marx was often — ^sometimes hopelessly — ^wrong, his
critics were far from being always right. Since there were excellent
economists among them, the fact should be recorded to his credit, par-
ticularly because most of them he was not able to meet himself.

Second, so should Marx’s contributions, both critical and positive,
to a great many individual problems. In a sketch like this, it is not
possible to enumerate them, let alone to do them justice. But we
have had a view of some of them in our discussion of his treatment
of the business cycle. I have also mentioned some that improved our
theory of the structure of physical capital. The schemata which he
devised in that field, though not irreproachable, have again proved
serviceable in recent work that looks quite Marxian in places.

But a court of appeal — even though still confined to theoretical
matters — might feel inclined to reverse this verdict altogether. For
there is one truly great achievement to be set against Marx’s theoreti-
cal misdemeanors. Through all that is faulty or even unscientific in
his analysis runs a fundamental idea that is neither — the idea of a
theory, not merely of an indefinite number of disjointed individual
patterns or of the logic of economic quantities in general, but of
the actual sequence of those patterns or of the economic process as it
goes on, under its own steam, in historic time, producing at every
instant that state which will of itself determine the next one. Thus,
the author of so many misconceptions was also the first to visualize
what even at the present time is still the economic theory of the future
for which we are slowly and laboriously accumulating stone and mor-
tar, statistical facts and functional equations.

And he not only conceived that idea, but he tried to carry it out.
All the shortcomings that disfigure his work must, because of the

44 The Marxian Doctrine

great purpose his argument attempted to serve, be judged differently
even where they are not, as they are in some cases, fully redeemed
thereby. There is however one thing of fundamental importance for
the methodology of economics which he actually achieved. Economists
always have either themselves done work in economic history or else
used the historical work of others. But the facts of economic history
were assigned to a separate compartment. They entered theory, if
at all, merely in the role of illustrations, or possibly of verifications
of results. They mixed with it only mechanically. Now Marx's mix-
ture is a chemical one; that is to say, he introduced them into the very
argument that produces the results. He was the first economist of top
rank to see and to teach systematically how economic theory may be
turned into historical analysis and how the historical narrative may
be turned into histoire raisonneeM the analogous problem with re-
spect to statistics he did not attempt to solve. But in a sense it is im-
plied in the other. This also answers the question how far, in the
way explained at the end of the preceding chapter, Marx's economic
theory succeeds in implementing his sociological setup. It does not
succeed; but in failing, it establishes both a goal and a method.

devoted disciples should therefore claim that he set the goal for the histori-
cal school of economics, that claim could not be lightly dismissed, though the work
of the Schmoller school was certainly dfuite independent of Marx's suggestion. But
if they went on to claim that Marx, and Marx only, knew how to rationalize history,
whereas the men of the historical school only knew how to describe facts without
getting at their meaning, they would be spoiling their case. Tor those men as a
matter of fact knew how to analyze. If their generalizations were less sweeping
and their narratives less selective, that is all to their credit.

CHAPTER IV

MARX THE TEACHER

T he main components of the Marxian structure are now before us.

What about the imposing synthesis as a whole? The question is
not otiose. If ever it is true, it is in this case that the whole is more
than the sum of the parts. Moreover, the synthesis may have so spoiled
the wheat or so utilized the chaff, both of which are present in almost
every spot, that the whole might be more true or more false than
any part of it is, taken by itself. Finally, there is the Message that
proceeds only from the whole. Of the latter however no more will be
said. Each of us must settle for himself what it means to him.

Our time revolts against the inexorable necessity of specialization
and therefore cries out for synthesis, nowhere so loudly as in the social
sciences in which the non-professional element counts for so much.^
But Marx’s system illustrates well that, though synthesis may mean
new light, it also means new fetters.

We have seen how in the Marxian argument sociology and eco-
nomics pervade each other. In intent, and to some degree also in
actual practice, they are one. All the major concepts and propositions
are hence both economic and sociological and carry the same meaning
on both planes — if, from our standpoint, we may still speak of two
planes of argument. Thus, the economic category 'labor” and the social
class ''proletariat” are, on principle at least, made congruent, in fact
identical. Or the economists’ functional distribution — that is to say,
the explanation of the way in which incomes emerge as returns to
productive services irrespective of what social class any recipient of
such a return may belong to — enters the Marxian system only in the
form of distribution between social classes and thus acquires a different
connotation. Or capital in the Marxian system is capital only if in
the hands of a distinct capitalist class. The same things, if in the
hands of the workmen, are not capital.

There cannot be any doubt about the access of vitality which comes
to analysis thereby. The ghostly concepts of economic theory begin

^The non-professional element is particularly strongly represented among those
admirers of Marx who, going beyond the attitude of the typical Marxian economist,
still take at face value everything he wrote. This is very significant. In every
national group of Marxists there are at least three laymen to every trained econ-
omist and even this economist is as a rule a Marxist only in that qualified sense
defined in the introduction to this part: he worships at the shrine, but he turns
his back upon it when he does his research.

The Marxian Doctrine

to breathe. The bloodless theorem descends into agmen^ pulverem et
clamorem; without losing its logical quality, it is no longer a mere
proposition about the logical properties of a system of abstractions;
it is the stroke of a brush that is painting the wild jumble of social
life. Such analysis conveys not only richer meaning of what all eco-
nomic analysis describes but it embraces a much broader field — it
draws every kind of class action into its picture, whether or not this
class action conforms to the ordinary rules of business procedure.
Wars, revolutions, legislation of all types, changes in the structure of
governments, in short all the things that non-Marxian economics
treats simply as external disturbances do find their places side by
side with, say, investment in machinery or bargains with labor —
everything is covered by a single explanatory schema.

At the same time, such procedure has its shortcomings. Conceptual
arrangements that are subject to a yoke of this kind may easily lose
in efficiency as much as they gain in vividness. The pair, worker-
proletarian, may serve as a telling if somewhat trite example. In non-
Marxian economics all returns to services of persons partake of the
nature of wages, whether those persons are tophole lawyers, movie
stars, company executives or street sweepers. Since all these returns
have, from the standpoint of the economic phenomenon involved,
much in common, this generalization is not futile or sterile. On the
contrary, it may be enlightening, even for the sociological aspect of
things. But by equating labor and proletariat we obscure it; in fact, we
entirely banish it from our picture. Similarly, a valuable economic
theorem may by its sociological metamorphosis pick up error instead
of richer meaning and vice versa. Thus, synthesis in general and
synthesis on Marxian lines in particular might easily issue in both
worse economics and worse sociology.

Synthesis in general, i.e., coordination of the methods and results
of different lines of advance, is a difficult thing which few are com-
petent to tackle. In consequence it is ordinarily not tackled at all and
from the students who are taught to see only individual trees we hear
discontented clamor for the forest. They fail to realize however that
the trouble is in part an embarras de richesse and that the synthetic
forest may look uncommonly like an intellectual concentration camp.

Synthesis on Marxian lines, i.e., coordination of economic and
sociological analysis with a view to bending everything to a single pur-
pose, is of course particularly apt to look like that. The purpose—
that histoire raisonn^e of capitalist society — is wide enough but the
analytic setup is not. There is indeed a grand wedding of political facts
and of economic theorems; but they are wedded by force and neither of
them can breathe. Marxists claim that their system solves all the great
problems that baffle non-Marxian economics; so it does but only by
emasculating them. This point calls for some elaboration.

Marx the Teacher 47

I said a moment ago that Marx's synthesis embraces all those his-
torical events — such as wars, revolutions, legislative changes — and all
those social institutions — such as property, contractual relations, forms
of government — that non-Marxian economists are wont to treat as dis-
turbing fa.ctors or as data, which means that they do not propose to
explain them but only to analyze their modi operandi and conse-
quences. Such factors or data are of course necessary in order to delimit
the object and range of any research program whatsoever. If they are
not always expressly specified, that is only because everyone is expected
to know what they are. The trait peculiar to the Marxian system
is that it subjects those historical events and social institutions them-
selves to the explanatory process of economic analysis or, to use the
technical lingo, that it treats them not as data but as variables.

Thus the Napoleonic Wars, the Crimean War, the American Civil
War, the World War of 1914, the French Frondes, the great French
Revolution, the revolutions of 1830 and 1848, English free trade, the
labor movement as a whole as well as any of its particular manifes-
tations, colonial expansion, institutional changes, the national and
party politics of every time and country — all this enters the domain of
Marxian economics which claims to find theoretical explanations in
terms of class warfare, of attempts at and revolt against exploitation,
of accumulation and of qualitative change in the capital structure, of
changes in the rate of surplus value and in the rate of profit. No longer
has the economist to be content with giving technical answers to
technical questions; instead, he teaches humanity the hidden mean-
ing of its struggles. No longer is ''politics" an independent factor
that may and must be abstracted from in an investigation of funda-
mentals and, when it does intrude, plays according to one's preferences
either the role of a naughty boy who viciously tampers with a ma-
chine when the engineer’s back is turned, or else the role of a deus
ex machina by virtue of the mysterious wisdom of a doubtful species
of mammals deferentially referred to as “statesmen." No — politics
itself is being determined by the structure and state of the economic
process and becomes a conductor of effects as completely within the
range of economic theory as any purchase or sale.

Once more, nothing is easier to understand than the fascination ex-
erted by a synthesis which does for us just this. It is particularly under-
standable in the young and in those intellectual denizens of our news-
paper world to whom the gods seem to have granted the gift of eternal
youth. Panting with impatience to have their innings, longing to save
the world from something or other, disgusted with textbooks of un-
describable tedium, dissatisfied emotionally and intellectually, unable
to achieve synthesis by their own effort, they find what they crave for
in Marx. There it is, the key to all the most intimate secrets, the
magic wand that marshals both great events and small. They are

^8 The Marxian Doctrine

beholding an explanatory schema that at the same time is — if I may
for a moment lapse into Hegelianism— most general and most con-
crete. They need no longer feel out of it in the great affairs of life —
all at once they see through the pompous marionettes of politics and
business who never know what it is all about. And who can blame
them, considering available alternatives?

Yes, of course — but apart from that, what does this service of the
Marxian synthesis amount to? I wonder. The humble economist who
describes England's transition to free trade or the early achievements
of English factory legislation is not, and never was, likely to forget
to mention the structural conditions of the English economy that
’ produced those policies. If he does not do so in a course or book on
pure theory that merely makes for neater and and more efficient
analysis. What the Marxist has to add is only the insistence on the
principle, and a particularly narrow and warped theory by which to
implement it. This theory yields results no doubt, and very simple and
definite ones to boot. But we need only apply it systematically to
individual cases in order to grow thoroughly weary of the unending
jingle about the class war between owners and non-owners and to
become aware of a painful sense of inadequacy or, worse still, of
triviality — of the former, if we do not swear by the underlying schema;
of the latter, if we do.

Marxists are in the habit of pointing triumphantly to the success
of the Marxian diagnosis of the economic and social tendencies that
are supposed to be inherent in capitalist evolution. As we have seen,
there is some justification for this: more clearly than any other writer
of his day Marx discerned the trend toward big business and not only
that but also some of the features of the consequent situations. We
have also seen that in this case vision lent its aid to analysis so as to
remedy some of the shortcomings of the latter and to make the import
of the synthesis truer than the contributing elements of the analysis
were themselves. But this is all. And against the achievement must be
set the failure of the prediction of increasing misery, the Joint result
of wrong vision and faulty analysis, on which a great many Marxian
speculations about the future course of social events had been based.
He who places his trust in the Marxian synthesis as a whole in order
to understand present situations and problems is apt to be woefully
wrong.^ This seems in fact to be felt by many a Marxist just now.

2 Some Marxists would reply that non-Marxian economists have simply nothing
to contribute to our understanding of our time so that the disdple of Marx is
nevertheless better oif in that respect. Waiving the question of whether it is better
to say nothing' or to say something that is wrong, we should bear in mind that
this is not true, for both economists and sociologists of non-Marxian persuasions
have as a matter of fact contributed substantially though mostly on individual ques-
tions. Least of all can this Marxist claim be based on a comparison of Marx's
teachings with that of the Austrians or of the Walras or Marshal! schools. The mem-

Marx the Teacher

In particular there is no reason for taking pride in the manner in
which the Marxian synthesis accounts for the experience of the last
decade. Any prolonged period of depression or of unsatisfactory re-
covery will verify any pessimistic forecast exactly as well as it verifies
the Marxian one. In this case an impression to the contrary is created
by the talk of disheartened bourgeois and elated intellectuals which
naturally acquired a Marxian hue from their fears and hopes. But
no actual fact warrants any specifically Marxian diagnosis, still less
an inference to the effect that what we have been witnessing was not
simply a depression, but the symptoms of a structural change in the
capitalist process such as Marx expected to occur. For, as will be
noted in the next part, all the phenomena observed such as super-
normal unemployment, lack of investment opportunity, shrinkage of
money values, losses and so on, come within the well-known pattern
of periods of predominating depression such as the seventies and
eighties on which Engels commented with a restraint that should set
an example to ardent followers of today.

Two outstanding examples will illustrate both the merits and the
demerits of the Marxian synthesis considered as a problem-solving
engine.

First we will consider the Marxist theory of Imperialism. Its roots
are all to be found in Marx’s chief work, but it has been developed
by the Neo-Marxist school which flourished in the first two decades
of this century and, without renouncing communion with the old
defenders of the faith, such as Karl Kautsky, did much to overhaul
the system. Vienna was its center; Otto Bauer, Rudolf Hilferding, Max
Adler were its leaders. In the field of imperialism their work was
continued, with but secondary shifts of emphasis, by many others,
prominent among whom were Rosa Luxemburg and Fritz Sternberg.
The argument runs as follows.

Since, on the one hand, capitalist society cannot exist and its eco-
nomic system cannot function without profits and since, on the other
hand, profits are constantly being eliminated by the very working of
that system, incessant effort to keep them alive becomes the central
aim of the capitalist class. Accumulation accompanied by qualitative
change in the composition of capital is, as we have seen, a remedy
which though alleviating for the moment the situation of the indi-
vidual capitalist makes matters worse in the end. So capital, yielding to
the pressure of a falling rate of profits — ^it falls, we recall, both because
constant capital increases relative to variable capital and because, if
wages tend to rise and hours are being shortened, the rate of surplus

bers of these groups were in most cases wholly, in all cases mainly, interested in
economic theory. This performance is hence incommensurable with Marx's syn-
thesis. It could only be compared with Marx’s theoretical apparatus and in that
field comparison is all to their advantage.

50 The Marxian Doctrine

value falls — seeks for outlets in countries in which there is still labor
that can be exploited at will and in which the process of mechaniza-
tion has not as yet gone far. Thus we get an export of capital into
undeveloped countries which is essentially an export of capital equip-
ment or of consumers' goods to be used in order to buy labor or to
acquire things with which to buy labor,^ But it is also export of capital
in the ordinary sense of the term because the exported commodities
will not be paid for — at least not immediately — by goods, services or
money from the importing country. And it turns into colonization if,
in order to safeguard the investment both against hostile reaction of
the native environment — or if you please, against its resistance to ex-
ploitation — and against competition from other capitalist countries,
the undeveloped country is brought into political subjection. This
is in general accomplished by military force supplied either by the
colonizing capitalists themselves or by their home government which
thus lives up to the definition given in the Communist Manifesto:
'"the executive of the modern State [is] ... a committee for managing
the common affairs of the whole bourgeoisie." Of course, that force
will not be used for defensive purposes only. There will be conquest,
friction between the capitalist countries and internecine war between
rival bourgeoisies.

Another element completes this theory of imperialism as it is now
usually presented. So far as colonial expansion is prompted by a falling
rate of profit in the capitalist countries, it should occur in the later
stages of capitalist evolution — ^Marxists in fact speak of imperialism as
a stage, preferably the last stage, of ^capitalism. Hence it would co-
incide with a high degree of concentration of capitalist control over
industry and with a decline of the type of competition that character-
ized the times of the small or medium-sized firm. Marx himself did not
lay much stress on the resulting tendency toward monopolistic re-
striction of output and on the consequent tendency toward protecting
the domestic game preserve against the intrusion of poachers from
other capitalist countries. Perhaps he was too competent an economist
to trust this line of argument too far. But the Neo-Marxists were
glad to avail themselves of it. Thus we get not only another stimulus
for imperialist policy and another source of imperialist imbroglios but

» Think o£ luxuries to be traded to chieftains against slaves or to be traded
against wage goods with which to hire native labor. For the sake of brevity, I do
not take account of the fact that capital export in the sense envisaged will in gen-
eral arise as a part of the total trade of the two countries which also includes com-
modity transactions unconnected with the particular process we have in mind.
These transactions of course greatly facilitate that capital export, but do mt
affect its principle. 1 shall also neglect other types of capital exports* The theory
under discussion is not, and is not intended to be, a general theory of international
trade and finance.

Marx the Teacher

also, as a by-product, a theory of a phenomenon that is not necessarily
imperialist in itself, modern protectionism.

Note one more hitch in that process that will stand the Marxist in
good stead in the task of explaining further difficulties. When the
undeveloped countries have been developed, capital export of the
kind we have been considering will decline. There may then be a
period during which the mother country and the colony will ex-
change, say, manufactured products for raw materials. But in the end
the exports of manufacturers will also have to decline while colonial
competition will assert itself in the mother country. Attempts to re-
tard the advent of that state of things will provide further sources of
friction, this time between each old capitalist country and its colonies,
of wars of independence and so on. But in any case colonial doors
will eventually be closed to domestic capital which will no longer be
able to flee from vanishing profits at home into richer pastures abroad.
Lack of outlets, excess capacity, complete deadlock, in the end regular
recurrence of national bankruptcies and other disasters — perhaps
world wars from sheer capitalist despair — ^may confidently be antici-
pated. History is as simple as that.

This theory is a fair — perhaps it is the best — example of the way
in which the Marxian synthesis attempts to solve problems and ac-
quires authority by doing so. The whole thing seems to follow beauti-
fully from two fundamental premises that are both firmly embedded
in the groundwork of the system: the theory of classes and the theory
of accumulation. A series of vital facts of our time seems to be per-
fectly accounted for. The whole maze of international politics seems
to be cleared up by a single powerful stroke of analysis. And we see
in the process why and how class action, always remaining intrinsically
the same, assumes the form of political or of business action accord-
ing to circumstances that determine nothing but tactical methods and
phraseology. If, the means and opportunities at the command of a
group of capitalists being what they are, it is more profitable to nego-
tiate a loan, a loan will be negotiated. If, the means and opportuni-
ties being what they are, it is more profitable to make war, war will
be made. The latter alternative is no less entitled to enter economic
theory than the former. Even mere protectionism now grows nicely out
of the very logic of capitalist evolution.

Moreover, this theory displays to full advantage a virtue that it has
in common with most of the Marxian concepts in the field of what
is usually referred to as applied economics. This is its close alliance
with historical and contemporaneous fact. Probably not one reader
has perused my r<§sum^ without being struck by the ease with which
supporting historical instances crowded in upon him at every single
step of the argument. Has he not heard of the oppression by Europeans
of native labor in many parts of the world, of what South and Central

The Marxian Doctrine

American Indians suffered at the hands of the Spaniards for instance,
or of slave-hunting and slave-trading and coolieism? Is capital export
not actually ever-present in capitalist countries? Has it not almost
invariably been accompanied by military conquest that served to
subdue the natives and to fight other European powers? Has not col-
onization always had a rather conspicuous military side, even when
managed entirely by business corporations such as the East India
Company or the British South Africa Company? What better illus-
tration could Marx himself have desired than Cecil Rhodes and the
Boer War? Is it not pretty obvious that colonial ambitions were, to
say the least, an important factor in European troubles, at all events
since about 1700? As for the present time, who has not heard, on the
one hand, about the “strategy of raw materials” and, on the other
hand, of the repercussions on Europe of the growth of native capital-
ism in the tropics? And so on. As to protectionism — well, that is as
plain as anything can be.

But we had better be careful. An apparent verification by prima
facie favorable cases which are not analyzed in detail may be very
deceptive. Moreover, as every lawyer and every politician knows,
energetic appeal to familiar facts will go a long way toward induc-
ing a jury or a parliament to accept also the construction he desires to
put upon them. Marxists have exploited this technique to the full.
In this instance it is particularly successful, because the facts in ques-
tion combine the virtues of being superficially known to everyone
and of being thoroughly understood by very few. In fact, though tve
cannot enter into detailed discussion here, even hasty reflection suffices
to suggest a suspicion that “it is not so.”

A few remarks will be made in the next part on the relation in
which the bourgeoisie stands to imperialism. We shall now consider
the question whether, if the Marxian interpretation of capital export,
colonization and protectionism were correct, it would also be adequate
as a theory of all the phenomena we think of when using that loose
and misused term. Of course we can always define imperialism in such
a way as to mean just what the Marxian interpretation implies; and
we can always profess ourselves convinced that all those phenomena
must be pplainable in the Marxian manner. But then the problem
of imperialism always granting that the theory is in itself correct
—would be “solved” only tautologically.^ Whether the Marxian ap-

. ujnger ot_empty tautologies being put over on ns is best illustrated by

individual rases. Thus, France conquered Algeria, Tunisia and Morocco, and Italy
conquered Abyssinia, by military force without there being any signifleant capitalist
interests to press for m As a matter of fact, presence of such interests was a pre-
tense that was very difficult to establish, and the subsequent development of such
interests was a slow process that went on, unsatisfactorily enough, under govern-
ment pressure If that should not look very Marxist, it will be replied
as taken under pressure of potential or anticipated capitalist interats or tliat in

Marx the Teacher

proach or, for that matter, any purely economic approach yields a
solution that is not tautological would still have to be considered.
This, however, need not concern us here, because the ground gives
way before we get that far.

At first sight, the theory seems to fit some cases tolerably well. The
most important instances are afforded by the English and Dutch con-
quests in the tropics. But other cases, such as the colonization of New
England, it does not fit at all. And even the former type of case is
not satisfactorily described by the Marxian theory of imperialism. It
would obviously not suffice to recognize that the lure of gain played
a role in motivating colonial expansion.® The Neo-Marxists did not
mean to aver such a horrible platitude. If these cases are to count
for them, it is also necessary that colonial expansion came about, in
the way indicated, under pressure of accumulation on the rate of
profit, hence as a feature of decaying, or at all events of fully matured,
capitalism. But the heroic time of colonial adventure was precisely
the time of early and immature capitalism when accumulation was
in its beginnings and any such pressure — also, in particular, any bar-
rier to exploitation of domestic labor — ^was conspicuous by its absence.
The element of monopoly was not absent. On the contrary it was far
more evident than it is today. But that only adds to the absurdity
of the construction which makes both monopoly and conquest specific
properties of latter-day capitalism.

Moreover, the other leg of the theory, class struggle, is in no better
condition. One must wear blinkers to concentrate on that aspect of
colonial expansion which hardly ever played more than a secondary
role, and to construe in terms of class struggle a phenomenon which
affords some of the most striking instances of class cooperation. It
was as much a movement toward higher wages as it was a movement
toward higher profits, and in the long run it certainly benefited (in
part because of the exploitation of native labor) the proletariat more
than it benefited the capitalist interest. But I do not wish to stress its

the last analysis some capitalist interest or objective necessity “must’' have been
at the bottom of it. And we can then hunt for corroboratory evidence that will
never be entirely lacking, since capitalist interests, like any others, will in fact be
affected by, and take advantage of, any situation whatsoever, and since the particu-
lar conditions of the capitalist organism will always present some features which
may without absurdity be linked up with those policies of national expansion.
Evidently it is preconceived conviction and nothing else that keeps us going in a
task as desperate as this; without such a conviction it would never occur to us to
embark upon it. And we really need not take the trouble; we might just as well
say that “it must be so” and leave it at that. This is what I meant by tautological
explanation,

® Nor is it sufficient to stress the fact that each country actually did “exploit”
its colonies. For that was exploitation of a country as a whole by a country as a
whole (of all classes by all classes) and has nothing to do with the specifically
Marxian kind of exploitation.

54 The Marxian Doctrine

effects. The essential point is that its causation has not much to do
with class warfare, and not more to do with class structure than is
implied in the leadership of groups and individuals that belonged to,
or by colonial enterprise rose into, the capitalist class. If however we
shake off the blinkers and cease to look upon colonization or imperial-
ism as a mere incident in class warfare, little remains that is spcciffcally
Marxist about the matter. What Adam Smith has to say on it does
just as well — better in fact.

The by-product, the Neo-Marxian theory of modern protectionism,
still remains. Classical literature is full of invectives against the “sinis-
ter interests” — at that time mainly, but never wholly, the agrarian
interests — ^which in clamoring for protection committed the unforgiv-
able crime against public welfare. Thus the classics had a causal
theory of protection all right — ^not only a theory of its effects — and
if now we add the protectionist interests of modern big business we
have gone as far as it is reasonable to go. Modern economists with
Marxist sympathies really should know better than to say that even
now their bourgeois colleagues do not see the relation between the
trend toward protectionism and the trend toward big units of con-
trol, though these colleagues may not always think it necessary to
stress so obvious a fact. Not that the classics and their successors to
this day were right about protection; their interpretation of it was,
and is, as one-sided as was the Marxian one, besides being often wrong
in the appraisal of consequences and of the interests involved. But for
at least fifty years they have known about the monopoly component
in protectionism all that Marxists ever knew, which was not difficult
considering the commonplace character of the discovery.

And they were superior to the Marxist theory in one very important
respect. Whatever the value of their economics — ^perhaps it was not
great — they mostly® stuck to it. In this instance, that was an advantage.
The proposition that many protective duties owe their existence to
the pressure of large concerns that desire to use them for the purpose
of keeping their prices at home above what they otherwise would be,
possibly in order to be able to sell more cheaply abroad, is a platitude
but correct, although no tariff was ever wholly or even mainly due to
this particular cause. It is the Marxian synthesis that makes it in-
adequate or wrong. If our ambition is simply to understand all the
causes and implications of modem protectionism, political, social
and economic, then it is inadequate. For instance, the consistent sup-
port given by the American people to protectionist policy, whenever

e They did not always confine themselves to their economics. When they did not,
results were anything but encouraging. Thus, James Mill’s purely economic writ-
ings, while not particularly valuable, cannot be simply dismissed as hopelessly
substandard. The real nonsense — and platitudinous nonsense at that— -is in his
articles on government and cogna'te subjects.

Marx the Teacher

they had the opportunity to speak their minds, is accounted for not
by any love for or domination by big business, but by a fervent wish
to build and keep a world of their ovfn and to be rid of all the
vicissitudes of the rest of the world. Synthesis that overlooks such ele-
ments of the case is not an asset but a liability. But if our ambition
is to reduce all the causes and implications of modern protectionism,
whatever they may be, to the monopolistic element in modern in-
dustry as the sole causa causans and if we formulate that proposition
accordingly, then it becomes wrong. Big business has been able to
take advantage of the popular sentiment and it has fostered it; but
it is absurd to say that it has created it. Synthesis that yields — ^we
ought rather to say, postulates — ^such a result is inferior to no synthesis
at all.

Matters become infinitely worse if, flying in the face of fact plus
common sense, we exalt that theory of capital export and colonization
into the fundamental explanation of international politics which
thereupon resolves into a struggle, on the one hand, of monopolistic
capitalist groups with each other and, on the odier hand, of each of
them with their own proletariat. This sort of thing may make useful
party literature but otherwise it merely shows that nursery tales are
no monopoly of bourgeois economics. As a matter of fact, very little
influence on foreign policy has been exerted by big business — or by
the haute finance from the Fuggers to the Morgans — and in most of
the cases in which large-scale industry as such, or banking interests as
such, have been able to assert themselves, their naive dilettantism has
resulted in discomfiture. The attitudes of capitalist groups toward
the policy of their nations are predominantly adaptive rather than
causative, today more than ever. Also, they hinge to an astonishing
degree on short-run considerations equally remote from any deeply
laid plans and from any definite “objective” class interests. At this
point Marxism degenerates into the formulation of popular super-
stitions.'^

There are other instances of a similar state of things in all parts
of the Marxian structure. To mention one, the definition of the
nature of governments that was quoted from the Communist Mani-

'’'This superstition is exactly on a par with another that is harbored by many
worthy and simple-minded people who explain modern history to themselves on
the hypothesis that there is somewhere a committee of supremely wise and
malevolent Jews who behind the scenes control international or perhaps all politics.
Marxists are not victims of this particular superstition but theirs is on no higher
plane. It if amusing to record that, when faced with either doctrine, I have always
experienced great difficulty in replying in anything like a fashion satisfactory to
myself. This was not only due to the circumstance that it is always difficult to
establish denial of factual assertions. The main difficulty came from the fact that
people, lacking any first-hand knowledge of international affairs and their per-
sonnel, also lack any organ for the perception of absurdity.

56 The Marxian Doctrine

festo a little while ago has certainly an element of truth in it. And
in many cases that truth will account for governmental attitudes
toward the more obvious manifestations of class antagonisms. But
so far as true, the theory embodied in that definition is trivial. All
that is worth while troubling about is the Why and How of that
vast majority of cases in which the theory either fails to conform to
fact or, even if conforming, fails to describe correctly the actual be-
havior of those “committees for managing the common affairs of the
bourgeoisie.” Again, in practically all cases the theory can be made
tautologically true. For there is no policy short of exterminating the
bourgeoisie that could not be held to serve some economic or extra-
economic, short-run or long-run, bourgeois interest, at least in the
sense that it wards off still worse things. This, however, does not make
that theory any more valuable. But let us turn to our second example
of the problem-solving power of the Marxian synthesis.

The badge of Scientific Socialism which according to Marx is to
distinguish it from Utopian Socialism consists in the proof that social-
ism is inevitable irrespective of human volition or of desirability. As
has been stated before, all this means is that by virtue of its very
logic capitalist evolution tends to destroy the capitalist and to pro-
duce the socialist order of things.® How far has Marx succeeded in
establishing the existence of these tendencies?

As regards the tendency toward self-destruction, the question has
already been answered.® The doctrine that the capitalist economy will
inevitably break down for purely economic reasons has not been
established by Marx, as Hilferding’s objections would suffice to show.
On the one hand, some of his propositions about future facts that
are essential to the orthodox argument, especially the one about the
inevitable increase of misery and oppression, are untenable; on the
other hand, the breakdown of the capitalist order would not neces-
sarily follow from these propositions, even if they were all true. But
other factors in the situation that the capitalist process tends to de-
velop were correctly seen by Marx, as was, so I hope to show, the
ultimate outcome itself. Concerning the latter, it may be necessary
to replace the Marxian nexus by another, and the term “breakdown”
may then turn out to be a misnomer, particularly if it be understood
in the sense of a breakdown caused by the failure of the capitalist
engine of production; but this does not affect the essence of the doc-
trine, however much it may affect its formulation and some of its im-
plications.

As regards the tendency toward socialism, we must first realize that
this is a distinct problem. The capitalist or any other order of things
may evidently break down — or economic and social evolution may
® See also Part II, Prologue.

® See supra, ch. iii, § 7,

Marx the Teacher

I outgrow it — and yet the socialist phoenix may fail to rise from the
\ ashes. There may be chaos and, unless we define as socialism any
; non-chaotic alternative to capitalism, there are other possibilities.
I The particular type of social organization that the average orthodox
Marxist — ^before the advent of bolshevism at any rate — seemed to
t anticipate is certainly only one of many possible cases.

Marx himself, while very wisely refraining from describing socialist
society in detail, emphasized conditions of its emergence: on the one
hand, the presence of giant units of industrial control — ^which, of
course, would greatly facilitate socialization — ^and, on the other hand,
the presence of an oppressed, enslaved, exploited, but also very
numerous, disciplined, united and organized proletariat. This suggests
much about the final battle that is to be the acute stage of the
secular warfare between the two classes which will then be arrayed
against each other for the last time. It also suggests something about
what is to follow; it suggests the idea that the proletariat as such will
“take over” and, through its dictatorship, put a stop to the “exploita-
tion of man by man” and bring about classless society. If our purpose
were to prove that Marxism is a member of the family of chiliastic
creeds this would indeed be quite enough. Since we are concerned
not with that aspect but with a scientific forecast, it clearly is not.
Schmoller was on much safer ground. For though he also refused to
commit himself to details, he obviously visualized the process as one
of progressive bureaucratization, nationalization and so on, ending
in state socialism which, whether we like it or not, at least makes
definite sense. Thus Marx fails to turn the socialist possibility into a
certainty even if we grant him the breakdown theory in its entirety;
if we do not, then failure follows a fortiori.

In no case, however — ^whether we accept Marx’s reasoning or any
other — ^will the socialist order be realized automatically; even if
capitalist evolution provided all conditions for it in the most Marxian
manner conceivable, distinct action would still be necessary to bring
it about.^® This of course is in accordance with Marx's teaching. His
revolution is but the particular garb in which his imagination liked
to clothe that action. The emphasis on violence is perhaps under-
standable in one who in his formative years had experienced all the
excitement of 1848 and who was, though quite able to despise revolu-
tionary ideology, yet never able to shake off its trammels. Moreover,
the greater part of his audience would hardly have been willing to
listen to a message that lacked the hallowed clarion call. Finally,
though he saw the possibility of peaceful transition, at least for Eng-
land, he may not have seen its likelihood. In his day it was not so
easy 10 see, and his pet idea of the two classes in battle array made it
still more difficult to see it. His friend Engels actually went to the

1® See Part III, ch. v.

58 The Marxian Doctrine

trouble of studying tactics. But though the revolution can be relegated
to the compound of non-essentials, the necessity for distinct action
still remains.

This should also solve the problem that has divided the disciples:
revolution or evolution? If I have caught Marx’s meaning, the answer
is not hard to give. Evolution was for him the parent of socialism. He
was much too strongly imbued with a sense of the inherent logic of
things social to believe that revolution can replace any part of the
work of evolution. The revolution comes in nevertheless. But it only
comes in order to write the conclusion under a complete set of
premises. The Marxian revolution therefore differs entirely, in nature
and in function, from the revolutions both of the bourgeois radical
and of the socialist conspirator. It is essentially revolution in the
fullness of time.^^ It is true that disciples who dislike this con-
clusion, and especially its application to the Russian case,^^ can point
to many passages in the sacred books that seem to contradict it. But
in those passages Marx himself contradicts his deepest and most ma-
ture thought which speaks out unmistakably from the analytic struc-
ture of Das Kapital and — as any thought must that is inspired by a
sense of the inherent logic of things — carries, beneath the fantastic
glitter of dubious gems, a distinctly conservative implication. And,
after all, why not? No serious argument ever supports any “ism” un-
conditionally.i^ To say that Marx, stripped of phrases, admits of
interpretation in a conservative sense is only saying that he can be
taken seriously.

UThis should be noticed for later reference. We shall repeatedly return to the
subject and, among other things, discuss the criteria of that “fullness of time.’’

^2 Karl Kautsky. in his preface to Theorien Uber den Mehrwert, even claimed
the revolution of 1905 for Marxian socialism, although it is patent that the
Marxian phraseology of a few intellectuals was all that was socialist about it.

18 This argument could be carried much further. In particular, there is nothing
specifically socialist in the labor theory of value; this of course everyone would
admit who is familiar with the historical development of that doctrine. But the
same is true (excepting of course the phrase) of the theory of exploitation. We
need only recognize that existence of the surpluses so dubbed by Maix is— or at
least was — a necessary condition for the emergence of all that we comprise in the
term civilization (which in fact it would be difficult to deny), and there we are. In
order to be a socialist, it is of course not necessary to be a Marxist; but neither is
it sufficient to be a Marxist in order to be a socialist. Socialist or revolutionary
conclusions can be impressed on any scientific theory; no scientific theory neces-
sarily implies them. And none will keep us in what Bernard Shaw somewhere
describes as sociological rage, unless its author goes out of his way in order to
work us up.

PART II

Can Capitalism Survive?

PROLOGUE

C AN capitalism survive? No. I do not think it can. But this opinion
of mine, like that of every other economist who has pronounced
upon the subject, is in itself completely uninteresting. What counts
in any attempt at social prognosis is not the Yes or No that sums
up the facts and arguments which lead up to it but those facts and
arguments themselves. They contain all that is scientific in the final
result. Everything else is not science but prophecy. Analysis, whether
economic or other, never yields more than a statement about the
tendencies present in an observable pattern. And these never tell us
what will happen to the pattern but only what would happen if they
continued to act as they have been acting in the time interval covered
by our observation and if no other factors intruded. “Inevitability"
or “necessity” can never mean more than this.

What follows must be read with that proviso. But there are other
limitations to our results and their reliability. The process of social
life is a function of so many variables many of which are not amenable
to anything like measurement that even mere diagnosis of a given
state of things becomes a doubtful matter quite apart from the formi-
dable sources of error that open up as soon as we attempt prognosis.
These difliculties should not be exaggerated, however. We shall see
that the dominant traits of the picture clearly support certain infer-
ences which, whatever the qualifications that may have to be added,
are too strong to be neglected on the ground that they cannot be
proved in the sense in which a proposition of Euclid’s can.

One more point before we start. The thesis I shall endeavor to
establish is that the actual and prospective performance of the cap-
italist system is such as to negative the idea of its breaking down under
the weight of economic failure, but that its very success undermines
the social institutions which protect it, and “inevitably” creates con-
ditions in which it will not be able to live and which strongly point
to socialism as the heir apparent. My final conclusion therefore does
not differ, however much my argument may, from that of most
socialist writers and in particular from that of all Marxists. But in
order to accept it one does not need to be a socialist. Prognosis does
not imply anything about the desirability of the course of events that
one predicts. If a doctor predicts that his patient will die presently,
this does not mean that he desires it. One may hate socialism or at
least look upon it with cool criticism, and yet foresee its advent. Many
conservatives did and do.

62 Can Capitalism Survive?

Nor need one accept this conclusion in order to qualify as a social-
ist. One may love socialism and ardently believe in its economic,
cultural and ethical superiority but nevertheless believe at the same
time that capitalist society does not harbor any tendency toward self-
destruction. There are in fact socialists who believe that the capitalist
order is gathering strength and is entrenching itself as time goes
on, so that it is chimerical to hope for its breakdown.

CHAPTER V

THE RATE OF INCREASE OF TOTAL OUTPUT

T he atmosphere of hostility to capitalism which we shall have to
explain presently makes it much more difficult than it otherwise
would be to form a rational opinion about its economic and cultural
performance. The public mind has by now so thoroughly grown out
of humor with it as to make condemnation of capitalism and all its
works a foregone conclusion — almost a requirement of the etiquette
of discussion. Whatever his political preference, every writer or speaker
hastens to conform to this code and to emphasize his critical attitude,
his freedom from “complacency," his belief in the inadequacies of
capitalist achievement, his aversion to capitalist and his sympathy
with anti-capitalist interests. Any other attitude is voted not only*
foolish but anti-social and is looked upon as an indication of immoral
servitude. This is of course perfectly natural. New social religions
will always have that effect. Only it does not make it easier to fulfill
the analyst's task: in 300 a.d. it would not have been easy to expound
the achievements of ancient civilization to a fervent believer in Christi-
anity. On the one hand, the most obvious truths are simply put out
of court a limine;^ on the other hand, the most obvious misstatements
are borne with or applauded.

A first test of economic performance is total output, the total of all
qhe commodities and services produced in a unit of time — a year or
a quarter of a year or a month. Economists try to measure variations
in this quantity by means of indices derived from a number of series
representing the output of individual commodities. “Strict logic is a
stern master, and if one respected it, one would never construct or
use any production index, for not only the material and the tech-
nique of constructing such an index, but the very concept of a total
output of different commodities produced in ever-changing propor-
tions, is a highly doubtful matter.® Nevertheless, I believe that this
device is sufficiently reliable to give us a general idea.

1 There is however another method of dealing with obvious though uncomfort-
able truth, viz., the method of sneering at its triviality. Such a sneer will serve as
well as a refutation would, for the average audience is as a rule perfectly unaware
of the fact that it often covers the impossibility of denial — a pretty specimen of
social psychology.

2 A. F. Burns, Production Trends in the United States Since z 8 jo, p. 262.

* We cannot enter into this problem here. A little will, however, be said about it
when we meet it again in the next chapter. For a fuller treatment see my book
on Business Cycles, ch. ix.

64 Can Capitalism Survive?

For the United States, individual series good and numerous enough
to warrant construction of such an index of output are available since
the Civil War. Choosing what is known as the Day-Persons index of
total production^ we find that, from 1870 to 1930, the average annual
rate of growth was 3.7 per cent and, in the division of manufactures
alone, 4.3 per cent. Let us concentrate on the former figure and try
to visualize what it means. In order to do this we must first apply a
correction: since the durable equipment of industry was always in-
creasing in relative importance, output available for consumption
cannot have increased at the same rate as total production. We must
allow for that. But I believe that an allowance of 1.7 per cent is
ample;® thus we arrive at a rate of increase in '‘available output” of %
per cent (compound interest) per year.

Now suppose that the capitalist engine keeps on producing at that
rate of increase for another half century starting from 1928. To this as-
sumption there are various objections which will have to be noticed
later on, but it cannot be objected to on the ground that in the decade
from 1929 to 1939 capitalism had already failed to live up to that stand-
ard. For the depression that ran its course from the last quarter of 1929
to the third quarter of 1932 does not prove that a secular break has
occurred in the propelling mechanism of capitalist production be-
cause depressions of such severity have repeatedly occurred— -roughly
once in fifty-five years— and because the effects of one of them— the
one from 1873 to 1877— are taken account of in the annual average
of 2 per cent. The subnormal recovery to 1935, the subnormal pros-
perity to 1937 and the slump after that are easily accounted for by
the difficulties incident to the adaptation to a new fiscal policy, new
labor legislation and a general change in the attitude of government
to private enterprise all of which can, in a sense to be defined later, be
distinguished from the working of the productive apparatus as such.

Since misunderstandings at this point would be especially undesir-
able, I wish to emphasize that the last sentence does not in itself
imply either an adverse criticism of the New Deal policies or the prop-
osition— which I do believe to be true but which I do not need just
now that policies of that type are in the long run incompatible with
the effective working of the system of private enterprise. All I now
mean to imply is that so extensive and rapid a change of the social
scene naturally affects productive performance for a time, and so
much the most ardent New Dealer must and also can admit. I for one
do not see how it would otherwise be possible to account for the

^ See W. M. Persons, Forecasting Business Cycles, ch. xl

s That allowance is in fact absurdly large. See also Professor F. C. Mill's estimate
of 5.1 per cent for the period 1901-1913, and of 3.8 per cent for the period losa-
1929 (construction excluded; Economic Tendencies in the United States^ 193a).

The Rate of Increase of Total Output 65

fact that this country which had the best chance of recovering quickly
was precisely the one to experience the most unsatisfactory recovery.
The only somewhat similar case, that of France, supports the same
inference. It follows that the course of events during the decade
from 1929 to 1939 does not per se constitute a valid reason for re-
fusing to listen to the argument in hand which, moreover, may in
any case serve to illustrate the meaning of past performance.

Well, if from 1928 on available production under the conditions
of the capitalist order continued to develop as it did before, i.e., at
a long-run average rate of increase of 2 per cent per year, it would
after fifty years, in 1978, reach an amount of roughly 2.7 (2.6916)
times the 1928 figure. In order to translate this into terms of average
real income per head of population, we first observe that our rate of
increase in total output may be roughly equated to the rate of in-
crease in the sum total of private money incomes available for con-
sumption,® corrected for changes in the purchasing power of the con-
sumers’ dollars. Second, we must form an idea about the increase in
population we are to expect; we will choose Mr. Sloane’s estimate,
which gives 160 millions for 1978. Average income per head during
those fifty years would therefore increase to a little more than double
its 1928 amount, which was about I650, or to about $1300 of 1^28 pur-
chasing power,'^

Perhaps some readers feel that a proviso should be added about the
distribution of the total monetary income. Until about forty years
ago, many economists besides Marx believed that the capitalist process
tended to change relative shares in the national total so that the
obvious inference from our average might be invalidated by the rich
growing richer and the poor growing poorer, at least relatively. But
there is no such tendency. Whatever may be thought of the statistical
measures devised for the purpose, this much is certain: that the
structure of the pyramid of incomes, expressed in terms of money,
has not greatly changed during the period covered by our material

® “Consumption” includes the acquisition of durable consumers’ goods such as
motor cars, refrigerators and homes. We do not distinguish between transient con-
sumers’ goods and what is sometimes referred to as “consumers’ capital.”

tThal is to say, average real income per head would increase at a compound
interest rate of per cent. It so happens that in England, during the century
preceding the First World War, real income per head of population increased at
almost exactly that rate (see Lord Stamp in Wealth and Taxable Capacity). No
great confidence can be placed in this coincidence. But I think it serves to show
that our little calculation is not wildly absurd. In Number 241 of the National
Industrial Conference Board Studies, Table I, pp. 6 and 7, we find that “per capita
realized national income” adjusted by the Federal Reserve Bank of New York and
the National Industrial Conference Board cost of living index, was in 1929 a little
over four times the 1829 figure— a similar result, though open to still more serious
doubts as to reliability.

66 Can Capitalism Survive?

—which for England includes the whole of the nineteenth century^
— and that the relative share of wages plus salaries has also been
substantially constant over time. There is, so long as we are discuss-
ing what the capitalist engine might do if left to itself, no reason to
believe that the distribution of incomes or the dispersion about our
average would in 1978 be significantly different from what it was
in 1928.

One way of expressing our result is that, if capitalism repeated its
past performance for another half century starting with 1928, this
would do away with anything that according to present standards
could be called poverty, even in the lowest strata of the population,
pathological cases alone excepted.

Nor is this all. Whatever else our index may do or may not do, it
certainly does not overstate the actual rate of increase. It does not
take account of the commodity, Voluntary Leisure. New commodities
escape or are inadequately represented by an index which must rest
largely on basic commodities and intermediate products. For the
same reason improvements in quality almost completely fail to assert
themselves although they constitute, in many lines, the core of the
progress achieved — there is no way of expressing adequately the
difference between a motorcar of 1940 and a motorcar of 1900 or
the extent to which the price of motorcars per unit of utility has
fallen. It would be more nearly possible to estimate the rate at which
given quantities of raw materials or semi-finished products are made
to go further than they used to — a steel ingot or a ton of coal, though
they may be unchanged in physical quality, represent a multiple of
their economic efficiency sixty years ago. But little has been done
along this line. I have no idea about what would happen to our
index if there were a method for correcting it for these and similar
factors. It is certain, however, that its percentage rate of change would
be increased and that we have here a reserve that should make the
estimate adopted proof against the effects of any conceivable down-
ward revision. Moreover, even if we had the means of measuring the
change in the technological efficiency of industrial products, this
measure would still fail to convey an adequate idea of what it means
for the dignity or intensity or pleasantness of human life — for all that
the economists of an earlier generation subsumed under the heading
of Satisfaction oi/^^nts. And this, after all, is for us the relevant
consideration, the true "output" of capitalist production, the reason

8 See Stamp, op. dt. The same phenomenon can be observed in all countries for
which there is sufficient statistical information, if we clear the latter of the disturb-
ing effect of the cycles of various span that are covered by the available material.
The measure of income distribution (or of inequality of incomes) devhed by
Vilfredo Pareto is open to objection. But the fact itself is indqiendent of its short-
comings.

The Rate of Increase of Total Output 67

why we are interested in the index of production and the pounds
and gallons that enter into it and would hardly be worth while in
themselves.

But let us keep to our 2 per cent. There is one more point that
is important for a correct appraisal of that figure. I have stated above
that, broadly speaking, relative shares in national income have re-
mained substantially constant over the last hundred years. This, how-
ever, is true only if we measure them in money. Measured in real
terms, relative shares have substantially changed in favor of the
lower income groups. This follows from the fact that the capitalist
engine is first and last an engine of mass production which unavoid-
ably means also production for the masses, whereas, climbing upward
in the scale of individual incomes, we find that an increasing propor- i
tion is being spent on personal services and on handmade commodi- ^
ties, the prices of which are largely a function of wage rates.

Verification is easy. There are no doubt some things available to
the modern workman that Louis XIV himself would have been de-
lighted to have yet was unable to have — modern dentistry for in-
stance. On the whole, however, a budget on that level had little that
really mattered to gain from capitalist achievement. Even speed of
traveling may be assumed to have been a minor consideration for so
very dignified a gentleman. Electric lighting is no great boon to
anyone who has money enough to buy a sufficient number of candles
and to pay servants to attend to them. It is the cheap cloth, the cheap ?
cotton and rayon fabric, boots, motorcars and so on that are the f
typical achievements of capitalist production, and not as a rule im- 1
provements that would mean much to the rich man. Queen Elizabeth '
owned silk stockings. The capitalist achievement does not typically
consist in providing more silk stockings for queens but in bringing
them within the reach of factory girls in return for steadily decreas-
ing amounts of effort.

The same fact stands out still better if we glance at those lopg
waves in economic activity, analysis of which reveals the nature and
mechanism of the capitalist process better than anything else. Each
of them consists of an “industrial revolution” and the absorption of
its effects. For instance, we are able to observe statistically and his-
torically — the phenomenon is so clear that even our scanty informa-
tion suffices to establish it — the rise of such a long wave toward the
end of the 1780’s, its culmination around 1800, its downward sweep
and then a sort of recovery ending at the beginning of the 1840’s.
This was the Industrial Revolution dear to the heart of textbook
writers. Upon its heels, however, came another such revolution pro-
ducing another long wave that rose in the forties, culminated just
before 1857 and ebbed away to 1897, to be followed in turn by the

68 Can Capitalism Survive?

one that reached its peak about 1911 and is now in the act of ebbing
away.®

These revolutions periodically reshape the existing structure of in-
dustry by introducing new methods of production — the mechanized
factory, the electrified factory, chemical synthesis and the like; new
commodities, such as railroad service, motorcars, electrical appliances;
new forms of organization — the merger movement; new sources of
supply — ^La Plata wool, American cotton, Katanga copper; new trade
routes and markets to sell in and so on. This process of industrial
change provides the ground swell that gives the general tone to busi-
ness: while these things are being initiated we have brisk expendi-
ture and predominating "prosperity” — ^interrupted, no doubt, by the
negative phases of the shorter cycles that are superimposed on that
ground swell — and while those things are being completed and their
results pour forth we have elimination of antiquated elements of the
industrial structure and predominating "depression.” Thus there are
prolonged periods of rising and of falling prices, interest rates, em-
ployment and so on, which phenomena constitute parts of the
I mechanism of this process of recurrent rejuvenation of the productive
' apparatus.

Now these results each time consist in an avalanche of consumers'
goods that permanently deepens and widens the stream of real income
although in the first instance they spell disturbance, losses and un-
employment. And if we look at those avalanches of consumers’ goods
we again find that each of them consists in articles of mass consump-
tion and increases the purchasing power of the wage dollar more than
that of any other dollar — in other words, that the capitalist process,
not. by coincidence but by virtue of its mechanism, progressively
raises the standard of life of the masses. It does so through a sequence
of vicissitudes, , the severity of which is proportional to the speed of
T*he advance. But it does so effectively. One problem after another
‘of the supply of commodities to the masses has been successfully
. solved^® by being brought within the reach of the methods of capital-
ist production. The most important one of those that remain, housing,
is approaching solution by means of the pre-fabricated house.

And still this is not all. Appraisal of an economic order would be
incomplete — and incidentally un-Marxian — if it stopped at the output
which the corresponding economic conveyor hands to the various
groups of society and left out of account all those things that the
conveyor does not serve directly but for which it provides the means

® These are the “long -waves” which, in business cycle literature, are primarily
associated with the name of Kondratieffl.

10 This of course also applies' to agricultural commodities, the cheap mass pro-
duction of which was entirely the work of large-scale capitalist enterprise (railroads,
shipping, agricultural machinery, fertilizers).

The Rate of Increase of Total Output 69

as well as the political volition, and all those cultural achievements
that are induced by the mentality it generates. Deferring considera-
tion of the latter (Chapter XI), we shall now turn to some aspects
of the former.

The technique and atmosphere of the struggle for social legislation
obscures the otherwise obvious facts that, on the one hand, part of
this legislation presupposes previous capitalist success (in other words,
wealth which had previously to be created by capitalist enterprise)
and that, on the other hand, much of what social legislation develops
and generalizes had been previously initiated by the action of the cap-
italist stratum itself. Both facts must of course be added to the sum
total of capitalist performance. Now if the system had another run
such as it had in the sixty years preceding 1928 and really reached
the $1300 per head of population, it is easy to see that all the de-
siderata that have so far been espoused by any social reformers —
practically without exception, including even the greater part of the
cranks — either would be fulfilled automatically or could be fulfilled
without significant interference with the capitalist process. Ample
provision for the unemployed in particular would then be not
only a tolerable but a light burden. Irresponsibility in creating un-
employment and in financing tlie support of the unemployed might
of course at any time create insoluble problems- But managed with
ordinary prudence, an average annual expenditure of 16 billions
on an average number of 16 million unemployed including depend-
ents (10 per cent of the population) would not in itself be a serious
matter with an available national income of the order of magnitude
of 200 billion dollars (purchasing power of 1928).

May I call the reader’s attention to the reason why unemployment
which everyone agrees must be one of the most important issues in
any discussion of capitalism — ^with some critics so much so that they
base their indictment exclusively on this element of the case — ^will play
a comparatively small role in my argument? *1 do not think that un-
employment is among those evils which, like poverty, capitalist evo-
lution could ever eliminate of itself. I also do not think that there |
is any tendency for the unemployment percentage to increase in the!
long run. The only series covering a respectable time interval —
roughly the sixty years preceding the First World War — ogives the Eng-
lish, trade-union percentage of unemployed members. It .is a typically
/cyclical series and displays no trend (or a horizontal one).ii Since this
^is theoretically understandable— there i^no theoretical reason to call
'the evidence in question— those two propositions seem established for

u That series lias often been charted and analyzed. See for instance, A. C. Pigou,
Industrial Fluctuations or my Business Cycles. ,1^. -every country there seems to
be an irreducible minimum and, superimposed on that, a cyclical movement, thd
strongest component of which has a period of about nine to ten years.

lyo Can Capitalism Survive?

the prewar time to 1913 inclusive. In the postwar time and in riiost
countries unemployment was mostly at an abnormally high level
even before 1930. But this and still more the unemployment during
the thirties can be accounted for on grounds that have nothing to do
with a long-run tendency of unemployment percentages to increase
from causes inherent in the capitalist mechanism itself. 1 have men-
tioned above those industrial revolutions which are so characteristic
of the capitalist process. Supernormal unemployment is one of the fea-
tures of the periods of adaptation that follow upon the “prosperity
phase” of each of them. We observe it in the 1820’s and 1 870’s, and the
period after 1920 is simply another of those periods. So far the phe-
nomenon is essentially temporary in the sense that nothing can be
inferred about it for the future. But there were a number of other
factors which tended to intensify it— war effects, dislocations of foreign
trade, wage policies, certain institutional changes that swelled the
statistical figure, in England and Germany fiscal policies (also impor-
tant in the United States since 1935) and so on. Some of these arc no
doubt symptoms of an “atmosphere” in which capitalism will work
with decreasing efficiency. That however is another matter which will
engage our attention later on.

i But whether lasting or temporary, getting worse or not, unem-
>|)loyment undoubtedly is and always has been a scourge. In the next
part of this book we shall have to list its possible elimination among
the claims of the socialist order to superiority. Nevertheless, I hold that
the real tragedy is ngt .unemployment per se, but unemployment
plus the impossibility of providing adequately for the unemployed
without impairing the conditions of further economic development'.
for obviously the suffering and degradation — the destruction of human
values — ^which we associate with unemployment, though not the waste
of productive resources, would be largely eliminated and unemploy-
ment would lose practically all its terror if the private life of the un-
employed were not seriously affected by their unemployment. The
Indictment stands that in the past — ^say, roughly, to the end of the
nineteenth century — the capitalist order was not only unwilling but
also quite incapable of guaranteeing this. But since it will be able to
do so if it keeps up its past performance for another half century
this indictment would in that case enter the limbo filled by the sorry
specters of child labor and sixteen-hour working days and five persons
living in one room which it is quite proper to emphasize when we
are talking about the past social costs of capitalist achievement but
which are not necessarily relevant to the balance of alternatives for
the future. Our own time is somewhere between the disabilities of
earlier stages in capitalist evolution and the abilities of the system in
full maturity. In this country at least, the better part of the task could
even now be accomplished without undue strain on the system. The

The Rate of Increase of Total Output 71

difficulties do not seem to consist so much in the lack of a surplus suffi-
cient to blot out the darkest hues in the picture: they consist, on the
one hand, in the fact that the unemployment figure has been in-
creased by anti-capitalist policies beyond what it need have been in
the tliirties and, on the other hand, in the fact that public opinion as
soon as it becomes at all alive to the duty in question, immediately
insists on economically irrational methods of financing relief and on
lax and wasteful methods of administering it.

Much the same argument applies to the future — and to a great
extent the present — possibilities held out by capitalist evolution for
the care of the aged and sick, for education and hygiene and so on.
Also, an increasing number of commodities might reasonably be ex-
pected, from the standpoint of the individual household, to pass out
of the class of economic goods and to be available practically up to the
satiety point. This could be brought about either by arrangements
between public agencies and producing concerns or by nationalization
or municipalization, gradual progress with which would of course be
a feature of the future development even of an otherwise unfettered
capitalism.

CHAPTER VI

PLAUSIBLE CAPITALISM

T he argument of the preceding chapter seems to be exposed to a
reply that is as damaging as it is obvious. The average rate of in-
crease in total available production that obtained during the sixty years
preceding 1938 has been projected into the future. So far as this was
merely a device in order to illustrate the significance of past develop-
ment, there was nothing in this procedure that could have shocked the
statistical conscience. But as soon as I implied that the following fifty
years might actually display a similar average rate of increase, I appar-
ently did commit a statistical crime; it is, of course, clear that a histori-
cal record of production over any given period does not in itself justify
any extrapolation at all,^ let alone an extrapolation over half a cen-
tury. It is therefore necessary to emphasize again that my extrapola-
tion is not intended to forecast the actual behavior of output in the
future. Beyond illustrating the meaning of past performance, it is
merely intended to give us a quantitative idea of what the capitalist
engine might conceivably accomplish if, for another half century,
it repeated its past performance-— which is a very different matter.
The question whether it can be expected to do so will be answered
quite independently of the extrapolation itself. For this purpose we
have now to embark upon a long and difficult investigation.

Before we can discuss the chance of capitalism repeating its past per-
formance we must evidently try to find out i^ what sense the observed
rate of increase in output really measures that past performance. No
doubt, the period that furnished our data was one of comparatively un-
fettered capitalism. But this fact does not in itself provide a sufficient
link between the performance and the capitalist engine. In order to
believe that this was more than coincidence we must satisfy ourselves
first, that there is an understandable relation between the capitalist
order and the observed rate of increase in output; second, that, given
such a relation, the rate of increase was actually due to it and not to

iThis proposition holds, on gfeneral principles, for any historical time series,
since the very concept of historical sequence implies the occurrence of irreversible
changes in the economic structure which must he expected to affect the law of any
given economic quantity. Theoretical justification and, as a rule, statistical treat-
ment are therefore necessary for even the most modest extrapolations. It may
however be urged that our case is somewhat favored by the fact that within the
comprehensive compound represented by the output series, idiosyncrasiet of indi-
vidual items will to some extent cancel each other.

Plausible Capitalism yg

particularly favorable conditions which had nothing to do with capi-
talism.

These two problems must be solved before the problem of a “repe-
tition of performance” can arise at all. The third point then reduces
to the question whether there is any reason why the capitalist engine
should, during the next forty years, fail to go on working as it did
in the past.

We shall deal with these three points in turn.

Our first problem may be reformulated as follows. On the one
hand, we have a considerable body of statistical data descriptive of a
rate of “progress” that has been admired even by very critical minds.
On the other hand, we have a body of facts about the structure of
the economic system of that period and about ^he way it functioned;
from these facts, analysis has distilled what * technically called a
“model” of capitalist reality, i.e., a generalized picture of its'i essential
features. We wish to know whether that type of economy was^ favor-
able, irrelevant, or unfavorable to the performance we observe and, if -
favorable, whether those features may be reasonably held to yield
adequate explanation of this performance. Waiving technicalities as
much as possible, we shall approach the question in a common-sense
spirit.

1. Unlike the class of feudal lords, the commercial and industrial
bourgeoisie rose by business success. Bourgeois society has been cast
in a purely economic mold: its foundations, beams and beacons are
all made of economic material. The building faces toward the eco-
nomic side of life. Prizes and penalties are measured in pecuniary
terms. Going up and going down means making and losing money.
This, of course, nobody can deny. But I wish to add that, within its
own frame, that social arrangement is, or at all events was, singularly
effective. In part it appeals to, and in part it creates, a schema of
motives that is unsurpassed in simplicity and force. The promises of
wealth and the threats of destitution that it holds out, it redeems
with ruthless promptitude. Wherever the bourgeois way of life asserts
itself sufficiently to dim the beacons of other social worlds, these
promises are strong enough to attract the large majority of super-
normal brains and to identify success with business success. T hey are
nm proffered, ayun,^^^^ yet ther^is.a sujficiently enticing admix
of "chance: the game is ‘not like r^ette, h is more like poker. They
are addressed to ability, energy and supernormal capacity for \vbrk;
but if there were a way of measuring either that ability in general or
the personal achievement that goes into any particular success, The
premiums actually paid out would probably not be found propor-
tional to either. Spectacular prizes much greater than would have
teen necessary to call forth the particular effort are thrown to a small
minority of winners, thus propelling much more efficaciously than a

^4 Can Capitalism Survive?

more equal and more "just” distribution would, the activity of that
large majority of businessmen who receive in return very modest
compensation or nothing or less than nothing, and yet do their utmost
because they have the big prizes before their eyes and overrate their
chances of doing equally well. Similarly, the threats are addressed to
incompetence. But though the incompetent men and the obsolete
methods are in fact eliminated, sometimes very promptly, sometimes
with a lag, failure also threatens or actually overtakes many an able
^man, thus whipping up everyone, again much more efficaciously than
[a more equal and more “just” system of penalties would. Finally,
; both business success and business failure are ideally precise. Neither
can be talked away.

One aspect of this should be particularly noticed, for future refer-
ence as well as because of its importance for the argument in hand.
In the way indicated and also in other ways which will be discussed
later on, the capitalist arrangement, as embodied in the institution of
private enterprise, effectively chains the bourgeois stratum to its tasks.
But it does more than that. The same apparatus which conditions for
performance the individuals and families that at any given time form
the bourgeois class, ipso facto also selects the individuals and families
that are to rise into that class or to drop out of it. This combination
of the conditioning and the selective function is not a matter of
course. On the contrary, most methods of social selection, unlike the
“methods” of biological selection, do not guarantee performance of
the selected individual; and their failure to do so constitutes one of
the crucial problems of socialist organization that will come up for
Idiscussion at another stage of our inquiry. For the time being, it

! should merely be observed how well the capitalist system solves that
problem; in most cases the man who rises first into the business class
.^and then within it is also an able businessman and he is likely to rise
I exactly as far as his ability goes — ^simply because in that schema rising
I to a position and doing well in it generally is or was one and the
* same thing^hil fact, so often obscured by the auto-therapeutic effort
of the unsuccessful to deny it, Is much more important for an ap-
praisal of capitalist society and its civilization than anything that
can be gleaned from the pure theory of the capitalist machine.

2. But is not all that we might be tempted to infer from “maximum
performance of an optimally selected group” invalidated by the fur-
ther fact that that performance is not geared to social service-pro-
duction, so we might say, for ' consumption — ^but to money-making,
that it aims at maximizing profits instead of welfare? Outside of the
bourgeois stratum, this has of course always been the popular opinion.
Economists have sometimes fought and sometimes espoused it. In
doing so they have contributed something that was much more valu-
able than were the final judgments themselves at which they arrived

Plausible Capitalism 75

individually and which in most cases reflect little more than their
social location, interests and sympathies or antipathies. They slowly
increased our factual knowledge and analytic powers so that the
answers to many questions we are able to give today are no doubt
much more correct although less simple and sweeping than were
those of our predecessors.

To go no further back, the so-called classical economists^ were
practically of one mind. Most of them disliked many things about
the social institutions of their epoch and about the way those institu-
tions worked. They fought the landed interest and approved of social
reforms — factory legislation in particular — that were not all on the
lines of laissez faire. But they were quite convinced that within the
institutional framework of capitalism, the manufacturer's and the
trader’s self-interest made for maximum performance in the interest
of all. Confronted with the problem we are discussing, they would
have had little hesitation in attributing the observed rate of increase ^
in total output to relatively unfettered enterprise and the profit motive.
— ^perhaps they would have mentioned “beneficial legislation” as a.,
condition but by this they would have meant the removal of fetters,
especially the removal or reduction of protective duties during the
nineteenth century.

It is exceedingly difficult, at this hour of the day, to do justice to
these views. They were of course the typical views of the English
bourgeois class, and bourgeois blinkers are in evidence on almost
every page the classical authors wrote. No less in evidence are blinkers
of another kind: the classics reasoned in terms of a particular historical
situation which they uncritically idealized and from which they un-
critically generalized. Most of thjsm, moreover, seem to have argued
exclusively in terms of the English interests and problems of their
time. This is the reason why, in other lands and at other times, people
disliked their economics, frequently to the point of not even caring tp
understand it. But it will not do to dismiss their teaching on these
grounds. A prejudiced man may yet be speaking the truth. Proposi-
tions developed from special cases may yet be generally valid. And
the enemies and successors of the classics had and have only different
but not fewer blinkers and preconceptions; they envisaged and en-
visage different but not less special cases.

From the standpoint of the economic analyst, the chief merit of the
classics consists in their dispelling, along with many other gross errors,
the naive idea that economic activity in capitalist society, because it

2 The term Classical Economists will in this book be used to designate the lead-
ing English economists whose works appeared between 1776 and 1848. Adam Smith,
Ricardo, Malthus, Senior and John Stuart Mill are the outstanding names. It is
important to keep this in mind because a much broader use of the term has come
into fashion of late.

(76 Can Capitalism Survive?

turns on the profit motive, must by virtue of that fact alone neces-
sarily run counter to the interests of consumers; or, to put it differ-
ently, that moneymaking necessarily deflects producing from its social
goal; or/ finally, that private profits, both in themselves and through
the distortion of the economic process they induce, are always a net
loss to all excepting those who receive them and would therefore
constitute a net gain to be reaped by socialization. If we look at the
logic of these and similar propositions which no trained economist
ever thought of defending, the classical refutation may well seem
trivial. But as soon as we look at all the theories and slogans which,
consciously or subconsciously, imply them and which are once more
served up today, we shall feel more respect for that achievement. Let
me add at once that the classical writers also clearly perceived, though
they may have exaggerated, the role of saving and accumulation and
that they linked saving to the rate of “progress” they observed in a
manner that was fundamentally, if only approximately, correct. Above
all, there was practical wisdom about their doctrine, a responsible
long-run view and a manly tone that contrast favorably with modern
hysterics.

But between realizing that hunting for a maximum of profit and
striving for maximum productive performance are not necessarily
incompatible, to proving that the former will necessarily — or in the
immense majority of cases — imply the latter, there is a gulf much
wider than the classics thought. And they never succeeded in bridging
it. The modern student of their doctrines never ceases to wonder how
it was possible for them to be satisfied with their arguments or to
mistake these arguments for proofs; in the light of later analysis their
theory was seen to be a house of cards whatever measure of truth
there may have been in their vision.^

3. This later analysis we will take in two strides — as much of it,
that is, as we need in order to clarify our problem. Historically, the
first will carry us into the first decade of this century, the second
will cover some of the postwar developments of scientific economics.
Frankly I do not know how much good this will do the non-profes-
sional reader; like every other branch of our knowledge, economics,
as its analytic engine improves, moves fatally away from that happy
stage in which all problems, methods and results could be made
accessible to every educated person without special training, I will,
however, do my best.

The first stride may be associated with two great names revered to

®The reader will recall my emphasis on the distinction between one’s theory
and one’s vision in the case of Marx. It is however always important to remember
that the ability to see things in their correct perspective may be, and often is,
divorced from the ability to reason correctly and vice versa. That is why a man
may be a very good theorist and yet talk absolute nonsense whenever confremted
with the task of diagnosing a concrete historical pattern as a whole,

Plausible Capitalism 77

this day by numberless disciples — ^so far at least as the latter do not
think it bad form to express reverence for anything or anybody,
which many of them obviously do — ^Alfred Marshall and Knut Wick-
sell.^ Their theoretical structure has little in common with that of the
classics — though Marshall did his best to hide the fact — but it con-
serves the classic proposition that in the case of perfect competition
the profit interest of, the producer tends to maximize production. It
even supplied almost satisfactory proof. Only, in the process of being
more correctly stated and proved, the proposition lost much of its
content — it does emerge from the operation, to be sure, but it emerges
emaciated, barely alive.^ Still it can be shown, within the general as-
sumptions of the Marshall-Wicksell analysis, that firms which cannot
by their own individual action exert any influence upon the price of
their products or of the factors of production they employ — so that
there would be no point in their weeping over the fact that any in-
crease in production tends to decrease the former and to increase the
latter — ^will expand their output until they reach the point at which
the additional cost that must be incurred in order to produce another
small increment of product (marginal cost) just equals the price they

4 Marshall’s Principles (first edition 1890) and Wicksell's Lectures (first Swedish
edition 1901, English translation 1934) are entitled to the prominence I am here
giving to them, because of the influence they exerted on many minds in their
formative stages and because they dealt with theory in a thoroughly practical
spirit. On purely scientific grounds, precedence should be given to the work of
Ldon Walras. In America, the names to mention are J. B. Clark, Irving Fisher and
F. W. Taussig.

* Anticipating later argument (see below, ch. viii, § 6) I shall in this note briefly
clarify the above passage. Analysis of the mechanism of the profit economy led not
only to the discovery of exceptions to the principle that competitive industry
tends to maximize output, but also to the discovery that proof of the principle
itself requires assumptions which reduce it to little more than a truism. Its practical
value is however particularly impaired by the two following considerations:

1, The principle, as far as it can be proved at all, applies to a state of static
equilibrium. Capitalist reality is first and last a process of change. In appraising
the performance of competitive enterprise, the question whether it would or would
not tend to maximize production in a perfectly equilibrated stationary condition
of the economic process is hence almost, though not quite, irrelevant.

a. The principle, as stated by Wicksell, is what was left of a more ambitious
proposition that, though in a rarefied form, can still be found in Marshall— -the
theorem that competitive industry tends to produce a state of maximum satisfac-
^tion of wants. But this theorem, even if we waive the serious objections to speak-
ing of non-observable psychic magnitudes, is readily seen to boil down to the
triviality that, whatever the data and in particular the institutional arrangements
of a society may be, human action, as far as it is rational, will always try to make
the best of any given situation. In fact it boils down to a definition of rational
action and can hence be paralleled by analogous theorems for, say, a socialist
society. But so can the principle of maximum production. Neither formulates any
spec 3 lic virtue of private competitive enterprise. This does not mean that such
I virtues do not exist. It does mean however that they are not simply inherent in
I the fogic of competition.

7 8 Can Capitalism Survive?

, can get for that increment, i.c., that they will produce as much as
^ they can without running into loss. And this can be shown to be as
much as it is in general “socially desirable” to produce. In more tech-
nical language, in that case prices are, from the standpoint of the
; individual firm, not variables but parameters; and where this is so,
I there exists a state of equilibrium in which all outputs are at their
( maximum and all factors fully employed. This case is usually referred
to as perfect competition. Remembering what has been said about
the selective process which operates on all firms and their managers, we
might in fact conceive a very optimistic idea of the results to be ex-
pected from a highly selected group of people forced, within that
pattern, by their profit motive to strain every nerve in order to maxi-
mize output and to minimize costs. In particular, it might seem at
first sight that a system conforming to this pattern would display
remarkable absence of some of the major sources of social waste. As a
little reflection should show, this is really but another way of stating
the content of the preceding sentence.

4, Let us take the second stride. The Marshall-Wicksell analysis of
course did not overlook the many cases that fail to conform to that
model. Nor, for that matter, had the classics overlooked them. They
recognized cases of “monopoly,” and Adam Smith himself carefully
noticed the prevalence of devices to restrict competition® and all the
differences in flexibility of prices resulting therefrom. But they looked
upon those cases as exceptions and, moreover, as exceptions that could
and would be done away with in time. Something of that sort is true
also of Marshall. Although he developed the Cournot theory of
monopoly'^ and although he anticipated later analysis by calling
attention to the fact that most firms have special markets of their
own in which they set prices instead of merely accepting them,® he as
well as Wicksell framed his general,, conclusions on the pattern of per-
fect competition so as to suggest, much as the classics did, that perfect
I competition was the rule. Neither Marshall and Wicksell nor the
I classics saw that perfect competition is the exception and that even if
lit were the rule there would be much less reason for congratulation
^than one might think.

If we look more closely at the conditions — ^not all of them explicitly
stated or even clearly seen by Marshall and Wicksell — tiiat must be
fulfilled in order to produce perfect competition, wc realize irame-

®In a manner strikingly suggestive of present-day attitudes he even emphasized
the discrepancy between the interests of every trade and those of the public and
talked about conspiracies against the latter which, so he thought, might originate
at any businessmen’s dinner party.

’’Augustin Cournot, 1938.

®This is why the later theory of imperfect competition may fairly be traced tp
him. Though he did not elaborate it, he saw the phenomenon more correctly
than most of those who did. In particular he did not exaggerate its importance.

Plausible Capitalism 7g

diatcly that outside of agricultural mass production there cannot be
many instances of it. A farmer supplies his cotton or wheat in fact
under those conditions: from his standpoint the ruling prices of cot-
ton or wheat are data, though very variable ones, and not being able
to influence them by his individual action he simply adapts his out-
put; since all farmers do the same, prices and quantities will in the
end be adjusted as the theory of perfect competition requires. But
this is not so even with many agricultural products — ^with ducks,
sausages, vegetables and many dairy products for instance. And as
regards practically all the finished products and services of industry
and trade, it is clear that every grocer, every filling station, every
manufacturer of gloves or shaving cream or handsaws has a small and
precarious market of his own which he tries — ^must try — to build up
and to keep by price strategy, quality strategy — “product differentia- ,
tion” — and advertising. Thus we get a completely different pattern’
which there seems to be no reason to expect to yield the results of
perfect competition and which fits much better into the monopolistic
schema. In these cases we speak of Monopolistic Competition. Their
theory has been one of the major contributions to postwar economics.®

There remains a wide field of substantially homogeneous products
— ^mainly industrial raw materials and semi-finished products such as
steel ingots, cement, cotton gray goods and the like — in which the
conditions for the emergence of monopolistic competition do not seem
to prevail. This is so. But in general, similar results follow for that
field inasmuch as the greater part of it is covered by largest-scale
firms which, either individually or in concert, are able to manipulate, ^
prices even without differentiating products — the case of Oligopoly^
Again the monopoly schema, suitably adapted, seems to fit this type)
of behavior much better than does the schema of perfect competition.

As soon as the prevalence of monopolistic competition or of oligop-
oly or of combinations of the two is recognized, many of the proposi-
tions which the Marshall-Wicksell generation of economists used, to
teach with the utmost confidence become either inapplicable or much
more difficult to prove. This holds true, in the first place, of the
propositions turning on the fundamental concept of equilibrium, i.e.,
a determinate state of the economic organism, toward which any
given state of it is always gravitating and which displays certain simple
properties. In the general case of oligopoly there is in fact no deter-
mipate equilibrium at all and the possibility presents itself that there
may be an endless sequence of moves and countermoves, an indefinite
state of warfare between firms. It is true that there are many special
cases in which a state of equilibrium t] 3 ,eoretically exists. In the second
place, even in these cas6s not only is it much harder to attain than

8 See, in particular, E. S. Chamberlin, Theory of Monopolistic Competition, and
Joan Robinson, The Economics of Imperfect Competition.

8o Can Capitalism Survive?

the equilibrium in perfect competition, and still harder to preserve,
but the “beneficial” competition of the classic type seems likely to be
replaced by “predatory” or “cutthroat” competition or simply by
struggles for control in the financial sphere. These things are so many
sources of social waste, and there are many others such as the costs of
advertising campaigns, the suppression of new methods of production
(buying up of patents in order not to use them) and so on. And most
important of all: under the conditions envisaged, equilibrium, even
if eventually attained by an extremely costly method, no longer guar-
antees either full employment or maximum output in the sense of
the theory of perfect competition. It may exist without full employ-
ment; it is bound to exist, so it seems, at a level of output below that
, maximum mark, because profit-conserving strategy, impossible in
conditions of perfect competition, now not only becomes possible but
* imposes itself.

Well, does not this bear out what the man in the street (unless a
businessman himself) always thought on the subject of private busi-
ness? Has not modern analysis completely refuted the classical doc- |
trine and justified the popular view? Is it not quite true after all, that *
there is little parallelism between producing for profit and producing |
for the consumer and that private enterprise is little more than a
device to curtail production in order to extort profits which then are
correctly described as tolls and ransoms?

CHAPTER VII

THE PROCESS OF CREATIVE DESTRUCTION

T he theories of monopolistic and oligopolistic competition and
their popular variants may in two ways be made to serve the view
that capitalist reality is unfavorable to maximum performance in
production. One may hold that it always has been so and that all
along output has been expanding in spite of the secular sabotage
perpetrated by the managing bourgeoisie. Advocates of this proposi-
tion would have to prpduce evidence to the effect that the observed
rate of increase can J)e accounted for by a sequence of favorable cir-
cumstances unconnected, with the mechanism of private* enterprise,
and strong enough to overcome the latter’s resistance. This is precisely
the question which we shall discuss in Chapter IX. However, those
who espouse this variant at least avoid the trouble about historical
fact that the advocates of the alternative proposition have to face.
This avers that capitalist reality once tended to favor maximum pro-
ductive performance, or at all events productive performance so con-
siderable as to constitute a major element in any serious appraisal of
the system; but that the later spread of monopolist structures, killing
competition, 1^ by now reversed that tendency.

First, this invoI^lKe creation’'H*an eh^ imaginary golden age
of perfect competition that at some time somehow metamorphosed
itself into the monopolistic age, whereas it is quite clear that perfect
competition has at no time been more of a reality than it is at present.
Secondly, it is necessary to point out that the rate of increase in output
did not decrease from the nineties from which, I suppose, the preva-
lence of the largest-size concerns, at least in manufacturing industry,
would have to be dated; that there is nothing in the behavior of the
time series of total output to suggest a “break in trend”; and, most
important of all, that the modern standard of life of the masses
evolved during the period of relatively unfettered “big business.” If
we list the items that enter the modern workman’s budget and from
1899 on observe the course of their prices not in terms of money but
in terms of the hours of labor that will buy them — ^i.e., each year’s
money prices divided by each year’s hourly wage rates — ^we canno t fal l
to be spuck„,by.jhe.^rate of the advance which, considering the spec-
tacuSr improvement ia qualities, seems to have been greater and not
smaller thaij it eyer was before. If we economists were given less to
wishful thinking and more to the observation of facts, doubts would
Bi

Can Capitalism Survive?

immediately arise as to the realistic virtues of a theory that would
have led us to expect a very different result. Nor is this all. As soon
as we go into details and inquire into the individual items in which
progress was most conspicuous, the trail leads not to the doors of
those firms that work under conditions of comparatively free com*
petition but precisely to the doors of the large concerns — ^which, as
in the case of agricultural machinery, also account for much of the
progress in the competitive sector — and a shocking suspicion dawns
upon us that big business may have had more to do with creating
that standard of life than with keeping it down.

The conclusions alluded to at the end of the preceding chapter are
in fact almost completely false. Yet they follow from observations and
theorems that are almost completely^ true. Both economists and
popular writers have once more run away with some fragments of
reality they happened to grasp. These fragments themselves were
mostly seen correctly. Their formal properties were mostly developed
correctly. But no conclusions about capitalist reality as a whole follow
from such fragmentary analyses. If we draw them nevertheless, we
can be right only by accident. That has been done. And the lucky
accident did not happen.

The essential point to grasp is that in dealing with capitalism' we
are dealing with an evolutionary process. It may seem strange that
anyone can fail to see so obvious a fact which moreover was long
ago emphasized by Karl Marx. Yet that fragmentary analysis which
yields the bulk of our propositions about the functioning of modern
capitalism persistently neglects it. Let us restate the point and see
how it bears upon our problem.

I Capitalism, then, is by nature a form or method of economic change
I and not only never is but never can be stationary. And this evolu-
/tionary character of the capitalist process is not merely due to the fact
that economic life goes on in a social and natural environment which
changes and by its change alters the data of economic action; this
fact is important and these changes (wars, revolutions and so on)
often condition industrial change, but they are not its prime movers.
Nor is this evolutionary character due to a quasi-automatic increase
in population and capital or to the vagaries of monetary systems of

As a matter of fact, tljpse observations and theorems are not completely .satis-
factory. Th#usual expositions of the doctrine of imperfect competition fail in
particular to give due attention to the many and important cases in which, even as
a matter of static theory, imperfect competition approximates the results of perfect
competition. There are other cases in .which it does not do this, but offers com-
pensations which, while not entering any output index, yet contribute to what
the output index is in the last rCsort intended to measure — the cases in which a
firm defends its market by establishing a naj^ for quality and service for instance.
However, in order to simplify matters, we will not take issue with that doctrine-
on its own ground.

The Process of Creative Destruction 83

which exactly the same thing holds true. The fundamental impulse
that sets and keeps the capitalist engine in motion comes from the
new consumers’ goods, the new methods of production or transporta-
tion, the new markets, the new forms of industrial organization that
capitalist enterprise creates.

As we have seen in the preceding chapter, the contents of the
laborer’s budget, say from 1760 to 1940, did not simply grow on un-
changing lines but they underwent a process of qualitative change.
Similarly, the history of the productive apparatus of a typical farm,
from the beginnings of the rationalization of crop rotation, plowing
and fattening to the mechanized thing of today — linking up with
elevators and railroads — is a history of revolutions. So is the history
of the productive apparatus of the iron and steel industry from the
charcoal furnace to our own type of furnace, or the history of the
apparatus of power production from the overshot water wheel to the
modern power plant, or the history of transportation from the mail-
coach to the airplane. The opening up of new .markets, foreign or
domestic, and the organizational development from the craft shop
and factory to such concerns as U. S. Steel illustrate the same process
of industrial mutation — if I may use that biological term — that inces-
santly revolutionizes^ the economic structure from within, incessantly
destroying the old one, incessantly creating a new one. This process
of Creative Destruction is the essential fact about capitalism. It is
what capitalism consists in and what every capitalist concern has got
to live in. This fact bears upon our problem in two ways.

First, since we are dealing with a process whose every element takes
cqnside^'able time in revealing its true features and ultimate effects,
there is no point in appraising the performance of that process ex visu
of a given point pf time; we must judge its performance over time, as
it unfolds through decades or centuries. A system — any system, eco-
nomic or other — 'that at every given point of time fully utilizes its
possibilities to the best advantage may yet in the long run be inferior
to a system that does so at no given, point of time, because the latter’s
failure to do so may be a conditioh for the level or speed of long-run
4 performance.

Second, since we are dealing with an organic process, analysis of
what happens in any particular part of it— »say»^ in an individual con-
cern or industry — ^may indeed clarify details of mechan^^m but is
inconclusive beyond that, Every piece of business strategy acquires its
true significance only against the background of that process and

2 Those revolutions are not strictly incessant; they occur in discrete rushes which
are separated from each other by spans of comparative quiet. The process as a
whole works incessantly however, in the sense that there always is either revolution
or absorption of the results of revolution, both together forming what are known
as business cycles,

84 Can Capitalism Survive?

within the situation created by it. It must be seen in its role in the
perennial gale of creative destruction; it cannot be understood irre-
spective of it or, in fact, on the hypothesis that there is a perennial lull.

But economists who, ex visu of a point of time, look for example
at the behavior of an oligopolist industry — an industry which con-
sists of a few big firms — and observe the well-known moves and
countermoves within it that seem to aim at nothing but high prices
and restrictions of output are making precisely that hypothesis. They
* accept the data of the momentary situation as if there were no past or
future to it and think that they have understood what there is to
understand if they interpret the behavior of those firms by means of
the principle of maximizing profits with reference to those data. The
usual theorist’s paper and the usual government commission's report
practically never try to see that behavior, on the one hand, as a result
of a piece of past history and, on the other hand, as an attempt to
deal with a situation that is sure to change presently — as an attempt
by those firms to keep on their feet, on ground that is slipping away
from under them. In other words, the problem that is usually being
visualized is how capitalism administers existing structures, whereas
the relevant problem is how it creates and destroys them. As long as
this is not recognized, the investigator does a meaningless job. As
soon as it is recognized, his outlook on capitalist practice and its
social results changes considerably.^

The first thing to go is the traditional conception of the modus
operandi of competition. Economists are at long last emerging from
the stage in which price competition was all they saw. As soon as
quality competition and sales effort are admitted into the sacred
precincts of theory, the price ^ariable is ousted from its dominant
position. However, it is still competition within a rigid pattern of
invariant conditions, methods of production and forms of industrial
organization in particular, that practically monopolizes attention.
But in capitalist reality as distinguished from its textbook picture, it
is not that kind of competition which counts but the competition
from the new commodity, the new technology, the new source of
supply, the new type of organization (the largest-scale unit of control
for instance) — competition which commands a decisive cost or quality
advantage and which strikes not at the margins of the profits and the
outputs of the existing firms but at their foundations and their very
lives. Thi^ kind of competition is as much more effective than the
other as a bombardment is in comparison with forcing a door, and

2 It should be understood that it is only our appraisal of economic performance
and not our moral judgment that can be so changed. Owing to its autonomy, moral
approval or disapproval is entirely independent of our appraisal of social (or ally
other) results, unless we happen to adopt a moral system such as utilitarianism

The Process of Creative Destruction 85

so much more important that it becomes a matter of comparative
indifference whether competition in the ordinary sense functions more
or less promptly; the powerful lever that in the long run expands
output and brings down prices is in any case made of other stuff.

It is hardly necessary to point out that competition of the hind we
now have in mind acts not only when in being but also when it is
merely an ever-present threat. It disciplines before it attacks. The
businessman feels himself to be in a competitive situation even if he
is alone in his field or if, though not alone, he holds a position such
that investigating government experts fail to see any effective com-
petition between him and any other firms in the same or a neighbor-
ing field and in consequence conclude that his talk, under examina-
tion, about his competitive sorrows is all make-believe. In many cases,
though not in all, this will in the long run enforce behavior very
similar to the perfectly competitive pattern.

Many theorists take the opposite view which is best conveyed by
an example. Let us assume that there is a certain number of retailers
in a neighborhood who try to improve their relative position by
service and "atmosphere” but avoid price competition and stick as to
methods to the local tradition — a picture of stagnating routine. As
others drift into the trade that quasi-equilibrium is indeed upset, but
in a manner that does not benefit their customers. The economic
space around each of the shops having been narrowed, their owners
will no longer be able to make a living and they will try to mend the
case by raising prices in tacit agreement. This will further reduce
their sales and so, by successive pyramiding, a situation will evolvcg
in which increasing potential supply will be attended by increasing
instead of decreasing prices and by decreasing instead of increasing
sales.

Such cases do occur, and it is right and proper to work them out.
But as the practical instances usually given show, they are fringe-end
cases to be found mainly in the sectors furthest removed from all that
is most characteristic of capitalist activity.^ Moreove r, they are tran -
sient by nature. In the case of retail trade the competition that matters
amSmdrfrom additional shops of the same type, but from the depart-
ment store, the chain store, the mail-order house and the super-
market which are bound to destroy those pyramids sooner or later.®

^ This is also shown by a theorem we frequently meet with in expositions of the
theory of imperfect competition, viz., the theorem that, under conditions of im-
perfect competition, producing or trading businesses tend to be irrationally small.
Since imperfect competition is at the same time held to be an outstanding charac-
teristic of modem industry we are set to wPndering what world these theorists
live in, unless, as stated above, fringe-end cases are all they have in mind.

®The mere threat of their attack cannot, in the particular conditions, environ-
mental and personal, of small-scale retail trade, have its usual disciplining influ-
ence, for the small man is too much hampered by his cost structure and, however

86 Can Capitalism Survive?

Now a theoretical construction which neglects this essential element
of the case neglects all that is most typically capitalist about it; even
if correct in logic as well as in fact, it is like Hamlei without the
Danish prince.

well he may manage within his inescapable limitations, he can never adapt him
self to the methods of competitors who can afford to sell at the price at which
he buys.

CHAPTER VIII

MONOPOLISTIC PRACTICES

W HAT has been said so far is really sujficient to enable the reader
to deal with the large majority of the practical cases he is likely
to meet and to realize the inadequacy of most of those criticisms of the
profit economy which, directly or indirectly, rely on the absence of
perfect competition. Since, however, the bearing of our argument on
some of those criticisms may not be obvious at a glance, it will be
worth our while to elaborate a little in order to make a few points
more explicit.

1 . We have just seen that, both as a fact and as a threat, the impact
of new things — new technologies for instance — on the existing struc-
ture of an industry considerably reduces the long-run scope and imr
portance of practices that aim, through restricting output, at conserv-
ing established positions and at maximii^ing the profits accruing from
them. We must now recognize the further fact that restrictive practices
of this kind, as far as they are effective, acquire a new significance in
the perennial gale of creative destruction, a significance which they
would not have in a stationary state or in a state of slow and balanced
growth. In either of these cases restrictive strategy would produce no
result other than an increase in profits at the expense of buyers except
that, in the case of balanced advance, it might still prove to be the
easiest and most effective way of collecting the means by which to
finance additional investment.^ But in the process of creative de^tT-UC-
Ti on. restr ictive practices may do much to steady Ihe ship and to allg;^
yiate^ temporary dij6S.cult;res. |This is in fact a very familiar argument
which always turns up in times of depression and, as everyone knows,
has become very popular with governments and their economic ad-
visers — ^witness the NRA. While it has been so much misused and
so faultily acted upon that most economists heartily despise it, those

^Theorists axe apt to look upon anyone who admits this possibility as guilty
of gross error, and to prove immediately that financing by borrowing from banks
or from private savers or, in the^^ase of public enterprise, financing from the
proceeds of an income tax is much more rational than is financing from surplus
profits collected through a restrictive policy. For some patterns of behavior they
are quite right. For others they are quite wrong. I believe that both capitalism
and communism of the Russian type belong in the latter category. But the point
is that theoretical considerations, especially theoretical considerations of the short-
run kind, cannot solve, although they contribute to the solution of, the problem
which we shall meet again in the next part.

88 Can Capitalism Survive?

same advisers who are responsible for this^ invariably fail to see its
much more general rationale.

Practically any investment entails, as a necessary complement of
entrepreneurial action, certain safeguarding activities such as insuring
or hedging. Long-range investing under rapidly changing conditions,
especially under conditions that change or may change at any mo-
ment under the impact of new commodities and technologies, is like
shooting at a target that is not only indistinct but moving — and mov-
ing jerkily at that. Hence it becomes necessary to resort to such
protecting devices as patents or temporary secrecy of processes or, in'
some cases, long-period contracts secured in advance. But these pro-
tecting devices which most economists accept as normal elements of
rational management^ are only special cases of a larger class com-
prising many others which most economists condemn although they
do not diflEer fundamentally from the recognized ones.

If for instance a war risk is insurable, nobody objects to a firm's
collecting the cost of this insurance from the buyers of its products.
But that risk is no less an element in long-run costs, if there are no
facilities for insuring against it, in which case a price strategy aiming
at the same end will seem to involve unnecessary restriction and to be
productive of excess profits. Similarly, if a patent cannot be secured
or would not, if secured, effectively protect, other means may have to
be used in order to justify the investment. Among them are a price
policy that will make it possible to write off more quickly than would
otherwise be rational, or additional investment in order to provide
excess capacity to be used only for aggression or defense. Again, if
long-period contracts cannot be entered into in advance, other means
may have to be devised in order to tie prospective cukomers to the
investing firm.

In analyzing such business strategy ex visu of a given point of time,
the investigating economist or government agent sees price policies
that seem to him predatory and restrictions of output that seem to him
synonymous with loss of opportunities to produce. He does not see
that restrictions of this type are, in the conditions of the perennial
gale, incidents, often unavoidable incidents, of a long-run process of
expansion which they protect rather than impede. There is no more
^of paradox in this than there is in saying that motorcars are travel-
ling faster than they otherwise would because they arc provided with
, brakes.

2 In particular, it is easy to show that there is no sense, and plenty of harm, in a
policy that aims at preserving “price parities.”

®Some economists, however, consider that even those devices are obstructions
to progress which, though perhaps necessary in capitalist society, would he absent
in a socialist one. There is some truth in this. But that does not affect the proposi-
tion that the protection afforded by patents and so on is, in the conditions of a
profit economy, on balance a propelling and not an inhibiting factor.

Monopolistic Practices 89

2. This stands out most dearly in the case of those sectors of the
economy which at any time happen to embody the impact of new
things and methods on the existing industrial structure. The best way
of getting a vivid and realistic idea of industrial strategy is indeed to
visualize the behavior of new concerns or industries that introduce new
commodities or processes (such as the aluminum industry) or else reor-
ganize a part or the whole of an industry (such as, for instance, the
old Standard Oil Company).

As we have seen, such concerns are aggressors by nature and wield*
the really effective weapon of competition. Their intrusion can only
in the rarest of cases fail to improve total output in quantity or
quality, both through the new method itself — even if at no time used
to full advantage — and through die pressure it exerts on the preexist-
ing firms. But these aggressors are so circumstanced as to require, for
purposes of attack and defense, also pieces of armor other than price
and quality of their product which, moreover, must be strategically
manipulated all along so that at any point of time they seem to be
doing nothing but restricting their output and keeping prices high.

On the one hand, largest-scale plans could in many cases not mate-
rialize at all if it were not known from the outset that competition
will be discouraged by heavy capital requirements or lack of expe-
rience, or that means are available to discourage or checkmate it so
as to gain the time and space for further developments. Even the con-
quest of financial control over competing concerns in otherwise unas-
sailable positions or the securing of advantages that run counter to the
public’s sense of fair play — ^railroad rebates — ^move, as far as long-run
effects on total output alone are envisaged, into a different light;^
they may be methods for removing obstacles that the institution of
private property puts in the path of progress. In a socialist society
that time and space would be no less necessary. They would have
to be secured by order of the central authority.

On the other hand, enterprise would in most cases be impossible if

^The qualification added removes, I think, any just cause for offense that the
above proposition might conceivably cause. In case that qualification is not ex-
plicit enough, I beg leave to repeat that the moral aspect is in this case, as it
must be in every case, entirely unaffected by an economic argument. For the rest,
let the reader reflect that even in dealing with indubitably criminal actions every
civilized judge and every civilized jury take account of the ulterior purpose in
pursuit of which a crime has occurred and of the difference it makes whether an
action that is a crime has or has not also effects they consider socially desirable.

Another objection would be more to the point. If an enterprise can succeed
only by such means, does not that prove m itself that it cannot spell social gain?
A very simple argument can be framed in support of this view. But it is subject
to a severe ceteris paribus proviso. That is to say, it holds for conditions which are
just about equivalent to excluding the process of creative destruction — capitalist
reality. On reflection, it will be seen that the analogy of the practices under dis-
cussion with patents is sufficient to show this.

go Can Capitalism Survive?

it were not known from the outset that exceptionally favorable situa-
tions are likely to arise which if exploited by price, quality and quan-
tity manipulation will produce profits adequate to tide over excep-
tionally unfavorable situations provided these are similarly managed.
Again this requires strategy that in the short run is often restrictive.
In the majority of successful cases this strategy just manages to serve
its purpose. In some cases, however, it is so successful as to yield
profits far above what is necessary in order to induce the corresponding
investment. These cases then provide the baits that lure capital on
to untried trails. Their presence explains in part how it is possible
for so large a section of the capitalist world to work for nothing: in
the midst of the prosperous twenties just about half of the business
corporations in the United States were run at a loss, at zero profits,
or at profits which, if they had been foreseen, would have been inade-
quate to call forth the effort and expenditure involved.

Our argument however extends beyond the cases of new concerns,
methods and industries. Old concerns and established industries,
whether or not directly attacked, still live in the perennial gale.
Situations emerge in the process of creative destruction in which many
firms may have to perish that nevertheless would be able to live on
vigorously and usefully if they could weather a particular storm. Short
of such general crises or depressions, sectional situations arise in which
the rapid change of data that is characteristic of that process so
disorganizes an industry for the time being as to inflict functionless
losses and to create avoidable unemployment. Finally, there is cer-
tainly no point in trying to conserve obsolescent industries indefi-
nitely; but there is point in trying to avoid their coming down with
a crash and in attempting to turn a rout, which may become a center
of cumulative depressive effects, into orderly retreat. Correspondingly
there is, in the case of industries that have sown their wild oats but
are still gaining and not losing ground, such a thing as orderly
advance.®

good example illustrative of this point — in fact of much of our general
argument — is the postwar history of the automobile and the rayon industry. The
first illustrates very well the nature and value of what we might call "edited” com-
petition. The bonanza time was over by about 1916. A host of firms nevertheless
crowded into the industry afterwards, most of which were eliminated 'by 1925.
From a fierce life and death struggle three conc^ns emerged that by now account
for over 80 per cent of total sales. They are under competitive pressure inasmuch
as, in spite of the advantages of an established position, an elaborate sales and
service organization and so on, any failure to keep up and improve the quality
of their products or any attempt at monopolistic combination would call in new
competitors. Among themselves, the three concerns behave in a way which should
be called corespective rather than competitive: they refrain from certain ag-
gressive devices (which, by the way, would also be absent in perfect competition);
they keep up with each other and in doing so play for points at the frontiers.
This has now gone on for upwards of fifteen years and it is not obvious that if condi-
tions of theoretically perfect competition had prevailed during that period, better

Monopolistic Practices 91

this is of course nothing but the tritest common sense. But it is
being overlooked with a persistence so stubborn as sometimes to raise
the question of sincerity. And it follows that, within the process
of creative destruction, all the realities of which theorists are in the
habit of relegating to books and courses on business cycles, there
is another side to industrial self-organization than that which these
theorists are contemplating. “Restraints of trade” of the cartel type
as well as those which merely consist in tacit understandings about
price competition may be effective remedies under conditions of de-
pression, As far as they are, they may in the end produce not only
steadier but also greater expansion of total output than could be
secured by an entirely uncontrolled onward rush that cannot fail
to be studded with catastrophes. Nor can it be argued that these
catastrophes occur in any case. We know what has happened in
each historical case. We have a very imperfect idea of what might
have happened, considering the tremendous pace of the process, if
such pegs had been entirely absent.

Even as now extended however, our argument does not cover all
cases of restrictive or regulating strategy, many of which no doubt
have that injurious effect on the long-run development of output
which is uncritically attributed to all of them. And even in the cases
our argument does cover, the net effect is a question of the circum-
stances and of the way in which and the degree to which industry
regulates itself in each individual case. It is certainly as conceivable
that an all-pervading cartel system might sabotage all progress as
it is that it might realize, with smaller social and private costs, all
that perfect competition is supposed to realize. This is why our argu-
ment does not amount to a case against state regulation. It does show
that there is no general case for indiscriminate “trust-busting” or for
the prosecution of everything that qualifies as a restraint of trade.
Rational as distinguished from vindictive regulation by public au-
thority turns out to be an extremely delicate problem which not every
government agency, particularly when in full cry against big business,
can be trusted to solve.® But our argument, framed to refute a preva-

or cheaper cars would now be offered to the public, or higher wages and more or
steadier employment to the workmen. The rlayon industry had its bonanza time in
the twenties. It presents the features incident to introducing a commodity into
fields fully occupied before and t^ie policies that impose themselves in such condi-
tions still more clearly than does the automobile industry. And there are a number
of other differences. But fundamentally the case is similar. The expansion in
quantity and quality of rayon output is common knowledge. Yet restrictive policy
presided over this expansion at each individual point of time.

® Unfortunately, this statement is almost as effective a bar to agreement on policy
as the most thoroughgoing denial of any case for government regulation could be.
In fact it may embitter discussion. Politicians, public officers and economists can
stand what I may politely term the whole-hog opposition of “economic royalists.”
Doubts about their competence, such as crowd upon us particularly when we see
the legal mind at work, are much more difficult for them to stand.

92 Can Capitalism Survive?

lent theory and the inferences drawn therefrom about the relation
between modern capitalism and the development of total output, only
yields another theory, i.e., another outlook on facts and another prin-
ciple by which to interpret them. For our purpose that is enough.
For the rest, the facts themselves have the floor.

3. Next, a few words on the subject of Rigid Prices which has been
receiving so much attention of late. It really is but a particular aspect
of the problem we have been discussing. We shall define rigidity as
follows: a price is rigid if it is less sensitive to changes in the condi-
tions of demand and supply than it would be if perfect competition
prevailed.’^

Quantitatively, the extent to which prices are rigid in that sense
depends on the material and the method of measurement we select
and is hence a doubtful matter. But whatever the material or method,
it is certain that prices are not nearly as rigid as they seem to be. There
are many reasons why what in effect is a change in price should not
show in the statistical picture; in other words, why there should be
much spurious rigidity. I shall mention only one class of them which
is closely connected with the facts stressed by our analysis.

I have adverted to the importance, for the capitalist process in gen-
eral and for its competitive mechanism in particular, of the intrusion
of new commodities. Now a new commodity may effectively bring
down the preexisting structure and satisfy a given want at much
lower prices per unit of service (transportation service for instance),
and yet not a single recorded price need change in the process; flexi-
bility in the relevant sense may be accompanied by rigidity in a formal
sense. There are other cases, not of this type, in which price reduction
is the sole motive for bringing out a new brand while the old one is
left at the previous quotation — again a price reduction that does not
show. Moreover, the great majority of new consumers’ goods — ^par-
ticularly all the gadgets of modern life — are at first introduced in an
experimental and unsatisfactory form in which they could never con-
quer their potential markets. Improvement in the quality of products
is hence a practically universal feature of the development of indi-
vidual concerns and of industries. Whether or not this improvement
involves additional costs, a constant price per unit of an improving
commodity should not be called rigid without further investigation.

Of course, plenty of cases of genuine price rigidity remain — of

This definition suffices for our purposes but would not be satisfactory for others.
See D. D. Humphrey’s article in the Journal of Political Economy, October 1937,
and E. S, Mason’s article in the Review of Economic Statistics, May 1938. Pro-
fessor Mason has shown, among other things, that contrary to a widespread belief
price rigidity is not increasing or, at all events, that it is no greater than it was
forty years ago, a result which in itself suffices to invalidate some of tire implica-
tions of the' current doctrine of rigidity.

Monopolistic Practices 93

prices which are being kept constant as a matter of business policy or
which remain unchanged because it is difficult to change, say, a price
set by a cartel after laborious negotiations. In order to appraise the
influence of this fact on the long-run development of output, it is first
of all necessary to realize that this rigidity is essentially a short-run
phenomenon. There are no major instances of long-run rigidity of
prices. Whichever manufacturing industry or group of manufactured
articles of any importance we choose to investigate over a period of
time, we practically always find that in the long run prices do not
fail to adapt themselves to technological progress — frequently they fall
spectacularly in response to it® — ^unless prevented from doing so by
monetary events and policies or, in some cases, by autonomous changes
in wage rates which of course should be taken into account by ap-
propriate corrections exactly as should changes in quality of products.®
And our previous analysis shows sufficiently why in the process of
capitalist evolution this must be so.

What the business strategy in question really aims at — all, in any
case, that it can achieve — is to avoid seasonal, random and cyclical
fluctuations in prices and to move only in response to the more
fundamental changes in the conditions that underlie those fluctua-
tions. Since these more fundamental changes take time in declaring
themselves, this involves moving slowly by discrete steps — ^keeping
to a price until new relatively durable contours have emerged into
view. In technical language, this strategy aims at moving along a step
function that will approximate trends. And that is what genuine and
voluntary price rigidity in most cases amounts to. In fact, most econo-
mists do admit this, at least by implication. For though some of their
arguments about rigidity would hold true only if the phenomenon
were a long-run one — ^for instance most of the arguments averring
that price rigidity keeps the fruits of technological progress from
consumers — in practice they measure and discuss primarily cyclical
rigidity and especially the fact that many prices do not, or do not
promptly, fall in recessions and depressions. The real question is there-

8 They do not as a rule fall as they would under conditions of perfect com-
petition. But this is true only ceteris paribus, and this proviso robs the proposi-
tion of all practical importance. I have adverted to this point before and shall
return to it below (§ 5).

8 From a welfare standpoint, it is proper to adopt a definition different from
ours, and to measure price changes in terms of the hours of labor that are cur-
rently necessary to earn the dollars which will buy given quantities of manu-
factured consumers’ goods, taking account of changes of quality. We have already
done this in the course of a previous argument. A long-run downward flexibility
is then revealed that is truly impressive. Changes in price level raise another
problem. So far as they reflect monetary influences they should be eliminated for
most of the purposes of an investigation into rigidity. But so far as they reflect the
combined effect of increasing efiiciencies in all lines of production they should not.

94 Can Capitalism Survive?

fore how this short-run rigidity^® may affect the long-run development
of total output. Within this question, the only really important issue
is this: prices that stay up in recession or depression no doubt in-
fluence the business situation in those phases of the cycles; if that
influence is strongly injurious — making matters much worse than
they would be with perfect flexibility all round — the destruction
wrought each time might also affect output in the subsequent recov-
eries and prosperities and thus permanently reduce the rate of increase
in total output below what it would be in the absence of those
rigidities. Two arguments have been put forth in favor of this view.

In order to put the first into the strongest possible light, let us
assume that an industry which refuses to reduce prices in recession
goes on selling exactly the same quantity of product which it would
sell if it had reduced them. Buyers are therefore out of pocket by
the amount to which the industry profits from the rigidity. If these
buyers are the kind of people who spend all they can and if the
industry or those to whom its net returns go does not spend the
increment it gets but either keeps it idle or repays bank loans, then,
total expenditure in the economy may be reduced thei"eby. If this
happens, other industries or firms may suffer and if thereupon they
restrict in turn, we may get a cumulation of depressive effects. In
other words, rigidity may so influence the amount and distribution
of national income as to decrease balances or to increase idle balances
or, if we adopt a popular misnomer, savings. Such a case is conceiv-
able. But the reader should have little difficulty in satisfying himselP^
that its practical importance, if any, is very small.

The second argument turns on the dislocating effects price rigidity
may exert if, in the individual industry itself or elsewhere, it leads
to an additional restriction of output, i.e., to a restriction greater
than that which must in any case occur during depression. Since the
most important conductor of those effects is the incident increase in
unemployment — unstabilization of employment is in fact the indict-

It should, however, be observed that this short run may last longer than the
term '‘short run” usually implies — ^sometimes ten years and even longer. There
is not one cycle, but there are many simultaneous ones of varying duration. One
of the most important ones lasts on the average about nine years and a half.
Structural changes requiring price adjustments do in important cases occur in
periods of about that length. The full extent of the spectacular changes reveals
itself only in periods much longer than this. To do justice to aluminum, rayon, or
motorcar prices one must survey a period of about forty-five years.

^^The best method of doing this is to work out carefully all the assumptions in-
volved, not only in the strong case imagined but also in the weaker cases that
are less unlikely to occur in practice. Moreover, it should not be forgotten that
the profit due to keeping prices up may be the means of avoiding bankruptcy or
at least the necessity of discontinuing operations, both of which might be much
more effective in starting a downward “vicious spiral” than is^ a possible rediiciion
in total expenditure. See the comments on the second argument.

Monopolistic Practices 95

ment most commonly directed against price rigidity — and the conse-
quent decrease in total expenditure, this argument then follows in
the tracks of the first one. Its practical weight is considerably reduced,
although economists greatly differ as to the extent, by the considera-
tion that in the most conspicuous cases price rigidity is motivated pre-
cisely by the low sensitiveness of demand to short-run price changes
within the practicable range. People who in depression worry about
their future are not likely to buy a new car even if the price were
reduced by 25 per cent, especially if the purchase is easily postponable
and if the reduction induces expectations of further reductions.

Quite irrespective of this however, the argument is inconclusive
because it is again vitiated by a ceteris paribus clause that is inadmis-
sible in dealing with our process of creative destruction. From the
fact, so far as it is a fact, that at more flexible prices greater quantities
could ceteris paribus be sold, it does not follow that either the output
of the commodities in question, or total output and hence employ-
ment, would actually be greater. For inasmuch as we may assume that
the refusal to lower prices strengthens the position of the industries
which adopt that policy either by increasing their revenue or simply
by avoiding chaos in their markets — that is to say, so far as this policy
is something more than a mistake on their part — it may make fortresses
oiit of what otherwise might be centers of devastation. As we have seen
before, from a more general standpoint, total output and employment
may well keep on a higher level with the restrictions incident to that
policy than they would if depression were allowed to play havoc
with the price structure.^^ other words, under the conditions
created by capitalist evolution, perfect and universal flexibility of
prices might in depression further unstabilize the system, instead of
stabilizing it as it no doubt would under the conditions envisaged by
general theory. Again this is to a large extent recognized in those
cases in which the economist is in sympathy with the interests imme-
diately concerned, for instance in the case of labor and of agriculture;
in those cases he admits readily enough that what looks like rigidity
may be no more than regulated adaptation.

Perhaps the reader feels some surprise that so little remains of a
doctrine of which so much has been made in the last few years. The
rigidity of prices has become, with some people, the outstanding defect
of the capitalist engine and — almost — the fundamental factor in the
explanation of depressions. But there is nothing to wonder at in this.
Individuals and groups snatch at anything that will qualify as a dis-
covery lending support to the political tendencies of the hour. The

^The theorist's way to put the point is that in depression demand curves
might shift downwards much more violently if all pegs were withdrawn from
under aU prices.

gS Can Capitalism Survive?

doctrine of price rigidity, with a modicum of truth to its credit, is
not the worst case of this kind by a long way.

4. Another doctrine has crystallized into a slogan, viz., that in the
era of big business the maintenance of the value of existing invest-
ment — conservation of capital — becomes the chief aim of entrepre-
neurial activity and bids fair to put a stop to all cost-reducing im-
provement. Hence the capitalist order becomes incompatible with
progress.

Progress entails, as we have seen, destruction of capital values in
the strata with which the new commodity or method of production
competes. In perfect competition the old investments must be adapted
at a sacrifice or abandoned; but when there is no perfect competition
and when each industrial field is controlled by a few big concerns,
these can in various ways fight the threatening attack on their capital
structure and try to avoid losses on their capital accounts; that is to
say, they can and will fight progress itself.

So far as this doctrine merely formulates a particular aspect of re-
strictive business strategy, there is no need to add anything to the
argument already sketched in this chapter. Both as to the limits of that
strategy and as to its functions in the process of creative destruction,
we should only be repeating what has been said before. This becomes
? still more obvious if we observe that conserving capital values is the
same thing as conserving profits. Modern theory tends in fact to use
the concept Present Net Value of Assets (= capital values) in place of
the concept of Profits. Both asset values and profits are of course not
being simply conserved but maximized.

But the point about the sabotage of cost-reducing improvement still
calls for comment in passing. As a little reflection will show, it is
sufficient to consider the case of a concern that controls a technological
device some patent, say — the use of which would involve scrapping
some or all of its plant and equipment. Will it, in order to conserve
its capital values, refrain from using this device when a management
not fettered by capitalist interests such as a socialist management
could and would use it to the advantage of all?

Again it is tempting to raise the question of fact. The first thing
a modern concern does as soon as it feels that it can afford it is to
establish a research department every member of which knows that
is bread and butter depends on his success in devising improvements,
his practice does not obviously suggest aversion to technological
progress. Nor can we in reply be referred to the cases in which patents
acquired by business concerns have not been used promptly or not
een used at all. For there may be perfectly good reasons for this;
tor example, the patented process may turn out to be no good or at
east not to be in shape to warrant application on a commercial basis,
eit er the inventors themselves nor the investigating economists

Monopolistic Practices 97

or government officials are unbiased judges of this, and from their
remonstrances or reports we may easily get a very distorted picture.^®

But we are concerned with a question of theory. Everyone agrees
that private and socialist managements will introduce improvements
if, with the new method of production, the total cost per unit of prod-
uct is expected to be smaller than the prime cost per unit of product
with the method actually in use. If this condition is not fulfilled,
then it is held that private management will not adopt a cost-reducing
method until the existing plant and equipment is entirely written
oiE, whereas socialist management would, to the social advantage, re-
place the old by any new cost-reducing method as soon as such a
method becomes available, i.e., without regard to capital values. This
however is not so.^^

Private management, if actuated by the profit motive, cannot be
interested in maintaining the values of any given building or machine
any more than a socialist management would be. All that private man-
agement tries to do is to maximize the present net value of total
assets which is equal to the discounted value of expected net returns.
This amounts to saying that it will always adopt a new method of
production which it believes will yield a larger stream of future
income per unit of the corresponding stream of future outlay, both
discounted to the present, than does the method actually in use. The
value of past investment, whether or not paralleled by a bonded debt
that has to be amortized, does not enter at all except in the sense and
to the extent that it would also have to enter into the calculation un-
derlying the decisions of a socialist management. So far as the use of
the old machines saves future costs as compared with the immediate
introduction of the new methods, the remainder of their service value
is of course an element of the decision for both the capitalist and the
socialist manager; otherwise bygones are bygones for both of them
and any attempt to conserve the value of past investment would con-
flict as much with the rules following from the profit motive as it
would conflict with the rules set for the behavior of the socialist
manager.

Incidentally, it should be noticed that the kind of restrictive practice under
discussion, granted that it exists to a significant extent, would not be without com-
pensatory effects on social welfare. In fact, the same critics who talk about
sabotage of progress at the same time emphasize the social losses incident to the
pace of capitalist progress, particularly the unemployment which that pace entails
and which slower advance might mitigate to some extent. Well, is technological
progress too quick or too slow for them? They had better make up their minds.

i^It should be observed that even if the argument were correct, it would still
be inadequate to support the thesis that capitalism is, under the conditions en-
visaged, ‘Incompatible with technological progress.” All that it would prove is, for
some cases, the presence of a lag of ordinarily moderate length in the introduction
of new methods.

gS Can Capitalism Survive?

It is however not true that private firms owning equipment the
value of which is endangered by a new method which they also con-
trol — if they do not control it, there is no problem and no indictment
— ^will adopt the new method only if total unit cost with it is smaller
than prime unit cost with the old one, or if the old investment
has been completely written off according to the schedule decided on
before the new method presented itself. For if the new machines
when installed are expected to outlive the rest of the period previ-
ously set for the use of the old machines, their discounted remainder
value as of that date is another asset to be taken account of. Nor is
it true, for analogous reasons, that a socialist management, if acting
rationally, would always and immediately adopt any new method
which promises to produce at smaller total unit costs or that this
would be to the social advantage.

There is however another element^^ which profoundly affects be-
havior in this matter and which is being invariably overlooked. This
is what might be called ex ante conservation of capital in expecta-
tion of further improvement. Frequently, if not in most cases, a going
concern does not simply face the question whether or not to adopt
a definite new method of production that is the best thing out and,
in the form immediately available, can be expected to retain that posi-
tion for some length of time. A new type of machine is in general
but a link in a chain of improvements and may presently become ob-
solete. In a case like this it would obviously not be rational to follow
the chain link by link regardless of the capital loss to be suffered each
time. The real question then is at which link the concern should take
action. The answer must be in the nature of a compromise between
considerations that rest largely on guesses. But it will as a rule involve
some waiting in order to see how the chain behaves. And to the out-
sider this may well look like trying to stifle improvement in order
to conserve existing capital values. Yet even the most patient of com-
rades would revolt if a socialist management were so foolish as to
follow the advice of the theorist and to keep on scrapping plant and
equipment every year.

5. I have entitled this chapter as I did because most of it deals
with the facts and problems that common parlance associates with
monopoly or monopolistic practice. So far I have as much as possible
refrained from using those terms in order to reserve for a separate
section some comments on a few topics specifically connected with
them. Nothing will be said however that we have not already met in
one form or another.

(a) To begin with, there is the term itself. Monopolist means Single

of course many other elements. The reader will please understand

tice to of principles it is impossible to do full jus-

rice to any of the topics touched upon. **

Monopolistic Practices 99

Seller. Literally therefore anyone is a monopolist who sells anything
that is not in every respect, wrapping and location and service in-
cluded, exactly like what other people sell: every grocer, or every
haberdasher, or every seller of '‘Good Humors’" on a road that is not
simply lined with sellers of the same brand of ice cream. This how-
ever is not what we mean when talking about monopolists. We mean
only those single sellers whose markets are not open to the intrusion
of would-be producers of the same commodity and of actual producers
of similar ones or, speaking slightly more technically, only those single
sellers who face a given demand schedule that is severely independent
of their own action as well as of any reactions to their action by other
concerns. The traditional Cournot-Marshall theory of monopoly as
extended and amended by later authors holds only if we define it in
this way and there is, so it seems, no point in calling anything a
monopoly to which that theory does not apply.

But if accordingly we do define it like this, then it becomes evident
immediately that pure cases of long-run monopoly must be of the
rarest occurrence and that even tolerable approximations to the re-
quirements of the concept must be still rarer than are cases of perfect
competition. The power to exploit at pleasure a given pattern of
demand — or one that changes independently of the monopolist’s
action and of the reactions it provokes — can under the conditions of
intact capitalism hardly persist for a period long enough to matter
for the analysis of total output, unless buttressed by public authority,
for instance, in the case of fiscal monopolies. A modern business con-
cern not so protected — i.e., even if protected by import duties or
import prohibitions — and yet wielding that power (except tempo-
rarily) is not easy to find or even to imagine. Even railroads and power
and light concerns had first to create the demand for their services
and, when they had done so, to defend their market against compe-
tition. Outside the field of public utilities, the position of a single
seller can in general be conquered — and retained for decades — only
on the condition that he does not behave like a monopolist. Short-
run monopoly will be touched upon presently.

Why then all this talk about monopoly? The answer is not without
interest for the student of the psychology of political discussion. Of
course, the concept of monopoly is being loosely used just like any
other. People speak of a country’s having a monopoly of something or
other^® even if the industry in question is highly competitive and so

These so-called monopolies have of late come to the fore in connection with
the proposal to withhold certain materials from aggressor nations. The lessons of
this discussion have some bearing upon our problem by way of analogy. At first,
much was thought of the possibilities of that weapon. Then, on looking more
closely at it, people found their lists of such materials to be shrinking, because
it became increasingly clear that there are very few things that cannot be either
produced or substituted for in the areas in question. And finally a suspicion began

100

Can Capitalism Survive?

on. But this is not all. Economists, government agents, journalists and
politicians in this country obviously love the word because it has come
to be a term of opprobrium which is sure to rouse the public's hostility
against any interest so labeled. In the Anglo-American world monopoly
has been cursed and associated with functionless exploitation ever
since, in the sixteenth and seventeenth centuries, it was English
administrative practice to create monopoly positions in large num-
bers which, on the one hand, answered fairly well to the theoretical
pattern of monopolist behavior and, on the other hand, fully justified
the wave of indignation that impressed even the great Elizabeth.

Nothing is so retentive as a nation's memory. Our time offers other
and more important instances of a nation's reaction to what happened
centuries ago. That practice made the English-speaking public so
monopoly-conscious that it acquired a habit of attributing to that
sinister power practically everything it disliked about business. To
the typical liberal bourgeois in particular, monopoly became the father
of almost all abuses — in fact, it became his pet bogey. Adam Smith,
thinking primarily of monopolies of the Tudor and Stuart type,
frowned on them in awful dignity. Sir Robert Peel — who like most
conservatives occasionally knew how to borrow from the arsenal of
the demagogue — in his famous epilogue to his last period of office
that gave so much offense to his associates, spoke of a monopoly of
bread or wheat, though English grain production was of course per-
I fectly competitive in spite of protection.^® And in this country monop-
I oly is being made practically synonymous with any large-scale business.

(b) The theory of simple and discriminating monopoly teaches that,
excepting a limiting case, monopoly price is higher and monopoly
output smaller than competitive price and competitive output. This
is true provided that the method and organization of production —
and everything else — are exactly the same in both cases. Actually how-
to dawn to the effect that even though some pressure can be exerted on them
in the short run, long-run developments might eventually destroy practically all
that was left on the lists.

There was more excuse for that uncritical attitude in the case of Adam Smith
and the classics in general than there is in the case of their successors because big
business in our sense had not then emerged. But even so they went too far. In part
this was due to the fact that they had no satisfactory theory of monopoly which
induced them not only to apply the terra rather promiscuously (Adam Smith
and even Senior interpreted for instance the rent of land as a monopoly gain)
but also to look upon the monopolists' power of exploitation as practically un-
limited which is of course wrong even for the most extreme cases.

i®This instance illustrates the way in which the term keeps on creeping into
illegitimate uses. Protection of agriculture and a monopoly of agrarian products
are entirely different things. The struggle was over protection and not over a non-
existent cartel of either landowners or farmers. But in fighting protection it was
just as well to beat up for applause. And there was evidently no simpler means of
doing so than by calling protectionists monopolists.

lOI

Monopolistic Practices

ever there are superior methods available to the monopolist which
either are not available at all to a crowd of competitors or are not
available to them so readily: for there are advantages which, though
not strictly unattainable on the competitive level of enterprise, are
as a matter of fact secured only on the monopoly level, for instance,
because monopolization may increase the sphere of influence of the
better, and decrease the sphere of influence of the inferior, brains,^^
or because the monopoly enjoys a disproportionately higher financial
standing. Whenever this is so, then that proposition is no longer true.
In other words, this element of the case for competition may fail
completely because monopoly prices are not necessarily higher or
monopoly outputs smaller than competitive prices and outputs would
be at the levels of productive and organizational efficiency that are
within the reach of the type of firm compatible with the competitive
hypothesis.

There cannot be any reasonable doubt that under the conditions
of our epoch such superiority is as a matter of fact the outstanding
feature of the typical large-scale unit of control, though mere size
is neither necessary nor sufficient for it. These units not only arise in
the process of creative destruction and function in a way entirely dif-
ferent from the static schema, but in many cases of decisive importance
they provide the necessary form for the achievement. They largely
create what they exploit. Hence the usual conclusion about their
influence on long-run output would be invalid even if they were
genuine monopolies in the technical sense of the term.

Motivation is quite immaterial. Even if the opportunity to set
monopolist prices were the sole object, the pressure of the improved
methods or of a huge apparatus would in general tend to shift the
point of the monopolist’s optimum toward or beyond the competitive
cost price in the above sense, thus doing the work — ^partly, wholly,
or more than wholly — of the competitive mechanism,^^ even if re-
reader should observe that while, as a broad rule, that particular type of
superiority is simply indisputable, the inferior brains, especially if their owners
are entirely eliminated, are not likely to admit it and that the public’s and the
recording economists’ hearts go out to them and not to the others. This may have
something to do with a tendency to discount the cost or quality advantages of quasi-
monopolist combination that is at present as pronounced as was the exaggeration
of them in the typical prospectus or announcement of sponsors of such combina-
tions.

20 The Aluminum Company of America is not a monopoly in the technical sense
as defined above, among other reasons because it had to build up its demand
schedule, which fact suffices to exclude a behavior conforming to the Cournot-
Marshall schema. But most economists call it so and in the dearth of genuine cases
we will for the purposes of this note do the same. From 1890 to 1929 the price
of the basic product of this single seller fell to about 12 per cent or, correcting
for the change in price level (B.L.S. index of wholesale prices), to about 8.8
per cent. Output rose from 30 metric tons to 103,400. Protection by patent ceased
in 1909. Argument from costs and profits in criticism of this ‘‘monopoly” must

102 Can Capitalism Survive?

striction is practiced and excess capacity is in evidence all along. Of
course if the methods of production, organization and so on are not
improved by or in connection with monopolization as is the case with
an ordinary cartel, the classical theorem about monopoly price and
output comes into its own again.^i So does another popular idea, viz.,
that monopolization has a soporific effect. For this, too, it is not dif-
ficult to find examples. But no general theory should be built upon
it. For, especially in manufacturing industry, a monopoly position
is in general no cushion to sleep on. As it can be gained, so it can
be retained only by alertness and energy. What soporific influence
there is in modern business is due to another cause that will be
mentioned later.

(c) In the short run, genuine monopoly positions or positions ap-
proximating monopoly are much more frequent. The grocer in a vil-
lage on the Ohio may be a true monopolist for hours or even days
during an inundation. Every successful corner may spell monopoly for
the moment. A firm specializing in paper labels for beer bottles may
be so circumstanced — potential competitors realizing that what seem
to be good profits would be immediately destroyed by their entering
the field — that it can move at pleasure on a moderate but still finite
stretch of the demand curve, at least until the metal label smashes
that demand curve to pieces.

New methods of production or new commodities, especially the
latter, do not per se confer monopoly, even if used or produced by a
single firm. The product of the new method has to compete with the
products of the old ones and the new commodity has to be intro-
duced, i.e., its demand schedule has to be built up. As a rule neither
patents nor monopolistic practices avail against that. But they may
in cases of spectacular superiority of the new device, particularly if it
can be leased like shoe machinery; or in cases of new commodities, the
permanent demand schedule for which has been established before
the patent has expired.

Thus it is true that there is or may be an element of genuine
monopoly gain in those entrepreneurial profits which are the prizes
offered by capitalist society to the successful innovator. But the quan-
titative importance of that clement, its volatile nature and its function
in the process in which it emerges put it in a class by itself. The main
value to a concern of a single seller position that is secured by patent
or monopolistic strategy does not consist so much in the opportunity

take it for granted that a multitude of competing firms would havTbmTab^
equally successful in cost-reducing research, in the economical development of
the productive apparatus, in teaching new uses for the product and in avoiding
wasteful breakdowns. This is, in fact, being assumed by criticism of this kind;
i.e., the propelling factor of modem capitalism is being assumed away,

«^See however supra, § i.

Monopolistic Practices 103

to behave temporarily according to the monopolist schema, as in
the protection it affords against temporary disorganization of the
market and the space it secures for long-range planning. Here how-
ever the argument merges into the analysis submitted before.

6. Glancing back we realize that most of the facts and arguments
touched upon in this chapter tend to dim the halo that once sur-
rounded perfect competition as much as they suggest a more favor-
able view of its alternative. I will now briefly restate our argument
from this angle.

Traditional theory itself, even within its chosen precincts of a sta-
tionary or steadily growing economy, has since the time of Marshall
and Edgeworth been discovering an increasing number of exceptions
to the old propositions about perfect competition and, incidentally,
free trade, that have shaken that unqualified belief in its virtues cher-
ished by the generation which flourished between Ricardo and Mar-
shall — ^roughly, J. S. Milks generation in England and Francesco Fer-
rara’s on the Continent. Especially the propositions that a perfectly
competitive system is ideally economical of resources and allocates
them in a way that is optimal with respect to a given distribution of
income — propositions very relevant to the question of the behavior
of output — cannot now be held with the old confidence.^^

Much more serious is the breach made by more recent work in the
field of dynamic theory (Frisch, Tinbergen, Roos, Hicks and others).
Dynamic analysis is the analysis of sequences in time. In explaining
why a certain economic quantity, for instance a price, is what we find
it to be at a given moment, it takes into consideration not only the
state of other economic quantities at the same moment, as static theory
does, but also their state at preceding points of time, and the expec-
tations about their future values. Now the first thing we discover in
working out the propositions that thus relate quantities belonging to
different points of time^^ is the fact that, once equilibrium has been
destroyed by some disturbance, the process of establishing a new one
is not so sure and prompt and economical as the old theory of perfect
competition made it out to be; and the possibility that the very struggle
for adjustment might lead such a system farther away from instead
of nearer to a new equilibrium. This will happen in most cases
unless the disturbance is small. In many cases, lagged adjustment is
sufficient to produce this result.

All I can do here is to illustrate by the oldest, simplest and most
familiar example. Suppose that demand and intended supply are in

22 Since we cannot enter into the subject, I will refer the reader to Mr. R. F.
Kahn’s paper entitled “Some Notes on Ideal Output” (Economic Journal for March
1935), which covers much of this ground.

2^ The term dynamics is loosely used and carries many different meanings. The
above definition was formulated by Ragnar Frisch.

104 Capitalism Survive?

equilibrium in a perfectly competitive market for wheat, but that
bad weather reduces the crop below what farmers intended to supply.
If price rises accordingly and the farmers thereupon produce that
quantity of wheat which it would pay them to produce if that new
price were the equilibrium price, then a slump in the wheat market
will ensue in the following year. If now the farmers correspondingly
restrict production, a price still higher than in the first year may result
to induce a still greater expansion of production than occurred in the
second year. And so on (as far as the pure logic of the process is
concerned) indefinitely. The reader will readily perceive, from a survey
of the assumptions involved, that no great fear need be entertained
of ever higher prices' and ever greater outputs' alternating till dooms-
day. But even if reduced to its proper proportions, the phenomenon
suffices to show up glaring weaknesses in the mechanism of perfect
competition. As soon as this is realized much of the optimism that
used to grace the practical implications of the theory of this mecha-
nism passes out through the ivory gate.

But from our standpoint we must go further than that.^^ If we
try to visualize how perfect competition works or would work in the
process of creative destruction, we arrive at a still more discouraging
result. This will not surprise us, considering that all the essential
facts of that process are absent from the general schema of economic
life that yields the traditional propositions about perfect competition.
At the risk of repetition I will illustrate the point once more.

\ Perfect competition implies free entry into every industry. It is
quite true, within that general theory, that free entry into all indus-
tries is a condition for optimal allocation of resources and hence for
maximizing output. If our economic world consisted of a number of
established industries producing familiar commodities by established
and substantially invariant methods and if nothing happened except
that additional men and additional savings combine in order to set
up new firms of the existing type, then impediments to their entry
into any industry they wish to enter would spell loss to the com-
munity. But perfectly free entry into a new field may make it impos-

It should be observed that the defining feature of dynamic theory has nothing
to do with the nature of the economic reality to which it is applied. It is a general
method of analysis rather than a study of a particular process. We can use it in
order to analyze a stationary economy, just as an evolving one can be analyzed by
means of the methods of statics (“comparative statics”). Hence dynamic theory
need not take, and as a matter of fact has not taken, any special cognizance of the
process of creative destruction which we have taken to be the essence of capitalism.
It is no doubt better equipped than is static theory to deal with many questions
of mechanism that arise in the analysis of that process. But it is not an analysis of
that process itself, and it treats the resulting individual disturbances of given states
and structures just as it treats other disturbances. To judge the functioning of
perfect competition from the standpoint of capitalist evolution is therefore not the
same thing as judging it from the standpoint of dynamic theory.

Monopolistic Practices 105

sible to enter it at all. The introduction of new methods of produc-
tion and new commodities is hardly conceivable with perfect — and
perfectly prompt — competition from the start. And this means that the
bulk of what we call economic progress is incompatible with it. As a
matter of fact, perfect competition is and always has been temporarily
suspended whenever anything new is being introduced — automatically
or by measures devised for the purpose — even in otherwise perfectly
competitive conditions.

Similarly, within the traditional system the usual indictment of rigid
prices stands all right. Rigidity is a type of resistance to adaptation
that perfect and prompt competition excludes. And for the kind of
adaptation and for those conditions which have been treated by
traditional theory, it is again quite true that such resistance spells loss
and reduced output. But we have seen that in the spurts and vicissi-
tudes of the process of creative destruction the opposite may be true:
perfect and instantaneous flexibility may even produce functionless
catastrophes. This of course can also be established by the general
dynamic theory which, as mentioned above, shows that there are at-
tempts at adaptation that intensify disequilibrium.

Again, under its own assumptions, traditional theory is correct in
holding that profits above what is necessary in each individual case to
call forth the equilibrium amount of means of production, entrepre-
neurial ability included, both indicate and in themselves imply net
social loss and that business strategy that aims at keeping them alive
is inimical to the growth of total output. Perfect competition would
prevent or immediately eliminate such surplus profits and leave no
room for that strategy. But since in the process of capitalist evolution
these profits acquire new organic functions — I do not want to repeat
what they are — that fact cannot any longer be unconditionally credited
to the account of the perfectly competitive model, so far as the secular
rate of increase in total output is concerned.

Finally, it can indeed be shown that, under the same assumptions
which amount to excluding the most characteristic features of capi-
talist reality, a perfectly competitive economy is comparatively free
from waste and in particular from those kinds of waste which we
most readily associate with its counterpart. But this does not tell us
anything about how its account looks under the conditions set by the
process of creative destruction.

On the one hand, much of what without reference to those condi-
tions would appear to be unrelieved waste ceases to qualify as such
when duly related to them. The type of ^excess capacity for example
that owes its existence to the practice of “building ahead of demand”
or to the practice of providing capacity for the cyclical peaks of de-
mand would in a regime of perfect competition be much reduced.
But when all the facts of the case are taken into consideration,

io6 Can Capitalism Survive?

it is no longer correct to say that perfect competition wins out on
that score. For though a concern that has to accept and cannot set
prices would, in fact, use all of its capacity that can produce at mar-
ginal costs covered by the ruling prices, it does not follow that it would
ever have the quantity and quality of capacity that big business has
created and was able to create precisely because it is in a position to
use it ‘‘strategically.'' Excess capacity of this type may — it does in some
and does not in other cases — constitute a reason for claiming su-
periority for a socialist economy. But it should not without quali-
fication be listed as a claim to superiority of the perfectly competitive
species of capitalist economy as compared with the “monopoloid"
species.

On the other hand, working in the conditions of capitalist evolu-
tion, the perfectly competitive arrangement displays wastes of its own.
The firm of the type that is compatible with perfect competition is
in many cases inferior in internal, especially technological, efficiency.
If it is, then it wastes opportunities. It may also in its endeavors to
improve its methods of production waste capital because it is in a less
favorable position to evolve and to judge new possibilities. And, as
we have seen before, a perfectly competitive industry is much more
apt to be routed — and to scatter the bacilli of depression — under the
impact of progress or of external disturbance than is big business.
In the last resort, American agriculture, English coal mining, the Eng-

I lish textile industry are costing consumers much more and are affect-
ing total output much more injuriously than they would if controlled,
each of them, by a dozen good brains.

Thus it is not sufficient to argue that because perfect competition is
impossible under modern industrial conditions — or because it always
has been impossible — the large-scale establishment or unit of control
must be accepted as a necessary evil inseparable from the economic
progress which it is prevented from sabotaging by the forces inherent
in its productive apparatus. What we have got to accept is that it has
come to be the most powerful engine of that progress and in particu-
lar of the long-run expansion of total output not only in spite of,
but to a considerable extent through, this strategy which looks so
restrictive when viewed in the individual case and from the individual
point of time. In this respect, perfect competition is not only impos-
sible but inferior, and has no title to being set up as a model of
ideal efficiency. It is hence a mistake to base the theory of government
regulation of industry on the principle that big business should be
made to work as the respective industry would work in perfect com-
petition. And socialists should rely for their criticisms on the virtues of
a socialist economy rather than on those of the competitive modeli

CHAPTER IX

CLOSED SEASON

I T IS for the reader to decide how far the preceding analysis has
attained its object. Economics is only an observational and interpre-
tative science which implies that in questions like ours the room for
difference of opinion can be narrowed but not reduced to zero. For
the same reason the solution of our first problem only leads to the door
of another which in an experimental science would not arise at all.

The first problem was to find out whether there is, as I have put
it (p. 72), “an understandable relation” between the structural fea-
tures of capitalism as depicted by various analytic "models” and the
economic performance as depicted, for the epoch of intact or relatively
unfettered capitalism, by the index of total output. My affirmative
answer to this question was based upon an analysis that ran on lines
approved by most economists up to the point at which what is usually
referred to as the modern tendency toward monopolistic control en-
tered the* scene. After that my analysis deviated from the usual lines
in an attempt to show that what practically everyone concedes to the
capitalism of perfect competition (whether a theoretical construction,
or, at some time or other, a “historical reality) must also to even a
greater degree be conceded to big-business capitalism. Since however
we cannot put the driving power and the engine into an experiment
station in order to let them perform under carefully controlled condi-
tions, there is no way of proving, beyond the possibility of doubt,
their adequacy to produce just that result, viz., the observed develop-
ment of output. All we can say is that there was a rather striking
performance and that the capitalist arrangement was favorable to pro-
ducing it. And this is precisely why we cannot stop at our conclusion
but have to face another problem.

A priori it might still be possible to account for the observed per-
formance by exceptional circumstances which would have asserted
themselves in any institutional pattern. The only way to deal with
this possibility is to examine the economic and political history of
the period in question and to discuss such exceptional circumstances
as we may be able to find. We will attack the problem by considering
those candidates for the role of exceptional circumstances not inherent
in the business processes of capitalism which have been put up by
economists or historians. There are five of them.

The first is govern ment . ..action which, though I quite agree with

107

io8 Can Capitalism Survive?

Marx in holding that politics and policies are not independent factors
but elements of the social process we are analyzing, may be considered
as a factor external to the world of business for the purposes of this
argument. The period from about 1870 to 1914 presents an almost
ideal case. It would be difficult to find another equally free from either
the stimuli or the depressants that may proceed from the political
sector of the social process. The removal of the fetters from entre-
preneurial activity and from industry and trade in general had
largely been accomplished before. New and different fetters and bur-
dens— social legislation and so on— were being imposed, but nobody
will hold that they were major factors in the economic situation before
1914. There were wars. But none of them was economically important
enough to exert vital effects one way or another. The Franco-German
war that issued in the foundation of the German Empire might sug-
gest a doubt. But the economically relevant event was after all the
foundation of the Zollverein. There was armament expenditure. But
in the circumstances of the decade ending in 1914 in which it assumed
really important dimensions, it was a handicap rather than a stimulus.

The second candidate is gold. It is very fortunate that we need not
enter into the thicket of questions that surrounds the modus operandi
of the new plethora of gold which burst forth from about 1890 on.
For since in the first twenty years of the period gold actually was
scarce and since the rate of increase in total output was then no
smaller than it was later on, gold production cannot have been a
major factor in the productive performance of capitalism whatever it
might have had to do with prosperities and depressions. The same
holds true as regards monetary management which at that time was
not of an aggressive but rather of an adaptive type.

Third, there was the increase in population which, whether a cause
or a consequence of economic advance, certainly was one of the domi-
nating factors in the economic situation. Unless we are prepared to
aver that it was wholly consequential and to assume that any varia-
tion in output will always entail a corresponding variation in popula-
tion while refusing to admit the converse nexus, all of which is of
course absurd, that factor must be listed as an eligible candidate. For
the moment, a brief remark will suffice to clarify the situation.

A greater number of gainfully employed people will in general pro-
duce more than a smaller number would whatever the social organ-
ization. Hence, if any part of the actual rate of increase in population
during that epoch can be assumed — as of course it can — to have
occurred independently of the results produced by the capitalist sys-
tem in the sense that it would have occurred under any system, popu-
lation must to that extent be listed as an external factor. To the
same extent, the observed increase in total output does not measure,
but exaggerates, capitalist performance.

Closed Season 109

Other things being equal, however, a greater number of gainfully
employed people will in general produce less per head of employed
or of population than a somewhat smaller number would whatever
the social organization. This follows from the fact that the greater
the number of workers, the smaller will be the amount of other factors
with which the individual worker cooperates.^ Hence, if output per
head of population is chosen for measuring capitalist performance,
then the observed increased is apt to understate the actual achieve-
ment, because part of this achievement has all along been absorbed
in compensating for the fall in per capita output that would have
occurred in its absence. Other aspects of the problem will be con-
sidered later on.

The fourth and fifth candidates command more support among
economists but can easily be dismissed as long as we are dealing with
past performance. The one is new land. The wide expanse of land
that, economically speaking, entered the Americo-European sphere
during that period; the huge mass of foodstuffs and raw materials,
agricultural and other, that poured forth from it; all the cities and
industries that everywhere grew up on the basis proffered by them —
was this not a quite exceptional factor in the development of output,
in fact a unique one? And was not this a boon that would have pro-
duced a vast access of wealth whatever the economic system it hap-
pened to impinge upon? There is a school of socialist thought that
takes this view and in fact explains in this way the failure of Marx’s
predictions about ever-increasing misery to come true. The results of
the exploitation of virgin environments they hold responsible for the
fact that we did not see more of exploitation of labor; owing to that
factor, the proletariat was permitted to enjoy a closed season.

There is no question about the importance of the opportunities
afforded by the existence of new countries. And of course they were
unique. But “objective opportunities” — that is to say, opportunities
that exist independently of any social arrangement — are always pre-
requisites of progress, and each of them is historically unique. The
presence of coal and iron ore in England or of petroleum in this and
other countries is no less important and constitutes an opportunity
that is no less unique. The whole capitalist process, like any other
economic process that is evolutionary, consists in nothing else but ex-
ploiting such opportunities as they enter the businessman’s horizon
and there is no point in trying to single out the one under discussion
in order to construe it as an external factor. There is less reason for
doing so because the opening up of these new countries was achieved
step by step through business enterprise and because business enter-

^This statement is far from satisfactory, but it seems to suffice for our purpose.
The capitalist part of the world taken as a whole had by then certainly developed
beyond the limits within which the opposite tendency is operative.

liO

Can Capitalism Survive?

prise provided all the conditions for it (railroad and power plant con-
struction, shipping, agricultural machinery and so on). Thus that
process was part and parcel of capitalist achievement and on a par
with the rest. Therefore the results rightfully enter our two per cent.
Again we might invoke the Communist Manifesto in support.

The last candidate is technological progress. Was not the observed
performance due to that stream of inventions that revolutionized the
technique of production rather than to the businessman’s hunt for
profits? The answer is in the negative. The carrying into effect of those
technological novelties was of the essence of that hunt. And even the
inventing itself, as will be more fully explained in a moment, was
a function of the capitalist process which is responsible for the mental
habits that will produce invention. It is therefore quite wrong — and
also quite un-Marxian — to say, as so many economists do, that capi-
talist enterprise was one, and technological progress a second, distinct
factor in the observed development of output; they were essentially
one and the same thing or, as we may also put it, the former was the
propelling force of the latter.

Both the new land and the technological progress may become trou-
blesome as soon as we proceed to extrapolation. Though achievements
of capitalism, they may conceivably be achievements that cannot be
repeated. And though, we now have established a reasonable case to the
effect that the observed behavior of output per head of population
during the period of full-fledged capitalism was not an accident but
;?may be held to measure roughly capitalist performance, we are faced
r by still another question, viz., the question to what extent it is legiti-
■ mate to assume that the capitalist engine will — or would if allowed
to do so — ^work on in the near future, say for another forty years,
about as successfully as it did in the past.

CHAPTER X

THE VANISHING OF INVESTMENT
OPPORTUNITY

T he nature of this problem can be most tellingly displayed against
the background of contemporaneous discussion. The present
generation of economists has witnessed not only a world-wide depres-
sion of unusual severity and duration but also a subsequent period of
halting and unsatisfactory recovery. I have already submitted my own
interpretation^ of these phenomena and stated the reasons why I do
not think that they necessarily indicate a break in the trend of capi-
talist evolution. But it is natural that many if not most of my fellow
economists should take a different view. As a matter of fact they feel,
exactly as some of their predecessors felt between 1873 and 1896 —
though then this opinion was mainly confined to Europe — that a
fundamental change is upon the capitalist process. According to this
view, we have been witnessing not merely a depression and a bad
recovery, accentuated perhaps by anti-capitalist policies, but the symp-
toms of a permanent loss of vitality which must be expected to go on
and to supply the dominating theme for the remaining movements
of the capitalist symphony; hence no inference as to the future can
be drawn from the functioning of the capitalist engine and of its
performance in the past.

This view is being held by many with whom the wish is not father
to the thought. But we shall understand why socialists with whom it
is, should have with particular alacrity availed themselves of the
windfall — ^some of them to the point of shifting the base of their anti-
capitalist argument completely to this ground. In doing so, they
reaped the additional advantage of being able to fall back once more
upon Marxian tradition which, as I have pointed out before, the
trained economists among them had felt compelled to discard more
and more. For, in the sense explained in the first chapter, Marx had
predicted such a state of things: according to him capitalism, before
actually breaking down, would enter into a stage of permanent crisis,
temporarily interrupted by feeble upswings or by favorable chance
occurrences. Nor is this all. One way of putting the matter from a
Marxian standpoint is to stress the effects of capital accumulation and ;
capital agglomeration on the rate of profits and, through the rate of j
profits, on the opportunity to invest. Since the capitalist process always|

3 - See V, p. 64.

112

Can Capitalism Survive?

has been geared to a large amount of current investment, even partial
elimination of it would suffice to make plausible the forecast that the
process is going to flop. This particular line in the Marxist argument
no doubt seems to agree well not only with some outstanding facts of
the past decade — ^unemployment, excess reserves, gluts in money
markets, unsatisfactory margins of profits, stagnation of private invest-
ment — but also with several non-Marxist interpretations. There is
surely no such gulf between Marx and Keynes as there was between
Marx and Marshall or WickselL Both the Marxist doctrine and its
non-Marxist counterpart are well expressed by the self-explanatory
phrase that we shall use: the theory of vanishing investment oppor-
tunity.2

It should be observed that this theory really raises three distinct
problems. The first is akin to the question that heads this part. Since
nothing in the social world can ever be aere perennius and since the
capitalist order is essentially the framework of a process not only of
economic but also of social change, there is not much room for differ-
ence about the answer. The second question is whether the forces and
mechanisms offered by the theory of vanishing investment opportunity
are the ones to stress. In the following chapters I am going to submit
another theory of what will eventually kill capitalism, but a number
of parallelisms will remain. There is however a third problem. Even
if the forces and mechanisms stressed by the theory of vanishing in-
vestment opportunity were in themselves adequate to establish the
presence in the capitalist process of a long-run tendency toward ulti-
mate deadlock, it does not necessarily follow that the vicissitudes of
the past decade have been due to them and — ^which it is important to
add for our purpose — that similar vicissitudes should therefore have
to be expected to persist for the next forty years.

For the moment we are mainly concerned with the third problem.
But much of what I am going to say also bears on the second. The
factors that are held to justify a pessimistic forecast concerning the
performance of capitalism in tlxe near future and to negative the idea
that past performance may be repeated may be divided into three
groups.

There are, first, the environmental factors. It has been stated and
will have to be established that the capitalist process produces a dis-
tribution of political power and a socio-psychological attitude — ex-
pressing itself in corresponding policies — that are hostile to it and
may be expected to gather force so that they will eventually prevent
the capitalist engine from functioning. This phenomenon I will set
aside for later consideration. What follows now must be read with
the appropriate proviso. But it should be noted that that attitude and
cognate factors also affect the motive power of the bourgeois profit
2 See my Business Cycles, ch. xv.

The Vanishing of Investment Opportunity 113

economy itself, and that hence the proviso covers more than one might
think at first sight— more, at any rate, than mere ^‘politics.”

Then there is the capitalist engine itself. The theory of vanishing
investment opportunity does not necessarily include, but as a matter
of fact is apt to be in alliance with, the other theory that modern
largest-scale business represents a petrified form of capitalism in
which restrictive practices, price rigidities, exclusive attention to the
conservation of existing capital values and so on are naturally inher-
ent, This has been dealt with already.

Finally, there is what may be described as the “materiaF’ the capi-
talist engine feeds on, i.e., the opportunities open to new enterprise
and investment. The theory under discussion puts so much emphasis
on this element as to justify the label we have affixed to it. The main
reasons for holding that opportunities for private enterprise and
investment are vanishing are these: saturation, population, new lands,
technological possibilities, and the circumstance that many existing
investment opportunities belong to the sphere of public rather than
of private investment.

1. For every given state of human wants and of technology (in the
widest possible sense of the term) there is of course for every rate of
real wages a definite amount of fixed and circulating capital that will
spell saturation. If wants and methods of production had been frozen
for good at their state in 1800, such a point would have been reached
long ago. But is it not conceivable that wants may some day be so
completely satisfied as to become frozen forever after? Some implica-
tions of this case will presently be developed, but so long as we deal
with what may happen during the next forty years we evidently need
not trouble ourselves about this possibility.

If ever it should materialize, then the current decline in birth rate,
still more an actual fall in population, would indeed become an
important factor in reducing opportunities for investment other than
replacement. For if everyone’s wants were satisfied or nearly satisfied,
increase in the number of consumers would ex hypothesi be the only
major source of additional demand. But independently of that possi-
bility, decrease in the rate of increase in population does not per se
endanger investment opportunity or the rate of increase in total out-
put per head .3 Of this we can easily satisfy ourselves by a brief ex-
amination of the usual argument to the contrary.

^ This also holds true for a small decline in absolute numbers of people such as
may occur in Great Britain before very long (see E. Charles, London and Cam-
bridge Economic Service, Memo. No. 40). A considerable absolute decline would
raise additional problems. These we shall neglect however because this cannot be
expected to occur durifig the space of time under consideration. Still other prob-
lems, economic as well as political and socio-psychological, are presented by the
aging of a population. Though they are beginning to assert themselves already —
there is practically such a thing as a “lobby of the old” — ^we cannot enter into

114 Can Capitalism Survive?

On the one hand it is being held that a declining rate of increase
in total population ipso facto spells a declining rate of increase in
output and hence of investment because it restricts the expansion of
demand. This does not follow. Want and effective demand are not
the same thing. If they were, the poorest nations would be the ones
to display the most vigorous demand. As it is, the income elements set
free by the falling birth rate may be diverted to other channels and
they are particularly apt to be so diverted in all those cases in which
the desire to expand alternative demands is the very motive of child-
lessness. A modest argument can indeed be made out by stressing the
fact that the lines of demand characteristic of an increasing population
are particularly calculable and thus afford particularly reliable invest-
ment opportunities. But the desires that provide alternative oppor-
tunities are, in the given state of satisfaction of wants, not much less
so. Of course the prognosis for certain individual branches of produc-
tion, especially for agriculture, is in fact not a bright one. But this
must not be confused with the prognosis for total output.^

On the other hand, we might argue that the declining rate of
increase in population will tend to restrict output from the supply
side. Rapid increase was in the past frequently one of the conditions
of the observed development of output, and we might conclude a
contrario that increasing scarcity of the labor factor might be expected
to be a limiting factor. However, we do not hear much of this argu-
ment and for very good reasons. The observation that at the begin-
ning of 1940 output of manufacturing industry in the United States
was about 120 per cent of the average for 1923-1925 whereas factory
employment was at about 100 per cent supplies an answer that is
adequate for the calculable future. The extent of current unemploy-
ment; the fact that with a falling birth rate women are increasingly
set free for productive work and that the falling death rate means
prolongation of the useful period of life; the unexhausted stream of
labor-saving devices; the possibility, increasing relatively to what it
would be in the case of rapid increase of population, of avoiding
complementary factors of production of inferior quality (warding off
in part the operation of the law of diminishing returns) — all this gives

them either. But it should be observed that, as long as retiring ages remain the
same, the percentage share of those who have to be provided for without con-
tributing need not be affected by a decreasing percentage of persons under fifteen.

^ There seems to be an impression, prevalent with many economists, to the
effect that an increase in population per se provides another source of demand for
investment. Why — must not all these new workmen be equipped with tools and
their complement of raw material? This however is by no means obvious. Unless
the increase is allowed to depress wages, the implication as to investment oppor-
tunity lacks motivation, and even in that case reduction of investment per head
employed would have to be expected.

The Vanishing of Investment Opportunity 115

ample support to Mr. Colin Clark’s expectation that product per
man-hour is going to rise during the next generation.^

Of course, the labor factor may be made artificially scarce through
high-wage and short-hour policies and through political interference
with the discipline of the labor force. Comparison of the economic
performance in the United States and France from 1933 ^94^ "^hh

the economic performance of Japan and Germany during the same
years suggests in fact that something of this kind has already occurred.
But this belongs to the group of environmental factors.

As my argument will abundantly show before long, I am very far
indeed from making light of the phenomenon under discussion. The
falling birth rate seems to me to be one of the most significant features
of our time. We shall see that even from a purely economic standpoint
it is of cardinal importance, both as a symptom and as a cause of‘|
changing motivation. This however is a more complicated matter.'
Here we are concerned only with the mechanical effects of a decreas-
ing rate of increase in population and these certainly do not support
any pessimistic forecast as to the development of output per head
during the next forty years. As far as that goes, those economists who
predict a “flop” on this ground simply do what unfortunately econo-
mists have always been prone to do: as once they worried the public,
on quite inadequate grounds, with the economic dangers of excessive
numbers of mouths to feed,^ so they worry it now, on no better
grounds, with the economic dangers of deficiencies.

2. Next as to the opening up of new lands — that unique opportu-
nity for investment which cannot ever recur. Even if, for the sake of
argument, we grant that humanity’s geographical frontier is closed
for good — ^which is not in itself very obvious in view of the fact that
at present there are deserts where once there were fields and populous
cities — and even if we further grant that nothing will ever contribute
to human welfare as much as did the foodstuffs and raw materials
from those new lands — ^which is more plausible — it does not follow
that total output per head must therefore decline, or increase at a
smaller rate, during the next half-century. This would indeed have
to be expected if the lands that in the nineteenth century entered
the capitalist sphere had been exploited in the sense that diminishing

^National Income and Outlay, p. 21.

® Forecasts of future populations, from those of the seventeenth century on, were
practically always wrong. For this, however, there is some excuse. There may be
even for Malthus’s doctrine. But I cannot see any excuse for its survival. In the
second half of the nineteenth century it should have been clear to anyone that
the only valuable things about Malthus’s law of population are its qualifications.
The first decade of this century definitely showed that it was a bogey. But no less
an authority than Mr. Keynes attempted to revitalise it in the post-war periodi
And as late as 1925, Mr. H. Wright in his book on Population spoke of “wasting
the gains of civilization on a mere increase in numbers.” Will economics never come
of age?

ii6 Can Capitalism Survive?

returns would now be due to assert themselves. This however is not
the case and, as was just pointed out, the decreasing rate of increase
in population removes from the range of practical considerations the
idea that nature’s response to human effort either already is or must
soon become less generous than it has been. Technological progress
effectively turned the tables on any such tendency, and it is one of
the safest predictions that in the calculable future we shall live in an
embarms de richesse of both foodstuffs and raw materials, giving all
the rein to expansion of total output that we shall know what to do
with. This applies to mineral resources as well.

There remains another possibility. Though the current output per
head of foodstuffs and raw materials need not suffer and may even
increase, the vast opportunities for enterprise and hence for invest-
ment that were afforded by the task of developing the new countries
seem to have vanished with its completion and all sorts of difficulties
are being predicted from the resulting reduction of outlets for sav-
ings. We will assume again for the sake of argument that those coun-
tries actually are developed for good and that savings, failing to adapt
themselves to a reduction of outlets, might cause troubles and wastes
unless other outlets open instead. Both assumptions are indeed
most unrealistic. But there is no necesHfy for us to question them
because the conclusion as to the future ’ .development of output is
contingent upon a third one that is completely gratuitous, viz., the
absence of other outlets.

This third assumption is simply due to lack of imagination and
exemplifies a mistake that very frequently distorts historical interpre-
tation. The particular features of a historic process that impress the
analyst tend in his mind to slip into the position of fundamental
causes whether they have a claim to that role or not. For instance,
what is usually referred to as the Rise of Capitalism roughly coincides
with the influx of silver from the Potosf mines and with a political
situation in which the expenditure of princes habitually outran their
revenue so that they had to borrow incessantly. Both facts are obvi-
ously relevant in a variety of ways to the economic developments of
those times — even peasants’ revolts and religious upheavals may with-
out absurdity be linked up with them. The analyst thereupon is apt
to jump to the conclusion that the rise of the capitalist order of things
is causally connected with them in the sense that without them (and
a few other factors of the same type) the feudal world would have
failed to transform itself into the capitalist one. But this is really
another proposition and one for which there is, on the face of it, no
warrant whatsoever. All that can be averred is that this was the road
by which events traveled. It does not follow that there was no other.
In this case, by the way, it cannot even be held that those factors

The Vanishing of Investment Opportunity 117

favored capitalist development for though they certainly did do so in
some respects they obviously retarded it in others.

Similarly, as we have seen in the preceding chapter, the opportuni-
ties for enterprise afforded by the new areas to be exploited were cer-
tainly unique, but only in the sense in which all opportunities are. It
is gratuitous to assume not only that the '‘closing of the frontier"'
will cause a vacuum but also that whatever steps into the vacant
place must necessarily be less important in any of the senses we may
choose to give to that word. The conquest of the air may well be
more important than the conquest of India was — ^we must not confuse
geographical frontiers with economic ones.

It is true that the relative positions of countries or regions may
significantly change as one type of investment opportunity is replaced
by another. The smaller a country or region is and the more closely
its fortunes are wedded to one particular element in the productive
process, the less confidence we shall feel as to the future in store for it
when that element is .played out. Thus agricultural countries or
regions may lose permanently by the competitive synthetic products
(rayon, dyes, synthetic rubber for instance), and it may be no comfort
to them that, if the process be taken as a whole, there may be net gain
in total output. It is also true that the possible consequences of this
may be much intensified by the division of the economic world into
hostile national spheres. And it is finally true that all we can assert
is that the vanishing of the investment opportunities incident to the
development of new countries — if they are already vanishing — need
not cause a void that would necessarily affect the rate of increase in
total output. We cannot assert that they actually will be replaced by
at least equivalent ones. We may point to the fact that from that
development further developments naturally arise in those same coun-
tries or in others; we may put some trust in the ability of the capitalist
engine to find or create ever new opportunities since it is geared to
this very purpose; but such considerations do not carry us beyond our
negative result. And recalling our reasons for embarking upon the
subject, this is quite enough.

3. An analogous argument applies to the widely accepted view that
the great stride in technological advance has been made and that but
minor achievements remain. So far as this view does not merely
render the impressions conceived from the state of things during and
after the world crisis — ^when an apparent absence of novel proposi-
tions of the first magnitude was part of the familiar pattern of any
great depression — it exemplifies still better than did the "closing of
humanity's frontier" that error in interpretation economists are so
prone to commit. We are just now in the downgrade of a wave of
enterprise that created the electrical power plant, the electrical indus-
try, the electrified farm and home and the motorcar. We find all that

ii8 Can Capitalism Survive?

very marvelous, and we cannot for our lives see where opportunities
of comparable importance are to come from. As a matter of fact how-
ever, the promise held out by the chemical industry alone is much
greater than what it was possible to anticipate in, say, 1880, not to
mention the fact that the mere utilization of the achievement of the
age of electricity and the production of modern homes for the masses
would suffice to provide investment opportunities for quite a time
to come.

Technological possibilities are an uncharted sea. We may survey a
geographical region and appraise, though only with reference to a
given technique of agricultural production, the relative fertility of
individual plots. Given that technique and disregarding its possible
future developments, we may then imagine (though this would be
wrong historically) that the best plots are first taken into cultivation,
after them the next best ones and so on. At any given time during
this process it is only relatively inferior plots that remain to be ex-
ploited in the future. But we cannot reason in this fashion about the
future possibilities of technological advance. From the fact that some
of them have been exploited before others, it cannot be inferred that
the former were more productive than the latter. And those that are
still in the lap of the gods may be more or less productive than any
that have thus far come within our range of observation. Again this
yields only a negative result which even the fact that technological
* 'progress’' tends, through systemization and rationalization of research
and of management, to become more effective and sure-footed, is
powerless to turn into a positive one. But for us the negative result
suffices: there is no reason to expect slackening of the rate of output
through exhaustion of technological possibilities.

4. Two variants of this branch of the theory of vanishing investment
opportunity remain to be noticed. Some economists have held that the
labor force of every country had to be fitted out at some time or other
with the necessary equipment. This, so they argue, has been accom-
plished roughly in the course of the nineteenth century. While it was
being accomplished, it incessantly created new demand for capital
goods, whereas, barring additions, only replacement demand remains
forever after. The period of capitalist armament thus would turn out
to be a unique intermezzo after all, characterized by the capitalist
economy's straining every nerve in order to create for itself the neces-
sary complement of tools and machines, and thus becoming equipped
for the purpose of producing for further production at a rate which
it is now impossible to keep up. This is a truly astounding picture of
the economic process. Was there no equipment in the eighteenth
century or, in fact, at the time our ancestors dwelled in caves? And
if there was, why should the additions that occurred in the nineteenth
century have been more saturating than any that went before? More-
over, additions to the armor of capitalism are as a rule competitive

The Vanishing of Investment Opportunity 119

with the preexisting pieces of it. They destroy the economic usefulness
of the latter. Hence the task of providing equipment can never be
solved once for all. The cases in which replacement reserves are ade-
quate to solve it — as they normally would be in the absence of tech-
nological change — are exceptions. This is particularly clear where the
new methods of production are embodied in new industries; obviously
the automobile plants were not financed from the depreciation ac-
counts of railroads. .

The reader will no doubt observe that even if we were able to accept
the premises of this argument, no pessimistic forecast about the rate
of expansion of total output would necessarily follow. On the con-
trary he might draw the opposite inference, viz., that the possession
of an extensive stock of capital goods that acquires economic immor-
tality through continuous renewal should if anything facilitate fur-
ther increase in total output. If so, he is quite right. The argument
rests entirely on the disturbance to be expected if an economy geared
to capital production faces a reduced rate of increase in the corre-
sponding demand. But this disturbance which is not of sudden occur-
rence can easily be exaggerated. The steel industry for instance has
not experienced great difficulties in transforming itself from an indus-
try that produced capital goods almost exclusively into one that pro-
duces primarily durable consumers' goods or semi-finished products
for the production of durable consumers' goods. And though com-
pensation may not be possible within each existing capital goods
industry, the principle involved is the same in all cases.

The other variant is this. The great bursts of economic activity
that used to spread the symptoms of prosperity all over the economic
organism have of course always been associated with expansions of i
producers' expenditure that were in turn associated with the construe- I
tion of additional plant and equipment. Now some economists have
discovered, or think they have discovered, that at the present time
new technological processes tend to require less fixed capital in this
sense than they used to in the past, particularly in the epoch of rail-
road building. The inference is that spending for capital construction
will henceforth decrease in relative importance. Since this will ad-
versely affect those intermittent bursts of economic activity that evi-
dently have much to do with the observed rate of increase in total
output, it further follows that this rate is bound to decline, especially
if saving goes on at the old rate.

This tendency of new technological methods to become increasingly
capital-saving has not so far Jbeen adequately established. Statistical
evidence up to 1929 — later data do not qualify for the purpose —
point the other way. All that the sponsors of the theory in question
have offered is a number of isolated instances to which it is possible to
oppose others. But let us grant that such a tendency exists. We have
then the same formal problem before us which exercised so many

120 Can Capitalism Survive?

economists of the past in the case of labor-saving devices. These may
affect the interests of labor favorably or adversely, but nobody doubts
that on the whole they are favorable to an expansion of output. And
this is — barring possible disturbances in the saving-investment process
which it is the fashion to exaggerate — no different in the case of devices
that economize outlay on capital goods per unit of the final product.
In fact, it is not far from the truth to say that almost any new process
that is economically workable economizes both labor and capital.
Railroads were presumably capital-saving as compared with the outlay
that transportation, by mailcoach or cart, of the same numbers of
passengers and of the same quantities of goods that actually are being
transported by railroads now would have involved. Similarly silk
production by mulberry trees and silkworms may be more capital-
consuming — I don't know — than the production of an equivalent
amount of rayon fabric would be. That may be very sad for the
owners of capital already sunk in the former. But it need not even
mean decrease of investment opportunity. It certainly does not neces-
sarily mean decrease in the expansion of output. Those who hope to
see capitalism break down solely by virtue of the fact that the unit of
capital goes further in productive effect than it used to, may have to
wait long indeed.

5. Finally, since the subject is usually dealt with by economists who
aim at impressing upon the public the necessity of governmental
deficit spending, another point never fails to turn up, viz., that such
opportunities for investment as remain are more suited for public
than they are for private enterprise. This is true to some extent. First,
with increasing wealth certain lines of expenditure are likely to gain
ground which do not naturally enter into any cost-profit calculation,
such as expenditure on the beautification of cities, on public health
and so on. Second, an ever-widening sector of industrial activity tends
to enter the sphere of public management, such as means of com-
munication, docks, power production, insurance and so on, simply
because these industries become increasingly amenable to the methods
of public administration. National and municipal investment could
thus be expected to expand, absolutely and relatively, even, in a thor-
oughly capitalist society, just as other forms of public planning would.

But that is all. In order to recognize it we need not make any hy-
pothesis about the course of things in the private sector of industrial
activity. Moreover, for the purpose in hand it is immaterial whether
in the future investment and the incident expansion of output will
to a greater or a lesser extent be financed and managed by public
rather than by private agencies unless it be held in addition that
public financing will impose itself because private business would
not be able to face the deficits to be expected in the future from any
investment. This however has been dealt with before.

CHAPTER XI

THE CIVILIZATION OF CAPITALISM

L eaving the precincts of purely economic considerations, we now turn
j to the cultural complement of the capitalist economy — to its
socio-psychological superstructure, if we wish to speak the Marxian
language — and to the mentality that is characteristic of capitalist
society and in particular of the bourgeois class. In desperate brevity,
the salient facts may be conveyed as follows.

Fifty thousand years ago man confronted the dangers and oppor-
tunities of his environment in a way which some “prehistorians,”
sociologists and ethnologists agree was roughly equivalent to the atti-
tude of modern primitives.^ Two elements of this attitude j ire partic u-
larly imp ortant for us: the ^'collective” and “affectiye”^^^ the

prinmive m ental pr ocess aiM, partly ove rlapping, the role of what, not
quite correctl y, I shall here call magic. By the first I designate the
fact that in small and undifferentiated or not much differentiated
social groups collective ideas impose themselves much more stringently
on the individual mind than they do in big and complex groups; and
that conclusions and decisions are arrived at by methods which for our
purpose may be characterized by a negative criterion: the disregard of
what we call logic and, in particular, of the rule that excludes contra-
diction. By the second I designate the use of a set of beliefs which are
not indeed completely divorced from experience — no magic device
can survive an unbroken sequence of failures — but which insert, into
the sequence of observed phenomena, entities or influences derived
from non-empirical sources.^ The similarity of this type of mental

^Research of this type goes far back. But I believe that a new stage of it ought
to be dated from the works of Lucien Levy-Bruhl. See in particular his Fonctions
mentales dans les societes inferieures (1909) and Le surnaturel et la nature dans la
mentalite primitive (1931)- There is a long way between the position held in the
first and the position held in the second work, the milestones of which are dis-
cernible in Mentalite primitive (1921) and Uame primitive (1927). For us, L^vy-
Bruhl is a particularly useful authority because he fully shares our thesis — in fact
his work starts from it — that the ‘‘executive'’ functions of thinking and the mental
structure of man are determined, partly at least, by the structure of the society
within which they develop. It is immaterial that, with L^vy-Bruhl, this principle
hails not from Marx but from Comte.

2 A friendly critic of the above passage expostulated with me on the ground that
I could not possibly mean what it says because in that case I should have to call
the physicist’s “force” a magic device. That is precisely what I do mean, unless it is
agreed that the term Force is merely a name for a constant times the second time
derivative of displacement. See the next but one sentence in the text.

X2£

Can Capitalism Survive?

process with the mental processes of neurotics has been pointed out
by G. Dromard (1911; his term, delire d' interpretation, is particularly
suggestive) and S. Freud {Totem und Tabu, 1913). But it does not
follow that it is foreign to the mind of normal man of our own time.
On the contrary, any discussion of political issues may convince the
reader that a large and — for action — most important body of our own
processes is of exactly the same nature.

Rational thought or behavior and a rationalistic civilization there-
fore do not imply absence ofjhe,.c riteria j nentioned but only a slow
though incessailt^wldehmg of the sector of social life within w hich
individuals or groups go about dealing with a given situation(^rst,;
b y trying to make th e best of it mor^or les^never wholly— accpri
i ng to their own ligh ts risl!:on3";^ by doing so according to those rule^ of
consist ency whi ch we cgll“logic; ahdl gKird j by doing so on assjanip-
tions which^atisfy^two conditions :^.thatjheir number be. a mininmm
and^Mf^Jvery^one of themi^e^^ to expression in terms of

potential ex peri ence.^

'‘^nrfhis is very inadequate of course but it suffices for our purpose.
There is however one more point about the concept of rationalist
civilizations that I will mention here for future reference. When the
habit of rational analysis of, and rational behavior in, the daily tasks
of life has gone far enough, it turns back upon the mass of collective
ideas and criticizes and to some extent ‘‘rationalizes'' them by way of
such questions as why there should be kings and popes or subordina-
tion or tithes or property. Incidentally, it is important to notice that,
while most of us would accept such an attitude as the symptom of a
“higher stage” of mental development, this value judgment is not
necessarily and in every sense borne out by the results. The rationalist
attitude may go to work with information and technique so inade-
quate that actions — and especially a general surgical propensity —
induced by it may, to an observer of a later period, appear to be, even
from a purely intellectual standpoint, inferior to the actions and anti-
surgical propensities associated with attitudes that at the time most
people felt inclined to attribute to a low I.Q. A large part of the
political thought of the seventeenth and eighteenth centuries illus-
trates this ever-forgotten truth. Not only in depth of social vision but
also in logical analysis later “conservative” countercriticism was clearly
superior although it would have been a mere matter of laughter for
the writers of the enlightenment.

Now the rational attitude presumably forced itself on the human
mind primarily from economic necessity; it is the everyday economic
task to which we as a race owe our elementary training in rational
thought and behavior — I have no hesitation in saying that all logic is

® This Kantian phrase has been chosen in order to guard against an obvious ob-
^ction.

The Givilization of Capitalism 123

derived from the pattern of the economic decision or, to use a pet
phrase of mine, that the economic pattern is the matrix of logic. This
seems plausible for the following reason. Suppose that some “primi-
tive'' man uses that most elementary of all machines, already appre-
ciated by our gorilla cousins, a stick, and that this stick breaks in his
hand. If he tries to remedy the damage by reciting a magic formula —
he might for instance murmur Supply and Demand or Planning and
Control in the expectation that if he repeats this exactly nine times
the two fragments will unite again — then he is within the precincts
of pre-rational thought. If he gropes for the best way to join the
fragments or to procure another stick, he is being rational in our sense.
Both attitudes are possible of course. But it stands to reason that in
this and most other economic actions the failure of a magic formula
to work will be much more obvious than could be any failure of a
formula that was to make our man victorious in combat or lucky in
love or to lift a load of guilt from his conscience. This is due to the
inexorable ‘definiteness and, in most cases, the quantitative character
that distinguish the economic from other spheres of human action,
perhaps also to the unemotional drabness of the unending rhythm of
economic wants and satisfaction^. Once hammered in, the rational
habit spreads under the pedagogic influence of favorable experiences
to the other spheres and there also opens eyes for that amazing thing,
the Fact.

This process is independent of any particular garb, hence also of
the capitalistic garb, of economic activity. So is the profit motive and
self-interest. Pre-capitalist man is in fact no less “grabbing" than
capitalist man. Peasant serfs for instance or warrior lords assert their
self-interest with a brutal energy all their own. But capitalism develops
rationality and adds a new edge to it in two interconnected ways.

First it exalts the monetary unit — not itself a creation of capitalism
— into a unit of account. That is to say, capitalist practice turns the
unit of money into a tool of rational cost-profit calculations, of which
the towering monument is double-entry bookkeeping.^ Without going
into this, we will notice that, primarily a product of the evolution
of economic rationality, the cost-profit calculus in turn reacts upon
that rationality; by crystallizing and defining numerically, it power-
fully propels the logic of enterprise. And thus defined and quantified

^ This element has been stressed, and more suo overstressed, by Sombart. Double-
entry bookkeeping is the last step on a long and tortuous road. Its immediate
predecessor was the practice of making up from time to time an inventory and
figuring out profit or loss; see A. Sapori in Biblioteca Storica Toscanut VII, 1932.
Luca Pacioli's treatise on bookkeeping, 1494^ supplies by its date an important
milestone. For the history and sociology of the state it is a vital fact to notice that
rational bookkeeping did not intrude into the management of public funds until
the eighteenth century and that even then it did so imperfectly and in the primitive
form of “cameralist” bookkeeping.

124 Capitalism Survive?

for the economic sector, this type of logic or attitude or method then
starts upon its conqueror’s career subjugating — ^rationalizing — ^man's
tools and philosophies, his medical practice, his picture of the cosmos,
his outlook on life, everything in fact including his concepts of beauty
and justice and his spiritual ambitions.

In this respect it is highly significant that modern mathematico-
experimental science developed, in the fifteenth, sixteenth and seven-
teenth centuries, not only along with the social process usually referred
to as the Rise of Capitalism, but also outside of the fortress of scho-
lastic thought and in the face of its contemptuous hostility. In the
fifteenth century mathematics was mainly concerned with questions
of commercial arithmetic and the problems of the architect. The
utilitarian mechanical device, invented by men of the craftsman type,
stood at the source of modern physics. The rugged individualism of
Galileo was the individualism of the rising capitalist class. The surgeon
began to rise above the midwife and the barber. The artist who at
the same time was an engineer and an entrepreneur — the type immor-
talized by such men as Vinci, Alberti, Cellini; even Diirer busied
himself with plans for fortifications — illustrates best of all what I
mean. By cursing it all, scholastic professors in the Italian universities
showed more sense than we give them credit for. The trouble was not
with individual unorthodox propositions. Any decent schoolman
could be trusted to twist his texts so as to fit the Copernican system.
But those professors quite rightly sensed the spirit behind such ex-
ploits — the spirit of rationalist individualism, the spirit generated by
rising capitalism.

« Second, rising capitalism produced not only the mental attitude of
imodern science, the attitude that consists in asking certain questions
land in going about answering them in a certain way, but also the
men and the means. By breaking up the feudal environment and dis-
turbing the intellectual peace of manor and village (though there
always was, of course, plenty to discuss and to fall out about in a con-
vent), but especially by creating the social space for a new class that
stood upon individual achievement in the economic field, it in turn
attracted to that field the strong wills and the strong intellects. Pre-
capitalist economic life left no scope for achievement that would carry
over class boundaries or, to put it differently, be adequate to create
social positions comparable to those of the members of the then ruling
classes. Not that it precluded ascent in general.® But business activity
was, broadly speaking, essentially subordinate, even at the peak of
success within the craft guild, and it hardly ever led out of it. The

®We are too prone to look upon the medieval social structure as static or rigid.
As a matter of fact, there was an incessant — to use Pareto's term — circulation dm
aristocracies. The elements that composed the uppermost stratum around 900 had
practically disappeared by 1500.

The Civilization of Capitalism 125

main avenues to advancement and large gain were the church — nearly
as accessible throughout the Middle Ages as it is now — to which we
may add the chanceries of the great territorial magnates, and the
hierarchy of warrior lords — quite accessible to every man who was
physically and psychically fit until about the middle of the twelfth
century, and not quite inaccessible thereafter. It was only when capi-
talist enterprise — first commercial and financial, then mining, finally
industrial — unfolded its possibilities that supernormal ability and
ambition began to turn to business as a third avenue. Success was
quick and conspicuous, but it has been much exaggerated as regards
the social weight it carried at first. If we look closely at the career of
Jacob Fugger, for instance, or of Agostino Chigi, we easily satisfy
ourselves that they had very little to do with steering the policies of
Charles V or of Pope Leo X and that they paid heavily for such
privileges as they enjoyed.® Yet entrepreneurial success was fascinating
enough for everyone excepting the highest strata of feudal society to
draw most of the best brains and thus to generate further success —
to generate additional steam for the rationalist engine. So, in this
sense, capitalism — and not merely economic activity in general — ^has
after all been the propelling force of the rationalization of human
behavior.

And now we are at long last face to face with the immediate goaF to
which that complex yet inadequate argument was to lead. Not only
the modern mechanized plant and the volume of the output that
pours forth from it, not only modern technology and economic or--^
ganization, but all the features and achievements of modern civiliza-t
tion are, directly or indirectly, the products of the capitalist process.
They must be included in any balance sheet of it and in any verdict
about its deeds or misdeeds.

There is the growth of rational science and the long list of its appli-
cations. Airplanes, refrigerators, television and that sort of thing are
immediately recognizable as results of the profit economy. But al- ;
though the modern hospital is not as a rule operated for profit, it is j
nonetheless, the product of capitalism not only, to repeat, because the ’
capitalist process supplies the means and the will, but much more ■
fundamentally because capitalist rationality supplied the habits ofJ

®The Medici are not really an exception. For though their wealth helped them
to acquire control of the Florentine commonwealth, it was this control and not
the wealth per se which accounts for the role played by the family. In any case
they are the only merchants that ever rose to a footing of equality with the upper-
most stratum of the feudal world. Real exceptions we find only where capitalist
evolution created an environment or completely broke up the feudal stratum^ —
in Venice and in the Netherlands for instance.

7 The immediate goal, because the analysis contained in the last pages will
stand us in good stead also for other purposes. It is in fact fundamental for any
s^ous discussion of the great theme of Capitalism and Socialism.

1^6 Can Capitalism Survive?

mind that evolved the methods used in these hospitals. And the vic-
tories, not yet completely won but in the offing, over cancer, syphilis
and tuberculosis will be as much capitalist achievements as motorcars
or pipe lines or Bessemer steel have been. In the case of medicine,
there is a capitalist profession behind the methods, capitalist both
because to a large extent it works in a business spirit and because it
is an emulsion of the industrial and commercial bourgeoisie. But
even if that were not so, modern medicine and hygiene would still be
by-products of the capitalist process just as is modern education.

There is the capitalist art and the capitalist style of life. If we limit
ourselves to painting as an example, both for brevity's sake and
because in that field my ignorance is slightly less complete than it is
in others, and if (wrongly, as I think) we agree to start an epoch with
Giotto's Arena frescoes and then follow the line (nothing short of
damnable though such “linear" arguments are) Giotto — Masaccio —
Vinci — Michelangelo — Greco, no amount of emphasis on mystical
ardors in the case of Greco can obliterate my point for anyone who
has eyes that see. And Vinci's experiments are offered to doubters who
wish, as it were, to touch the capitalist rationality with their finger-
tips. This line if projected (yes, I know) could be made to land us
(though perhaps gasping) in the contrast between Delacroix and
Ingres. Well, and there we are; Cezanne, Van Gogh, Picasso or Matisse
will do the rest. Expressionist liquidation of the object forms an
admirably logical conclusion. The story of the capitalist novel (cul-
minating in the Goncourt novel: “documents written up") would
illustrate still better. But that is obvious. The evolution of the capi-
talist style of life could be easily — and perhaps most tellingly —
described in terms of the genesis of the modern lounge suit.

There is finally all that may be grouped around the symbolic cen-
terpiece of Gladstonian liberalism. The term Individualist Democ-
racy would do just as well — ^better in fact because we want to cover
some things that Gladstone would not have approved and a moral and
spiritual attitude which, dwelling in the citadel of faith, he actually
hated. At that I could leave this point if radical liturgy did not con-
sist largely in picturesque denials of what I mean to convey. Radicals
may insist that the masses are crying for salvation from intolerable
sufferings and rattling their chains in darkness and despair, but of
course there never was so much personal freedom of mind and body
for all, never so much readiness to bear with and even to finance the
mortal enemies of the leading class, never so much active sympathy
with real and faked sufferings, never so much readiness to accept
burdens, as there is in modern capitalist society; and whatever democ-
racy there was, outside of peasant communities, developed historically
in the wake of both modern and ancient capitalism. Again plenty of
Cacts can be adduced from the past to make up a counterargument

The Civilization of Capitalism 127

that will be effective but is irrelevant in a discussion of present condi-
tions and future alternatives.® If we do decide to embark upon his-
torical disquisition at all, then even many of those facts which to
radical critics may seem to be the most eligible ones for their purpose
will often look differently if viewed in the light of a comparison with
the corresponding facts of pre-capitalist experience. And it cannot be
replied that “those were different times/' For it is precisely the capi-
talist process that made the difference.

Two points in particular must be mentioned. I have pointed out
before that social legislation or, more generally, institutional change
for the benefit of the masses is not simply something which has been
forced upon capitalist society by an ineluctable necessity to alleviate
the ever-deepening misery of the poor but that, besides raising the
standard of living of the masses by virtue of its automatic effects, the
capitalist process also provided for that legislation the means “and
the will." The words in quotes require further explanation that is to
be found in the principle of spreading rationality. The capitalist
process rationalizes behavior and ideas and by so doing chases from
our minds, along with metaphysical belief, mystic and romantic ideas
of all sorts.' Thus it reshapes not only our methods of attaining our
ends but also these ultimate ends themselves. “Free thinking" in the
sense of materialistic monism, laicism and pragmatic acceptance of
the world this side of the grave follow from this not indeed by logical
necessity but nevertheless very naturally. Gn the one hand, our in-
herited sense of duty, deprived of its traditional basis, becomes focused
in utilitarian ideas about the betterment of mankind which, quite
illogically to be sure, seem to withstand rationalist criticism better,
than, say, the fear of God does. On the other hand, the same rationali-
zation of the soul rubs off all the glamour of super-empirical sanction
from every species of classwise rights. This then, together with the
typically capitalist enthusiasm for Efficiency and Service — ^so com-
pletely different from the body of ideas which would have been asso-
ciated with those terms by the typical knight of old — ^breeds that
“will" within the bourgeoisie itself. Feminism, an essentially capitalist
phenomenon, illustrates the point still more clearly. The reader will
realize that these tendencies must be understood “objectively" and
that therefore no amount of anti-feminist or anti-reformist talk or
even of temporary opposition to any particular measure proves any-
thing against this analysis. These things are the very symptoms of the
tendencies they pretend to fight. Of this, more in the subsequent
ch^apters.

Also, capitalist civilization is rationalistic “and anti-heroic." The

« Even Marx, in whose time indictments of this kind were not anything like as
absurd as they are today, evidently thought it desirable to strengthen his case by
dwelling on conditions that even then were either past or visibly passing.

128

Can Capitalism Survive?

two go together of course. Success in industry and commerce requires
a lot of stamina, yet industrial and commercial activity is essentially
unheroic in the knight's sense — no flourishing of swords about it, not
much physical prowess, no chance to gallop the armored horse into
the enemy, preferably a heretic or heathen — and the ideology that
glorifies the idea of fighting for fighting’s sake and of victory for vic-
tory’s sake understandably withers in the office among all the columns
of figures. Therefore, owning assets. that are apt to attract the robber
or the tax gatherer and not sharing or even disliking warrior ideology
that conflicts with its ‘‘rational” utilitarianism, the industrial and
commercial bourgeoisie is fundamentally pacifist and inclined to
insist on the application of the moral precepts of private life to inter-
national relations. It is true that, unlike most but like some other
features of capitalist civilization, pacifism and international morality
have also been espoused in non-capitalist environments and by pre-
capitalist agencies, in the Middle Ages by the Roman Church for
instance. Modem pacifism and modern international morality are
nonetheless products of capitalism.

In view of the fact that Marxian doctrine — especially Neo-Marxian
doctrine and even a considerable body of non-socialist opinion — is,
as we have seen in the first part of this book, strongly opposed to this
proposition® it is necessary to point out that the latter is not meant to
deny that many a bourgeoisie has put up a splendid fight for hearth
and home, or that almost purely bourgeois commonwealths were often
aggressive when it seemed to pay — like the Athenian or the Venetian
commonwealths — or that no bourgeoisie ever disliked war profits and
advantages to trade accruing from conquest or refused to be trained
in warlike nationalism by its feudal masters or leaders or by the
propaganda of some specially interested group. All I hold is, first, that
such instances of capitalist combativeness are not, as Marxism has it,
to be explained — exclusively or primarily — in terms of class interests
or class situations that systematically engender capitalist wars of con-
quest; second, that there is a difference between doing that which you
consider your normal business in life, for which you prepare yourself
in season and out of season and in terms of which you define your
success or failure, and doing what is not in your line, for which your
normal work and your mentality do not fit you and success in which
will increase the prestige of the most unbourgeois of professions; and
third, that this difference steadily tells — in international as well as in
domestic affairs — against the use of military force and for peaceful
arrangements, even where the balance of pecuniary advantage is clearly
on the side of war which, under modern circumstances, is not in
general very likely. As a matter of fact, the more completely capitalist
the structure and attitude of a nation, the more pacifist — and the
® See our discussion of the Marxian theory of imperialism, Part I, ch. iv.

The Civilization of Capitalism

more prone to count the costs of war — we observe it to be. Owing to
the complex nature of every individual pattern, this coula be fully
brought out only by detailed historical analysis. But the bourgeofe
attitude to the military (standing armies), the spirit in which and the
methods by which bourgeois societies wage war, and the readiness
with which, in any serious case of prolonged warfare, they submit to
non-bourgeois rule are conclusive in themselves. The Marxist theory
that imperialism is the last stage of capitalist evolution therefore fails
quite irrespective of purely economic objections.

But I am not going to sum up as the reader presumably expects me
to. That is to say, I am not gping to invite him, before he decides to
put his trust in an untried alternative advocated by untried men, to
look Pnce more at the impressive economic and the still more impres-
sive cultural achievement of the capitalist order and at the immense
promise held out by both. I am not going to argue that that achieve-
ment and that promise are in themselves sufl&cient to support an argu-
ment for allowing the capitalist process to work on and, as it might
easily be put, to lift poverty from the shoulders of mankind.

There would be no sense in this. Even if mankind were as free to
choose as a businessman is free to choose between two competing
pieces of machinery, no determined value judgment necessarily follows
from the facts and relations between facts that I have tried to convey.
As regards the economic performance, it does not follow that men are
“happier’' or even “better off” in the industrial society of today than
they were in a medieval manor or village. As regards the cultural per-
formance, one may accept every word I have written and yet hate it —
its utilitarianism and the wholesale destruction of Meanings incident
to it — from the bottom of one’s heart. Moreover, as I shall have to
emphasize again in our discussion of the socialist alternative, one may
care less for the efficiency of the capitalist process in producing eco-
nomic and cultural values than for the kind of human beings that it
turns out and then leaves to their own devices, free to make a mess
of their lives. There is a type of radical whose adverse verdict about
capitalist civilization rests on nothing except stupidity, ignorance or
irresponsibility, who is unable or unwilling to grasp the most obvious
facts, let alone their wider implications. But a completely adverse
verdict may also be arrived at on a higher plane.

However, whether favorable or unfavorable, value judgments about
capitalist performance are of little interest. For man kind is not free
to choose. This is not

mtionally_ and always accept wbat

tfi’ey are barig ' toltf/ TTiereTs T

"’ecqrTomic ahd s^^^ by their own momentum and the ensuing

situations compel individuals and groups to behave in certain ways
^Eatever they may v^^ish to do — hot indeed by destroying their free-

igo Can Capitalism Survive?

dom of choice but by shaping the choosing mentalities and by nar-
rowing the list of possibilities- from which to choose. If this is the
"Quintessence of Marxism then we all of us have got to be Marxists. In
consequence, capitalist performance is not even relevant for prognosis.
Most civilizations have disappeared before they had time to fill to
the full the measure of their promise. Hence I am not going to argue,
on the strength of that performance, that the capitalist intermezzo is
likely to be prolonged. In fact, I am now going to draw the exactly
opposite inference.

CHAPTER XII

CRUMBLING WALLS

I. The Obsolescence of the Entrepreneurial Function

r ouR discussion of the theory of vanishing investment opportunity,
a reservation was made in favor of the possibility that the economic
wants of humanity might some day be so completely satisfied that littk
motive ~wbffl be left to push productive effort still further ahead.
Such a state of satiety is no doubt very far off even if we keep within
the present scheme of wants; and if we take account of the fact that,
as higher standards of life are attained, these wants automatical!)?
expand and new wants emerge or are created,^ satiety becomes a flying
goal, particularly if we include leisure among consumers’ goods. How-
ever, let us glance at that possibility, assuming, still more unrealisti-
cally, that methods of production have reached a state of perfection
which does not admit of further improvement.

more or less stationary state would ensue^Capitalism, being es-
sentially an evolutionary process, would become atrophic. The^^^
j^e. nothing left for entrepreneurs to do. They woul(i\find themselves
in much the same situation as generals would in a s6ciety_p„erfectly
sure of permanent peace.. Profits and along with profitkthe rate of
interest would converge toward zero. The bourgeois strata that live on
' profits and interest would tend to disappear. The management ol
i industry and trade would become a matter of current administration,
and the personnel would unavoidably acquire the characteristics of a
bureaucracy. Socialism of a very sober type would almost automati-
cally come into being. Human energy would turn away from business
Other th^n economic pursuits would attract the brains and provide
the^j*dft^€hture.

^’or the calculable future this vision is of no importance. But alj
the greater importance attaches to the fact that many of the effects or
the structure of society and on the organization of the productive proc
ess that we might expect from an approximately complete satisfac
tion of wants or from absolute technological perfection can also b(
expected from a development that is clearly observable already. Prog
ress itself may be mechanized as well as the management of a stationary
economy, and this mechanization of progress may affect entrepre
neurship and capitalist society nearly as much as the cessation of eco
nomic progress would. In order to see this it is only necessary to restate

1 Wilhelm Wundt called this the Heterogony of Aims (Heierogonie der Zwecke).

131

igg Can Capitalism Survive?

first, what the entrepreneurial function consists in and, secondly, what
it means for bourgeois society and the survival of the capitalist order.

We have seen that the function of entrepreneurs is to reform or
revolutionize the pattern of production by exploiting an invention or,
more generally, an untried technological possibility for producing a
new commodity or producing an old one in a new way, by opening up

new source of supply of materials or a new outlet for products, by
reorganizing an industry and so on. Railroad construction in its
earlier stages, electrical power production before the First World War,
steam and steel, the motorcar, colonial ventures afford spectacular in-
stances of a large genus which comprises innumerable humbler ones
— down to such things as making a success of a particular kind of
sausage or toothbrush. This kind of activity is primarily responsible
for the recurrent “prosperities'" that revolutionize the economic organ-
ism and the recurrent “recessions" that are due to the disequilibrating
impact of the new products or methods. To undertake such new things
is difficult and constitutes a distinct economic function, first, because
they lie outside of the routine tasks which everybody understands and,
secondly, because the environment resists in many ways that vary, ac-
cording to social conditions, from simple refusal either to finance or
to buy a new thing, to physical attack on the man who tries to produce
it. To act with confidence beyond the range of familiar beacons and
to overcome that resistance requires aptitudes that are present in only
a small fraction of the population and that define the entrepreneuriaP
type as well as the entrepreneurial function. This function does not
essentially consist in either inventing anything or otherwise creating
the conditions which the enterprise exploits. It consists in getting
things done.

This social function is already losing importance and is bound to
lose it at an accelerating iate 4n the future even if the economic proc-
ess itself of which entrepreneurship was the prime mover went on
! unabated. For, on the one hand, it is much easier now than it has been
in the past to do things that lie outside familiar routine — innovation
itself is being reduced to routine. Technological progress is increas-
; ingly becoming the business of teams of trained specialists who turri^
out what is required and make it work in predictable ways. The ro-
mance of earlier commercial adventure is rapidly wearing away, be-
cause so many more things can be strictly calculated that had of old
to be visualized in a flash of genius.

On the other hand, personality and will power must count for less
in environments which have become accustomed to economic change —
best instanced by an incessant stream of new consumers' and produc-
ers' goods — and which, instead of resisting, accept it as a matter of
course. The resistance which comes from interests threatened by an
innovation in the productive process is not likely to die out as long as

Crumbling Walls 133

the capitalist order persists. It is, for instance, the great obstacle on
the road toward mass production of cheap housing which presupposes
radical mechanization and wholesale elimination of inefficient methods
of work on the plot. But every other kind of resistance — the resist-
ance, in particular, of consumers and producers to a new kind of thing
because it is new — has well-nigh vanished already.

Thus, economic progress tends to become depersonalized and autom-
atized. Bureau and committee work tends to replace individual
action. Once more, reference to the military analogy will help to bring
out the essential point.

Of old, roughly up to and including the Napoleonic Wars, general-
ship meant leadership and success meant the personal success of the
man in command who earned corresponding ' ‘profits'' in terms of
social prestige. The technique of warfare and the structure of armies
being what they were, the individual decision and driving power of
the leading man — even his actual presence on a showy horse — ^were
essential elements in the strategical and tactical situations. Napoleon's
presence was, and had to be, actually felt on his battlefields. This is
iiQ iq^ger so. Rationalized and specialized office work will eventually
blot out personality, the calculable result, the “vision." The leading
man no longer has the opportunity to fling himself into the fray. He
is becoming just another office worker — and one who is not always:
difficult to replace. *

Or take another military analogy. Warfare in the Middle was
a very personal affair. The armored knights practiced an art mat re-
quired lifelong training and every one of them counted individually
by virtue of personal skill and prowess. It is easy to understand why
^this craft should have become the basis of a social class in the fullest
and richest sense of that term. But social and technological chahgi
undermined and eventually destroyed both the function and the posi-^
tion of that class. Warfare itself did not cease on that account. It
simply became more and more mechanized — eventually so much so
that success in what now is a mere profession no longer carries that
connotation of individual achievement which would raise not only
the man but also his group into a durable position of social leadership.

Now a similar social process — in the last analysis the same social
process — undermines the role and, along with the role, the social
position of the capitalist entrepreneur. His role, though less glamor-
ous than that of medieval warlords, great or small, also is or was just
another form of individual leadership acting by virtue of personal
force and personal responsibility for success. His position, like that of
warrior classes, is threatened as soon as this function in the social
process loses its importance, and no less if this is due to the cessation
of the social needs it served than if those needs are being served by
other, more impersonal, methods.

134 Can Capitalism Survive?

But this affects the position of the entire bourgeois stratum. Al-
though entrepreneurs are not necessarily or even typically elements
of that stratum from the outset, they nevertheless enter it in case of
success- Thus, though entrepreneurs do not per se form a social class,
the bourgeois class absorbs them and their families and connections,
thereby recruiting and revitalizing itself currently while at the same
time the families that sever their active relation to “business'" drop
out of it after a generation or two. Between, there is the bulk of what
we refer to as industrialists, merchants, financiers and bankers; they
are in the intermediate stage between entrepreneurial venture and
mere current administration of an inherited domain. The returns on
which the class lives are produced by, and the social position of the
class rests on, the success of this more or less active sector — ^which of
course may, as it does in this country, form over 90 per cent of the
bourgeois stratum — and of the individuals who are in the act of rising
into that class. Economically and sociologically, directly and indirectly,
the bourgeoisie therefore depends on the entrepreneur and, as a class,
lives and will die with him, though a more or less prolonged transi-
tional stage — eventually a stage in which it may feel equally unable to
die and to ;|ive — is quite likely to occur, as in fact it did occur in the
case of th4 feudal civilization.

To sum tip this part of our argument: if capitalist evolution —
“progress^" — eith^ ceases or becomes completely automatic, the eco-
nomiQb^sis of the industrial bourgeoisie will be reduced ^eventually
to wages such as are paid for current administrative work excepting
remnants of quasi-rents ^d monopoloid gains that may be expected
to linger on for some time. Since capitalist enterprise, by its very
achieveihents, tends to. amoamtK^..pro!gre?s; 'w that tends ?

to make itself superfluous — to break to pieces under the pressure of
its o w n^^ succe^. The perfectly bureaucratized giant industrial unit
TSot^only ousts the small or medium-sized firm and “expropriates"
its owners, but in the end it also ousts the entrepreneur and expro-
priates the bourgeoisie as a class which in the process stands to lose
not only its income but also what is infinitely more important, its
function. The true pacemakers of socialism were not the intellectuals
or agitators who preached it but the Vanderbilts, Carnegies and
Rockefellers. This result may not in every respect be to the taste of
Marxian socialists, still less to the taste of socialists of a more popular
(Marx would have said, vulgar) description. But so far as prognosis
goes, it does not differ from theirs.

II. The Destruction of the Protecting Strata

So far we have been considering the effects of the capitalist process
upon the economic bases of the upper strata of capitalist society and
upon their social position and prestige. But effects further extend to the

Crumbling Walls 135

institutional framework that protected them. In showing this we shall
take the term in its widest acceptance so as to include not only legal
institutions but also attitudes of the public mind and policies.

1. Capitalist evolution first of all destroyed, or went far toward
destroying, the institutional arrangements of the feudal world — the
manor, the village, the craft guild. The facts and mechanisms of this
process are too familiar to detain us. Destruction was wrought in three
ways. The world of the artisan was destroyed primarily by the auto-
matic effects of the competition that came from the capitalist entrepre-
neur; political action in removing atrophic organizations and regula-
tions only registered results. The world of the lord and the peasant
was destroyed primarily by political — in some cases revolutionary —
action and capitalism merely presided over adaptive transformations,
say, of the German manorial organizations into large-scale agricul-
tural units of production. But along with these industrial and agrar-
ian revolutions went a no less revolutionary change in the general atti-
tude of legislative authority and public opinion. Together with the
old economic organization vanished the economic and political privi-
leges of the classes or groups that used to play the leading role in it,
particularly the tax exemptions and the political prerogatives of the
landed nobility and gentry and of the clergy.

Economically all this meant for the bourgeoisie the breaking of
so many fetters and the removal of so many barriers. Politically it
meant the replacement of an order in which the bourgeois was a
humble subject by another that was more congenial to his rationalist
mind and to his immediate interests. But, surveying that process from
the standpoint of today, the observer might well wonder whether in
the end such complete emancipation was good for the bourgeois and
his world. For those fetters not only hampered, they also sheltered.
Before proceeding further we must carefully clarify and appraise this
point.

2. The related processes of the rise of the capitalist bourgeoisie and \
of the rise of national states produced, in the sixteenth, seventeenth and
eighteenth centuries, a social structure that may seem to us amphibial
though it was no more amphibial or transitional than any other.
Consider the outstanding instance that is afforded by the monarchy
of Louis XIV. The royal power had subjugated the landed aristocracy
and at the same time conciliated it by proffering employment and
pensions and by conditionally accepting its claim to a ruling or lead-
ing class position. The same royal power had subjugated and allied
itself with the clergy .2 It had finally strengthened its sway over the
bourgeoisie, its old ally in the struggle with the territorial magnates,
protecting and propelling its enterprise in order to exploit it the more
effectively in turn. Peasants and the (small) industrial proletariat were

2 GalUcanism was nothing else but the ideological reflex of this.

Can Capitalism Survive?

likewise managed, exploited and protected by public authority —
though the protection was in the case of the French ancien regime very
much less in evidence than for instance in the Austria of Maria
Theresa or of Joseph II — and, vicariously, by landlords or industrial-
ists. This was not simply a government in the sense of nineteenth-cen-
tury liberalism, i.e., a social agency existing for the performance of a
few limited functions to be financed by a minimum of revenue. On
principle, the monarchy managed everything, from consciences to the
patterns of the silk fabrics of Lyons, and financially it aimed at a maxi-
mum of revenue. Though the king was never really absolute, public
authority was all-comprehensive.

Correct diagnosis of this pattern is of the utmost importance for our
subject. The king, the court, the army, the church and the bureaucracy
lived to an increasing extent on revenue created by the capitalist proc-
ess, even purely feudal sources of income being swelled in conse-
quence of contemporaneous capitalist developments. To an increasing
extent also, domestic and foreign policies and institutional changes
were shaped to suit and propel that development. As far as that goes,
the feudal elements in the structure of the so-called absolute mon-
archy come in only under the heading of atavisms which in fact is
the diagnosis one would naturally adopt at first sight.

Looking more closely, however, we realize that those elements
meant more than that. The steel frame of that structure still con-
sisted of the human material of feudal society and this material still
behaved according to precapitalist patterns. It filled the offices of
state, officered the army, devised policies — it functioned as a classe
dirigente and, though taking account of bourgeois interests, it took
care to distance itself from the bourgeoisie. The centerpiece, the
king, was king by the grace of God, and the root of his position was
feudal, not only in the historical but also in the sociological sense,
however much he availed himself of the economic possibilities offered
by capitalism. All this was more than atavism. It was an active sym-
biosis of two social strata, one of which no doubt supported the other
economically but was in turn supported by the other politically.
Whatever we may think of the achievements or shortcomings of this
arrangement, whatever the bourgeois himself may have thought of
it at the time or later— and of the aristocratic scapegrace or idler —
it was of the essence of that society.

3. Of that society only? The subsequent course of things, best ex-
emplified by the English case, suggests the answer. The aristocratic
element continued to rule the roost right to the end of the period of
intact and vital capitalism. No doubt that element — though nowhere
so effectively as in England— currently absorbed the brains from
other strata that drifted into politics; it made itself the representa-
tive of bourgeois interests and fought the battles of the bourgeoisie; it

Crumbling Walls 137

had to surrender its last legal privileges; but with these qualifications,
and for ends no longer its own, it continued to man the political
engine, to manage the state, to govern.

The economically operative part of the bourgeois strata did not
offer much opposition to this. On the whole, that kind of division
of labor suited them and they liked it. Where they did revolt against
it or where they got into the political saddle without having to
revolt, they did not make a conspicuous success of ruling and did not
prove able to hold their own. The question arises whether it is
really safe to assume that these failures were merely due to lack of
opportunity to acquire experience and, with experience, the attitudes
of a politically ruling class.

It is not. There is a more fundamental reason for those failures
such as are instanced by the French or German experiences with
bourgeois attempts at ruling — a reason which again will best be
visualized by contrasting the figure of the industrialist or merchant
with that of the medieval lord. The latter's “profession" not only
qualified him admirably for the defense of his own class interest —
he was not only able to fight for it physically — but it also cast a halo
around him and made of him a ruler of men. The first was impor-
tant, but more so were the mystic glamour and the lordly attitude —
that ability and habit to command and to be obeyed that carried
prestige with all classes of society and in every walk of life. That
prestige was so great and that attitude so useful that the class posi-
tion outlived the social and technological conditions which had given
rise to it and proved adaptable, by means of a transformation of the
class function, to quite different social and economic conditions.
With the utmost ease and grace the lords and knights metamoi'phosed
themselves into courtiers, administrators, diplomats, politicians and
into military officers of a type that had nothing whatever to do with
that of the medieval knight. And — ^most astonishing phenomenon
when we come to think of it — a remnant of that old prestige survives
even to this day, and not only with our ladies.

Of the industrialist and merchant the opposite is true. There is
surely no trace of any mystic glamour about him which is what
counts in the ruling of men. The stock exchange is a poor substitute
for the Holy Grail. We have seen that the industrialist and mer--
chant, as far as they are entrepreneurs, also fill a function of leader-
ship. But economic leadership of this type does not readily expand,
like the medieval lord’s military leadership, into the leadership off
nations. On the contrary, the ledger and the cost calculation absorb!
and confine.

I have called the bourgeois rationalist and unheroic. He can only
use rationalist and unheroic means to defend his position or to bend
a nation to his will. He can impress by what people may expect

138 Can Capitalism Survive?

from his economic performance, he can argue his case, he can prom-
ise to pay out money or threaten to withhold it, he can hire the
treacherous services of a condottiere or politician or journalist. But
that is all and all of it is greatly overrated as to its political value.
Nor are his experiences and habits of life of the kind that develop
personal fascination. A genius in the business office may be, and
often is, utterly unable outside of it to say boo to a goose — both in
the drawing room and on the platform. Knowing this he wants to be
left alone and to leave politics alone.

Again exceptions will occur to the reader. But again they do not
amount to much. Aptitude for, and interest and success in, city man-
agement is the only important exception in Europe, and this will be
found to strengthen our case instead of weakening it. Before the
advent of the inodern metropolis, which is no longer a bourgeois
affair, city management was akin to business management. Grasp of
its problems and authority within its precincts came naturally to the
manufacturer and trader, and the local interests of manufacturing
and trading supplied most of the subject matter of its politics which
therefore lent itself to treatment by the methods and in the spirit
of the business office. Under exceptionally favorable conditions, ex-
ceptional developments sprouted from those roots, such as the de-
velopments of the Venetian or Genoese republics. The case of the
Low Countries enters into the same pattern, but it is particularly
instructive by virtue of the fact that the merchants’ republic in-
variably failed in the great game of international politics and that
in practically every emergency it had to hand over the reins to a
warlord of feudal complexion. As regards the United States, it would
be easy to list the uniquely favorable circumstances — ^rapidly waning
— that explain its case.^

4. The inference is obvious: barring such exceptional conditions,
the bourgeois class is ill equipped to face the problems, both domestic
and international, that have normally to be faced by a country of
any importance. The bourgeois themselves feel this in spite of all the
phraseology that seems to deny it, and so do the masses. Within a pro-
tecting framework not made of bourgeois material, the bourgeoisie
may be successful, not only in the political defensive but also in the
offensive, especially as an opposition. For a time it felt so safe as to
be able to afford the luxury of attacking the protective frame itself;
such bourgeois opposition as there was in imperial Germany illustrates
this to perfection. But without protection by some non-bourgeois
group, the bourgeoisie is politically helpless and unable not only to
lead its nation but even to take care of its particular class interest.
Which amounts to saying that it needs a master.

But the capitalist process, both by its economic mechanics and by
^ This line of reasoning will be taken up again in Part IV.

Crumbling Walls 139

its psycho-sociological eJEects, did away with this protecting master
or, as in this country, never gave him, or a substitute for him, a
chance to develop. The implications of this are strengthened by an-
other consequence of the same process. Capitalist evolution eliminates
not only the king Dei Gratia but also the political entrenchments
that, had they proved tenable, would have been formed by the village
and the craft guild. Of course, neither organization was tenable in the
precise shape in which capitalism found it. But capitalist policies
wrought destruction much beyond what was unavoidable. They at-
tacked the artisan in reservations in which he could have survived
for an indefinite time. They forced upon the peasant all the blessings
of early liberalism — the free and unsheltered holding and all the in-
dividualist rope he needed in order to hang himself.

In breaking down the pre-capitalist framework of society, capitalism
thus broke not only barriers that impeded its progress but also flying
buttresses that prevented its collapse. That process, impressive in its
relentless necessity, was not merely a matter of removing institutional
deadwood, but of removing partners of the capitalist stratum, sym-
biosis with whom was an essential element of the capitalist schema.
Having discovered this fact which so many slogans obscure, we might
well wonder whether it is quite correct to look upon capitalism as a
social form sui generis or, in fact, as anything else but the last stage
of the decomposition of what we have called feudalism. On the whole,
I am inclined to believe that its peculiarities suffice to make a type
and to accept that symbiosis of classes which owe their existence to
different epochs and processes as the rule rather than as an exception
— at least it has been the rule these 6000 years, i.e., ever since primi-
tive tillers of the soil became the subjects of mounted nomads. But
there is no great objection that I can see against the opposite view
alluded to.

We return from our digression with a load of ominous facts. They
are almost, though not quite, sufficient to establish our next point,
viz., that the capitalist process in much the same way in which it de-
stroyed the institutional framework of feudal society also undermines
its own.

It has been pointed out above that the very success of capitalist
enterprise paradoxically tends to impair the prestige or social weight
of the class primarily associated with it and that the giant unit of
control tends to oust the bourgeoisie from the function to which it
owed that social weight. The corresponding change in the meaning,
and the incidental loss in vitality, of the institutions of the bourgeois
world and of its typical attitudes are easy to trace.

140 Can Capitalism Survive?

On the one hand, the capitalist process unavoidably attacks the
economic standing ground of the small producer and trader. What it
did to the pre-capitalist strata it also does — and by the same competi-
tive mechanism — to the lower strata of capitalist industry. Here of
course Marx scores. It is true that the facts of industrial concentra-
tion do not quite live up to the ideas the public is being taught to
entertain about it (see Chapter XIX). The process has gone less far
and is less free from setbacks and compensatory tendencies than one
would gather from many a popular exposition. In particular, large-
scale enterprise not only annihilates hut also, to some extent, creates
space for the small producing, and especially trading, firm. Also, in
the case of the peasants and farmers, the capitalist world has at last
proved both willing and able to pursue an expensive but on the whole
effective policy of conservation. In the long run, however, there can
be little doubt about the fact we are envisaging, or about its conse-
quences. Outside of the agrarian field, moreover, the bourgeoisie has
shown but little awareness of the problem^ or its importance for the
survival of the capitalist order. The profits to be made by rationaliz-
ing the organization of production and especially by cheapening the
tortuous way of commodities from the factory to the ultimate con-
sumer are more than the mind of the typical businessman can resist.

Now it is important to realize precisely what these consequences
consist in. A very common type of social criticism which we have
already met laments the “decline of competition'* and equates it to
the decline of capitalism because of the virtues it attributes to com-
petition and the vices it attributes to modern industrial “monopolies."
In this schema of interpretation, monopolization plays the role of
arteriosclerosis and reacts upon the fortunes of the capitalist order
through increasingly unsatisfactory economic performance. We have
seen the reasons for rejecting this view. Economically neither the
case for competition nor the case against concentration of economic
control is anything like as strong as this argument imp|ies. And,
whether weak or strong, it misses the salient point. Even it the giant
concerns were all managed so perfectly as to call forth applause from
the angels in heaven, the political consequences of concentration
would still be what they are. The political structure of a nation is
profoundly affected by the elimination of a host of small and medium-
sized firms the owner-managers of which, together with their de-
pendents, henchmen and connections, count quantitatively at the
polls and have a hold on what we may term the foreman class that
no management of a large unit can ever have; the very foundation
of private property and free contracting wears away in a nation in

^Although some governments did; the government of imperial Germany did
much to fight this particular kind of rationalization, and there is now a strong
tendency to do the same in this country.

Crumbling Walls 141

which its most vital, most concrete, most meaningful types disappear
from the moral horizon of the people.

On the other hand, the capitalist process also attacks its own in-
stitutional framework — let us continue to visualize “property’* and
“free contracting” as partes pro toto — ^within the precincts of the
big units. Excepting the cases that are still of considerable importance
in which a corporation is practically owned by a single individual or
family, the figure of the proprietor and with it the specifically propri-
etary interest have vanished from the picture. There are the salaried ’
executives and all the salaried managers and submanagers. There are
the big stockholders. And then there are the small stockholders. The
first group tends to acquire the employee attitude and rarely if ever
identifies itself with the stockholding interest even in the most favor-
able cases, i.e., in the cases in which it identifies itself with the in-
terest of the concern as such. The second group, even if it considers
its connection with the concern as permanent and even if it actually
behaves as financial theory would have stockholders behave, is at
one remove from both the functions and the attitudes of an owner.
As to the third group, small stockholders often do not care much
about what for most of them is but a minor source of income and,
whether they care or not, they hardly ever bother, unless they or
some representatives of theirs are out to exploit their nuisance value;
being often very ill used and still more often thinking themselves ill
used, they almost regularly drift into an attitude hostile to “their’*
corporations, to big business in general and, particularly when things
look bad, to the capitalist order as such. No element of any of those
three groups into which I schematized the typical situation uncondi-
tionally takes the attitude characteristic of that curious phenomenon,
so full of meaning and so rapidly passing, that is covered by the term
Property.

Freedom^ of contracting is in the same boat. In its full vitality it
meant individual contraAing regulated by individual choice between
an indefinite number of possibilities. The stereotyped, unindividual,
impersonal and bureaucratized contract of today — this applies much
more generally, but a potiori we may fasten upon the labor contract
— which presents but restricted freedom of choice and mostly turns
on a c'est d prendre ou d laisser, has none of the old features the most
important of which become impossible with giant concerns dealing
with other giant concerns or impersonal masses of workmen or con-
sumers. The void is being filled by a tropical growth of new legal
structures — and a little reflection shows that this could hardly be
otherwise.

Thus the capitalisj: process pushes into the background all those
institutions, the institutions of property and free contracting in par-
ticular, that expressed the needs and ways of the truly “private”

Can Capitalism Survive?

economic activity. Where it does not abolish them, as it already has
abolished free contracting in the labor market, it attains the
by shifting the relative importance of existing legal forms the legal
forn« perfaining to corporate business for instance as against those
oertaimng to the partnership or individual firm— or by changing
Se r confents or meanings. The capitalist process by substituting a
mie parcel of shares for the walls of and the machines m a factory,
takes Ae life out of the idea of property. It loosens the grip that
once was so strong-Uie grip in the seme of the legal nght and the
actual ability to do as one pleases with one's own; the grip also in
S serirthat the holder of the title loses the will m fight, economi-
cally, physically, politically, for “his” factory and his control oyer it,
to die if necessary on its steps. And this evaporauon of what we may
term the material substance of property— its visible and touchaWe
reality— affects not only the attitude of holders but also that of the
workmen and of the public in general. Dematenalized, defunctional-
ized and absentee ownership does not impress and call forth
allegiance as the vital form of property did. Eventually there will be
nobody left who really cares to stand for it— nobody within and no-
'bbdy without the precincts of the big concerns.

CHAPTER XIII

GROWING HOSTILITY

I. The Social Atmosphere of Capitalism

F rom the analysis of the two preceding chapters, it should not be
difficult to understand how the capitalist process produced that
atmosphere of almost universal hostility to its own social order to
which I have referred at the threshold of this part. The phenomenon
is so striking and both the Marxian and the popular explanations
are so inadequate that it is desirable to develop the theory of it a
little further.

1 . The capitalist process, so we have seen, eventually decreases
the importance of the function by which the capitalist class lives.
We have also seen that it tends to wear away protective strata, to
break down its own defenses, to disperse the garrisons of its entrench-
ments. And we have finally seen that capitalism creates a critical
frame of mind which, after having destroyed the moral authority of
so many other institutions, in the end turns against its own; the
bourgeois finds to his amazement that the rationalist attitude does
not stop at the credentials of kings and popes but goes on to attack
private property and the whole scheme of bourgeois values.

The bourgeois fortress thus becomes politically defenseless. De-
fenseless fortresses invite aggression especially if there is rich booty in
them. Aggressors will work themselves up into a state of rational-
izing hostility^ — aggressors always do. No doubt it is possible, for a
time, to buy them off. But this last resource fails as soon as they
discover that they can have all. In part, this explains what we are
out to explain. So far as it goes — it does not go the whole way of
course — this element of our theory is verified by the high correlation
that exists historically between bourgeois defenselessness and hostility
to the capitalist order: there was very little hostility on principle as
long as the bourgeois position was safe, although there was then
much more reason for it; it spread pari passu with the crumbling of
the protecting walls.

2. But, so it might well be asked — in fact, so it is being asked in
naive bewilderment by many an industrialist who honestly feels he
^ It is hoped that no confusion will arise from my using the verb *‘to rationalize’'
in two different meanings. An industrial plant is being ‘"rationalized” when
its productive efficiency per unit of expenditure is being increased. We “rationalize”
an action of ours when we supply ourselves and others with reasons for it that
satisfy our standard of values regardless of what our true impulses may be.

143

144 Can Capitalism Survive?

is doing his duty by all classes of society — why should the capitalist
order need any protection by extra-capitalist powers or extra-rational
loyalties? Can it not come out of the trial with flying colors? Does not
our own previous argument sufficiently show that it has plenty of
utilitarian credentials to present? Cannot a perfectly good case be
made out for it? And those industrialists will assuredly not fail to
point out that a sensible workman, in weighing the pro’s and con’s
of his contract with, say, one of the big steel or automobile concerns,
might well come to the conclusion that, everything considered, he is
not doing so badly and that the advantages of this bargain are not
all on one side. Yes — certainly, only all that is quite irrelevant.

For, first, it is an error to believe that political attack arises pri-
marily from grievance and that it can be turned by justification.
Political criticism cannot be met effectively by rational argument.
From the fact that the criticism of the capitalist order proceeds from
a critical attitude of mind, i.e., from an attitude which spurns alle-
giance to extra-rational values, it does not follow that rational refu-
tation will be accepted. Such refutation may tear the rational garb
of attack but can never reach the extra-rational driving power that
always lurks behind it. Capitalist rationality does not do away with
sub- or super-rational impulses. It merely makes them get out of
hand by removing the restraint of sacred or semi-sacred tradition. In
a civilization that lacks the means and even the will to discipline
and to guide them, they will revolt. And once they revolt it matters
little that, in a rationalist culture, their manifestations will in gen-
eral be rationalized somehow. Just as the call for utilitarian creden-
tials has never been addressed to kings, lords and popes in a judicial
frame of mind that would accept the possibility of a satisfactory
answer, so capitalism stands its trial before judges who have the sen-
tence of death in their pockets. They are going to pass it, whatever
the defense they may hear; the only success victorious defense can
possibly produce is a change in the indictment. Utilitarian reason is
in any case weak as a prime mover of group action. In no case is it a
match for the extra-rational determinants of conduct.

Second, the success of the indictment becomes quite understand-
able as soon as we realize what acceptance of the case for capitalism
would imply. That case, were it even much stronger than it actually
is, could never be made simple. People at large would have to be
possessed of an insight and a power of analysis which are altogether
beyond them. Why, practically every nonsense that has ever been said
about capitalism has been championed by some professed economist.
But even if this is disregarded, rational recognition of the economic
performance of capitalism and of the hopes it holds out for the future
would require an almost impossible moral feat by the have-not. That
performance stands out only if we take a long-run view; any pro-

Growing Hostility 145

capitalist argument must rest on long-run considerations. In the short
run, it is profits and inefficiencies that dominate the picture. In order
to accept his lot, the leveler or the chartist of old would have had to
comfort himself with hopes for his great-grandchildren. In order to
identify himself with the capitalist system, the unemployed of today
would have completely to forget his personal fate and the politician
of today his personal ambition. The long-run interests of society are
so entirely lodged with the upper strata of bourgeois society that it is
perfectly natural for people to look upon them as the interests of
that class only. For the masses, it is the short-run view that counts.
Like Louis XV, they feel apres nous le deluge, and from the stand-
point of individualist utilitarianism they are of course being per-
fectly rational if they feel like that.

Third, there are the daily troubles and expectations of trouble
everyone has to struggle with in any social system — the frictions and
disappointments, the greater and smaller unpleasant events that hurt,
annoy and thwart. I suppose that every one of us is more or less in the
habit of attributing them wholly to that part of reality which lies
without his skin, and emotional attachment to the social order — i.e.,
the very thing capitalism is constitutionally unable to produce — is
necessary in order to overcome the hostile impulse by which we react
to them. If there is no emotional attachment, then that impulse has
its way and grows into a permanent constituent of our psychic setup.

Fourth, the ever-rising standards of life and particularly the leisure
that modern capitalism provides for the fully employed workman
. . . well, there is no need for me to finish the sentence or to elaborate
one of the tritest, oldest and most stodgy of all arguments which
unfortunately is but too true. Secular improvement that is taken for
granted and coupled with individual insecurity that is acutely re-
sented is of course the best recipe for breeding social unrest.

II. The Sociology of the Intellectual

Nevertheless, neither the opportunity of attack nor real or fancied
grievances are in themselves sufficient to produce, however strongly
they may favor, the emergence of active hostility against a social
order. For such an atmosphere to develop it is necessary that there
be groups to whose interest it is to work up and organize resent-
ment, to nurse it, to voice it and to lead it. As will be shown in Part
IV, the mass of people never develops definite opinions on its own
initiative. Still less is it able to articulate them and to turn them
into consistent attitudes and actions. All it can do is to follow or
refuse to follow such group leadership as may offer itself. Until we
have discovered social groups that will qualify for that role our
theory of the atmosphere of hostility to capitalism is incomplete.

Broadly speaking, conditions favorable to general hostility to a

146 . Can Capitalism Survive?

social system or specific attack upon it will in any case tend to call
forth groups that will exploit them. But in the case of capitalist society
there is a further fact to be noted: unlike any other type of society,
capitalism inevitably and by virtue of the very logic of its civilization
creates, educates and subsidizes a vested interest in social unrest.^
Explanation of this phenomenon, which is as curious as it is impor-
tant, follows from our argument in Chapter XI, but may be made
more telling by an excursion into the Sociology of the Intellectual.

1. This type is not easy to define. The difficulty is in fact sympto-
matic of the character of the species. Intellectuals are not a social class
in the sense in which peasants or industrial laborers constitute social
classes; they hail from all the corners of the social world, and a great
part of their activities consist in fighting each other and in forming
the spearheads of class interests not their own. Yet they develop group
attitudes and group interests sufficiently strong to make large num-
bers of them behave in the way that is usually associated with the con-
cept of social classes. Again, they cannot be simply defined as the sum
total of all the people who have had a higher education; that would
obliterate the most important features of the type. Yet anyone who
had — and, save exceptional cases, nobody who ha d not — is a pote ntial
jntejUeiBual; S minds are all si milarly fu rnish ed

facilitates understandiii ^Jbje^een them an d constitutes ”a bond. Nor
wouHTt serve ouFpurpose to make the concept coextensive’” with the
membership of the liberal professions; physicians or lawyers for in-
stance are not intellectuals in the relevant sense unless they talk ‘or
w rite *abQ UL,s Jibiects outsid e o£ t heir profes siojaaLcompetence which
no doubt they often do — particularly the lawyers. Yet there is a close
connection between the intellectuals and the professions. For some
professions — especially if we count in purnalis m — actually do belong
almost wholly to the" domain of the intellectual type;^ the members of
all professions have the opportunity of becoming int ellectuals; and
many intellectuals ta]s£_.tD ..jQ|n e j)rQfess iQn,for^^^^^^ deK-

nitjog^by-joiga iis of the contract t o manual l abor w ould b e much tog
wid^Yet the Duke of Wellington’s “scribbling set” seems to be too
narrow.^ So is the meaning of hommes de le tires,

2 Every social system is sensitive to revolt and in every social system stirring up
revolt is a business that pays in case of success and hence always attracts both
brain and brawn. It did in feudal times — ^very much so. But warrior nobles who
revolted against their superiors attacked individual persons or positions. They did
not attack the feudal system as such. And feudal society as a whole displayed no
tendencies to encourage-^intentionally or unintentionally— attacks upon its own
social system as a whole.

®To my sorrow, I have found that the Oxford English Dictionary does not list
the meaning I wish to attach to the term. It does give the turn of phrase ‘‘a
dinner of intellectuals/’ but in connection with “superior powers of intellect’'
which points in a very different direction, I have been duly disconcerted, yet have
not been able to discover another term that would serve my purpose equally well.

^The Duke's phrase occurs in The Croker Papers (ed. L. J. Jennings, 1884),

Growing Hostility 147

But we might do worse than take our lead from the Iron Duke.
Intellectuals are in fact people who wield the power of the spoken
and the written word, and one of the touches that distinguish them
from other people who do the same is the absence of direct responsi-
bility for practical affairs. This touch in general accounts for an-
other — the absence of that first-hand knowledge of them which only
actual experience can give. The critical attitude, arising no less from
the intellectuaFs situation as an onlooker — in most cases also as an
outsider — than from the fact that his main chance of asserting himself
lies in his actual or potential nuisance value, should add a third touch.
The profession of the unprofessional? Professional dilettantism? JThe
people who tal^ abo ut everything because they understand not hiii^
Bernard Shawls journalist in TA g D^tor's Di le mma ? No, no. I have
not said that and I do not mean that. That sort of thing would be
still more untrue than it would be offensive. Let us give up trying
to define by words and instead define “epideiktically”: in the Greek
museum we can see the object, nicely labeled. The sophists, philoso-
phers and rhetors — ^however strongly* they objected to being thrown to-
gether, they were all of the same genus — of the fifth and fourth cen-
turies B.c. illustrate ideally what I mean. That practically all of them
were teachers does not destroy the value of the illustration.

2. When analyzing the rationalist nature of capitalist civilization
(Chapter XI) I pointed out that the development of rational thought
of course precedes the rise of the capitalist order by thousands of
years; all that capitalism did was to give a new impulse and a particu-
lar bend to the process. Similarly — cleaving aside the Graeco-Roman
world — ^we find intellectuals in thoroughly pre-capitalist conditions,
for instance in the Kingdom of the Franks and in the countries into
which it dissolved. But they were few in number; they were clergy-
men, mostly monks; and their written performance was accessible to
only an infinitesimal part of the population. No doubt strong indi-
viduals were occasionally able to develop unorthodox views and even
to convey them to popular audiences. This however in general implied
antagonizing a very strictly organized environment — from which at
the same time it was difficult to get away — and risking the lot of the
heretic. Even so it was hardly possible without the support or conniv-
ance of some great lord or chieftain, as the tactics of missionaries suf-
fice to show. On the whole, therefore, intellectuals were well in hand,
and kicking over the traces was no joke, even in times of exceptional
disorganization and license, such as during the Black Death (in and
after 1348).

But if the monastery gave birth to the intellectual of the medieval
world, it was capitalism that let him loose and presented him with
the printing press. The slow evolution of the lay intellectual was
merely an aspect of this process; the coincidence of the emergence of

148 Can Capitalism Survive?

humanism with the emergence of capitalism is very striking. The hu-
manists were primarily philologists but — excellently illustrating a
point made above — they quickly expanded into the fields of manners,
politics, religion and plxilosophy. This was not alone due to the con-
tents of the classic works which they interpreted along with their
grammar — from the criticism of a text to the criticism of a society, the
way is shorter than it seems. Nevertheless, the typical intellectual did
not relish the idea of the stake which still awaited the heretic. As a
rule, honors and comfort suited him a great deal better. And these
were after all to be had only from princes, temporal or spiritual,
though the humanists were the first intellectuals to have a public in
the modern sense. The critical attitude grew stronger every day. But
social criticism — ^beyond what was implied in certain attacks on the
Catholic Church and in particular its head — did not flourish under
such conditions.

Honors and emoluments can however be had in more than one way.
Flattery and subservience are often less remunerative than are their
opposites. This discovery was not made by the Aretino® but no mortal
ever surpassed him in exploiting it. Charles V was a devoted husband
but, during his campaigns which kept him from home for many
months at a time, he lived the life of a gentleman of his time and
class. Very well, the public — and what particularly mattered to
Charles, his empress — need never know, provided arguments of the
right kind and weight were duly handed to the great critic of politics
and morals. Charles paid up. But the point is that this was not simple
blackmail which in general benefits one party only and inflicts un-
compensated loss on the other. Charles knew why he paid though
doubtless it would have been possible to secure silence by cheaper if
more drastic methods. He did not display resentment. On the con-
trary he even went out of his way to honor the man. Obviously he
w^^anted more than silence and, as a matter of fact, he received full
value for his gifts.

§. In a sense, therefore, the Aretino’s pen was indeed stronger than
the sword. But, perhaps through ignorance, I do not know of com-
parable instances of that type for the next hundred and fifty years, ^
during which intellectuals do not seem to have played any great role
outside and independently of the established professions, mainly the
law and the church. Now this setback roughly coincides with the set-
back in capitalist evolution which in most countries of continental
Europe occurred in that troubled period. And the subsequent recovery
of capitalist enterprise was similarly shared by the intellectuals. The
cheaper book, the cheap newspaper or pamphlet, together with the

^ Pietro Aretino, 1492-1556.

England, however, the scope and importance of pamphleteering increased
greatly in the seventeenth century.

Growing Hostility 149

widening of the public that was in part their product but partly an in-
dependent phenomenon due to the access of wealth and weight which
came to the industrial bourgeoisie and to the incident increase in the
political importance of an anonymous public opinion — ail these boons,
as well as increasing freedom from restraint, are by-products of the
capitalist engine.

In the first three-quarters of the eighteenth century the individual pa-
tron was slow to lose the paramount importance in the intellectuaFs
career that he had held at the beginning. But in the peak successes at
least, we clearly discern the growing importance of the new element —
the support of the collective patron, the bourgeois public. In this as in
every other respect, Voltaire affords an invaluable instance. His very
superficiality that made it possible for him to cover everything from
religion to Newtonian optics, allied to indomitable vitality and an
insatiable curiosity, a perfect absence of inhibitions, an unerring
instinct for and a wholesale acceptance of the humors of his time,
enabled that uncritical critic and mediocre poet and historian to fasci-
nate — and to sell. He also speculated, cheated, accepted gifts and ap-
pointments, but there was always the independence founded on the
solid base of his success with the public. Rousseau's case and type,
though entirely different, would be still more instructive to discuss.

In the last decades of the eighteenth century a striking episode dis-
played the nature of the power of a free-lance intellectual who has
nothing to work with but the socio-psychological mechanism called
Public Opinion. This happened in England, the country that was
then farthest advanced on the road of capitalist evolution. John
Wilkes' attacks on the political system of England, it is true, were
launched under uniquely favorable circumstances; moreover, it cannot
be said that he actually upset the Earl of Bute's government which
never had any chance and was bound to fail for a dozen other reasons;
but Wilkes' North Briton was nevertheless the last straw that broke
. . . Lord Bute's political back. No. 45 of the North Briton was the
first discharge in a campaign that secured the abolition of general
warrants and made a great stride toward the freedom of the press
and of elections. This does not amount to making history or to creat-
ing the conditions for a change in social institutions, but it does
amount to playing, say, the role of a midwife's assistant."^ The in-
ability of Wilkes' enemies to thwart him is the most significant fact

do not fear that any historian of politics will find that I have exaggerated
the importance of Wilkes* success. But I do fear objection to my calling him a free
lance and to the implication that he owed everything to the collective, and nothing
to any individual patron. In his beginnings he was no doubt encouraged by a
coterie. On examination it wnll however be conceded, I think, that this was not of
decisive importance and that all the support and all the money and honors he got
afterwards were but a consequence of and tribute to previous success and to a
position independently acquired with the public.

150 Can Capitalism Survive?

about it all. They evidently had all the power of organized govern-
ment at their command. Yet something drove them back.

In France, the years preceding the revolution and the revolution
itself brought the rabble-raising tabloid (Marat, Desmoulins), which
however did not, like ours, completely jettison style and grammar.
But we must hurry on. The Terror and, more systematically, the
First Empire put an end to this. Then followed a period, interrupted
by the rule of the roi bourgeois, of more or less resolute repression
that lasted until the Second Empire felt compelled to loosen the reins —
about the middle sixties. In central and southern Europe this period
also lasted about as long, and in England analogous conditions pre-
vailed from the beginning of the revolutionary wars to Canning's
accession to power.

4. How impossible it is to stem the tide within the framework of
capitalist society is shown by the failure of the attempts — some of
them prolonged and determined — ^made during that period by prac-
tically all European governments to bring the intellectuals to heel.
Their histories were nothing but so many different versions of Wilkes'
exploits. In capitalist society — or in a society that contains a capitalist
element of decisive importance — any attack on the intellectuals must
run up against the private fortresses of bourgeois business which, or
some of which, will shelter the quarry. Moreover such an attack must
proceed according to bourgeois principles of legislative and adminis-
trative practice which no doubt may be stretched and bent but will
checkmate prosecution beyond a certain point. Lawless violence the
bourgeois stratum may accept or even applaud when thoroughly roused
or frightened, but only temporarily. In a purely bourgeois regime like
that of Louis Philippe, troops may fire on strikers, but the police can-
not round up intellectuals or must release them forthwith; otherwise
the bourgeois stratum, however strongly disapproving some of their
doings, will rally behind them because the freedom it disapproves
cannot be crushed without also crushing the freedom it approves.

Observe that I am not crediting the bourgeoisie with an unrealistic
dose of generosity or idealism. Nor am I unduly stressing what people
think and feel and want — on the importance of which I almost, though
not quite, agree with Marx. In defending the intellectuals as a group
— not of course every individual-— the bourgeoisie defends itself and
its scheme of life. Only a government of non-bourgeois nature and
non-bourgeois creed — under modern circumstances only a socialist or
fascist one— is strong enough to discipline them. In order to do that
it would have to change typically bourgeois institutions and drasti-
cally reduce the individual freedom of all strata of the nation. And
such a government is not likely — it would not even be able — to stop
short of private enterprise.

From this follows both the unwillingness and the inability of the

Growing Hostility 151

capitalist order to control its intellectual sector effectively. The un-
willingness in question is unwillingness to use methods consistently
that are uncongenial to the mentality shaped by the capitalist proc-
ess; the inability is the inability to do so within the frame of institu-
tions shaped by the capitalist process and without submitting to non-
bourgeois rule. Thus, on the one hand, freedom of public discussion
involving freedom to nibble at the foundations of capitalist society
is inevitable in the long run. On the other hand, the intellectual group
cannot help nibbling, because it lives on criticism and its whole posi-
tion depends on criticism that stings; and criticism of persons and of
current events will, in a situation in which nothing is sacrosanct,
fatally issue in criticism of classes and institutions.

5. A few strokes will complete the modern picture. There are the
increasing means. There is the increase in the standard of life and in
the leisure of the masses that changed and is still changing the com-
position of the collective patron for the tastes of whom the intellectuals
have to provide. There was and is the further cheapening of the book
and newspaper and the large-scale newspaper concern.® There is now
the radio. And there was and is the tendency toward complete re-
moval of restraints, steadily breaking down those short-run attempts
at resistance by which bourgeois society proves itself so incompetent
and occasionally so childish a disciplinarian.

8 The emergence and the career up to date of the large-scale newspaper concern
illustrate two points which I am anxious to stress: the manifold aspects, relations
and effects of every concrete element of the social pattern that preclude simple
and one-way propositions, and the importance of distinguishing short-run and
long-run phenomena for which different, sometimes opposite, propositions hold true.
The large-scdXe newspaper concern is in most cases simply a capitalist business en-
terprise. This does not imply that it espouses capitalist or any other class interests.
It may do so, but only from one or more of the following motives, the limited
importance of which is obvious: because it is subsidized by a capitalist group for
the very purpose of advocating its interests or views — the larger the concern and
its sales, the less important this element; because it intends to sell to a public of
bourgeois tastes — this, very important until about 1914, now increasingly cuts the
other way; because advertisers prefer to use a congenial medium — ^but mostly they
take a very businesslike view of the matter; because the owners insist on a certain
course irrespective of their interest in sales— -to a certain extent, they do and espe-
cially did, but experience teaches that they do not hold out if the conflict with
their pecuniary interest in sales is too severe. In other words, the large-scale news-
paper concern is a most powerful tool for raising the position and increasing the
influence of the intellectual group, but it is even now not completely in its control.
It means employment and a wider public, but it also means “strings.” These are
mainly of importance in the short run; in fighting for greater freedom to do as
he pleases, the individual journalist may easily meet defeat. But this short-run
aspect — ^and the group’s recollection of past conditions — are what enters the in-
tellectual’s mind and tvhat determines the colors of the picture of slavery and
martyrdom he draws for the public. In reality, it should be a picture of conquest.
Conquest and victory are in this, as in so many other cases, a mosaic composed
of defeats.

15 ^ Can Capitalism Survive?

There is, however, another factor. One of the most important fea-
tures of the later stages of capitalist civilization is the vigorous ex-
pansion of the educational apparatus and particularly of the facilities
for higher education. This development was and is no less inevitable
than the development of the largest-scale industrial unit,^ but, unlike
the latter, it has been and is being fostered by public opinion and
public authority so as to go much further than it would have done
under its own steam. Whatever we may think of this from other stand-
points and whatever the precise causation, there are several conse-
quences that bear upon the size and attitude of the intellectual group.

First, inasmuch as higher education thus increases the supply of
services in professional, quasi-professional and in the end all ''white-
collar’' lines beyond the point determined by cost-return considera-
tions, it may create a particularly important case of sectional unem-
ployment.

Second, along with or in place of such unemployment, it creates
unsatisfactory conditions of employment — employment in substandard
work or at wages below those of the better-paid manual workers.

Third, it may create unemployability of a particularly disconcerting
type. The man who has gone through a college or university easily
becomes psychically unemployable in manual occupations without
necessarily acquiring employability in, say, professional work. His
failure to do so may be due either to lack of natural ability — per-
fectly compatible with passing academic tests — or to inadequate teach-
ing; and both cases will, absolutely and relatively, occur more fre-
quently as ever larger numbers are drafted into higher education and
as the required amount of teaching increases irrespective of how many
teachers and scholars nature chooses to turn out. The results of neg-
lecting this and of acting on the theory that schools, colleges and
universities are just a matter of money, are too obvious to insist upon.
Cases in which among a dozen applicants for a job, all formally
qualified, there is not one who can fill it satisfactorily, are known to
everyone who has anything to do with appointments — to everyone,
that is, who is himself qualified to judge.

»At present this development is viewed by most people from the standpoint of
the ideal of making educational facilities of any type available to all who can be
induced to use them. This ideal is so strongly held that any doubts about it are
almost universally considered to be nothing short of indecent, a situation not im-
proved by the comments, all too often flippant, of dissentients. Actually, we brush
here against a set of extremely complex problems of the sociology of education and
educational ideals which we cannot attack within the limits of this sketch. This is
why I have confined the above paragraph to two incontestable and noncommittal
trivialities that are all we want for the purpose in hand. But of course they do
not dispose of the larger problems which must be left aside to testify to the in-
completeness of my exposition.

Growing Hostility 153

All those who are unemployed or unsatisfactorily employed or un-
employable drift into the vocations in which standards are least defi-
nite or in which aptitudes and acquirements of a different order count.
They swell the host of intellectuals in the strict sense of the term
whose numbers hence increase disproportionately. They enter it in a
thoroughly discontented frame of mind. Discontent breeds resentment.
And it often rationalizes itself into that social criticism which as we
have seen before is in any case the intellectual spectator's typical at-
titude toward men, classes and institutions especially in a rationalist
and utilitarian civilization. Well, here we have numbers; a well-defined
group situation of proletarian hue; and a group interest shaping a
group attitude that will much more realistically account for hostility
to the capitalist order than could the theory — itself a rationalization
in the psychological sense — according to which the intellectuaFs right-
eous indignation about the wrongs of capitalism simply represents the
logical inference from outrageous facts and which is no better than
the theory of lovers that their feelings represent nothing but the
logical inference from the virtues of the beloved.^^ Moreover our
theory also accounts for the fact that this hostility increases, instead of
diminishing, with every achievement of capitalist evolution.

Of course, the hostility of the intellectual group — amounting to
moral disapproval of the capitalist order — is one thing, and the gen-
eral hostile atmosphere which surrounds the capitalist engine is an-
other thing. The latter is the really significant phenomenon; and it is
not simply the product of the former but flows partly from inde-
pendent sources, some of which have been mentioned before; so far
as it does, it is raw material for the intellectual group to work on.
There are give-and-take relations between the two which it would
require more space to unravel than I can spare. The general contours
of such an analysis are however sufficiently obvious and I think it safe
to repeat that the role of the intellectual group consists primarily in
stimulating, energizing, verbalizing and organizing this material and
only secondarily in adding to it. Some particular aspects will illus-
trate the principle.

6. Capitalist evolution produces a labor movement which obviously
is not the creation of the intellectual group. But it is not surprising
that such an opportunity and the intellectual demiurge should find
each other. Labor never craved intellectual leadership but intellectuals
invaded labor politics. They had an important contribution to make:

reader will observe that any such theories would be unrealistic even if
the facts of capitalism or the virtues of the beloved were actually all that the social
critic or the lover believes them to be. It is also important to note that in the
overwhelming majority of cases both critics and lovers are obviously sincere; neither
psycho-sociological nor psycho-physical mechanisms enter as a rule into the lime-
light of the Ego, except in the mask of sublimations.

154 Can Capitalism Survive?

they verbalized the movement, supplied theories and slogans for it
— class war is an excellent example — made it conscious of itself and
in doing so changed its meaning. In solving this task from their own
standpoint, they naturally radicalized it, eventually imparting a revo-
lutionary bias to the most bourgeois trade-union practices, a bias
most of the non-intellectual leaders at first greatly resented. But there
was another reason for this. Listening to the intellectual, the work-
man is almost invariably conscious of an impassable gulf if not of
downright distrust. In order to get hold of him and to compete with
non-intellectual leaders, the intellectual is driven to courses entirely
unnecessary for the latter who can afford to frown. Having no genuine
authority and feeling always in danger of being unceremoniously told
to mind his own business, he must flatter, promise and incite, nurse left
wings and scowling minorities, sponsor doubtful or submarginal cases,
appeal to fringe ends, profess himself ready to obey — in short, behave
toward the masses as his predecessors behaved first toward their ec-
clesiastical superiors, later toward princes and other individual patrons,
still later toward the collective master of bourgeois complexion.^^
Thus, though intellectuals have not created the labor movement, they
have yet worked it up into something that differs substantially from
what it would be without them.

The social atmosphere, for the theory of which we have been gather-
ing stones and mortar, explains why public policy grows more and
more hostile to capitalist interests, eventually so much so as to refuse
on principle to take account of the requirements of the capitalist
engine and to become a serious impediment to its functioning. The
intellectual group’s activities have however a relation to anti-capitalist
policies that is more direct than what is implied in their share in ver-
balizing them. Intellectuals rarely enter professional politics and still
more rarely conquer responsible office. But they staff political bureaus,
write party pamphlets and speeches, act as secretaries and advisers,
make the Individual politician’s newspaper reputation which, though
it is not everything, few men can afford to neglect. In doing these
things they to some extent impress their mentality on almost every-
thing that is being done.

The actual influence exerted varies greatly with the state of the
political game from mere formulation to making a measure politically
possible or impossible. But there is always plenty of scope for it. When
we say that individual politicians and parties are exponents of class
interests we are at best emphasizing one-half of the truth. The other
half, just as important if not more so, comes into view when we con-
sider that politics is a profession which evolves interests of its own —
interests that may clash with as well as conform to the interests of the

All this will be illustrated and further developed in Part V.

Growing Hostility 1 55

groups that a man or party “represents/ ’^2 individual and party
opinion is, more than anything else, sensitive to those factors in the
political situation that directly affect the career or the standing of the
individual or party. Some of these are controlled by the intellectual
group in much the same sense as is the moral code of an epoch that
exalts the cause of some interests and puts the cause of others tacitly
out of court.

Finally, that social atmosphere or code of values affects not only
policies — the spirit of legislation — but also administrative practice.
But again there is also a more direct relation between the intellectual
group and bureaucracy. The bureaucracies of Europe are of pre- and
extra-capitalist origin. However much they may have changed in com-
position as the centuries rolled on, they never identified themselves
wholly with the bourgeoisie, its interests or its scheme of values, and
never saw much more in it than an asset to be managed in the interest
of the monarch or of the nation. Except for inhibitions due to pro-
fessional training and experience, they are therefore open to conver-
sion by the modern intellectual with whom, through a similar educa-
tion, they have much in common,^^ while the tinge of gentility that in
many cases used to raise a barrier has been fading away from the
modern civil servant during the last decades. Moreover, in times of
rapid expansion of the sphere of public administration, much of the
additional personnel required has to be taken directly from the in-
tellectual group — ^witness this country.

12 This of course is just as true of the intellectuals themselves with respect to
the class from which they come or to which, economically and culturally, they
belong. The subject will be taken up again in ch. xxiii.

For examples see ch. xxvi.

CHAPTER XIV

DECOMPOSITION

1. Faced by the increasing hostility of the environment and by the
legislative, administrative and judicial practice born of that hostility,
entrepreneurs and capitalists — in fact the whole stratum that accepts
the bourgeois scheme of life — ^will eventually cease to function. Their
standard aims are rapidly becoming unattainable, their efforts futile.
The most glamorous of these bourgeois aims, the foundation of an
industrial dynasty, has in most countries become unattainable already,
and even more modest ones are so difficult to attain that they may
cease to be thought worth the struggle as the permanence of these
conditions is being increasingly realized.

Considering the role of bourgeois motivation in the explanation of
the economic history of the last two or three centuries, its smothering
by the unfavorable reactions of society or its weakening by disuse no
doubt constitutes a factor adequate to explain a flop in the capitalist
process — should we ever observe it as a permanent phenomenon — and
one that is much more important than any of those that are presented
by the Theory of Vanishing Investment Opportunity. It is hence inter-
esting to observe that that motivation not only is threatened by forces
external to the bourgeois mind but that it also tends to die out from
internal causes. There is of course close interdependence between the
two. But we cannot get at the true diagnosis unless we try to disen-
tangle them.

One of those “internal causes” we have already met with. I have
dubbed it Evaporation of the Substance of Property. We have seen
that, normally, the modern businessman, whether entrepreneur or
mere managing administrator, is of the executive type. From the logic
of his position he acquires something of the psychology of the salaried
employee working in a bureaucratic organization. Whether a stock-
holder or not, his will to fight and to hold on is not and cannot be
what it was xvith the man who knew ownership and its responsibilities
in the fullblooded sense of those words. His system of values and his
conception of duty undergo a profound change. Mere stockholders
of course have ceased to count at all — quite independently of the clip-
ping of their share by a regulating and taxing state. Thus the modern
corporation, although the product of the capitalist process, socializes
the bourgeois mind; it relentlessly narrows the scope of capitalist
motivation; not only that, it will eventually kill its roots.^

^Many people will deny this. This is due to the fact that they derive their
impression from past history and from the slogans generated by past history during

156

Decomposition 1 57

2. Still more important however is another ''internal cause/’ viz.,
the disintegration of the bourgeois family. The facts to which I am
referring are too well known to need explicit statement. To men and
women in modem capitalist societies, family life and parenthood mean
less than they meant before and hence are less powerful molders of
behavior; the rebellious son or daughter who professes contempt for
"Victorian” standards is, however incorrectly, expressing an undeni-
able truth. The weight of these facts is not impaired by our inability
to measure them statistically. The marriage rate proves nothing be-
cause the term Marriage covers as many sociological meanings as does
the term Property, and the kind of alliance that used to be formed by
the marriage contract may completely die out without any change in
the legal construction or in the frequency of the contract. Nor is the
divorce rate more significant. It does not matter how many marriages
are dissolved by judicial decree — ^what matters is how many lack the
content essential to the old pattern. If in our statistical age readers
insist on a statistical measure, the proportion of marriages that pro-
duce no children or only one child, though still inadequate to quan-
tify the phenomenon I mean, might come as near as we can hope to
come to indicating its numerical importance. The phenomenon by
now extends, more or less, to all classes. But it first appeared in the
bourgeois (and intellectual) stratum and its symptomatic as well as
causal value for our purposes lies entirely there. It is wholly attribut-
able to the rationalization of everything in life, which we have seen
is one of the effects of capitalist evolution. In fact, it is but one of the
results of the spread of that rationalization to the sphere of private
life. All the other factors which are usually adduced in explanation
can be readily reduced to that one.

As soon as men and women learn the utilitarian lesson and refuse
to take for granted the traditional arrangements that their social en-
vironment makes for them, as soon as they acquire the habit of weigh-
ing the individual advantages and disadvantages of any prospective
course of action — or, as we might also put it, as soon as they introduce
into their private life a sort of inarticulate system of cost accounting
— they cannot fail to become aware of the heavy personal sacrifices
that family ties and especially parenthood entail under modern con-
ditions and of the fact that at the same time, excepting the cases of
farmers and peasants, children cease to be economic assets. These
sacrifices do not consist only of the items that come within the reach
of the measuring rod of money but comprise in addition an indefinite

which the institutional change brought about by the big corporation had not yet
asserted itself. Also they may think of the scope which corporate business used to
give for illegal satisfactions of the capitalist motivation. But that would cut my
way: the fact that personal gain beyond salary and bonus cannot, in corporate
business, be reaped by executives except by illegal or semi-illegal practices shows
precisely that the structural idea of the corporation is averse to it.

158 Can Capitalism Survive?

amount of loss of comfort, of freedom from care, and opportunity
to enjoy alternatives of increasing attractiveness and variety — alter-
natives to be compared with joys of parenthood that are being sub-
jected to a critical analysis of increasing severity. The implication of
this is not weakened but strengthened by the fact that the balance
sheet is likely to be incomplete, perhaps even fundamentally wrong.
For the greatest of the assets, the contribution made by parenthood
to physical and moral health — to ‘^normality” as we might express it
— particularly in the case of women, almost invariably escapes the
rational searchlight of modern individuals who, in private as in public
life, tend to focus attention on ascertainable details of immediate utili-
tarian relevance and to sneer at the idea of hidden necessities of
human nature or of the social organism. The point I wish to convey
is, I think, clear without further elaboration. It may be summed up
in the question that is so clearly in many potential parents* minds:
“Why should we stunt our ambitions and impoverish our lives in
order to be insulted and looked down upon in our old age?**

While the capitalist process, by virtue of the psychic attitudes it
creates, progressively dims the values of family life and removes the
conscientious inhibitions that an old moral tradition would have put
in the way toward a different scheme of life, it at the same time imple-
ments the new tastes. As regards childlessness, capitalist inventiveness
produces contraceptive devices of ever-increasing efficiency that over-
come the resistance which the strongest impulse of man would other-
wise have put up. As regards the style of life, capitalist evolution de-
creases the desirability of, and provides alternatives to, the bourgeois
family home. I have previously adverted to the Evaporation of Indus-
trial Property; I have now to advert to the Evaporation of Con-
sumers* Property.

Until the later decades of the nineteenth century, the town house
and the country place were everywhere not only pleasant and con-
venient shells of private life on the higher levels of income, but they
were indispensable. Not only hospitality on any scale and in any style,
but even the comfort, dignity, repose and refinement of the family
depended upon its having an adequate foyer of its own that was
adequately staffed. The arrangements summarized by the term Home
were accordingly accepted as a matter of course by the average man
and woman of bourgeois standing, exactly as they looked upon mar-
riage and children — the “founding of a family** — ^as a matter of course.

Now, on the one hand, the amenities of the bourgeois home are
becoming less obvious than are its burdens. To the critical eye of a
critical age it is likely to appear primarily as a source of trouble and
expense which frequently fail to justify themselves. This would be
so even independently of modern taxation and wages and of the atti-
tude of modern household personnel, all of which are typical results

Decomposition 1 59

of the capitalist process and of course greatly strengthen the case
against what in the near future will be almost universally recognized
as an outmoded and uneconomical way of life. In this respect as in
others we are living in a transitional stage. The average family of
bourgeois standing tends to reduce the difficulties of running the big
house and the big country place by substituting for it small and
mechanized establishments plus a maximum of outside service and
outside life — ^hospitality in particular being increasingly shifted to the
restaurant or club.

On the other hand, the home of the old type is no longer an indis-:
pensable requirement of comfortable and refined living in the bour-
geois sphere. The apartment house and the apartment hotel represent
a rationalized type of abode and another style of life which when
fully developed will no doubt meet the new situation and provide all
the essentials of comfort and refinement. To be sure, neither that
style nor its shell are fully developed anywhere as yet and they proffer
cost advantage only if we count in the trouble and annoyance incident
to running a modern home. But other advantages they pi;;gffer already
— ^the facility of using to the full the variety of modern enjoyments,
of travel, of ready mobility, of shifting the load of the current little
things of existence to the powerful shoulders of highly specialized or-
ganizations.

It is easy to see how this in turn bears, in the upper strata of capital-
ist society, upon the problems of the child. Again there is interaction:
the passing of the spacious home — in which alone the rich life of a
numerous family can unfold^^ — and the increasing friction with which
it functions supply another motive for avoiding the cares of parent-
hood; but the decline of philoprogenitivity in turn renders the spacious
home less worth while.

I have said that the new style of bourgeois life does not as yet offer
any decisive cost advantage. But this refers only to the current or
prime costs of servicing the wants of private life. As to overhead, even
the ptirely pecuniary advantage is obvious already. And inasmuch as
the outlay on the most durable elements of home life — especially the
house, the pictures, the furniture — ^used to be financed mainly from
previous earnings we may say that the need for accumulation of “con-
sumers' capital" is drastically reduced by that process. This does not
mean of course that demand for “consumers* capital" is at present,
even relatively, smaller than it was; the increasing demand for durable
consumers* goods from small and medium incomes more than counter-
balances this effect. But it does mean that, so far as the hedonistic com-
ponent in the pattern of acquisitive motives is concerned, the desir-
ability of incomes beyond a certain level is reduced. In order to satisfy

^ Modem relations between parents and children are of course partly conditioned
by the crumbling of that steady frame of family life.

i6o Can Capitalism Survive?

himself of this, the reader need only visualize the situation in a thor-
oughly practical spirit: the successful man or couple or the “society’'
man or couple who can pay for the best available accommodation in
hotel, ship and train, and for the best available qualities of the objects
of personal consumption and use — ^which qualities are increasingly
being turned out by the conveyor of mass production® — ^will, things
being what they are, as a rule have ail they want with any intensity
for themselves. And it is easy to see that a budget framed on those
lines will be far below the requirements of a “seignioral” style of life.

3. In order to realize what all this means for the efficiency of the
capitalist engine of production we need only recall that the family
and the family home used to be the mainspring of the typically bour-
geois kind of profit motive. Economists have not always given due
weight to this fact. When we look more closely at their idea of the
self-interest of entrepreneurs and capitalists we cannot fail to discover
that the results it was supposed to produce are really not at all what
one would expect from the rational self-interest of the detached indi-
vidual or the childless couple who no longer look at the world through
the windows of a family home. Consciously or unconsciously they
analyzed the behavior of the man whose views and motives are shaped
by such a home and who means to work and to save primarily for wife
and children. As soon as these fade out from the moral vision of the
businessman, we have a different kind of homo oeconomicus before us
who cares for different things and acts in different ways. For him and
from the standpoint of his individualistic utilitarianisni, the behavior
of that old type would in fact be completely irrational. He loses the
only sort of romance and heroism that is left in the unromantic and
unheroic civilization of capitalism — the heroism of navigate necesse
est, vivere non necesse est,^ And he loses the capitalist ethics that
enjoins working for the future irrespective of whether or not one is
going to harvest the crop oneself.

The last point may be put more tellingly. In the preceding chapter
it was observed that the capitalist order entrusts the long-run interests
of society to the upper strata of the bourgeoisie. They are really en-
trusted to the family motive operative in those strata. The bourgeoisie
worked primarily in order to invest, and it was not so much a standard
of consumption as a standard of accumulation that the bourgeoisie
struggled for and tried to defend against governments that took the

® Effects on consumers’ budgets o£ the increasing eligibility of mass-produced
articles are enhanced by the price difference between them and the corresponding
custom-made articles which increases owing to the increase in wages pari passu
with the decrease in the relative desirability of the latter; the capitalist process
democratizes consumption.

“Seafaring is necessary^ living is not necessary.” Inscription on an old house
in Bremen.

Decomposition i6i

short-run view,® With the decline of the driving power supplied by
the family motive, the businessman's time-horizon shrinks, roughly, to
his life expectation. And he might now be less willing than he was
to fulfill that function of earning, saving and investing even if he saw
no reason to fear that the results would but swell his tax bills. He drifts
into an anti-saving frame of mind and accepts with an increasing
readiness anti-saving theories that are indicative of a short-run
philosophy.

But anti-saving theories are not all that he accepts. With a different
attitude to the "concern he works for and with a different scheme of
private life he tends to acquire a different view of the values and
standards of the capitalist order of things. Perhaps the most striking
feature of the picture is the extent to which the bourgeoisie, besides
educating its own enemies, allows itself in turn to be educated by them.
It absorbs the slogans of current radicalism and seems quite willing
to undergo a process of conversion to a creed hostile to its very exist-
ence. Haltingly and grudgingly it concedes in part the implications of
that creed. This would be most astonishing and indeed very hard to
explain were it not for the fact that the typical bourgeois is rapidiyj
losing faith in his own creed. And this again becomes fully under- ;
standable as soon as we realize that the social conditions which account
for its emergence are passing.

This is verified by the very characteristic manner in which particular
capitalist interests and the bourgeoisie as a whole behave when facing
direct attack. They talk and plead — or hire people to do it for them;
they snatch at every chance of compromise; they are ever ready to
give in; they never put up a fight under the flag of their own ideals
and interests — ^in this country there was no real resistance anywhere
against the imposition of crushing financial burdens during the last
decade or against labor legislation incompatible with the effective
management of industry. Now, as the reader will surely know by this
time, I am far from overestimating the political power of either big
business or the bourgeoisie in general. Moreover, I am prepared to
make large allowances for cowardice. But still, means of defense were
not entirely lacking as yet and history is full of examples of the success
of small groups who, believing in their cause, were resolved to stand
by their guns. The only explanation for the meekness we observe is
that the bourgeois order no longer makes any sense to the bourgeoisie
itself and that, when all is said and nothing is done, it does not really
care.

Thus the same economic process that undermines the position of the
bourgeoisie by decreasing the importance of the functions of entre-

®It has been said that in economic matters “the state can take the longer view.”
But excepting certain matters outside of party politics such as conservation of
natural resources, it hardly ever does.

i6s Can Capitalism Survive?

preneurs and capitalists, by breaking up protective strata and insti-
tutions, by creating an atmosphere of hostility, also decomposes the
motor forces of capitalism from within. Nothing else shows so well
that the capitalist order not only rests on props made of extra-capital-
ist material but also derives its energy from extra-capitalist patterns
of behavior which at the same time it is bound to destroy.

We have rediscovered what from different standpoints and, so I
believe, on inadequate grounds has often been discovered before: there
;is inherent in the capitalist system a tendency toward self-destruction
Vhich, in its earlier stages, may well assert itself in the form of a
tendency toward retardation of progress.

I shall not stay to repeat how objective and subjective, economic
and extra-economic factors, reinforcing each other in imposing accord,
contribute to that result. Nor shall I stay to show what should be
obvious and in subsequent chapters will become more obvious still,
viz., that those factors make not only for the destruction of the capi-

I talist but for the emergence of a socialist civilization. They all point
in that direction. The capitalist process not only destroys its own
institutional framework but it also creates the conditions for anotheri'
Destruction may npt be the right woj:d after all. Perhaps I foul'd have
ispoken of transformation. The outcome of the process is not simply
fa void that could be filled by whatever might happen to turn up;
^things and souls are transformed in such a way as to become increas-
ingly amenable to the socialist form of life. With every peg from under
the capitalist structure vanishes an impossibility of the socialist plan.
In both these respects Marx's vision was right. We can also agree with
him in linking the particular social transformation that goes on under
our eyes with an economic process as its prime mover. What our analy-
sis, if correct, disproves is after all of secondary importance, however
essential the role may be which it plays in the socialist credo. In the
end there is not so much difference as one might think between saying
that the decay of capitalism is due to its success and saying that it is
due to its failure.

But our answer to the question that heads this part posits far more
problems than it solves. In view of what is to follow in this book, the
reader should bear in mind:

First, that so far we have not learned anything about the kind of
socialism that may be looming in the future. For Marx and for most
of his followers — and this was and is one of the most serious short-
comings of their doctrine — socialism meant just one definite thing.
But the definiteness really goes no further than nationalization of
industry would carry us and with this an indefinite variety of economic
and cultural possibilities will be seen to be compatible.

Second, that similarly we know nothing as yet about the precise

Decomposition 1 63

way by which socialism may be expected to come except that there
must be a great many possibilities ranging from a gradual bureau-
cratization to the most picturesque revolution. Strictly speaking we do
not even know whether socialism will actually come to stay. For to
repeat: perceiving a tendency and visualizing the goal of it is one
thing and predicting that this goal will actually be reached and that
the resulting state of things will be workable, let alone permanent, is
quite another thing. Before humanity chokes (or basks) in the dungeon
(or paradise) of socialism it may well burn up in the horrors (or glories)
of imperialist wars.^

Third, that the various components of the tendency we have been
trying to describe, while everywhere discernible, have as yet nowhere
fully revealed themselves. Things have gone to different lengths in
different countries but in no country far enough to allow us to say
with any confidence precisely how far they will go, or to assert that
their ‘"underlying trend"' has grown too strong to be subject to any-
thing more serious than temporary reverses. Industrial integration is
far from being complete. Competition, actual and potential, is still
a major factor in any business situation. Enterprise is still active, the
leadership of the bourgeois group still the prime mover of the eco-
nomic process. The middle class is still a political power. Bourgeois
standards and bourgeois motivations though being increasingly im-
paired are still alive. Survival of traditions — and family ownership of
controlling parcels of stock — still make many an executive behave as
the owner-manager did of old. The bourgeois family has not yet died;
in fact, it clings to life so tenaciously that no responsible politician has
as yet dared to touch it by any method other than taxation. From the
standpoint of immediate practice as well as for the purposes of short-
run forecasting — and in these things, a century is a “short run""'^ — all
this surface may be more important than the tendency toward another
civilization that slowly works deep down below.

® Written in the summer of 1935.

7 This is why the facts and arguments presented in this and the two preceding
chapters do not invalidate my reasoning about the possible economic results of
another fifty years of capitalist evolution. The thirties may well turn out to have
been the last gasp of capitalism — the likelihood of this is of course greatly in-
creased by the current war. But again they may not. In any case there are no
purely economic reasons why capitalism should not have another successful run
which is all I wished to establish.

PART III

Can Socialism Work?

CHAPTER XV

CLEARING DECKS

C AN socialism work? Of course it can. No doubt is possible about
fBat once that the requisite stage of industrial

development has been reached and, second, that transitional problems
can be successfully resolved. One may, of course, feel very uneasy
about these assumptions themselves or about the questions whether
the socialist form of society can be expected to be democratic and,
democratic or not, how well it is likely to function. All that will be
discussed later on. But if we accept these assumptions and discard
these doubts the answer to the remaining question is clearly Yes.

Before I attempt to prove it, I should like to clear some obstacles
from our way. We have so far been rather careless about certain defi-
nitions and we must make up for it now. We shall simply envisage
two types of society and mention others only incidentally. These types
we will call Commercial and Socialist.

Commercial society is defined by an institutional pattern of which
we need only mention two elements: private property in means of
production and regulation of the productive process by private con-
tract (or management or initiative). Such a type of society is not as a
rule purely bourgeois, however. For as we have seen in Part II an in-
dustrial and commercial bourgeoisie will in general^ not be able to
exist except in. ^symb stratumrNor is com-

mercial society identical with capitalist society. The latter ' a “special
c^seoi the former, is defined by the additional phenomenon of credit
creation — by the practice, responsible for so many outstanding features
of modern economic life, of financing enterprise by bank credit, i.e.,
by mbney (notes or deposits) manufactured for that purpose. But since
commercial society, as an alternative to socialism, in practice always
appears in the particular form of capitalism, it will make no great dif-
ference if the reader prefers to keep to the traditional contrast be-
tween capitalism and socialism.

By socialist society we shall designate an institutional pattern in
which the control over means of production and over production itself
is vested with a central authority — or, as we may say, in which, as a
matter of principle, the economic affairs of society belong to the public
and not to the private sphere. Socialism has been called an intellectual
Proteus. There are many ways of defining it — ^many acceptable ways,
that is, besides the silly ones such as means bread for

167

i68

Can Socialism Work?

all — and ours is not necessarily the best. But there are some points
aTSbiit it which it may be well for us to notice, braving the danger of an
indictment on the score of pedantry.

Our definition excludes guild socialism, syndicalism and other types.
This is because what may be termed Centralist Socialism seems to me
to hold the field so clearly that it would be waste of space to consider
other forms. But if we adopt this term in order to indicate the only
kind of socialism we shall consider, we must be careful to avoid a mis-
understanding. The term centralist socialism is only intended to ex-
clude the existence of a plurality of units of control such that each
of them would on principle stand for a distinct interest of its own,
in particular the existence of a plurality of autonomous territorial
sectors that would go far toward reproducing the antagonisms of
capitalist society. This exclusion of sectional interests may well be
thought unrealistic. Nonetheless it is essential.

But our term is not intended to suggest centralism either in the
sense that the central authority, which we shall alternatively call
Central Board or Ministry of Production, is necessarily absolute or in
the sense that all the initiative that pertains to the executive proceeds
from it alone. As regards the first point, the board or ministry may
have to submit its plan to a congress or parliament. There may also
be a supervising and checking authority — a kind of coiir des comptes
that could conceivably even have the right to veto particular decisions.
As regards the second point, some freedom of action must be left, and
almost any amount of freedom might be left, to the ‘*men on the
spot,'’ say, the managers of the individual industries or plants. For
the moment, I ®ilLmake the bold assumption that the rational amount
of freedom is experimentally found and actually granted so that ef-
ficiency suffers neither from the unbridled ambitions of subordinates
lior from the piling up on the desk of the minister of reports and
unanswered questions — ^nor from orders of the latter suggestive of
Mark Twain's rules about the harvesting of potatoes.

I have not separately defined collectivism or communism. The
former term I shall not use at all and the latter only incidentally with
reference to groups that call themselves so. But if I had to use them I
should make them synonymous with socialism. Analyzing historical
usage, most writers have tried to give them distinct meanings. It is
true that the term communist has fairly consistently been chosen to
denote ideas more thoroughgoing or radical than others. But then,
one of the classic documents pf socialism is entitled the “Communist’’
Manifesto. And the difference of principle has never been fundamental

what there is of it is no less pronounced within the socialist camp
than it is as between it and the communist one. Bolsheviks call them-
selves communists and at the same time the true and only socialists.
IVhether or not the true and only ones, they are certainly socialistr

Clearing Decks 169

I have avoided the terms state ownership of, or property in, natural
resources, plant and equipment. This point is of some importance in
the methodology of the social sciences. There are no doubt concepts
that bear no relation to any particular epoch or social world, such
as want or choice or economic good. There are others which, while in
their everyday meaning they do bear such a relation, have been refined
by the analyst to the point of losing it. Price or cost may serve as
examples.^ But there are still others which by virtue of their nature
cannot stand transplantation and always carry the flavor of a particular
institutional framework. It is extremely dangerous, in fact it amounts
to a distortion of historical description, to use them beyond the social
world or culture whose denizens they are. Now ownership or property
— also, so I believe, taxation — are such denizens of the world of com-
mercial society, exactly as knights and fiefs are denizens of the feudal
world.

But so is the state. We might of course define it by the criterion of
sovereignty and then speak of a socialist state. But if there is to be
meat in the concept and not merely legal or philosophic gas, the
state should not be allowed to intrude into discussions of either feudal
or socialist society, neither of which did or would display that divid-
ing line between the private and the public sphere from which the
better part of its meaning flows. To conserve that meaning with all
its wealth of functions, methods and attitudes, it seems best to say
that the state, the product of the clashes and compromises between
feudal lords and bourgeoisie, will form part of the ashes from which
the socialist phoenix is to rise. Therefore, I did not use it in my
definition of socialism. Of course socialism may come about by an act
of the state. But there is no inconvenience that I can see in saying
that the state dies in this act— as has been pointed out by Marx and
repeated by Lenin.

In one respect, finally, our definition agrees with all the others that
I have ever come across, viz., in that it turns on an exclusively eco-
nomic point. Every socialist wishes to revolutionize society from the
economic angle and all the blessings he expects are to come through
a change in economic institutions. This of course implies a theory
about social causation— the theory that the economic pattern is the
really operative element in the sum total of the phenomena that we
call society. Two remarks, however, suggest themselves.

First, it has been pointed out in the preceding part with reference
to capitalism, and must now be pointed out with reference to social-
ism, that neither for us, the observers, nor for the people that are to
put their trust in socialism, is the economic aspect the only or even

3- Price, in modern theory, is defined as a mere coefficient of transformation. Cost,
in the sense of opportunity cost, is a general logical category. We shall however
soon return to this.

t^o Can Socialism Work?

the most important one. In defining as I did, I did not intend to deny
that. And in fairness to all the civilized socialists whom I have ever
met or read, it should be stated that the same holds true for them:
that in stressing the economic element because of the causative impor-
tance their creed attributes to it, they do not mean to suggest that
nothing is worth struggling for except beefsteaks and radios. There
are indeed insufferable stick-in-the-muds who mean precisely that,*
And many who are not stick-in-the-muds will nevertheless, in the
hunt for votes, emphasize the economic promise because of its im-
mediate appeal. In doing so they distort and degrade their creed. We
will not do the same. Instead we will keep in mind that socialism
aims at higher goals than full bellies, exactly as Christianity means
more than the somewhat hedonistic values of heaven and hell. First
and foremost, socialism means a new cultural world. For the sake of
it, one might conceivably be a fervent socialist even though believing
that the socialist arrangement is likely to be inferior as to economic
performance.^ Hence no merely economic argument for or against
can ever be decisive, however successful in itself.

But second — ^what cultural world? We might try to answer this
question by surveying the actual professions of accredited socialists
in order to see whether a type emerges from them. At first sight, the
material seems to be abundant. Some socialists are ready enough,
with folded hands and the smile of the blessed on their lips, to chant
the canticle of justice, equality, freedom in general and freedom from
'"the exploitation of man by man'* in particular, of peace and love, of
fetters broken and cultural energies unchained, of new horizons
opened, of new dignities revealed- But that is Rousseau adulterated
with some Bentham. Others simply voice the interests and appetites
of the radical wing of trade unionism. Still others, however, are re-
markably reticent. Because they despise cheap slogans but cannot
think of anything else? Because, though they do think of something
else, they doubt its popular appeal? Because they know that they
differ hopelessly with their comrades?

So we cannot proceed on this line. Instead we have to face what I
shall refer to as the Cultural Indeterminateness of Socialism, In fact,
according to our definition as well as to most others, a society may be
fully and truly socialist and yet be led by an absolute ruler or be
organized in the most democratic of all possible ways; it may tie aris-
tocratic or proletarian; it may be a theocracy and h&
or indifferent as to religion; it may be much more strictly disarmed
than men are in a modern army or completely lacking in discipline;
it may be ascetic or eudemonist in spirit; energetic or slack; thinking
only of the future or only of the day; warlike and nationalist or p^ace-

2 The reverse is also true of course: one might concede the economic claims made
on behalf of socialism and yet hate it on cultural grounds.

Clearing Decks 171

ful and internationalist; equalitarian or the opposite; it may hav^
the ethics of lords or the ethics of slaves; its art may be subjective or
objective;^ its forms of life individualistic or standardized; and —
what for some of us would by itself suffice to command our allegiance
or to arouse our contempt — it may breed from its supernormal or
from its subnormal stock and produce supermen or submen ac-
cordingly.

Why is this so? Well, the reader may have his choice. He may say
either that Marx is wrong and that the economic pattern does not
determine a civilization or else that the complete economic pattern
would determine it but that, without the aid of further economic
data and assumptions, the element that constitutes socialism in our
sense does not. We should not have fared any better with capitalism,
by the way, had we tried to reconstruct its cultural world from nothing
but the facts embodied in our definition of it. We have in this case
no doubt an impression of determinateness and find it possible to
reason on tendencies in capitalist civilization- But this is only because
we have a historic reality before us that supplies us with all the addi-
tional data we need and via facti excludes an infinite number of
possibilities.

We have, however, used the word determinateness in a rather strict
and technical sense and, moreover, with reference to a whole cultural
world. Indeterminateness in this sense is no absolute bar to attempts
at discovering certain features or tendencies that the socialist ar-
rangement as such may be more likely to produce than others, espe-
cially features of, and tendencies in, particular spots of the cultural
organism. Nor is it impossible to frame reasonable additional assump-
tions. This much is obvious from the above survey of possibilities.
If, for instance, we believe as many socialists do — ^wrongly, as I think
— that TOr?„ of the forms of the conflict of capi-
talist, intere^ readily follows that socialism would be pacifist and
not warlike. Or if we assume that socialism evolves along with, and
is mseparable from, a certain type of rationalism we shall conclude
that it is likely to be irreligious if not anti-religious. We shall our-
selves try our hand at this game here and there, although in the main
we had better yield the floor to the only truly great performer in that
field, Plato. But all this does not do away with the fact that socialism
is indeed a cultural Proteus and that its cultural possibilities can be
made more definite only if we resign ourselves to speaking of special
cases within the socialist genus — each of which to be sure will be
the only true one for the man who stands for it but any one of which
may be in store for us.

3 Paradoxical as it sounds, individualism and socialism are not necessarily op-
posites. One may argue that the socialist form of organization will guarantee ‘*truly*^
individualistic realization of personality. This would in fact be quite in the
Marxian line.

CHAPTER XVI

THE SOCIALIST BLUEPRINT

F irst of all we must see whether or not there is anything wrong
with the pure logic of a socialist economy. For although no proof
of the soundness of that logic will ever convert anyone to socialism
or, in fact, prove much for socialism as a practical proposition, proof
of logical unsoundness or even failure in an attempt to prove logical
soundness would in itself suffice to convict it of inherent absurdity.

More precisely, our question may be formulated as follows: given
a socialist system of the kind envisaged, is it possible to derive, from
its data and from the rules of rational behavior, uniquely determined
decisions as to what and how to produce or, to put the same thing
into the slogan of exact economics, do those data and rules, under
I the circumstances of a socialist economy, yield equations which are
I independent, compatible — i.e., free from contradiction — and sufficient
I in number to determine uniquely the unknowns of the problem before
I the central board or ministry of production?

1* The answer is in the affirmative. There is nothing wrong with
the pure logic of socialism. And this is so obvious that it would not
have occurred to me to insist on it were it not for the fact that it has
been denied and the still more curious fact that orthodox socialists,
until they were taught their business by economists of strongly
bourgeois views and sympathies, failed to produce an answer that
would meet scientific requirements.

The only authority standing for denial that we need to mention is
;! Professor L. von Mises.^ Starting from the proposition that rational
: economic behavior presupposes rational cost calculations, hence prices
i of cost factors, hence markets which price them, he concluded that
an a socialist society, since there would be no such markets, the beacon
flights of rational production would be absent so that the system
iwould have to function in a haphazard manner if at alL To this and
similar criticisms or perhaps to some doubts of their own, the ac-
credited exponents of socialist orthodoxy had at first not much to
oppose except the argument that the socialist management would be
able to start from the system of values evolved by its capitalist prede-
cessor — which is no doubt relevant for a discussion of practical diffi-
culties but not at all for the question of principle — or a paean on the

^ His paper, published in 1920, is now available in English; see Collectivist Eco-
nomic Planning (F. A. von Hayek, ed., 1935). Also see his Gemeinwirtschaft, Eng-
lish translation under the title Socialism (1937).

The Socialist Blueprint 173

miraculous glories of their heaven, in which it would be easy to
dispense altogether with capitalist tricks like cost rationality and in
which comrades would solve all problems by helping themselves to
the bounties pouring forth from social stores. This amounts to accept-l
ing the criticism, and some socialists actually seem to do so even today.?

The economist who settled the question in a manner that left little
to do except elaboration and the clearing up of points of secondary
importance, was Enrico Barone to whose argument I refer readers
who want a rigorous demonstration.^ Here a brief sketch will suffice. '

Viewed from the economists’ standpoint, production — including
transportation and all operations incident to marketing — is nothing
but the rational combination of the existing “factors” within the
constraints imposed by technological conditions. In a commercial
society, the task of combining factors involves buying or hiring them,
and those individual incomes which are typical of such a society
emerge in this very process of buying or hiring. That is to say, the
production and the “distribution” of the social product are but dif-
ferent aspects of one and the same process that affects both simul-
taneously. Now the most important logical — or purely theoretical —
difference between commercial and socialist economy is that in the
latter this is no longer so. Since prima facie there are no market
values of means of production and, what is still more important, since
the principles of socialist society would not admit of making them
the criterion of distribution even if they did exist, the. distributive
, automatism of commercial society is lacking in a socialist one. The
f void has to be filled by a political act, let us say by the constitution of
the commmr5;^£§lth^^ Distribution thus becomes a distinct operation
and, in logic at least, is completely severed from production. This
political act or decision would have to result from, and in turn go a
long way toward determining, the economic and cultural character

2 Upward of a dozen economists had hinted at the solution before Barone.
Among them were such authorities as F. von Wieser (in his Natural Value ^ 1893,
German original 1889) and Pareto (Cours d'tconomie politique, vol. ii, 1897). Both
perceived the fact that the fundamental logic of economic behavior is the samej
in both commercial and socialist society from >yhich the solution follows. Butf
Barone, a follower of Pareto, was the first to work it out. See his papers entitled
*U1 Ministro della Produzione nello Stato Collettivista,’* Giornale degli Economisti,
1908; English translation included in the volume Collectivist Economic Planning
mentioned in the preceding note.

It is neither possible nor necessary to do justice to the rich crop of later work.

I will only mention, as particularly important in one way or another: Fred
M. Taylor, *'The Guidance of Production in a Socialist State,” American Eco-
nomic Review, March 1929; K. Tisch, Wirtschaftsrechnung und Verteilung im . . .
sozialistischen Gemeinwesen, 1932; H. Zassenhaus, *‘Theorie der Planwirtschaft,”
Zeitschrift fur Nationalokonomie, 1934; espedally Oskar Lange, ‘'On the Economic
Theory of Socialism,” Review of Economic Studies, 1936/7, republished as a book
in Lange and Taylor, same title, 1938; and A. P. Lerner whose artides will be re-
ferred to in a later footnote.

Can Socialism Work?

174

of the society, its behavior, aims and achievements; but it would be
completely arbitrary when viewed from the economic standpoint. As
has been pointed out before, the commonwealth may adopt an equali-
tarian rule — and this again in any of the many meanings that may
be associated with equalitarian ideals — or admit inequalities to any
desired degree. It might even distribute with a view to producing
maximum performance in any desired direction — a particularly in-
teresting case. It may study the wishes of individual comrades or
resolve to give them what some authority or other thinks best for
them; the slogan “to everyone according to his needs” might carry
either meaning. But some rule must be established. For our purpose
it will be sufficient to consider a very special case.

s. Suppose then that the ethical persuasion of our socialist com-
monwealth is thoroughly equalitarian but at the same time prescribes
that comrades should be free to choose as they please among all the
consumers' goods which the ministry is able and willing to produce —
the community may of course refuse to produce certain commodities,
alcoholic beverages for instance. Furthermore let us assume that the
particular equalitarian ideal adopted is satisfied by handing out to
every person — children and possibly other individuals counting for
fractional persons as the competent authority may decide — a voucher
representing his or her claim to a quantity of consumers' goods equal
to the social product available in the current period of account
divided by the number of claimants, all vouchers to become valueless
at the end of that period. These vouchers can be visualized as claims
to the Xth part of all food, clothing, household goods, houses, motor-
cars, movie plays and so on that have been or are being produced
for consumption (for the purpose of being delivered to consumers)
during the period under consideration. It is only to avoid a complex
and unnecessary mass of exchanges that would otherwise have to take
place among the comrades, that we express the claims not in goods

but by equal amounts of conveniently chosen but meaningless units

we can call them simply units, or moons or suns or even dollars

and rule that units of each good will be handed over against the
surrender of a stated number of them. These “prices” charged by the
social stores would under our assumptions have always to fulfill the
condition that, each of them multiplied by the existing quantity of
the commodity to which it refers, they add up to the otherwise arbi-
pary total of the comrades' claims. But the ministry need not fix the
individual “prices” except by way of initial suggestions. Given the
tastes and the equal “dollar incomes,” comrades will reveal, by their
reaction to these initial suggestions, at what prices they are ready to
take the whole social product save those articles that nobody cares
to have at all, and the ministry will then have to accept those prices
if it wishes to have the stores cleared. This will accordingly be done

The Socialist Blueprint 175

and the principle of equal shares will be thus carried out in a very
plausible sense and in a uniquely determined way.

But of course this presupposes that a definite quantity of every good
has already been produced. The real problem, the solvability of which
has been denied, is precisely how this can be done rationally, i.e., in a
way which will result' in a maximum of consumers' satisfaction^ sub-
ject to the limits imposed by the available resources, the technological
possibilities ^ud the rest of the environmental conditions. It is clear
that decision on the plan of production by, say, a majority vote of
the comrades would entirely fail to fulfill this^ requirement because
in this case certainly some people and possibly all the people would
not get what they want and what it would still be possible to give
them without reducing the satisfaction of others. It is, however,
equally clear that economic rationality in this sense can be attained
in another way. For the theorist this follows from the elementary
proposition that consumers in evaluating (''demanding") consumers'
goods ipso facto also evaluate the means of production which enter
into the production of those goods. For the layman proof of the
possibility of a rational plan of production in our socialist society
can^ be supplied as,, £0^^^^

3. To facilitate matters we wm assume that means of production are
present in given and, for the moment, unalterable quantities. Now
let the central board resolve itself into a committee on a particular
industry or, still better, let us set up an authority for each industry
that is to manage it and to cooperate with the central bo^d which
controls and coordinates all these industrial managers” or' managing
boards. This the central board does by allocating productive resources
— all of which are under its control — to these industrial managements
according to certain rules. Suppose the board rules that industrial
managements can have any quantities of producers' goods and services
they choose to call for subject to three conditions. First, they must
produce as economically as possible. Second, they are required to
transfer to the central board, for every unit of each producer's good
and service called for, a stated number of those consumers' dollars
which they have acquired by previous deliveries of consumers’ goods —
we might just as well say that the central board declares itself ready
to "sell" to any industrial management unlimited quantities of pro-
ducers' goods and services at stated "prices." Third, the managements

3 If modern theorists should object to this turn of phrase, let me entreat them
to consider the amount of entirely unnecessary circumlocution that more correct
phrasing would involve without offering, for the purposes of this argument, any
compensatory advantage.

^ This is not to say that it would not fulfill requirements from the standpoint of
another definition of rationality. No assertion is being made here about how the
arrangement under discussion compares with others. Something will be said about
this presently.

Can Socialism Work?

176

are required to call for and to use such quantities as (and not less
than), producing in the most economical manner, they can use with-
out having to “sell” any part of their products for less “dollars” than
they have to transfer to the central board for the corresponding
I amounts of means of production. In more technical language, this
I condition means that production in all lines should be such as to
I make “prices” equal (not merely proportional) to marginal costs.®

®This principle, which follows from the general logic of choice, was not uni-
versally accepted until Mr. A. P. Lemer stressed it and fought for it in a number
^ of notes and papers, mostly in the Review of Economic Studies (also in the Eco-
j nomic Journal, September 1937), which constitute an important contribution to
I the theory of the socialist economy and to which I take this opportunity of draw-
{ ing the reader’s attention. It is also correct, as a proposition of that logic of choice,
to say that the above condition should prevail over the rule of equating prices
to total cost per unit whenever it conflicts with it. But the relation between them
has been somewhat obscured by a confusion of different things, and calls for some
clarification.

The concept of marginal cost, meaning the increment of total cost that must
be incurred if production is to be increased by a small amount, is indeterminate
as long as we do not relate it to a definite period of time. Thus, if the question
is whether or not to transport an additional passenger by a train that would
run in any case, marginal cost to be considered might be zero and at all events
is very small. This may be expressed by saying that, from the standpoint of a
very short period — an hour or a day, or even a week — ^practically everything is
overhead, even lubricants and coal, and that overhead does not enter into mar-
ginal cost. But the longer the period envisaged the more cost elements enter
marginal cost, first all that are usually comprised in the concept of prime cost
and after them more and more of what the businessman calls overhead, until, for
the very long run or from the standpoint of planning an as yet non-existent in-
dustrial unit, nothing (or practically nothing) is left in the category of overhead
and everything including depreciation has to be taken into account in figuring
out marginal cost, so far as this principle is not modified, in the case of some
factors such as a railroad track, by the technological fact that they are available
or usable only in very big units ("indivisibility”). Marginal costs should hence
• always be distinguished from (marginal) prime costs.

Now we often associate the condition under discussion with the rule that the
socialist — ^just like the capitalist — managements should, at any point of time, let
bygones be bygones if they are to act rationally; that is to say that in their de-
cisions they are not to take account of the book values of existing investments.
But this is only a rule for short-run behavior in a given situation. It does not mean
that they are to neglect ex ante those elements that will crystallize into fixed costs
or overhead. To neglect these would spell irrational behavior with respect to the
labor hours and units of natural resources that go into the production of the
overhead, whenever there is an alternative u^e for them. But to take account of
them will in general imply equating prices to total cost per unit of product as long
as things develop according to plans, and since exceptions are mainly due to the
technological obstacle to rationality represented by indivisibility or to deviations
of the actual course of events from the plans, the logic of these plans is after all
not badly expressed by the latter principle. Though in a short-run situation it
may be the most rational thing to do, it is yet never part of that logic to operate
an industry at a deficit. This is important to note for two reasons.

First, it has been denied. It has even been suggested that welfare would (i.e., in
the long run) be increased if prices were always equated to short-run marginal costs

The Socialist Blueprint 177

The task of each industrial board is then uniquely determined.
Exactly as today every firm in a perfectly competitive industry knows
what and how much to produce and how to produce it as soon as
technical possibilities, reactions of consumers (their tastes and in-
comes) and prices of means of production are given, so the industrial
managements in our socialist commonwealth would know what to
produce, how to produce and what factor quantities to “buy'' from
the central board as soon as the latter's “prices" are published and
as soon as the consumers have revealed their “demands." *

In a sense these “prices," unlike the “prices" of consumers' goods,
are unilaterally set by the central board. We may also say however
that industrial managers display a uniquely determined “demand"
for the producers' goods much as consumers do for consumers' goods.
All we still need to complete our proof is a rule, conforming to the
maximum criterion, for that price-fixing activity of the central board.
But this rule is obvious. The board has simply to set a single price
on every kind and quality of producers' goods — if the board dis-
criminates, i.e., charges different prices for the same kind and quality
to different managements, this would in general® have to be justified
on non-economic grounds — and to see to it that that price exactly
“clears the market," i.e., that no unused quantities of producers'
goods remain on its hands and that.no additional quantities are called
at those “prices." This rule will normally suffice to insure rational
cost accounting, hence economically rational allocation of productive
resources— “for the former is nothing but a method of insuring and
verifying the latter — hence rationality oi the plan of production in
socialist societies. Proof follows from the consideration that as long as
this rule is being observed no element of productive resources can be
diverted to any other line of production without causing the destruc-
tion of as much (or more) consumers' values, expressed in terms of
consumers' dollars, as that element would add in its new employ-

excluding depreciation and that overhead (say, the cost of a bridge) should be
financed by taxation. Our rule, as given in the text, does not mean this, and it
would not be a rational thing to do.

Second, in a decree of March 1936 the Russian central authority, abolishing for
a number of industries the system of subsidies till then in force, prescribed that
prices should be regulated so as to equate average total cost per unit plus an
addition for accumulation. For the first part of the rule it may be said that, though
not strictly correct, it differs less from the correct one than incorrect formulations
of the latter might lead one to suppose; for the latter, that the obvious objection
to it is much weakened as soon as we take into account the conditions or necessi-
ties of rapid development — the reader will recall the argument submitted in
Part II for the capitalist case — and that it is quite conceivable that the Soviet gov-
ernment was right both in embarking upon its policy of subsidies, which amounted
to financing investment at a loss, and in partly abolishing the practice in 1936.

® There are exceptions to this which are of importance but do not affect the
drift of our argument.

178 Can Socialism Work?

ment. This amounts to saying that production is being carried, in all
directions open in the general conditions of the society’s environment,
as far as and no farther than it rationally can be, and completes our
case for the rationality of socialist planning in a stationary process of
economic life in which everything is correctly foreseen and repeats
itself and in which nothing happens to upset the plan.

4. But no great difficulties arise if we go beyond the precincts of
the theory of the stationary process and admit the phenomena incident
to industrial change. So far as economic logic is concerned, it cannot
be held that socialism of the kind envisaged, while theoretically
capable of coping with the recurrent tasks of the administration of a
stationary economy, would necessarily fail in the solution of the prob-
lems presented by “progress.” We shall see later why it is nevertheless
important for the success of a socialist society that it should embark
upon its career not only as richly endowed as possible by its capitalist
predecessor — ^with experience and techniques as well as with resources
— but also after the latter has sown its wild oats, done its work and
is approaching a stationary state. But the reason for it is not in any
inability of ours to devise a rational and uniquely determined course
for the socialist society to take whenever the opportunity for an im-
provement in the industrial apparatus presents itself.

Suppose that a new and more efficient piece of machinery has been
designed for the productive process of industry X. In order to exclude
the problems incident to the financing of investment — to be consid-
ered presently — and to isolate a distinct set of phenomena, we will
assume that the new machine can be produced by the same plants
which thus far produced the less efficient one and at exactly the same
costs in terms of productive resources. The management of industry
X, in obedience to the first clause of its instruction — ^viz., the rule to
produce as economically as possible — ^will adopt the new machine and
thus produce the same output with a smaller amount of means of
production than heretofore. Consequently it would henceforth be in
a position to transfer to the ministry or central board an amount of
consumers’ dollars smaller than the amount received from consumers.
Call the difference as you please, for instance D, or a shovel, or
“profits.” The management would, it is true, violate the condition
set by the third clause of its instruction if it realized that “profit”; and
if it obeys that clause and immediately produces the greater amount
now required in order to satisfy that condition, those profits will never
emerge. But their potential existence in the calculations of the man-
agement is quite sufficient to make them fill the only function they
! would have under our assumption, viz., the function of indicating,
! in a uniquely determined manner, the direction and extent of the
■ reallocation of resources that it is now rational to carry out.

If, at a time when the available resources of the society are fully

The Socialist Blueprint 179

employed in the task of providing a given level of consumption, an
improvement — such as a new bridge or a new railway — ^which requires
the use of additional factors or, as we may also say, additional invest-
ment suggests itself, the comrades would either have to work beyond
the hours which so far we have assumed to be fixed by law or to
restrict their consumption or both. In this case our assumptions,
framed for the purpose of solving the fundamental problem in the
simplest possible way, preclude an ‘'automatic'' solution, i.e., a deci-
sion at which the central board and the industrial managements
could arrive merely by passively following, within the three rules, the
guidance of objective indications. But this of course is a disability of
our schema and not of the socialist economy. All we have to do if we
wish to have such an automatic solution is to repeal the law invalidat-
ing all claims to consumers’ goods that are not used during the period
for which they are issued, to renounce the principle of absolute
equality of incomes and to grant power to the central board to offer
premiums for overtime and — what shall we call it? — ^well, let us say
saving. The condition that possible improvements or investments be
undertaken to such an extent that the least tempting one of them
would yield a “profit" equal to the premiums which have to be offered
in order to call forth the amounts of overtime or saving (or both)
required for it, then uniquely determines all the new variables that
our problem introduces provided overtime and saving are in the
relevant interval single-valued functions of the respective premiums.*^
The “dollars" that are handed out in discharge of the latter may
conveniently be assumed to be additional to the income dollars issued
before. The readjustments this would impose in various directions
need not detain us.

But this argument about investment makes it still clearer that the
schema which seemed best adapted to our particular purpose is neither
the only possible blueprint of a socialist economy, nor necessarily th^
one that would recommend itself to a socialist society. Socialism need
not be equalitarian but no amount of inequality of incomes that we
could reasonably expect a socialist society to tolerate is likely to pro-
duce the rate of investment that capitalist society produces in the
average of cyclical phases. Even capitalist inequalities are not sufficient
for that and they have to be reinforced by corporate accumulation
and “created" bank credit, methods which are not particularly auto-
matic or uniquely determined either. If, therefore, a socialist society

7 The problem, it should be observed, only arises with new investment. Such
investment as is currently needed in order to keep a stationary process going can
and would be provided for exactly as are all other cost items. In particular, there
would be no interest. I may take the opportunity to observe that the attitude of
socialists toward the phenomenon of interest is not uniform. St. Simon admitted
it almost as a matter of course. Marx excluded it from socialist society. Some mod-
em socialists again admit it. Russian practice admits it.

i8o Can Socialism Work?

desires to achieve a similar or even greater rate of real investment —
of course it need not — methods other than saving would have to be
resorted to. Accumulation out of “profits” which could be allowed to
materialize instead of remaining potential only or, as suggested above,
something analogous to credit creation would be quite feasible. It
would be much more natural however to leave the matter to the
central board and the congress or parliament who between them
could settle it as part of the social budget; while the vote on the
“automatic” part of the society's economic operations would be purely
formal or perhaps supervisory in character, the vote on the investment
item — at least on its amount — ^would involve a real decision and stand
on a par with the vote on army estimates and so on. Coordination of
this decision with the “automatic” decisions about the quantities and
qualities of individual consumers' goods would not present any in-
surmountable difiiculties. But in accepting this solution we should
renounce allegiance to the basic principle of our schema in a very
important point.

Other features of our blueprint can be altered even within its gen-
eral framework. For example, with a conditional exception as to
overtime, I have not left it to the individual comrades to decide how
much work they are going to do, though as voters and in other ways
they may have as much influence on this decision as they have on the
distribution of incomes and so on. Nor have I allowed them more
freedom of choice of occupation than the central board, within the
requirements of its general plan, may be able and willing to grant
them. The arrangement may be visualized by means of the analogy
with compulsory military service. Such a plan comes fairly close to
the slogan: “to everyone according to his need, everyone to contribute
according to his aptitude” — or at all events it could, with only minor
modifications, be made to conform to it. But instead we may also
leave it to the individual comrades to decide how much and what
kind of work they are to do. Rational allocation of the working
force would then have to be attempted by a system of inducements —
premiums again being offered, in this case not only for overtime but
for all work, so as to secure everywhere the “offer” of labor of all
types and grades appropriate to the structure of consumers' demand
and to the investment program. These premiums would have to bear
an obvious relation to the attractiveness or irksomeness of each job
and to the skill that must be acquired in order to fill it, hence also
to the wage schedule of capitalist society. Though the analogy between
the latter and such a socialist system of premiums should not be
pushed too far, we might speak of a “labor market.” Insertion of this
piece of mechanism would of course make a great deal of difference to
our blueprint. But it would not affect the determinateness of the

The Socialist Blueprint i8i

socialist system. Its formal rationality would in fact stand out still
more strongly.

5. So would that family likeness between commercial and socialist
economy which the reader cannot have failed to notice all along. Since
this resemblance seems to have given pleasure to non-socialists and
some socialists and to have annoyed other socialists, it is just as well
to restate explicitly in what it consists and to what it is due. It will
then be seen how little reason there is for either the pleasure or the
annoyance. In trying to construct a rational schema of a socialist
economy we have made use of mechanisms and concepts traditionally
specified by terms that are familiar to us from our discussions of the
processes and problems of capitalist economy. We have described a
mechanism which is immediately understood as soon as we utter the
words “market,” “buying and selling,” “competing” and so on. We
seem to have used, or barely avoided using, such terms savoring of
capitalism as prices, costs, incomes and even profits while rent, inter-
est, wages and others, money among them, have, as it were, hovered
about our path.

Let us consider what to most socialists would certainly seem to be
one of the worst cases, that of rent, meaning thereby returns from the
productive use of natural agents, let us say “land.” Our schema evi-
dently cannot imply that ground rent would be paid to any land-
holders. What then does it imply? Simply that any kind of land which
is not plentiful beyond all requirements in the calculable future must
be used economically or allocated rationally exactly like labor or any
other type of productive resources, and that for this purpose it must
receive an index of economic significance with which any new use
that may suggest itself must be compared and by means of which the
land enters the social bookkeeping .process. If this were not done the
commonwealth would be behaving irrationally. But no concession to
capitalism or to the spirit of capitalism is implied in doing it. All that
is commercial or capitalist about ground rent, in both its economic and
its sociological associations, and all that can possibly be sympathetic
to the advocate of private property (private income, the landlord and
so on) has been completely removed.

The “incomes” with which we endowed the comrades at the start
are not wages. In fact they would on analysis be seen to be composites
of disparate economic elements of which one only could be linked to
marginal productivity of labor. The premiums which we introduced
later have more to do with the wages of capitalist society. But the
counterpart of the latter really exists nowhere except in the books of
the central board and again consists in a mere index of significance
associated, for the purposes of rational allocation, with every type and
grade of labor — an index from which has vanished a whole bundle
of meanings that pertain to the capitalist world. In passing, we may

iS^ Can Socialism Work?

observe that since we can call as we please the units into which we
split the vouchers that represent the comrade’s claims to consumers'
goods, we can also call them hours o£ labor. And since the total num-
ber of these units is — within the limits set by convenience — no less
arbitrary we could make it equal to the hours actually worked, adjust-
ing all kinds and grades of labor to some standard quality in the
Ricardo-Marxian way. Finally our commonwealth can adopt, just as
well as any other, the principle that “incomes” should be proportional
to the hours of standard work contributed by each comrade. Then we
should have a system of labor notes. And the interesting point about
it is that barring technical difficulties which do not concern us now
such a system would prove quite workable. But it is easy to see why
even then these “incomes” would not be “wages.” It is no less obvious
that the workability of such an arrangement does not prove anything
for the labor theory of value.

It is hardly necessary to perfoim the same operation on profits,
interest, prices and costs. The cause of that family likeness is by now
clearly visible without doing so: our socialism borrows nothing from
capitalism, but capitalism borrows much from the perfectly general
logic of choice. Any rational behavior must of course display certain
formal similarities with any other rational behavior, and it so happens
that in the sphere of economic behavior the molding influence of
mere rationality goes pretty far, at least with regard to the pure
theory of it. The concepts which express the behaviorist pattern are
then drenched with all the particular meanings of a historical epoch
and will tend to retain, in the layman’s mind, the colors thus ac-
quired. If our historical acquaintance with economic phenomena had
been made in socialist environments, we should now seem to be bor-
rowing socialist concepts when analyzing a capitalist process.

So far, there is nothing for capitalist-minded economists to con-
gratulate themselves on in the discovery that socialism could after all
only use capitalist mechanisms and categories. There should be as
little reason for socialists to object. For only the most naive mind can
feel disappointed at the fact that the socialist miracle does not create
a logic of its own, and only the crudest and most stupid variants of
the socialist creed can be endangered by any demonstration to that
effect — those variants according to which the capitalist process is
nothing but a wild jumble without any logic or order at all. Reason-
able people of both persuasions can agree on such resemblance as
there is and remain just as far apart as ever. But an objection on the
score of terminology might remain: it may be argued that it Is not
convenient to use terms loaded with adventitious yet very important
meaning which not everyone can be trusted to discard. Moreover, we
must not forget that one may accept the result arrived at about the
essential sameness of the economic logic of socialist and commercial

The Socialist Blueprint 183

production and yet object to the particular schema or model by
means of which we have arrived at it (see below).

This is not all however. Some socialist as well as non-socialist
economists have been not only willing but anxious to recognize a
particularly strong family likeness between a socialist economy of
the type envisaged and a commercial economy of the perfectly com-
petitive type. We might almost speak of a school of socialist thought
that tends to glorify perfect competition and to advocate socialism
on the ground that it offers the only method by which the results of
perfect competition can be attained in the modern world. The tactical
advantages to be reaped by placing oneself on this standpoint are
indeed obvious enough to explain what at first sight looks like sun
prising broad-mindedness. A competent socialist who sees as clearly
as any other economist all the weaknesses of Marxian and of popular
arguments can thus admit whatever he feels should be admitted with-
out compromising his convictions because the admissions refer to a
historical stage that (so far as it ever did exist) is safely dead and
buried; he is enabled, by judiciously confining his condemnatory
verdict to the non-competitive case, to lend qualified support to some
indictments, such as that in modern capitalism production is for profit
and not for the consumption of the people, which otherwise would
be merely silly; and he can bafHe and puzzle good bourgeois by telling
them that socialism will only do what they really wanted all along
and what their own economic ulemas always taught them. But the
analytic advantages of stressing that family likeness are not equally
great.®

As we have already seen, the bloodless concept of perfect competi-
tion that economic theory has framed for its purposes turns on
whether or not individual firms can, by their single-handed action,
influence the prices of their products and of their cost factors. If they
cannot — that is, if each firm is a mere drop in an ocean and therefore
has to accept the prices that rule in the market — the theorist speaks of
perfect competition. And it can be shown that in this case the mass
effect of the passive reaction of all individual firms will result in
market prices and volumes of output displaying certain formal prop-
erties that are similar to those of the indices of economic significance
and volumes of output in our blueprint of a socialist economy. How-
ever, in all that really matters — in the principles governing the forma-
tion of incomes, the selection of industrial leaders, the allocation of
initiative and responsibility, the definition of success and failure — in
everything that constitutes the physiognomy of competitive capital-
^ ism, the blueprint is the very opposite of perfect competition and
much further removed from ^ than from the big-business type of
capitalism.

sSee di. viii

184 Can Socialism Work?

Though I do not think therefore that our blueprint can be objected
to on the ground that it is borrowed from commercialism or that it
wastes socialist oil in order to anoint that unholy thing, I am yet
much in sympathy with those socialists who object to it on other
grounds. I have, it is true, pointed out myself that the method of
constructing a ''market'’ of consumers’ goods and of orienting produc-
tion according to the indications derived from it will come nearer
than any other, for instance the method of decision by majority vote,
to giving each individual comrade what he wants — there exists no
more democratic institution than a market — and that in this sense
it will result in a “maximum of satisfaction." But this maximum is
only a short-run one^ and, moreover, is relative to the actual desires
of the comrades as they are felt at the moment. Only outright beef-
steak socialism can be content with a goal such as this. I cannot blame
any socialist for despising it and dreaming of new cultural forms for
the human clay, perhaps of a new clay withal; the real promise of
socialism, if any, lies that way. Socialists who are of this mind may
still allow their commonwealth to be guided by the comrades’ actual
tastes in matters that present no other than the hedonist aspect. But
they will adopt a Gosplan not only, as we conditionally did ourselves,
for their investment policy but for all purposes that do present other
aspects. They may still let the comrades choose as they like between
peas and beans. They may well hesitate as to milk and whisky and
as to drugs and improvement of housing. And they will not allow
comrades to choose between loafing and temples — if the latter be
allowed to stand for what Germans inelegantly but tellingly call
objective (manifestations of) culture.

6. It is therefore necessary to ask whether, if we jettison our “mar-
kets," rationality and determinateness do not go overboard also. The
answer is obvious. Inhere would have to be an authority to do the
evaluating, i.e., to determine the indices of significance for all con-
sumers’ goods. Given its system of values, that authority could do
this in a perfectly determined manner exactly as a Robinson Crusoe
can.^® And the rest of the planning process could then run its course,
much as it did in our original blueprint. The vouchers, prices, and
the abstract units would still serve the purposes of control and cost
calculation, although they %vould lose their affinity to disposable in-
come and its units. All the concepts that derive from the general
logic of economic action would turn up again.

Any kind of centralist socialism, therefore, can successfully clear
the first hurdle — logical definiteness and consistency of socialist plan-

Q It is however a provable maximum and as such establishes the economic ration-
ality of that type of socialism exactly as the competitive maximum establishes the
rationality of competitive economy. And in neither case does this mean very much.

i®This is perhaps why Marx showed considerable interest in Crusoe economics.

The Socialist Blueprint 185

ning — and we may as well negotiate the next one at once. It consists
of the “practical impossibility’' on which, it seems, most anti-socialist
economists are at present inclined to retire after having accepted
defeat on the purely logical issue. They hold that our central board
would be confronted with a task of unmanageable complication,^^
and some of them add that in order to function the socialist arrange-
ment would presuppose a wholesale reformation of souls or of be-
havior — ^whichever way we prefer to style it — ^which historical expe-
rience and common sense prove to be out of the question. Deferring
consideration of the latter point we can easily dispose of the former.

First, a glance at our solution of the theoretical problem will satisfy
the reader that it is eminently operational; that is to say, it not only
establishes a logical possibility but in doing so also shows the steps,
by vjhich this possibility can be realized in practice. This holds even
if, in order to face the issue squarely, we require that the plan of
production be built up ah ovo, i.e., without any previous experience
as to quantities and values and on no other basis to start from than a
survey of the available resources and technologies and a general
knowledge about what kind of people the comrades are. Moreover it
must be borne in mind that under modern conditions a socialist
economy requires the existence of a huge bureaucracy or at least
social conditions favorable to its emergence and functioning. This
requirement constitutes one of the reasons why the economic prob-
lems of socialism should never be discussed without reference to given
states of the social environment or to historical situations. Such an
administrative apparatus may or may not deserve all the derogatory
comments which some of us are in the habit of passing upon bureau-
cracy — ^we shall presently comment upon it ourselves — ^but just now
we are not concerned with the question how well or ill it may be
expected to fulfill its task; all that matters is that, if it exists at all,
there is no reason to believe that it will break down under the task.

In any normal situation it would command information sufficient
to enable it to come at first throw fairly close to the correct quantities
of output in the major lines of production, and the rest would be a
matter of adjustments by informed trial and error. So far there is in
this respect no very fundamental differenced^ between socialist and
commercial economies either as to the problems which the theorist
meets in showing how an economic system proceeds to a state that
could be “rational” or “optimal” in the sense of fulfilling certain

UThis is the line taken by most authors of non-socialist persuasion who accept
the logical credentials of socialism. Professors Robbins and von Hayek may be
mentioned as the chief authorities for this view.

12 Some writers seem to imply that the process by which equilibrium is reached
would be the same as in a state of perfect competition. That is not so however.
Step-by-step adjustment in reaction to price changes alone might easily miss the
goal altogether. This is why in the text I spoke of “informed” trial and error.

i86

Can Socialism Work?

maximum conditions, or as to the problems which managers have to
meet in actual practice. If we admit previous experience to start from
as most socialists do and especially Karl Kautsky always did, the task
is of course greatly simplified, particularly if that experience is of
the big-business type.

But something else follows, secondly, from another inspection of
our blueprint: solution of the problems confronting the socialist man-
agement would be not only just as possible as is the practical solution
of the problems confronting commercial managements: it would be
easier. Of this we can readily convince ourselves by observing that
one of the most important difficulties of running a business — the diffi-
culty which absorbs most of the energy of a successful business leader
— consists in the uncertainties surrounding every decision. A very
important class of these consists in turn in the uncertainties about
I the reaction of one’s actual and potential competitors and about how
[general business situations are going to shape. Although other classes
of uncertainties would no doubt persist in a socialist commonwealth,
these two can reasonably be expected to vanish almost completely.
The managements of socialized industries and plants would be in a
position to know exactly what the other fellows propose to do. and
nothing would prevent them from getting together for concerted
action.^^ The central board could, and to a certain extent would
unavoidably, act as a clearing house of information and as a coordina-
tor of decisions — at least as much as an all-embracing cartel bureau
would. This would immensely reduce the amount of work to be done
in the workshops of managerial brains and much less intelligence
would be necessary to run such a system than is required to steer a
concern of any importance through the waves and breakers of the
capitalist sea. This suffices to establish our proposition.

So far as this is being done in capitalist economies, it is a most important
step toward socialism. In fact, it progressively reduces the difficulties of transition
and is in itself a symptom of the advent of the transitional stage. To fight this
tendency unconditionally is tantamount to fighting socialism.

CHAPTER XVII

COMPARISON OF BLUEPRINTS

I. A Preliminary Point

T he reader who has followed so far will naturally expect me to
embark upon a comparative appraisal of the socialist plan. Per-
haps it would be wise to disappoint that expectation. For nobody
who is not completely lacking in a sense of responsibility can fail to
see that comparison between a system which we have lived with and
a system which as yet is but a mental image — no socialist will accept
the Russian experience as a full-weight realization — ^must be ex-
tremely hazardous. But we will take the risk, bearing in mind all the
time that beyond the realm of fact and argument over which we are
going to travel there is the realm of individual preferences, convic-
tions, evaluations into which we cannot enter. And we will improve
our chances of success by severely restricting our goal and frankly
recognizing difficulties and pitfalls.

In particular, we shall not compare the cultural worlds of commer-
cial and socialist society. What I have called the cultural indeter-
minateness of socialism is in itself sufficient to bar the attempt. But
we have also another reason for refraining. Even if socialist civiliza-
tion meant just one definite pattern, comparative appraisal would
still be a doubtful matter. There are idealists and monomaniacs who
can see no difficulty in it and gaily adopt for a standard of compari-
son some feature which they value to the exclusion of everything else
and which they expect their socialism to display. But if we resolved
to do better than that and, so far as our vision may reach, to see all
the facets of a civilization in the light that is born and dies with it,
we should instantly discover that every civilization is a world unto
itself, and incommensurable with every other.

There is one point however that bears upon comparison of actual
and possible cultural achievement and yet comes within the scope
of our type of analysis. It is often claimed that the socialist plan, by
removing economic care from the shoulders of the individual, will
release incalculable cultural energies that now go to waste in the
struggle for daily bread. To some extent this is true — any “planned*’
society may do that as, for other reasons and in other respects, it also
may smother cultural possibilities. It might be objected that public
authorities as we know them are hardly up to the responsibility of
discovering and nursing talent to the stage of fruition, and that there

187

i88 Can Socialism Work?

is no sound reason to believe that they would have appreciated Van
Gogh any sooner than capitalist society did. But this objection misses
the point. For public authority need not go as far as this. Ail that is
necessary is that Van Gogh gets his ‘‘income" as everyone else does
and that he is not worked too hard; this would suffice in any normal
case — though, when I come to think of it, I am no longer sure whether
it would have sufficed in the case of Van Gogh— to give the necessary
opportunity for the assertion of creative ability.

But another objection carries more weight. In this matter as in
others the advocate of socialism is likely to overlook — often he is pas-
sionately resolved not to admit — the degree to which certain ideals
of his are satisfied in the modern world. Capitalism provides, to a
much greater extent than most of us believe, the ladders for talent
to climb. There is an element of truth in the brutal slogan of the
typical bourgeois which many worthy men find so irritating, viz.,
that those who cannot climb by these ladders are not worth troubling
about. The ladders may not be up to any standard we choose to set,
but it cannot be said that they do not exist. Not only does modern
capitalism systematically proffer means to shelter and nurse almost
any kind of ability in the early stages of its development — so much
so that in some lines the difficulty is not how to find the means for
talent but how to find anything that has any claim to be called a
talent for the means proffered — but by the very law of its structure it
tends to send up the able individual and, much more effectively, the
able family. Thus, though there may be social losses^ particularly in
the class of semi-pathological genius, it is not likely that they are
very great.

II. A Discussion of Comparative Efficiency

Let us stay however within the economic sphere though I hope I
have made it quite clear that I do not attribute to it more than sec-
ondary importance.

1. The restrictions of our scope are most obvious and hence the
pitfalls least dangerous at the first step which is still concerned with
nothing but blueprints. Again deferring discussion of transitional dif-
ficulties, to be dealt with separately, and provisionally assuming that
they have been successfully overcome, we need only glance at the im-
plications of our proof of the possibility and practicability of the so-
cialist schema in order to realize that there is a strong case for
believing in its superior economic efficiency.

That superiority need be proved only with respect to big-business

1 Instances overstate by inference, even if they do not vanish on investigation as
they often do. Moreover, some of those losses occur independently of the particular
organization of society; not every such loss in the capitalist arrangement is also a
loss through the capitalist arrangement.

Comparison of Blueprints 189

or “monopolistic"’ capitalism because superiority over “competitive”
capitalism then follows a fortiori. This is evident from our analysis
in Chapter VIII. Many economists, on the strength of the fact that
under completely unrealistic conditions all sorts of flattering propo-
sitions can be established about competitive capitalism, have acquired
a habit of extolling it at the expense of its “monopolistic” successor.
I wish to repeat therefore that even if those eulogies were entirely
justified — ^which they are not — and if the theorist’s perfect competi-
tion had ever been realized in the field of industry and transporta-
tion — ^which it never was — finally, if all the accusations ever leveled
against big business were entirely justified — ^which is far from being
the case — it would still be a fact that the actual eSiciency of the
capitalist engine of production in the era of the largest-scale units
has been much greater than in the preceding era of small or medium-
sized ones. This is a matter of statistical record. But if we recall the
theoretical explanation of that fact, we further realize that the in-
creasing size of units of control and all the business strategy that
went with it were not only unavoidable incidents but to a consider-
able extent also conditions of the achievement reflected in that record;
in other words, that the technological and organizational possibilities
open to firms of the type which is compatible with approximately
perfect competition could never have produced similar results. How
modern capitalism would work under perfect competition is hence a
meaningless question. Therefore, quite apart from the fact that so-
cialism will inherit a “monopolistic” and not a competitive capitalism,
we need not trouble about the competitive case except incidentally.

Economic efficiency of a system we will reduce to productive effi-
ciency. Even the latter is by no means easy to define. The two alterna-
tives to be compared must of course^ be referred to the same point
of time — ^past, present or future. But this is not enough. For the
relevant question is not what, ex visu of a given point of time,
socialist management could do with the capitalist apparatus existing
at that point of time — this is for us not much more interesting than
what socialist management could do with a given stock of consumers’
goods — but what productive apparatus would exist or would have
existed had a socialist instead of the capitalist management presided
over its construction. The mass of information about our actual and
potential productive resources that has been accumulated during
the last twenty years, however valuable it may be for other purposes,
thus lends but little aid in the struggle with our difficulty. And ail
2 This rule should be self-evident, yet it is frequently violated. For fnstance, the
economic performance of Soviet Russia at the present time is often compared with
that of the tsarist regime at the threshold of the First World War. But the lapse
of a quarter of a century has robbed such a comparison of all significance. The
only comparison that could possibly be significant would be with the values on
an extrapolated trend based upon the figures for, say, 1890-1914.

igo Can Socialism Work?

we can do is to list such differences between the mechanisms of the
economic engines of socialist and of commercial society as we may
nevertheless perceive, and to appraise their importance as best we can.

We will postulate that the number, quality, tastes and age distri-
bution of the population at the time of comparison be the same in
both cases. Then we shall call that system relatively more efficient
which we see reason to expect would in the long run produce the
larger stream of consumers' goods per equal unit of time.^

2. This definition requires comment. It will be seen that it does
not identify economic efficiency with economic welfare or with given
degrees of satisfaction of wants. Even if any conceivable socialist
economy were sure to be in our sense less efficient than any con-
ceivable commercial economy, the majority of people — all in fact for
whom the typical socialist cares — ^might still be ‘‘better off” or “hap-
pier” or “more content” in the former than in the latter. My first
and main reply is that relative efficiency retains independent mean-
ing even in such cases and that in all cases it will be an important
consideration. But secondly I do not think that we lose much by
adopting a criterion that neglects those aspects. This however is a
very debatable matter on which it is just as well to be a little more
explicit.

To begin with, convinced socialists will derive satisfaction from
the mere fact of living in a socialist society.'^ Socialist bread may well

s Since the capitalist and the socialist streams of real income will to some extent
consist of different commodities and contain the commodities common to both
in somewhat different proportions — though in the absence of additional hypotheses
about the change in the distribution of spendable incomes it is impossible to esti-
mate the importance of the difference — comparison raises delicate questions of
theory. If more wine and less bread are produced in the capitalist than would be
produced in the socialist society, which of the streams is the larger? In any attempt
to answer such a question, the difficulties incident to comparing income streams in
the same social framework from one year to the next (to constructing any index
of total output, that is) are met on a greatly magnified scale. For our purpose, how-
ever, the following definition sufficiently meets the theoretical problem: one of
the streams shall be called larger than the other if, and only if, it yields a greater
monetary total than the other, whichever of the two price systems is used in the
evaluation of both. If one stream yields a higher figure when both are evaluated
by means of, say, the capitalist price system, and at the same time a smaller
figure when both are evaluated at the socialist price system, then we call them
equal just as if they actually yielded equal totals with both price systems — ^which
simply means that we trust that the difference will in general not be very sig-
nificant in that case. The statistical problem is of course not solved by this defini-
tion, because we cannot have the two streams before us at the same time.

The reason why the words in the long run have been inserted in the sentence
of the text should be obvious from our analysis in ch. vii.

4 We are in fact sometimes invited to overlook admitted shortcomings of the
socialist plan for the sake of the privilege of becoming members of a socialist so-
ciety. This argument, frankly formulating as it does the truly socialist feeling, is
by no means as unreasonable as it may sound. It really renders all other arguments
superfluous.

Comparison of Blueprints 191

taste sweeter to them than capitalist bread simply because it is social-
ist bread, and it would do so even if they found mice in it. If, more-
over, the particular socialist system adopted happens to agree with
one’s moral principles as for instance equalitarian socialism would
with the moral principles of many socialists, this fact and the conse-
quent gratification of one’s sense of justice will of course be listed
among that system’s titles to superiority. For the working of the
system such moral allegiance is by no means indifferent; its impor-
tance even for eiB&ciency in our sense will have to be noticed later.
But beyond that all of us had better admit that our phraseology
about justice and so on reduces largely to whether we like a certain
form of society or not.

There seems however to be a purely economic argument in favor
of equalitarian socialism or any socialism the structure of which
admits of greater equality of incomes. Those economists at least who
feel no compunction about treating satisfactions of wants as meas-
urable quantities and about comparing and adding the satisfactions
of different persons have a right to argue that a given stock or stream
of consumers’ goods will in general produce the maximum of satis-
faction if equally distributed. An equalitarian system as efficient as
its commercial counterpart will hence run at a higher level of wel-
fare. Even a somewhat less efficient equalitarian system might do
so. Most modern theorists would discard this argument on the grounds
that satisfactions are not measurable or that comparison and addi-
tion of the satisfactions of different people are meaningless. We need
not go so far. It is sufficient to point out that the equalitarian argu-
ment is particularly open to the objection raised in our analysis of
monopolistic practice: the problem is not how to distribute a quantity
given independently of the principles of income distribution. Wage
incomes might well be higher in a commercial society admitting un-
restricted inequalities than the equal incomes would be in equali-
tarian socialism. So long as it is not made reasonably certain that
the socialist engine of production would be at least nearly as efficient
as the commercial engine is or was or can be expected to be at the
time of the comparison, the argument about distribution remains
inconclusive — question-begging in fact — even if we choose to accept
it.^ And as soon as the question of productive efficiency is settled the
distributive argument will in most cases be superfluous; unless it be
based exclusively on moral ideals, it will turn the balance only in
borderline cases.

3. There is still another reason why similar levels of productive

sThe argument we thus discard may be made to read that other things being
equal the socialist maximum is greater than the competitive maximum. Owing to
the purely formal nature of both maxima however there is no point in compar-
ing them, as should be obvious from previous considerations.

ig2 Can Socialism Work?

efficiency might be associated with different levels of welfare. Most
socialists will hold that a given national income would go further in
socialist than it goes in capitalist society because the former would
make a more economical use of it. These economies follow from the
fact that certain types of society may, by virtue of their organization,
be indifferent or adverse to purposes to which other types, also by
virtue of their organization, allocate considerable parts of their re-
sources. A pacifist socialism for instance would economize on arma-
ments, an atheist one on churches, and both might therefore have
more hospitals instead. This is so, of course. But since it involves
valuations which cannot with confidence be attributed to socialism
in general — though they could be to many individual socialists — ^it
does not concern us here.

Almost any socialist society — not the Platonic type though — ^would
surely realize another type of economy, viz., the economy from the
elimination of the leisure class, the '‘idle rich.'’ Since from the so-
cialist standpoint it is quite proper to neglect the satisfactions accruing
to the individuals belonging to this group and to evaluate its cul-
tural functions at zero — though civilized socialists always save their
faces by adding: in the world of today — there is obviously a net gain
to be made by the socialist regime. How much do we lose by using
an efficiency test which neglects this?

Of course, modern taxation of incomes and inheritance is rapidly
reducing the problem to quantitative insignificance, even independ-
ently of the fiscal methods applied in financing the current war. But
this taxation itself is the expression of an anti-capitalist attitude and
possibly the forerunner of complete elimination of the typically
capitalist income brackets. We must therefore put our question for
a capitalist society not yet attacked at its economic roots. For this
country, it seems reasonable to select the data of 1929.®

Let us define rich people as those who have incomes of $50,000
and over. In 1929, they received about 13 billion dollars out of a na-
tional total of about 93 billions.'^ From these 13 billions we have to
deduct taxes, savings, and gifts for public purposes, because the elim-
ination of these items would not constitute economies for the socialist
regime; it is only the expenditure of rich people for their own con-
sumption that would be “saved" in the proper sense of the word.®

®The United States is the country that qualifies best for this test. In most
European countries the problem would be complicated, at least for the nineteenth
century or even until 1914, by the presence of high incomes which were of pre-
capitalist origin but had been swelled by capitalist evolution.

7 See H. G. Moulton, M. Levin, and C. A. Warburton, American's Capacity to Cow-
sume (1934), p. 206. These figures are admittedly extremely rough. They include
incomes from occupations and investments, also from sales of property and im-
puted returns from owned homes.

*It will be seen that the fact that the socialist authority would presumably me
those savings and gifts for different purposes does not affect the argument.

Comparison of Blueprints 193

This expenditure cannot be estimated with any accuracy. All we can
hope for is an idea about the orders of magnitude involved- Since
most economists who have been willing to take the risk guessed at
less than one-third of the 13 billions, it will be fairly safe to say
that this expenditure did not amount to more than 4% billions or
to about 4.6 per cent of the total national income. Now this 4.6 per
cent includes all of the consumers' expenditure from the higher busi-
ness and professional incomes, so that the idle rich cannot have
absorbed more than 1 or 2 per cent at the outside. And, so far as the
family motive is still alive, not even all of that can be considered
irrelevant to performance conducive to the efficiency of the economic
engine.

Some readers will no doubt feel that the $50,000 limit is unduly
high. It is clear of course that more could be economized by elimi-
nating or reducing to a subsistence level the incomes of all the
people who are, economically speaking, idle whether rich or poor.^
Still more could be economized, so one would think, by rationalizing
the distribution of all higher incomes so as to bring them into closer
correspondence with performance. But arguments to be submitted
in the next section suggest that the high hopes entertained on that
score are likely to meet with disappointment.

I do not wish however to insist. For if the reader should attach
greater importance to these economies than I think justified, the con-
clusion we are going to arrive at will apply only a fortiori,

III. The Case for the Superiority of the Socialist Blueprint

Thus our criterion of superiority or inferiority after all covers more
ground than it seems to. But if we stand by it, what is that strong
case for the superiority of the socialist blueprint of which I spoke
before?

The reader who has perused the analysis in Chapter VIII may
well wonder. Most of the arguments usually advanced in support of
the socialist and against the capitalist regime, as we have seen, fail
as soon as proper account is taken of the conditions created for busi-
ness by a rapid rate of progress. Some of those arguments, on closer
inspection, even turn out to cut the other way. Much of what is
®It should however be noted that an income consisting exclusively of returns
on investments is no indication of the economic idleness of its receiver, because
his work may be embodied in his investments. The classroom illustration of this
will serve as well as a longer argument could: suppose a man reclaims a piece of
land by the work of his hands; the return he will thereafter receive is a “return
on an appliance made by man” or, as economists call it, a quasi-rent. If the im-
provement is permanent, it will become undistinguishable from the rent of land
proper and hence look like the very incarnation of unearned income whereas in
reality it is a form of wages if we dehne wages as returns attributable to personal
productive exertions. Generalizing, we may say that effort may be undergone in
order to secure revenues which may, but need not, take the form of wages, ,

194 Can Socialism Work?

being considered pathological is seen to be physiological — to fulfill
important functions in the process of creative destruction. Many
wastes carry compensations that sometimes completely, in other cases
partly, invalidate the inference. Socially irrational allocation of re-
sources is not nearly as frequent or important as it is made out to be.
In some cases, moreover, it is no less likely to occur in a socialist
economy. Excess capacity, also partly inevitable in a socialist econ-
omy, will often bear an interpretation which rebuts criticism. And
even unrelieved blemishes are after all but incidents of an achieve-
ment that is great enough to cover a multitude of sins.

The answer to our question follows from the last paragraph of
the preceding chapter. It might be of doubtful validity as long as
capitalist evolution is in full swing but it will be decisive as soon as
it permanently slackens down, whether from reasons inherent in or
external to its economic mechanism.

There are cases in which capitalist industries are so circumstanced
that prices and output become theoretically indeterminate. They may
occur, though they do not always occur, whenever there is oligopoly.
In a socialist economy everything — limiting cases without practical
importance alone excepted — is uniquely determined. But even when
there exists a theoretically determined state it is much more difficult
and expensive to reach in the capitalist economy than it would be
in the socialist economy. In the former endless moves and counter-
moves are necessary and decisions have to be taken in an atmosphere
of uncertainty that blunts the edge of action, whereas that strategy
and that uncertainty would be absent from the latter. That this
applies not only to ‘^monopolistic” capitalism but, though for other
reasons, still more to the competitive species is shown by the hog-
cycle case^^ and by the behavior of more or less perfectly competi-
tive industries in general depressions or in vicissitudes of their own.

But this means more than it seems to mean at first sight. Those
determinate solutions of the problems of production are rational or
optimal from the standpoint of given data, and anything that shortens,
smoothens or safeguards the road that leads to them is bound to .save
human energy and material resources, and to reduce the. costs at
which a given result is attained. Unless the resources thus saved are
completely wasted, efficiency in our sense must necessarily increase.

Under this heading some of the sweeping indictments of the capi-
talist system which have been glanced at above acquire a qualified
justification. As an instance, take excess capacity. It is not true that
it would be entirely absent in socialism; it would be absurd for the
central board to insist on full utilization of a new railroad through
as yet unsettled country. Nor is it true that excess capacity spells loss
In all cases. But there are types of excess capacity which do spell loss
ch. viii.

Comparison of Blueprints 195

and can be avoided by a socialist management, the chief case being
that of reserve capacity for the purpose of economic warfare. What-
ever the importance of the particular case — do not think it is very
considerable — it shows up a point to which I have already adverted:
there are things which within the conditions of capitalist evolution
are, or may be, perfectly rational and even necessary and therefore
need not, e% visu of the capitalist order, constitute blemishes at all;
nor need they constitute weaknesses of '‘monopolistic'" as against com-
petitive capitalism if they are associated, as conditions, with achieve-
ments of the former that are out of the reach of the latter; but even
if that be so they may yet constitute weaknesses as against the
socialist blueprint.

This is particularly true of most of the phenomena that make up
the mechanism of trade cycles. Capitalist enterprise does not lack
regulators, some of which may well be met with again in the practice
of the ministry of production. But the planning of progress, in par-
ticular the systematic coordination and orderly distribution in time
of new ventures in all lines, would be incomparably more effective
in preventing bursts at some times and depressive reactions at others
than any automatic or manipulative variations of the rate of interest
or the supply of credit can be. In fact, it would eliminate the cause
of the cyclical ups and downs whereas in the capitalist order it is
only possible to mitigate them. And the process of discarding the
obsolete that in capitalism — especially in competitive capitalism —
means temporary paralysis and losses that are in part functionless,
could be reduced to what “discarding the obsolete" actually conveys
to the layman's mind within a comprehensive plan providing in ad-
vance for the shifting to other uses of the non-obsolete complements
of the obsolete plants or pieces of equipment. Concretely: a crisis
centering in the cotton industry may in the capitalist order put a stop
to residential construction; in the socialist order it may of course
also happen that the production of cotton goods has to be drastically
curtailed at short notice, though it is not so likely to happen; but
this would be a reason to speed up residential construction instead
of stopping it.

Whatever the economic goals desired by whoever is in the position
to give effect to his desires, socialist management could attain them
with less disturbance and loss without necessarily incurring the dis-
advantages that would attend attempts at planning progress within
the framework of capitalist institutions. One aspect of this might
be expressed by saying that the socialist management could steer a
course approximating the long-run trend of output, thus developing
a tendency which as we have seen is not foreign to big-business policy.
And the whole of our argument might be put in a nutshell by saying
that socialization means a stride beyond big business on the way that

igG Can Socialism Work?

has been chalked out by it or, what amounts to the same thing,
that socialist management may conceivably prove as superior to big-
business capitalism as big-business capitalism has proved to be to
the kind o£ competitive capitalism of which the English industry of
a hundred years ago was the prototype. It is quite possible that future
generations will look upon arguments about the inferiority of the
socialist plan as we look upon Adam Smith's arguments about joint-
stock companies which, also, were not simply false.

Of course, all that I have said so far refers exclusively to the logic
of blueprints, hence to “objective" possibilities which socialism in
practice may be quite unable to realize. But as a matter of blueprint
logic it is undeniable that the socialist blueprint is drawn at a higher
level of rationality. This, I believe, is the correct way of putting the
matter. It is not a case of rationality versus irrationality. The farmer
whose reaction to hog and fodder prices produces the hog cycle is,
individually and from the standpoint of the moment, acting perfectly
rationally. So is the management of a concern that maneuvers in an
oligopolistic situation. So is the firm that expands in the boom and
restricts in recession. It is the kind and scope of rationality that
makes the difference.

This is certainly not all that can be adduced on behalf of the
socialist plan. But so far as the pure logic of a socialist economy is
concerned, most arguments that are not provably wrong are in fact
implied in the one submitted.

An example of the first importance is afforded by unemployment.
We have seen in Part II that, as regards the interest of the unem-
ployed themselves, capitalist society in any stage sufficiently advanced
to offer a chance for successful socialization need and presumably
will not leave very much to be desired. But concerning the loss to
society the preceding argument implies that in a socialist society
unemployment will be less, mainly in consequence of the elimination
of depressions, and that where it does occur, mainly in consequence
of technological improvement, the ministry of production will be in
a position — ^whatever it may actually do — to redirect the men to
other employments which, if the planning lives up to its possibilities
at all, might in each case be waiting for them.

A minor advantage that is also implied in the superior rationality
of the socialist plan results from the fact that in the capitalist order
improvements occur as a rule in individual concerns and take time
and meet resistance in spreading. If the pace of progress is rapid,
there is often a large number of firms that cling to old methods or
are otherwise of substandard efficiency. In the socialist order every
improvement could theoretically be spread by decree and substand-
ard practice could be promptly eliminated. I call this a minor ad-
vantage because capitalism as a rule also deals pretty ejfficiently with

Comparison of Blueprints 197

the inefficient. Of course, the likelihood of this particular advantage,
whether great or small, being realized by a bureaucracy is another
matter; a decent bureaucracy may always be relied on to bring all
its members up to its standard, but this says nothing about what this
standard itself will be. That possible superiorities might in practice
turn into actual inferiorities must be kept in mind throughout.

Again, managers or owner-managers of small or medium-sized con-
cerns are as a rule primarily either engineers or salesmen or organ-
izers and, even if good men, rarely do all things equally well. We
often find that even successful businesses are indifferently managed
in some respect or other— witness the reports of efficiency experts —
and their leaders are therefore partially misplaced. The socialist econ-
omy could, as modern largest-scale business does, use them to fuller
advantage by using them exclusively in what they really know how
to do. But obvious considerations that need not detain us will not
allow us to entertain high hopes on that score.

There is however an advantage of prime importance that is not
visible in our blueprint as drawn. The outstanding feature of com-
mercial society is the division between the private and the public
sphere — or, if you prefer, the fact that in commercial society there
is a private sphere which contains so much more than either feudal
or socialist society allocates to it. This private sphere is distinct from
the public sphere not only conceptually but also actually. The two
are to a great extent manned by different people — the history of local
self-government offering the most conspicuous exception — and organ-
ized as well as run on different and often conflicting principles, pro-
ductive of different and often incompatible standards.

Friction can only temporarily be absent from such an arrangement
the paradoxical nature of which would be a source of wonder to us
if we were not so accustomed to it. As a matter of fact, friction was
present long before it developed into antagonism in consequence of
the wars of conquest waged upon the bourgeois domain with ever-
increasing success by the men of the public sphere. This antagonism
entails struggle. Most activities of the state in the economic field
then appear in the light that is well characterized by the old bour-
geois economist's phrase, government interference. These activities
do in fact interfere in every sense of the word, especially in the sense
that they hamper and paralyze the private engine of production. It
cannot be urged that they are frequently successful, even in increas-
ing productive efficiency. But as far as they are, the central board's
activity would stand a still greater chance of being so, whereas the
costs and losses incident to the struggle as such would be entirely
avoided in the socialist case. And these losses are considerable, espe-
cially if we count in all the worry caused by incessant inquiries and

igS Can Socialism Work?

prosecutions and the consequent discouraging effects on the energies
that propel business.

One element of these costs should be mentioned specifically. It
consists in the absorption of ability in merely protective activities.
A considerable part of the total work done by lawyers goes into the
struggle of business with the state and its organs. It is immaterial
whether we call this vicious obstruction of the common good or de-
fense of the common good against vicious obstruction. In any case
the fact remains that in socialist society there would be neither need
nor room for this part of legal activity. The resulting saving is not
satisfactorily measured by the fees of the lawyers who are thus en-
gaged. That is inconsiderable. But not inconsiderable is the social
loss from such unproductive employment of many of the best brains.
Considering how terribly rare good brains are, their shifting to other
employments might be of more than infinitesimal importance.

The friction or antagonism between the private and the public
sphere was intensified from the first by the fact that, ever since the
princes' feudal incomes ceased to be of major importance, the state
has been living on a revenue which was being produced in the private
sphere for private purposes and had to be deflected from these purposes
by political force.^^ On the one hand, taxation is an essential attri-
bute of commercial society — or, if we accept the conception of the
state alluded to in the first chapter, of the state — and, on the other
hand, it is almost inevitably^^ ^he nature of an injury to the pro-
ductive process. Until 1914 roughly — if we agree to consider modern
times only — that injury was confined within narrow bounds. But
since then taxes have grown, by degrees, into the dominant item of
business and family budgets and into a major factor in the explana-
tion of unsatisfactory economic performance. Moreover, in order to
wrench ever-increasing amounts from an unwilling organism, a huge
administrative apparatus has come into existence that does nothing
but struggle with the bourgeoisie for every dollar of its revenue. That
organism has in response developed organs of defense and does an
immense amount of work in self-protection.

Nothing else brings out so well the wastes that result from the con-
flict of structural principles in a social body. Modern capitalism relies
on the profit principle for its daily bread yet refuses to allow it to
prevail. No such conflict, consequently no such wastes, would exist
in socialist society. Since it would control all sources of revenue,
taxes could vanish with the state or, if my conception of the state
does not command approval, with the bourgeois state. For, as a

^^The theory which construes taxes on the analogy of club dues or of the pur-
chase of the services of, say, a doctor only proves how far removed this part of
the social sciences is from scientific habits of mind.

12 Exceptions exist, but they do not matter for practical purposes.

Comparison of Blueprints 199

matter of common sense, it would be clearly absurd for the central
board to pay out incomes first and, after having done so, to run
after the recipients in order to recover part of them. If radicals were
not so fond of chivying the bourgeois that they cannot see anything
wrong in taxes except that they are too low, it would have been
recognized before this that here we have got hold of one of the most
significant titles to superiority that can be advanced in favor of the
socialist plan.

CHAPTER XVIII

THE HUMAN ELEMENT

A Warning

r is quite likely that many opponents of socialism will accept the
result we have just arrived at. But their assent will mostly take
the following form: ‘‘Oh well, of course, if you had demigods to
direct the socialist engine and archangels to man it, all that might
well be so. But the point is that you have not and that, human nature
being what it is, the capitalist alternative with its pattern of motiva-
tions and its distribution of responsibilities and rewards after all
offers, though not the best conceivable, yet the best practicable ar-
rangement.”

And there is something to this reply. On the one hand, we have
now to guard not only against the dangers that lurk in any attempt
to compare a given reality with an idea, but also against the error
or trick inherent in any comparison of a given reality with an ideal.'^
On the other hand, though I think I have made it abundantly clear
that in the nature of things there never can be a general case for
socialism but only a case with reference to given social conditions and
given historical stages, this relativity becomes much more important
now than it was as long as we moved among blueprints.

I. The Historical Relativity of the Argument

To illustrate this point by an analogy. In feudal society, much of
what all of us, the staunchest supporters of private property included,

^An idea or schema or model or blueprint also embodies an ideal, but only in
the logical sense; such an ideal means only absence of non-essentials — the un-
adulterated design as we might say. Of course it remains a debatable question
exactly what should be included in it and what should, in consequence, be re-
garded as deviation. Though this should be a question of analytic technique, love
and hate may enter into it nevertheless: socialists will tend to include in the blue-
print of capitalism as many traits as possible that are felt to be derogatory;
anti-socialists will do the same to the socialist blueprint; and both parties will
try to "'whitewash" their own by listing as many "blemishes" as possible among
unessential, hence by implication avoidable, deviations. Even if they agree in any
given case to label certain phenomena as deviations, they may still disagree as to
the degree to which their own system and that of their opponents are liable
to deviate. For instance, bourgeois economists will tend to attribute to “political
interference" whatever they themselves do not like about capitalism while socialists
will hold that these politics are the inevitable outcome of capitalist processes and
situations created by the way in which the capitalist engine works. Although I
recognize all these difficulties, I do not think that they affect my exposition which,
as the professional reader will notice, has been framed so as to avoid them,

201

The Human Element

now think of as the exclusive domain of public administration was
managed by means of an arrangement that to us looks as if those
public functions had been made the objects of private ownership and
the sources of private gain; every knight or lord in a hierarchy of
liege relations held his fief for profit and not as a payment for the
services he rendered in managing it. The now so-called public func-
tions connected with it were but a reward for services rendered to
some superior liege. Even this does not quite express the matter: he
held his fief because, being a knight or lord, he was entitled to hold
one whatever he did or did not do. This state of things people who
lack the historical dimension are prone to look upon as a compound
of ‘‘abuses.'’ But that is nonsense. Under the circumstances of its
own epoch — ^like every bit of institutional framework, feudalism sur-
vived what was truly “its” epoch — this arrangement was the only
feasible one and it embodied the only method by which those public
functions could be discharged. If Karl Marx had put in appearance,
say, in the fourteenth century and if he had been so foolish as to
advocate another method of public administration, then he would
have laid himself open to the reply that such a system was an ad-
mirable device for getting done what without it could not have been
done at all and in particular that “human nature being what it is”
the profit motive was indispensable for the functioning of public
adriiinistration; its elimination would in fact have spelled chaos and
could have been well described as an impracticable dream.

Similarly, at the time when the English textile mill was the high
spot of capitalist economy — up to 1850, say — socialism was not a
practical proposition and no sensible socialist would hold now or
did hold then that it was. The master’s eye that makes the cattle fat
and turns sand to gold, the goose that lays the golden eggs and other
such homely phrases then were but the expression, by and for simple
and slow-witted people, of an undeniable truth. I submit to socialist
friends that there is a better way of encountering them than sneering
— sneering in the hope that the opponent, a vain and touchy intel-
lectual like themselves, will cease to argue as soon as he perceives that
he may encounter ridicule: it is better to recognize the rightful claim
of those geese within their proper historical setting and confine
denial to other historical settings. We shall then at least face the
relevant question — to wit, how much there is to them now — and still
retain plenty of parking space for our disagreements.

Since we must visualize a definite pattern of capitalism if com-
parison of capitalist reality with socialist chances of success is to
have any meaning, let us choose the capitalism of our own epoch,
that is to say, big-business capitalism in fetters. And let us observe
first, that though this defines an epoch and a pattern it does not
define any particular date, not even in terms of decades, because the
question how far the pattern of fettered capitalism has developed

^02 Can Socialism Work?

and stabilized its features at any given time, say at present, would
still have to wait upon factual investigation; second, that for this
part of our argument it becomes irrelevant whether those fetters,
whatever they are, have been evolved by the capitalist process itself
or may be looked upon as something imposed upon it by an agency
that stands outside of it; third, that though we are now going to deal
with somewhat more practical problems—namely, how far socialism
can be expected to reap the harvest that is potentially present in its
blueprint — we shall still be speaking of chances only and that as-
sumptions will have to step in to remedy our ignorance about what
kind of socialism will be our fate.

II. About Demigods and Archangels

Returning to our bourgeois who talked about demigods and arch-
angels, we can easily dispose of the first; no demigods will be re-
quired to direct the socialist engine because, as we have seen before,
the task to be solved will — once transitional dijBSculties have been
disposed of — ^be not only no more difficult but easier than the task
that faces a captain of industry in the modern world. The archangels
stand for the well-known proposition that the socialist form of exist-
ence presupposes an ethical level that men as they are cannot be
expected to reach.

Socialists have themselves to blame if arguments of this type ever
carried weight with their opponents. They talked about the horrors
of capitalist oppression and exploitation which had only to be re-
moved in order to reveal human nature in all its beauty right away
or, at all events, in order to start a process of education that would
reform human souls so as to lead up to the ethical level required.^
Thus they laid themselves open not only to the charge of flattering
the masses to a ridiculous degree but also to the charge of espousing
a Rousseauism which should be sufficiently exploded by now. But it
is not at all necessary to do that. A good common-sense case can be
made out without it.

For this purpose, let us adopt a distinction that proves useful
though psychologists may object to it. First, a given set of propensi-
ties to feel and to act may be altered by changes in the social environ-
ment while the fundamental pattern underlying it (“human nature”)
remains what it is. We will call this Change by Reconditioning.
Second, still within that fundamental pattern, reconditioning may
impinge on propensities to feel and to act which, though ultimately
amenable to change by environmental alterations — particularly if

2 Among Neo-Marxists the chief sinner was Max Adler (not to be confused with
the two other Viennese Adlers who hold a prominent place in the history of Aus-
trian socialism, Victor Adler, the great organizer and leader of the party, and his
son, Fritz Adler, the murderer of Prime Minister Count Stiirgkh),

The Human Element

S03

these alterations- are carried out rationally — ^yet resist for a time and
create trouble as long as they do. This fact we may associate with
the term Habits. Third, the fundamental pattern itself may be
changed either within the same stock of human material or by means
of eliminating refractory elements of it; human nature is certainly
malleable to some extent particularly in groups whose composition
may be changed. How far this malleability goes is a question for
serious research and not one that can be usefully dealt with in the
platform style by reckless assertion or equally reckless denial. But
we need not commit ourselves either way, because no such funda-
mental reform of the human soul would now be necessary in order
to make socialism work.

Of this we can easily satisfy ourselves. We can first exclude the
agrarian sector which could be expected to offer the most serious
difficulties. Our socialism would still be socialism if the socialist
management confined itself to a kind of agrarian planning that would
only in degree differ from the practice that is already developing.
Settling a plan of production; rationalizing location (land use);
supplying farmers with machinery, seeds, stock for breeding purposes,
fertilizers and so on; fixing prices of products and buying them
from farmers at these prices — this is all that would be necessary and
yet it would leave the agrarian world and its attitudes substantially
intact. There are other possible courses. But what matters to us is
that there is one which could be followed with very little friction and
could be followed indefinitely without impairing the claim of the
society to being called socialist.

Second, there is the world of the laborer and of the clerk. No re-
form of souls, no painful adaptation would be required of them.
Their work would remain substantially what it is — and it would,
with an important qualification to be added later, turn out similar
attitudes and habits. From his work the laborer or clerk would return
to a home and to pursuits which socialist fancy may denote as it
pleases — ^he may, for instance, play proletarian football whereas now
he is playing bourgeois football — but which would still be the same
kind of home and the same kind of pursuits. No great difficulties need
arise in that quarter.

Third, there is the problem of the groups that not unnaturally
expect to be the victims of the socialist arrangement — the problem,
roughly speaking, of the upper or leading stratum. It cannot be
settled according to that hallowed doctrine which has become an
article of faith much beyond the socialist camp, viz., the doctrine
that this stratum consists of nothing but overfed beasts of prey
whose presence in their economic and social positions is explicable
only by luck and ruthlessness and who fill no other 'function” than
to withhold from the working masses — or the consumers, as the case

go4 Can Socialism Work?

may be — the fruits of their toil; that these beasts of prey, moreover,
bungle their own game by incompetence and (to add a more modern
touch) produce depressions by their habit of hoarding the greater
part of their loot; and that the socialist community need not bother
about them beyond seeing to it that they are promptly ousted from
those positions and prevented from committing acts of sabotage.
Whatever the political and, in the case of the subnormal, the psycho-
therapeutic virtues of this doctrine, it is not even good socialism.
For any civilized socialist will, when on his good behavior and in-
tending to be taken seriously by serious people, admit many facts
about the quality and the achievements of the bourgeois stratum
which are incompatible with such a doctrine, and go on to argue
that its upper ranks are not going to be victimized at all but that,
on the contrary, they too are to be freed from the shackles of the
system which oppresses them morally no less than it oppresses the
masses economically. From this standpoint which agrees with the
teaching of Karl Marx, the way is not so very far to the conclusion
that a cooperation of the bourgeois elements may make all the differ-
ence between success and failure for the socialist order.

The problem, then, posits itself like this. Here is a class which, by
virtue of the selective process of which it is the result, harbors human
material of supernormal quality^ and hence is a national asset which
it is rational for any social organization to use. This alone implies
more than refraining from exterminating it. Moreover, this class is
fulfilling vital functions that will have to be fulfilled also in socialist

®See di. vi. More precisely, the modal individual in the bourgeois class is
superior as to intellectual and volitional aptitudes to the modal individual in any
other of the classes of industrial society. This has never been established statistically,
and hardly ever can be, but it follows from an analysis of that process of social
selection in capitalist society. The nature of the process also determines the sense
in which the term superiority is to be understood. By similar analysis of other
social environments, it can be shown that the same holds true for all ruling
classes about which we have historical information. That is to say, it can be shown
in all cases, first, that human molecules rise and fall within the class into which
they are born, in a manner which fits the hypothesis that they do so because of
their relative aptitudes; and it can also be shown, second, that they rise and fall
across the boundary lines of their class in the same manner. This rise and fall
into higher and lower classes as a rule takes more than one generation. These
molecules are therefore families rather than individuals. And this explains why ob-
servers who focus attention on individuals so frequently fail to find any relation
between ability and class position and are inclined to go so far as to contrast
them. For individuals do start so differently handicapped that, excepting cases
of unusual personal achievement, that relation, which moreover refers to a mode
only and leaves room for many exceptions, reveals itself much less clearly if
we neglect to survey the whole chain of which each individual is a link. These
indications do not of course establish my point but only suggest how I should go
about establishing it if it were possible to do so within the frame of this book.
I may however refer the reader to my ‘Theorie der sozialen Klassen im ethnisch
homogenen Milieu,” Archiv fur Sozialwissenschaft, 1937.

The Human Element 205

society. We have seen that it has been and is causally associated with
practically all the cultural achievements of the capitalistic epoch and
with as much of its economic achievements as is not accounted for
by the growth of the laboring population — ^with all the increase, that
is, in what is usually called the productivity of labor (product per
man-hour).^ And this achievement has been in turn causally asso-
ciated with a system of prizes and penalties of unique efficiency that
socialism is bound to abolish. Therefore the question is, on the one
hand, whether the bourgeois stock can be harnessed into the service
of socialist society and, on the other hand, whether those of the func-
tions discharged by the bourgeoisie which socialism must take away
from it can be discharged by other agents or by other than bourgeois
methods, or by both.

III. The Problem of Bureaucratic Management

Rational exploitation of the bourgeois stock is doubtless the prob-
lem which a socialist regime will find the most difficult of ail, and
it would take some optimism to aver that it will be successfully solved.
This however is due not primarily to the difficulties inherent in it
but rather to the difficulty socialists will experience in recognizing
its importance and in facing it in a reasonable frame of mind. The
doctrine about the nature and the functions of the capitalist class
that has been alluded to above is in itself a symptom of a strong aver-
sion to doing so and may be looked upon as a psycho-technic prepa-
ration for refusing to do so. Nor is this surprising. Whether a free
lance or a party executive or a civil servant, the individual socialist
looks upon the advent of socialism, naively but naturally, as syn-
onymous with his advent to power. Socialization means to him
that *‘we’' are going to take over. Displacement of existing manage-
ments is an important, perhaps the most important, part of the show.
And I confess that in conversing with militant socialists I have often
felt some doubt as to whether some or even most of them would
care for a socialist regime, however perfect in other respects, if it
were to be run by other people. I must add at once that the attitude
of others was irreproachable.®

In itself, successful solution of the problem requires above all
that the bourgeois stock be allowed to do the work it is qualified
to do by aptitude and tradition, and hence that a method of selec-
tion for managerial positions be adopted which is based upon fitness
and does not differentiate against the ex-bourgeois. Such methods
are conceivable and some of them may even compare favorably with

“^As pointed out in the first Part, this has been recognized by Marx himself, in
a locus classicus of the Communist Manifesto.

®On this, see the comments on the deliberations of the German Committee on
Socialization, ch. xxiii, p. 300.

206

Can Socialism Work?

the capitalist method as it works in the era of the big corporation.
However, to be allowed to do one*s work involves more than ap-
pointment to an appropriate place. When so appointed, one must
also be given freedom to act under one's own responsibility. And
this raises the question of that Bureaucratization of Economic Life
which constitutes the theme of so many anti-socialist homilies.

I for one cannot visualize, in the conditions of modern society,
a socialist organization in any form other than that of a huge and
all-embracing bureaucratic apparatus. Every other possibility I can
conceive would spell failure and breakdown. But surely this should
not horrify anyone who realizes how far the bureaucratization of
economic life — of life in general even — has gone already and who
knows how to cut through the underbrush of phrases that has grown
up around the subject. As in the case of “monopoly" these phrases
derive much of their hold on our minds from their historical source.
In the epoch of rising capitalism the bourgeoisie asserted itself pri-
marily through a struggle with territorial powers represented by, and
acting through, a monarchist bureaucracy. And most of what the
merchant and the manufacturer felt to be irksome or silly inter-
ference associated itself in the collective mind of the capitalist class
with this bureaucracy or civil service. Such an association is an ex-
tremely durable thing; this particular one proved so durable that
even socialists themselves are afraid of the bugbear and often go
out of their way to assure us that nothing is further removed from
their plans than the idea of a bureaucratic regime.®

We shall see in the next part that bureaucracy is not an obstacle
to democracy but an inevitable complement to it. Similarly it is an
inevitable complement to modern economic development and it will
be more than ever essential in a socialist commonwealth. But recog-
nition of the inevitability of comprehensive bureaucratization does
not solve the problems that arise out of it, and it is just as well to
use this opportunity to state what they consist of.

The elimination of the profit and loss motive that is often ex-
clusively stressed is not the essential point. Moreover, responsibility
in the sense of having to pay for one's mistakes with one's own
money is passing anyhow (though not as quickly as wishful thinking
would have us believe) and the kind of responsibility that exists in
the large-scale corporation could no doubt be reproduced in a social-
ist society (see below). Nor is the method of selecting leading execu-
tives which is peculiar to a bureaucracy or civil service necessarily so
inefiicient as it is often made out to be. Civil service rules of ap-

Russia there is an additional reason for such professions. The bugbear be-
came a scapegoat which all the leaders, but especially Trotsky, knew how to use.
Rightly banking on the thoughtlessness of both the domestic and the foreign pub-
lic, they simply laid at the door of “bureaucracy** anything in Russia that they
felt to be short of admirable.

The Human Element

207

pointment and promotion are not without an appreciable measure
of rationality. Also they sometimes work better in practice than they
appear on paper: in particular, the element of the corporate opinion
of the service about a given man may, if given adequate weight, do
much toward favoring ability — at least ability of a certain type.*^ »

Much more important is another point. The bureaucratic method
of transacting business and the moral atmosphere it spreads doubtless
often exert a depressing influence on the most active minds. Mainly,
this is due to the difficulty, inherent in the bureaucratic machine, of
reconciling individual initiative with the mechanics of its working.
Often the machine gives little scope for initiative and much scope
for vicious attempts at smothering it. From this a sense of frustra-
tion and of futility may result which in turn induces a habit of
mind that revels in blighting criticism of the efforts of others. This
need not be so; many bureaucracies gain on closer acquaintance with
their work. But it is difficult to avoid and there is no simple recipe
for doing so.

It is not difficult however to insert the stock of bourgeois extrac-
tion into its proper place within that machine and to reshape its
habits of work. We shall see later that, at least in the case of social-
ization in the fullness of time, the conditions for moral acceptance
of the socialist order of things and for a transfer of loyalties to it
are likely to be met, and that there need be no commissars to thwart
and to insult. Rational treatment of the ex-bourgeois elements with
a view to securing a maximum of performance from them will then
not require anything that is not just as necessary in the case of man-
agerial personnel of any other extraction. The question what this
rational treatment implies has been so reasonably and so undema-
gogically answered by some socialist authorities that a very brief
survey of the important points will suffice.

We had better recognize from the start that exclusive reliance on
a purely altruistic sense of duty is as unrealistic as would be a whole-
sale denial of its importance and its possibilities. Even if full allow-
ance be made for the various elements that are cognate to sense
of duty, such as the satisfaction derived from working and directing,
some system of rewards at least in the form of social recognition
and prestige would presumably prove advantageous. On the one hand,
common experience teaches that it is difficult to find a man or
woman, however high-minded, whose altruism or sense of duty func-
tions in complete independence of at least that kind of self-interest
or, if you prefer, of his or her vanity or desire for self-assertion. On
the other hand, it is clear that the attitude which underlies this
often pathetically obvious fact is more deeply rooted than the capi-
talist system and belongs to the logic of life within any social group.

^ See below, ch. xxiv.

Can Socialism Work?

308

Hence it cannot be disposed of by phrases about the pest of capi-
talism that infects souls and distorts their “natural” propensities.
It is however quite easy to deal with this type of individual egotism
so as to exploit it for the service of society. And a socialist community
is in a particularly favorable position to do this.

In capitalist society, social recognition of performance or social
prestige carries a strongly economic connotation both because pecu-
niary gain is the typical index of success, according to capitalist stand-
ards, and because most of the paraphernalia of social prestige — in par-
ticular, that most subtle of all economic goods. Social Distance —
have to be bought. This prestige or distinction value of private wealth
has of course always been recognized by economists. John Stuart
Mill, no wizard in foresight or insight, saw it. And it is clear that
among the incentives to supernormal performance this is one of the
most important.

It has been shown in Part II that capitalist evolution itself tends
to weaken that motive for desiring wealth along with all the others.
Socialism will hence require not nearly as great a revaluation of the
values of life in what now forms the uppermost stratum as it would
have done a hundred years ago. Moreover the prestige motive, more
than any other, can be molded by simple reconditioning; successful
performers may conceivably be satisfied nearly as well with the privi-
lege — if granted with judicious economy — of being allowed to stick
a penny stamp on their trousers as they are by receiving a million a
year. Nor would that be irrational. For, assuming that the penny
stamp will impress the environment sufficiently to induce it to be-
have deferentially toward the wearer, it will give him many of the
advantages for the sake of which he at present prizes the million a
year. This argument loses nothing by the fact that such a practice
would only revive a device which in the past has been widely used
with excellent results. Why not? Trotsky himself accepted the Order
of the Red Flag.

As regards preferential treatment in terms of real income it should
be observed first of all that to a certain extent it is a matter of
rational behavior toward the existing stock of social resources quite
independently of the stimulus aspect. Just as race horses and prize
bulls are the grateful recipients of attentions which it would be neither
rational nor possible to bestow on every horse and bull, so the super-
normal human performer has to be accorded preferential treatment
if the rules of economic rationality are to prevail. Of course they
need not. The community may elect to give effect to ideals that pre-
clude this and to refuse to look upon men as they would upon
machines. And all that an economist is entitled to say about it is
that the community should not act in ignorance of the fact that
those ideals cost something. The point is of considerable importance.

The Human Element S09

Many incomes high enough to evoke adverse comment do not give
their receivers more than the conditions of life and work — distance
and freedom from minor worries included — that are sufficient to
keep them fit for the kind of thing they are doing.

So far as that point is taken account of, it will simultaneously
solve, at least in part, the problem of providing purely economic
stimuli. But I think that, again as a matter of rationality, the socialist
community stands to gain considerably by going much beyond the
limits that are imposed by the race horse or machine aspect. Once
more the reason for this flows, on the one hand, from observation
of behavior and, on the other, from analysis of the economy and
civilization of capitalism which fails to support the view that the
urge which society may exploit by preferential treatment is a product
of capitalist conditions. This urge is a propeller of socially valuable
effort. If it is denied all chance of satisfaction, results will be some-
what smaller than they could be although it is impossible to say by
how much and although the importance of this element will be the
smaller the more stationary the economic process when socialism
takes over.

This does not mean that in order to do justice to the possibilities
of stimulation of this kind, nominal incomes would have to go to
anything like their present heights. At present, they include taxes,
savings and so on. The elimination of these items would in itself
suffice to reduce drastically the figures that are so offensive to the
petty-bourgeois mentality of our time. Moreover, as we have seen
before, the people in the upper income brackets are being increas-
ingly trained to more modest ideas and in fact are losing most of
the motives — other than the prestige motive — for desiring those levels
of income that used to support expenditure on the seignorial scale;
their ideas will be still more modest by the time socialism can be
expected to be a success.

Naturally, economic pharisees would still throw up their hands
in holy horror. For their benefit, I beg to point out that devices
are ready at hand to placate their scruples. These devices have emerged
in the capitalist world but have been greatly developed in Russia,
Essentially they amount to a combination of payments in kind with
a liberal provision in money for what are supposed to be expenses
of the proper discharging of certain duties. In most countries the
higher ranks of the civil service are no doubt very modestly paid,
often irrationally so, and the great political offices mostly carry dec-
orously small money salaries. But at least in many cases this is partly,
in some cases very amply, compensated not only by honors but also
by ofiicial residences staffed at the public expense, allowances for
‘‘officiaF' hospitality, the use of admiralty and other yachts, special

210

Can Socialism Work?

provisions for service on international commissions or in the head-
quarters of an army and so on.

IV. Saving and Discipline

Finally, what about the functions at present discharged by the
bourgeoisie that the socialist regime is bound to take away from it?
Under this heading we shall discuss Saving and Discipline.

As regards the first — a function almost entirely discharged by the
bourgeoisie and especially its higher ranks — I am not going to argue
that saving is unnecessary or anti-social. Nor am I going to ask the
reader to rely on the individual comrades’ propensity to save. Their
contribution need not be neglected but it would be inadequate unless
the socialist economy is to be thought of as quasi-stationary. Much
more effectively, as we have seen, the central authority can do all
that is now being done through private saving by directly allocating
part of the national resources to the production of new plant and
equipment. The Russian experience may be inconclusive on many
points, but it is conclusive on this. Hardships and ‘‘abstinence” have
been imposed such as no capitalist society could ever have enforced.
In a more advanced stage of economic development it would not, in
order to secure progress at the capitalist rate, be necessary to impose
nearly as much. When a quasi-stationary stage has been reached by
the capitalist predecessor, even voluntary saving may be sufficient.
The problem, though always solvable, again shows that different
situations require different socialisms and that the idyllic type can
be successful only if economic progress is held to be of no account,
in which case the economic criterion ceases to be relevant, or if eco-
nomic progress though appreciated for the past is held to have gone
far enough to be of no account for the future.

As regards discipline: there is an obvious relation between the
efficiency of the economic engine and the authority over employees
which, by means of the institutions of private property and “free”
contracting, commercial society vests with the bourgeois employer.
This is not simply a privilege conferred upon Haves in order to
enable them to exploit Have-nots. Behind the private interest imme-
diately concerned there is the social interest in the smooth running
of the productive apparatus. Opinions may differ fairly as to how far
in a given situation the latter is actually served by the former and
as to the extent of functionless hardship which the method of entrust-
ing the social interest to the self-interest of employers used to inflict
on^ the underdog. But historically there cannot be any difference of
opinion either as to the existence of that social interest or as to the
general effectiveness of that method which moreover, during the
epoch of intact capitalism, was evidently the only possible one. Hence
we have two questions to answer. Will that social interest persist

The Human Element 211

in the socialist environment? If so, can the socialist plan supply the
required amount of authority whatever it may be?

It will be convenient to replace the term authority by its comple^
ment, authoritarian discipline, which is taken to mean the habit,
inculcated by agents other than the disciplined individuals them-
selves, of obeying orders and of accepting supervision and criticism.
From this we distinguish self-discipline — ^noting that, in part at least,
it is due to previous, even ancestral, exposure to the disciplining in-
fluence of authority — and group discipline which is the result of
the pressure of group opinion on every member of the group and
similarly due, in part, to authoritarian training undergone in the
past.

Now there are two facts that may be expected to make for stricter
self-discipline and group discipline in the socialist order. The case
has, like so many others, been all but spoiled by foolish idealizations
— the absurd picture of workers who are supposed to arrive by means
of intelligent discussion (when resting from pleasant games) at
decisions which they then arise to carry out in joyful emulation. But
things of this sort should not blind us to facts and inferences from
facts that lend support to favorable expectations of a more reasonable
nature.

First, the socialist order presumably will command that moral
allegiance which is being increasingly refused to capitalism. This, it
need hardly be emphasized, will give the workman a healthier atti-
tude toward his duties than he possibly can have under a system he
has come to disapprove. Moreover his disapproval is largely the
result of the influences to which he is exposed. He disapproves be-
cause he is told to do so. His loyalty and his pride in good perform-
ance are being systematically talked out of him. His whole outlook
on life is being warped by the class-war complex. But what on a
previous occasion I have called the vested interest in social unrest
will to a large extent disappear — or be made to disappear as we shall
presently see — along with all other vested interests. Of course, against
this must be set the removal of the disciplining influence exerted
by the responsibility for one's own economic fate.

Second, one of the chief merits of the socialist order consists in
the fact that it shows up the nature of economic phenomena with
unmistakable clearness whereas in the capitalist order their faces are
covered by the mask of the profit interest. We may think as we please
about the crimes and follies which socialists hold are perpetrated
behind that mask but we cannot deny the importance of the mask
itself. For instance, in a socialist society nobody could possibly doubt
that what a nation gets out of international trade is the imports
and that the exports are the sacrifice which must be undergone in
order to procure the imports, whereas in commercial society this

212 Can Socialism Work?

common-sense view is as a rule completely hidden from the man in
the street who therefore cheerfully supports policies that are to his
disadvantage. Or whatever else the socialist management may bungle,
it certainly will not pay any premium to anybody for the express
purpose of inducing him not to produce. Or nobody will be able
to get away with nonsense about saving. Far beyond the matter in
hand, economic policy will therefore be rationalized and some of the
worst sources of waste will be avoided simply because the economic
significance of measures and processes will be patent to every com-
rade. Among other things, every comrade will realize the true sig-
nificance of restiveness at work and especially of strikes. It does not
matter in the least that he will not on that account ex post facto con-
demn the strikes of the capitalist period, provided he comes to the con-
clusion that strikes would “now’' be nothing else but anti-social attacks
upon the nation’s welfare. If he struck all the same, he would do so
with a bad conscience and meet public disapproval. There would
no longer be, in particular, any well-meaning bourgeois of both sexes
who think it frightfully exciting to applaud strikers and strike
leaders.

V. Authoritarian Discipline in Socialism; a Lesson from

Russia

But those two facts carry us beyond an inference to the effect
that as far as they go there might be more self-discipline and more
group discipline in socialist society, hence less need for authoritarian
discipline than there is in the society of fettered capitalism. They
also suggest that, whenever needed, authoritarian enforcement of
discipline will prove an easier task.® Before giving the reasons for
believing this I must give the reasons for believing that socialist
society will not be able to dispense with authoritarian discipline.

First of all, so far as self-discipline and group discipline are, at
least to a considerable extent, the result of previous, possibly ancestral,
training provided by authoritarian discipline, they will wear away if
that training is discontinued for a sufficient length of time, quite
irrespective of whether or not the socialist order provides additional
reasons for conserving the required type of behavior that may appeal
to the rational consideration or the moral allegiance of individuals
or groups. Such reasons and their acceptance are important factors

8 The importance of this, if it can be established as a reasonable expectation to
entertain at least for some types of the socialist pattern, can hardly be exaggerated.
It is not only that discipline improves the quality and, if required, the quantity
of the labor hours. Irrespective of this, discipline is an economizing factor of the
first order. It lubricates the wheels of the economic engine and greatly reduces
waste and total effort per unit of performance. The efficiency of planning as well
as of current management in particular may be raised to a level far above any-
thing that is feasible under present conditions.

The Human Element 213

in inducing people to submit to the training and to a system of
sanctions rather than in enabling them to keep up to the mark of
themselves. This aspect gains weight if we reflect that we are con-
sidering discipline in the drab routine of everyday life, unglorified
by enthusiasm, irksome in some if not in all details, and that the
socialist order will remove, to say the least, some of the pressure of
the survival motive which largely motivates self-discipline in capi-
talist society.

Second, closely allied to the necessity of incessant training of the
normal is the necessity of dealing with the subnormal performer.
This term does not refer to isolated pathological cases but to a broad
fringe of perhaps 25 per cent of the population. So far as subnormal
performance is due to moral or volitional defects, it is perfectly un-
realistic to expect that it will vanish with capitalism. The great
problem and the great enemy of humanity, the subnormal, will be
as much with us as he is now. He can hardly be dealt with by
unaided group discipline alone — although of course the machinery
of authoritarian discipline can be so constructed as to work, partly
at least, through the group of which the subnormal is an element.

Third, though the vested interest in social unrest may be expected
to disappear in part, there is reason to believe that it will not
disappear entirely. Stirring up trouble and putting monkey wrenches
into the works will still mean a career or the short cut to a career;
it will no less than now be the natural reaction of both idealists
and self-seekers displeased with their position or with things in
general. Moreover there will be plenty to fight about in socialist
society. After all, only one of all the great sources of controversy
will be eliminated. Beyond the obvious likelihood of the partial sur-
vival of sectional interests — ^geographical and industrial — there may
be clashes of opinion for instance about the relative weight to be at-
tributed to immediate enjoyment versus the welfare of future genera-
tions, and a management that espouses the cause of the latter might
well be faced by an attitude not entirely dissimilar to the present
attitude of labor and of the public in general toward big business
and its policy of accumulation. Last but not least, recalling what
has been said on the subject of the cultural indeterminateness of so-
cialism, we shall have to realize that many of the great issues of
national life will be as open as ever and that there is little reason
to expect that men will cease to fight over them.

Now, in appraising the ability of socialist management to cope
with the difficulties that may arise under these three heads, we must
bear in mind that the comparison is with capitalism as it is today or
even with capitalism as it may be expected to function in a still
more advanced stage of disintegration. When discussi^ig the im-
portance, so completely overlooked by many economists since the

Can Socialism Work?

214

time of Jeremy Bentham, of unquestioning subordination within
the individual firm,^ we saw that capitalist evolution tends to wear
away its socio-psychological bases. The workman's readiness to obey
orders was never due to a rational conviction of the virtues of capi-
talist society or to a rational perception of any advantages accruing
to him personally. It was due to discipline inculcated by the feudal
predecessor of his bourgeois master. To this master the proletariat
transferred part of that respect — by no means all of it — that their
ancestors in all normal cases bore to their feudal lords, whose de-
scendants also made things a lot easier for the bourgeoisie by staying
in political power for the greater part of capitalist history.

By fighting the protecting stratum, by accepting equality in the
political sphere, by teaching the laborers that they were just as val-
uable citizens as anyone else, the bourgeoisie forfeited that advantage.
For a time, enough authority remained to veil the gradual but
incessant change that was bound to dissolve the discipline in the
factory. By now, most of it is gone. Gone are most of the means of
maintaining discipline, and, even more, the power to use them.
Gone is the moral support of the community that used to be ex-
tended to the employer struggling with infractions of discipline.
Gone finally is — ^largely in consequence of the withdrawal of that
support — the old attitude of governmental agencies; step by step
we can trace the way that led from backing the master to neutrality,
through the various nuances of neutrality to backing the workman's
right to being considered an equal partner in a bargain, and from
this to backing the trade union against both employers and individual
workmen.^<> The picture is completed by the attitude of the hired
business executive who, knowing that if he claimed to be fighting
for a public interest he would not even rouse indignation but only
hilarity, concludes that it is more pleasant to be commended for
progressiveness — or to go on holiday — than to incur obloquy or
danger by doing what nobody admits to be his duty.

Considering this state of things, we need not project the tendencies

®See ch. xi, p. 127.

Toleration amounting to encouragement of such practices as picketing may
serve as a useful landmark in a process that has not run a straight-line course.
Legislation, still more administrative practice, in this country is particularly in-
teresting because the problems involved have been brought out with unequaled
emphasis owing to the fact that change, after having been long delayed, has been
crowded into so short a time. The absence of any awareness that there may be
other social interests for government to take care of in its attitude to labor
problems than the short-run interest of the working class is as characteristic as is
the half-hearted but significant adoption of class-war tactics. Much of this can
be explained by a peculiar political configuration and by the peculiarly American
impossibility of corralling the proletariat into an effective organization in any
other way. But the illustrative value of the American labor situation is not sub-
stantially impaired thereby.

The Human Element

215

inherent in it very far ahead in order to visualize situations in which
socialism might be the only means of restoring social discipline. But
it is clear in any case that the advantages which a socialist manage-
ment will command in this respect are so considerable as to weigh
heavily in the balance of productive efficiencies.

First, the socialist management will have at its disposal many more
tools of authoritarian discipline than any capitalist management can
ever have again. The threat of dismissal is practically the only one
that is left — agreeable to the Benthamite idea of a contract to be
rationally entered into and dissolved by social equals — and the handle
of even that tool is so framed as to cut the hand that attempts to
use it. But threat of dismissal by the socialist management may mean
the threat of withholding sustenance that cannot be secured by an
alternative employment. Moreover, whereas in capitalist society it
must as a rule be dismissal or nothing — because public opinion on
principle disapproves of the very idea of one party to a contract dis-
ciplining the other — the socialist management may be able to apply
that threat to any degree that may seem rational and to apply other
sanctions as well. Among the less drastic of the latter are some
which a capitalist management cannot use because of its lack of
moral authority. In a new social atmosphere, mere admonition may
have an effect which it could not possibly have now.

Second, the socialist management will find it much easier to use
whatever tools of authoritarian discipline it may have. There will be
no government to interfere. Intellectuals as a group will no longer
be hostile and those individuals who are will be restrained by a society
that once more believes in its own standards. Such a society will in
particular be firm in its guidance of the young. And, to repeat, public
opinion will no longer countenance what it will consider semi-
criminal practice. A strike would be mutiny.

Third, there will be infinitely more motive for the managing group
to uphold authority than there is for government in capitalist democ-
racy. At present the attitude of governments toward business is akin
to the attitude which in political life we associate with opposition: it
is critical, checking and fundamentally irresponsible. That could not
be so in socialism. The ministry of production will be responsible for
the functioning of the engine. To be sure that responsibility would
be political only and good oratory might possibly cover many sins.
Nevertheless the opposition interest of government will of necessity
be eliminated, and a strong motive for successful operation will be
substituted for it. Economic necessities will no longer be a laughing
matter. Attempts at paralyzing operations and at setting people against
their work will amount to attacking the government. And it can rea-
sonably be expected to react to this.

Again, as in the case of saving, the various objections that may be

2i 6 Can Socialism Work?

raised against generalizations from Russian experience do not impair
the value of its lessons in a matter which in a more mature or other-
wise more nearly normal socialist society should present less and not
more difficulties. On the contrary, we can hardly hope for a better
illustration of the main points of the above argument.

The Bolshevik Revolution of 1917 completed the disorganization of
the small but highly concentrated industrial proletariat of Russia.
The masses got out of hand entirely and gave effect to their conception
of the new order of things by innumerable strikes of the holiday-
making type and by taking possession of the factories.^i Management
by workmen's councils or by trade unions was the order of the day
and was accepted by many leaders as a matter of course. A minimum
of influence was with difficulty secured for engineers and for the
Supreme Council by a compromise arrived at early in 1918, the thor-
oughly unsatisfactory working of which was one of the major motives
for embarking upon the New Economic Policy in 1921. Trade unions
then for a time relapsed into something like the functions and atti-
tudes they have in a severely fettered capitalism. But the first Five-
Year Plan (1928) changed all that; by 1932 the industrial proletariat
was more in hand than it had been under the last Tsar. Whatever
else the bolsheviks may have failed in, they have certainly succeeded
in this respect ever since. The way in which this was done is highly
instructive.

The trade unions were not suppressed. On the contrary they were
fostered by the government: membership increased by leaps and
bounds and was nearly 17 millions as early as 1932. But from expo-
nents of group interests and obstacles to discipline and performance
they developed into exponents of the social interests and into tools
of discipline and performance, acquiring an attitude so completely
different from that which is associated with trade unions in capitalist
countries that some western laborites refused to recognize them as
trade unions at all. They no longer opposed the hardships incident
to the pace of industrialization. They readily stood for extension of
the working day without additional remuneration. They dropped the
principle of equal wages and espoused a system of premiums and
other inducements to effort, Stakhanovism and the rest of it. They
recognized — or submitted to — the manager's right to dismiss workmen
at will, discouraged '‘democratic meetingism" — the practice of the
workmen's discussing ' the orders received and executing them only
after approval — and, cooperating with "comrades' courts" and "purge
commissions," adopted rather strong lines against the slacker and the

Such breakdowns of discipline so far have occurred in most historical cases.
For instance, they were the immediate cause of the failure of the quasi-socialist
experiments tried in Paris during the revolution of 1848.

The Human Element

subnormal. Nothing was heard any more of the right to strike and to
control production.

Now ideologically there was no difficulty at all about this. We may
smile at the quaint terminology which labeled as counterrevolutionary
and contrary to Marx’s teaching everything that did not quite agree
with the government’s interest in the full utilization of labor. But
there is in fact nothing anti-socialist in that attitude: it is only logical
that with class warfare the obstructionist practices should pass away
and the character of collective agreements should change. Critics are
wrong to overlook the amount of self-discipline and group discipline
which the system was able to release and which fully bears out the
expectations we have formed on the subject. At the same time it is
no less wrong to overlook the part played in the achievement, such
as it is, by the authoritarian kind of discipline which powerfully sup-
ports and no less powerfully supplements the other kinds.

The individual trade unions as well as their central organ, the
General Council, have been subjected to the control of the govern-
ment and of the Communist party. What used to be described as the
labor opposition in the latter has been suppressed, and labor leaders
who persisted in recognizing a distinct interest of the workmen have
been removed from their positions. Thus, ever since the govern-
mental reorganization in 1921, certainly since 1929, trade unions have
hardly been in a position to say or do anything that might run counter
to the wishes of the ruling set. They have become organs of authori-
tarian discipline — ^which fact well illustrates a point made before.

Again, inasmuch as the modern workman’s unhealthy attitude to
his work is due to the influences to which he is exposed, it is essential
to notice the tremendous difference it makes if sense of duty and pride
in performance are incessantly being talked into him instead of being
incessantly talked out of him. The fact that the Russian state, unlike
the capitalist state, is in a position to enforce, in the teaching and
guiding of the young, conformity with its ends and structural ideas
immeasurably increases its ability to create an atmosphere favorable
to factory discipline. Intellectuals are evidently not at liberty to
tamper with it. And there is no public opinion to encourage infrac-
tions.

Finally, dismissal spelling privation, shifts amounting to deporta-
tion, “visits” by shock brigades and occasionally also by comrades of
the Red Army are, whatever their legal construction, practically inde-
pendent means in the hands of the government by which to safeguard
performance. There is motive to use them and, as a matter of uni-
versally admitted fact, they have been unflinchingly used. Sanctions
which no capitalist employer would think of applying even if he had
the power frown sternly from behind all gentler psycho-technics.

The sinister connotations of all this are not essential to our argu-

2i 8 Can Socialism Work?

ment. There is nothing sinister in what I am trying to convey. The
cruelties to individuals and whole groups are largely attributable to
the unripeness of the situation, to the circumstances of the country
and to the quality of its ruling personnel. In other circumstances, in
other stages of development and with other ruling personnel they
will not be necessary. If it should prove unnecessary to apply any
sanctions at all, so much the better. The point is that at least one
socialist regime has actually been able to foster group discipline and
to impose authoritarian discipline. It is the principle that matters and
not the particular forms in which it was turned into practice.

Thus, even apart from the merits or demerits of blueprints, com-
parison with fettered capitalism does not turn out unfavorably for
the socialist alternative. It must be emphasized again that we have
been talking — though in a sense difiEerent from that which was relevant
to our discussion of the blueprint — of possibilities only. Many as-
sumptions are necessary in order to turn them into certainties or even
practical likelihoods, and it is no doubt just as legitimate to adopt
other assumptions that would yield different results. In fact, we need
only assume that the ideas prevail which constitute what I have
termed idyllic socialism in order to convince ourselves of the likeli-
hood of complete and even ludicrous failure. This would not even
be the worst possible outcome. Failure so patent as to be ludicrous
could be remedied. Much more insidious as well as likely is failure not
so complete which political psycho-technics could make people believe
to be a success. Moreover, deviations from the blueprint of the engine
and from the principles of running the system are of course no less
likely than they are in commercial society but they may prove to be
more serious and less self-corrective. But if the reader glances once
more over the steps of our argument he will, I think, be able to satisfy
himself that the objections which have their roots in this class of
considerations do not substantially impair our case — or that, more
precisely, they are objections not to socialism per se, as defined for our
purpose, but to the features particular types of socialism may present.
It does not follow from them that it is nonsense or wickedness to
fight for socialism. It only follows that fighting for socialism means
no determinate thing unless it is coupled with a perception of what
kind of socialism will work. Whether such a socialism is compatible
with what we usually mean by democracy is another question.

CHAPTER XIX

TRANSITION

I. Two Different Problems Distinguished

I T IS, I believe, recognized by everybody and in particular by all
orthodox socialists that the transition from the capitalist to the
socialist order will always raise problems sui generis whatever the
conditions under which it may take place. But the nature and extent
of the difficulties to be expected differ so greatly according to the
stage of the capitalist evolution at which the transition is to be made
and according to the methods which the socializing group is able and
willing to use that it will be convenient to construct two different
cases in order to typify two different sets of circumstances. This device
is all the more easy to apply because there is an obvious connection
between the When and the How. Nevertheless both cases will be dealt
with in reference to fully developed and “fettered’' capitalism only —
I shall not waste space on the possibilities or impossibilities presented
by any earlier stages. Bearing this in mind, we shall call them the
cases of mature and premature socialization.

Most of the argument of Part II may be summed up in the Marxian
proposition that the economic process tends to socialize itselj — and
also the human soul. By this we mean that the technological, organi-
zational, commercial, administrative and psychological prerequisites
of socialism tend to be fulfilled more and more. Let us again visualize
the state of things which looms in the future if that trend be projected.
Business, excepting the agrarian sector, is controlled by a small num-
ber of bureaucratized corporations. Progress has slackened and be-
come mechanized and planned. The rate of interest converges toward
zero, not temporarily only or under the pressure of governmental
policy, but permanently owing to the dwindling of investment oppor-
tunities. Industrial property and management have become deperson-
alized — ownership having degenerated to stock and bond holding, the
executives having acquired habits of mind similar to those of civil
servants. Capitalist motivation and standards have ail but wilted
away. The inference as to the transition to a socialist regime in such
fullness of time is obvious. But two points deserve to be mentioned.

Pirst, different people — different socialists even — ^will differ from
one another both in the degree of approximation to that state which
will be satisfactory to them and in their diagnosis of the degree of
approximation which has been actually reached at any given time.

220

Can Socialism Work?

This is quite natural because the progress toward socialism which is
inherent in the capitalist process goes on by slow degrees and will
never pass any traffic light that, recognizable to all, would show beyond
the possibility o£ doubt exactly when the road is open. Room for
honest difference of opinion is greatly increased by the additional
fact that the required conditions of success do not necessarily evolve
pari passu. For instance, it might be plausibly argued that in 1913
the industrial structure of this country, taken by itself, was more
nearly “ripe"' than that of Germany. Yet few people will doubt that,
had the experiment been made in both countries, the chances of suc-
cess would have been infinitely greater with the state-broken Germans,
led and disciplined as they were by the best bureaucracy the world
has ever seen and by her excellent trade unions. But beyond honest
differences of opinion — including those that are explainable on dif-
ferences of temperament similar to those which will make equally
competent and honest doctors differ as to the advisability of an opera-
tion — there will always be a suspicion, often but too well founded,
that the one party to the discussion does not and will never want to
admit maturity because it does not really want socialism and that the
other party will, for reasons that may or may not spring from idealistic
bases, assume maturity under any circumstances whatsoever.

Second, even supposing that an unmistakable state of maturity be
reached, transition will still require distinct action and still present
a number of problems.

The capitalist process shapes things and souls for socialism. In the
limiting case it might do this so completely that the final step would
not be more than a formality. But even then the capitalist order
would not of itself turn into the socialist order; such a final step, the
official adoption of socialism as the community’s law of life, would
still have to be taken, say, in the form of a constitutional amendment.
In practice however people will not wait for the limiting case to
emerge. Nor would it be rational for them to do so, for maturity may
to all intents and purposes be reached at a time when capitalist in-
terests and attitudes have not yet completely vanished from every
nook and cranny of the social structure. And then the passing of the
constitutional amendment would be more than a formality. There
would be some resistance and some difficulties to overcome. Before
considering these, let us introduce another distinction.

Fundamentally, things and souls shape themselves for socialism
automatically, i.e., independently of anyone’s volition and of any
measures taken to that effect. But among other things that process
also produces such volition and hence such measures — enactments,
administrative actions and so on. The sum total of these measures is
part of the policy of socialization which therefore must be thought of
as covering a long stretch of time, at all events many decades. But

Transition

221

its history naturally divides into two segments separated by the act of
adopting and organizing the socialist regime. Before that act, the
policy of socialization is — ^no matter whether intentionally or unin-
tentionally — ^preparatory, after that act it is constitutive. The former
segment will come in for only a short discussion at the end of this
chapter. Now we are going to concentrate on the latter.

II. Socialization in a State of Maturity

In the case of mature socialization the difficulties with which it
will be the first task of “socialization after the act” to deal are not
only not insurmountable but not even very serious. Maturity implies
that resistance will be weak and that cooperation will be forthcoming
from the greater part of all classes — one symptom of which will be
precisely the possibility of carrying adoption by a constitutional
amendment, i.e., in a peaceful way without a break in legal continuity.
Ex hypothesi people will understand the nature of the step and even
most of those who do not like it will give it a tolerari posse. Nobody
will be bewildered or feel that the world is crashing about his ears.

Even so, of course, it is not entirely oft the cards that there might
be revolution. But there is not much danger of this. Not only will
complete or approximate absence of organized resistance on the one
hand and of violent excitement on the other reduce the opportunity
for a revolutionary drive, but also there will be a group of experienced
and responsible men ready to put their hands to the helm, both able
and willing to keep up discipline and to use rational methods that
will minimize the shock. They will be assisted by well-trained public
and business bureaucracies which are in the habit of accepting orders
from the legal authority whatever it is and who are not very partial
to capitalist interests anyway.

To begin with, we will simplify the transitional problems before the
new ministry or central board in the same way in which we have
already simplified their permanent problems, i.e., by assuming that
they will leave farmers substantially alone. This will not only elimi-
nate a difficulty that might well prove fatal — for nowhere else is the
property interest so alive as it is among farmers or peasants; the
agrarian world is not everywhere peopled by Russian peasants — ^but
also bring additional support, for nobody hates large-scale industry
and the specifically capitalist interest as much as the farmer does.
The board may also be expected to conciliate small men of other
types: around the socialized industries the small craftsman might, for
a time at least, be allowed to do his jobs for profit, and the small
independent retailer to sell as the tobacconist does today in countries
where tobacco and tobacco products are monopolized by the state.
On the other end of the scale, the personal interests of the man
whose work counts individually — the executive type, let us say —

222

Can Socialism Work?

could easily be taken care of, on the lines indicated before, so as to
avoid any serious hitch in the running of the economic engine. Drastic
assertion of equalitarian ideals of course might spoil everything.

What about the capitalist interest? In the fullness of time, as indi-
cated above, we may roughly equate it to the interest of stock and
bond holders — the latter standing also for holders of mortgages and
insurance policies. For the socialist who knows nothing except the
Holy Writ and who thinks of this group as composed of a small num-
ber of immensely rich idlers there would be a surprise in store: at
maturity this group might possibly comprise a majority of the elec-
torate which then would look with little favor on proposals for the
confiscation of their claims however small individually. But never
mind whether or not the socialist regime could or “should'* expropri-
ate them without indemnity. All that matters to us is that it would
be under no economic necessity to do so and that, if it should decide
for confiscation, this would be the community's free choice, in obe-
dience, say, to the ethical principles it might adopt, and not because
there is no other way. For payment of the interest on bonds and
mortgages as far as owned by individuals plus payment of claims from
insurance contracts plus payment, in lieu of dividends, of interest on
bonds to be issued to former stockholders by the central board — so
that these stockholders while losing their voting power would still
retain an income roughly equal to a suitably chosen average of past
dividends — ^would not, as a glance at the relevant statistics will show,
constitute an unbearable burden. So far as the socialist commonwealth
continues to make use of private savings it obviously might be policy
to shoulder it. Limitation in time could be achieved either by turn-
ing all these payments into terminable annuities or else by an appro-
priate use of income and inheritance taxes that might thus render
their last service before disappearing forever.

This, I think, sufficiently characterizes a feasible method of “social-
ization after the act'’ that, under the circumstances envisaged, might
be expected to perform the task of transition firmly, safely and gently
with a minimum of loss of energy and of injury to cultural and eco-
nomic values. The managements of large-scale concerns would be
replaced only in cases in which there are specific reasons for replace-
ment. If at the moment of transition there are still private partner-
ships among the firms to be socialized, they would be first transformed
into companies and then socialized in the same way as others. Founda-
tion of new firms would of course be prohibited. The structure of
intercorporate relations — ^holding companies in particular — ^would be
rationalized, i.e., reduced to those relations that serve administrative
efficiency. Banks would all be turned into branch offices of the central
institution and in this form might still retain not only some of their
mechanical functions — ^part at least of the social bookkeeping would

Transition

223

almost necessarily devolve upon them — but possibly also some power
over industrial managements that might take the form of power to
grant and to refuse ‘‘credits”; if so, the central bank might be left
independent of the ministry of production itself and become a sort
of general supervisor.

Thus, the central board going slowly at first and gradually taking
up the reins without a jerk, the economic system would have time to
settle down and find its bearings while the minor problems incident
to transition could be solved one by one. Little adjustment of pro-
duction would be necessary at the beginning — a matter of 5 per cent
of total output at the outside. For unless equalitarian ideas assert
themselves much more strongly than I have assumed, the structure of
demand will not be very materially affected. Transfer of men, lawyers
for instance, to other employments would, it is true, be on a some-
what larger scale because there are functions to be served in capitalist
industry which will no longer have to be served in the socialist econ-
omy. But this too would not create any serious difficulty. The larger
problems of the elimination of subnormal units of production, of
further concentration on the best opportunities, of locational rationali-
zation with the incidental redistribution of the population, of stand-
ardization of consumers’ and producers’ goods and so on would or, at
all events, need not emerge before the system has digested the organic
change and is running smoothly on the old lines. Of socialism of this
type it may without absurdity be expected that it would in time realize
all the possibilities of superior performance inherent in its blueprint.

III. Socialization in a State of Immaturity

1. No such prognosis is possible in the second case, the case of
premature adoption of the principle of socialism. It may be defined
as transition from the capitalist to the socialist order occurring at a
time when it has become possible for socialists to gain control of the
central organs of the capitalist state while nevertheless both things
and souls are as yet unprepared. We are not, let me repeat, going to
discuss situations so immature that the hope of success would seem
fantastic to any sane person and the attempt at conquering power
could not be more than a ridiculous Putsch, Hence I am not going to
argue that immature socialization must unavoidably end in complete
discomfiture or that the resulting arrangement is bound to break
down. I am still envisaging fettered capitalism of the present-day
type with reference to which the problem can at least be reasonably
raised. In such a setting it is even likely to be raised sooner or later.
The long-run situation becomes more and more favorable to socialist
ambitions. It is still more importaijit that short-run situations may
occur — the German situation in 19 18 and 1919 is a good example;
some people would also point to th| American situation in 1932 — ^in

Gan ScM:ialism Work?

^24

which temporary paralysis of the capitalist strata and their organs
offers tempting opportunities.

2. Just what this unpreparedness or immaturity of things and souls
means, the reader can easily realize by turning to the picture of a
mature situation that has been drawn a few pages back. Nevertheless
I wish to add a few touches for the particular case of this country in
1932.

A period of vigorous — though, in terms of rates of change, not
abnormal — industrial activity had preceded a depression the very
violence of which testified to the extent of the necessary adjustments
to the results of “progress.'’ That progress, in the leading lines, was
obviously not completed — it is enough to point to the fields of rural
electrification, of the electrification of the household, to all the new
things in chemistry and to the possibilities opening up in the building
industry. Hence considerable loss in entrepreneurial energy, in pro-
ductive efficiency and in the future welfare of the masses could have
been confidently predicted from bureaucratizing socialization. It is
amusing to realize that the general opinion which in the hysteria of
the depression the intellectuals of socialist leanings were able to impart
to the public was exactly the opposite. This however is more germane
to the diagnosis of the social psychology of that situation than to its
economic interpretation.

Immaturity also showed in the industrial and commercial organiza-
tion. Not only was the number of small and medium-sized firms still
very considerable and their cooperation in trade associations and so
on far from perfect, but the development of big business itself, though
the subject of much uncritical wonder and hostility, had not gone
nearly far enough to make it safe and easy to apply our method of
socialization. If we draw the line of large-scale business at firms having
50 million dollars of assets, then only 53.3 per cent of the national
total was owned by large corporations, only 36.2 per cent if we exclude
finance and public utilities and only 46.3 per cent in the division of
manufactures.^ But corporations smaller than this will not in general
lend themselves easily to socialization and cannot be expected to work
on under it in their existing form. If nevertheless we descend to a
lo-million-dollar limit, we still find no more than 67.5, 52.7 and 64.5
per cent, respectively. The mere task of “taking over" an organism
structured like this would have been formidable. The still more for-
midable task of making it function and of improving it would have
had to be faced without an experienced bureaucracy and with a labor
force so imperfectly organized and, in part, so questionably led as to
be likely to get out of hand.

Souls were still more unprepared than things. In spite of the shock

^See W. L. Crum, "’Concentration of Corporate Control,” Journal of Business,
voL viii, p. 275.

Transition

225

imparted by the depression, not only business people but a very large
part of the workmen and farmers thought and felt in the terms of
the bourgeois order and did not really have a clear conception of any
alternative; for them the conception of socialization and even of
much less than this was still *'un-American/' There was no efficient
socialist party, in fact no quantitatively significant support for any
of the official socialist groups excepting the communists of Stalinist
persuasion. The farmers disliked socialism, though every trouble was
taken to reassure them, only a shade less than they disliked big busi-
ness in general or railroads in particular. While support would have
been weak and much of it either blatantly interested or else luke-
warm, resistance would have been strong. It would have been the
resistance of people who honestly felt that what they were doing
nobody, least of all the state, could do as well and that in resisting
they were fighting not for their interests only but also for the common
good — for the absolute light against absolute darkness. The American
bourgeoisie was losing its vitality but had not lost it completely. It
would have resisted with a clear conscience and would have been in a
position to refuse both assent and cooperation. One symptom of the
situation would have been the necessity to use force not against iso-
lated individuals but against groups and classes; another would have
been the impossibility of carrying adoption of the socialist principle
by constitutional amendment, i.e., without break in legal continuity:
the new order would have had to be established by revolution, more
likely than not by a sanguinary one. This particular example of an
immature situation may be open to the objection that it comes within
the category of absurdly hopeless cases. But the picture combines and
illustrates the main features presented by every immature socializa-
tion and will hence serve for the purposes of a discussion of the
general case.

This case is of course the one contemplated by orthodox socialists,
most of whom would be unable to put up with anything less fascinat-
ing than the spectacular slaying of the capitalist dragon by the prole-
tarian St. George. It is not however because of that unfortunate
survival of early bourgeois revolutionary ideology that we are going
to survey the consequences which follow from the combination of
political opportunity and economic unpreparedness but because the
problems characteristic of the act of socialization as usually under-
stood arise only in this case.

3. Suppose then that the Revolutionary People — in the Bolshevist
Revolution this became a sort of official title like Most Christian.
King — ^have conquered the central offices of the government, the non-
socialist parties, the non-socialist press, etc., and installed their men.
The personnel of these offices as well as the personnel of the indus-
trial and commercial concerns is partly goaded into — ex hypothesi —

Can Socialism Work?

unwilling cooperation and partly replaced by the labor leaders and
by the intellectuals who rush from the cafe to these oifices. To the
new central board we shall concede two things: a red army strong
enough to quell open resistance and to repress excesses — ^wild sociali-
:^ations in particular^ — by firing impartially to right and left, and
sense enough to leave peasants or farmers alone in the way indicated
above. No assumption is made as to the degree of rationality or hu-
manity in the treatment dealt out to the members of what had been
the ruling strata. In fact, it is difficult to see how any but the most
ruthless treatment could be possible under the circumstances. People
who know that their action is felt to be nothing else but vicious ag-
gression by their opponents and that they are in danger of meeting
the fate of Karl Liebknecht and Rosa Luxemburg will soon be
driven to courses violent beyond any original intention. They will
hardly be able to help behaving with criminal ferocity toward oppo-
nents whom they will look upon as ferocious criminals — those oppo-
nents that still stand for the old order and those opponents that form
the new leftist party which cannot fail to emerge. Neither violence nor
sadism will solve problems however. What is the central board to do
except complain about sabotage and call for additional powers in
order to deal with conspirators and wreckers?

The first thing which must be done is to bring about inflation. The
banks must be seized and combined or coordinated with the treasury,
and the board or ministry must create deposits and banknotes using
traditional methods as much as possible. I believe inflation to be
unavoidable because I have still to meet the socialist who denies that
in the case under discussion the socialist revolution would at least
temporarily paralyze the economic process or that in consequence the
treasury and the financial centers would for the moment be short of
ready means. The socialist system of bookkeeping and income units
not iDeing as yet in working order, nothing remains except a policy
analogous to that of Germany during and after the First World War or
that of France during and after the revolution of 1789, notwithstand-
ing the fact that in those cases it was precisely the unwillingness to
break with the system of private property and with the methods of
commercial society that enforced inflation for so considerable a time;
for "'the day after the socialist revolution” when nothing would be in
shape, this difference does not matter.

It should be added however that besides necessity there is another
motive to embark upon this course. Inflation is in itself an excellent
means of smoothing certain transitional difficulties and of effecting
partial expropriation. As regards the first, it is for instance evident

2 Wild socializations — a term that has acquired official standing — ^are attempts by
the workmen of each plant to supersede the management and to take matters into
their own hands. They are the nightmare of every responsible socialist.

Transition

SS7

that a drastic increase in money wage rates will for a time avail to
ward off possible outbreaks of rage at the fall in real wage rates that,
temporarily at least, would have to be imposed. As regards the second,
inflation expropriates the holder of claims in terms of money in a
delightfully simple way. The board might even make matters easier
for itself by paying owners of real capital — ^factories and so on — any
amount of indemnities if it resolves at the same time that these shall
become valueless before long. Finally, it must not be forgotten that
inflation would powerfully ram such blocks of private business as
may have to be left standing for the moment. For, as Lenin has pointed
out, nothing disorganizes like inflation: “in order to destroy bourgeois
society you must debauch its money.’*

4. The second thing to do is of course to socialize. Discussion of
transitional problems starts from the old controversy waged among
socialists themselves — ^more precisely between socialists and what are
more properly called laborites — on full or one-stroke versus partial or
gradual socialization. Many socialists seem to think it due to the purity
of the Faith and the true belief in the efficacy of the socialist grace
to champion the former under any circumstances and to despise weak-
kneed laborites who on this point as on others are much hampered
by most inconvenient traces of a sense of responsibility. But I am
going to vote for the true believers.^ We are not now discussing
transitional policy in a capitalist system; that is another problem to
be touched upon presently when we shall see that gradual socializa-
tion within the framework of capitalism is not only possible but even
the most obvious thing to expect. We are discussing the completely
different transitional policy which is to be pursued after a socialist
regime has been set up by a political revolution.

In this case, even if there be no more than the inevitable minimum
of excesses and if a strong hand impose comparatively orderly pro-
cedure, it is difficult to imagine a stage in which some of the great
industries are socialized whereas others are expected to work on as
if nothing had happened. Under a revolutionary government which
would have to live up to at least some of the ideas propagated in the
days of irresponsibility, any remaining private industries may well
cease to function. I am not thinking primarily of the obstruction that
might be expected from the entrepreneurs and from capitalist interests
in general. Their power is being exaggerated now and would largely
cease to exist under the eyes of commissars. And it is not the bourgeois
way to refuse to fulfill current duties; the bourgeois way is to cling
to them. Resistance there would be, but it would be resistance in the
political sphere and outside of the factory rather than resistance within

» Scripture does not support them clearly however. If the reader will look up the
Communist Manifesto he will find a most disconcerting “by degrees'* planted right
in the most relevant passage.

Can Socialism Work?

22S

it. Unsodalized industries would cease to function simply because they
would be prevented from functioning in their own way — the only one
in which capitalist industry can function — by the supervising com-
missars and by the humor of both their workmen and the public.

But this argument covers only the cases of large-scale industries and
of those sectors which can be easily molded into large-scale units of
control. It does not completely cover all the ground between the
agrarian sphere which we have excluded and the large-scale indus-
tries. On that ground, consisting mainly of small or medium-sized
business, the central board could presumably maneuver as expediency
might dictate and in particular advance and retire according to
changing conditions. This would still be full socialization within our
meaning of the term.

One point remains to be added. It should be obvious that socializa-
tion in any situation immature enough to require revolution not only
in the sense of a break in legal continuity but also in the sense of a
subsequent reign of terror cannot benefit, either in the short or in the
long run, anyone except those who engineer it. To work up enthusiasm
about it and to glorify the courage of risking all that it might entail
may be one of the less edifying duties of the professional agitator. But
as regards the academic intellectual, the only courage that can possibly
reflect any credit on him is the courage to criticize, to caution and to
restrain.

IV. Socialist Policy Before the Act; the English Example

But must we really conclude that, now and for another fifty or one
hundred years, serious socialists cannot do anything except to preach
and wait? Well, the fact that this is more than can be expected of any
party that wants to keep any members, and all the arguments — and
sneers — that flow from this all-too-human source, should not be allowed
to blot out the other fact that there is a weighty argument for this
conclusion. It might even be argued quite logically that socialists
have an interest to further the development that works for them,
hence to unfetter capitalism rather than to fetter it still more.

I do not think however that this means there is nothing for socialists
to do, at all events under the conditions of our own time. Though at-
tempts to establish socialism now would, for most of the great nations
and many small ones, undoubtedly amount to courting failure — ^fail-
ure of socialism as such perhaps, but certainly failure of the socialist
groups responsible for the plunge, while another group not necessarily
socialist in the usual sense might then easily walk away with their
clothes — and though in consequence a policy of socialization after the
act probably is a very doubtful matter, a policy of socialization before
the act offers much better chances. Like other parties, but with a
clearer perception of the goal, socialists can take a hand in it without

Transition 229

compromising ultimate success. All that I wish to say on this question
will stand out best in the garb of a particular example.

All the features we could wish our example to display are presented
by modern England. On the one hand, her industrial and commercial
structure is obviously not ripe for successful one-stroke socialization,
in particular because concentration of corporate control has not gone
far enough. In conformity with this, neither managements nor capital-
ists nor workmen are ready to accept it — there is a lot of vital “indi-
vidualism'' left, enough at any rate to put up a fight and to refuse
cooperation. On the other hand there has been, roughly since the be-
ginning of the century, a perceptible slackening of entrepreneurial
effort which among other things produced the result that state leader-
ship and state control in important lines, production of electric power
for instance, have been not only approved but demanded by all parties.
With more justice than anywhere else it might be argued that capital-
ism has done by far the greater part of its work. Moreover, English peo-
ple on the whole have become state-broken by now. English workmen
are well organized and as a rule responsibly led. An experienced bu-
reaucracy of irreproachable cultural and moral standards could be
trusted to assimilate the new elements required for an extension of the
sphere of the state. The unrivaled integrity of the English politician
and the presence of a ruling class that is uniquely able and civilized
make many things easy that would be impossible elsewhere. In particu-
lar this ruling group unites in the most workable proportions adher-
ence to formal tradition with extreme adaptability to new principles,
situations and persons. It wants to rule but it is quite ready to rule on
behalf of changing interests. It manages industrial England as well as
it managed agrarian England, protectionist England as well as free-
trade England. And it possesses an altogether unrivaled talent for ap-
propriating not only the programs of oppositions but also their brains.
It assimilated Disraeli who elsewhere would have become another Las-
salle. It would have, if necessary, assimilated Trotsky himself or rather,
as in that case he would assuredly have been, the Earl of Prinkipo K.G.

In such conditions a policy of socialization is conceivable that, by
carrying out an extensive program of nationalization, might on the
one hand accomplish a big step toward socialism and, on the other
hand, make it possible to leave untouched and undisturbed for an in-
definite time ail interests and activities not included in that program.
In fact, these could be freed from many fetters and burdens, fiscal
and other, which hamper them now.

The following departments of business activity could be socialized
without serious loss of efficiency or serious repercussions on the depqirt-
ments that are to be left to private management. The question of in-
demnities could be settled on the lines suggested in our discussion of

Can Socialism Work?

^30

mature socialization; with modern rates of income tax and death
duties this would not be a serious matter.

First the banking apparatus of England is no doubt quite ripe for
socialization. The Bank of England is little more than a treasury de-
partment, in fact less independent than a well-ordered socialist com-
munity may well wish its financial organ to be. In commercial bank-
ing, concentration and bureaucratization seem to have done full work.
The big concerns could be made to absorb as much of independent
banking as there is left to absorb and then be merged with the Bank
of England into the National Banking Administration, which could
also absorb savings banks, building societies and so on without any
customer becoming aware of the change except from his newspaper.
The gain from rationalizing coordination of services might be sub-
stantial. From the socialist standpoint, there would also be a gain in
the shape of an increase in the government’s influence on non-national-
ized sectors.

Second, the insurance business is an old candidate for nationaliza-
tion and has to a large extent become mechanized by now. Integra-
tion with at least some of the branches of social insurance may prove
feasible; selling costs of policies could be considerably reduced and
socialists might again rejoice in the access of power that control over
the funds of insurance companies would give to the state.

Third, few people would be disposed to make great difficulties over
railroads or even over trucking. Inland transportation is in fact the
most obvious field for successful state management.

Fourth, nationalization of mining, in particular coal mining, and
of the coal and tar products down to and including benzol, and also
of the trade in coal and in those products might even result in an
immediate gain in efficiency and prove a great success if labor prob-
lems can be dealt with satisfactorily. From the technological and
commercial standpoint, the case seems clear. But it seems equally
clear that, private enterprise having been active in the chemical in-
dustry, no such success can with equal confidence be expected from
an attempt to go beyond the limit indicated.

Fifth, the nationalization of the production, transmission and distri-
bution of electric current being substantially completed already, all
that remains to be said under this head is that the electro-technical
industry is a typical instance of what may still be expected from pri-
vate enterprise — ^which shows how little sense, economically speaking,
there is in standing either for general socialization or against any. But
the case of power production also shows the difficulty of working a
socialized industry for profit which nevertheless would be an essential
condition of success if the state is to absorb so great a part of the
nation’s economic life and still fulfill all the tasks of the modern
state.

Transition

231

Sixth, socialization of the iron and steel industry will be felt to be
a much more controversial proposition than any made so far. But
this industry has certainly sown its wild oats and can be “adminis-
tered’' henceforth — the administration including, of course, a huge
research department. Some gains would result from coordination. And
there is hardly much danger of losing the fruits of any entrepreneurial
impulses.

Seventh, with the possible exception of the architects' share in the
matter, the building and building material industries could, I believe,
be successfully run by a public body of the right kind. So much of it
already is regulated, subsidized and controlled in one way or another
that there even might be a gain in efficiency — more than enough, per-
haps, to compensate for the sources of loss that might be opened up.

This is not necessarily all. But any step beyond this program would
have to justify itself by special, mostly non-economic reasons — the
armament or key industries, movies, shipbuilding, trade in foodstuffs
being possible instances. At any rate, those seven items are enough
to digest for quite a time to come, enough also to make a responsible
socialist, if he gets so much done, bless his work and accept the con-
cessions that it would at the same time be rational to make outside of
the nationalized sector. If he insists also on nationalizing land — leav-
ing, I suppose, the farmer's status as it is — i.e., transferring to the state
all that remains of ground rents and royalties, I have no objection to
make as an economist.^

The present war will of course alter the social, political and eco-
nomic data of our problem. Many things will become possible, many
others impossible, that were not so before. A few pages at the end of
this book will briefly deal with this aspect. But it seems to me essential,
for the sake of clarity of political thought, to visualize the problem
irrespective of the effects of the war. Otherwise its nature can never
stand out as it should. Therefore I leave this chapter, both in form
and in content, exactly as I wrote it in the summer of 1938.

^This is no place for airing personal preferences. Nevertheless I wish it to be
understood that the above statement is made as a matter of professional duty
and does not imply that I am in love with that proposal which, were I an Eng-
lishman, I should on the contrary oppose to the best of my ability.

PART IV

Socialism and Democracy

CHAPTER XX

THE SETTING OF THE PROBLEM

I. The Dictatorship of the Proletariat

N othing is so treacherous as the obvious. Events during the past
twenty or twenty-five years have taught us to see the problem
that lurks behind the title of this part. Until about 1916 the relation
between socialism and democracy would have seemed quite obvious
to most people and to nobody more so than to the accredited expo-
nents of socialist orthodoxy. It would hardly have occurred to anyone
to dispute the socialists’ claim to membership in the democratic club.
Socialists themselves of course — except a few syndicalist groups — even
claimed to be the only true democrats, the exclusive sellers of the
genuine stuff, never to be confused with the bourgeois fake.

Not only was it natural for them to try to enhance the values of
their socialism by the values of democracy; but they had also a theory
to offer that proved to their satisfaction that the two were indissolubly
wedded. According to this theory, private control over the means of
production is at the bottom both of the ability of the capitalist class
to exploit labor and of its ability to impose the dictates of its class
interest upon the management of the political affairs of the com-
munity; the political power of the capitalist class thus appears to be
but a particular form of its economic power. The inferences are, on
the one hand, that there cannot be democracy so long as that power
exists — that mere political democracy is of necessity a sham — and, on
the other hand, that the elimination of that power will at the same
time end the “exploitation of man by man” and bring about the
“rule of the people.”

This argument is essentially Marxian of course. Precisely because
it follows logically — tautologically in fact — from the definitions of
terms in the Marxian schema, it will have to share the fate of the
latter and in particular the fate of the doctrine of “exploitation of
man by man.”^ What seems to me a more realistic analysis of the re-
lation between socialist groups and the democratic creed will presently
be offered. But we also want a more realistic theory of the relation
that may exist between socialism and democracy themselves, that is
to say, of the relation that may exist, independently of wishes and

J^The fact that individual and group-wise power cannot be defined in purely
economic terms — as Marx’s theory of social classes defines it — is however a still
more fundamental reason why this argument is inacceptable.

235

Socialism and Democracy

slogans, between the socialist order as we have defined it and the
modus operandi of democratic government. In order to solve this
problem we must first inquire into the nature of democracy. Another
point however calls for immediate clarification.

Socialism in being might be the very ideal of democracy. But social-
ists are not always so particular about the way in which it is to be
brought into being. The words Revolution and Dictatorship stare
us in the face from sacred texts, and many modern socialists have still
more explicitly testified to the fact that they have no objection to
forcing the gates of the socialist paradise by violence and terror which
are to lend their aid to more democratic means of conversion. Marx's
own position concerning this matter is no doubt capable of an inter-
pretation that will clear him in the eyes of democrats. In Part I it
was shown how his views on revolution and evolution may be recon-
ciled. Revolution need not mean an attempt by a minority to impose
its will upon a recalcitrant people; it may mean no more than the
removal of obstructions opposed to the will of the people by outworn
institutions controlled by groups interested in their preservation. The
dictatorship of the proletariat will bear a similar interpretation. In
support, I may again point to the wording of the relevant passages
in the Communist Manifesto where Marx talks about wresting things
from the bourgeoisie “by degrees" and about the disappearance of
class distinctions “in the course of development" — phrases which, the
emphasis on “force" notwithstanding, seem to point toward a pro-
cedure that might come within the meaning of democracy as ordinarily
understood.^

But the grounds for this interpretation, which all but reduces the
famous social revolution and the no less famous dictatorship to agi-
tatorial flourishes intended to fire the imagination, are not quite
conclusive. Many socialists who were, and many others who declared
themselves to be, disciples of Marx were of a different opinion. Yield-
ing to the authority of the true scribes and pharisees who should
know the Law better than I do, and to an impression based upon
perusal of the volumes of the Neuc Zeit, I must admit the possibility
that, if he had had to choose, Marx might have put socialism above
the observance of democratic procedure.

In that case he would no doubt have declared, as so many have
done after him, that he was not really deviating from the truly demo-
cratic path because in order to bring true democracy to life it is
necessary to remove the poisonous fumes of capitalism that asphyxiate
it. Now for the believer in democracy, the importance of observing
democratic procedure obviously increases in proportion to the im-
portance of the point at issue. Hence its observance never needs to

-2 In ch. XXV I shall return to the question of how the problem of democracy
presented itself to Marx personally.

The Setting of the Problem 237

be more jealously watched and more carefully safeguarded by all
available guarantees than in the case of fundamental social reconstruc-
tion. Whoever is prepared to relax this requirement and to accept
either frankly undemocratic procedure or some method of securing
formally democratic decision by undemocratic means, thereby proves
conclusively that he values other things more highly than he values
democracy. The thoroughgoing democrat will consider any such re-
construction as vitiated in its roots, however much he might approve
of it on other grounds. To try to force the people to embrace some-
thing that is believed to be good and glorious but which they do not
actually want — even though they may be expected to like it when
they experience its results — is the very hall mark of anti-democratic
belief. It is up to the casuist to decide whether an exception may be
made for undemocratic acts that are perpetrated for the sole purpose
of realizing true democracy, provided they are the only means of doing
so. For this, even if granted, does not apply to the case of socialisrn
which, as we have seen, is likely to become democratically possible
precisely when it can be expected to be practically successful.

In any case however it is obvious that any argument in favor of
shelving democracy for the transitional period affords an excellent
opportunity to evade all responsibility for it. Such provisional ar-
rangements may well last for a century or more and means are avail-
able for a ruling group installed by a victorious revolution to prolong
them indefinitely or to adopt the forms of democracy without the
substance.

II. The Record of Sociaust Parties

As soon as we turn to an examination of the records of socialist
parties, doubts will inevitably arise about the validity of their con-
tention that they have uniformly championed the democratic creed.

In the first place, there is the great socialist commonwealth that is
ruled by a party in a minority and does not offer any chance to any
other. And the representatives of that party, assembled in their eight-
eenth congress, listened to reports and unanimously passed resolutions
without anything resembling what we should call a discussion. They
wound up by voting — as officially stated — that ‘‘the Russian people [?],
in unconditional devotion to the party of Lenin-Stalin and to the
great Leader, accept the program of the grand works which has been
sketched in that most sublime document of our epoch, the report of
comrade Stalin, in order to fulfill it unwaveringly"' and that “our
Bolshevik Party enters, under the leadership of the genius of the
great Stalin, upon a new phase of development.”^ That, and single-

8 1 do not know Russian. The above passages have been translated faithfully
from the German newspaper that used to be published in Moscow and are open
to possible objections against its translation of the Russian text, though that news-

238 Socialism and Democracy

candidate elections, complemented by demonstration trials and GPU
methods, may no doubt constitute '‘the most perfect democracy in the
world,’' if an appropriate meaning be assigned to that term — ^but it is
not exactly what most Americans would understand by it.

Yet in essence and principle at least, this commonwealth is a social-
ist one, and so were the short-lived creations of this type of which
Bavaria and especially Hungary were the scenes. Now there are no
doubt socialist groups which to this day consistently keep to what
in this country is meant by Democratic Ideals; they include for in-
stance the majority of English socialists, the socialist parties in Bel-
gium, the Netherlands and the Scandinavian countries, the American
party led by Mr. Norman Thomas, and German groups in exile. From
their standpoint as well as from the standpoint of the observer it is
tempting to deny that the Russian system constitutes '‘true” socialism
and to hold that, in this respect at least, it is an aberration. But what
does “true” socialism mean except “the socialism which we like”?
Hence what do such statements signify except recognition of the fact
that there are forms of socialism which do not command the allegiance
of all socialists and which include non-democratic ones? That a
socialist regime may be non-democratic is indeed undeniable, as we
have seen before, on the purely logical ground that the defining
feature of socialism does not imply anything about political procedure.
As far as that goes the only question is whether and in what sense it
can be democratic.

In the second place, those socialist groups that have consistently
upheld the democratic faith never had either a chance or a motive
for professing any other. They lived in environments that would have
strongly resented undemocratic talk and practice and in fact always
turned against syndicalists. In some cases they had every reason to
espouse democratic principles that sheltered them and their activity.
In other cases most of them were satisfied with the results, political
and other, that advance on democratic lines promised to yield. It is
easy to visualize what would have happened to the socialist parties
of, say, England or Sweden if they had displayed serious symptoms
of anti-democratic propensities. They at the same time felt that they
were steadily growing in power and that responsible office was slowly
coming to them of itself. When it came, it satisfied them. Thus; in
professing allegiance to democracy, they simply did the obvious thing
all along. The fact that their policy did not give pleasure to Lenin
does not prove that, had he been situated as they were, he would
have behaved differently. In Germany where the party developed still
better but where until 1918 the avenue to political responsibility
seemed to be blocked, socialists, facing a strong and hostile state and

paper was of course in no position to publish anything that was not fully ap-
proved by the authorities.

The Setting of the Problem 239

having to rely for protection on bourgeois sympathies and on the
power of trade unions that were at best semi-socialistic, were still
less free to deviate from the democratic creed, since by doing so they
would only have played into the hands of their enemies.^ To call
themselves social democrats was for them a matter of common pru-
dence.

But, in the third place, the test cases that turned out favorably
are few and not very convincing.^ It is true in a sense that in 1918
the Social Democratic party of Germany had a choice, that it decided
for democracy, and (if this is a proof of democratic faith) that it put
down the communists with ruthless energy. But the party split on the
issue. It lost heavily from its left wing and the seceding dissenters
have more, not less, claim to the badge of socialism than those who
stayed. Many of the latter moreover, though submitting to party
discipline, disapproved. And many of those who approved did so
merely on the ground that, from the summer of 1919 at least, chances
of succeeding in more radical (i.e., in this case, anti-democratic)
courses had become negligible and that, in particular, a leftist policy
in Berlin would have meant serious danger of secession in the Rhine-
land and the countries south of the Main even if it had not met smash-
ing defeat immediately. Finally, to the majority, or at all events to
the trade-union element in it, democracy gave everything they really
cared for, including office. They had no doubt to share the spoils
with the Centrist (Catholic) party. But the bargain was satisfactory to
both. Presently the socialists did indeed become vociferously demo-
cratic. This however was when an opposition associated with an
anti-democratic creed began to rise against them.

I am not going to blame German Social Democrats for the sense
of responsibility they displayed or even for the complacency with
which they settled down in the comfortable armchairs of officialdom.
The second is a common human failing, the first was entirely to their
credit as I shall try to show in the last part of this book. But it takes
some optimism to cite them as witnesses for the unswerving allegiance
of socialists to democratic procedure. Nor can I think of any better
test case — unless indeed we agree to accept the Russian and Hungarian
cases both of which present the crucial combination of a possibility
of the conquest of power with the impossibility of doing so by dem-
ocratic means. Our difficulty is well illustrated by the Austrian case,
the importance of which is enhanced much beyond the importance of
the country by the exceptional standing of the leading (Neo-Marxist)
group. The Austrian socialists did adhere to democracy in 1918 and

^ These situations will be more fully discussed in Part V.

5 We are going to confine ourselves to the attitudes of socialist parties in national
politics. Their practice and that of trade unions concerning non-socialist or non-
union workmen is of course still less convincing.

240 Socialism and Democracy

1919 when it was not yet, as it soon afterwards became, a matter of
self-defense. But during the few months when monopolization of
power seemed within their reach, the position of many of them was
not unequivocal. At that time Fritz Adler referred to the majority
principle as the fetishism of the “vagaries of arithmetics'' (Zufall der
Arithmetik) and many others shrugged their shoulders at democratic
rules of procedure. Yet these men were regular party members and
not communists. When bolshevism ruled in Hungary, the question of
the course to choose became burning. Nobody can have followed the
discussion of that epoch without realizing that the sense of the party
was not badly rendered by the formula: “We do not particularly
relish the prospect of having to go left [= adopt soviet methods]. But
if go we must, then we shall go all of us.”^ This appraisal both
of the country’s general situation and of the party danger was emi-
nently reasonable. So was the inference. Ardent loyalty to democratic
principles, however, was not conspicuous in either. Conversion came
to them eventually. But it did not come from repentance, it came in
consequence of the Hungarian counter-revolution.

Please do not think that I am accusing socialists of insincerity or
that I wish to hold them up to scorn either as bad democrats or as
unprincipled schemers and opportunists. I fully believe, in spite of
the childish Machiavellism in which some of their prophets indulge,
that fundamentally most of them always have been as sincere in their
professions as any other men. Besides, I do not believe in insincerity
in social strife, for people always come to think what they want to
think and what they incessantly profess. As regards democracy, socialist
parties are presumably no more opportunists than are any others;
they simply espouse democracy if, as, and when it serves their ideals
and interests and not otherwise. Lest readers should be shocked and
think so immoral a view worthy only of the most callous of political
practitioners, we will at once make a mental experiment that will
at the same time yield the starting point of our inquiry into the
nature of democracy.

III. A Mental Experiment

Suppose that a community, in a way which satisfies the reader’s
criteria of democracy, reached the decision to persecute religious
dissent. The instance is not fanciful. Communities which most of us
would readily recognize as democracies have burned heretics at the
stake — the republic of Geneva did in Calvin’s time — or otherwise per-

« In plain English, this saying of one of the more prominent leaders meant that
they fully realized the risk involved in staging bolshevism in a country entirely
dependent on capitalist powers for its food and with French and Italian troops
practically at its door, but that, if pressure from Russia via Hungary should be-
come too great, they would not split the party but would try to lead the whole
flock into the bolshevik camp.

The Setting of the Problem 241

secuted them in a manner repulsive to our moral standards — colonial
Massachusetts may serve as an example. Cases of this type do not cease
to be relevant if they occur in non-democratic states. For it is naive
to believe that the democratic process completely ceases to work in
an autocracy or that an autocrat never wishes to act according to the
will of the people or to give in to it. Whenever he does, we may con-
clude that similar action would have been taken also if the political
pattern had been a democratic one. For instance, at least the earlier
persecutions of the Christians were certainly approved by Roman
public opinion and presumably would have been no milder if Rome
had been a pure democracy.'^

Witch hunting affords another example. It grew out of the very
soul of the masses and was anything but a diabolical invention of
priests and princes who, on the contrary, suppressed it as soon as they
felt able to do so. The Catholic Church, it is true, punished witch-
craft. But if we compare the measures actually taken with those taken
against heresy, where Rome meant business, we immediately have the
impression that in the matter of witchcraft the Holy See gave in to
public opinion rather than instigated it. The Jesuits fought witch
hunting, at first unsuccessfully. Toward the end of the seventeenth
and in the eighteenth centuries — that is to say, when monarchic abso-
lutism was fully established on the continent — governmental prohi-
bitions eventually prevailed. The curiously cautious way in which so
strong a ruler as the Empress Maria Theresa went about prohibiting
the practice clearly shows that she knew she was fighting the will of
her people.

Finally, to choose an example that has some bearing on modern
issues, anti-Semitism has been one of the most deep-seated of all
popular attitudes in most nations in which there was, relative to total
population, any considerable number of Jews. In modern times this
attitude has in part given way under the rationalizing influence of
capitalist evolution, but enough has remained of it to assure popular
success to any politician who cared to appeal to it. Most of the anti-
capitalist movements of our time other than straight socialism have
in fact learned the lesson. In the Middle Ages however, it is not too
much to say that the Jews owed their survival to the protection of the

^ An example will illustrate the kind of evidence there is for this statement.
Suetonius in his biography of Nero {De vita Caesarum, liber VI) first relates those
acts of the latter’s reign which he, Suetonius, considered to be partly blameless
and partly even commendable {partim nulla reprehensione, partim etiam non
mediocri laude digna) and then his misdeeds (pro bra ac scelera). The Neronian
persecution of the Christians he noted not under the second but under the first
heading in the midst of a list o^ rather meritorious administrative measures
(afflicti suppUciis Christiani, genus hominum superstitionis novm ac maleficee). There
is no reason to suppose that Suetonius expressed anything but the opinion (and,
by inference, the will) of the people. In fact it is not far-fetched to suspect that
Nero’s motive was to nlease the neoDle.

24 -Z Socialism and Democracy

church and of the princes who sheltered them in the face of popular
opposition and in the end emancipated them.®

Now for our experiment. Let us transport ourselves into a hypo-
thetical country that, in a democratic way, practices the persecution
of Christians, the burning of witches, and the slaughtering of Jews.
We should certainly not approve of these practices on the ground
that they have been decided on according to the rules of demo-
cratic procedure. But the crucial question is: would we approve of
the democratic constitution itself that produced such results in pref-
erence to a non-democratic one that would avoid them? If we do
not, we are behaving exactly as fervent socialists behave to whom
capitalism is worse than witch hunting and who are therefore pre-
pared to accept non-democratic methods for the purpose of suppress-
ing it. As far as that goes we and they are in the same boat. There
are ultimate ideals and interests which the most ardent democrat will
put above democracy, and all he means if he professes uncompromis-
ing allegiance to it is that he feels convinced that democracy will
guarantee those ideals and interests such as freedom of conscience
and speech, justice, decent government and so on.

The reason why this is so is not far to seek. Democracy is a political
method^ that is to say, a certain type of institutional arrangement
for arriving at political — ^legislative and administrative — decisions and
hence incapable of being an end in itself, irrespective of what de-
cisions it will produce under given historical conditions. And this
must be the starting point of any attempt at defining it.

Whatever the distinctive trait of the democratic method may be,
the historical examples we have just glanced at teach us a few things
about it that are important enough to warrant explicit restatement.

First, these examples suffice to preclude any attempt at challenging
the proposition just stated, viz., that, being a political method, democ-
racy cannot, any more than can any other method, be an end in
itself. It might be objected that as a matter of logic a method as such
can be an absolute ideal or ultimate value. It can. No doubt one
might conceivably hold that, however criminal or stupid the thing
that democratic procedure may strive to accomplish in a given historical
pattern, the will of the people must prevail, or at all events that it
must not be opposed except in the way sanctioned by democratic
principles. But it seems much more natural in such cases to speak of
the rabble instead of the people and to fight its criminality or stupidity
by all the means at one's command.

Second, if we agree that unconditional allegiance to democracy can

8 The protective attitude of the popes may be instanced by the bull Etsi Judms
(1120) the repeated confirmation of which by the successors of Calixtus II proves
both the continuity of that policy and the resistance it met. The protective atti-
tude of the princes will be readily understood if it be pointed out that expulsions
or massacres of Jews meant loss of much-needed revenue to them.

The Setting of the Problem 243

be due only to unconditional allegiance to certain interests or ideals
which democracy is expected to serve, our examples also preclude the
objection that though democracy may not be an absolute ideal in its
own right, it is yet a vicarious one by virtue of the fact that it will
necessarily, always and everywhere, serve certain interests or ideals
for which we do mean to fight and die unconditionally. Obviously
that cannot be true.® No more than any other political method does
democracy always produce the same results or promote the same in-
terests or ideals. Rational allegiance to it thus presupposes not only
a schema of hyper-rational values but also certain states of society in
which democracy can be expected to work in ways we approve. Prop-
ositions about the working of democracy are meaningless without
reference to given times, places and situations^® and so, of course, are
anti-democratic arguments.

This after all is only obvious. It should not surprise, still less shock,
anyone. For it has nothing to do with the fervor or dignity of demo-
cratic conviction in any given situation. To realize the relative
validity of one’s convictions and yet stand for them unflinchingly is
what distinguishes a civilized man from a barbarian.

IV. In Search of a Definition

We have a starting point from which to proceed with our investi-
gation. But a definition that is to serve us in an attempt to analyze
the relations between democracy and socialism is not yet in sight. A
few preliminary difficulties still bar the outlook.

It would not help us much to look up Aristotle who used the term
in order to designate one of the deviations from his ideal of a well-
ordered commonwealth. But some light may be shed on our difficulties
by recalling the meaning we have attached to the term Political
Method. It means the method a nation uses for arriving at decisions.
Such a method we ought to be able to characterize by indicating
by whom and how these decisions are made. Equating “making de-
cisions” to “ruling,” we might then define democracy as Rule by
the People. Why is that not sufficiently precise?

It is not because it covers as many meanings as there are combi-
nations between all the possible definitions of the concept “people”
(demos, the Roman populus) and all the possible definitions of the
concept “to mle” (kratein), and because these definitions are not in-
dependent of the argument about democracy. As regards the first con-
cept, the populus in the constitutional sense may exclude slaves

®In particular it is not true that democracy will always safeguard freedom of
conscience better than autocracy. Witness the most famous of all trials. Pilate was,
from the standpoint of the Jews, certainly the representative of autocracy. Yet he
tried to protect freedom. And he yielded to a democracy.

i^See below, ch. xxiii.

244 Socialism and Democracy

completely and other inhabitants partially; the law may recognize
any number o£ status between slavery and full or even privileged
citizenship. And irrespective of legal discrimination, diifferent groups
considered themselves as the People at difEerent times.^^

Of course we might say that a democratic society is one that does
not thus differentiate, at least in matters concerning public affairs,
such as the franchise. But, first, there have been nations that practiced
discrimination of the kind alluded to and nevertheless displayed
most of those characteristics which are usually associated with democ-
racy. Second, discrimination can never be entirely absent. For in-
stance, in no country, however democratic, is the right to vote extended
below a specified age. If, however, we ask for the rationale of this
restriction we find that it also applies to an indefinite number of
inhabitants above the age limit. If persons below the age limit are
not allowed to vote, we cannot call a nation undemocratic that for
the same or analogous reasons excludes other people as well. Observe:
it is not relevant whether we, the observers, admit the validity of
those reasons or of the practical rules by which they are made to
exclude portions of the population; all that matters is that the society
in question admits it. Nor should it be objected that, while this may
apply to exclusions on grounds of personal unfitness (e.g., “age of
discretion'’), it does not apply to wholesale exclusion on grounds
that have nothing to do with the ability to make an intelligent
use of the right to vote. For fitness is a matter of opinion and of
degree. Its presence must be established by some set of rules. Without
absurdity or insincerity it is possible to hold that fitness is measured
by one’s ability to support oneself. In a commonwealth of strong
religious conviction it may be held — again without any absurdity
or insincerity — that dissent disqualifies or, in an anti-feminist com-
monwealth, sex. A race-conscious nation may associate fitness with
racial considerations. ^2 And so on. The salient point, to repeat, is not
what we think about any or all of these possible disabilities. The
salient point is that, given appropriate views on those and similar
subjects, disqualifications on grounds of economic status, religion
and sex will enter into the same class with disqualifications which

See, e.g., the definition given by Voltaire in his Letters Concerning the English
Nation (published in English, 1733; reprint of the first edition published by Peter
Davies, 1926, p. 49): '‘the most numerous, the most useful, even the most virtuous,
and consequently the most venerable part of mankind, consisting of those who
study the laws and the sciences; of traders, of artificers, in a word, of all who
were not tyrants; that is, those who are calFd the people.’’ At present “people”
is likely to mean the “masses,” but Voltaire’s concept comes nearer to identifying
that people for which the Constitution of this country was written.

12 Thus the United States excludes Orientals and Germany excludes Jews from
citizenship; in the southern part of the United States Negroes are also often de-
prived of the vote.

^45

The Setting of the Problem

we all of us consider compatible with democracy. We may disapprove
of them to be sure. But if we do so we should in good logic disap-
prove of the theories about the importance of property, religion, sex,
race and so on, rather than call such societies undemocratic. Religious
fervor for instance is certainly compatible with democracy however
we define the latter. There is a type of religious attitude to which a
heretic seems worse than a madman. Does it not follow that the
heretic should be barred from participation in political decisions as
is the lunatic.^^ Must we not leave it to every populus to define
himself?

This inescapable conclusion is usually evaded by introducing addi-
tional assumptions into the theory of the democratic process, some
of which will be discussed in the next two chapters. Meanwhile we
will merely note that it clears much mist from the road. Among other
things it reveals the fact that the relation between democracy and
liberty must be considerably more complex than we are in the habit
of believing.

Still more serious difficulties arise with respect to the second ele-
ment that enters into the concept of democracy, the kratein. The
nature and the modus opemndi of any ‘'rule*' are always difficult to
explain. Legal powers never guarantee the ability to use them yet
are important pegs as well as fetters; traditional prestige always counts
for something but never for everything; personal success and, partly
independent of success, personal weight act and are reacted upon by
both the legal and the traditional components of the institutional
pattern. No monarch or dictator or group of oligarchs is ever abso-
lute. They rule not only subject to the data of the national situation
but also subject to the necessity of acting with some people, of getting
along with others, of neutralizing still others and of subduing the
rest. And this may be done in an almost infinite variety of ways each
of which will determine what a given formal arrangement really means
either for the nation in which it obtains or for the scientific observer;
to speak of monarchy as if it meant a definite thing spells dilettantism.
But if it is the people, however defined, who are to do the kratein,
still another problem emerges. How is it technically possible for
“people” to rule?

There is a class of cases in which this problem does not arise, at
least not in an acute form. In small and primitive communities with
a simple social structure^^ in which there is not much to disagree

13 To the bolshevik any non-bolshevik is in the same category. Hence the rule
of the Bolshevik party would not per se entitle us to call the Soviet Republic un-
democratic. We are entitled to call it so only if the Bolshevik party itself is man-
aged in an undemocratic manner — as obviously it is.

1^ Smallness of numbers and local concentration of the people are essential.
Primitivity of civilization and simplicity of structure are less so but greatly facili-
tate the functioning of democracy.

24.6 Socialism and Democracy

on, it is conceivable that all the individuals who form the people as
defined by the constitution actually participate in all the duties of
legislation and administration. Certain diifficulties may still remain
even in such cases and the psychologist of collective behavior would
still have something to say about leadership, advertising and other
sources of deviation from the popular ideal of a democracy. Never-
theless there would be obvious sense in speaking of the will or the
action of the community or the people as such — of government by
the people — particularly if the people arrive at political decisions
by means of debates carried out in the physical presence of all, as
they did, for instance, in the Greek polis or in the New England town
meeting. The latter case, sometimes referred to as the case of ‘‘direct
democracy,*' has in fact served as a starting point for many a political
theorist.

In all other cases our problem does arise but we might dispose
of it with comparative ease provided we are prepared to drop gov-
ernment by the people and to substitute for it government approved
by the people. There is much to be said for doing this. Many of the
propositions we usually aver about democracy will hold true for all
governments that command the general allegiance of adarge majority
of their people or, better still, of a large majority of every class of
their people. This applies in particular to the virtues usually asso-
ciated with the democratic method: human dignity, the contentment
that comes from the feeling that by and large things political do con-
form to one's ideas of how they should be, the coordination of
politics with public opinion, the citizen's attitude of confidence in
and cooperation with government, the reliance of the latter on the
respect and support of the man in the street — all this and much be-
sides which to many of us will seem the very esssence of democracy
is quite satisfactorily covered by the idea of government approved
by the people. And since it is obvious that excepting the case of
“direct democracy" the people as such can never actually rule or gov-
ern, the case for this definition seems to be complete.

All the same we cannot accept it. Instances abound — perhaps they
are the majority of historical cases — of autocracies, both dei gratia
and dictatorial, of the various monarchies of non-autocratic type, of
aristocratic and plutocratic oligarchies, which normally commanded
the unquestioned, often fervent, allegiance of an overwhelming ma-
jority of all classes of their people and which, considering their
environmental conditions, did very well in securing what most of us
believe the democratic method should secure. There is point in em-
phasizing this and in recognizing the large element of democracy
— in this sense — that entered into those cases. Such an antidote to
the cult of mere forms, of mere phraseologies even, would indeed be
highly desirable. But this does not alter the fact that by accepting this

The Setting of the Problem 247

solution we should lose the phenomenon we wish to identify: democ-
racies would be merged in a much wider class of political arrangement
which contains individuals of clearly non-democratic complexion.

Our failure teaches us one thing however. Beyond “direct** democ-
racy lies an infinite wealth of possible forms in which the “people**
may partake in the business of ruling or influence or control those
who actually do the ruling. None of these forms, particularly none
of the workable ones, has any obvious or exclusive title to being de-
scribed as Government by the People if these words are to be taken
in their natural sense. If any of them is to acquire such a title it can
do so only by virtue of an arbitrary convention defining the mean-
ing to be attached to the term “to rule.’* Such a convention is always
possible of course: the people never actually rule but they can always
be made to do so by definition.

The legkl “theories** of democracy that evolved in the seventeenth
and eighteenth centuries were precisely intended to provide such
definitions as would link certain actual or ideal forms of government
to the ideology of the Rule by the People. Why this ideology should
have imposed itself is not difficult to understand. At that time, with
the nations of western Europe at least, the trappings of God-ordained
authority were rapidly falling from the shoulders • of royalty^® — the
process set in much earlier of course — and, as a matter of both ethical
and explanatory principle, the Will of the People or the Sovereign
Power of the People stood out as the substitute most acceptable to
a mentality which, while prepared to drop that particular charisma
of ultimate authority, was not prepared to do without any.

The problem being thus set, the legal mind ransacked the lumber
room of its constructs in search for tools by which to reconcile that
supreme postulate with existing political patterns. Fictitious contracts
of subjection to a prince^® by which the sovereign people was sup-
posed to have bargained away its freedom or power, or no less fictitious
contracts by which it delegated that power, or some of it, to chosen
representatives, were substantially what the lumber room supplied.
However well such devices may have served certain practical purposes,
they are utterly valueless for us. They are not even defensible from a
legal standpoint.

For in order to make sense at all the terms delegation and repre-
ss Sir Robert Filmer’s Patriarcha (published 1680) may be looked upon as the
last important exposition of the doctrine of divine right in English political
philosophy.

Those contracts were fictiones juris et de jure. But there was one realistic
analogy for them, viz., the voluntary and contractual subjection of a freeholder
to a medieval lord extensively practiced between the sixth and twelfth centuries.
The freeholder accepted the jurisdiction of the lord and certain economic obli-
gations. He gave up his status as a fully free man. In exchange he received the
lord’s protection and other advantages.

248 Socialism and Democracy

sentation must refer not to the individual citizens — that would be the
doctrine of the medieval estates^ — but to the people as a whole. The
people as such, then, would have to be conceived as delegating its
power to, say, a parliament that is to represent it. But only a (physical
or moral) person can legally delegate df be represented. Thus the
American colonies or states that sent delegates to the continental
congresses which met from 1774 on in Philadelphia — the so-called
'‘revolutionary congresses'" — ^were in fact represented by these dele-
gates. But the people of those colonies or states were not, since a
people as such has no legal personality: to say that it delegates powers
to, or is represented by, a parliament is to say something completely
void of legal meaning.^'^ What, then, is a parliament? The answer
is not far to seek: it is an organ of the state exactly as the government
or a court of justice is. If a parliament represents the people at all,
it must do so in another sense which we have still to discover.

However, these “theories" about the sovereignty of the people and
about delegation and representation reflect something more than an
ideological postulate and a few pieces of legal technique. They com-
plement a sociology or social philosophy of the body politic that,
partly under the influence of the revival of Greek speculations on the
subject, partly under the influence of the events of the time,^® took
shape and reached its apogee toward the end of the eighteenth cen-
tury and actually tried to solve the problem. Though such general
terms are never adequate or strictly correct, I will risk describing
it — ^in the usual way — as fundamentally rationalist, hedonist and in-
dividualist: the happiness, defined in hedonic terms, of individuals
endowed with a clear perception— or amenable to education that will
impart clear perception — both of this end and of the appropriate
means, was conceived as the meaning of life and the grand prin-
ciple of action in the private as well as in the political sphere. We
may just as well designate this sociology or social philosophy, the
product of early capitalism, by the term introduced by John Stuart
Mill, Utilitarianism. According to it, behavior conforming to that
principle was not merely the only rational and justifiable but ipso

Similarly, there is no legal sense in describing a public prosecution as a case
of *‘the People versus So-and-so.” The prosecuting legal person is the state.

i®This is particularly obvious in England and especially in the case of John
Locke. As a political philosopher he simply pleaded, in the guise of general argu-
ment, against James II and for his Whig friends who made themselves responsi-
ble for the “glorious” revolution. This accounts for the success of a line of rea-
soning that without this practical connotation would have been beneath contempt.
The end of government is the good of the people and this good consists in the pro-
tection of private property which is why men “enter into society.” For this pur-
pose they meet and make an Original Contract of submission to a common au-
thority. This contract is broken, property and liberty endangered and resistance
iiistified when, to put it frankly. Whig aristocrats and London merchants think

The Setting of the Problem 249

facto also the “natural” one. This proposition is the bridge be-
tween the otherwise very different theories of Bentham and Rousseau’s
contrat social — names that may serve us for beacons in what for the
rest must be left in darkness here.

If such desperate brevity does not prevent readers from following
my argument, the bearing of this philosophy on the subject of democ-
racy should be clear. It evidently yielded, among other things, a
theory of the nature of the state and the purposes for which the state
exists. Moreover, by virtue of its emphasis on the rational and hedo-
nistic individual and his ethical autonomy it seemed to be in a position
to teach the only right political methods for running that state and
for achieving those purposes — the greatest happiness for the greatest
number and that sort of thing. Finally, it provided what looked like
a rational foundation for belief in the Will of the People (volonte
generale) and in the advice that sums up all that democracy meant to
the group of writers who became known as Philosophical Radicals:
educate the people and let them vote freely.

Adverse criticism of this construction arose almost immediately as
a part of the general reaction against the rationalism of the eight-
eenth century that set in after the revolutionary and Napoleonic
Wars. Whatever we may think about the merits or demerits of the
movement usually dubbed Romanticism, it certainly conveyed a
deeper understanding of pre-capitalist society and of historical evolu-
tion in general and thus revealed some of the fundamental errors
of utilitarianism and of the political theory for which utilitarianism
served as base. Later historical, sociological, biological, psychological
and economic analysis proved destructive to both and today it is diffi-
cult to find any student of social processes who has a good word for
either. But strange though it may seem, action continued to be taken
on that theory all the time it was being blown to pieces. The more
untenable it was being proved to be, the more completely it dominated
official phraseology and the rhetoric of the politician. This is why
in the next chapter we must turn to a discussion of what may be
termed the Classical Doctrine of Democracy.

But no institution or practice or belief stands or falls with the
theory that is at any time offered in its support. Democracy is no
exception. It is in fact possible to frame a theory of the democratic
process that takes account of all the realities of group-wise action and
of the public mind. This theory will be presented in Chapter XXII
and then we shall at last be able to say how democracy may be ex-
pected to fare in a socialist order of things.

For general orientation see especially, Kent, The Philosophical Radical;
Graham Wallas. The Life of Francis Place; Leslie Stephen, The English Utilitarians.

CHAPTER XXI

THE CLASSICAL DOCTRINE OF DEMOCRACY

I. The Common Good and the Will of the People

T he eighteenth-century philosophy of democracy may be couched
in the following definition: the democratic method is that insti-
tutional arrangement for arriving at political decisions which realizes
the common good by making the people itself decide issues through
the election of individuals who are to assemble in order to carry out
its will. Let us develop the implications of this.

It is held, then, that there exists a Common Good, the obvious
beacon light of policy, which is always simple to define and which
every normal person can be made to see by means of rational argu-
ment. There is hence no excuse for not seeing it and in fact no
explanation for the presence of people who do not see it except igno-
rance — which can be removed — ^stupidity and anti-social interest. More-
over, this common good implies definite answers to all questions so
that every social fact and every measure taken or to be taken can un-
equivocally be classed as “good’' or “bad.” All people having there-
fore to agree, in principle at least, there is also a Common Will of the
people (= will of all reasonable individuals) that is exactly cotermi-
nous with the common good or interest or welfare or happiness. The
only thing, barring stupidity and sinister interests, that can possibly
bring in disagreement and account for the presence of an opposition
is a difference of opinion as to the speed with which the goal, itself
common to nearly all, is to be approached. Thus every member of the
community, conscious of that goal, knowing his or her mind, discern-
ing what is good and what is bad, takes part, actively and responsibly,
in furthering the former and fighting the latter and all the members
taken together control their public affairs.

It is true that the management of some of these affairs requires
special aptitudes and techniques and will therefore have to be en-
trusted to specialists who have them. This does not affect the principle,
however, because these specialists simply act in order to carry out
the will of the people exactly as a doctor acts in order to carry out
the will of the patient to get well. It is also true that in a community
of any size, especially if it displays the phenomenon of division of
labor, it would be highly inconvenient for every individual citizen to
have to get into contact with all the other citizens on every issue in
order to do his part in ruling or governing. It will be more convenient

«5o

The Classical Doctrine of Democracy 251

to reserve only the most important decisions for the individual citi-
zens to pronounce upon — say by referendum — and to deal with the
rest through a committee appointed by them — an assembly or parlia-
ment whose members will be elected by popular vote. This committee
or body of delegates, as we have seen, will not represent the people in
a legal sense but it will do so in a less technical one — it will voice,
reflect or represent the will of the electorate. Again as a matter of con-
venience, this committee, being large, may resolve itself into smaller
ones for the various departments of public affairs. Finally, among
these smaller committees there will be a general-purpose committee,
mainly for dealing with current administration, called cabinet or
government, possibly with a general secretary or scapegoat at its
head, a so-called prime minister.^

As soon as we accept all the assumptions that are being made by this
theory of the polity — or implied by it — democracy indeed acquires a
perfectly unambiguous meaning and there is no problem in connection
with it except how to bring it about. Moreover we need only forget
a few logical qualms in order to be able to add that in this case the
democratic arrangement would not only be the best of all conceiv-
able ones, but that few people would care to consider any other. It is
no less obvious however that these assumptions are so many state-
ments of fact every one of which would have to be proved if we are
to arrive at that conclusion. And it is much easier to disprove them.

There is, first, no such thing as a uniquely determined common
good that all people could agree on or be made to agree on by the
force of rational argument. This is due not primarily to the fact that
some people may want things other than the common good but to the
much more fundamental fact that to different individuals and groups
the common good is bound to mean different things. This fact, hidden
from the utilitarian by the narrowness of his outlook on the world
of human valuations, will introduce rifts on questions of principle
which cannot be reconciled by rational argument because ultimate
values — our conceptions of what life and what society should be — are
beyond the range of mere logic. They may be bridged by compromise
in some cases but not in others. Americans who say, “We want this
country to arm to its teeth and then to fight for what we conceive
to be right all over the globe” and Americans who say, “We want
this country to work out its own problems which is the only way it
can serve humanity” are facing irreducible differences of ultimate
values which compromise could only maim and degrade.

Secondly, even if a sufficiently definite common good — ^such as for

iThe official theory of the functions of a cabinet minister holds in fact that he
is appointed in order to see to it that in his department the will of the people pre-
vails.

2^2 Socialism and Democracy

instance the utilitarian’s maximum of economic satisfaction^ — proved
acceptable to all, this would not imply equally definite answers to
individual issues. Opinions on these might differ to an extent im-
portant enough to produce most of the effects of “fundamentaF’ dis-
sension about ends themselves. The problems centering in the evalua-
tion of present versus future satisfactions, even the case of socialism
versus capitalism, would be left still open, for instance, after the con-
version of every individual citizen to utilitarianism, “Health” might
be desired by all, yet people would still disagree on vaccination and
vasectomy. And so on.

The utilitarian fathers of democratic doctrine failed to see the full
importance of this simply because none of them seriously considered
any substantial change in the economic framework and the habits of
bourgeois society. They saw little beyond the world of an eighteenth-
century ironmonger.

But, third, as a consequence of both preceding propositions, the
particular concept of the will of the people or the volonte generate
that the utilitarians made their own vanishes into thin air. For that
concept presupposes the existence of a uniquely determined common
good discernible to all. Unlike the romanticists the utilitarians had
no notion of that semi-mystic entity endowed with a will of its own
— that “soul of the people” which the historical school of jurispru-
dence made so much of. They frankly derived their will of the people
from the wills of individuals. And unless there is a center, the com-
mon good, toward which, in the long run at least, all individual wills
gravitate, we shall not get that particular type of “natural” volonte
generate. The utilitarian center of gravity, on the one hand, unifies
individual wills, tends to weld them by means of rational discussion
into the will of the people and, on the other hand, confers upon the
latter the exclusive ethical dignity claimed by the classic democratic
creed. This creed does not consist simply in worshiping the will of
the people as such but rests on certain assumptions about the “natural”
object of that will which object is sanctioned by utilitarian reason.
Both the existence and the dignity of this kind of volonte generate are
gone as soon as the idea of the common good fails us. And both the
pillars of the classical doctrine inevitably crumble into dust.

II. The Will of the People and Individual Volition

Of course, however conclusively those arguments may tell against
this particular conception of the will of the people, they do not debar

2 The very meaning of ‘^greatest happiness’' is open to serious doubt. But even
if this doubt could be removed and definite meaning could be attached to the sum
total of economic satisfaction of a group of people, that maximum would still
be relative to given situations and valuations which it may be impossible to alter,
or compromise on, in a democratic way.

The Classical Doctrine of Democracy 253

us from trying to build up another and more realistic one. I do not
intend to question either the reality or the importance of the socio-
psychological facts we think of when speaking of the will of a nation.
Their analysis is certainly the prerequisite for making headway with
the problems of democracy. It would however be better not to retain
the term because this tends to obscure the fact that as soon as we
have severed the will of the people from its utilitarian connotation
we are building not merely a different theory of the same thing, but
a theory of a completely different thing. We have every reason to be
on our guard against the pitfalls that lie on the path of those de-
fenders of democracy who while accepting, under pressure of accu-
mulating evidence, more and more of the facts of the democratic
process, yet try to anoint the results that process turns out with oil
taken from eighteenth-century jars.

But though a common will or public opinion of some sort may still
be said to emerge from the infinitely complex jumble of individual
and group-wise situations, volitions, influences, actions and reactions
of the “democratic process,” the result lacks not only rational unity
but also rational sanction. The former means that, though from the
standpoint of analysis, the democratic process is not simply chaotic —
for the analyst nothing is chaotic that can be brought within the
reach of explanatory principles — ^yet the results would not, except by
chance, be meaningful in themselves — as for instance the realization
of any definite end or ideal would be. The latter means, since that
will is no longer congruent with any “good,” that in order to claim
ethical dignity for the result it will now be necessary to fall back
upon an unqualified confidence in democratic forms of government
as such — a belief that in principle would have to be independent of
the desirability of results. As we have seen, it is not easy to place one-
self on that standpoint. But even if we do so, the dropping of the
utilitarian common good still leaves us with plenty of difficulties on
our hands.

In particular, we still remain under the practical necessity of at-
tributing to the will of the individual an independence and a rational
quality that are altogether unrealistic. If we are to argue that the, will
of the citizens per se is a political factor entitled to respect, it must
first exist. That is to say, it must be something more than an indeter-
minate bundle of vague impulses loosely playing about given slogans
and mistaken impressions. Everyone would have to know definitely
what he wants to stand for. This definite will would have to be imple-
mented by the ability to observe and interpret correctly the facts that
are directly accessible to everyone and to sift critically the informa-
tion about the facts that are not. Finally, from that definite will and
from these ascertained facts a clear and prompt conclusion as to particu-
lar issues would have to be derived according to the rules of logical

254 Socialism and Democracy

inference — ^with so high a degree of general efficiency moreover that
one man’s opinion could be held, without glaring absurdity, to be
roughly as good as every other man’s.^ And all this the modal citizen
would have to perform for himself and independently of pressure
groups and propaganda,^ for volitions and inferences that are imposed
upon the electorate obviously do not qualify for ultimate data of the
democratic process. The question whether these conditions are ful-
filled to the extent required in order to make democracy work should
not be answered by reckless assertion or equally reckless denial. It can
be answered only by a laborious appraisal of a maze of conflicting
evidence.

Before embarking upon this, however, I want to make quite sure
that the reader fully appreciates another point that has been made
already. I will therefore repeat that even if the opinions and desires
of individual citizens were perfectly definite and independent data
for the democratic process to work with, and if everyone acted on
them with ideal rationality and promptitude, it would not necessarily
follow that the political decisions produced by that process from the
raw material of those individual volitions would represent anything
that could in any convincing sense be called the will of the people.
It is not only conceivable but, whenever individual wills are much
divided, very likely that the political decisions produced will not
conform to '‘what people really want.” Nor can it be replied that, if

3 This accounts for the strongly equalitarian character both of the classical doc-
trine of democracy and of popular democratic beliefs. It will be pointed out later on
how Equality may acquire the status of an ethical postulate. As a factual statement
about human nature it cannot be true in any conceivable sense. In recognition of
this the postulate itself has often been reformulated so as to mean ‘‘equality of
opportunity.” But, disregarding even the difficulties inherent in the word oppor-
tunity, this reformulation does not help us much because it is actual and not
potential equality of performance in matters of political behavior that is required
if each man’s vote is to carry the same weight in the decision of issues.

It should be noted in passing that democratic phraseology has been instrumental
in fostering the association of inequality of any kind with “injustice” which is so
important an element in the psychic pattern of the unsuccessful and in the arsenal
of the politician who uses him. One of the most curious symptoms of this was
the Athenian institution of ostracism or rather the use to which it was sometimes
put. Ostracism consisted in banishing an individual by popular vote, not necessarily
for any particular reason: it sometimes served as a method of eliminating an un-
comfortably prominent citizen who was felt to “count for more than one.”

4 This term is here being used in its original sense and not in the sense which
it is rapidly acquiring at present and which suggests the definition: propaganda is
any statement emanating from a source that we do not like. I suppose that the
term derives from the name of the committee of cardinals which deals with matters
concerning the spreading of the Catholic faith, the congregatio de propaganda fide.
In itself therefore it does not carry any derogatory meaning and in particular it
does not imply distortion of facts. One can make propaganda, for instance, for a
scientific method. It simply means the presentation of facts and arguments with
a view to influencing people’s actions or opinions in a definite direction.

The Classical Doctrine of Democracy 255

not exactly what they want, they will get a “fair compromise/' This
may be so. The chances for this to happen are greatest with those
issues which are quantitative in nature or admit of gradation, such
as the question how much is to be spent on unemployment relief
provided everybody favors some expenditure for that purpose. But
with qualitative issues, such as the question whether to persecute
heretics or to enter upon a war, the result attained may well, though
for different reasons, be equally distasteful to all the people whereas
the decision imposed by a non-democratic agency might prove much
more acceptable to them.

An example will illustrate. I may, I take it, describe the rule of
Napoleon, when First Consul, as a military dictatorship. One of the
most pressing political needs of the moment was a religious settlement
that would clear the chaos left by the revolution and the directorate
and bring peace to millions of hearts. This he achieved by a number
of master strokes, culminating in a concordat with the pope (1801)
and the “organic articles" (1802) that, reconciling the irreconcilable,
gave just the right amount of freedom to religious worship while
strongly upholding the authority of the state. Fie also reorganized
and refinanced the French Catholic church, solved the delicate ques-
tion of the “constitutional" clergy, and most successfully launched
the new establishment with a minimum of friction. If ever there was
any justification at all for holding that the people actually want some-
thing definite, this arrangement affords one of the best instances in
history. This must be obvious to anyone who looks at the French
class structure of that time and it is amply borne out by the fact that
this ecclesiastical policy greatly contributed to' the almost universal
popularity which the consular regime enjoyed. But it is difficult to
see how this result could have been achieved in a democratic way.
Anti-church sentiment had not died out and was by no means confined
to the vanquished Jacobins. People of that persuasion, or their leaders,
could not possibly have compromised to that extent.^ On the other end
of the scale, a strong wave of wrathful Catholic sentiment was steadily
gaining momentum. People who. shared that sentiment, or leaders
dependent on their good will, could not possibly have stopped at the
Napoleonic limit; in particular, they could not have dealt so firmly
with the Holy See for which moreover there would have been no
motive to give in, seeing which way things were moving. And the
will of the peasants who more than anything else wanted their priests,
their churches and processions would have been paralyzed by the very
natural fear that the revolutionary settlement of the land question
might be endangered once the clergy — the bishops especially — ^were
in the saddle again. Deadlock or interminable struggle, engendering

5 The legislative bodies, cowed though they were, completely failed in fact to
support Napoleon in this policy. And some of his most trusted paladins opposed it.

256 Socialism and Democracy

increasing irritation, would have been the most probable outcome of
any attempt to settle the question democratically. But Napoleon was
able to settle it reasonably, precisely because all those groups which
could not yield their points of their own accord were at the same time
able and willing to accept the arrangement if imposed.

This instance of course is not an isolated one.® If results that prove
in the long run satisfactory to the people at large are made the test of
government for the people, then government by the people, as con-
ceived by the classical doctrine of democracy, would often fail to
meet it.

III. Human Nature in Politics

It remains to answer our question about the definiteness and inde-
pendence of the voter’s will, his powers of observation and interpreta-
tion of facts, and his ability to draw, clearly and promptly, rational
inferences from both. This subject belongs to a chapter of social psy-
chology that might be entitled Human Nature in Politics.'^

During the second half of the last century, the idea of the human
personality that is a homogeneous unit and the idea of a definite will
that is the prime mover of action have been steadily fading — even
before the times of Theodule Ribot and of Sigmund Freud. In particu-
lar, these ideas have been increasingly discounted in the field of social
sciences where the importance of the extra-rational and irrational
element in our behavior has been receiving more and more atten-
tion, witness Pareto’s Mind and Society. Of the many sources of the
evidence that accumulated against the hypothesis of rationality, I
shall mention only two.

The one — in spite of much more careful later work — ^may still be
associated with the name of Gustave Le Bon, the founder or, at any

mother instances could in fact be adduced from Napoleon’s practice. He was an
autocrat who, whenever his dynastic interests and his foreign policy were not con-
cerned, simply strove to do what he conceived the people wanted or needed. This
is what the advice amounted to which he gave to Eugdne Beauharnais concerning
the latter’s administration of northern Italy.

7 This is the title of the frank and charming book by one of the most lovable
..English radicals who ever lived, Graham Wallas. In spite of all that has since been
written on the subject and especially in spite of all the detailed case studies that
now make it possible to see so much more clearly, that book may still be recom-
mended as the best introduction to political psychology. Yet, after having stated
with admirable honesty the case against the uncritical acceptance of the classical
doctrine, the author fails to draw the obvious conclusion. This is all the more
remarkable because he rightly insists on the necessity of a scientific attitude o£
mind and because he does not fail to take Lord Bryce to task for having, in his
book on the American commonwealth, professed himself “grimly” resolved to see
some blue sky in the midst of clouds of disillusioning facts. Why, so Graham
Wallas seems to exclaim, what should we say of a meteorologist who insisted from
the outset that he saw some blue sky? Nevertheless in the constructive part of his
book he takes much the same ground.

The Classical Doctrine of Democracy 257

rate, the first effective exponent of the psychology of crowds (psy-
chologic des joules).^ By showing up, though overstressing, the reali-
ties of human behavior when under the influence of agglomeration —
in particular the sudden disappearance, in a state of excitement, of
moral restraints and civilized modes of thinking and feeling, the sud-
den eruption of primitive impulses, infantilisms and criminal pro-
pensities — he made us face gruesome facts that everybody knew but
nobody wished to see and he thereby dealt a serious blow to the picture
of man's nature which underlies the classical doctrine of democracy
and democratic folklore about revolutions. No doubt there is much
to be said about the narrowness of the factual basis of Le Eon's in-
ferences which, for instance, do not fit at all well the normal behavior
of an English or Anglo-American crowd. Critics, especially those to
whom the implications of this branch of social psychology were un-
congenial, did not fail to make the most of its vulnerable points. But
on the other hand it must not be forgotten that the phenomena of
crowd psychology are by no means confined to mobs rioting in the
narrow streets of a Latin town. Every parliament, every committee,
every council of war composed of a dozen generals in their sixties,
displays, in however mild a form, some of those features that stand
out so glaringly in the case of the rabble, in particular a reduced
sense of responsibility, a lower level of energy of thought and greater
sensitiveness to non-logical influences. Moreover, those phenomena
are not confined to a crowd in the sense of a physical agglomeration
of many people. Newspaper readers, radio audiences, members of a
party even if not physically gathered together are terribly easy to
work up into a psychological crowd and into a state of frenzy in which
attempt at rational argument only spurs the animal spirits.

The other source of disillusioning evidence that I am going to men-
tion is a much humbler one — no blood flows from it, only nonsense.
Economists, learning to observe their facts more closely, have begun to
discover that, even in the most ordinary currents of daily life, their
consumers do not quite live up to the idea that the economic text-
book used to convey. On the one hand their wants are nothing like as
definite and their actions upon those wants nothing like as rational
and prompt. On the other hand they are so amenable to the influence
of advertising and other methods of persuasion that producers often
seem to dictate to them instead of being directed by them. The tech-
nique of successful advertising is particularly instructive. There is
indeed nearly always some appeal to reason. But mere assertion, often
repeated, counts more than rational argument and so does the direct

8 The German term, Massenpsychologie, suggests a warning: the psychology o£
crowds must not be confused with the psychology of the masses. The former does
not necessarily carry any class connotation and in itself has nothing to do with a
study of the ways of thinking and feeling of, say, the working class.

ggS Socialism and Democracy

attack upon the subconscious which takes the form of attempts to
evoke and crystallize pleasant associations of an entirely extra-rational,
very frequently of a sexual nature.

The conclusion, while obvious, must be drawn with care. In the
ordinary run of often repeated decisions the individual is subject to
the salutary and rationalizing influence of favorable and unfavorable
experience. He is also under the influence of relatively simple and un-
problematical motives and interests which are but occasionally inter-
fered with by excitement. Historically, the consumers' desire for shoes
may, at least in part, have been shaped by the action of producers offer-
ing attractive footgear and campaigning for it; yet at any given time it
is a genuine want, the definiteness of which extends beyond “shoes
in general” and wdiich prolonged experimenting clears of much of
the irrationalities that may originally have surrounded it.^ More-
over, under the stimulus of those simple motives consumers learn to
act upon unbiased expert advice about some things (houses, motor-
cars) and themselves become experts in others. It is simply not true
that housewives are easily fooled in the matter of foods, familiar
household articles, wearing apparel. And, as every salesman knows to
his cost, most of them have a way of insisting on the exact article they
want.

This of course holds true still more obviously on the producers' side
of the picture. No doubt, a manufacturer may be indolent, a bad
judge of opportunities or otherwise incompetent; but there is an
effective mechanism that will reform or eliminate him. Again Taylor-
ism rests on the fact that man may perform simple handicraft opera-
tions for thousands of years and yet perform them inefliciently. But
neither the intention to act as rationally as possible nor a steady pres-
sure toward rationality can seriously be called into question at what-
ever level of industrial or commercial activity we choose to look.^^

And so it is with most of the decisions of daily life that lie within
the little field which the individual citizen's mind encompasses with
a full sense of its reality. Roughly, it consists of the things that directly
concern himself, his family, his business dealings, his hobbies, his
friends and enemies, his township or ward, his class, church, trade
union or any other social group of which he is an active member —

® In the above passage irrationality means failure to act rationally upon a given
wish. It does not refer to the reasonableness of the wish itself in the opinion of
the observer. This is important to note because economists in appraising the extent
of consumers" irrationality sometimes exaggerate it by confusing the two things.
Thus, a factory girl’s finery may seem to a professor an indication of irrational
behavior for which there is no other explanation but the advertiser’s arts. Actually,
it may be all she craves for. If so her expenditure on it may be ideally rational in
the above sense.

10 This level differs of course not only as between epochs and places but also, at
a given time and place, as between different industrial sectors and classes. There
is no such thing as a universal pattern of rationality.

The Classical Doctrine of Democracy 259

the things under his personal observation, the things which are
familiar to him independently of what his newspaper tells him, which
he can directly influence or manage and for which he develops the
kind of responsibility that is induced by a direct relation to the favor-
able or unfavorable effects of a course of action.

Once more: definiteness and rationality in thought and action^^
are not guaranteed by this familiarity with men and things or by that
sense of reality or responsibility. Quite a few other conditions which
often fail to be fulfilled would be necessary for that. For instance,
generation after generation may suffer from irrational behavior in
matters of hygiene and yet fail to link their sufferings with their
noxious habits. As long as this is not done, objective consequences,
however regular, of course do not produce subjective experience. Thus
it proved unbelievably hard for humanity to realize the relation be-
tween infection and epidemics: the facts pointed to it with what to us
seems unmistakable clearness; yet to the end of the eighteenth cen-
tury doctors did next to nothing to keep people afflicted with in-
fectious disease, such as measles or smallpox, from mixing with other
people. And things must be expected to be still worse whenever there
is not only inability but reluctance to recognize causal relations or
when some interest fights against recognizing them.

Nevertheless and in spite of all the qualifications that impose
themselves, there is for everyone, within a much wider horizon, a nar-
rower field — ^widely differing in extent as between different groups
and individuals and bounded by a broad zone rather than a sharp
line — ^which is distinguished by a sense of reality or familiarity or
responsibility. And this field harbors relatively definite individual
volitions. These may often strike us as unintelligent, narrow, egotis-
tical; and it may not be obvious to everyone why, when it comes to
political decisions, we should worship at their shrine, still less why
we should feel bound to count each of them for one and none of them
for more than one. If, however, we do choose to worship we shall at
least not find the shrine empty

Rationality of thought and rationality of action are two different things.
Rationality of thought does not always guarantee rationality of action. And the
latter may be present without any conscious deliberation and irrespective of any
ability to formulate the rationale of one’s action correctly. The observer, par-
ticularly the observer who uses interview and questionnaire methods, often over-
looks this and hence acquires an exaggerated idea of the importance of irrationality
in behavior. This is another source of those overstatements which we meet so often.

12 It should be observed that in speaking of definite and genuine volitions I do
not mean to exalt them into ultimate data for all kinds of social analysis. Of
course they are themselves the product of the social process and the social environ-
ment. All I mean is that they may serve as data for the kind of special-purpose
analysis which the economist has in mind when he derives prices from tastes or
wants that are “given” at any moment and need not be further analyzed each time.
Similarly we may for our purpose speak of genuine and definite volitions that at

260 Socialism and Democracy

Now this comparative definiteness of volition and rationality of be-
havior does not suddenly vanish as we move away from those concerns
of daily life in the home and in business which educate and discipline
us. In the realm of public affairs there are sectors that are more
within the reach of the citizen’s mind than others. This is true, first,
of local affairs. Even there we find a reduced power of discerning
facts, a reduced preparedness to act upon them, a reduced sense of
responsibility. We all know the man — and a very good specimen he
frequently is — ^who says that the local administration is not his busi-
ness and callously shrugs his shoulders at practices which he would
rather die than suffer in his own office. High-minded citizens in a
hortatory mood who preach the responsibility of the individual voter
or taxpayer invariably discover the fact that this voter does not feel
responsible for what the local politicians do. Still, especially in com-
munities not too big for personal contacts, local patriotism may be
a very important factor in “making democracy work.” Also, the prob-
lems of a town are in many respects akin to the problems of a manu-
facturing concern. The man who understands the latter also under-
stands, to some extent, the former. The manufacturer, grocer or
workman need not step out of his world to have a rationally defensible
view (that may of course be right or wrong) on street cleaning or
town halls.

Second, there are many national issues that concern individuals and
groups so directly and unmistakably as to evoke volitions that are
genuine and definite enough. The most important instance is afforded
by issues involving immediate and personal pecuniary profit to in-
dividual voters and groups of voters, such as direct payments, pro-
tective duties, silver policies and so on. Experience that goes back to
antiquity shows that by and large voters react promptly and rationally
to any such chance. But the classical doctrine of democracy evidently
stands to gain little from displays of rationality of this kind. Voters
thereby prove themselves bad and indeed corrupt judges of such is-
sues,^^ and often they even prove themselves bad judges of their own

any moment are given independently 6f attempts to manufacture them, although
we recognize that these genuine volitions themselves are the result of environmental
influences in the past, propagandist influences included. This distinction between
genuine and manufactured will (see below) is a difficult one and cannot be applied
in all cases and for all purposes. For our purpose however it is sufficient to point
to the obvious common-sense case which can be made for it.

^^The reason why the Benthamites so completely overlooked this is that they
did not consider the possibilities of mass corruption in modern capitalism. Com-
mitting in their political theory the same error which they committed in their eco-
nomic theory, they felt no compunction about postulating that '"the people” were
the best judges of their own individual interests and that these must necessarily
coincide with the interests of all the people taken together. Of course this was
made easier for them because actually though not intentionally they philosophized
in terms of bourgeois interests which had more to gain from a parsimonious state

The Classical Doctrine of Democracy 261

long-run interests, for it is only the short-run promise that tells
politically and only short-run rationality that asserts itself effectively.

However, when we move still farther away from the private con-
cerns of the family and the business office into those regions of na-
tional and international affairs that lack a direct and unmistakable
link with those private concerns, individual volition, command of
facts and method of inference soon cease to fulfill the requirements of
the classical doctrine. What strikes me most of all and seems to me to
be the core of the trouble is the fact that the sense of reality^^ is so
completely lost. Normally, the great political questions take their
place in the psychic economy of the typical citizen with those leisure-
hour interests that have not attained the rank of hobbies, and with
the subjects of irresponsible conversation. These things seem so far
off; they are not at all like a business proposition; dangers may not
materialize at all and if they should they may not prove so very
serious; one feels oneself to be moving in a fictitious world.

This reduced sense of reality accounts not only for a reduced sense
of responsibility but also for the absence of effective volition. One has
one's phrases, of course, and one's wishes and daydreams and grumbles;
especially, one has one’s likes and dislikes. But ordinarily they do not
amount to what we call a will — the psychic counterpart of purposeful
responsible action. In fact, for the private citizen musing over national
affairs there is no scope for such a will and no task at which it could
develop. He is a member of an unworkable committee, the committee
of the whole nation, and this is why he expends less disciplined effort
on mastering a political problem than he expends on a game of
bridge.^®

The reduced sense of responsibility and the absence of effective
volition in turn explain the ordinary citizen's ignorance and lack of
judgment in matters of domestic and foreign policy which are if any-
thing more shocking in the case of educated people** and of people
who are successfully active in non-political walks of life than it is with
uneducated people in humble stations. Information is plentiful and
readily available. But this does not seem to make any difference. Nor
should we wonder at it. We need only compare a lawyer's attitude
to his brief and the same lawyer's attitude to the statements of political
fact presented in his newspaper in. order to see what is the matter. In

14 William James’ '‘pungent sense of reality.” The relevance of this point has been
particularly emphasized by Graham Wallas.

15 It will help to clarify the point if we ask ourselves why so much more intelli-
gence and clear-headedness show up at a bridge table than in, say, political dis-
cussion among non-politicians. At the bridge table we have a definite task; we
have rules that discipline us; success and failure are clearly defined; and we are
prevented from behaving irresponsibly because every mistake we make will not
only immediately tell but also be immediately allocated to us. These conditions,
by their failure to be fulfilled for the political behavior of the ordinary citizen,
show why it is that in politics he lacks all the alertness and the judgment he may
display in his profession.

26 si Socialism and Democracy

the one case the lawyer has qualified for appreciating the relevance
of his facts by years of purposeful labor done under the definite stimu-
lus of interest in his professional competence; and under a stimulus
that is no less powerful he then bends his acquirements, his intellect,
his will to the contents of the brief. In the other case, he has not
taken the trouble to qualify; he does not care to absorb the infor-
mation or to apply to it the canons of criticism he knows so well how
to handle; and he is impatient of long or complicated argument. All
of this goes to show that without the initiative that comes from im-
mediate responsibility, ignorance will persist in the face of masses of
information however complete and correct. It persists even in the face
of the meritorious efforts that are being made to go beyond presenting
information and to teach the use of it by means of lectures, classes,
discussion groups. Results are not zero. But they are small. People
cannot be carried up the ladder.

Thus the typical citizen drops down to a lower level of mental per-
formance as soon as he enters the political field. He argues and analyzes
in a way which he would readily recognize as infantile within the
sphere of his real interests. He becomes a primitive again. His think-
ing becomes associative and affective.^® And this entails two further
consequences of ominous significance.

First, even if there were no political groups trying to influence him,
the typical citizen would in political matters tend to yield to extra-
rational or irrational prejudice and impulse. The weakness of the
rational processes he applies to politics and the absence of effective
logical control over the results he arrives at would in themselves suf-
fice to account for that. Moreover, simply because he is not “all there,”
he will relax his usual moral standards as well and occasionally give
in to dark urges which the conditions of private life help him to re-
press. But as to the wisdom or rationality of his inferences and con-
clusions, it may be just as bad if he gives in to a burst of generous
indignation. This will make it still more difficult for him to see things
in their correct proportions or even to see more than one aspect of
one thing at a time. Hence, if for once he does emerge from his usual
vagueness and does display the definite will postulated by the classical
doctrine of democracy, he is as likely as not to become still more un-
intelligent and irresponsible than he usually is. At certain junctures,
this may prove fatal to his nation.^*^

i®See di. xii.

The importance of such bursts cannot be doubted. But it is possible to doubt
their genuineness. Analysis will show in many instances that they are induced by
the action of some group and do not spontaneously arise from the people. In this
case they enter into a (second) class of phenomena which we are about to deal with.
Personally, I do believe that genuine instances exist. But I cannot be sure that
more thorough analysis would not reveal some psycho-technical effort at the bottom
of them.

The Classical Doctrine of Democracy 263

Second, however, the weaker the logical element in the processes of
the public mind and the more complete the absence of rational criti-
cism and of the rationalizing influence of personal experience and
responsibility, the greater are the opportunities for groups with an
ax to grind. These groups may consist of professional politicians or
of exponents of an economic interest or of idealists of one kind or
another or of people simply interested in staging and managing polit-
ical shows. The sociology of such groups is immaterial to the argu-
ment in hand. The only point that matters here is that, Human
Nature in Politics being what it is, they are able to fashion and,
within very wide limits, even to create the will of the people. What
we are confronted with in the analysis of political processes is largely
not a genuine but a manufactured will. And often this artefact is all
that in reality corresponds to the volonte generale of the classical
doctrine. So far as this is so, the will of the people is the product and
not the motive power of the political process.

The ways in which issues and the popular will on any issue are
being manufactured is exactly analogous to the ways of commercial
advertising. We find the same attempts to contact the subconscious.
We find the same technique of creating favorable and unfavorable
associations which are the more effective the less rational they are.
We find the same evasions and reticences and the same trick of pro-
ducing opinion by reiterated assertion that is successful precisely to
the extent to which it avoids rational argument and the danger of
awakening the critical faculties of the people. And so on. Only, all
these arts have infinitely more scope in the sphere of public affairs
than they have in the sphere of private and professional life. The
picture of the prettiest girl that ever lived will in the long run prove
powerless to maintain the sales of a bad cigarette. There is no equally
effective safeguard in the case of political decisions. Many decisions
of fateful importance are of a nature that makes it impossible for the
public to experiment with them at its leisure and at moderate cost.
Even if that is possible, however, judgment is as a rule not so easy to
arrive at as it is in the case of the cigarette, because effects are less
easy to interpret.

But such arts also vitiate, to an extent quite unknown in the field
of commercial advertising, those forms of political advertising that
profess to address themselves to reason. To the observer, the anti-
rational or, at all events, the extra-rational appeal and the defense-
lessness of the victim stand out more and not less clearly when cloaked
in facts and arguments. We have seen above why it is so difficult to
impart to the public unbiased information about political problems
and logically correct inferences from it and why it is that information
and arguments in political matters will “register’' only if they link
up with the citizen’s preconceived ideas. As a rule, however, these

264 Socialism and Democracy

ideas are not definite enough to determine particular conclusions.
Since they can themselves be manufactured, effective political argu-
ment almost inevitably implies the attempt to twist existing voli-
tional premises into a particular shape and not merely the attempt to
implement them or to help the citizen to make up his mind.

Thus information and arguments that are really driven home are
likely to be the servants of political intent. Since the first thing man
will do for his ideal or interest is to lie, we shall expect, and as a
matter of fact we find, that effective information is almost always
adulterated or selective^® and that effective reasoning in politics con-
sists mainly in trying to exalt certain propositions into axioms and
to put others out of court; it thus reduces to the psycho-technics men-
tioned before. The reader who thinks me unduly pessimistic need
only ask himself whether he has never heard — or said himself — that
this or that awkward fact must not be told publicly, or that a certain
line of reasoning, though valid, is undesirable. If men who according
to any current standard are perfectly honorable or even high-minded
reconcile themselves to the implications of this, do they not thereby
show what they think about the merits or even the existence of the
will of the people?

There are of course limits to all this.^® And there is truth in Jeffer-
son’s dictum that in the end the people are wiser than any single
individual can be, or in Lincoln’s about the impossibility of “fooling
all the people all the time.” But both dicta stress the long-run aspect
in a highly significant way. It is no doubt possible to argue that given
time the collective psyche will evolve opinions that not infrequently
strike us as highly reasonable and even shrewd. History however con-
sists of a succession of short-run situations that may alter the course
of events for good. If all the people can in the short run be “fooled”
step by step into something they do not really want, and if this is not
an exceptional case which we could afford to neglect, then no amount
of retrospective common sense will alter the fact that in reality they
neither raise nor decide issues but that the issues that shape their
fate are normally raised and decided for them. More than anyone
else the lover of democracy has every reason to accept this fact and to
clear his creed from the aspersion that it rests upon make-believe.

IV. Reasons for the Survival of the Classical Doctrine

But how is it possible that a doctrine so patently contrary to fact
should have survived to this day and continued to hold its place in

IS Selective information, if in itself correct, is an attempt to lie by speaking the
truth.

Impossibly they might show more clearly if issues were more frequently decided
by referendum. Politicians presumably know why they are almost invariably hostile
to that institution.

The Classical Doctrine of Democracy 265

the hearts of the people and in the official language of governments?
The refuting facts are known to all; everybody admits them with
perfect, frequently with cynical, frankness. The theoretical basis, utili-
tarian rationalism, is dead; nobody accepts it as a correct theory of
the body politic. Nevertheless that question is not difficult to answer.

First of ail, though the classical doctrine of collective action may
not be supported by the results of empirical analysis, it is powerfully
supported by that association with religious belief to which I have
adverted already. This may not be obvious at first sight. The utili-
tarian leaders were anything but religious in the ordinary sense of
the term. In fact they believed themselves to be anti-religious and
they were so considered almost universally. They took pride in what
they thought was precisely an unmetaphysical attitude and they were
quite out of sympathy with the religious institutions and the religious
movements of their time. But we need only cast another glance at the
picture they drew of the social process in order to discover that it
embodied essential features of the faith of protestant Christianity and
was in fact derived from that faith. For the intellectual who had cast
off his religion the utilitarian creed provided a substitute for it. For
many of those who had retained their religious belief the classical
doctrine became the political complement of it.^^

Thus transposed into the categories of religion, this doctrine — and
in consequence the kind of democratic persuasion which is based
upon it — changes its very nature^ There is no longer any need for
logical scruples about the Common Good and Ultimate Values. All
this is settled for us by the plan of the Creator whose purpose defines
and sanctions everything. What seemed indefinite or unmotivated
before is suddenly quite definite and convincing. The voice of the
people that is the voice of God for instance. Or take Equality. Its
very meaning is in doubt, and there is hardly any rational warrant
for exalting it into a postulate, so long as we move in the sphere of
empirical analysis. \.But Christianity harbors a strong equalitarian
element. The Redeemer died for all: He did not differentiate between
individuals of different social status. In doing so. He testified to the
intrinsic value of the individual soul, a value that admits of no grada-
tions. Is not this a sanction— and, as it seems to me, the only possible
sanction^i — of “everyone to count for one, no one to count for more

20 Observe the analogy with socialist belief which also is a substitute for Christian
belief to some and a complement of it to others.

21 It might be objected that, however difficult it may be to attach a general
meaning to the word Equality, such meaning can be unraveled from its context
in most if not all cases. For instance,, it may be permissible to infer from the
circumstances in which the Gettysburg address was delivered that by the ^proposi-
tion that all men are created free and equal," Lincoln simply meant equality of
legal status versus the kind of inequality that is implied in the recognition of
slavery. This meaning would be definite enough. But if we ask why that proposi-

266 Socialism and Democracy

than one’* — a sanction that pours super-mundane meaning into articles
of the democratic creed for which it is not easy to find any other? To
be sure this interpretation does not cover the whole ground. How-
ever, so far as it goes, it seems to explain many things that otherwise
would be unexplainable and in fact meaningless. In particular, it
explains the believer’s attitude toward criticism: again, as in the case
of socialism, fundamental dissent is looked upon not merely as error
but as sin; it elicits not merely logical counterargument but also
moral indignation.

We may put our problem differently and say that democracy, when
motivated in this way, ceases to be a mere method that can be dis-
cussed rationally like a steam engine or a disinfectant. It actually
becomes what from another standpoint I have held it incapable of
becoming, viz., an ideal or rather a part of an ideal schema of things.
The very word may become a flag, a symbol of all a man holds dear,
of everything that he loves about his nation whether rationally con-
tingent to it or not. On the one hand, the question how the various
propositions implied in the democratic belief are related to the facts
of politics will then become as irrelevant to him as is, to the believing
Catholic, the question how the doings of Alexander VI tally with
the supernatural halo surrounding the papal office. On the other
hand, the democrat of this type, while accepting postulates carrying
large implications about equality and brotherliness, will be in a posi-
tion also to accept, in all sincerity, almost any amount of deviations
from them that his own behavior or position may involve. That is
not even illogical. Mere distance from fact is no argument against an
ethical maxim or a mystical hope.

Second, there is the fact that the forms and phrases of classical
democracy are for many nations associated with events and develop-
ments in their history which are enthusiastically approved by large
majorities. Any opposition to an established regime is likely to use
these forms and phrases whatever its meaning and social roots may
be.22 If it prevails and if subsequent developments prove satisfactory,
then these forms will take root in the national ideology.

The United States is the outstanding example. Its very existence as
a sovereign state is associated with a struggle against a monarchial
and aristocratic England. A minority of loyalists excepted, Americans

tion should be morally and politically binding and if we refuse to answer ^‘Because
every man is by nature exactly like every other man/' then we can only fall back
upon the divine sanction supplied by Christian belief. This solution is conceivably
implied in the word ‘‘created.”

22 It might seem that an exception should be made for oppositions that issue into
frankly autocratic regimes. But even most of these rose, as a matter of history, in
democratic ways and based their rule on the approval of the people. Caesar was not
killed by plebeians. But the aristocratic oligarchs who did kill him also used
democratic phrases.

The Classical Doctrine of Democracy 267

had, at the time of the Grenville administration, probably ceased to
look upon the English monarch as their king and the English aristoc-
racy as their aristocracy. In the War of Independence they fought
what in fact as well as in their feeling had become a foreign monarch
and a foreign aristocracy who interfered with their political and eco-
nomic interests. Yet from an early stage of the troubles they presented
their case, which really was a national one, as a case of the “people”
versus its “rulers,” in terms of inalienable Rights of Man and in the
light of the general principles of classical democracy. The wording
of the Declaration of Independence and of the Constitution adopted
these principles. A prodigious development followed that absorbed
and satisfied most people and thereby seemed to verify the doctrine
embalmed in the sacred documents of the nation.

Oppositions rarely conquer when the groups in possession are in
the prime of their power and success. In the first half of the nine-
teenth century, the oppositions that professed the classical creed of
democracy rose and eventually prevailed against governments some
of which — especially in Italy — ^were obviously in a state of decay and
had become bywords of incompetence, brutality and corruption.
Naturally though not quite logically, this redounded to the credit of
that creed which moreover showed up to advantage when compared
with the benighted superstitions sponsored by those governments.
Under these circumstances, democratic revolution meant the advent
of freedom and decency, and the democratic creed meant a gospel of
reason and betterment. To be sure, this advantage was bound to be
lost and the gulf between the doctrine and the practice of democracy
was bound to be discovered. But the glamour of the dawn was slow
to fade.

Third, it must not be forgotten that there are social patterns in
which the classical doctrine will actually fit facts with a sufficient
degree of approximation. As has been pointed out, this is the case
with many small and primitive societies which as a matter of fact
served as a prototype to the authors of that doctrine. It may be the
case also with societies that are not primitive provided they are not
too differentiated and do not harbor any serious problems. Switzer-
land is the best example. There is so little to quarrel about in a world
of peasants which, excepting hotels and banks, contains no great
capitalist industry, and the problems of public policy are so simple
and so stable that an overwhelming majority can be expected to un-
derstand them and to agree about them. But if we can conclude that
in such cases the classical doctrine approximates reality we have to
add immediately that it does so not because it describes an effective
mechanism of political decision but only because there are no great
decisions to be made. Finally, the case of the United States may again
be invoked in order to show that the classical doctrine sometimes

268 Socialism and Democracy

appears to fit facts even in a society that is big and highly differentiated
and in which there are great issues to decide provided the sting is
taken out of them by favorable conditions. Until this country’s entry
into the First World War, the public mind was concerned mainly
with the business of exploiting the economic possibilities of the en-
vironment. So long as this business was not seriously interfered with
nothing mattered fundamentally to the average citizen who looked
on the antics of politicians with good-natured contempt. Sections
might get excited over the tariff, over silver, over local misgovernment,
or over an occasional squabble with England. The people at large
did not care much, except in the one case of serious disagreement
which in fact produced national disaster, the Civil War.

And fourth, of course, politicians appreciate a phraseology that
flatters the masses and offers an excellent opportunity not only for
evading responsibility but also for crushing opponents in the name
of the people.

CHAPTER XXII

ANOTHER THEORY OF DEMOCRACY

I. Competition for Political Leadership

I THINK that most students o£ politics have by now come to accept
the criticisms leveled at the classical doctrine of democracy in the
preceding chapter. I also think that most of them agree, or will agree
before long, in accepting another theory which is much truer to life
and at the same time salvages much of what sponsors of the demo-
cratic method really mean by this term. Like the classical theory, it
may be put into the nutshell of a definition.

It will be remembered that our chief troubles about the classical
theory centered in the proposition that “the people” hold a definite
and rational opinion about every individual question and that they
give effect to this opinion — in a democracy — by choosing “repre-
sentatives” who will see to it that that opinion is carried out. Thus
the selection of the representatives is made secondary to the primary
purpose of the democratic arrangement which is to vest the power
of deciding political issues in the electorate. Suppose we reverse the
roles of these two elements and make the deciding of issues by the
electorate secondary to the election of the men who are to do the
deciding. To put it differently, we now take the view that the role
of the people is to produce a government, or else an intermediate
body which in turn will produce a national executive^ or govern-
ment. And we define: the democratic method is that institutional
arrangement for arriving at political decisions in which individuals
acquire the power to decide by means of a competitive struggle for
the people’s vote.

Defense and explanation of this idea will speedily show that, as to
both plausibility of assumptions and tenability of propositions, it
greatly improves the theory of the democratic process.

First of all, we are provided with a reasonably efficient criterion
by which to distinguish democratic governments from others. We have
seen that the classical theory meets with difficulties on that score
because both the will and the good of the people may be, and in many
historical instances have been, served just as well or better by govern-

iThe insincere word ‘‘executive” really points in the wrong direction. It ceases
however to do so if we use it in the sense in which we speak of the “executives” of
a business corporation who also do a great deal more than “execute” the will of
stockholders.

269

270 Socialism and Democracy

ments that cannot be described as democratic according to any ac-
cepted usage o£ the term. Now we are in a somewhat better position
partly because we are resolved to stress a modus procedendi the
presence or absence of which it is in most cases easy to verify.^

For instance, a parliamentary monarchy like the English one fulfills
the requirements of the democratic method because the monarch is
practically constrained to appoint to cabinet office the same people as
parliament would elect. A “constitutionaF' monarchy does not qualify
to be called democratic because electorates and parliaments, while
having all the other rights that electorates and parliaments have in
parliamentary monarchies, lack the power to impose their choice as
to the governing committee: the cabinet ministers are in this case
servants of the monarch, in substance as well as in name, and can in
principle be dismissed as well as appointed by him. Such an arrange-
ment may satisfy the people. The electorate may reaffirm this fact by
voting against any proposal for change. The monarch may be so
popular as to be able to defeat any competition for the supreme office.
But since no machinery is provided for making this competition effec-
tive the case does not come within our definition.

Second, the theory embodied in this definition leaves all the room
we may wish to have for a proper recognition of the vital fact of
leadership. The classical theory did not do this but, as we have seen,
attributed to the electorate an altogether unrealistic degree of initia-
tive which practically amounted to ignoring leadership. But collec-
tives act almost exclusively by accepting leadership — this is the domi-
nant mechanism of practically any collective action which is more
than a reflex. Propositions about the working and the results of the
democratic method that take account of this are bound to be infinitely
more realistic than propositions which do not. They will not stop at
the execution of a volonte generale but will go some way toward
showing how it emerges or how it is substituted or faked. What we
have termed Manufactured Will is no longer outside the theory, an
aberration for the absence of which we piously pray; it enters on the
ground floor as it should.

Third, however, so far as there are genuine group-wise volitions at
all — for instance the will of the unemployed to receive unemploy-
ment benefit or the will of other groups to help — our theory does not
neglect them. On the contrary we are now able to insert them in
exactly the role they actually play. Such volitions do not as a rule
assert themselves directly. Even if strong and definite they remain
latent, often for decades, until they are called to life by some political
leader who turns them into political factors. This he does, or else his
agents do it for him, by organizing these volitions, by working them
up and by including eventually appropriate items in his competitive
offering. The interaction between sectional interests and public opin-

2 See however the fourth point below.

Another Theory of Democracy 271

ion and the way in which they produce the pattern we call the
political situation appear from this angle in a new and much clearer
light.

Fourth, our theory is of course no more definite than is the concept
of condpetition for leadership. This concept presents similar difficulties
as the concept of competition in the economic sphere, with which it
may be usefully compared. In economic life competition is never
completely lacking, but hardly ever is it perfect.^ Similarly, in polit-
ical life there is always some competition, though perhaps only a
potential one, for the allegiance of the people. To simplify matters
we have restricted the kind of competition for leadership which is to
define democracy, to free competition for a free vote. The justification
for this is that democracy seems to imply a recognized method by which
to conduct the competitive struggle, and that the electoral method is
practically the only one available for communities of any size. But
though this excludes many ways of securing leadership which should
be excluded,^ such as competition by military insurrection, it does not
exclude the cases that are strikingly analogous to the economic phe-
nomena we label “unfair"’ or “fraudulent” competition or restraint
of competition. And we cannot exclude them because if we did we
should be left with a completely unrealistic ideal.^ Between this ideal
case which does not exist and the cases in which all competition with
the established leader is prevented by force, there is a continuous
range of variation within which the democratic method of govern-
ment shades off into the autocratic one by imperceptible steps. But if
we wish to understand and not to philosophize, this is as it should be.
The value of our criterion is not seriously impaired thereby.

Fifth, our theory seems to clarify the relation that subsists between
democracy and individual freedom. If by the latter we mean the ex-
istence of a sphere of individual self-government the boundaries of
which are historically variable — no society tolerates absolute freedom
even of conscience and of speech, no society reduces that sphere to
2ero — the question clearly becomes a matter of degree. We have seen
that the democratic method does not necessarily guarantee a greater
amount of individual freedom than another political method would
permit in similar circumstances. It may well be the other way round.
But there is still a relation between the two. If, on principle at least,

3 In Part II we had examples of the problems which arise out of this.

4 It also excludes methods which should not be excluded, for instance, the
acquisition of political leadership by the people’s tacit acceptance of it or by elec-
tion quasi per inspirationem. The latter differs from election by voting only by a
technicality. But the former is not quite without importance even in modern
politics; the sway held by a party boss within his party is often based on nothing
but tacit acceptance of his leadership. Comparatively speaking however these are
details which may, I think, be neglected in a sketch like this.

^As in the economic field, some restrictions are implicit in the legal and moral
principles of the community.

272 Socialism and Democracy

everyone is free to compete for political leadership® by presenting
himself to the electorate, this will in most cases though not in all
mean a considerable amount of freedom of discussion for all. In par-
ticular it will normally mean a considerable amount of freedom of
the press. This relation between democracy and freedom is not abso-
lutely stringent and can be tampered with. But, from the standpoint
of the intellectual, it is nevertheless very important. At the same time,
it is all there is to that relation.

Sixth, it should be observed that in making it the primary function
of the electorate to produce a government (directly or through an
intermediate body) I intended to include in this phrase also the func-
tion of evicting it. The one means simply the acceptance of a leader
or a group of leaders, the other means simply the withdrawal of this
acceptance. This takes care of an element the reader may have missed.
He may have thought that the electorate controls as well as installs.
But since electorates normally do not control their political leaders
in any way except by refusing to reelect them or the parliamentary
majorities that support them, it seems well to reduce our ideas about
this control in the way indicated by our definition. Occasionally,
spontaneous revulsions occur which upset a government or an indi-
vidual minister directly or else enforce a certain course of action. But
they are not only exceptional, they are, as we shall see, contrary to
the spirit of the democratic method.

Seventh, our theory sheds much-needed light on an old controversy.
Whoever accepts the classical doctrine of democracy and in conse-
quence believes that the democratic method is to guarantee that issues
be decided and policies framed according to the will of the people
must be struck by the fact that, even if that will were undeniably real
and definite, decision by simple majorities would in many cases distort
it rather than give effect to it. Evidently the will of the majority is
the will of the majority and not the will of “the people.'* The latter
is a mosaic that the former completely fails to “represent.** To equate
both by definition is not to solve the problem. Attempts at real solu-
tions have however been made by the authors of the various plans for
Proportional Representation.

These plans have met with adverse criticism on practical grounds.
It is in fact obvious not only that proportional representation will
offer opportunities for all sorts of idiosyncrasies to assert themselves
but also that it may prevent democracy from producing efficient gov-
ernments and thus prove a danger in times of stress.*^ But before con-

^Free, that is, in the same sense in which everyone is free to start another
textile mill.

^The argument against proportional representation has been ably stated by
Protessor F. A. Hermens in ‘*The Trojan Horse of Democracy,” Social Research,
November 1938.

Another Theory of Democraq? m

eluding that democracy becomes unworkable if its principle is carried
out consistently, it is just as well to ask ourselves whether this prin-
ciple really implies proportional representation. As a matter of fact
it does not. If acceptance of leadership is the true function of the elec-
torate's vote, the case for proportional representation collapses because
its premises are no longer binding. The principle of democracy then
merely means that the reins of government should be handed to those
who command more support than do any of the competing indi-
viduals or teams. And this in turn seems to assure the standing of
the majority system within the logic of the democratic method, al-
though we might still condemn it on grounds that lie outside of that
logic.

II. The Principle Applied

The theory outlined in the preceding section we are now going to
try out on some of the more important features of the structure and
working of the political engine in democratic countries.

1. In a democracy, as I have said, the primary function of the elec-
tor's vote is to produce government. This may mean the election of a
complete set of individual officers. This practice however is in the
main a feature of local government and will be neglected henceforth.®
Considering national government only, we may say that producing
government practically amounts to deciding who the leading man
shall be.® As before, we shall call him Prime Minister,

There is only one democracy in which the electorate's vote does this
directly, viz., the United States.^® In all other cases the electorate's

« This we shall do for simplicity’s sake only. The phenomenon fits perfectly into
our schema.

9 This is only approximately true. The elector’s vote does indeed put into power
a group that in all normal cases acknowledges an individual leader but there are
as a rule leaders of second and third rank who carry political guns in their own
right and whom the leader has no choice but to put into appropriate offices. This
fact will be recognized presently.

Another point must be kept in mind. Although there is reason to expect that a
man who rises to a position of supreme command will in general be a man of
considerable personal force, whatever else he may be — to this we shall return later
on — it does not follow that this will always be the case. Therefore the term 'leader”
or 'leading man” is not to imply that the individuals thus designated are neces-
sarily endowed with qualities of leadership or that they always do give any personal
leads. There are political situations favorable to the rise of men deficient in leader-
ship (and other qualities) and unfavorable to the establishment of strong individual
positions. A party or a combination of parties hence may occasionally be acephalous.
But everyone recognizes that this is a pathological state and one of the typical
causes of defeat.

10 We may, I take it, disregard the electoral college. In calling the President of
the United States a prime minister I wish to stress the fundamental similarity ^ of
his position to that of prime ministers in other democracies. But I do not wish
to minimize the differences, although some of them are more formal than real.
The least important of them is that the President also fulfills those largely cere-

274 Socialism and Democracy

vote does not directly produce government but an intermediate organ,
henceforth called parliament,!^ upon which the government-producing
function devolves. It might seem easy to account for the adoption or
rather the evolution of this arrangement, both on historical grounds
and on grounds of expediency, and for the various forms it took in
different social patterns. But it is not a logical construct; it is a natural
growth the subtle meanings and results of which completely escape
the official, let alone legal, doctrines.

How does a parliament produce government? The most obvious
method is to elect it or, more realistically, to elect the prime minister
and then to vote the list of ministers he presents. This method is
rarely used.^^ But it brings out the nature of the procedure better
than any of the others. Moreover, these can all be reduced to it,
because the man who becomes prime minister is in all normal cases
the one whom parliament would elect. The way in which he is actually
appointed to office, by a monarch as in England, by a President as in
France or by a special agency or committee as in the Prussian Free
State of the Weimar period, is merely a matter of form.

The classical English practice is this. After a general election the
victorious party normally commands a majority of seats in Parliament
and thus is in a position to carry a vote of want of confidence against
everyone except its own leader who in this negative way is designated
“by Parliament*' for national leadership. He receives his commission
from the monarch — “kisses hands" — and presents to him his list of
ministers of which the list of cabinet ministers is a part. In this he
includes, first, some party veterans who receive what might be called

monial functions of, say, the French presidents. Much more important is it that he
cannot dissolve Congress — ^but neither could the French Prime Minister do so. On
the other hand, his position is stronger than that of the English Prime Minister
by virtue of the fact that his leadership is independent of his having a majority
in Congress — at least legally; for as a matter of fact he is checkmated if he has
none. Also, he can appoint and dismiss cabinet officers (almost) at will. The latter
can hardly be called ministers in the English sense of the word and are really no
more than the word "secretary” conveys in common parlance. We might say, there-
fore, that in a sense the President is not only prime minister but sole minister,
unless we find an analogy between the functions of an English Cabinet minister
and the functions of the managers of the administration's forces in Congress.

There is no difficulty about interpreting and explaining these and many other
peculiarities in this or any other country that uses the democratic method. But in
order to save space we shall mainly think of the English pattern and consider all
oth^ cases as more or less important "deviations” on the theory that thus far the
^ logic of democratic government has worked itself out most completely in the English
practice though not in its legal forms.

will be recalled that 1 have defined parliament as an organ of the state.
Although that was done simply for reasons of formal (legal) logic this definition
fits hi particularly well with our conception of the democratic method. Membership
in parliament is hence an office.

; ^^For example, it was adopted in Austria after the breakdown in 1918.

Another Theory of Democracy 275

complimentary ofi&ce; secondly, the leaders of the second rank, those
men on whom he counts for the current fighting in Parliament and
who owe their preferment partly to their positive political value and
partly to their value as potential nuisances; third, the rising men
whom he invites to the charmed circle of office in order to “extract
the brains from below the gangway''; and sometimes, fourth, a few
men whom he thinks particularly well qualified to fill certain offices.^^
But again, in all normal cases this practice will tend to produce the
same result as election by Parliament would. The reader will also
see that where, as in England, the prime minster has the actual power
to dissolve (“to go to the country”), the result will to some extent
approximate the result we should expect from direct election of the
cabinet by the electorate so long as the latter supports him.^^ This
may be illustrated by a famous instance.

2. In 1879, Beaconsfield (Disraeli) government, after

almost six years of prosperous tenure of power culminating in the
spectacular success of the Congi^ess of Berlin,^^ was on all ordinary
counts entitled to expect a success at the polls, Gladstone suddenly
roused the country by a series of addresses of unsurpassable force
(Midlothian campaign) which played up Turkish atrocities so suc-
cessfully as to place him on the crest of a wave of popular enthusiasm
for him personally. The official party had nothing to do with it.
Several of its leaders in fact disapproved. Gladstone had resigned the

^®To lament, as some people do, how little fitness for office counts in these ar-
rangements is beside the point where description is concerned; it is of the essence
of democratic government that political values should count primarily and fitness
only incidentally- See below, ch. xxiii.

i^If, as was the case in France, the prime minister has no such power, parlia-
mentary coteries acquire so much independence that this parallelism between ac-
ceptance of a man by parliament and acceptance of the same man by the electorate
is weakened or destroyed. This is the situation in which the parlor game of
parliamentary politics runs riot- From our standpoint this is a deviation from the
design of the machine. Raymond Poincard was of the same opinion.

Of course, such situations also occur in England. For the Prime Minister’s power
to dissolve — strictly, his power to ^‘advise” the monarch to dissolve the House of
Commons — ^is inoperative either if his party’s inner circle sets its face against it
or if there is no chance that elections will strengthen his hold upon Parliament.
That is to say, he may be stronger (though possibly still weak) in Parliament than
he is in the country. Such a state of things tends to develop with some regularity
after a government has been in power for some years. But under the English system
this deviation from design cannot last very long.

do not mean that the temporary settlement of the questions raised by the
Russo-Turkish War and the acquisition of the perfectly useless island of Cyprus
were in themselves such masterpieces of statesmanship. But I do mean t^at from
the standpoint of domestic politics they were just the kind of showy success that
would normally flatter the average citizen’s vanity and would greatly enhance the
government’s prospects in an atmosphere of jingo patriotism. In fact it was the
general opinion that Disraeli would have won if he had dissolved immediately
on returning from Berlin.

276 Socialism and Democracy

leadership years before and tackled the country single-handed. But
when the liberal party under this impetus had won a smashing vic-
tory, it was obvious to everyone that he had to be again accepted as
the party leader — nay, that he had become the party leader by virtue
of his national leadership and that there simply was no room for any
other. He came into power in a halo of glory.

Now this instance teaches us a lot about the working of the demo-
cratic method. To begin with, it must be realized that it is unique only
in its dramatic quality, but in nothing else. It is the oversized speci-
men of a normal genus. The cases of both Pitts, Peel, Palmerston,
Disraeli, Campbell Bannerman and others differ from it only in degree.

First, as to the Prime Minister’s political leadership.^® Our exam-
ple shows that it is composed of three different elements which must
not be confused and which in every case mix in different proportions,
the mixture then determining the nature of every individual Prime
Minister’s rule. On the face of it, he comes into office as the leading

is characteristic of the English way of doing things that official recognition
of the existence of the Prime Minister’s office was deferred until 1907, when it was
allowed to apppr in the official order of precedence at court. But it is as old as demo-
cratic government. However, since democratic government was never introduced by
a distinct act but slowly evolved as part of a comprehensive social process, it is not
easy to indicate even an approximate birthday or birth period. There is a long
stretch that presents embryonic cases. It is tempting to date the institution from
the reign of William III, whose position, so much weaker than that of the native
rulers had been, seems to give color to the idea. The objection to this however
is not so much that England was no “democracy” then — the reader will recall that
we do not define democracy by the extent of the franchise — as that, on the one
hand, the embryonic case of Danby had occurred under Charles H and that, on
the other hand, William III never reconciled himself to the arrangement and kept
certain matters successfully in his own hands. We must not of course confuse
prime ministers with mere advisers, however powerful with their sovereign and
however firmly entrenched in the very center of the public power plant they may
be — such men as Richelieu, Mazarin or Strafford for instance. Godolphin and
Harley under Queen Anne were clearly transitional cases. The first man to
be universally recognized at the time and by political historians was Sir Robert
Walpole. But he as well as the Duke of Newcastle (or his brother Henry Pelham,
or both jointly) and in fact all the leading men down to Lord Shelburne (including
the elder Pitt who even as foreign secretary came very near to fulfilling our re-
quirements in substance) lack one or another of the characteristics. The first full-
fledged specimen was the younger Pitt.

It is interesting to note that what his own time recognized in the case of Sir
Robert Walpole (and later in that of Lord Carteret [Earl of Granville]) was not
that here was an organ essential to democratic government that was breaking
through atrophic tissues. On the contrary, public opinion felt it to be a most
vicious cancer the growth of which was a menace to the national welfare and to
democracy — “sole minister” or “first minister” was a term of opprobrium hurled
at Walpole by his enemies. This fact is significant. It not only indicates the resist-
ance new institutions usually meet with. It also indicates that this institution was
felt to be incompatible with the classic doctrine of democracy which in fact has no
place* for political leadership in our sense, hence no place for the realities of the
position of a prime minister.

Another Theory of Democracy 277

man of his party in Parliament. As soon as installed however^ he
becomes in a sense the leader of Parliament, directly of the house of
which he is a member, indirectly also of the other. This is more than
an official euphemism, more also than is implied in his hold upon his
own party. He acquires influence on, or excites the antipathy of, the
other parties and individual members of the other parties as well, and
this makes a lot of difference in his chances of success. In the limiting
case, best exemplified by the practice of Sir Robert Peel, he m%y
coerce his own party by means of another. Finally, though in all nor-
mal cases he will also be the head of his party in the country, the
well-developed specimen of the prime ministerial genus will have a
position in the country distinct from what he automatically acquires
by heading the party organization. He will lead party opinion crea-
tively — shape it — and eventually rise toward a formative leadership
of public opinion beyond the lines of party, toward national leader-
ship that may to some extent become independent of mere party
opinion. It is needless to say how very personal such an achievement
is and how great the importance of such a foothold outside of both
party and Parliament. It puts a whip into the hand of the leader the
crack of which may bring unwilling and conspiring followers to heel,
though its thong will sharply hit the hand that uses it unsuccessfully.

This suggests an important qualification to our proposition that
in a parliamentary system the function of producing a government
devolves upon parliament. Parliament does normally decide who will
be Prime Minister, but in doing so it is not completely free. It decides
by acceptance rather than by initiative. Excepting pathological cases
like the French chambre, the wishes of members are not as a rule the
ultimate data of the process from which government emerges. Mem-
bers are not only handcuffed by party obligations. They also are
driven by the man whom they **elect'’ — driven to the act of the “elec-
tion'* itself exactly as they are driven by him once they have “elected”
him. Every horse is of course free to kick over the traces and it does
not always run up to its bit. But revolt or passive resistance against
the leader's lead only shows up the normal relation. And this normal
relation is of the essence of the democratic method. Gladstone's per-
sonal victory in 1880 is the answer to the official theory that Parlia-
ment creates and cashiers government.^'^

17 Gladstone himself upheld that theory strongly. In 1874, when defeated at the
polls, he still argued for meeting Parliament because it was up to Parliament to
pass the sentence of dismissal. This of course means nothing at all. In the same
way he studiously professed unbounded deference to the crown. One biographer
after another has marveled at this courtly attitude of the great democratic leader.
But surely Queen Victoria showed better discernment than did those biographers if
we may judge from the strong dislike which she displayed for Gladstone from
1879 which the biographers attribute simply to the baleful influence of

Disraeli. Is it really necessary to point out that professions of deference may mean

Socialism and Democracy

3. Next, as to the nature and role of the cabinet.^® h jg a curiously
double-faced thing, the joint product of Parliament and Prime Min-
ister. The latter designates its members for appointment, as we have
seen, and the former accepts but also influences his choice. Looked at
from the party’s standpoint it is an assemblage of subleaders more or
less reflecting its own structure. Looked at from the Prime Minister’s
standpoint it is an assemblage not only of comrades in arms but of
party men who have their own interests and prospects to consider —
a miniature Parliament. For the combination to come about and to
work it is necessary for prospective cabinet ministers to make up their
Hxinds — ^not necessarily from enthusiastic love — to serve under Mr. X
and for Mr. X to shape his program so that his colleagues in the
cabinet will not too often feel like “reconsidering their position,” as
official phraseology has it, or like going on a sitdown strike. Thus
the cabinet — and the same applies to the wider ministry that com-
prises also the political officers not in the cabinet — has a distinct
function in the democratic process as against Prime Minister, party,
Parliament and electorate. This function of intermediate leadership
is associated with, but by no means based upon, the current business
transacted by the individual cabinet officers in the several departments
to which they are appointed in order to keep the leading group’s
hands on the bureaucratic engine. And it has only a distant relation,
if any, with “seeing to it that the will of the people is carried out in
each of them.” Precisely in the best instances, the people are presented
with results they never thought of and would not have approved of
in advance.

4. Again, as to Parliament. I have both defined what seems to me
to be its primary function and qualified that definition. But it might
be objected that my definition fails to do justice to its other functions.
Parliament obviously does a lot of other things besides setting up
and pulling down governments. It legislates. And it even administers.
For although every act of a parliament, except resolutions and declara-

two different things? The man who treats his wife with elaborate courtliness is not
as a rule the one to accept comradeship between the sexes on terms of equality.
As a matter of fact, the courtly attitude is precisely a method to evade this.

Still more than the evolution of the prime minister’s office, that of the cabinet
is blurred by the historical continuity that covers changes in the nature of an
institution. To this day the English cabinet is legally the operative part of the
Privy Council, which of course was an instrument of government in decidedly pre-
democratic times. But below this surface an entirely different organ has evolved.
As soon as we realize this we find the task of dating its emergence somewhat easier
than we found the analogous task in the case of the prime minister. Though em-
bryonic cabinets existed in the time of Charles II (the “cabal” ministry was one,
and the committee of four that was formed in connection with Temple's experi-
ment was another), the Whig “junto” under William III is a fair candidate for first
place. From the reign of Anne on only minor points of membership or functioning
remain to disagree on.

Another Theory of Democracy 279

tions of policy, makes ‘law” in a formal sense, there are many acts
which must be considered as administrative measures. The budget is
the most important instance. To make it is an administrative func-
tion. Yet in this country it is drawn up by Congress. Even where it is
drawn up by the minister of finance with the approval of the cabinet,
as it is in England, Parliament has to vote on it and by this vote it
becomes an act of Parliament. Does not this refute our theory?

When two armies operate against each other, their individual moves
are always centered upon particular objects that are determined by
their strategical or tactical situations. They may contend for a par-
ticular stretch of country or for a particular hill. But the desirability
of conquering that stretch or hill must be derived from the strategical
or tactical purpose, which is to beat the enemy. It would be obviously
absurd to attempt to derive it from any extra-military properties the
stretch or hill may have. Similarly, the first and foremost aim of each
political party is to prevail over the others in order to get into power
or to stay in it. Like the conquest of the stretch of country or the
hill, the decision of the political issues is, from the standpoint of the
politician, not the end but only the material of parliamentary activity.
Since politicians fire off words instead of bullets and since those words
are unavoidably supplied by the issues under debate, this may not
always be as clear as it is in the military case. But victory over the
opponent is nevertheless the essence of both games.^^

Fundamentally, then, the current production of parliamentary deci-
sions on national questions is the very method by which Parliament
keeps or refuses to keep a government in power or by which Parlia-
ment accepts or refuses to accept the Prime Minister's leadership.^^
With the exceptions to be noticed presently, every vote is a vote of
confidence or want of confidence, and the votes that are technically
so called merely bring out in abstract o the essential element that is
Sometimes politicians do emerge from phraseological mists. To cite an ex-
ample to which no objection can be raised on the score of frivolity: no lesser poli-
tician than Sir Robert Peel characterized the nature of his craft when he said after
his parliamentary victory over the Whig government on the issue of the latter's
policy in Jamaica: “Jamaica was a good horse to start." The reader should ponder
over this.

20 This of course applies to the pre- Vichy French and pre-Fascist Italian practice
just as much as to the English practice. It may however be called in question in
the case of the United States where defeat of the administration on a major issue
does not entail resignation of the President. But this is merely due to the fact that
the Constitution, which embodies a different political theory, did not permit parlia-
mentary practice to develop according to its logic. In actual fact this logic did
not entirely fail to assert itself. Defeats on major issues, though they cannot dis-
place the President, will in general so weaken his prestige as to oust him from a
position of leadership. For the time being this creates an abnormal situation. But
whether he wins or loses the subsequent presidential election, the conflict is then
settled in a way that does not fundamentally differ from the way in which an
English Prime Minister deals with a similar situation when he dissolves Parliament.

s8o Socialism and Democracy

common to all. Of this we can satisfy ourselves by observing that the
initiative in bringing up matters for parliamentary decision as a rule
lies with the government or else with the opposition's shadow cabinet
and not with private members.

It is the Prime Minister who selects from the incessant stream of
current problems those which he is going to make parliamentary
issues, that is to say, those on which his government proposes to intro-
duce bills or, if he is not sure of his ground, at least resolutions. Of
course every government receives from its predecessor a legacy of
open questions which it may be unable to shelve; others are taken
up as a matter of routine politics; it is only in the case of the most
brilliant achievement that a Prime Minister is in a position to impose
measures about a political issue which he has created himself. In any
case however the government's choice or lead, whether free or not, is
the factor that dominates parliamentary activity. If a bill is brought
in by the opposition, this means that it is offering battle: such a move
is an attack which the government must either thwart by purloining
the issue or else defeat. If a major bill that is not on the governmental
menu is brought in by a group of the governmental party, this spells
revolt and it is from this angle and not from the extra-tactical merits
of the case that it is looked upon by the ministers. This even extends
to the raising of a debate. Unless suggested or sanctioned by the gov-
ernment, these are symptoms of the government forces' getting out of
hand. Finally, if a measure is carried by inter-party agreement, this
means a drawn battle or a battle avoided on strategical grounds.^^

5. The exceptions to this principle of governmental leadership in
“representative" assemblies only serve to show how realistic it is. They
are of two kinds.

First, no leadership is absolute. Political leadership exerted accord-
ing to the democratic method is even less so than are others because
of that competitive element which is of the essence of democracy.
Since theoretically every follower has the right of displacing his leader
and since there are nearly always some followers who have a real

21 Another highly significant piece of English technique may be mentioned in
this connection. A major bill is or was usually not proceeded with if the majority
for it fell to a very low figure on the second reading. This practice first of all
recognized an important limitation of the majority principle as actually applied in
well-managed democracies: it would not be correct to say that in a democracy the
minority is always compelled to surrender. But there is a second point. While the
minority is not always compelled to yield to the majority on the particular issue
under debate, it is practically always — there were exceptions even to this — com-
pelled to yield to it on the question whether the cabinet is to stay in power. Such
a vote on the second reading of a major government measure may be said to com-
bine a vote of confidence with a vote for shelving a bill. If the contents of the bill
were all that mattered there would hardly be any sense in voting for it if it is
not to make the statute book. But if Parliament is primarily concerned with
keeping the cabinet in office, then such tactics become at once understandable.

Another Theory of Democracy ^8i

chance of doing so, the private member and — ^if he feels that he could
do with a bigger hat — the minister within and without the inner
circle steers a middle course between an unconditional allegiance to
the leader's standard and an unconditional raising of a standard of
his own, balancing risks and chances with a nicety that is sometimes
truly admirable xhe leader in turn responds by steering a middle
course between insisting on discipline and allowing himself to be
thwarted. He tempers pressure with more or less judicious concessions,
frowns with compliments, punishments with benefits. This game re-
sults, according to the relative strength of individuals and their posi-
tions, in a very variable but in most cases considerable amount of
freedom. In particular, groups that are strong enough to make their
resentment felt yet not strong enough to make it profitable to include
their protagonists and their programs in the governmental arrange-
ment will in general be allowed to have their way in minor questions
or, at any rate, in questions which the Prime Minister can be induced
to consider as of minor or only sectional importance. Thus, groups
of followers or even individual members may occasionally have the
opportunity of carrying bills of their own and still more indulgence
will of course be extended to mere criticism or to failure to vote
mechanically for every government measure. But we need only look
at this in a practical spirit in order to realize, from the limits that
are set to the use of this freedom, that it embodies not the principle
of the working of a parliament but deviations from it.

Second, there are cases in which the political engine fails to absorb
certain issues either because the high commands of the government's
and the opposition's forces do not appreciate their political values or
because these values are in fact doubtful.23 Such issues may then be
taken up by outsiders who prefer making an independent bid for
power to serving in the ranks of one of the existing parties. This of
course is perfectly normal politics. But there is another possibility. A
man may feel so strongly about a particular question that he may
enter the political arena merely in order to have it solved in his way
and without harboring any wish to start in on a normal political

22 One of the most instructive examples by which the above can be illustrated

is afforded by the course taken by Joseph Chamberlain with respect to the Irish
question in the i88o’s. He finally outmaneuvered Gladstone, but he started the
campaign while officially an ardent adherent. And the case is exceptional only in
the force and brilliance of the man. As every political captain knows, only medi-
ocrities can be counted on for loyalty. That is why some of the greatest of those
captains, Disraeli for instance, surrounded themselves by thoroughly second-rate
men. ^

23 An issue that has never been tried out is the typical instance of the first class.
The typical reasons why a government and the shadow cabinet of the opposition
may tacitly agree to leave an issue alone in spite of their realizing its potentialities
are technical difficulty of handling it and the fear that it will cause sectional
difficulties.

§82 Socialism and Democracy

career. This however is so unusual that it is difficult to find instances
of first-rank importance of it. Perhaps Richard Cobden was one. It is
true that instances of second-rank importance are more frequent,
especially instances of the crusader type. But nobody will hold that
they are anything but deviations from standard practice.

We may sum up as follows. In observing human societies we do
not as a rule find it difficult to specify, at least in a rough common-
sense manner, the various ends that the societies under study struggle
to attain. These ends may be said to provide the rationale or meaning
of corresponding individual activities- But it does not follow that
the social meaning of a type of activity will necessarily provide the
motive power, hence the explanation of the latter. If it does not, a
theory that contents itself with an analysis of the social end or need to
be served cannot be accepted as an adequate account of the activities
that serve it. For instance, the reason why there is such a thing as eco-
nomic activity is of course that people want to eat, to clothe them-
selves and so on. To provide the means to satisfy those wants is the
social end or meaning of production. Nevertheless we all agree that
this proposition would make a most unrealistic starting point for a
theory of economic activity in commercial society and that we shall
do much better if we start from propositions about profits. Similarly,
the social meaning or function of parliamentary activity is no doubt
to turn out legislation and, in part, administrative measures. But in
order to understand how democratic politics serve this social end, we
must start from the competitive struggle for power and office and
realize that the social function is fulfilled, as it were, incidentally —
in the same sense as production is incidental to the making of profits.

6. Finally, as to the role of the electorate, only one additional point
need be mentioned. We have seen that the wishes of the members of
a parliament are not the ultimate data of the process that produces
government. A similar statement must be made concerning the elec-
torate. Its choice — ideologically glorified into the Call from the Peo-
ple — does not flow from its initiative but is being shaped, and the
shaping of it is an essential part of the democratic process. Voters do
not decide issues. But neither do they pick their members of parlia-
ment from the eligible population with a perfectly open mind. In
all normal cases the initiative lies with the candidate who makes a
bid for the office of member of parliament and such local leadership
as that may imply. Voters confine themselves to accepting this bid in
preference to others or refusing to accept it. Even most of those ex-
ceptional cases in which a man is genuinely drafted by the electors
come into the same category for either of two reasons: naturally a
man need not bid for leadership if he has acquired leadership already;
or it may happen that a local leader who can control or influence
the vote but is unable or unwilling to compete for election himself

Another Theory of Democracy 583

designates another man who then may seem to have been sought out
by the voters acting on their own initiative.

But even as much of electoral initiative as acceptance of one of the
competing candidates would in itself imply is further restricted by
the existence of parties. A party is not, as classical doctrine (or Ed-
mund Burke) would have us believe, a group of men who intend to
promote public welfare “upon some principle on which they are all
agreed.’' This rationalization is so dangerous because it is so tempt-
ing. For all parties will of course, at any given time, provide them-
selves with a stock of principles or planks and these principles or
planks may be as characteristic of the party that adopts them and as
important for its success as the brands of goods a department store
sells are characteristic of it and important for its success. But the
department store cannot be defined in terms of its brands and a party
cannot be defined in terms of its principles. A party is a group whose
members propose to act in concert in the competitive struggle for
political power. If that were not so it would be impossible for different
parties to adopt exactly or almost exactly the same program. Yet this
happens as everyone knows. Party and machine politicians are simply
the response to the fact that the electoral mass is incapable of action
other than a stampede, and they constitute an attempt to regulate
political competition exactly similar to the corresponding practices of
a trade association. The psycho-technics of party management and
party advertising, slogans and marching tunes, are not accessories.
They are of the essence of politics. So is the political boss.

CHAPTER XXIII

THE INFERENCE

I. Some Implications of the Preceding Analysis

T he theory of competitive leadership has proved a satisfactory
interpretation of the facts of the democratic process. So we shall
naturally use it in our attempt to unravel the relation between de-
mocracy and a socialist order of things. As has been stated before,
socialists claim not only compatibility; they claim that democracy
implies socialism and that there cannot be true democracy except
in socialism. On the other hand, the reader cannot but be familiar
with at least some of the numerous pamphlets that have been pub-
lished in this country during the last few years in order to prove that
a planned economy, let alone full-fledged socialism, is completely
incompatible with democracy. Both standpoints are of course easy to
understand from the psychological background of the contest and
from the natural wish of both parties to it to secure the support of a
people the great majority of whom fervently believes in democracy.
But suppose we ask: where lies the truth?

Our analysis in this and preceding parts of this book readily yields
an answer. Between socialism as we defined it and democracy as we
defined it there is no necessary relation: the one can exist without
the other. At the same time there is no incompatibility: in appro-
priate states of the social environment the socialist engine can be run
on democratic principles.

But observe that these simple statements depend upon our view
about what socialism and democracy are. Therefore they mean not
only less than, but also something different from, what either party
to the contest has in mind. For this reason and also because behind
the question of mere compatibility there inevitably arises the further
question whether the democratic method will work more or less
effectively in a socialist as compared with a capitalist regime, we
have still a lot of explaining to do. In particular we must try to
formulate the conditions under which the democratic method can be
expected to give satisfaction. This will be done in the second section
of this chapter. Now we shall look at some of the implications of
our analysis of the democratic process.

First of all, according to the view we have taken, democracy does
not mean and cannot mean that the people actually rule in any
obvious sense of the terms ‘^people'' and ‘"rule.” Democracy means

284

The Inference 285

only that the people have the opportunity of accepting or refusing
the men who are to rule them. But since they might decide this also
in entirely undemocratic ways, we have had to narrow our definition
by adding a further criterion identifying the democratic method, viz.,
free competition among would-be leaders for the vote of the elector-
ate. Now one aspect of this may be expressed by saying that de-
mocracy is the rule of the politician. It is of the utmost importance
to realize clearly what this implies.

Many exponents of democratic doctrine have striven hard to
divest political activity of any professional connotation. They have
held strongly, sometimes passionately, that politics ought not to be a
profession and that democracy degenerates whenever it becomes one.
But this is just ideology. It is true that, say, businessmen or lawyers
may be elected to serve in parliament and even taken office occa-
sionally and still remain primarily businessmen and lawyers. It is
also true that many who become primarily politicians continue to
rely on other activities for their livelihood.^ But normally, personal
success in politics, more than occasional rise to cabinet office in par-
ticular, will imply concentration of the professional kind and relegate
a man's other activities to the rank of sidelines or necessary chores.
If we wish to face facts squarely, we must recognize that, in modern
democracies of any type other than the Swiss, politics will unavoid-
ably be a career. This in turn spells recognition of a distinct profes-
sional interest in the individual politician and of a distinct group
interest in the political profession as such. It is essential to insert this
factor into our theory. Many a riddle is solved as soon as we take
account of it.^ Among other things we immediately cease to wonder
why it is that politicians so often fail to serve the interest of their
class or of the groups with which they are personally connected. Po-
litically speaking, the man is still in the nursery who has not ab-
sorbed, so as never to forget, the saying attributed to one of the most
successful politicians that ever lived: “What businessmen do not un-
derstand is that exactly as they are dealing in oil so I am dealing in
votes.''^

3- Illustrations abound of course. A particularly instructive class are the lawyers
in the French chambre and senat. Some of the outstanding political leaders were
also great avocats: think for instance of Waldeck-Rousseau and of PoincarA But
as a rule (and if we choose to neglect the cases in which lawyers’ firms will mirac-
ulously run by themselves if one of their partners is a leading politician and
enjoys frequent spells of political office) success at the bar and success in politics
do not go together.

2 It should be noticed how this argument links up with our analysis of the posi-
tion and behavior of the intellectuals in ch. xiii. Section II.

«Such a view is sometimes disapproved of as frivolous or cynical. I think, on
the contrary, that it is frivolous or cynical to render lip service to slogans for
which in private one has nothing but an augur’s smile. But it is just as well to
point out that the view in question is not so derogatory to the politician as it

286

Socialism and Democracy

Let us note that there is no reason to believe that this will be
either better or worse in a socialist organization of society. The
doctor or engineer who means to fill the cup of his ambitions by
means of success as a doctor or engineer will still be a distinct type
of man and have a distinct pattern of interests; the doctor or engineer
who means to work or reform the institutions of his country will still
be another type and have another pattern of interests.

Second, students of political organization have always felt doubts
concerning the administrative efficiency of democracy in large and
complex societies. In particular it has been urged that, as compared
with other arrangements, the efficiency of democratic government is
inevitably impaired because of the tremendous loss of energy which
the incessant battle in parliament and outside of it imposes upon the
leading men. It is further impaired, for the same reason, by the ne-
cessity of bending policies to the exigencies of political warfare.
Neither proposition is open to doubt. Both are but corollaries to our
previous statement that the democratic method produces legislation
and administration as by-products of the struggle for political office.

Visualize, for instance, the situation of a Prime Minister. Where
governments are as unstable as they have been in France from 1871
to the breakdown in 1940, his attention must be almost monopolized
by a task that is like trying to build a pyramid from billiard balls.
Only men of quite unusual force under such conditions can have had
any energy to spare for current administrative work on bills and so
on; and only such exceptional men can have acquired any authority
with their civil service subordinates who like everybody else knew
that their chief would be out before long. Of course this is not any-
thing like as bad in the English case. Unstable governmental com-
binations are exceptions, and normally a government can count on a
life of about five or six years. Ministers can settle down in their
offices and are not so easy to unhorse in Parliament. But this does not
mean that they are exempt from fighting. There always is a current
contest and if governments are not constantly on trial for their lives
it is only because they are as a rule able to smother current 'attacks
this side of the danger point. The Prime Minister has to watch his
opponents all the time, to lead his own flock incessantly, to be ready
to step into breaches that might open at any moment, to keep his
hand on the measures under debate, to control his cabinet— all of
which amo unts to saying that, when Parliament is in session, he is

might seem. It does not exclude ideals or a sense of duty. The analogy with
businessman will again help to make this clear. As I have said in another place no
economist who knows anything about the realities of business life will hold for a
moment that sense of duty and ideals about service and efficiency play no role in
shapii^^ businessmen's behavior. Yet the same economist is within his rights if he
bases his explanation of that behavior on a schema that rests on the profit motive.

The Inference

287

lucky if he has a couple of hours in the morning left for thinking
things over and for real work. Individual miscarriages and defeats
of a government as a whole are not infrequently due to physical ex-
haustion of the leading man or men.^ How could he, so it might well
be asked, undertake to lead and supervise an administrative organism
that is to embrace all the problems of economic life?

But this wastage of governmental energy is not all. The incessant
competitive struggle to get into office or to stay in it imparts to every
consideration of policies and measures the bias so admirably expressed
by the phrase about “dealing in votes.” The fact that in a democracy
government must attend primarily to the political values of a policy
or a bill or an administrative act — that is to say, the very fact that
enforces the democratic principle of the government’s dependence
upon the voting of parliament and of the electorate — is likely to dis-
tort all the pro’s and con’s. In particular, it forces upon the men at
Dr near the helm a short-run view and makes it extremely difficult
ior them to serve such long-run interests of the nation as may require
consistent work for far-off ends; foreign policy, for instance, is in
danger of degenerating into domestic politics. And it makes it no less
difficult to dose measures rationally. The dosing that a government
decides on with an eye to its political chances is not necessarily the
one that will produce the results most satisfactory to the nation.

Thus the prime minister in a democracy might be likened to a
horseman who is so fully engrossed in trying to keep in the saddle
♦that he cannot plan his ride, or to a general so fully occupied with
making sure that his army will accept his orders that he must leave
strategy to take care of itself. And this remains true (and must, in the
case of some countries such as France and Italy, be frankly recognized
as one of the sources from which anti-democratic feeling has spread)
in spite of the facts that may be invoked in extenuation.

There is, to begin with, the fact that the instances in which those
consequences show to an extent that may be felt to be unbearable
can often be explained on the ground that the social pattern is not
up to the task of working democratic institutions. As the examples of
France and Italy show, this may happen in countries that are much
more civilized than some which do succeed in that task. But neverthe-

4 To give a portentous example: no student of the origins of the World War
of 1914-1918 can fail to be struck by the passivity of the English government from
the murder of the Archduke to the declarations of war. Not that no efforts were
made to avoid the conflagration. But they were singularly ineffective and fell far
short of what could have been done. It is of course possible to explain this on the
theory that the Asquith government did not really wish to avoid the war. But if
this theory be considered unsatisfactory, as I think it should be, then we are driven
back upon another: it is just possible that the gentlemen on the treasury bench
were so absorbed in their political game that they did not wake up to the dangers
of the international situation until it was too late.

s88 Socialism and Democracy

less the weight of the criticism is thereby reduced to the statement
that the satisfactory working of the democratic method is contingent
upon fulfillment of certain conditions — a subject that will be taken
up presently.

Then there is the question of the alternative. These weaknesses
are obviously not absent in non-democratic patterns. Paving one's
way to a leading position, say, at a court, may absorb quite as much
energy and distort one’s views about issues quite as much as does
the democratic struggle though that waste or distortion does not stand
out so publicly. This amounts to saying that attempts at comparative
appraisal of engines of government will have to take account of
many other factors besides the institutional principles involved.

Moreover, some of us will reply to the critic that a lower level of
governmental efficiency may be exactly what we want. We certainly
do not want to be the objects of dictatorial efficiency, mere material
for deep games. Such a thing as the Gosplan may at present be im-
possible in the United States. But does not this prove precisely that,
just like the Russian Gosplan, its hypothetical analogue in this coun-
try would violate the spirit as well as the organic structure of the
commonwealth?

Finally, something can be done to reduce the pressure on the lead-
ing men by appropriate institutional devices. The American arrange-
ment for instance shows up to advantage on this point. The American
“prime minister” must no doubt keep his eye on his political chess-
board. But he need not feel responsible for every individual meas-
ure. And, not sitting in Congress, he is at least exempt from the physi-
cal strain this would involve. He has all the opportunity he wants
to nurse his strength.

Third, our analysis in the preceding chapter brings into bold relief
the problem of the quality of the men the democratic method selects
for positions of leadership. The well-known argument about this
hardly needs recalling: the democratic method creates professional
politicians whom it then turns into amateur administrators and
“statesmen.” Themselves lacking all the acquirements necessary for
dealing with the tasks that confront them, they appoint Lord Macau-
lay’s “judges without law and diplomatists without French,” ruining
the civil service and discouraging all the best elements in it. Worse
still, there is another point, distinct from any question" of specialized
competence and experience: the qualities of intellect and character
that make a good candidate , are not necessarily those that make a
good administrator, and selection by means of success at the polls
may work against the people who would be successes at the head of
affairs. And even if the products of this selection prove successes in
office these successes may well be failures for the nation. The poli-

The Inference §8g

tician who is a good tactician can successfully survive any number
of administrative miscarriages.

Recognition of the elements of truth in all this should again be
tempered by the recognition of the extenuating facts. In particular,
the case for democracy stands to gain from a consideration of the
alternatives: no system of selection whatever the social sphere — ^with
the possible exception of competitive capitalism — tests exclusively the
ability to perform and selects in the way a stable selects its Derby
crack- Though to varying degrees, all systems put premiums on other
qualities as well, qualities that are often inimical to performance.
But we may perhaps go further than this. It is not quite true that
in the average case political success proves nothing for a man or that
the politician is nothing but an amateur. There is one very important
thing that he knows professionally, viz., the handling of men. And,
as a broad rule at least, the ability to win a position of political
leadership will be associated with a certain amount of personal force
and also of other aptitudes that will come in usefully in a prime
minister's workshop. There are after all many rocks in the stream
that carries politicians to national office which are not entirely inef-
fective in barring the progress of the moron or the windbag.

That in such matters general argument one way or another does
not lead to a definite result is only what we should expect. It is much
more curious and significant that factual evidence is not, at first
sight at least, any more conclusive. Nothing is easier than to compile
an impressive list of failures of the democratic method, especially if
we include not only cases in which there was actual breakdown or
national discomfiture but also those in which, though the nation
led a healthy and prosperous life, the performance in the political
sector was clearly substandard relative to the performance in others.
But it is just as easy to marshal hardly less impressive evidence in
favor of the politician. To cite one outstanding illustration: It is true
that in antiquity war was not so technical an affair as it has become
of late. Yet one would think that the ability to make a success at it
had even then very little to do with the ability to get oneself elected
to political office. All the Roman generals of the republican era
however were politicians and all of them got their commands directly
through the elective offices they held or had previously held. Some
of the worst disasters were due to this. But on the whole, these poli-
tician-soldiers did remarkably well.

Why is that so? There can be only one answer to this question.

II. Conditions for the Success of the Democratic Method

If a physicist observes that the same mechanism works differently
at different times and in different places, he concludes that its func-
tioning depends upon conditions extraneous to it. We cannot but

290 Socialism and Democracy

arrive at the same conclusion. And it is as easy to see what these con-
ditions are as it was to see what the conditions were under which
the classical doctrine of democracy might be expected to fit reality
to an acceptable degree.

This conclusion definitely commits us to that strictly relativist
view that has been indicated all along. Exactly as there is no case
for or against socialism at all times and in all places, so there is no
absolutely general case for or against the democratic method. And
exactly as with socialism, this makes it difficult to argue by means
of a ceteris paribus clause, for ''other things’' cannot be equal as
between situations in which democracy is a workable, or the only
workable, arrangement and situations in which it is not. Democracy
thrives in social patterns that display certain characteristics and it
might well be doubted whether there is any sense in asking how it
would fare in others that lack those characteristics — or how the peo-
ple in those other patterns would fare with it. The conditions which
I hold must be fulfilled for the democratic method to be a success^ —
in societies in which it is possible for it to work at all — I shall group
under four headings; and I shall confine myself to the great indus-
trial nations of the modern type.

The first condition is that the human material of politics — the
people who man the party machines, are elected to serve in parlia-
ment, rise to cabinet office — ^should be of sufficiently high quality.
This means more than that individuals of adequate ability and moral
character must exist in sufficient numbers. As has been pointed out
before, the democratic method selects not simply from the popula-
tion but only from those elements of the population that are avail-
able for the political vocation or, more precisely, that offer them-
selves for election. All methods of selection do this of course. All of
them therefore may, according to the degree to which a given voca-
tion attracts talent and character, produce in it a level of perform-
ance that is above or below the national average. But the competitive
struggle for responsible office is, on the one hand, wasteful of per-
sonnel and energy. On the other hand, the democratic process may
easily create conditions in the political sector that, once established,
will repel most of the men who can make a success at anything else.
For both these reasons, adequacy of material is particularly important
for the success of democratic government. It is not true that in a de-
mocracy people always have the kind and quality of government
they want or merit.

There may be many ways in which politicians of sufficiently good

5 By ^‘success’' I mean no more than that the democratic process reproduce itself
steadily without creating situations that enforce resort to non-democratic methods
and that it cope with current problems in a way which all interests that count
politically find acceptable in the long run. I do not mean that every observer, from
his own individual standpoint, need approve of the results.

The Inference 291

quality can be secured. Thus far however, experience seems to sug-
gest that the only effective guarantee is in the existence of a social
stratum, itself a product of a severely selective process, that takes to
politics as a matter of course. If such a stratum be neither too ex-
clusive nor too easily accessible for the outsider and if it be strong
enough to assimilate most of the elements it currently absorbs, it
not only will present for the political career products of stocks that
have successfully passed many tests in other fields — served, as it were,
an apprenticeship in private affairs — but it will also increase their
fitness by endowing them with traditions that embody experience,
with a professional code and with a common fund of views.

It is hardly mere coincidence that England, which is the only
country to fulfill our condition completely, is also the only country
to have a political society in this sense. Still more instructive is the
case of Germany in the period of the Weimar Republic (1918-1933).
As I hope to show in Part V, there was nothing about the German
politicians of that period that would ordinarily be considered a
glaring defect. The average member of parliament and the average
prime and cabinet minister were honest, reasonable and conscien-
tious. This applies to all parties. However, with due respect for the
sprinkling of talent that showed here and there, though rarely in a
position of or near high command, it must be added that most of
them were distinctly below par, in some cases pitifully so. Obviously
this cannot have been due to any lack of ability and energy in the
nation as a whole. But ability and energy spurned the political career.
And there was no class or group whose members looked upon poli-
tics as their predestined career. That political system missed fire for
many reasons. But the fact that eventually it met smashing defeat
at the hands of an anti-democratic leader is nevertheless indicative of
the lack of inspiring democratic leadership.

The second condition for the success of democracy is that the effec-
tive range of political decision should not be extended too far. How
far it <;an be extended depends not only on the general limitations
of the democratic method which follow from the analysis presented
in the preceding section but also on the particular circumstances
of each individual case. To put this more concretely: the range does
not only depend, for instance, on the kind and quantity of matters
that can be successfully handled by a government subject to the
strain of an incessant struggle for its political life; it also depends,
at any given time and place, on the quality of the men who form
that government and on the type of political machine and the pat-
tern of public opinion they have to work with. From the standpoint
of our theory of democracy it is not necessary to require, as it
would be from the standpoint of the classical theory, that only such
rqatters should be dealt with by the political apparatus which the people

2g2 Socialism and Democracy

at large can fully understand and have a serious opinion about But
a less exacting requirement of the same nature still imposes itself.
It calls for additional comment

Of course there cannot be any legal limits to what a parliament,
led by the prime minister, might subject to its decision, if need be,
by means of a constitutional amendment. But, so Edmund Burke
argued in discussing the behavior of the English government and
Parliament with respect to the American colonies, in order to function
properly that all-powerful parliament must impose limits upon itself.
Similarly we may argue that, even within the range of matters that
have to be submitted to parliamentary vote, it is often necessary for
government and parliament to pass measures on which their decision
is purely formal or, at most, of a purely supervisory nature. Other-
wise the democratic method may turn out legislative freaks. Take
for instance the case of so bulky and so technical a measure as a
criminal code. The democratic method will apply to the question
whether or not a country is to have such a codification at all. It
will also apply to certain ‘‘issues” that the government may choose
to select for political decision which is more than formal — for instance,
whether certain practices of labor or employers' associations should
or should not be considered criminal. But for the rest, government
and parliament will have to accept the specialists' advice whatever
they may think themselves. For crime is a complex phenomenon.
The term in fact covers many phenomena that have very little in
common. Popular slogans about it are almost invariably wrong.
And a rational treatment of it requires that legislation in this mat-
ter should be protected from both the fits of vindictiveness and the
fits of sentimentality in which the laymen in the government and
in the parliament are alternatingly prone to indulge. This is what I
meant to convey by stressing the limitations upon the effective range
of political decision — the range within which politicians decide in
truth as well as in form.

Again, the condition in question can indeed be fulfilled by* a cor-
responding limitation of the activities of the state. But it would be
a serious misunderstanding if the reader thought that such a limita-
tion is necessarily implied. Democracy does not require that every
function of the state be subject to its political method. For instance,
in most democratic countries a large measure of independence from
political agencies is granted to the judges. Another instance is the
position held by the Bank of England until 1914. Some of its func-
tions were in fact of a public nature. Nevertheless these functions
were vested with what legally was just a business corporation that was
sufficiently independent of the political sector to have a policy of its
own. Certain federal agencies in this country are other cases in point.
The Interstate Commerce Commission embodies an attempt to extend

The Inference

293

the sphere of public authority without extending the sphere of po-
litical decision. Or, to present still another example, certain of our
states finance state universities “without any strings,'* that is to say,
without interfering with what in some cases amounts to practically
complete autonomy.

Thus, almost any type of human affairs may conceivably be made
to enter the sphere of the state without becoming part of the mate-
rial of the competitive struggle for political leadership beyond what
is implied in passing the measure that grants the power and sets
up the agency to wield it and the contact that is implied in the
government’s role of general supervisor. It is of course true that
this supervision may degenerate into vitiating influence. The poli-
tician’s power to appoint the personnel of non-political public agen-
cies, if remorselessly used, will often suffice in itself to corrupt them.
But that does not affect the principle in question.

As a third condition, democratic government in modern industrial
society must be able to command, for all purposes the sphere of
public activity is to include — no matter whether this be much or
little — the services of a well-trained bureaucracy of good standing
and tradition, endowed with a strong sense of duty and a no less
strong esprit de corps. Such a bureaucracy is the main answer to the
argument about government by amateurs. Potentially it is the only
answer to the question so often heard in this country: democratic
politics has proved itself unable to produce decent city government;
how can we expect the nation to fare if everything, eventually in-
cluding the whole of the productive process, is to be handed over to
it? And finally, it is also the principal answer to the question about
how our second condition can be fulfilled® whenever the sphere of
public control is wide.

It is not enough that the bureaucracy should be efficient in cur-
rent administration and competent to give advice. It must also be
strong enough to guide and, if need be, to instruct the politicians
who head the ministries. In order to be able to do this it must be in
a position to evolve principles of its own and sufficiently independent
to assert them. It must be a power in its own right. This amounts to
saying that in fact though not in form appointment, tenure and
promotion must depend largely — ^within civil service rules that poli-
ticians hesitate to violate — on its own corporate opinion in spite of
all the clamor that is sure to arise whenever politicians or the public
find themselves crossed by it as they frequently must.

Again, as in the case of the personnel of politics, the question of the

« Reference to some comments on the subject of bureaucracy in ch. xviii will
convince the reader that, in all three respects, the answer provided by bureaucracy
is not held to be ideal in any sense. On the other hand readers should not allow
themselves to be unduly influenced by the associations the term carries in popular
parlance. In any case that answer is the only realistic one.

^94 Socialism and Democracy

available human material is all-important. Training though essential
is quite secondary to this. And again, both requisite material and
the traditional code necessary for the functioning of an official class
of this kind can be most easily secured if there is a social stratum
of adequate quality and corresponding prestige that can be drawn
upon for recruits — not too rich, not too poor, not too exclusive, not
too accessible. The bureaucracies of Europe, in spite of the fact that
they have drawn enough hostile criticism to blur their records, ex-
emplify very well what I am trying to convey. They are the product
of a long development that started with the ministeriales of medieval
magnates (originally serfs selected for administrative and military
purposes who thereby acquired the status of petty nobles) and went
on through the centuries until the powerful engine emerged which we
behold today. It cannot be created in a hurry. It cannot be ‘'hired*'
with money. But it grows everywhere, whatever the political method
a nation may adopt. Its expansion is the one certain thing about
our future.

The fourth set of conditions may be summed up in the phrase
Democratic Self-control. Everybody will of course agree that the
democratic method cannot work smoothly unless all the groups that
count in a nation are willing to accept any legislative measure as
long as it is on the statute book and all executive orders issued by
legally competent authorities. But democratic self-control implies
much more than this.

Above all, electorates and parliaments must be on an intellectual
and moral level high enough to be proof against the offerings of the
crook and the crank, or else men who are neither will be driven
into the ways of both. Moreover, miscarriages that will discredit de-
mocracy and undermine allegiance to it may also occur if measures
are passed without regard to the claims of others or to the national
situation. The individual proposals for legislative reform or execu-
tive action must, as it were, be content to stand in an orderly bread-
line; they must not attempt to rush the shop. Recalling what has
been said in the preceding chapter about the modus operandi of
the democratic method, the reader will realize that this involves a
lot of voluntary subordination.

In particular, politicians in parliament must resist the temptation
to upset or embarrass the government each time they could do so.
No successful policy is possible if they do this. This means that the
supporters of the government must accept its lead and allow it to
frame and act upon a program and that the opposition should accept
the lead of the “shadow cabinet" at its head and allow it to keep
political warfare within certain rules. Fulfillment of this require-
ment, habitual violation of which spells the beginning of the end of
a democracy, will be seen to call for just the right amount — ^not too

The Inference 295

much, not too little — of traditionalism. To protect this traditionalism
is in fact one of the purposes for which rules of parliamentary pro-
cedure and etiquette exist.

The voters outside of parliament must respect the division of labor
between themselves and the politicians they elect. They must not
withdraw confidence too easily between elections and they must un-
derstand that, once they have elected an individual, political action
is his business and not theirs. This means that they must refrain
from instructing him about what he is to do — a principle that has
indeed been universally recognized by constitutions and political
theory ever since Edmund Burke's time. But its implications are not
generally understood. On the one hand, few people realize that this
principle clashes with the classical doctrine of democracy and really
spells its abandonment. For if the people are to rule in the sense of
deciding individual issues, what could be more natural for them to
do than to issue instructions to their representatives as the voters for
the French States-General did in and before 1789? On the other hand,
it is still less recognized that if the principle be accepted, not only
instructions as formal as those French cahiers but also less formal
attempts at restricting the freedom of action of members of parlia-
ment — the practice of bombarding them with letters and telegrams
for instance — ought to come under the same ban.

We cannot enter into the various delicate problems which this raises
concerning the true nature of democracy as defined by us. All that
matters here is that successful democratic practice in great and com-
plicated societies has invariably been hostile to political back-seat
driving — to the point of resorting to secret diplomacy and lying about
intentions and commitments — and that it takes a lot of self-control
on the part of the citizen to refrain from it.

Finally, effective competition for leadership requires a large meas-
ure of tolerance for difference of opinion. It has been pointed out
before that this tolerance never is and never can be absolute. But it
must be possible for every would-be leader who is not lawfully ex-
cluded to present his case without producing disorder. And this may
imply that people stand by patiently while somebody is attacking
their most vital interests or offending their most cherished ideals —
or as an alternative, that the would-be leader who holds such views
restrains himself correspondingly. Neither is possible without genuine
respect for the opinions of one's fellow citizens amounting to a will-
ingness to subordinate one's own opinions.

Every system can stand deviating practice to a certain extent. But
even the necessary minimum of democratic self-control evidently
requires a national character and national habits of a certain type
which have not everywhere had the opportunity to evolve and which
the democratic method itself cannot be relied on to produce. And

296 Socialism and Democracy

nowhere will that self-control stand tests beyond a varying degree of
severity. In fact the reader need only review our conditions in order
to satisfy himself that democratic government will work to full ad-
vantage only if all the interests that matter are practically unanimous
not only in their allegiance to the country but also in their allegiance
to the structural principles of the existing society. Whenever these
principles are called in question and issues arise that rend a nation
into two hostile camps, democracy works at a disadvantage. And it
may cease to work at all as soon as interests and ideals are involved
on which people refuse to compromise.

This may be generalized to read that the democratic method will
be at a disadvantage in troubled times. In fact, democracies of all
types recognize with practical unanimity that there are situations in
which it is reasonable to abandon competitive and to adopt monopo-
listic leadership. In ancient Rome a non-elective office conferring such
a monopoly of leadership in emergencies was provided for by the
constitution. The incumbent was called magister popiili or dictator.
Similar provisions are known to practically all constitutions, our own
included: the President of the United States acquires in certain con-
ditions a power that makes him to all intents and purposes a dictator
in the Roman sense, however great the differences are both in legal
construction and in practical details. If the monopoly is effectively
limited either to a definite time (as it originally was in Rome) or to
the duration of a definite short-run emergency, the democratic prin-
ciple of competitive leadership is merely suspended. If the monopoly,
either in law or in fact, is not limited as to time — and if not limited
as to time it will of course tend to become unlimited as to every-
thing else — the democratic principle is abrogated and we have the
case of dictatorship in the present-day sense J

III. Democracy in the Socialist Order

1. In ^setting forth our conclusions we had better begin with the
relation between democracy and the capitalist order of things.

The ideology of democracy as reflected by the classical doctrine
rests on a rationalist scheme of human action and of the values of
life. By virtue of a previous argument (Chapter XI) this fact would in
itself suffice to suggest that it is of bourgeois origin. History clearly
confirms this suggestion: historically, the modern democracy rose
along with capitalism, and in causal connection with it. But the same

^In ancient Rome whose term we are in the habit of misusing, an autocracy
developed that for several centuries displayed certain features not dissimilar to
those of modern dictatorships though the analogy should not be pushed too far.
But that autocracy did not make use of the republican office of dictator except in
one case, that of G. Julius Caesar. Sulla’s dictatorship was simply a temporary
magistracy created for a definite purpose (constitutional reform). And there are no
other but quite “regular” cases.

The Inference 297

holds true for democratic practice: democracy in the sense of our
theory of competitive leadership presided over the process of politi-
cal and institutional change by which the bourgeoisie reshaped, and
from its own point of view rationalized, the social and political struc-
ture that preceded its ascendancy: the democratic method was the
political tool of that reconstruction. We have seen that the democratic
method works, particularly well, also in certain extra- and pre-capi-
talist societies. But modern democracy is a product of the capitalist
process.

Whether or not democracy is one of those products of capitalism
which are to die out with it is of course another question. And still
another is how well or ill capitalist society qualifies for the task of
working the democratic method it evolved.

As regards the latter question, it is clear that capitalist society
qualifies well in one respect. The bourgeoisie has a solution that is
peculiar to it for the problem of how the sphere of political decision
can be reduced to those proportions which are manageable by means
of the method of competitive leadership. The bourgeois scheme of
things limits the sphere of politics by limiting the sphere of public
authority; its solution is in the ideal of the parsimonious state that
exists primarily in order to guarantee bourgeois legality and to pro-
vide a firm frame for autonomous individual endeavor in all fields.
If, moreover, account be taken of the pacific — at any rate, anti-mili-
tarist — and free-trade tendencies we have found to be inherent in
bourgeois society, it will be seen that the importance of the role of
political decision in the bourgeois state can, in principle at least, be
scaled down to almost any extent that the disabilities of the political
sector may require.

Now this kind of state has no doubt ceased to appeal to us. Bour-
geois democracy is certainly a very special historical case and any
claims that may be made on behalf of it are obviously contingent
upon acceptance of standards which are no longer ours. But it is
absurd to deny that this solution which we dislike is a solution and
that bourgeois democracy is democracy. On the contrary, as its colors
fade it is all the more important to recognize how colorful it was
in the time of its vitality; how wide and equal the opportunities
it offered to the families (if not to the individuals); how large the
personal freedom it granted to those who passed its tests (or to their
children). It is also important to recognize how well it stood, for
some decades at least, the strain of uncongenial conditions and how
well it functioned, when faced by demands that were outside of and
hostile to the bourgeois interests.

Also in another respect capitalist society in its meridian qualified
well for the task of making democracy a success. It is easier for a class
whose interests are best served by being left alone to practice demo-

£98 Socialism and Democracy

cratic self-restraint than it is for classes that naturally try to live on
the state. The bourgeois who is primarily absorbed in his private
concerns is in general — as long as these concerns are not seriously
threatened— much more likely to display tolerance of political differ-
ences and respect for opinions he does not share than any other type
of human being. Moreover so long as bourgeois standards are domi-
nant in a society this attitude will tend to spread to other classes as
well. The English landed interest accepted the defeat of 1845 witli
relatively good grace; English labor fought for the removal of disa-
bilities but until the beginning of the present century was slow to
claim privileges. It is true that in other countries such self-restraint
was much less in evidence. These deviations from the principle were
not always serious or always associated with capitalist interests only.
But in some cases political life all but resolved itself into a struggle
of pressure groups and in many cases practices that failed to conform
to. the spirit of the democratic method have become important enough
to distort its modus operandi. That there “cannot’’ be true democracy
in the capitalist order is nevertheless an obvious over-statement.^

In both respects however capitalism is rapidly losing the advan-
tages it used to possess. Bourgeois democracy which is wedded to
that ideal of the state has for some time been working with increasing
friction. In part this was due to the fact that, as we have seen before,
the democratic method never works at its best when nations are much
divided on fundamental questions of social structure. -And this diffi-
culty in turn proved particularly serious, because bourgeois society
signally failed to fulfill another condition for making the democratic
method function. The bourgeoisie produced individuals who made a
success at political leadership upon entering a political class of non-
bourgeois origin, but it did not produce a successful political stratum
of its own although, so one should think, the third generations of
the industrial families had all the opportunity to form one. Why
this was so has been fully explained in Part II. All these facts to-
gether seem to suggest a pessimistic prognosis for this type of democ-
racy. They also suggest an explanation of the apparent ease with
which in some cases it surrendered to dictatorship.

2. The ideology of classical socialism is the offspring of bourgeois
ideology. In particular, it fully shares the latter's rationalist and utili-
tarian background and many of the ideas and ideals that entered the

«What should be said is that there are some deviations from the principle of
democracy which link up with the presence of organized capitalist interests. But
thus corrected, the statement is true both from the standpoint of the classical and
from the standpoint of our own theory of democracy. From the first standpoint,
the result reads that the means at the disposal of private interests are often used in
order to thwart the will of the people. From the second standpoint, the result reads
that those private means are often used in order to interfere with the working of the
mechanism of competitive leadership.

The Inference

classical doctrine of democracy. So far as this goes, socialists in fact
experienced no difficulty whatever in appropriating this part of the
bourgeois inheritance and in making out a case for the proposition
that those elements of the classical doctrine which socialism is un-
able to absorb — the emphasis on protection of private property for
instance — are really at variance with its fundamental principles.
Creeds of this kind could survive even in entirely non-democratic
forms of socialism and we may trust the scribes and pharisees to
bridge by suitable phrases any gap there may be between creed and
practice. But it is the practice that interests us — the fate of demo-
cratic practice as interpreted by the doctrine of competitive leader-
ship. And so, since we have seen that non-democratic socialism is
perfectly possible, the real question is again how well or ill socialism
qualifies for the task of making the democratic method function
should it attempt to do so.

The essential point to grasp is this. No responsible person can view
with equanimity the consequences of extending the democratic
method, that is to say the sphere of ‘'politics,'’ to all economic affairs.
Believing that democratic socialism means precisely this, such a per-
son will naturally conclude that democratic socialism must fail. But
this does not necessarily follow. As has been pointed out before, ex-
tension of the range of public management does not imply corre-
sponding extension of the range of political management. Conceiv-
ably, the former may be extended so as to absorb a nation’s economic
affairs while the latter still remains within the boundaries set by
the limitations of the democratic method.

It does follow however that in socialist society these limitations
will raise a much more serious problem. For socialist society lacks
the automatic restrictions imposed upon the political sphere by the
bourgeois scheme of things. Moreover, in socialist society it will no
longer be possible to find comfort in the thought that the inefficiencies
of political procedure are after all a guarantee of freedom. Lack of
efficient management will spell lack of bread. However, the agencies
that are to operate the economic engine — the Central Board we met
in Part III as well as the subordinate bodies entrusted with the man-
agement of individual industries or concerns — ^may be so organized
and manned as to be sufficiently exempt in the fulfillment of their
current duties from interference by politicians or, for that matter, by
fussing citizens’ committees or by their workmen. That is to^ say,
they may be sufficiently removed from the atmosphere of political
strife as to display no inefficiencies other than those associated with
the term Bureaucracy. And even these can be mucli reduced by an
appropriate concentration of responsibility on individuals and by a
system of well-chosen incentives and penalties, of which the methods
of appointment and promotion are the most important part.

goo Socialism and Democracy

Serious socialists, when off the stump and in a responsible mood,
have always been aware of this problem and also of the fact that
* ‘democracy” is no answer to it. An interesting illustration is afforded
by the deliberations of the German Committee on Socialization
(Sozialisierungs Kommission), In 1919, when the German Social Dem-
ocratic party had definitely set its face against bolshevism, the more
radical among its members still believed that some measure of so-
cialization was imminent as a matter of practical necessity and a
committee was accordingly appointed in order to define aims and to
recommend methods. It did not consist exclusively of socialists but
socialist influence was dominating, Karl Kautsky was chairman. Defi-
nite recommendations were made only about coal and even these,
arrived at under the gathering clouds of anti-socialist sentiment,
are not very interesting. All the more interesting are the views that
emerged in discussion at the time when more ambitious hopes still
prevailed. The idea that managers of plants should be elected by
the workmen of the same plants was frankly and unanimously con-
demned. The workmen's councils that had grown up during the
months of universal breakdown were objects of dislike and suspicion.
The committee, trying to get away as far as possible from the
popular ideas about Industrial Democracy,^ did its best to shape them
into an innocuous mold and cared little for developing their func-
tions. All the more did it care for strengthening the authority and
safeguarding the independence of the managerial personnel. Much
thought was bestowed on how to prevent managers from losing capi-
talist vitality and sinking into bureaucratic ruts. In fact — if it be
possible to speak of results of discussions that were soon to lose
practical importance — these socialist managers would not have dif-
fered very much from their capitalist predecessors, and in many
cases the same individuals would have been reappointed. We thus
reach, by a different route, the conclusion already arrived at in Part
III.

But we are now in a position to link up this conclusion with an
answer to the problem of democracy in socialism. In a sense, of course,
the present-day forms and organs of democratic procedure are as
much the outgrowth of the structure and the issues of the bourgeois

^industrial or Economic Democracy is a phrase that figures in so many quasi-
utopias that it has retained very little precise meaning. Mainly, I think, it means
two things: first, the trade-union rule over industrial relations; second, democratiza-
tion of the monarchic factory by workmen’s representation on boards or other
devices calculated to secure them influence on the introduction of technological
improvements, business policy in general and, of course, discipline in the plant in
particular, including methods of “hiring and firing.” Profit-sharing is a nostrum
of a subgroup of schemes. It is safe to say that much of this economic democracy
will vanish into thin air in a socialist regime. Nor is this so offensive as it may
sound. For many of the interests this kind of democracy is intended to safe*'
guard will then cease to exist.

The Inference 301

world as is the fundamental principle of democracy itself. But this
is no reason why they should have to disappear along with capitalism.
General elections, parties, parliaments, cabinets and prime ministers
may still prove to be the most convenient instruments for dealing
with the agenda that the socialist order may reserve for political
decision. The list of these agenda will be relieved of all those items
that at present arise from the clash of private interests and from the
necessity of regulating them. Instead there will be new ones. There
will be such questions to decide as what the volume of investment
should be or how existing rules for the distribution of the social
product should be amended and so on. General debates about effi-
ciency, investigation committees of the type of the English Royal
Commissions would continue to fulfill their present functions.

Thus the politicians in the cabinet, and in particular the poli-
tician at the head of the Ministry of Production, would no doubt
assert the influence of the political element, both by their legislative
measures concerning the general principles of running the economic
engine and by their power to appoint which could not be entirely
absent or entirely formal. But they need not do so to an extent in-
compatible with efficiency. And the Minister of Production need not
interfere more with the internal working of individual industries
than English Ministers of Health or of War interfere with the in-
ternal working of their respective departments.

3. It goes without saying that operating socialist democracy in the
way indicated would be a perfectly hopeless task except in the case
of a society that fulfills all the requirements of '‘maturity” listed in
Part III, including, in particular, the ability to establish the socialist
order in a democratic way and the existence of a bureaucracy of
adequate standing and experience. But a society that does fulfill these
requirements — I shall not deal with any other — ^would first of all
command an advantage of possibly decisive importance.

I have emphasized that democracy cannot be expected to function
satisfactorily unless the vast majority of the people in all classes are
resolved to abide by the rules of the democratic game and that this in
turn implies that they are substantially agreed on the fundamentals
of their institutional structure. At present the latter condition fails
to be fulfilled. So many people have renounced, and so many more
are going to renounce, allegiance to the standards of capitalist so-
ciety that on this ground alone democracy is bound to work with
increasing friction. At the stage visualized however, socialism may
remove the rift. It may reestablish agreement as to the tectonic prin-
ciples of the social fabric. If it does, then the remaining antagonisms
will be exactly of the kind with which the democratic method is well
able to cope.

It has also been pointed out in Part III that those remaining an-

302 Socialism and Democracy

tagonisms will be further decreased in number and importance by
the elimination of clashing capitalist interests. The relations between
agriculture and industry, small-scale and large-scale industry, steel-
producing and steel-consuming industries, protectionist and export in-
dustries will — or may — cease to be political questions to be settled
by the relative weights of pressure groups and become technical
questions to which technicians would be able to give unemotional
and unequivocal answers. Though it may be utopian to expect that
there would be no distinct economic interests or conflicts between
them, and still more utopian to expect that there would be no non-
economic issues to disagree about, a good case may be made out for
expecting that the sum total of controversial matter would be de-
creased even as compared with what it was in intact capitalism.
There would, for instance, be no silver men. Political life would be
purified.

On the face of it, socialism has no obvious solution to offer for the
problem solved in other forms of society by the presence of a political
class of stable traditions. I have said before that there will be a
political profession. There may evolve a political set, about the qual-
ity of which it is idle to speculate.

Thus far socialism scores. It might still be argued that this score
can be easily balanced by the importance and likelihood of possible
deviations. To some extent we have provided for this by insisting
on economic maturity which among other things implies that no great
sacrifices need be required of one generation for the benefit of a
later one. But even if there is no necessity for sweating the people by
means of a Gosplan, the task of keeping the democratic course may
prove to be extremely delicate. Circumstances in which the indi-
viduals at the helm would normally succeed in solving it are perhaps
no easier to imagine than circumstances in which, faced by a spec-
tacle of paralysis spreading from the political sector all over the
nation's economy, they might be driven into a course of action which
must always have some temptation for men beholding the tremendous
power over the people inherent in the socialist organization, ^ After
all, effective management of the socialist economy means dictator-
ship not 0/ but over the proletariat in the factory. The men who are
there so strictly disciplined would, it is true, be sovereign at the elec-
tions. But just as they may use this sovereignty in order to relax the
discipline of the factory, so governments— precisely the governments
which have the future of the nation at heart— may avail themselves
of this discipline in order to restrict this sovereignty. As a matter of
practical necessity, socialist democracy may eventually turn out to be
more of a sham than capitalist democracy ever was.

In any case, that democracy will not mean increased personal free-
dom. And, once more, it will mean no closer approximation to the
ideals enshrined in the classical doctrine.

PART V

A Historical Sketch of Socialist Parties

PROLOGUE

I T IS not for me to write a history of the socialist parties* Both the
settings in which they rose and fell and the ways in which they
with their problems call for a larger canvas and a mightier
brush than mine. Also, the time has not yet come to make the
attempt: though the last twenty years have brought up many valuable
monographs that shed all the light we need on particular situations
or phases, a vast amount of research has still to be done before a
history of modern socialism in action can be written that will meet
the requirements of scholarship. But certain facts are necessary in
order to complement and to put into the proper perspective much
of what has been said in the preceding parts of this book. And some
other points that have occurred to me from study or personal obser-
vation^ I wish to present because they seem to be interesting on their
own account. For this double purpose I have assembled the frag-
ments that are to follow, in the hope that even fragments may indi-
cate the contours of the whole.

Not every reader — not even every socialist reader — will approve
of the central position this fragment gives to Marx and Marxism. I
readily confess to personal bias in the matter. For me, the fascinating
thing about socialist policy — the thing that gives it a special claim
to attention and a dignity all its own that is both intellectual and
moral — is its clear and close relation to a doctrinal basis. In prin-
ciple at least, it is theory implemented by action or inaction turning
on the true or false perception of a historical necessity. (See Part I.)
Even considerations of expediency and mere tactics carry that char-
acter indelebilis and always have been discussed in the light of that
principle. But all this is true only of the Marxian streak; no truer,
of course, than it is, within the bourgeois compound, of the Bentham-
ite radicals — the ''philosophicaP* radicals as they were significantly
called. All non-Marxian socialist groups are more or less like other
groups and' parties; only Marxists of pure persuasion consistently
walked in the light of a doctrine that to them contained all answers
to all questions. As will be seen, I do not admire this attitude un-
conditionally. It may well be called narrow and even naive. But the
doctrinaires of all types, whatever their practical disabilities, have
certain esthetic qualities that raise them high above the common
run of political practitioners. Also they command sources of strength
which there practitioners will never be able to understand.

^One of these points has been dealt with elsewhere. See ch, xx.

CHAPTER XXIV

THE NONAGE

S ocialist doctrines, in some of their roots presumably as old as
articulate thought, were dreams, beautiful or hateful — impotent
longings out of contact with social realities — so long as they lacked the
means to convince anybody that the social process worked for the
realization of socialism. Socialist efEort amounted to preaching in the
desert so long as it had no established contact with an existing or
potential source of social power — to preaching of the Platonic type
about which no politician need bother and which no observer of
social processes need list among operative factors.

This is the gist of Marx's criticism of most of the socialists who
preceded him or in his day offered competitive teaching, and the
reason why he called them utopian. The point was not so much that
many of their schemes were obviously freaks or otherwise below par
intellectually, but that those schemes were essentially unimplemented
and unimplementable. A few examples will illustrate this and will
stand instead of a survey of a large body of literature. Also they will
suffice to show how far Marx's judgment was wrong.

Sir Thomas More's (1478-1535) Utopia, read, admired arid even
copied right into the nineteenth century — ^witness the success of
Cabet and of Bellamy — ^unfolds the picture of a frugal, moral and
equalitarian society that was the exact opposite of English society in
More's day. This ideal may be but the literary form of social criticism.
Perhaps we need not accept it for a presentation of More's opinion
about the aims^of practical social planning. However, if it be under-
stood in the latter sense — and so it was — the trouble with it does not
lie in its impracticability. In some respects it is less impracticable
than are certain present-day forms of idyllic socialism. For instance,
it faces the question of authority and it frankly accepts the prospect —
exalted no doubt into a virtue — of a modest standard of life. The
real trouble is that there is no attempt to show how society is to
evolve toward that ideal state (except possibly by conversion) or
what the real factors are that might be worked upon in order to
produce it. We can like or dislike the ideal. But we cannot do much
about it. To put the practical dot on the i, there is nothing in it on
which to found a party and to provide a program.

Another type may be instanced by Robert Owen's (1771-1858)
socialism. A manufacturer and practical reformer, he was not content

306

The Nonage 307

to conceive — or adopt — the idea of small self-sufficing communities,
producing and consuming their means of livelihood according to
communist principles in the word's boldest acceptance. He actually
went about realizing it. First he hoped for government action, then
he tried the effect of setting an example. So it might seem that the
plan was more operational than J^ore's: there was not only an ideal
but also a bridge leading to it. Actually however that kind of bridge
only serves to illustrate more precisely the nature of utopianism. For
both government action and individual efforts are introduced as dei
ex machina — the thing would have had to be done just because some
agent thought it worth while. No social force working toward the
goal was indicated or could have been indicated. No soil was provided
for the rose trees — they were left to feed on beauty.^

The same applies to Proudhon's (1809-1865) anarchism, except that
in his case definite economic error is much more in evidence than it
is with most of the other classics of anarchism who despised economic
argument and, whether stressing the ideal of free and stateless co-
operation of individuals or the task of destruction to be accomplished
in order to make way for it, avoided errors of reasoning largely by
avoiding reasoning. Like “poet, lunatic and lover of imagination all
compact," they were constitutionally unable to do anything except to
upset socialist applecarts and to add to confusion in situations of
revolutionary excitement. It is not difficult to sympathize with Marx's
disgust, that sometimes was not unmixed with despair, at the doings
of M. Bakunin.

But anarchism was utopianism with a vengeance. The pathological’
species has been mentioned only in order to make it quite clear that
such revivals of fourteenth-century mentality should not be confused
with the genuine brand of utopian socialism which St. Simon's (1760-
1825) writings display at its best. There we find sense and responsi-
bility coupled with considerable analytic power. The goal envisaged
was not absurd or visionary. What was lacking was the way: again
the only method suggested was government action — action by gov-
ernments that at the time were essentially bourgeois.

If this view be accepted, the great break that put an end to the
nonage of socialism must in fact be associated with the name and

iThe same is true of the similar plan of Charles Fourier (1772-1837) which will
not however be called socialist by everyone, since labor was to receive only 5/12 of
the social product, the rest going to capital and management. Though in itself this
was a meritorious attempt to take account of realities, it is amusing to note that
labor would in that ideal state of things have done worse than it actually does in
capitalist society. In prewar England for instance (see A. Bowley, The Division of
the Product of Industry, 1921, p. 37), wages and salaries under £160 absorbed, in
manufacturing and mining, 62 per cent of the value of net output or, counting
in salaries above £160, 68 per cent. Of course Fourier’s ideals were not primarily
economic, but as far as they were, they illustrate well how large an element of
ignorance about capitalist facts enters into reformist creeds.

3o8 a Historical Sketch of Socialist Parties

work of Karl Marx. We may then date it, so far as in such matters
dating is possible at all, by the issue of the Manifesto of the Com-
munist Party (1848) or by the foundation of the First International
(1864): it was in that period that both the doctrinal and the political
criteria of seriousness were met. But, on the one hand, this achieve-
ment only summed up the developments of the centuries of nonage
and, on the other hand, it formulated them in a particular way that
perhaps was practically, but certainly was not logically, the only pos-
sible one. To some extent, therefore, the judgment passed by orthodox
socialism on the men of the nonage must be revised.

First of all, if the socialist schemes of those centuries were dreams,
most of them were rationalized dreams. And what individual thinkers
more or less perfectly succeeded in rationalizing were not simply their
individual dreams but the dreams of the non-ruling classes. Thus,
those thinkers were not living completely in the clouds; they also
helped to bring to the surface what slumbered below but was getting
ready to wake up. In this respect even the anarchists, back to their
medieval predecessors who flourished in many a convent and still
moi'e in the tertiary groups of the Franciscan Order, acquire a sig-
nificance which Marxists usually do not accord to them. However
contemptible their beliefs may seem to the orthodox socialist, much
of the propelling force of socialism comes, even today, from those irra-
tional longings of the hungry soul — not belly — which they voiced.^

Second, the socialist thinkers of the nonage provided many a brick
and many a tool that proved useful later on. After all, the very idea
of a socialist society was their creation, and it was owing to their
efforts that Marx and his contemporaries were able to discuss it as a
thing familiar to everyone. But many of the Utopians went much
further than that. They worked out details of the socialist plan or of
certain variants of it, thereby formulating problems — however in-
adequately — and clearing much ground. Tven their contribution to
purely economic analysis cannot be neglected. It provided a much-
needed leaven m an otherwise distressingly stodgy pudding. Much of
it moreover was simply professional work that improved existing
theory and, among other things, stood Marx in good stead. The Eng-
lish socialists and quasi-socialists who elaborated the labor theory of
value— such men as William Thompson— afford the best example of
this.

Third, not all of those whom Marxists include among the Utopians

^That is why the trained socialist's endeavors to shake off what he himself
admits to be nonsensical or visionary in the creed of the untutored believer can
never be wholly successful. The popular appeal of socialism is due not to what
can be rationally established about it, but precisely to those mystic heresies which
bourgeois and socialist economists unite in condemning. In trying to distance
himself, the socialist not only is being ungrateful to the wave that carries him, but
he is also courting the danger that its forces might be harnessed into other service.

The Nonage gog

lacked contact with mass movements. Some contact inevitably resulted
from the fact that the social and economic conditions which set in
motion the intellectual’s pen will also set in motion some group or
class of the people — ^peasants or artisans or agricultural laborers or
simply the vagrants and the rabble. But many of the Utopians estab-
lished much closer contact. The demands of the peasants during the
revolutions of the sixteenth century were already formulated by intel-
lectuals, and coordination and cooperation steadily became closer as
the centuries rolled on. ‘‘Gracchus” Babeuf, the leading spirit of the
only purely socialist movement within the French Revolution, was
considered of sufiScient importance for the government to pay him
the compliment of executing him in 1797. Again England best illus-
trates this development. We need only compare, from this angle, the
history of the Leveller movement in the seventeenth and the Chartist
movement in the nineteenth centuries. In the first case, Winstanley
joined and led as an individual; in the second case, groups of intel-
lectuals reacted in a body and though their cooperation tapered off
into Christian Socialism, it was not merely an affair of the student’s
closet entirely divorced from a contemporaneous mass movement. In
France, the best example is afforded by Louis Blanc’s activities in
1848. In this as in other respects, therefore, utopian socialism differed
from “scientific” socialism in degree rather than in kind: the relation
of the socialists of the nonage to class movements was occasional and
not as a rule a matter of fundamental principle, whereas with Marx
and with post-Marxian socialism it became precisely a matter of
fundamental principle and similar to the relation of a government to
its standing army.

A very important point — ^I hope it will not prove a stumbling
block — ^remains to be made. I have said that the doctrine which avers
the presence of a tendency toward socialism,® and the permanent
contact with an e^tisting or potential source of social power — the two
requisites of socialism as a serious political factor— ^were definitely
established around the middle of the nineteenth century in a way
that was logically not the only possible one. Marx and most of his
contemporaries imparted a particular slant to their doctrine by hold-
ing that the laboring class was the only one to be actively associated
with this tendency and that hence it was the only source of power
for the socialist to tap. For them, socialism meant primarily libera-
tion of labor from exploitation, and “the emancipation of the workers
must be the task of the working class itself.”

®For the precise meaning of this phrase the reader should again turn to our
discussions in Parts I and II. Here it means two things: first, that real social forces,
independent of desirabilities or undesirabilities, are making for socialism which
therefore will increasingly acquire the character of a practical proposition; second,
that this being so, there is present room for party activities on socialist lines. The
latter point will be discussed in ch. xxv.

gio A Historical Sketch of Socialist Parties

Now it is easy to understand why, as a practical proposition, the
conquest of the labor interest should have appealed to Marx more
than any other course, and why his doctrine should have been shaped
accordingly. But the idea has become so firmly rooted, also in some
nomsocialist minds, as to blot out completely some facts which it takes
a lot of trouble to explain away, viz., that the labor movement,
though often allied with socialism, has remained distinct from it to
this day, and that it proved by no means so easy for socialists to estab-
lish in the workers' world spheres of influence in which their creed
is accepted as a matter of course. However we may interpret these
facts, it should be clear that the labor movement is not essentially
socialist, just as socialism is not necessarily laborite or proletarian.
Nor is this surprising. For we have seen in Part II that though the
capitalist process slowly socializes economic life and much besides,
this spells transformation of the whole of the social organism all parts
of which are equally affected. The real income and the social weight
of the working class rise in this process, and capitalist society becomes
more and more incapable of dealing with labor difficulties. But this
is a poor substitute for the Marxian picture of labor being goaded
into the grand, revolution by increasingly intolerable suffering. If we
discard this picture and realize that what actually increases is labor's
stake in the capitalist system, we shall inevitably think less of the
particular call addressed to the working class by the logic of evolu-
tion. Still less convincing is the role that Marxism assigns to the pro-
letariat in the catastrophe of the social drama. There is little for it to
do if the transformation is gradual. And if there be a grand revolu-
tion, the proletariat will simply be talked and bullied into consent.
The spearhead will be formed by intellectuals assisted by the semi-
criminal rabble. And Marx's ideas on the subject are nothing but
“ideology" — ^just as utopian as any beliefs of the utopists.

Thus, while it remains substantially true that, unlike most of his
predecessors, Marx intended to rationalize an existing movement and
not a dream, and also that he and his successors actually gained par-
tial control of that movement, the difference is smaller than Marxists
would have us believe. There was, as we have seen, more of realism
in the thought of the utopists, and there was more of unrealistic
dreaming in Marx's thought than they admit.

In the light of this fact, we shall think better of the socialists of
the nonage because they did not exclusively stress the proletarian
aspect. In particular their appeal to governments or to classes other
than the proletariat will appear to us less visionary and more realistic
than it appeared to Marx. For the state, its bureaucracy and the
groups that man the political engine are quite promising prospects
for the socialist looking for his source of social power. As should be
evident by How, they are likely to move in the desired direction with

The Nonage 311

no less **dialecticar’ necessity than are the masses. And that excrescence
o£ the bourgeois stratum which we shall term {a potion) Fabian Social-
ism^ is also suggestive. Marx’s choice of social motive power thus
produced a special case which, though practically the most important,
yet stands logically on a par with others that are frauds and heresies
to the orthodox.

^See ch. xxvi. Marxists 'will naturally reply that those phenomena are mere
derivates of the genuine one, mere effects of the forward march of the proletariat.
This is true if it means that the latter is one of the factors in the situation which
produced and is producing the former. But taken in this sense, this proposition
does not constitute an objection. If it means that there is a one-way or purely
cause-effect relation between proletarian and state socialism, then it does constitute
an objection but it is wrong. The socio-psychological process described in Part II
will, without any pressure from below, produce state and Fabian socialism which
will even help to produce that pressure. As we shall presently see, it is a fair ques-
tion to ask where socialism would be without the fellow traveler. It is certain that
socialism (as distinguished from the labor movement of the trade-union type)
would be nowhere without the intellectual leader of bourgeois extraction.

CHAPTER XXV

THE SITUATION THAT MARX FACED

1. According to Engels, Marx in 1847 adopted the term “com-
munist*' in preference to the term “socialist," because socialism had
by that time acquired a flavor of bourgeois respectability. However
that may have been and however we choose to explain this fact if it
was a fact — ^more than once we have seen good reason for interpreting
socialism as a product of the bourgeois mentality — there cannot be
any doubt that Marx and Engels themselves were typical bourgeois
intellectuals. Exiles of bourgeois extraction and tradition — this for-
mula accounts for a lot both in Marx’s thought and in the policies
and political tactics he recommended. The astounding thing is the
extent to which his ideas prevailed.

First of all, the uprooted intellectual, with the formative experience
of 1848 forever impressed upon his whole soul, cast off his own class
and was cast off by it. Similarly uprooted intellectuals and, at one
remove, the proletarian masses were henceforth all that was accessible
to him and all he had to put his trust in. This explains the doctrine
which, as we have seen in the preceding chapter, does stand in need
of explanation, viz., that workers would “emancipate themselves."

Second, the same uprooted intellectual naturally became inter-
nationalist in feeling. This meant more than that the problems and
vicissitudes of any particular country — even of individual national
proletariats — did not primarily concern him and always remained on
the periphery of his interests. It meant that it was so much easier for
him to create the hypernational socialist religion and to conceive of
an international proletariat the component parts of which were, in
principle at least, much more closely wedded to each other than each
of them was to its own co-nationals of a different class. Anyone could
in cold logic have framed this obviously unrealistic conception and
all that it implies for the interpretation of past history and for the
views of Marxist parties on foreign policy. But then it would have
had to contend with all the affective influences exerted by the na-
tional environments and could never have been passionately em-
braced by a man tied to a country by innumerable bonds. No such
bonds existed for Marx. Having no country himself he readily con-
vinced himself that the proletariat had none.

We shall presently see why — and how far — this teaching survived
and what, under varying circumstances, it was made to mean. Marx

312

The Situation That Marx Faced 313

himself no doubt accepted its non-interventionist and pacifist impli-
cations. He certainly thought not only that “capitalist wars'" were of
no concern to the proletariat but also that they were the means of
subjugating it still more completely. The concession he may be held
to have made, i.e,, that participation in the defense of one's own
country against attack is not incompatible with the duties of the
faithful, obviously was no more than a very necessary tactical device.

Third, whatever his doctrine may have been,i the uprooted bour-
geois had democracy in his blood. That is to say, belief in that part
of the bourgeois scheme of values which centers in democracy was
for him not alone a matter of the rational perception of the condi-
tions peculiar to the social pattern of his or any other time. Nor was
it merely a matter of tactics. It is true that socialist activities (and
his personal work) could not have been carried on, not with any
comfort at all events, in any environment professing other than
democratic principles as then understood. Save in very exceptional
cases, every opposition must stand for freedom — ^which for him meant
democracy — and throw itself on the mercy of “the people.” Of course
this element was and in some countries is even now very important.
This is precisely, as I have pointed out, why democratic professions
by socialist parties do not mean much until their political power
becomes great enough to give them a choice of an alternative, and
why they do not, in particular, avail to establish any fundamental
relation between the logic of socialism and the logic of democracy.
But it nevertheless seems safe to say that for Marx democracy was
above discussion and any other political pattern below it. This much
must be granted to the revolutionary of the 1848 type.^ Of course it
was out of the question for him to accept so important an article of
the bourgeois faith as it stood. That would have uncovered a most
inconveniently large expanse of common ground. But we have seen
in the preceding part that he knew how to meet this difficulty by
boldly claiming that only socialist democracy was true democracy and
that bourgeois democracy was no democracy at all.

s. Such then was Marx's political apriorL^ No need to emphasize
that it was totally different from the aprioris of the average English
socialist not only of his own but of any time — ^so different as to render
mutual sympathy and even full mutual understanding almost impos-
sible, quite irrespective of Hegelianism and other doctrinal barriers.
The 'same difference will stand out still better if we compare Marx to

^See ch. xx and xxiii. . . . , .

2 The emotional attitude acquired in 1848 also made it quite impossible for h
to understand, let alone to do justice to, the non-democratic regime that exiled
him. Dispassionate analysis could not have failed to reveal its achievements and
possibilities. But such analysis was in this case quite beyond his range.

2 No language that I know officially admits this word as a noun. To make it one
is however a very convenient solecism.

314 A Historical Sketch of Socialist Parties

another German intellectual of very similar background, Ferdinand
Lassalle (1825-1864). The scion of the same race, the product of the
same stratum, molded by a closely similar cultural tradition, similarly
conditioned by the experiences of 1848 and by the ideology of bourgeois
democracy, Lassalle yet differs from Marx in a manner that cannot be
explained wholly by the personal equation. Much more vital than
this was the fact that Marx was an exile and Lassalle was not. Lassalle
never cut himself off from his country or from classes other than the
proletariat. He never was an internationalist like Marx, By prole-
tariat he meant primarily the German proletariat. He had no objection
to cooperation with the state that was. He did not object to personal
contact with Bismarck or with the king of Bavaria. Such things are
important, more important perhaps than the most profound doc-
trinal differences, important enough to produce different kinds of
socialism and irreconcilable antagonisms.

Let us now take our stand on Marx’s apriori and survey the polit-
ical data that confronted him.

At first, the huge industrial masses of which Marx wrote and
thought existed nowhere except in England. Even there, the chartist
movement having petered out by the time he had found his bearings,
the working class was becoming increasingly realistic and conservative.
Disappointed by the failure of earlier radical activities, the men were
turning away from flashy programs and from songs about their right
to the total product. They soberly embarked upon an attempt to
increase their share in it. The leaders were cautiously trying to estab-
lish, to buttress and to increase the legal status and the economic
power of the trade unions within the political framework of bourgeois
society. On principle as well as for obvious tactical considerations,
they were bound to look upon revolutionary ideas or activities as a
nuisance and as a stupid or frivolous sabotage of labor’s serious busi-
ness. Also, they concerned themselves with the upper stratum of the
working class; for the lower, they harbored feelings that were akin
to contempt.

In any case however, Marx and Engels, circumstanced as they were
and being the types they were, could never have thought of going
forth in order to organize the industrial proletariat, or any particular
group of it, 'according to ideas of their own. All they could hope for
was contact with leaders and with the union bureaucracy. Beholding,
on the one hand, that attitude of the “respectable” workman and, on
the other hand, the attitude of the (then) unorganizable mob of the
big cities with which they hardly wished to act,^ they faced a dis-
agreeable dilemma. They could not fail to recognize the importance
of the trade-union movement that was about to accomplish, step by

^ Marxians are, it should he remembered, quite prone to speak of a proletarian
mob (Lumpenproletariat), ^

The Situation That Marx Faced 315

step, the gigantic task of organizing the masses into something like
an articulate class, that is to say, to solve the problem which they
themselves felt to be the most important of all. But, being completely
out of it and realizing the danger that this class might acquire
bourgeois standing and adopt a bourgeois attitude, they were bound
to dislike and to distrust the trade unions as much as they were dis-
liked and distrusted — as far as they were noticed at all — by them.
They were thus driven back upon the position that has become
characteristic of classical socialism and that, though much reduced in
importance, to this day expresses the fundamental antagonism be-
tween the socialist intellectuals and labor (which may in important
cases be roughly equated to the antagonism between socialist parties
and trade unions). For them, the trade-union movement was some-
thing to be converted to the doctrine of class war; as a means of such
conversion, occasional cooperation with it was proper for the faithful
whenever labor troubles radicalized the masses and sufficiently wor-
ried or excited trade-union officials to induce them to listen to the
gospel. But so long as conversion was not complete and in particular
so long as trade-union opinion remained on principle averse to revo-
lutionary or simply to political action, the movement was not in a
state of grace but on the contrary in error, misconceiving its own true
ends, deluding itself with trivialities that were worse than futile; ^
hence, except for the purpose of boring from within, the faithful
had to keep aloof.

This situation changed even during Marx's and still more during
Engels' lifetime. The growth of the industrial proletariat that eventu-
ally made it a power also on the Continent and the unemployment
incident to the depressions of that period increased their influence
with labor leaders though they never acquired any direct influence
on the masses. To the end however it was mainly the intellectuals
that supplied them the material to work with. But though their suc-
cess in that quarter was considerable, the intellectuals gave them
still more trouble than did the indifference, occasionally amounting
to hostility, of the labor men. There was a fringe of socialist intel-
lectuals that had no objection to identifying themselves either with
the trade unions or with social reform of the bourgeois-radical or
even the conservative type. And these of course dispensed a very dif-
ferent socialism which, holding out the promise of immediate benefit,
was a dangerous competitor. There were moreover intellectuals, fore-
most among them Lassalle, who had conquered positions among the
masses that were still more directly competitive. And finally there
were intellectuals who went far enough as regards revolutionary ardor,
but whom Marx and Engels quite rightly looked upon as the worst
enemies of serious socialism — the ‘‘putschists" like Blanqui, .the dream-
ers, the anarchists and so on. Doctrinal as well as tactical considera-

3i6 a Historical Sketch of Socialist Parties

tions rendered it imperative to meet all of these groups with an
unflinching No.

3. That doctrinal background and that tactical situation made it
extremely difficult for Marx to find answers for two vital questions
which every follower or would-be follower was sure to ask: the ques-
tion of the attitude toward the policies of the bourgeois parties and
the question of the immediate program.

As regards the first, socialist parties could not be advised to watch
bourgeois politics in silence. Their obvious task was to criticize capi-
talist society, to expose the masquerade of class interests, to point out
how much better everything would be in the socialist paradise and to
beat up for recruits: to criticize and to organize. However, a wholly
negative attitude, though quite satisfactory as a principle, would have
been impossible for any party of more than negligible political im-
portance to keep up. It would inevitably have collided with most of
the real desiderata of organized labor and, if persisted in for any
length of time, would have reduced the followers to a small group of
political ascetics. Considering the influence that Marx’s teaching
exerted, right up to 1914, on the great German party and on many
smaller groups it is interesting to see how he dealt with this difficulty.

So far as he felt it possible to do so, he took the only position that
was logically unimpeachable. Socialists must refuse to participate in
the sham improvements by which the bourgeoisie tried to deceive the
proletariat. Such participation — later dubbed Reformism — spelled
lapse from the Faith, betrayal of the true aims, an insidious attempt
to patch up what should be destroyed. Disciples like Bebel who made
the pilgrimage to the shrine after having thus strayed from the right
path were soundly rated. It is true that Marx and Engels themselves
had at the time of their communist party of 1847 contemplated co-
operation with left-wing bourgeois groups. Also, the Communist
Manifesto recognized the necessity of occasional compromises and alli-
ances, just as it allowed that tactics would have to differ according to
the circumstances of time and place. So much was implied in the
maxim enjoined upon the faithful to make use of all the antagonisms
between the bourgeoisies of different countries and between bourgeois
groups within every country — ^for this can hardly be done without a
measure of cooperation with some of them. But all that only amounted
to qualifying a principle in order to uphold it the more effectively.
In each case, the exception had to be severely scrutinized, the pre-
sumption being always against it. Moreover, it was cooperation in
certain definite emergencies, preferably revolutions, that was envisaged
rather than more durable alliance involving understandings in the
ordinary run of political life which might endanger the purity of the
creed.

How Marxists should behave when confronted by a particular

The Situation That Marx Faced 317

policy of the bourgeois enemy that clearly benefits the proletariat,
we may infer from the example set by the master himself in a very
important instance. Free trade was one of the main planks in the
platform of English liberalism. Marx was far too good an economist
not to see what boon, in the circumstances of that time, it conferred
upon the working class. The boon might be belittled, the motives of
bourgeois free traders might be reviled. But that did not solve the
problem, for surely socialists would have to support free trade, par-
ticularly in foodstuffs. Well, so they should but not of course because
cheap bread was a boon — oh, no! — but because free trade would
quicken the pace of social evolution, hence the advent of the social
revolution. The tactical trick is admirable. The argument is moreover
quite true and admits of application to a great many cases. The oracle
did not say however what socialists should do about policies which,
while also benefiting the proletariat, do not promote capitalist evo-
lution — such as most measures of social betterment, social insurance
and the like — or which, while promoting capitalist evolution, do not
’directly benefit the proletariat. But if the bourgeois camp should split
upon such questions the road was clear by virtue of the precept to
make use of capitalist dissensions. From this angle Marx would also
have dealt with reforms sponsored, in opposition to the bourgeoisie
by extra-bourgeois elements such as the landed aristocracy and gentry
although, in his schema of things, there was no separate place for
this phenomenon.

The second question was no less thorny. No party can live without a
program that holds out the promise of immediate benefits. But in
strict logic Marxism had no such program to offer. Anything positive
done or to be done in the vitiated atmosphere of capitalism was ipso
facto tainted. Marx and Engels were in fact worrying about this and
always discouraged programs that involved constructive policy within
the capitalist order and inevitably savored of bourgeois radicalism.
However, when they themselves faced the problem in 1847, they reso-
lutely cut the Gordian knot. The Communist Manifesto quite illog-
ically lists a number of immediate objects of socialist policy, simply
laying the socialist barge alongside the liberal liner.

Free education, universal suffrage, suppression of child labor, a
progressive income tax, nationalization of land, banking and trans-
portation, expansion of state enterprise, reclamation of waste lands,
compulsory industrial service for all, the spreading out of industrial
centers over the country — all this clearly measures the extent to which
(at that time) Marx and Engels allowed themselves to be opportunist
though they were inclined to deny the privilege to other socialists.
For the striking thing about this program is the absence of any plank
that we should recognize as typically or exclusively socialist it we met
it in another entourage; any single one of them could figure in a non-

3i8 a Historical Sketch of Socialist Parties

socialist program — even the nationalization of land has been advo-
cated, on special grounds, by otherwise bourgeois writers — and most
of them are simply taken from the radical stockpot. This was of course
the only sensible thing to do. But all the same it was a mere make-
shift, obviously intended to serve no other purpose than that of
covering an embarrassing practical weakness. Had Marx been inter-
ested in those items for their own sake, he would have had no alterna-
tive but to coalesce with the radical wing of bourgeois liberalism. As
it was, they mattered little to him and he felt no obligation to make
any sacrifice for their sake; had the bourgeois radicals carried them
all, this would presumably have come to Marx as a very disagreeable
surprise.

4. The same principles, the same tactics and similar political data
produced the Inaugural Address to the International Workmen's Asso-
ciation (the 'Tirst International") in 1864. The foundation of the
latter meant indeed a great stride beyond the German ArbeiterbiU
dungsverein of 1847 or the little international group of the same year.
It was of course no organization of socialist parties — though for in-
stance the two German ones joined, the Lassallean Allgemeiner
Deutscker Arbeit erverein speedily resigned — and still less an inter-
national organization of the proletariat. But labor groups from many
lands and of many types were actually represented and even English
trade unions showed interest enough to bear for a time, in a rather
noncommittal way and with an eye to possible immediate advantages,
with a somewhat uncongenial alliance. George Odger figured among
the founders.® The large claims made by the Association and some
of its historians concerning its role in the revolutionary movements
and the major labor troubles of the time will bear discounting. But
if it effected little and never led or controlled, it at least offered
unifying phraseology. And it established contacts that in the end
might have raised it, with the kind assistance of its bourgeois enemies
who were foolish enough to advertise for it, to a position of real im-
portance. In the beginning all went fairly well and the first four
"'congresses" were distinctly successful, certain unsocialist incidents,
such as the vote upholding the principle of inheritance, being tact-
fully overlooked by the orthodox members. Bakunin's invasion (1869)
and expulsion (1872) however dealt a blow from which the Associa-
tion proved unable to recover though it lingered on till 1874.

Marx was from the first aware of the possibilities and of the dangers
inherent in that caravanserai which held intellectuals of doubtful
standing alongside of labor men obviously determined to use the

5 He even acted as president of the Internationars council. That meant a lot,
since he had been one of the most prominent promoters of federation and amalga-
mation among trade unions, an organizer of the London Trade Council and a
leading officer of the reform league for the enfranchisement of urban workers.

The Situation That Marx Faced 319

Association or to disown it according to circumstances. They were
the possibilities for which, and the dangers against which, he had
always fought. The first task was to keep the organization together,
the second to impart to it the Marxian slant, both to be solved in
the face of the facts, that his personal followers were always a minority
and that his influence on the other members was much smaller than
might be inferred from his being drafted — or rather allowed — to make
the program address. In consequence, this address contained conces-
sions to un-Marxian views similar to those which Marx himself was
shocked to find in the Gotha program of the German Social Demo-
cratic party (1875). Similarly, judicious maneuvering and compromise
were much in evidence ever after — the sort of thing that once made
Marx exclaim in semi-humorous despair: ''Je ne suis pas Marxiste/^
But the meaning of compromise depends upon the man by whom, and
the spirit in which, it is made. He who cares only for the trend may
put up with many deviations. Evidently Marx trusted himelf to keep his
trend steadily in view and to find his way back to it after each devia-
tion. But we shall understand that he felt misgivings when he saw
others playing the same game. There was thus more than mere egotism
both in his tactical shuffling and in his venomous denunciations of
other people’s shuffling.

Of course both the tactics and the principle of what has ever since
remained the classical policy of orthodox socialism are open to criti-
cism. The tactical example set by Marx left followers free to justify
practically any course of action or inaction by some move or dictum
of the master. The principle has been denounced for pointing a way
that led nowhere. All the more important is it to realize its rationale.
Marx believed in the proletarian revolution. He also believed — though
his own doctrine should have made him doubt this — that the right
moment for it was not far off, just as most early Christians believed
that the day of judgment was at hand. Therefore, his political method
was indeed founded upon an error of diagnosis. Those intellectuals
who extol his political acumen® fail entirely to see the amount of
wishful thinking that entered into his practical judgment. But the facts
within his horizon and his inferences from them being taken for
granted, that method does follow as do his views on the subject of
immediate results and on the table fellowship with bourgeois re-
formers. To found a homogeneous party based upon the organized
proletariat of all countries that would march toward the goal without
losing its revolutionary, faith and getting its powder wet on the road
was from that standpoint indeed the task of paramount importance
compared with which everything else was nugatory.

^See for instance Benedetto Croce, Materialismo Storico ed Economia Mafxista$
translation by C, M» Meredith, 1914*

CHAPTER XXVI

FROM 1875 TO 1914

I. English Developments and the Spirit of Fabianism

T here is some symbolic significance im these two dates. The year
1875 saw the birth o£ the first purely socialist party that was
powerful enough to count as a factor in politics. This momentous
event came to pass through the merger of the two German groups—
Lassalle's group and another founded by Bebel and Liebknecht in
i35g — into the Social Democratic Party which, though at the time
(Gotha program) it made considerable concessions to Lassalle's creed,^
eventually embraced Marxism (Erfurt program, 1891) and steadily
fought its way to the proud position it held in 1914 when, like all
socialist parties, it met the crisis of its fate.^ Before commenting on the
astounding development that brought a Marxist party, without any
compromise involving sacrifice of principle, within sight of parlia-
mentary leadership, we shall glance at the course of events in other
countries and first at the English socialism of that period which on
the surface offers so striking and instructive a contrast to it.

Below the surface, there are of course substantially similar social
processes and, as parts of them, substantially similar labor movements.
The differences between the English and the German cases as to tone,
ideology and tactics are easily explained. Ever since the Owenite
Grand National Consolidated Trade Union had broken down in 1834
or since chartism had ebbed away, the English labor movement had
ceased to elicit any determined hostility. Some of its economic aims
were espoused by the liberal and others by the conservative party
The trade union acts of 1871, 1875 and 1876, for instance, were passed
without anything that could have stung labor into militancy. More-
over, the battle for enfranchisement was fought out by non-socialist

^Lassalle’s main nostrum was organization of the workmen into state-aided pro-
ducers' cooperatives that were to compete with, and in the end to eliminate,
private industry. This so obviously smacks of utopianism that it is not difficult to
understand Marx's aversion.

2 It then held no out of 397 seats in the Reichstag and, owing to the inability
of the bourgeois groups to organize great homogeneous parties, this meant even
more than the figure in itself suggests.

® The emergence of a pro-labor attitude in the conservative camp is particularly
striking. On the one hand the group led by Lord Ashley, and on the other hand
the Young England group (Disraeli's Tory Democracy) may be mentioned by way
of illustration.

320

From 1875 to 1914

321

groups, the masses not having to do much except cheering and booing.
In all this, the superior quality of the rank and file of English labor
stands out well. So does the superior quality of English political so-
ciety; after having proved itself able to avoid an analogon to the
French Revolution and to eliminate the dangers threatening from
dear bread, it then continued to know how to manage social situations
of increasing difficulty and how to surrender with some grace — ^witness
the Trades Disputes Act of 1906.^ In consequence, the English prole-
tariat took longer in becoming “class-conscious"’ or in getting to the
landmark at which Keir Hardie was able to organize the Independent
Labour Party (1893). But the rise of the New Unionism^ eventually
heralded a state of things that, barring verbalization, did not differ
essentially from the German one.

The nature and extent of such difference as there was will stand
out most clearly if for a moment we look at the group whose aims
and methods express it to perfection, the Fabian Society. Marxists
will smile contemptuously at what to them must seem to be a gross
exaggeration of the importance of a small group of intellectuals which
never wished to be anything else. In reality, the Fabians in England,
or the attitudes they embodied, were just as important as were the
Marxists in Germany.

The Fabians emerged in 1883, and remained for the whole of our

4 It is difficult, at the present time, to realize how this measure must have struck
people who still believed in a state and in a legal system that centered in the
institution of private property. For in relaxing the law of conspiracy in respect to
peaceful picketing-— which practically amounted to legalization of trade-union action
implying the threat of force — and in exempting trade-union funds from liability
in actions for damages for forts— which practically amounted to enacting that
trade unions could do no wrong— this measure in fact resigned to the trade unions
part of the authority of the state and granted to them a position of privilege which
the formal extension of the exemption to employers’ unions wp powerless to
affect. Yet the bill was the result of the report of a Royal Commission set up in
1Q03 when the conservative party was in power. And the conservative leader
(Balfour), in a speech on the third reading, accepted it without displaying any
discomfort. The political situation in 1906 no doubt goes far to explain this atti-
tude. But this does not invalidate my point.

5 The New Unionism means the spread of regular and stable organizations which
to the middle of the nineties were substantially confined to the skilled trades and
had developed attitudes of professional pride and bourgeois respectability (some
leaders of the eighties, like Crawford, frequently emphasized the gulf that separated
the respectable people in the trade unions from the proletarian mass) to the more
or less unskilled strata below them. These felt much less sure of their bargaining
power and were hence more amenable to socialist propaganda and to the argument
that strikes alone were unsafe weapons and that they should be supplemented by
political action. There is thus an important link between that downward spread
of unionism and the change in the trade unions’ attitude toward political activity
on the one hand and toward socialism on the other. It was then— a few years after
the great dock strike of 1889— that trade-union congresses began to pass socialist
resolutions.

322 A Historical Sketch of Socialist Parties

period a small group of bourgeois intellectuals.® They hailed from
Bentham and Mill and carried on their tradition. They entertained
the same generous hopes for humanity as the philosophical radicals
had before them. They went forth to work for rational reconstruction
and improvement in the same spirit of practical progressivism.

They were careful about their facts which some of them took no
end of trouble to collect by means of extensive research, and critical
of arguments and measures. But they were quite uncritical as to the
fundamentals, cultural and economic, of their aims. These they took
for granted which is only another way of saying that, like good English-
men, they took themselves for granted. They were unable to see the
difference between a slum and the House of Lords. Why both of
these were obviously '‘bad things,'’ that’s common sense, is it not?
And greater economic equality or self-government in India or
trade unions or free trade were no less obviously “good things,'’ who
could doubt it? All the thinking that was necessary was on how to
clean up the bad things and on how to secure the good things; every-
thing else was irritating futility. Single-minded devotion to public
service was as much in evidence in all this as was intolerance of other
views about individual and national values — in its way quite as pro-
nounced as was that of the Marxists — and an element of petty-bour-
geois resentment against everything aristocratic, including beauty.

At first there was nothing behind the Fabians. They set out to per-
suade whoever would listen. They lectured to working-class and to
bourgeois crowds. They pamphleteered ably and extensively. They
recommended or fought particular policies, plans and bills. The most
important of all their avenues to influence however was their contact
with individual “keymen,” or rather with individuals in the entour-
age of political, industrial and labor leaders. Their country and their
own social and political location in their country offered a unique
opportunity for establishing and exploiting such contacts.

English political society does not always accept outsiders’ advice
but, much more than any other society, it is ready to listen, to it.
And some of the Fabians were not simply outsiders. A few were able
to avail themselves of connections formed in Oxford and Cambridge
students’ unions and common rooms. They were not living, morally
speaking, on another planet. Most of them were not straight enemies
of the established order. All of them stressed willingness to cooperate
much more than hostility. They were not out to found a party and
greatly disliked the phraseology of class war and revolution. Whenever

® The group, which never numbered more than from 3000 to 4000 members, was
really still smaller than its membership indicates. For the operative nucleus
amounted to no more than 10 or 20 per cent of it. This nucleus was bourgeois in
background and tradition and also in another respect: most of its members were
economically independent at least in the sense that they had a bare competence
to live on.

From 1875 to 1914 323

possible they preferred making themselves useful to making them-
selves a nuisance. And they had something to ofiEer to the parliamen-
tarian or administrator who often welcomed suggestions as to what
should be done and how to do it.

A modern cabinet minister can in general find within the walls
of his ministry most of the information and suggestions he needs.
In particular, he can never suffer from lack of statistics. That was
not so in the eighties and nineties. With rare exceptions, civil servants
of all ranks knew their routine and little else. Outside of the lines of
established policies the parliamentarian in office, still more the parlia-
mentarian out of office, was often hard up for facts and ideas es-
pecially in the field of the “new” social problems. A group that had
them in stock and was always willing to serve them up, neatly arranged
and ready for use from the treasury or any other bench, was sure to
have entree, especially by the backdoor. The civil service accepted
this. And not only that: being to a considerable extent in sympathy
with at least the immediate aims of the Fabians, it allowed itself
to be educated by them. The Fabians in turn also accepted this role
of unofficial public servants. In fact, it suited them perfectly. They
were not personally ambitious. They liked to serve behind the scene.
Action through the bureaucracy whose growth in numbers and in
power they foresaw and approved fitted in very well with the general
scheme of their democratic state socialism.

But how — so Marx would have asked and so the little group of Eng-
lish Marxists (Hyndman^s Democratic Federation, born in 1881) actu-
ally did ask — could that kind of achievement ever amount to anything
if, indeed, it did not amount to conspiracy with the political expo-
nents of the bourgeois interests? How could it be called socialist at all
and, if so, was this not another edition of utopian socialism (in the
Marxist sense defined above)? It is easy to visualize how perfectly
nauseating Fabians and Marxists must have been to each other and
how heartily they must have despised each other’s illusions, though
it was the practice of the Fabians to avoid the discussions of funda-
mental principles and tactics in which Marxists delighted and to bear
with the latter in an attitude of slightly patronizing sympathy. Yet
for the detached observer there is no difficulty in answering these
questions.

Socialist endeavor of the Fabian type would not have amounted to
anything at any other time. But it did amount to much during the
three decades preceding 1914' because things and souls were ready for
that kind of message and neither for a less nor for a more radical
one. Formulation and organization of existing opinion were all that
was needed in order to turn possibilities into articulate policy, and
this ‘‘organizing formulation^’ the Fabians provided in a most work-
manlike manner. They were reformers. The spirit of the times made

32i4 A Historical Sketch of Socialist Parties

socialists of them. They were genuine socialists because they aimed
at helping in a fundamental reconstruction of society which in the
end was to make economic care a public affair. They were voluntarist
socialists and therefore they would at any earlier stage have come
within the Marxian concept of utopists. But as it was, they had their
bearings waiting for them so that the implications of that concept did
not fit their case. From their standpoint it would have been nothing
short of madness to rouse the bourgeois quarry into awareness of
danger by talking about revolutions and class wars. The awakening
of class consciousness was precisely what they wanted to avoid, at
least at first, since it would have rendered impossible the peaceful
but effective spread of their principles throughout the political and
administrative organs of bourgeois society. When things had suffi-
ciently matured, they did not hesitate to help the Independent Labour
party into existence, to cooperate with (and on) the Labour Repre-
sentation Committee of 1900, to start the trade unions on their political
career, to shape the course of the Progressive party in the London
County Council, to preach first municipal and then general socialism
— and, eventually, the virtues of the soviet system.

No doubt there is a side to all this which it would be easy to make
the subject of adverse comment. But, after all, if they never issued
a resounding declaration of war more Marxiano and never told the
quarry exactly what they were going to do to it, they also never under-
took to protect it. Another criticism that might be leveled against the
Fabians from the opposite standpoint, viz., that their modus pro-
cedendi courted the danger of getting stuck in the outlying defenses
of the capitalist system and that it might never lead to the grand
pitched battle, fails to take account of their peculiar attitude. On
their behaljE it can be replied that if, par r impossible y their attack on
the capitalist system succeeded in reforming it sufficiently without
killing it, why, that would only be a matter for congratulation. And
as to the pitched battle, they answered their revolutionary critics in
advance by adopting, with singular felicity, the name of the Roman
general who, for all his circumspection, did more than any of his
impetuous predecessors had done toward driving Hannibal from Italy.

Thus, though it might be said with truth that, in the matter of
class war as in others, Fabianism is the very opposite of Marxism, it
might also be held that the Fabians were in a sense better Marxists
than Marx was himself. To concentrate on the problems that are
within practical politics, to move in step with the evolution of things
social, and to let the ultimate goal take care of itself is really more in
accord with Marx's fundamental doctrine than the revolutionary
ideology he himself grafted upon it. To have no illusions about an
imminent catastrophe of capitalism, to realize that socialization is

From 1875 to 1914 3^5

a slow process which tends to transform the attitudes of all classes
of society, even spells superiority in fundamental doctrine.

II. Sweden on the One Hand and Russia on the Other

Every country has its own socialism. But things did not differ
greatly from the English paradigma in those continental countries
whose contributions to humanity’s fund of cultural values is so
strikingly out of proportion to their size — the Netherlands and the
Scandinavian countries in particular. Take Sweden for an instance.
Like her art, her science, her politics, her social institutions and much
besides, her socialism and her socialists owe their distinction not to

any peculiar features of principle or intention, but to the stuff the
Swedish nation is made of and to its exceptionally well-balanced social
structure. That is why it is so absurd for other nations to try to copy
Swedish examples; the only effective way of doing so would be to
import the Swedes and to put them in charge.

The Swedes being the people they are and their social structure
being what it is, we shall have no difficulty in understanding the two
outstanding characteristics of their socialism. The socialist party,
almost always ably and conscientiously led, grew slowly in response
to a very normal social process, without any attempt to push ahead
of normal development and to antagonize for the sake of antagonizing.
Hence its rise to political power produced no convulsions. Responsible
office came naturally to its leaders who were able to meet the leaders
of other parties on terms of equality and largely on common ground,
to this day, though a communist group has of course developed, the
differences in current politics reduce to such questions as whether
a few million kroner more or less should be spent on some social pur-
pose accepted by all. And within the party, the antagonism between
intellectuals and labor men only shows under the microscope pre-
cisely because, owing to the level of both, there is no great cul-
tural gulf between them and because, the Swedish social organism
producing a relatively smaller supply of unemployable intellectuals
than* do other social organisms, exasperated and exasperating intel-
lectuals are not as numerous as they are elsewhere. This is some-
times described as the ‘‘enervating control” exerted by trade unions
over the socialist movement in general and over the party m particu-
lar To observers steeped in the phraseology of current radicalism,
this may well seem so. But this diagnosis entirely fails to do justice to
the social and racial environment of which not only the labor but
also the intellectuals are the products and whiA prevents both of
them from exalting their socialism into a religion. Though room might
be found in Marx’s teaching for such patterns, the average M^ist can-
not of course be expected to look with favor upon a socialist party of
the Swedish type, or even to admit that it embodies a genuine case of

326 A Historical Sketch of Socialist Parties

socialist endeavor. Swedish socialists in turn were very lightly tinged
with Marxism though they frequently used language that conformed
to what was then considered socialist etiquette, especially in their in-
ternational relations with other socialist groups.

On the other end of the scale, in Russia, we find a socialism that
was almost purely Marxist and hence enjoyed that favor to the full,
but is no less easy to understand from its environment. Tsarist Russia
was an agrarian country of largely pre-capitalist complexion. The in-
dustrial proletariat, so far as it was accessible to the professional
socialist, formed but a small part of the total population of about 150
millions.'^ The commercial and industrial bourgeoisie, correspondingly
weak in numbers, was not much more efficient than was anyone else,
though capitalist evolution fostered by the government was rapidly
gathering momentum. Inserted into this structure was an intelligentsia
whose ideas were as foreign to the soil as were the Paris dresses of
Russian society women.

To many of the intellectuals, the form of government then pre-
vailing — an absolute monarch (autocrator) heading a huge bureauc-
racy and allied with the landed aristocracy and the church — ^was of
course abomination. And public opinion all over the world has ac-
cepted their reading of history. Even writers most hostile to the regime
that followed upon that of the tsars invariably make haste to assure
their readers that they are duly horrified at the monstrosity of tsarism.
Thus the simple truth has been entirely lost in a maze of cant phrases.
As a matter of fact, that form of government was no less appropriate
to the social pattern that had produced it than was the parliamentary
monarchy in England and the democratic republic in the United
States. The performance of the bureaucracy, considering the condi-
tions under which it had to work, was far above what the world has
been made to believe; its social reforms, agrarian and other, and its
halting steps toward a diluted type of constitutionalism were all that
could have been expected in the circumstances. It was the imported
radicalism and the group interest of the intellectuals that clashed
with the spirit of the nation and not the tsarist monarchy which on
the contrary had a strong hold upon the vast majority of all classes.

From this, two conclusions follow which at first sight seem para-
doxical though no serious student of history will consider them so.
On the one hand, any big or sudden move in the direction desired
by those liberal lawyers, doctors, professors and civil servants that
formed the Kadet party (the party of the Constitutional Democrats)
was impossible not so much because their program was inacceptable
to the monarchy as because they were so weak. Admitting them to
power would have meant admitting an element that commanded not
more but less support among the masses and was not more but less
1905 factory employment amounted to about one million and a half.

From 1875 to 1914

327

in sympathy with their feelings and interests than were the groups
that ran tsarism. There was no scope for a bourgeois regime let alone
a socialist one. And there was no analogy between the French situa-
tion of 1789 and the Russian situation of 1905. The social structure
that crumbled in 1789 was obsolete, stood in the way of almost every-
thing that had any vitality in the nation, and was unable to cope with
the fiscal, economic and social problems of the hour. This was not so
in the Russia of 1905. There had been loss of prestige owing to the de-
feat suffered at the hands of Japan and there were disaffection and
disorder in consequence. But the state proved itself equal to the tasks
not only of suppressing the disorder but also of attacking the problems
behind it. In France the result was Robespierre, in Russia it was
Stolypin. This would not have been possible if the life had gone out
of tsarism as it had gone out of the French ancien regime. There is
no reason for assuming that, but for the strain the World War put
upon the social fabric, the Russian monarchy would have failed to
transform itself peacefully and successfully under the influence of,
and in step with, the economic development of the country,®

« This analysis, of course, raises questions of great interest concerning the nature
of what we are in the habit of calling historical necessity on the one hand and
of the role in the historical process of the quality of individual leadership on the
other. It would, I think, be difficult to hold that Russia was driven into the war
by inexorable necessity. The interests at stake in the Serbian quarrel were not of
vital importance, to say the least. The domestic situation in 1914 was not such as
to enforce a policy of military aggression as a last resort. The former no doubt
actuated nationalists, the latter some (not all) of the extreme reactionaries, and both a
number of individuals and groups with axes to grind. But a modicum of common pru-
dence and firmness in the last of the tsars could no doubt have averted participa-
tion in the war. It would have been more difficult, but it cannot be called
impossible, to avert catastrophe later on when the situation had declared itself
and when, after the battle of Gorlice, all hope for military success had gone. Even
after the downfall of the monarchy, it is by no means certain that the Kerensky
government could not have saved the situation by carefully husbanding its re-
sources and refusing to yield to the importunity of the Allies instead of ordering
that desperate last attack. But tsarist society before the bourgeois revolt, and
bourgeois society after it, watched the approaching doom in a state of paralysis
that was as unmistakable as it is difficult to explain. Now the presence of group-
wise incompetence in the one camp and of ability and energy in the other cannot
of course be attributed to chance. But in this case, the incompetence of the old
regime merely amounted to its being not equal to a situation of complete dis-
organization and this situation could doubtless have been avoided.

The reader will hardly expect to find that my analysis of Russian socialism and
its environmental conditions agrees with Trotsky’s {History of the Russian Revolu-
tion, English translation by M. Eastman, 1934)* All the more significant is the
fact that the two do not differ tota coelo and that, in particular, Trotsky consid-
ered the question what would have happened if the revolutionary movement had
impinged upon a “different tsar.” It is true that he dismisses the obvious inference
from considLations of that order. But he recognizes that the Marast doctrine ^es
not constrain us to neglect the element of personality, though he does^ not seem
to admit the full importance of it for a diagnosis of the Russian revolution.

^ 3^8 A Historical Sketch of Socialist Parties

On the other hand, it was precisely because of the fundamental
stability of the social structure that the intellectuals, who could not
hope to prevail by anything like normal methods, were driven into a
desperate radicalism and into courses of criminal violence. Theirs was
the kind of radicalism whose intensity is in inverse proportion to its
practical possibilities, the radicalism of impotence. Assassinations
might be futile and productive of nothing but repression but there
was not much else to do. The brutality of the methods of repression
in turn produced retaliation and thus that tragedy unfolded, the
tragedy of cruelty and crime incessantly reinforcing each other, which
is all that the world saw and felt and which it diagnosed as we should
expect.

Now Marx was no putschist. For some of the antics of Russian
revolutionaries, especially for those of the Bakunin type, he harbored
as much hatred as is compatible with contempt. Moreover, he should
have seen — perhaps he did see — that the social and economic struc-
ture of Russia failed to fulfill every one of the conditions which ac-
cording to his own doctrine are essential for the success and even for
the emergence of his type of socialism. But if, on logical grounds,
this should have prevented the Russian intellectuals from embracing
his teaching, we shall understand readily why, on the contrary, it was
a tremendous success with them. They were — more or less seriously —
revolutionaries and they were at loose ends. Here was a revolutionary
gospel of unsurpassable force. Marx's glowing phrases and chiliastic
prophecy were exactly what they needed in order to get out of the
dreary desert of nihilism. Moreover, this compound of economic
theory, philosophy and history suited the Russian taste to perfection.
Never mind that the gospel was quite inapplicable to their case and
really held out no promise to them. The believer always hears what
he wants to hear, no matter what the prophet actually says. The
further removed the actual situation was from the state of maturity
which Marx visualized, the more ready were the Russian intellectuals
— ^not only the professed socialists among them — to look to him for a
solution of their problems.

Thus, a Marxist group emerged as early as 1883, to evolve into the
Social Democratic party in 1898. Leadership and, at the beginning,
membership were primarily intellectual of course, though sufficient
success attended the underground organizing activity among the
‘^masses" to enable sympathetic observers to speak of a fusion of labor
groups under Marxist leadership. This accounts for the absence of
many of the difficulties met by other Marxist groups in countries
with strong labor unions. In any case at first, the workmen who en-
tered the organization accepted the intellectuals' leadership with the
utmost docility and hardly even pretended to decide anything for
themselves. In consequence, developments in doctrine and in action

From 1875 to 1914

329

were on strictly Marxian lines and on a high level. Naturally this
drew the blessings of the German defenders of the faith who, be-
holding such disarming virtue, evidently felt that there must be some
exceptions to the Marxian thesis that serious socialism can spring
only from full-fledged capitalism. Plekhanov, however, the founder of
the group of 1883 and the leading figure of the first two decades,
whose able and learned contributions to Marxist doctrine commanded
universal respect, really accepted this thesis and therefore cannot have
hoped for the early realization of socialism. While valiantly fighting
the good fight against reformism and all the other contemporaneous
heresies that threatened the purity of the faith, and while upholding
belief in the revolutionary goal and method, this true Marxist must
have felt early misgivings at the rise, within the party, of a group
that seemed bent on action in the immediate future, though he sym-
pathized with it and with its leader, Lenin.

The inevitable conflict that split the party into Bolsheviks and
Mensheviks (1903) meant something much more serious than a mere
disagreement regarding tactics such as the names of the two groups
suggest. At the time no observer, however experienced, could have
realized fully the nature of the rift. By now the diagnosis should be
obvious. The Marxist phraseology which both groups retained ob-
scured the fact that one of them had irrevocably broken away from
classical Marxism.

Lenin had evidently no illusions concerning the Russian situation.
He saw that the tsarist regime could be successfully attacked only
when temporarily weakened by military defeat and that in the en-
suing disorganization a resolute and well-disciplined group could by
ruthless terror overthrow whatever other regime might attempt to
replace it. For this contingency, the likelihood of which he seems to
have realized more clearly than did anyone else, he was resolved to
prepare the appropriate instrument. He had little use for the semi-
bourgeois ideology about the peasants — ^who of course in Russia consti-
tuted the relevant social problem — and still less for theories about the
necessity of waiting for the workmen to rise of their own initiative in
order to accomplish the grand revolution. What he needed was a
well-trained bodyguard of revolutionist janissaries, deaf to any argu-
ment but his own, free from all inhibitions, impervious to the voices
of reason or humanity. Under the circumstances and in the requisite
quality such a troop could be recruited only from the intellectual
stratum, and the best material available was to be found within the
party. His attempt to gain control of the latter therefore amounted to
an attempt to destroy its very soul. The majority and their leader,
L. Martov, must have felt that. He did not criticize Marx or advocate
any new departure. He resisted Lenin in the name of Marx and stood

ggo A Historical Sketch of Socialist Parties

for the Marxist doctrine of a proletarian mass party. The novel note
was struck by Lenin.

Since time immemorial, heretics have invariably claimed that they
were not out to destroy whatever gospel they found in possession but,
on the contrary, that they were trying to restore its pristine purity.
Lenin, adopting the time-honored practice, exalted and out-Marxed
Marx instead of renouncing allegiance. At the most, he gave the lead
implied in the phrase that became so popular with Trotsky and
Stalin, “Marxism in the epoch of imperialism.'' And the reader will
readily see that, up to a certain crucial range, it was not difficult for
Lenin to adopt both form and matter of unadulterated Marxism. Yet
it is no less easy to see that from this stronghold he sallied forth to
occupy an essentially un-Marxian position. Un-Marxian was not merely
the idea of socialization by pronunciamiento in an obviously imma-
ture situation; much more so was the idea that “emancipation" was to
be not, as the Marxist dogma has it, the work of the proletariat itself
but of a band of intellectuals officering the rabble.^ This meant more
than a different view about agitatorial practice and compromises, more
than a disagreement on secondary points of Marxist doctrine. This
meant divorce from its innermost meaning.^^

® As a matter of fact, contact with criminal elements was formed, though not by
Lenin himself but by the lieutenants on the spot. This led to the activity of the
*'ex’s’* (shock groups engaged in practical ^‘expropriations," i.e., holdups) both in
Russia proper and in Poland. This was pure gangsterdom though western intel-
lectuals swallowed an apologetic “theory" of it.

our purpose it is not necessary to comment further on the details of a
well-known story. The following remarks will suffice. Lenin did not succeed in
subjugating the Russian socialist party whose leaders on the contrary drew away
from him as time went on; the difficulty of their situation, arising from their wish
to keep up something like a united front without jettisoning their principles, is
well illustrated by Plekhanov’s vacillations. But Lenin did succeed in keeping his
group together, in curbing it into obedience and in adjusting its course to the
problems raised by the revolt of 1905 and its aftermath, including the presence of
a Leninist element in the Duma. At the same time, he succeeded in keeping
contact with, and standing in, the Second International (see below) of which he
attended three congresses and in whose bureau he for a time represented the
Russian party. This would hardly have been possible if his views and activities
had been allowed to impress the representatives of the other nations as they im-
pressed the majority of Russian socialists. As it was, that body, and western social-
ist opinion in general, looked upon him simply as the outstanding figure in the
left wing of orthodoxy and bore with him and his unbending extremism, admiring
him in some respects and not taking him too seriously in others. Thus in his sphere
of politics he played a double role that was not without analogy with the double
role of the tsarist regime whose international attitudes (as exemplified by its
sponsoring international arbitration and security) also differed considerably from
its attitudes at home.

Neither these achievements nor his contributions to socialist thought^ — ^most of
them distinctly mediocre (as, by the way, were those of Trotsky) — ^would ha\’e
secured him a place in the front rank of socialists. Greatness came after Russia’s
breakdown in the World War and was as much the result of a unique combina-

From 1875 to 1914

331

III. Socialist Groups in the United States

In the United States a totally different social pattern proved as un-
favorable as was the Russian to the growth of a genuinely socialist
mass movement. Thus the two cases present similarities that are no
less interesting than the differences. If the agrarian world of Russia,
in spite of the streak of communism inherent in the structure of the
Russian village, was practically impervious to the influence of modern
socialism, the agrarian world of the United States provided an anti-
socialist force that stood ready to make short work of any activities
on Marxist lines important enough to be noticed by it. If the in-
dustrial sector of Russia failed to produce a significant socialist mass
party because capitalist evolution was so sluggish, the industrial sector
of the United States failed to do so because capitalist evolution rushed
on at such a vertiginous pace.^^

The most important difference was between the respective intel-
lectual groups: unlike Russia, the United States did not, until the
end of the nineteenth century, produce an under-employed and
frustrated set of intellectuals. The scheme of values that arose from
the national task of developing the economic possibilities of the coun-
try drew nearly all the brains into business and impressed the busi-
nessman’s attitudes upon the soul of the nation. Outside of New
York, intellectuals in our sense were not numerous enough to count.
Most of them moreover accepted this scheme of values. If they did
not. Main Street refused to listen and instinctively frowned upon
them, and this was much more effective in disciplining them than
were the methods of the Russian political police. Middle-class hostility
to railroads, utilities and big business in general absorbed almost all
there was of “revolutionary” energy.

The average competent and respectable workman was, and felt
himself to be, a businessman. He successfully applied himself to ex-
ploiting his own individual opportunities, to getting on or, in any
case, tQ selling his labor as advantageously as possible. He understood
and’ largely shared his employer’s way of thinking. When he found it
useful to ally himself with his peers within the same concern, he did
so in the same spirit. Since roughly the m iddle of the nineteenth

tion of circumstances that made his weapons adequate as the result of his supreme
ability in handling them. In this respect, though in no other. Professor Laskts
proskynesis in the Encyclopaedia of the Social Sciences (article Ulyanov) is fully
understandable, provided of course that intellectuals must prostrate themselves

before the idols of their time. , , j j .v

uThe presence of the “frontier” of course greatly reduced the possibilities of
friction. The importance of this element, though great, is however likely to be
over-estimated. That pace of industrial evolution incessantly created new industnal
frontiers, and this fact was much more important than was the opportunity of
packing one’s bags and going west.

33S A Historical Sketch of Socialist Parties

century this practice increasingly took the form of employees' com-
mittees, the forerunners of the postwar company unions that acquired
their full economic and cultural significance in company towns.^^

Beyond that, it was frequently good business for the workman to
combine on a national scale with the other members of his craft in
order further to improve his bargaining position as against employers
directly and as against other crafts indirectly. This interest shaped
many trade unions that are typically American, largely accounts for
the adoption of the craft principle which is much more effective than
any other principle can be in keeping away would-be entrants, and
really produced workmen’s cartels. Naturally enough, these cartels
displayed that lack of radicalism which was and is so eloquently
lamented by both domestic and foreign socialists and fellow travelers.
Nothing but wage rates and hours mattered to them and they were
quite prepared to study the wishes of the public or even of the em-
ployers in everything else, particularly in their phraseology. This is
illustrated to perfection by the type and behavior of the leaders both
of individual unions and of the American Federation of Labor which
embodied that spirit, as well as by the attempts of the trade-union
bureaucracy to enter, with trade-union funds, the sphere of indus-
trial and financial enterprise that was quite congenial to them.^^

To be sure, the fact that the creeds and slogans — the ideologies —
were so unrevolutionary and so averse to class war is in itself of
limited importance. American trade unionists were not much given
to theorizing. If they had been they might have put a Marxist inter-

12 The common sense of the arrangement and its particular suitability to Amer-
ican conditions are as obvious as is the fact that it was a thorn in the flesh of
trade unions and also of the radical intellectuals of a later type. The slogans of
our days — ^recently officialized — ^have thus stigmatized company unions as the prod-
uct of a diabolical attempt by employers to thwart the efforts toward effective
representation of the workmen’s interests. While this view too is perfectly under-
standable from a standpoint from which militant organization of the proletariat
is in the nature of a moral axiom — and from the standpoint of the corporative
state that grows up before our eyes — it vitiates historical interpretation. The fact
that employers provided facilities for this type of organization, often took the
initiative and tried to influence it so as to be able to get along with it, does not
exclude or disprove the other fact that company unions and their forerunners
fulfilled a much-needed function and that, in the normal case, they served the
interests of the men quite well.

IS The figure of Warren Sanford Stone, of the Brotherhood of Locomotive Engi-
neers, affords an excellent (though later) illustration of the last-mentioned aspect
as well as of the others. Further examples from the time of Samuel Gompers will
so readily occur to the reader that there is no need of mentioning them. But the
above should not be interpreted to mean that the trade union with high entrance
fees and long waiting lists which looks so strangely like a copper corner is or was
the only kind of trade union in this country. On the contrary, immigrants im-
ported every European variety, and, irrespective of this, forms similar to those
found in Europe developed where conditions were favorable, that is, especially
in the relatively old and consolidated locations and branches of industry.

From 1875 to 1914

333

pretadon upon their practice. It remains true however that, bargain-
ing aside, they did not consider themselves on the other side of the
fence in all things and that cooperation — which those of us who do
not like it will call collusion — with employers was in accord not only
with their principles but also with the logic of their situation. Beyond
a narrow range of questions, political action was not only unneces-
sary but even meaningless to them. And for the influence he was able
to exert, the radical intellectual might just as well have tried to con-
vert the board of the Pennsylvania Railroad.

But there was another world within the world of American labor.
Along with elements of supernormal quality, immigration included
from the first some substandard ones also which increased in relative
as well as absolute numbers after the Civil War. These numbers were
swelled by individuals who, though not subnormal as to physical fit-
ness or intelligence or energy, yet gravitated into that group, owing
to past misfortunes or to the persistence of the influence of the un-
favorable environments from which they sprang or simply owing to
restlessness, inadaptable temperament or criminal proclivities. All
these types were an easy prey to exploitation which was facilitated by
the absence of moral bonds, and some of them reacted by a blind and
impulsive hatred that readily crystallized into crime. In many new
and rapidly growing industrial communities where people of the
most varied origins and propensities were thrown together and law
and order had to be kept, if at all, by action that was itself outside
of the law, rough people, made still rougher by the treatment they
received, faced employers, or agents of employers, who had not yet
developed a sense of responsibility and were often driven to brutal
courses by a fear not only for their property but also for their lives.

There, so the socialist observer is inclined to say, was class war in
the most literal sense — actual guns going off to illustrate the Marxist
concept. As a matter of fact, it was nothing of the sort. It is hard to
imagine any set of conditions less favorable to the development of
political laborism or of serious socialism, and very little of either
showed as long as those conditions lasted.

The history of the Knights of Labor, the one really important and
nation-wide organization of all wageworkers regardless of skill or
craft — and in fact of all who cared to join — covers about a decade of
significant power and activity (1878-1889). In 1886 the Noble Orders
membership was almost 700,000. The part of it which consisted of
industrial — ^mainly unskilled — ^laborers energetically participated ^ in
or even initiated the strikes or boycotts that accompanied the depres-
sions of that time. A scrutiny of programs and pronouncements reveals
a somewhat incoherent medley of all sorts of socialist, cooperative and,
occasionally, anarchist ideas that we can trace, if we wish, to a wide
variety of sources — Owen, the English agrarian socialists, Marx, and

334 A Historical Sketch of Socialist Parties

the Fabians among them. The political point of view was much in
evidence and so was the idea of general planning and of social recon-
struction. But such definiteness of aims as we may discover is really
due to our reading back from the standpoint of our own time. In
reality there were no definite aims and it was precisely the compre-
hensive character of the ideology of the Good Life — Uriah S. Stephens,
the founder, had been trained for the ministry — and of the American
Constitution which appealed to so many people, farmers and profes-
sional men included. The Order thus was a sort of exchange for the
plans of all kinds of reformers. In this respect it indeed filled a func-
tion which its leaders had in mind when they stressed the educational
aspect of its activities. But an organization formed of such different
clays was constitutionally incapable of action. When definitely social-
ist profession was insisted on, it broke. Similar movements (Populists,
Henry George’s and others) tell the same tale.

The obvious inference is that in the American environment of that
time there was not and could not be either the requisite material or
the requisite motive power for a socialist mass movement. This can
be verified by following the thread that leads from the Knights to
the Industrial Workers of the World. This thread is embodied in the
career of a Marxist intellectual, Daniel De Leon, and hence should
have, for the faithful, considerable specific weight.^^ It was under his
command that, in 1893, socialists within the Order of the Knights rose
against the old leader, Powderly, thereby, as it turned out, dealing a
death blow to the organization. The idea was to create an instrument
for political action on more or less Marxian lines. Class war, revolu-
tioni destruction of the capitalist state and the rest of it were to be
sponsored by a proletarian party. But neither the Socialist Labor
Party (1890) nor De Leon’s Socialist Trade and Labor Alliance (1895)
had any life in it. Not only was the working-class following small —
this would not in itself have been decisive — but success even of the
Russian kind, that is to say, conquest of a controlling nucleus of in-
tellectuals, was not attained. The Socialist Labor party first split and
then lost most of the remaining ground to the new Socialist party.

The latter came as near to being an orthodox success as any group
did in this country. To begin with, its origin was orthodox. It arose
from the labor struggles during 1892-1894, when strikes were broken
by the use of force, the federal government and the judiciary lending
resolute support to the employers.^^ This converted many a man who

i^All the more so as Lenin himself went out of his way to pay homage, quite
unusual for him, to De Leon's work and thought.

It will be observed that this was done at a time when most European govern-
ments were rapidly adopting another attitude. However, this does not simply spell
'"backwardness" on this side of the Atlantic. It is true that the social and political
prestige of the business interest was here much greater than anywhere else and
that American democracy in consequence took a much narrower view of labor

From 1875 to 1914

335

had been previously a “conservative” craft unionist. At any rate, it
converted Eugene V. Debs first to industrial unionism and then to
the principle of political action. Secondly, the general attitude adopted
by the Socialist party was orthodox. It tried to work with and to
“bore from within” the trade unions. It gave itself a regular political
organization. It was in principle revolutionary in the same sense as
were the great socialist parties of Europe. Its doctrine was not quite
orthodox. In fact it did not stress doctrinal aspects to any great extent
— either under Debs or later — ^and it allowed considerable latitude to
the teaching activities within its ranks. But though it never succeeded
in absorbing the little local labor parties that kept on cropping up
all over the country, it developed fairly well up to the postwar period
when communist competition asserted itself. A majority of socialists
would, I think, agree in calling it the one genuine socialist party of
this country. Its voting strength, though swelled as that of most
socialist parties is by non-socialist sympathizers, measures the scope
there was for serious socialist effort.

De Leon however had another chance. It came from — and went
with — the Western Federation of Miners whose radicalism, quite in-
dependent of any doctrinal background, was nothing but the product
of rough people reacting to a rough environment. This union pro-
vided the corner stone for the structure of the I.W.W. (1905). De
Leon and his associates added the wreckage of their own and other
unsuccessful organizations as well as splinters mostly of dubious char-
acter-intellectual or proletarian or both— from everywhere and
nowhere. But the leadership — and in consequence the phraseology —
was strong. Besides De Leon himself, -there were Haywood, Traut-
mann, Foster and others.

Shock tactics that knew no inhibitions and the spirit of uncom-
promising warfare account for a series of isolated successes, and the
absence of anything else but phrases and shock tactics, for the ulti-
mate failure that was hastened by quarrels with and defections to the
communists as well as by incessant internal dissensions. But I need
not retell a story that has been told so often from every conceivable
standpoint. What matters to us is this. The organization has been
called syndicalist — even anarchist — ^and later on the criminal s'^-
dicalism laws enacted in several states were applied to it. The prin-
ciple of “direct” action on the spot and the doctrinal concession to

problems than did, say, the Junker government m Pru^ssia. But one can recognue
this and even judge it according to one’s moral or huiMmtanan standard, and
at the same time also recognize that parfly owing to the undeveloped state of
public administration, partly owing to the presence of elements with which no
Lntler method would have worked, and partly owing to the nations dete^na-
tion to press forward on the road of economic development, problems did present
*em“l4 under a different aspect and would have done so even to a governmental
agency completely free from bourgeois blinkers-

336 A Historical Sketch of Socialist Parties

the Western Federation of Miners which assigned to industrial unions
a basic role in the construction of socialist society — De Leon's con-
tribution to or deviation from classical Marxism — no doubt suggest
that it was. But it seems more correct to speak of the insertion of
syndicalist elements into what substantially was and remained an
offshoot of the Marxian stem than to base diagnosis entirely on those
elements.

Thus that great sociologist, the man in the street, has been right
once more. He said that socialism and socialists were un-American. If
I catch his meaning, it amounts, pretty much to what, less succinctly,
I have been trying to convey. American development practically
skipped the phase of socialism which saw the career of unadulterated
Marxism and of the Second International. Their essential problems
were hardly understood. The attitudes appropriate to them existed
only as sporadic imports. American problems and attitudes occasion-
ally borrowed these imported articles. But that was all. And the
events of the next phase impinged on intellectuals and on a proletariat
that had not gone through the Marxian school.

IV. The French Case; Analysis of Syndicalism

What syndicalism really is we shall see best in the French picture.^®
Before attempting to do so we shall briefly note a few things about
French socialism in general.

First, its ideological history goes further back and is perhaps more
distinguished than that of any other. But no single variety of it ever
crystallized so completely and commanded allegiance so widely as did
the socialism of, say, the Fabian type on the one hand and of the
Marxian on the other. Fabian socialism requires English political
society, and nothing like that developed in France — the great revolu-
tion and the subsequent failure of the aristocratic and the bourgeois
elements to coalesce prevented it. Marxian socialism requires a broad
and unified labor movement; or, as a rallying creed for intellectuals,
it requires cultural traditions quite uncongenial to French limpidiU.
But all the other socialist creeds that have so far emerged appehl only
to particular mentalities and social locations and are sectarian by
nature.

Second, France was typically the country of the peasant, the artisan,
the clerk and the small rentier. Capitalist evolution proceeded by
measured steps and large-scale industry was confined to a few centers.
Whatever the issues that divided these classes, they were economically
conservative at first — nowhere else did conservatism rest on so broad

Italian and Spanish syndicalism would do almost equally well. Only, in pro-
portion to the number of illiterates, the anarchist element increases so much as to
distort what I believe to be the true traits. This element has its place. But it
should not be overemphasized.

From 1875 to 1914

337

a basis^ — and later on lent increasing support to groups that sponsored
middle-class reform, among them the radicaux-socialistes, a party that
can be best described by saying that it was neither radical nor social-
ist. Many workmen were of the same sociological type and of the
same mind. Many professionals and intellectuals adapted themselves
to it, which accounts for the fact that over-production and under-
employment of intellectuals, though it existed, failed to assert itself
as we should otherwise expect. Unrest there was. But among the
malcontents, the Catholics, who disapproved of the anti-clerical tenden-
cies that various circumstances brought to the fore in the Third
Republic, were more important than the people who were displeased
with the capitalist order of things. It was from the former and not
from the latter that the real danger to the bourgeois republic arose
at the time of the affaire Dreyfus,

Third, it follows that, though again for different reasons, there was
not much more scope for serious socialism in France than there was
in Russia or the United States. Hence she had a variety of socialisms
and quasi-socialisms that were not serious. The Blanquist party whose
hope was the action of '*a few resolute men” may serve as an example:
a small band of intellectuals with a bent for conspiracy and profes-
sional revolutionists together with the mob of Paris and two or three
other big towns was all that ever came within the horizon of groups
like that. Eventually however a Marxist parti ouvrier was founded
by Guesde and Lafargue with a class-war program (1883) that had
received the sanction of Marx himself. It developed on orthodox
lines, fighting putschism of the Herve type and anarchism on the one
front and Jaures’ reformism on the other, much as its German coun-
terpart did. But it never acquired similar importance and never meant
nearly as much either to the masses or to the intellectuals, in spite of
the merger of socialist groups in the chambre which was achieved in
1893 (48 seats as compared with the 300 occupied by governmental
republicans) and eventually led to the formation of the Unified Social-
ist party (1905)* . . i.- j

Fourth, I will simply state the fact, without attempting to go behind
it, that ‘the social pattern glanced at above precluded the emergence
of great and disciplined parties of the English type. Instead, as every-
one knows, parliamentary politics became a cotillon of small and
unstable groups that combined and dissolved in response to momentary
situations and individual interests and intrigues, setting up and pulling
down cabinets according to the principles, as I put it before, of a
parlor game. One of the consequences of this was governmental ineffi-
ciency. Another was that cabinet office came within the sight of
socialist and quasi-socialist groups sooner than it did m countries
whose socialist parties were much more powerful but whose polity
were run according to somewhat more rational methods. Until the

358 A Historical Sketch of Socialist Parties

national emergency of 1914, Guesde and his group proved impervious
to the temptation and consistently refused cooperation with bourgeois
parties in the best orthodox style. But the reformist group which in
any case shaded off into bourgeois radicalism and whose principles —
reform without revolution — did not condemn such cooperation had
really no reason to do likewise. Jaures accordingly felt no compunc-
tion at the time of the Dreyfus crisis (1898) in lending support to a
bourgeois government in order to defend the Republic. Thus an old
problem of socialist principle and tactics, which was no problem at
all in England or Sweden but a fundamental one everywhere else,
suddenly burst upon the socialist world in a most practical form. It
acquired its particular sting by an additional circumstance: sup-
porting a bourgeois government was one thing, though bad enough
from the standpoint of rigid orthodoxy, but sharing its responsibilities
by actually entering it was quite another thing. M. Millerand did
precisely this. In 1899 he entered the Waldeck-Rousseau cabinet —
together with M. de GallifiEet, a conservative general who was best
known to the public for his vigorous participation in the suppression
of the Paris Commune in 1871.

Two patriots sacrificing personal views in order to join forces in a
national emergency — what of it? This, I suppose, will express the
reaction of most of my readers. I need hardly assure them that per-
sonally I have no wish to hold that the two gentlemen disgraced
themselves. Moreover, it may well be questioned whether even then
M. Millerand should have been called a socialist at all.^'^ Finally, the
French working class has every reason to remember with gratitude
what, legislatively and administratively, he did for it while in cabinet
office.

At the same time, we must try to understand how ‘"Millerandism*"
was bound to strike the Guesdists in France and orthodox socialists
all over Europe. For them it spelled lapse and sin, betrayal of the
goal, pollution of the faith. This was very natural and so was the
anathema hurled at it by the international congress of Amsterdam
(1904). But beyond and behind the doctrinal anathema there was a
piece of simple common sense. If the proletariat was not to lend its
back for ambitious politicians to use for climbing into power, every
deviation from approved practice had to be most jealously watched.

He had, it is true, risen to prominence among “left-wingers'* by defending
strike leaders and when he entered the Waldeck-Rousseau cabinet he was the chief
figure among the sixty members of what was called the “socialist left.*’ However he
had done nothing that could not have been done equally well by a bourgeois rad-
ical. His later attitude as minister of public works (1909) and as minister of war
{1912) hence spelled not quite so great a break as his enemies made out. His subse-
quent alliance with the hloc national and his conflict with the cartel des gauches
during his tenure of the presidential office after 1920 were different matters yet
they also admit of plausible justifications.

339

From 1875 to 1914

The trick of talking about national emergencies whenever it suits
careerists to make a bid for power— after all, was there ever a situation
that politicians did not consider an emergency? — ^was too well known
and too discredited to impress anyone, particularly the French prole-
tariat that had learned to rate political phrases at their true value.
There was danger that the masses might turn away from political
socialism in contempt.^®

In fact, there was more than a mere danger. They were actually
turning away from it. Beholding, as the whole nation did, the sorry
spectacle of political inefficiency, incompetence and frivolity that was
the product of the sociological pattern imperfectly sketched above,
they placed no trust in the state, the political world, the scribblers,
and had no respect for any of them or indeed for anything or any-
body except the memory of some great figures of the past. Part of the
industrial proletariat had conserved its Catholic faith. The rest was
adrift. And to those who had overcome their bourgeois propensities,
syndicalism was much more attractive than any of the available
species of straight socialism the sponsors of which bade fair to repro-
duce, on a smaller scale, the games of the bourgeois parties. Revolu-
tionary tradition of the French type of which syndicalism was the
principal heir, of course greatly helped.

For syndicalism is not merely revolutionary trade unionism. This
may mean many things which have little to do with it. Syndicalism
is apolitical and anti-political in the sense that it despises action on or
through the organs of traditional politics in general and parliaments
in particular. It is anti-intellectual both in the sense that it despises
constructive programs with theories behind them and in the sense
that it despises the intellectuars leadership. It really appeals to the
workman’s instincts — and not, like Marxism, to the intellectual’s idea
of what the workman’s instincts ought to be — by promising him what
he can understand, viz., the conquest of the shop he works in, con-
quest by physical violence, ultimately by the general strike.

Now, unlike Marxism or Fabianism, syndicalism cannot be espoused
by anyone afflicted by any trace of economic or sociological training.
There is no rationale for it. Writers who, acting on the hypothesis
that everything must be amenable to rationalization, try to construct
a theory for it inevitably emasculate it. Some linked it to anarchism
which, as a social philosophy, is completely alien to it in roots, aims
and ideology — ^however similar the behavior of Bakunin’s working-
class following (1872-1876) may look to us. Others attempted to sub-
sume it, as a special case characterized by a special tactical bent, under
Marxism, which involves discarding all that is most essential to both.
Still others have constructed a new socialist species to function as the

18 The Italian socialists actually declined the invitation to join the cabinet that
was three times extended to them by Giolitti (1903, 1906, 1911).

340 A Historical Sketch of Socialist Parties

Platonic idea of it— guild socialism— but in doing so they had to
commit the movement to a definite schema of ultimate values the
absence of which is one of its salient features. The men who organized
and led the Confederation Generale du Travail during its syndicalist
stage (1895-1914) were mostly genuine proletarians or trade-union
officers, or both. They were brimming over with resentment and with
the will to fight. They did not bother about what they would do with
the wreckage in case of success. Is that not enough? Why should we
refuse to recognize the truth which life teaches us every day — that
there is such a thing as pugnacity in the abstract that neither needs
nor heeds any argument and cares for nothing except for victory
as such?

But any intellectual can fill the void behind that brute violence in
the way that suits his taste. And the violence itself, combined with
the anti-intellectualism and the anti-democratic slant, acquires a sig-
nificant connotation if viewed in the setting of a disintegrating civili-
zation that so many people hate for all kinds of reasons. Those who
at the time felt like that but hated not so much the economic ar-
rangements of capitalist society as its democratic rationalism were
not free to fall back on orthodox socialism which promises still more
rationalism. To their intellectual anti-intellectualism — ^whether Nie-
tzschean or Bergsonian — the syndicalist anti-intellectualism of the
fist may well have appealed as the complement — in the world of the
masses — of their own creed. Thus a very strange alliance actually
came to pass, and syndicalism found its philosopher after all in
Georges Sorel.

Of course all revolutionary movements and ideologies that coexist
at any time always have a lot in common. They are the products of
the same social process and must in many respects react in similar
ways to similar necessities. Also, they cannot avoid borrowing from
each other or splashing each other with their colors in their very
squabbles. Finally, individuals as well as groups often do not know
where, if anywhere, they belong and, sometimes from ignorance, at
other times from a correct perception of advantage, they mix up con-
tradictory principles into mongrel creeds of their own. All this con-
fuses observers and accounts for the wide variety of current interpreta-
tions. It is particularly confusing in the case of syndicalism which
flourished only so short a time and was soon to be deserted by its
intellectual exponents. Nevertheless,” however we may appraise what
syndicalism meant to Sorel and what Sorel meant to syndicalism, his
Reflexions sur la Violence and his Illusions du Progres do help us
toward a diagnosis. That his economics and his sociology completely
diffet'ed from those of Marx may in itself not mean much. But stand-
ing as it does right in the midst of the anti-intellectualist torrent,
SoreFs social' philosophy sheds a flood of light on the first practical

From 1875 to 1914

manifestation of a social force that was and is revolutionary in a
sense in which Marxism was not.

V. The German Party and Revisionism; the Austrian Socialists

But why was it that the English methods and tactics did not prevail
in Germany? Why that Marxist success which accentuated antagonisms
and split the nation into two hostile camps? This would be easy to
understand if there had been no extra-socialist groups to work for
social reconstruction or if the ruling stratum had turned a deaf ear
to their proposals. It becomes a riddle as soon as we realize that Ger-
man public authority was not less but more alive to the social exigen-
cies of the time than was English political society and that the work
of the Fabians was being done not less but more effectively by a very
similar group.

Germany did not lag behind but, until the passing of the security
legislation primarily associated with the name of Lloyd George, led
in matters of ‘‘social policy.” Also, it was the government’s initiative
that placed those measures for social betterment on the statute book,
and not pressure from below asserting itself by exasperating strug-
gles. Bismarck initiated social insurance legislation. The men who
developed it and added other lines of social improvement were con-
servative civil servants (von Berlepsch, Count Posadowsky) carrying
out the directions of William II. The institutions created were truly
admirable achievements and they were so considered all over the
world. Simultaneously, trade-union activity was unfettered and a sig-
nificant change occurred in the attitude of public authority toward
strikes.

The monarchist garb in which all this appeared no doubt consti-
tutes a difference as against the English procedure. But this differ-
ence made for more and not less success. The monarchy, after having
for a time given in to economic liberalism (“Manchesterism” as its
critics called it), simply returned to its old traditions by doing—
mutatis mutandis — for the workmen what it had previously done for
the peapnts. The civil service, much more developed and much more
powerful than in England, provided excellent administrative machin-
ery as well as the ideas and the drafting skill for legislation. And this
civil service was at least as amenable to proposals of social reform as
was the English one. Largely consisting of impecunious Junkers—
many of whom had no other means of subsistence than their truly
Spartan salaries — entirely devoted to its duty, well educated and in-
formed, highly critical of the capitalist bourgeoisie, it took to the
task as a fish takes to water.

Ideas and proposals normally came, to the bureaucracy from its
teachers at the universities, the “socialists of the chair.” Whatever we
may think of the scientific achievements of the professors who or-

342 f A Historical Sketch of Socialist Parties

ganized themselves into the Verein fur Sozialpolitik^^ and whose work
often lacked scientific refinement, they were aglow with a genuine
ardor for social reform and entirely successful in spreading it. They
resolutely faced bourgeois displeasure not only in framing individual
measures of practical reform but also in propagating the spirit of
reform. Like the Fabians, they were primarily interested in the work
at hand and they deprecated class war and revolution. But, also like
the Fabians, they knew where they were going — they knew and did
not mind that socialism loomed at the end of their way. Of course,
the state socialism they envisaged was national and conservative. But
it was neither a fake nor utopian.

The world at large never understood this social pattern and the
nature of the constitutional monarchy it produced. At any rate, it has
forgotten whatever it may have once known. But as soon as we get a
glimpse of the truth, we find it still more difficult to understand how
in that unplutocratic environment it was possible for the greatest of
all socialist parties to grow up on a purely Marxist program and on a
Marxist phraseology of unsurpassed virulence, pretending to fight
ruthless exploitation and a state that was the slave of slave drivers.
Surely this cannot be explained by the “logic of the objective social
situation.''

Well, I suppose we must recognize once more that in the short run
— and forty years is short run in such matters — methods and mistakes,
individual and group-wise manque de savoir faire, may count for
much more than that logic. Everything else I could point to is obviously
inadequate. There was, of course, the struggle for the extension of
the franchise in the legislatures of the individual states. But much of
what was most important to the industrial masses was within the
competence of the imperial parliament {Reichstag) and for it Bis-
marck had introduced universal manhood suffrage from the first.
More important was protection for agriculture — dear bread. No doubt
this did much to poison the atmosphere, especially because its prin-
cipal beneficiaries were the big and medium-sized estates in eastern
Prussia and not the peasants. However, as to the real pressure exerted
by it, the fact is conclusive that around 1900 emigration practically
ceased. No — explanation cannot lie on that route.

But that manque de savoir faire plus German manners! We may
make things clearer by the obvious analogy with Germany’s behavior
in matters of international relations. Before 1914, Germany's colonial
and other foreign ambitions were — ^so it seems right to say at this
really wish I could induce the reader to peruse the short history of that
unique organization that was so characteristic of what imperial Germany really
was, though it has not been and probably never will be translated. Its author was
for decades secretary of the Verein* and his story is only the more impressive for
being so unpretentious. (Franz Boese, Geschichte^ des Vereins fur SozialpoUtik,
Berlin, 1939.)

From 1875 to 1914 343

distance of time — distinctly modest, especially if we compare them
with the neat and effective moves by which England and France at
that time increased their empires. Nothing that Germany actually did
or indicated any intention of doing will bear comparison with, say,
Tel-El-Kebir or with the Boer War or with the conquest of Tunisia
or of French Indo-China. All the less modest and all the more aggres-
sive, however, was the talking that Germans indulged in, and un-
bearably offensive was the swashbuckling manner in which even rea-
sonable claims were presented. Worse than this, no line was ever
adhered to; headlong forward rushes in ever-changing directions al-
ternated with blustering retreats, undignified propitiations with
uncalled-for rebuffs, until all the factors that make the world's opinion
were thoroughly disgusted as well as disquieted.20 Things were no
different in domestic affairs.

The fatal mistake was really Bismarck's, It consisted in the attempt,
explicable only on the hypothesis that he completely misconceived
the nature of the problem, at suppressing socialist activities by coercion
culminating in a special enactment (Sozialistengesetz) which he carried
in 1878 and which remained in force until 1890 (when William II
insisted on its repeal), that is to say, long enough to educate the party
and to subject it for the rest of the prewar period to the leadership
of men who had known prison and exile and had acquired much of
the prisoner's and exile's mentality. Through an unfortunate com-
bination of circumstances, it so happened that this vitiated the whole
course of subsequent events. For the one thing those exile-shaped
men could not stand was militarism and the ideology of military
glory. And the one thing which the monarchy — otherwise in sym-
pathy with a large part of what reasonable socialists considered as
immediately practical aims — could not stand was sneers at the army
and at the glories of 1870. More than anything else, this was for both
what defined the enemy as distinguished from the mere opponent.
Add Marxian phraseology — however obviously academic — at the party
conventions on the one hand and the aforesaid blustering on the
other, and you have the picture. No amount of fruitful social legisla-
tion and no amount of law-abiding behavior availed against that
reciprocal non possumus, that cardboard barrier across which the two
^ I want to make it q.iute dear that the above is not intended to attribute this
policy, either wholly or primarily, to William II, He was no insignificant ruler.
Moreover, he was fully entitled to the comment made upon him by Prince Billow
In the most unusual defense ever made for a monarch in a parliament: "‘Say what
you will, he is no philistine.” If he quarreled with the one man who- could have
taught him the technique of his craft, critics of his behavior to Bismarck should
not forget that the quarrel was mainly about the persecution of socialists which
the emperor wished to discontinue and about the inau^ration of a great program
of social legislation. If one disregards talk and simply tries to reconstruct intentions
by following the emperor^s acts from year to year, one cannot help arriving at^ the
conclusion that he was often right in his views about the great questions of his time.

344 A Historical Sketch of Socialist Parties

hosts reviled each other, made the most terrible faces at each other,
devoured each other in principle — all without really meaning any
serious harm.

From this state of things a situation developed that no doubt had
its dangers — great power without responsibility is always dangerous —
but was not anything like as uncomfortable as it might seem. The
federal and state governments — or the old civil servants promoted to
cabinet rank who formed those governments — cared primarily for
honest and efficient administration, for beneficial and on the whole
progressive legislation, and for the army and navy estimates. None of
these objects was seriously jeopardized by the adverse votes of the
socialists, the passing of the army and navy estimates in particular
being assured most of the time by the support of a large majority of
the population. The Social Democratic party in turn, well organized
and brilliantly led by August Bebel, was absorbed in consolidating
and expanding its vote which in fact increased by leaps and bounds.
This was not seriously interfered with by the governments, the bureauc-
racy scrupulously observing the letter of the law which gave all the
freedom of action really necessary for partisan activity.^^ And both
the managing bureaucracy and the party had reason to be grateful to
each other, especially during Billow’s tenure of power, for providing
outlets for oratorical excess capacity of which both of them stood in
need.

Thus the party not only developed satisfactorily but also settled
down. A party bureaucracy, a party press, a staff of elder statesmen
developed, all adequately financed, as a rule secure in their positions
and, on the whole, highly respectable in every — and also in the bour-
geois — sense of the word. A nucleus of working-class members grew
up for whom membership was no longer a question of choice but a
matter of course. More and more people were “born into the party”
and educated to unquestioning acceptance of its leadership and
catechism which then, for some of them, meant as much and no
more than religious catechisms mean to the average man or woman
of today.

All this was greatly facilitated by the inability of the non-socialist
parties to compete effectively for the labor vote. There was an excep-
tion to this. The Centrist (Catholic) party, on the one hand, com-
manded all the talent required because it had the support of a priest-
hood of quite exceptionally high quality and, on the other hand, was
prepared to make a bid for the labor vote by going as far in the direc-

21 Administrative vexations were doubtless not absent, and socialists of course
made the most of everything that could by any stretch be styled as vexatious. But
this sort of thing did not go to great lengths as in fact the history of socialist ac-
tivity from 1890 to the First World War in itself suffices to prove. Moreover* vexa-
tions of this kind are really in the nature of a service to the “persecuted"' party.

From 1875 to 1914

345

tion of social reform as it felt itself able to do without affronting its
right wing, and by taking its stand on the doctrines of the encyclicals
Immortale Dei (1885) Rerum Novarum (189 1).^^ But all the
other parties, though for different reasons and in different degrees,
stood on a footing of mutual distrust, if not of hostility, with the
industrial proletariat and never so much as attempted to sell them-
selves to any significant number of labor voters. These, unless they
were active Catholics, accordingly had hardly any party to turn to
other than the Social Democratic party. Unbelievable as such inepti-
tude seems in the light of English and American experience, it is yet
a fact that the socialist army was allowed, amid all the clamor about
the horrible dangers threatening from it, to march into politically
unguarded territory.

We are now in a position to understand what, on the face of it,
seems so incomprehensible, viz., why German socialists so tenaciously
clung to the Marxian creed. For a powerful party that could afford
a distinctive creed yet was completely excluded not only from political
responsibility but from any immediate prospect of it, it was natural
to conserve the purity of the Marxian faith once it had been em-
braced. That purely negative attitude toward non-socialist reform
and all the doings of the bourgeois state — ^which as we have seen
above was the tactical principle Marx recommended for all save ex-
ceptional cases — ^was really thrust upon it. The leaders were not
irresponsible nor were they desperadoes. But they realized that in the
given situation there was not much for the party to do except to
criticize and to keep the banner flying. Any sacrifice of revolutionary
principle would have been perfectly gratuitous. It would have only
disorganized their following without giving to the proletariat much
more than it got in any case, not on the initiative of the other parties
but on that of the monarchist bureaucracy. Such small additional
successes as might have been attained hardly warranted the party risk.
Thus, serious, patriotic and law-abiding men continued to repeat the
irresponsible slogans of revolution and treason — the sanguinary im-
plications of which came so strangely from many a pacific and bespec-
tacled countenance — blissfully conscious of the fact that there was
little likelihood of their having to act upon them.

Before long however the suspicion began to dawn upon a few of
them that some day or other the revolutionary talk might meet the

Let us note in passing an interesting (almost American) phenomenon: here we
have a political party that comprised within itself almost all shades of opinion
on economic and social questions that it is possible to have, from the starkest
conservatism to radical socialism, and yet was a most powerful political engine.
Men of the most different types, origins and desires, extreme democrats and ex-
treme authoritarians, cooperated with a smoothness that might have roused the
envy of the Marxists, solely on the strength of their allegiance to the Catholic
Church.

346 A Historical Sketch of Socialist Parties

most deadly weapon of political controversy— smiles. Perhaps it was
an apprehension of this kind or simply the perception of the almost
ludicrdois discrepancy between Marxian phraseology and the social
reality of those times that eventually prompted no less a personage
than old Engels to pronounce ex cathedra — that is to say, in a preface
he wrote to a new edition of Marx's Class Struggles in France ^^ —
that street fighting presented certain inconveniences after all and
that the faithful need not necessarily feel committed to it (1895).

This timely and modest adjustment roused the wrath of a small
minority of thoroughgoing hotspurs, Mrs. Rosa Luxemburg in par-
ticular surpassing herself in fiery denunciations of the old man. But
it was acquiesced in by the party — ^possibly with a sigh of relief — and
further cautious steps in the same direction might perhaps have been
tactfully made. When however Eduard Bernstein coolly proceeded to
‘‘revise” the whole structure of the party creed, there was a major row.
After what I have said about the situation this should not be sur-
prising.

Even the most worldly party is aware of the dangers involved in
altering any of its more important planks. In the case of a party whose
program and whose very existence were based on a creed every detail
of which had been worked out with theological fervor, root-and-
branch reform was bound to mean a terrific shock. That creed was
the object of quasi-religious reverence. It had been upheld for a
quarter of a century. Under its flag the party had marched to suc-
cess. It was all the party had to show. And now the beloved revolu-
tion — that was to them what the Second Coming of the Lord was to
the early Christians — ^was to be unceremoniously called off. No class
war any more. No thrilling war cries. Cooperation with bourgeois
parties instead. All this from a member of the old guard, a former
exile, and, as it happened, one of the most lovable members of the
party!

But Bernstein^^ went further still. He laid sacrilegious hands on
the hallowed foundations of the doctrine. He attacked the Hegelian
background. The labor theory of value and the exploitation theory
came in for stricture. He doubted the inevitability of socialism and
reduced it to tame “desirability.” He looked askance at the economic
interpretation of history. Crises would not kill the capitalist dragon;
on the contrary, with time capitalism would gain in stability. Grow-
ing misery was nonsense of course. Bourgeois liberalism had produced

23 It has been shown by Ryazanov that the editor of this booh took liberties with
Engels' text. But the above argument is not affected by even the highest possible
estimate of the ravages of his pencil. See Ryazanov, Karl Marx and Friedrich Engels
(translated by Kunitz, 19257).

24 Xhe two books of his that are most relevant for our purpose are Die Vorausset-
zungen des Sozialismus und die Aufgaben der Soziaidemokratie (1899), translation
by E- C. Harvey, 1909, and Zur Ceschichte und Theorie des Sozialismus (1901).

From 1875 to 1914 347

lasting values which it was worth while trying to conserve. He even
said that the proletariat was not everything. Think of that!

This of course was more than the party could stand. It would have
been unbearable even if Bernstein had been incontestably right on
every point, for creeds embodied in an organization cannot be re-
formed by means of holocausts. But he was not. He was an excellent
man but he was not Marx’s intellectual peer. We have seen in Part I
that he went too far in the matter of the economic interpretation of
history which he can hardly have fully understood. He also went too
far in his assertion that developments in the agrarian sector refute
Marx’s theory of the concentration of economic control. And there
were other points inviting effective reply so that the champion of
orthodoxy, Karl Kautsky,^^ found it not too difficult to hold his
ground — or some of it. Nor is it so clear that it would have been to
the advantage of the party had Bernstein’s tactical recommendations
prevailed. A wing would certainly have broken away. The prestige of
the party would have suffered greatly. And, as has been stated before,
no immediate gain would have accrued. There was hence a lot to be
said for the '^conservative” view.

Under the circumstances, the course which Bebel took was neither
so obviously unwise nor so obviously tyrannical as fellow travelers
and other critics made out at the time. He denounced Revisionism
vigorously, so vigorously as to keep his hold on his leftists. He had it
anathematized at the conventions in Hanover (1899) and Dresden
(1903). But he saw to it that the resolutions reaffirming class war and
other articles of faith were so framed as to make it possible for
"revisionists” to submit. They did, and no further measures were
taken against them though there was, I believe, some cracking of the
whip. Bernstein himself was allowed to enter the Reichstag with the
support of the party. Von Vollmar remained in the fold.

Trade-union leaders shrugged their shoulders and murmured about
the chewing of doctrinal cud. They had been revisionists all along.
But so long as the party did not interfere in their immediate con-
cerns ^and so long as it did not call upon them to do anything they
really disliked, they did not much care. They extended protection to
some revisionists and also to some of their literary organs. They made
it quite clear that, whatever the party’s philosophy, business was
business. But that was all.

The intellectual revisionists for whom doctrine was not a matter of

25 From that time on, Kautsky, the founder and editor of the Neue Zeit and
author of several treatises on Marxist theory, held a position that can be described
only in ecclesiastical terms, upholding the "revolutionary- doctrine against xevisi^-
ism as he was later on to uphold orthodoxy against the bolshevik heretms. He
was the most professorial of men and much less lovable than Bernstein, On the
whole, however, both sections of the party must be congratulated on the moral as
well as on the intellectual level of their champions.

348 A Historical Sketch of Socialist Parties

indifference, and the non-socialist sympathizers some of whom would
have liked to join a socialist party that did not stress class war and
revolution, thought differently of course. It was they who talked
about a party crisis and shook their heads about the future of the
party. They had every reason to do so. For their future in and around
the party was indeed jeopardized. In fact Bebel, himself no intellec-
tual and no friend to parlor pinks, lost no time in warning them off
the premises. The rank and file of the party however were but little
disturbed about all this. They followed their leaders and repeated
their slogans until, without any compunction about what Marx or,
for that matter, Bebel would have said, they rushed to arms in order
to defend their country.

Some interesting light is shed on the development we have just
been surveying by the parallel yet different development in Austria.^®
As we should expect from the much slower pace of capitalist develop-
ment, it took twenty years longer to become a political factor of im-
portance. Rising slowly from small and not very creditable beginnings,
it eventually established itself in 1888 (convention of Hainfeld) under
Victor Adler, who had succeeded in the almost desperate task of
welding together the socialists of all the nations who inhabited that
country and who was to lead them, with consummate ability, for
another thirty years. *

Now this party was also officially Marxist. The little circle of bril-
liant Jews that formed its intellectual nucleus, the Neo-Marxists,
even contributed substantially to the development of Marxian doctrine
as we have seen in Part I — going on along orthodox lines, altering
them no doubt in the process but fighting, bitterly and ably, anyone
else who tried to do so, and always keeping to the revolutionary
ideology in its most uncompromising form. The relations with the
German party were close and cordial. At the same time, everyone
knew that Adler would stand no nonsense. Having, for cultural and
racial reasons, much more authority over his intellectual extremists
than Bebel ever had over his, he was able to allow them all the
Marxism they wanted in their caf^s and to use them whenever he saw
fit without letting them interfere with what really mattered to him,
the organization and the party press, universal suffrage, progressive
legislation and, yes, the proper working of the state. This combina-

2^ By Austria I here mean the western half of the Austro-Hungarian monarchy
which since 1866 had a parliament and a government (lacking however the de-
partments of foreign affairs and of war) of its own that were coordinated on a
footing of equality with the parliament and government of the eastern half —
Hungary or, to use oflScial language, “the countries of the Holy Crown of St.
Stephen.”' The Hungarian Social Democratic party took its pattern from the Aus-
trian, but never attained quantitative significance.

27 Trotsky, as yet under the name of Bronstein, occasionally showed up among
them and seems to have experienced their influence.

From 1875 to 1914 349

tion of Marxist doctrine and reformist practice answered admirably.
The Austrian governments soon discovered that here was a factor, no
less important than the church or the army, that from its own interest
was bound to support the central authority in its perennial struggle
with filibustering nationalist oppositions, particularly the German
and the Czech. These governments — mostly civil servants' cabinets as
in Germany although attempts were made incessantly by the crown
to insert politicians, at least as ministers without portfolio — there-
upon proceeded to extend favors to the party, which reciprocated in
full.^^ And when a government (a civil servants' cabinet headed by
Baron Gautsch) took up the cause of universal suffrage, Adler, with-
out encountering any opposition among his followers, was able to
declare publicly that, for the time being, the socialists were a ‘'gov-
ernmental party" (Regierungspartei), although cabinet ojHice was
neither offered nor would have been acceptable to them.^^

VI. The Second International

The internationalist plank in the program of the Marxist parties
called for an international organization like the defunct First Inter-
national. The other socialist and laborite groups were not interna-
tionalist in the sense of the Marxian creed. But, partly from the
inheritance of bourgeois radicalism and partly from aversion to the
upper-class governments of their respective nations, they had all of
them acquired, though in varying degrees, internationalist and pacifist
views and sympathies so that international cooperation occurred
readily to them. The foundation of the Second International (1889)
thus embodied a compromise that really attempted to reconcile the
irreconcilable but worked until 1914. A few remarks will suffice on
this subject.

There was the international bureau. And there were the congresses
with their full-dress debates on questions of tactics and of principle.
Measured by tangible achievements, the importance of the Second
International might well be equated to zero. And at zero it has indeed
been. evaluated both by revolutionary activists and by laborites. As a
matter of fact, however, it was not meant for immediate action of any

28 A device which the socialists repeatedly used in order to help the government
was this. When nationalist filibusters paralyzed parliament and all business was
at a standstill, they would move “urgency” for the budget. The urgency motion
when duly passed practically meant that the measure thus declared urgent went
through if there was a majority for it (which was always available in the case of
the budget) irrespective of those formal rules of parliamentary procedure which
the filibuster made it impossible to observe.

28 -the chief difficulty was, I suppose, in the strong stand that the German party
had taken in the matter. Scruples of the Austrian socialists themselves were second
in importance. Aversion of the Austrian bureaucracy or of the old Emperor, if
any, was a bad third among the factors which prevented that consummation.

350 A Historical Sketch of Socialist Parties

sort; action, whether revolutionary or reformist, could at that time
have been only national. It was to organize contacts between the
affiliated parties and groups, to standardize views, to coordinate lines
of advance, to restrain the irresponsible, and to urge on the laggard,
to create, as far as possible, an international socialist opinion. All of
this was, from the socialist standpoint, extremely desirable and im-
portant though in the nature of things positive results would have
taken many decades to mature.

Accordingly, the chief and the members of the bureau were any-
thing but a directing board of international socialism. There was no
policy for them to shape and no program to impose such as there had
been in the case of the First International. The national parties and
labor groups were left perfectly autonomous and free to join other
international organizations that might suit their particular aims.
Trade unions — also cooperatives and educational bodies — were wel-
comed and even courted but they did not play the leading role. The
national parties were nevertheless kept on a common ground that
was sufficiently broad for Stauning and Branting on the one hand
and Lenin and Guesde on the other to move on. Some of the mem-
bers of that international institute no doubt sneered at the chicken-
hearted reserve of others and the latter objected to the hotheaded
radicalism of the former. And sometimes things came perilously near
a showdown. On the whole however they all took a course in socialist
diplomacy at the hands of one another. Since this modus vivendi —
with plenty of freedom for agreeing to differ — ^was the only possible
one, this was in itself a great achievement.

Strange as it may sound, it was the Germans who were — ^with Rus-
sian and Guesdist support — ^primarily responsible for it. They were
the one great Marxist party and they gave the common ground a
coating of Marxism. But they realized quite clearly that the majority
of the men who represented the socialist forces outside of Germany
were not Marxists. For most of these men it was a case of signing the
thirty-nine articles while reserving an unlimited freedom of interpreta-
tion. Naturally enough, the more ardent believers were shocked at
this and talked about the faith being degraded to a matter of form
that had no substance in it. The German leaders however put up with
it. They even tolerated straight heresy which they would have at-
tacked furiously at home. Bebel knew how far he could go and that
his forbearance, immediately met as it was by English forbearance,
would pay in the end as, without the war, it assuredly would have
done. Thus he maneuvered to cement the proletarian front with a
view to vitalizing it in time, and in doing so he showed an ability
that, if Germany's diplomacy had had it, might have prevented the
First World War.

Some results did mature. The somewhat indefinite discussions of

From 1875 to 1914

351

the first decade or so were eventually focused on foreign policy and
something like a common view began eventually to emerge. It was a
race against time. This race Was lost. Every journalist who now refers
to that epoch feels entitled to condemn the International for what he
styles the failure of international socialism at the outbreak of the
catastrophe. But this is a most superficial view to take. The extraor-
dinary congress at Basle (1912) and its appeal to the workers of all
nations to exert themselves for peace was surely all that it was possible
to do under those circumstances. A call for a general strike issued to
an international proletariat that exists nowhere except in the imagi-
nation of a few intellectuals would not have been more effective, it
would have been less so. To achieve the possible is not failure but
success, however inadequate the success may prove in the end. If fail-
ure there was, it occurred at the domestic fronts of the individual
national parties.

CHAPTER XXVII

FROM THE FIRST TO THE SECOND
WORLD WAR

I. The “Gran Rifiuto“

As MEMBERS of their international organization, the socialist parties
jCa. had done all they could to avert the war. But when neverthe-
less it broke out, they rallied to their national causes with a readi-
ness that was truly astounding. The German Marxists hesitated even
less than the English laborites.^ Of course it must be borne in mind
that every belligerent nation was fully convinced that it was waging
a purely defensive war — every war is defensive or at least “pre-
ventive” in the eyes of the nations that wage it.^ Still, if we reflect
that the socialist parties had an indubitable constitutional right to
vote against war budgets and that within the general moral schema
of bourgeois democracy there is no obligation to identify oneself
with national policy — ^men far removed from socialist anti-militarism
in fact disapproved of the war in all the belligerent countries — ^we
seem to face a problem that is not solved by doubtful references to
Marx or to previous declarations by Bebel and von Vollmar that
they would defend their country if attacked. There should have been
no difiiculty in recalling Marx's true teaching on the subject. More-
over, defending one's country means only doing one's duty with the
army; it does not imply voting with the government and entering
into unions sacrees.^ Guesde and Sembat in France and Vandervelde
in Belgium who took oflice in war cabinets, and the German social-
ists who voted the war budgets, thus did more than loyalty to their
nations required, as then commonly understood.^

There is but one solution to the puzzle. Whether or not the ma*
jority of socialist politicians believed in Marxian internationalism
— ^perhaps this belief had by that time shared the fate of the cognate

^The English Labour party was in fact alone in naaking a serious stand for
peace in 1914, though it joined the war coalition later on.

2 This is why the attempt made by the victors to decide the moral issue by means
of a clause in an imposed peace treaty was not only so unfair but also so foolish.

®Nor is it true that failure to do so would have weakened the national cause.
Lord Morley’s resignation clearly did not injure England.

^Many of us will think differently at present. But this merely shows how far we
have traveled from the old moorings of liberal democracy. iTo exalt national unity
into a moral precept spells acceptance of one of the most important principles of
fascism.

35a

From the First to the Second World War 353

belief in a spectacular revolution — they certainly realized that any
stand taken upon the gospel would have cost them their following.
The masses would have first stared at them and then they would
have renounced allegiance, thereby refuting via facti the Marxian
doctrine that the proletarian has no country and that class war is
the only war that concerns him. In this sense, and with a proviso
to the effect that things might have been different if the war had
impinged after a longer spell of evolution within the bourgeois
framework, a vital pillar of the Marxian structure broke in August
1914.5

This was in fact widely felt. It was felt in the conservative camp:
German conservatives suddenly began to refer to the socialist party
in language that was the pink of courtesy. It was felt in that part
of the socialist camp in which the faith still retained its old ardor.
Even in England MacDonald lost the leadership of the labor party
and eventually his seat rather than join the war coalition. In Ger-
many, Kautsky and Haase left the majority (March 1916) and in
1917 organized the Independent Social Democratic party, though
most of its important members returned to the fold in 1919.® Lenin
declared that the Second International was dead and that the cause
of socialism had been betrayed.

There was an element of truth in this. So far as the majorities of
the Marxist parties were concerned, socialism at the crossroads had
in fact not stood the test. It had not chosen the Marxist route. The
creeds, the slogans, the ultimate goals, the organizations, the bureauc-
racies, the leaders had not changed. They remained on the morrow
of the gran rifiuto what they had been on its eve. But what they meant
and stood for had changed all the more. After that experimentum
crucis neither socialists nor anti-socialists could any longer look at
those parties in the same light as before. Nor could those parties
themselves go on with their old antics. For better and for worse
they had stepped out of their ivory tower. They had testified to the
fact that the fate of their countries meant more to them than did
the socialist goal.

The case was different however with ;those of them who, like the
Social Democratic parties of the Scandinavian countries, never had

sTo some extent this must also be attributed to the success of non-socialist
reforms.

«It is worth noting that the Independents recruited themselves by no means
exclusively from the uncompromising Marxists. Kautsky and Haase belonged to
that sector, but many i^ho joined with them did not. Bernstein, for instance, joined
and so did several others revisionists whose motive cannot have been respect for the
Marxian faith. But t|3tjye is nothing to wonder at in this. Orthodox Marxism was
of course not the only , reason a socialist might have had for disapproving the course
taken by the mafority. These revisionists simply shared Ramsay MacDonald's
persuasion.

354 A Historical Sketch of Socialist Parties

been in any ivory tower. And even with the others the case will
look different to observers who never took those revolutionary antics
seriously. As regards the German party in particular, it may well
be nearer the truth to say that the ''social traitors*' — as they were
dubbed — simply came down from unrealistic clouds and that the
national emergency taught them to stand on their feet instead of on
their heads — ^which, so some of us will add, was all to their credit
and no rifiuto at all. But whichever view we take, there cannot be
any doubt that the new attitude of responsibility drastically short-
ened the long stretch that before 1914 seemed to lie between them
and the natural goal of every party — office. I am far indeed from
attributing to German Social Democrats any calculations of this kind
or from doubting the sincerity of their decision not to take office
in bourgeois society. But it is obvious that, as a result of the stand
they took at the beginning of the war, they were — if I may say so —
"sitting pretty” at the end of it. Unlike the other parties, they had
not compromised themselves by running along in full cry. But
neither had they deserted their nation in the hour of danger.

II. The Effects of the First World War on the Chances of
THE Socialist Parties of Europe

1. Any major war that ends in defeat will shake the social fabric
and threaten the position of the ruling group; the loss of prestige
resulting from military defeat is one of the hardest things for a
regime to survive. I do not know of any exception to this rule. But
the converse proposition is not so certain. Unless success be quick
or, at all events, striking and clearly associated with the performance
of the ruling stratum — as was, for instance, Germany's success in
1870 — exhaustion, economic, physical and psychological may well
produce, even in the case of victory, effects on the relative position
of classes, groups and parties that do not differ essentially from those
of defeat.

The First World War illustrates this. In the United States the
effort had not been sufficiently prolonged and exhausting to ^ show
it. Even here the administration responsible for the war suffered a
crushing defeat at the polls. But in all other victorious countries the
prestige of the ruling strata and their hold on their people were
impaired and not enhanced. For the fortunes of the German and
English socialist parties, this meant the advent of power or, at all
events, office. In Germany control of the central organs of society
was thrust upon the party: though in order to save doctrinal face
some of them as well as some antbsocialists insisted on speaking of a
revolution, the fact was that they undertook government by request
— and a humble request it was. In England the labor vote that had
been at little over half a million in January 1910 and not quite

From the First to the Second World War 355

two millions and a quarter in 1918/ went to 4>236,733 in 1922 and to
5,487,620 in 1924 (8,362,594 in 1929). MacDonald reconquered the
leadership and in 1924 the party came into office if not really into
power. In France the structure of the political world prevented any
such clear-cut consummation, but the general contours were the
same: there was a syndicalist revival immediately after the war, but
the Confederation Generale du Travail, leaving the newly founded
Confederation Generale du Travail Syndicaliste and the communist
Confederation Generale du Travail Unitaire to absorb inadaptable
elements, discouraged revolutionary courses and slowly prepared it-
self for a dominant political role.

Moreover, the socialist or quasi-socialist parties who then shoul-
dered the responsibility that came to them may well have felt that
they had almost a monopoly of many of the qualifications required
in order to make a success of their venture. Better than any other
group they were able to handle the masses that seethed with dis-
content. As the German example shows, they even were in a better
position than anyone else was for the time being to deal firmly with
revolutionary outbreaks — if need be, by force. At any rate, they
were the very people to administer the right dose of social reform,
to carry it on the one hand, and to make the masses accept it on the
other. Most important of all, they were, from their standpoint, quite
justified in believing that they were also the people to heal the
wounds the ‘Imperialist war" had inflicted, to restore international
relations and to clear up the mess which, without any fault of theirs,
purely bourgeois governments had made of the peace. In this they
committed the same kind of error which from a different standpoint
was committed by their bourgeois competitors who believed in col-
lective security, the League of Nations, the reconstruction of gold
currencies and the removal of trade barriers. But once we grant the
erroneous premise we must also grant that the socialists were right
in hoping for success, particularly in the field of foreign policy.

2. The achievements of the two MacDonald governments— Mac-
Donald's and Henderson’s work at the foreign office— are sufiScient
to illustrate this. But the German case is still more significant. First
of all, only the Social Democrats were in a moral position to accept
the peace treaty and to support a policy that aimed at fulfilling its
provisions. They lamented the national catastrophe, of course, and
the burdens it imposed. But feeling as they did about military glp^>
neither the defeat itself nor the peace spelled unbearable humilia-
tion for them. Some of them almost subscribed to the Anglo-French
theory of the war. Most of them cared little for rearmament. While
other Germans looked on in sullen disgust, they worked for peaceful

'J'The increase from 1910 to 1918 is wholly accounted for by the enfranchisement
of women and the simplification of the electoral qualification.

356 A Historical Sketch of Socialist Parties

understanding with the victors in a spirit that was perfectly free, if
not from resentment, yet from passionate hatred. In the matter of
what to others was an imposed democracy, they even saw eye to eye
with the western nations: having disposed of the communist revolts
in 1918-1919 and having by judicious compromise acquired a domi-
nant role in domestic politics, they were in their most democratic
mood.

Second, their hold on the masses was strong enough to make this
attitude politically effective. For the moment, a great part of the
population saw things in the same light. Their views of the situation
and the right way of dealing with it temporarily became the ojB&dal
view whatever the politics of the government that happened to be in
office. T^hey provided the political support for the coalitions which
negotiated the Dawes plan and the Locarno pact and which could
never have been formed or, if formed, could never have taken that
line without them. Stresemann was no socialist. Yet the policy as-
sociated with his name was the policy of the Social Democratic
party — the policy for which they were to get all the credit during
one decade and all the punishment in another.

Third, they were at an advantage in their relations to political
opinion abroad. The world knew little about Germany. But it un-
derstood two things: on the one hand, it realized that there was a
party that was ready to accept for good many of the postwar arrange-
ments and in fact quite approved of some of them, a party that was
the enemy of what France and England had convinced themselves
was their enemy; on the other hand, it realized that German Social
Democracy need not be feared on other counts — ^however conserva-
tive a government might be, there was no need for it to object to
German as it did object to Russian socialism. In the long run this
was a weakness. It had much to do with the dilatory treatment dealt
out to German grievances, for it induced the foreign offices of Eng-
land and France to believe that Germany would remain indefinitely
the meek petitioner who could be made happy by assurances that
some day he might be promoted to a position of equality with the su-
perior nations. In the short run, however, and especially during the
dark days of the Ruhr invasion, it was an asset: the party — or rather
governments known to depend on the support of the party — ^had an
entree that would have been denied to others.

Fourth, there were the old contacts of the Social Democratic party
with the corresponding parties in other countries which dated from‘
the Second International. These contacts had not been completely
severed by the war. After all, the Second International had never
been officially dissolved, and many individuals and groups within it
— especially, but by no means exclusively, those of the neutral coun-
tries— had Kept their internationalist beliefs intact. The secretary (C.

From the First to the Second World War 357

Huysmans) had continued to act, and in 1917, on the suggestion of
the Scandinavian socialists, he had even made an attempt to convene
a congress which failed only because the Allied powers, by that
time determined to crush their adversary, refused to grant passports.®
Thus it was but natural that many socialists should have thought
of reviving it as a matter of course.

3. It was revived but not without difficulties. The first conferences
that were held for this purpose in 1919 and 1920 were only moder-
ately successful. The Communist (Third) International that had
emerged meanwhile (see below) exerted an attraction that proved a
serious obstacle to unity among the laborite and socialist parties of
the world. And several important groups that were in no mind
to throw in their lot with the communists still wanted something
more up to date than the Second International. This situation was
met successfully by a clever tactical device. On the initiative of the
Austrian Socialists who were joined by the German Independents and
the English Independent Labor Party, a new organization, the Work-
ers' International Union of Socialist Parties (the so-called Vienna
International), was formed in order to radicalize the groups in the
revived Second International, to restrain the groups that leaned too
much toward communism and to bring them both into line by ju-
dicious formulations of aims.®

The meaning of the venture is exactly rendered by the sobriquet
the communists immediately found for it, the “International number
two and one-half." That is precisely why it was able to serve the
needs of the time. At the Congress of Hamburg (1923) the Second
and the Vienna Internationals were united in order to form the
Labor and Socialist International, to stigmatize the peace as “im-
perialist" and to call for a united front against international reac-
tion — which at any rate sounded well — ^for the eight-hour day and
for international social legislation. The reduction of Germany's in-
demnity to a definite and reasonable figure, the abolishment of inter-
allied debts and the evacuation of German territory had been de-
clared necessary a year before (Frankfort Resolutions, 1922). In the
light of subsequent events we cannot fail to realize how great an
achievement — and service — that was.

8 Before that there had actually been two conventions in Switzerland— at Zim-
itnerwald (1915) and at Kienthal (1916)— which acquired, contrary to the original
intention I believe, a different color owing to the fact that the attendance was not
representative of the official parties. I shall return briedy to them later on.

»Some of those formulations would have done credit to any eigliteenth-century
diplomatist. The great stumbling block was class war. The continental groups could
not live without it, the English could not live with it. So, when the merger was
consummated at the Congress of Hamburg, the Klassenkampf and the lutte des
classes were retained in the German and French texts but in the English text they
were replaced by an unrecognizable circumlocution.

358

A Historical Sketch of Socialist Parties

III. Communism and the Russian Element

1. Meanwhile, communist parties were rapidly developing. In itself
this is only what we should have expected. Nor was it dangerous.
Any party that experiences the sobering influence of responsibility
will unavoidably have to leave room for groups further to the left
(or right) to develop in, and such room is not likely to remain un-
occupied for long. Provided defection can be kept within bounds,
this need not be more than a nuisance — it may even be preferable
to keeping unruly elements in the fold. Socialist parties had always
had trouble with hyper-radical wings.^^ That such ‘leftist'" groups
should gain ground in the troubled days that followed upon the
war and that they should seize the opportunity to acquire the status
of distinct parties is no more surprising than that they should follow
classical usage and call themselves “communist"" or that they should
display a much stronger internationalist slant than the official parties
did at the time.

Bear in mind that all this is completely independent of the Rus-
sian aspect of the case. There would be communist parties and there
would be a Communist International if the tsars still reigned over
Russia. But since the Russian element became a factor in shaping
the fortunes of both socialism and communism all over the world —
in fact, in shaping the social and political history of our time — ^it is
essential to restate how it developed and to appraise its nature and
importance. For this purpose we shall divide its development into
three stages.

2. At first — that is to say, until the bolsheviks seized power in 1917
— there was nothing particularly Russian about the development of
the communist groups except that the strongest man happened to be
a Russian and that a streak of Mongol despotism was present in his
scheme of thought. When at the outbreak of the war the Second In-
ternational suspended itself via facti, and when Lenin declared
that it was dead and that the hour had struck for more effective
methods, it was natural for those who felt as he did to get together.
Opportunity presented itself at the two conventions that were held
in Switzerland, at Zimmerwald (1915) and at Kienthal (1916). Since
practically all of those who had espoused the causes, of, their nations

^®The splits that occurred in England and Germany over the war issue were
of course a different matter and of only temporary importance. Even the German
Spartacus League, founded in 1916 by Karl Liebknecht and Rosa Luxemburg,
though it went much further in its opposition to war than the Independents
approved, took time to develop a definitely hostile attitude and even then did
not go, officially at least, beyond insisting on the letter of the old Erfurt program.
So far as I know, neither Liebknecht nor Mrs. Luxemburg ever completely severed
contact with the party. The latter was one of the most relentless critics of bolshevist
practice.

359

From the First to the Second World War

stayed away, the attending militants found little difficulty in — ^more
or less — ^rallying to Lenin’s program of converting the imperialist
war into an international revolution. There was more in this than
a mere profession of faith in pristine Marxism and its Messianic
promise. There was, with some of them, also the clear perception of
the truth, to which the bourgeois of all countries were so completely
blind, that the fabric of bourgeois society is unequal to the strains
and stresses of prolonged “total” warfare and that breakdowns would
occur at least in some countries. Beyond that however Lenin’s lead-
ership was not accepted. Most of those who were present thought
of convincing, bullying and using existing socialist parties rather
than of destroying them. Moreover — and in this Lenin agreed — the
international revolution was to be brought about by the individual
actions of the national proletariats, and in the “advanced” countries
first.

The second stage I date from 1917 to 1927, that is to say, from
the rise of the bolsheviks to power in Russia to Trotsky’s expulsion
from the Central Committee of the Bolshevik party (October 1927).
That decade witnessed the emergence of communist parties and of a
Communist (the “Third”) International. It also witnessed the (for the
time being) definitive break with the socialist and laborite parties
which, in the case of Germany, was embittered beyond remedy by
the severely repressive measures adopted by the Social Democrats in
power during the winter of 1918 to 1919. And finally it witnessed
the forging of the Russian chain.

But during the whole of that decade, the chain neither galled nor
distorted. It must be remembered that the bolshevik conquest of
the rule over the most backward of all the great nations was noth-
ing but a fluke.^^ To a certain extent Lenin himself recognized this.
He repeated over and over again that final victory would be won
only by the action of the revolutionary forces in more advanced coun-
tries and that this action was the really important thing. Of course
he dictated to communists as he had done before, and he insisted
on a strictly centralist organization of the Communist International
— ^whose bureau took power to prescribe every move of the individual
parties — ^but he did so in his role of communist leader and not in his
role of Russian despot. That made all the difference. The headquar-
ters of the International were in Moscow, the actual leader was
Russian, but policy was directed in a thoroughly internationalist
spirit, without any particular reference to Russian national inter-
ests and on principles with which the communists of all countries

UFor this fluke, bolshevism was possibly indebted to the German general staflP,
by whose orders Lenin was transported to Russia. If this should be thought an
exaggeration of his personal share in the events of 1917, there were enough other
chance factors in the situation to teach us the freakishness of this piece of history.

360 A Historical Sketch of Socialist Parties

substantially agreed. Though the personal relation between the
Bureau of the International and the Political Bureau of the Soviet
power^^ was then much closer than it was later on, the two were
nevertheless much more nearly distinct agencies. Thus the Interna-
tional itself and the individual parties did not behave differently
than they would have behaved in the absence of the link with
Russia.

During that decade, therefore, the importance of the Russian
connection, though great, did not amount to more than this. First of
all, there was the weighty fact that however insignificant in quality
and quantity of membership a communist group might be and how-
ever little claim to being taken seriously it might have, it could bask
in the glory reflected by that other group which had conquered an
empire, and it could derive encouragement from such a backing.
Second, bolshevist reality notwithstanding — the terror, the misery,
the confession of failure implied in the adoption of the New Eco-
nomic Policy after the Kronstadt revolt — it was henceforth possible
to point to a socialist system that ''worked.** The bolsheviks proved
themselves masters in the art of exploiting the fact that public
opinion in England and the United States will swallow anything
provided it is served up in the garb of familiar slogans. This of
course also redounded to the advantage of the other communist
parties. Third, so long as communists of all countries (Lenin him-
self included) believed in the imminence of a world revolution, the
Russian army meant as much to them as the army of Tsar Nicholas
I had meant to the reactionary groups during the second quarter
of the nineteenth century In 1919 such hopes were less unreasonable
and nearer to fulfillment than people are now prepared to believe.
It is true that communist republics were actually established only
in Bavaria and in Hungary But in Germany, Austria and Italy

12 In Lenin's time, administrative authority was wielded by the Political Bureau,
run by Lenin himself, by the Military Council, Trotsky's domain, and by the
Cheka, then managed by Dzerzhinsky. All three bodies were unknown to the con-
stitution of the Soviet state, which vested that authority in the “Soviet of the
People’s Commissars." Perhaps they should theoretically be called organs of the
party. But the party was the state.

13 It should be noticed that communists had dropped anti-militarism and non-
interventionism as easily as they had dropped democracy.

i^The Hungarian case (the government of B^la Kun) is highly instructive. The
paralysis of the upper classes and the indifference of the peasantry made it possible
for a small group of intellectuals to seize power without meeting significant resist-
ance. They were a strange crowd — ^some of them displaying (the same was true
in Bavaria) unmistakably pathological symptoms — and utterly unequal to this or
any other serious task. But they had unbounded confidence in themselves and their
creed and no objection whatever to terrorist methods. And that proved quite
sufficient. They were allowed to stage their opera and might have gone on for an
indefinite time if the Allies had not permitted (or ordered) the Rumanian army
to eject them.

From the First to the Second World War 361

the social structure was perilously near toppling and there is no say-
ing what would have happened in those countries and possibly farther
west if Trotsky’s war machine had been in working order at that
time and not engaged in the civil and the Polish wars.^^ It should
not be forgotten that the Communist International was founded in
that atmosphere of impending life and death struggle. Many things
•which acquired a different meaning afterwards — such as the central-
ized management that has unlimited power over the individual
parties and deprives them of all freedom of action — ^may then have
seemed quite reasonable from that aspect.

The third stage I have dated from the expulsion of Trotsky
(1927) because this is a convenient landmark in the rise of Stalin
to absolute power. After that every actual decision in matters of
policy seems to have been his, though he still met some opposition
in the Political Bureau and elsewhere until the "trial” of Kamenew
and Zinoviev (1936) or even until Yezhov’s reign of terror (1937).
For our purpose this means that every decision was thenceforth the
decision of a Russian statesman acting on behalf of national Russian
interests as seen from the standpoint of a streamlined despotism.
And this in turn, if correct, defines what his attitude to the "Com-
intern” (the Communist International) and to foreign communist
parties must have been. They became tools of Russian policy, taking
rank within the huge arsenal of such tools and being realistically
evaluated relative to others according to circumstances. Up to the
present war which may revive it, the world revolution was a frozen
asset. The surviving veterans as well as the neophytes of interna-
tionalist communism may have been contemptible. But they were
still of some use. They could preach the glories of the Russian regime.
They could serve as pins with which to prick hostile governments.
They increased the bargaining power of Russia. So it was worth
while to go to some trouble and expense in order to keep them in
subjection, to supervise them by agents of the secret police, and to
man the Comintern’s bureau with absolutely obsequious serfs who
would. obey in fear and trembling.

3. In all this (and in lying about it) Stalin followed the established
practice of the ages. Most national governments have acted as he did
and it is pure hypocrisy to profess specific indignation in his case.

w Therefore it is doubtful whether it is correct to say that the western powers
acted foolishly and inefficiently in supporting in a half-hearted way the various
counterrevolutions that were attempted in Russia, particularly the Denikin and
Wrangel ventures. It seems to me that, whether by a shrewd appraisal of the situa-
tion or by luck, they attained exactly what they could have wished: they neutralized
the Soviet power at a crucial moment and thus stopped the advance of bolshevism.
Less than this would have endangered their own social systems: more than this
would have involved prolonged, costly and perhaps unprofitable efforts that might
easily have defeated their aims.

362 A Historical Sketch of Socialist Parties

The most obvious examples are afforded by the practice of govern-
ments who espoused a religious creed. As long as the respective
creeds were sufRciently vital to motivate action, these governments
often used foreign groups of the same creed for their purposes. But,
as the history of the years from 1793 to 1815 is sufficient to prove,
the practice is much more general than these examples suggest. No
less standardized is the reaction — ^phraseological and other — by the<
governments which are affected by it: politicians of all types and
classes are happy to seize the opportunity of calling an opponent a
traitor.

But for the communist parties outside of Russia it was a serious
matter to receive orders from a caput mortuum in the hands of a
modernized tsar. Their abject servility raises two questions, one as to
its causes and another as to its possible bearing on the future char-
acter and fate of revolutionary socialism.

The first question is perhaps less difficult to answer than it seems.
All we have to do is to put ourselves in the communist's chair and,
taking account of his type, look at his situation in a practical spirit.
He would not object to the Stalin regime on humanitarian considera-
tions. He may even glory in the slaughter — some neurasthenic de-
generates do, and others, the communists from failure and resent-
ment, experience satisfaction at the sufferings of a certain class of
victims. Moreover, why should he resent cruelties that do not prevent
thoroughly bourgeois people from idolizing the regime? Why should
he, on that ground, condemn bolshevism when the Dean of Canter-
bury does notpi® Why indeed?

Again, there was hardly any reason for communists to object on the
ground of Thermidorism. This phrase was first used by the oppo-
nents of the New Economic Policy but Trotsky adopted it later in
order to stigmatize Stalin's regime as “reactionary” in the sense in
which the action of the men who overthrew Robespierre in 1794
was “reactionary.” But it is completely meaningless. After all, it was
Stalin who collectivized^ agriculture, “liquidated” the Kulaks, re-
versed the New Economic Policy. In fact, like a good tactician, he
suppressed opposition and substantially carried out the opposition's
program.

Finally, what the protecting power does at home is not of primary
importance to the communist in another country as long as that
power plays fair with him. And even if it does not play fair with
him, what is he to do? The chain tightened and galled. But it also

sentiments expressed in the book by that ecclesiastic cannot be defended
on the ground that the principles of the ‘^Russian experiment” are one thing and
the mode of its execution is another thing. For the really terrible point about the
Stalin regime is not what it did to millions of victims but the fact that it had to
do it if it wished to survive* In other words, those principles and that practice
are inseparable.

From the First to the Second World War 363

supported. The socialist parties would not have accepted him. The
normal healthy-minded workman turned from him with a groan.
He would have been at loose ends like Trotsky. He was in no posi-
tion to do without the chain, and in accepting his slavery he may
have hoped — he may still hope — that junctures will arise in which
he may be able to pull it his way . . . after the present World War
perhaps . . .

The last point goes some way toward answering the second ques-
tion. Certainly there is a possibility that Russian despotism will
spread over the ruins of European civilization — or even beyond them
— and that in this case the communist parties all over the world
will be turned into Russian garrisons. But there are many other pos-
sibilities. And one of them is that the Russian regime will founder
in the process or that in spreading over other countries it will acquire
traits more congenial to the individual national soils. A special case
of this kind would be that in the end the Russian element will have
changed nothing in the future character of revolutionary socialism.
To bank on this is no doubt risky. But it is not as foolish as it is
to hope that our civilization will emerge unscathed from the present
conflagration — ^unless of course this conflagration subsides more
quickly than we have a right to expect.

IV. Administering Capitalism?

1. So far, then, we have not seen any convincing reason why the
experiments in political responsibility that socialist parties made
after 1918 should not have been perfectly successful. To repeat, in
some countries— in Sweden for instance— socialists merely continued
to consolidate a power they had acquired before; in others, power
had come naturally to them without having to be conquered by
revolutionary action; in all countries, they seemed to be much more
in a position to grapple with the great problems of the time than
was am other party. As I have put it before, they almost seemed
to monopolize the essential conditions for success. Moreover, though
most of them had not had any previous experience in oSice, they
had acquired plenty of experience of a most useful sort in organizing,

IT This of course particularly applies to the communist group or groups in the
United States. The conditions of American politics are not favorable to the growth
of an official communist party-a few county treasurerships do not go far from
the recruiting standpoint. But the importance of the coinmumst element must not
£ reasured by the membership of the official party. Those intellectuals who are
Sher straight communists or fellow travelers have really no motive to join it
?fey have Lery motive to stay out of it, for they are much better able to serve ,f.
Slut carrying the badge, they conquer positions -

mittees or in administrative bodies and so on, remaining free to deny, with perfect
Sh thShey are communists in a party sense. SuA invisible groups are in-
capable of concerted action except for the lead from Moscow.

g 64 A Historical Sketch of Socialist Parties

negotiating and in administration. In fact, it should be stated at once
that they hardly ever did a downright foolish thing. Finally, neither
the inevitable emergence of a new party to the left of the socialists
nor the connection of that party with Moscow was as serious for
them as their opponents tried to make out.

But in spite of all this, their situation was everywhere precarious.
To the true believer it might well have seemed an impossible one.
For all those tactical advantages hid a fundamental difficulty which
they were powerless to remove. The war and the upheaval caused
by the war had brought the socialists into office; but below the
tatters of the old garb, the social organism, and in particular the
economic process, were still what they had been before. That is to
say, socialists had to govern in an essentially capitalist world.

Marx had visualized the conquest of political power as the pre-
requisite of socialization which was to be taken in hand immedi-
ately. This implied, however, as in fact Marx's argument implied
throughout, that the opportunity for that conquest would occur
when capitalism had run its course or, to use our own phrase again,
when things and souls were ripe. The breakdown he thought of
was to be a breakdown of the economic engine of capitalism from
internal causes.^® Political breakdown of the bourgeois world was
to be a mere incident to this. But now the political breakdown —
or something akin to it — had happened, and the political oppor-
tunity had occurred, while the economic process was nowhere near
maturity as yet. The “superstructure” had moved more quickly than
the propelling mechanism. It was a most un-Marxian situation.

The student in his closet may speculate about what the course
of things would have been if the socialist parties, recognizing the
state of things, had refused the Trojan horse of office, remained in
the opposition and allowed the bourgeoisie to deal with the wreck-
age left by the war and by the peace. Perhaps it would have been
better for them, for socialism, for the world — ^who knows? But for
men who by that time had learned to identify themselves with their
nations and to take the point of view of responsibility there was no
choice. They resolutely faced what fundamentally was an insoluble
problem.

There was a social and economic system that would not function
except on capitalist lines. The socialists might control it, regulate it
in the interest of labor, squeeze it to the point of impairing its effi-
ciency — but they were unable to do anything specifically socialist.
If they were to run it, they would have to run it according to its
logic. They would have to '^administer capitalism.” And this they

i»This in part explains the favor enjoyed in the United States by theories which
aim at showing that capitalism is as a matter of fact breaking down from internal
causes. See ch. x.

From the First to the Second World War 365

did. Something was done to dress up their measures in socialist
phrases, and the magnifying glass was applied, with some success, to
every difference between their policy and what the bourgeois alter-
native was in each case supposed to be. In substance however they
had to do what liberals or conservatives would also have done under
the same circumstances. But, though the only possible course,^^ this
was, for the socialist parties, a most dangerous one to pursue.

Not that it was entirely hopeless or, from the standpoint of the
socialist faith, entirely incapable of defense. At the beginning of
the twenties, socialists in Europe may well have hoped that, with
luck and cautious steering, they would establish themselves in or
near the centers of political power so as to be able to avert any
danger of “reaction” and to buttress the position of the proletariat
until the day when it would be possible to socialize society with-
out any violent break; they would preside over the euthanasia of
bourgeois society and at the same time make sure that the process
of dying went on all right and that the victim would not experi-
ence a comeback. But for the presence of other factors than those
which enter the socialist’s or the labor man’s picture of society,
this hope might have come true.

Defense from the standpoint of the Faith might have been based
on the proposition stated above, viz., that the situation was a novel
one and had not been foreseen by Marx. The bourgeois victim turn-
ing to the socialists for shelter — such a case was evidently not pro-
vided for in his schema. It might have been argued that under the
circumstances even mere “administering capitalism” was a great step
in advance. Nor was it a question of administering capitalism in the
capitalist interest but of doing honest work in the field of social
reform, and of building a state that would pivot on the workman’s
interests. In any case that was the only thing to do if the democratic
road was to be chosen, for the immaturity of the situation asserted
itself precisely by the fact that there were no majorities to be had
for the socialist alternative. No wonder that the socialist parties
which had resolved to accept office under such circumstances loudly
proclaimed their allegiance to democracy!

Thus, the political hack’s craving for oflGice was capable of justi-
fication on the highest grounds of doctrine and proletarian interest.
The reader will have no difficulty in visualizing how such comfort-
able concordance must have impressed radical critics. But since later
events have induced so many people to speak of the failure of that
policy and to lecture the leaders of that time on what they ought
to have done, I do wish to emphasize both the rationale of their

do not propose to discuss, as another possibility, an attempt at fundamental
reconstruction on Russian lines. For it seems to me too obvious that any such at-
tempt would have speedily ended in chaos and counterrevolution.

§66 A Historical Sketch of Socialist Parties

views and the compelling nature of the pattern within which they
had to act. If failure there was, its causes must be looked for else-
where than in stupidity or treason. In order to convince ourselves
of this we need only glance at the English and German cases.

2 . As soon as the orgy of nationalist sentiment that accompanied
the close of the war subsided, a genuinely revolutionary situation de-
veloped in England, the temper of the masses asserting itself, for
instance, by political strikes. Responsible socialists and responsible
laborites were so completely driven together by these events — and by
the danger of the nation's being goaded into a truly reactionary mood
— that they henceforth accepted a common leadership, at least as far
as parliamentary maneuvering was concerned. The lion's share of
the combined weight went to the labor interest and, within the labor
interest, to the bureaucracy of a few big unions so that an opposition
of disgruntled intellectuals developed almost at once. These intel-
lectuals objected to the laborite character of the alliance and pro-
fessed themselves unable to see anything socialist about it. The
ideological opportunism of the laborites lends some color to this
view but, stressing the facts of the situation rather than slogans, we
shall nevertheless equate the whole of the political labor forces,
as far as they then accepted MacDonalds leadership, with the Social
Democratic party of Germany.

Having successfully emerged from that revolutionary situation the
party steadily improved its position until MacDonald came into
ojB&ce in 1924. He and his men made so creditable a showing that
even malcontent intellectuals were temporarily subdued. In matters
of foreign and colonial policy, this government was able to strike a
note of its own — ^particularly with respect to Russia. In domestic
affairs, this was less easy to do, mainly because fiscal radicalism had
been (and continued to be) carried, quite as far as was possible under
the circumstances, by conservative governments dependent upon a
share in the labor vote. But while in legislation the labor govern-
ment did not go beyond comparative details, it proved itself quali-
fied to administer the nation's affairs. Snowden's excellent perform-
ance in the office of chancellor of the exchequer would have sufficed
to show to the nation and to the world that labor was fit to govern.
And this was in itself a service to the cause of socialism.^^

Of course that success was greatly facilitated and any other kind
of success was rendered more difficult or even impossible by the fact
that the labor government was in a minority and had to rely not
only on the cooperation of the liberals — ^with whom they had much
in common, for instance their free-trade views — ^but also, to some ex-
tent, on the tolerance of the conservatives. They were in much the

Moreover, from the standpoint of party tactics, it made things much more
difficult for the conservatives, than headstrong radicalism would have done.

From the First to the Second World War 367

same situation as the conservatives were during their short spells
of office in the 1850 s and i86o’s. It would not have been so easy
for them to take a responsible attitude if they had had a majority.
But, as stated above, the very fact that they had not should have
proved even to a Marxist tribunal that the time had not yet come
for a stronger course of action— at ail events, on any plan that would
answer democratic requirements.

The rank and file however did not appreciate all this. Still less
did the masses realize that they owed to the labor party not only
what that party itself accomplished but also part of what was being
done for them by its conservative competitor for the labor vote.
They missed spectacular proposals of reconstruction and promises of
immediate benefits, and did not know how unfair they were when
they naively asked: “Why don’t the socialists do something for us
now they are in power?” The intellectuals who did not relish being
sidetracked naturally availed themselves of the opportunity afforded
by this mood in order to attack the sway of the laborites over the
true socialists and to work up current grievances into horrible wrongs
callously neglected by tyrannical trade-union bureaucrats. Under their
influence the Independent Labor party grew increasingly restive
during the subsequent years of opposition especially when MacDon-
ald proved impervious to their arguments for a more radical pro-
gram. 2 ^ Thus, to many people, success looked much like failure, and
responsibility much like cowardice.

This was unavoidable however. The difficulties and dangers that
are inherent in a policy of socialist parties which involves accepting
office under conditions of “immaturity” are still better illustrated by
the history of MacDonald’s second ministry .22 Historians have learned

21 That program primarily ran in terms of the socialization of banking and of
certain key industries and hence was not really on the lines of orthodox socialism.
But under the circumstances it was advertised as the genuine thing whereas Mac-
Donald’s was styled ''reformist” — a term which according to classical usage applies
equally well to the I.L.P. program.

22 Readers may miss a comment on the general strike of 1926. Though it was
to the interest of both parties to the contest to minimize its symptomatic impor-
tance and though the official theories of it have been shaped accordingly, it was
much more than a series of tactical errors issuing in a situation in which the
trade-union congress had to "bluff” and the conservative government had to "call
the bluff.” We need only ask ourselves what the consequences of a success would
have been, for the authority of government and for democracy, in order to realize
that the strike was an historical event of the first order of importance. If that
weapon had proved effective, the trade unions would have become absolute masters
of England and no other political, judicial or economic power could have con-
tinued to exist beside them except on sufferance. And in this position they could
not have remained what they were. However reluctantly, the leaders would have
had to use the absolute power thrust upon them.

368 A Historical Sketch of Socialist Parties

to do justice to the statesmanship of Sir Robert Peel.^^ I trust that
they will learn to do justice to the statesmanship of MacDonald. He
had the singular misfortune of coming in at the very beginning of
the world depression which, moreover, was the immediate cause of
the breakdown of the international system embodied in the League
of Nations.

Lesser men might have thought— lesser men did think, as a matter
of fact — that an opportunity had come for fundamental reconstruc-
tion. This would have rent the nation in two and there cannot be
any doubt about what the result would have been. Short of funda-
mental reconstruction, however, a policy of monetary expansion
combined with less-than-fundamental social reform — individual
measures of nationalization for instance and additional security
legislation — and resort to mercantilist policies in the field of inter-
national relations was being widely recommended. But part of this
program would undoubtedly have intensified the depression, and
the rest of it — abandonment of the gold parity of the pound and
mercantilism — meant so radical a break with the national tradition
and with the tradition of the labor party itself that the socialists
would hardly have been able to carry it, still less to make a success
of it; to carry it safely and effectively it had to be carried by consent,
that is to say, by a coalition.

So long as coalition was not possible, therefore, MacDonald and
his men applied themselves to the task of working the system as they
found it. This, under such conditions, was the most difficult of all
the tasks they could have undertaken. While everybody was clamor-
ing that “something’* must be done at once, while irresponsibles of
all types had the floor to themselves, while the masses were grum-
bling, businessmen despairing, intellectuals ranting, they steadily
fought every inch of their ground. At home they kept order in the
finances, they supported the pound and they refrained from speeding
up the legislative machine. Abroad they strove with desperate energy
— and considerable success — to make the Geneva system work and to
reduce dangers and tensions all around. When the time had come
and the national interest seemed to warrant the party risk, they took
the plunge and helped the National Government into existence.

It is a melancholy reflection that, in many and important cases, a

sedulously fostered by many irresponsible elements, had much to do with the
causation of the strike. Second, the strike did not impair the power of the party
us it might have done. On the contrary, defeat seems to have produced a radicaliza-
tion of the masses which partly accounts for the party's success in 1929.

23 The analogy extends from certain features of the political and economic situa-
tions that confronted both men (although Peel had the advantage of entering
upon office after the crisis of 1836-1839) to matters of political detail. In both cases
there was a party split, boldly risked and eventually boldly accepted; in both cases
the leaders were felt to be '‘traitors.*'

From the First to the Second World War 369

policy is bound to be the more unpopular with the public and with
the intellectual critic the wiser it is. This is a case in point. To the
radical critic who failed to link up that policy with the comparative
mildness of the depression in England and with the steadiness of
the subsequent recovery, there was nothing in it except weakness,
incompetence, hidebound traditionalism, if not traitorous abandon-
ment of the socialist cause. What probably was one of the best per-
formances in the history of democratic politics and one of the best
examples of action responsibly decided on from a correct perception
of an economic and social situation, the critic looked upon with
“shame and disgust.” At best he considered MacDonald simply as a
bad jockey who had brought the horse to its knees. But the hypothesis
that appealed to him most was that the MacDonald government
yielded to the diabolical whisperings (or worse) of English bankers
or to the pressure of their American backers.

Unfortunately, such nonsense is a factor of real importance and
must be taken account of in any attempt at prognosis. It may seri-
ously interfere with the ability of socialist parties to serve the cause
of civilization during the transitional age in which we live. But if
we discard this element and also the truism that any party which
makes a sacrifice in the national interest will suffer for it in the
short run, we shall have little difficulty in recognizing that in the
long run the labor influence may well turn out to have been strength-
ened by MacDonald^s second tenure of office. Again the analogy
with Sir Robert Peel’s second ministry will help to illustrate this.
Peel’s conservative majority split on the issue of the repeal of the
corn laws. The Peelite wing, though much more numerous and im-
portant than MacDonald’s personal following, soon disintegrated.
The conservative party was maimed and proved unable to get into
power— though it got three times into office— until Disraeli’s great
victory in 1873. But after that and until Sir Henry Campbell-
Bannerman’s victory in 1905, it held power for about two-thirds of
the time. More important than this, the English aristocracy and
gentry,. politically speaking, held their own all the time much better
dian they* would have done if the stigma of dear bread had not been
removed.

As a matter of fact, the labor party quickly recovered and con-
solidated its position in the country during the years that followed
upon the split. It is safe to say that even in the normal course of
things — -irrespective of the war, that is the socialists would have
again come into office before long, with increased power and better
chances of success, and that they would have been able to take a
stronger line than they had taken previously. But it is equally safe
to say that both as to their program and as to their ability to give
effect to it, their policy would have differed only in degree from the

370 A Historical Sketch of Socialist Parties

MacDonald policy — ^principally by some individual measures of
socialization.

3. The postwar career of the German Social Democratic party of
course differs from that of the English labor party in many particu-
lars. But as soon as the German socialists who stayed in the Social
Democratic party had accepted office and made up their minds to
fight communism they were just as much committed to ‘‘administer
capitalism*' as were their English colleagues. If we grant these prem-
ises and take account of the fact that they did not have, and could
not expect to have in the calculable future, a majority either in the
federal parliament or in the Prussian diet or in the population,
everything else follows with inexorable logic. In 1925 the total popu-
lation was about 62 millions. The proletariat (laborers and their
families; I include the domestic servants) numbered not quite 28
millions and part of the vote of this class went to other parties. The
“independent” population was not much smaller — about 24 millions
— and largely impervious to the socialist persuasion. Even if we ex-
clude an upper stratum — say one million — and confine ourselves to
the groups that count at the polls — the peasants, artisans, retailers —
there was not much to be conquered there, not only for the moment
but even for the near future. Between these two groups there were
the white-collar employees, no less than 10 millions of them including
their families. The Social Democratic party of course realized that
this class held the key position, and made great efforts to conquer it.
But in spite of considerable success, these efforts only served to show
that the white collar is a much more serious barrier than it should
be according to the Marxian theory of social classes.^^

Thus, even if the communists had been the allies of the Social
Democrats instead of being their bitterest enemies, the party would
still have been in the minority. It is true that the non-socialist major-
ity was not actively hostile in all its sections: the left-wing liberals
(the Democratic People's party), stronger in talent than in numbers,
were always ready for cooperation (up to a point). It is also true that
this majority was split up into many groups which were quite in-
capable of acting in unison and whose members and supporters were
not anything like as disciplined as were the Social Democrats them-

2^ When confronted with this fact socialists usually derive comfort from the
arguments that non-socialist employees are just erring sheep who have not yet
found their true political location but who are sure to find it eventually, or that
they are prevented from joining the party by the ruthless pressure exerted by their
employers. The first argument will not carry conviction to anyone beyond the
Marxian fold — ^we have seen that the theory of social classes is one of the
weakest links in the Marxian chain. The second argument is false as a matter
of plain fact. Whatever truth it may have contained at other times, the German
employers of the twenties were, save exceptions without quantitative importance,
in no position to influence the vote of their employees.

From the First to the Second World War 371

selves. But sensible people who were neither able nor willing to em-
bark upon hazardous courses would nevertheless feel that there was
for them but one line to take — the line of democracy — and that this
line spelled coalition.

The party that best qualified for the role of an ally was the Catholic
party (the Center). It was powerful. Before the advent of Hitler it
seemed that nothing could shake the loyalty of its supporters. Its or-
ganization was excellent. Provided the interests of the church were
safeguarded, it was prepared to go nearly as far in social reform of
the immediately practical kind as were the socialists themselves, in
some respects even further. Not harboring any particularly fervent
feelings for the displaced dynasties, it stood squarely behind the
Weimar constitution. Last but not least, it welcomed spoils-sharing
arrangements that would guarantee its preserves. Thus understanding
came about with what to the foreign observer might seem surprising
ease. The socialists treated the Catholic Church with the utmost defer-
ence and tact. They made no difficulties about a concordat with the
pope that gave the clergy more than it ever had had under the heretic
Hohenzollerns. As to policies, there were hardly any dissensions at all.

But although this alliance was fundamental, no party that professed
allegiance to the Weimar constitution was excluded from office. Demo-
crats, National Liberals, Nationals (= Conservatives) were all of them
admitted, even to positions of high command. Coalition as a universal
principle meant compromise as a universal principle. The necessary
concessions as to measures were in fact readily made. The army was
left alone, practically under management of its own choosing, and
adequately provided with means. Eastern Prussia was subsidized and
agriculture in general was the object of solicitous care. Some implica-
tions of this which might not quite tally with socialist professions were
made more palatable to the proletariat that paid the bill by calling
this sort of thing Planning— perhaps the reader feels that there is

nothing new under the sun.

In its attitude toward the industrial masses and toward its own
program the Social Democratic party laborized itself. At the beginning
a token payment was made by the passing of a very moderate bill of
which the most radical feature consisted in the word Socialization
that was inserted in its title (1919)- socialists soon shelved

all this in order to apply themselves to labor legislation of the kind
made familiar to Americans by the New Deal. This satisfied the trade
unions whose bureaucracy was increasingly allowed to form the opera-
tive section of the party’s policy-making machine.

This, so one might think, should have been difficult for a party with
a Marxian tradition that continued to prevail in the party schools.
But it was not. Except for a certain amount of communist defection,
the intellectuals from whom opposition within the party could have

372 A Historical Sketch o£ Socialist Parties

been expected to arise were kept well in hand. Unlike the English
party, the German one had settled down in the administrative ap-
paratus o£ the Reich, the states and the municipalities. Moreover, it
had, in its press and elsewhere, many jobs of its own to offer. This
patronage was energetically used. Obedience spelled preferment in
the civil service, in the academic career, in the numerous public enter-
prises and so on. These means were effective in bringing radicals to
heel.

The firm hold the Social Democrats acquired on all the parts of
the machinery of public administration not only made for stricter
discipline but also helped to increase membership and, beyond mem-
bership, the vote on which the party was able to count. Of course it
also increased its power in other ways. For instance, the socialists
secured dominant power in the Prussian Free State. This gave them
control of the police force and they were careful to choose party
members or reliable careerists for police presidents (chiefs of police)
in the big towns. Thus they buttressed their camp until their position
seemed impregnable according to all ordinary standards. And, again
according to all ordinary rules of political analysis, even an orthodox
Marxist could have comforted himself by arguing that in those
trenches they could quite comfortably dwell till things in their secular
course would of themselves change minority into majority and draw
the curtains that veiled the Ultimate Goal for the time being. Quota-
tion from the Communist Manifesto . . .

Irrespective of the mechanics of the party's power plant, the polit-
ical setup as well as the general social situation looked eminently
stable. Moreover, whatever might be urged against many individual
measures, legislative and administrative, on the whole the coalition's
policies made for and not against stability. Much that was done must
command our sincere respect. Nothing that was done qualifies for
explanation of anything worse than the ordinary measure of discon-
tent that every regime elicits which lacks authority and glamour.
The only possible exception to this lies in the financial sphere. Part
of the cultural and political achievements of this governmental system
was associated with large and rapidly increasing public expenditure.
Furthermore, this expenditure was financed by methods — though a
highly successful sales tax was among them — ^which drained the
sources of accumulation. So long as the inflow of foreign capital con-
tinued, all went comparatively well, although budgetary and even
cash difficulties began to appear more than a year before it ceased.
When it did cease, that well-known situation emerged which would
have undermined the position of the most magnetic of leaders. All in
all, however, the socialist critics of the party and its conduct during
this spell of power will be entitled to boast of no mean achievement
if, in case they were ever installed in office, they should do equally well.

From the First to the Second World War

373

V. The Present War and the Future of Socialist Parties

How the present war will affect the fortunes of existing socialist
groups of course depends on its duration and outcome. For our pur-
pose, I do not see any point in speculating about this. Let us how-
ever, by way of example, consider two cases out of a great many pos-
sible ones.

Even now (July 1942) many observers seem to expect that Russia
will emerge from the war with a great access of power and prestige,
in fact that Stalin will emerge as the true victor. If this should be so,
it does not necessarily follow that a communist world revolution will
be the consequence or even that there will be “Russification'' of
continental Europe accompanied by an extermination of the upper
strata and a settlement of accounts with non-communist socialist
(and Trotskyite) groups. For even barring a possible Anglo-American
resistance to the expansion of Russian power, it is not certain that
the self-interest of Russian autocracy will lie in that direction. But it
is certain that the chances for such a consummation — ^realization of
the full Lenin program — ^would be immeasurably increased. However
this world revolution might differ from the Marxian idea, it would
for those who are willing to accept it as a substitute doubtless cease
to be a daydream. And not only as regards Europe.

In that case the fate of orthodox socialism and all it stands for
would be sealed. And so it would be, on the continent of Europe, in
case the fascist powers hold their own. If however we again assume
complete victory of the Anglo-American-Russian alliance — that is to
say, a victory that enforces unconditional surrender but with all the
honors held by England and the United States — then we see readily
that orthodox socialism of the German Social Democratic or of a still
more laborite type stands a much better chance to survive on the
continent of Europe, at all events for some time. One reason for
believing this is that people, if they find both the bolshevist and the
fascist routes barred, may well turn to the Social Democratic republic
as the most obvious of the remaining choices. But there is a much
more important reason: laborite socialism will enjoy the favor of the
victors. For the consequence of so complete a victory as we now
envisage will be Anglo-American management of the affairs of the
— a kind of Anglo-American rule which, from the ideas we see
taking shape under our eyes, may be termed Ethical Imperialism. A
world order of this kind in which the interests and ambitions of other
nations would count only as far as understood and approved by Eng-
land and the United States can be established only by military force
and upheld only by permanent readiness to use military force. It is
perhaps unnecessary to explain why, in the political and economic
conditions of our time, this would mean for these two countries a

374 A Historical Sketch of Socialist Parties

social organization that is best described as Militarist Socialism. But
it is clear that the task of controlling and policing the world would
be much facilitated, on the one hand, by the re-creation and new crea-
tion of small and inefficient states in Europe and, on the other hand,
by installing governments of the laborite or Social Democratic types.
Especially in Germany and Italy, the debris of the Social Democratic
parties would constitute the only political material from which to
construct governments which could possibly accept this world order
for longer than a period of prostration and cooperate with the
agents of the world protectorate without mental reservations. What-
ever it may be worth, this is the chance of Liberal Socialism.

From the standpoint of the subject of this book however (though
from no other) all this is of secondary importance. Whatever the fate
of particular socialist groups, there cannot be any doubt that the
present conflagration will — inevitably, everywhere, and independently
of the outcome of the war — mean another great stride toward the
socialist order. An appeal to our experience of the effects of the First
World War on the social fabric of Europe suffices to establish this
prognosis. This time however the stride will be taken also in the
United States.

But , that experience, though a valuable guide, is an inadequate
one. A quarter of a century has elapsed. This is no negligible span
even as regards the secular forces that make for socialism in the sense
explained in Part II. Independently of everything else we shall be
confronted at the end of this war with an economic situation, a social
atmosphere, a distribution of political power substantially different
from those of 1918. Much however has happened during these twenty-
five years that could not have been predicted from secular tendencies
alone. Among other things there was the great depression which,
impinging upon a delicate situation, shook social structures to their
foundations, nowhere more than in this country. Still more effective
in undermining these structures were the policies by which that
depression was handled. And this must be attributed largely to polit-
ical configurations that were in part accidental. The consequences
are obvious. In particular, huge bureaucracies have developed that
by now are powerful enough to hold their ground and to implement
policies of fundamental reconstruction.

In no country will war taxation of business and of the business
class be reduced in the proportion in which it was reduced after 1919.
This may in itself suffice to paralyze the motors of capitalism for good
and thus provide another argument for government management.
Inflation, even if it should go no further than is, for instance in this
country, unavoidable in the present political pattern, may well do
the rest, both directly and, through the radicalization of the expro-
priated holders of bonds and insurance policies, indirectly. More-

From the First to the Second World War 375

over, nowhere will war controls be liquidated to the extent the
experience of the years after 1918 might lead us to believe. They will
be put to other uses. In this country steps are already being taken to
prepare public opinion for governmental management of postwar
adjustments and to put the bourgeois alternative out of court. Finally,
there is no reason to believe that governments will ever relax the
hold they have gained on the capital market and the investment
process. To be sure, this does not sum up to socialism. But socialism
may, under such conditions, impose itself as the only practicable
alternative to deadlocks and incessant friction.

Details and phrases will of course differ in different countries. So
will political tactics and economic results. English developments are
comparatively easy to foresee. The labor men entered the Churchill
government in response to the call of emergency. But, as has been
pointed out before, they were then well advanced on the road to
office and power irrespective of any emergency. Therefore they will
quite naturally be in a position to manage postwar reconstruction
alone or — which may prove to be the most effective method — in a
coalition they would control. The war economy will have realized
some of their immediate aims. To a considerable extent they will
only have to keep what they have got already. Further advance toward
the socialist goal can be expected to be relatively easy in conditions in
which there is not much left for capitalists to fight for. And it may
prove possible to be quite frank about it and to carry out socializa-
tion soberly, in an orderly way, and largely by consent. For many
reasons, but principally because of the weakness of the official socialist
party, prognosis is less easy in the case of this country. But ultimate
results are not likely to be different, though slogans are almost sure
IQ be — and costs in terms of both welfare and cultural values.

Once more: it is only socialism in the sense defined in this book
that is so predictable. Nothing else is. In particular there is little
reason to believe that this socialism will mean the advent of the
civilization of which orthodox socialists dream. It i§ much more likely
to present fascist features. That would be a strange answer to Marx’s
prayer. .But history sometimes indulges in jokes of questionable taste.

INDEX

Accumulation, primitive, 17; theory of,
30-32

Adler, F., 240

Adler, M., 49, 202n

Adler, V., 202n, 348

Allocation of resources, 174

American Federation of Labor, 332

Anarchism, 307

Ancien regime, social structure of, 135
Anti-intellectualism, Bergsonian, 340
Anti-Semitism, 241
Aristotle, 230

Austrian socialist party, 348-349
Authority, 210

Babeuf, G., 309

Bailey, S., 26n

Bakunin, M., 307, 339

Barone, E., 173

Bauer, O., 150, 49

Bebel, A., 344, 347, 350

Bentham, J., 214, 26on

Berlepsch, v., 341

Bernstein, E., 12, 346, 3530

Big business and the standard of life, 81

Bismarck, Prince, 343

Blanc, L., 309

Blanquist party, 337

Bolsheviks, 329

Bortkiewicz, L. v., 290

Breakdown, of capitalism, 57

Bureaucracy, problem of, 205-207, 293-

294

Burke, E., 283, 292, 295
Burns, A. F., 630
Business strategy, 88

Cabinet, 270, 278
Cabinet ministers, 270
Capital, organic structure of, 26; Marx’s
definition of, 45
Capital-saving innovations, 119

Capitalism, performance of, 63-71; evo-
lutionary nature of, 82; and govern-
ment action, 107; and gold, 108; and
increase in population, 108; and new
countries, 109; and technological prog-
ress, 110; classical theory of, 74-76
Catastrophe of capitalism; See Zusam-
menbruchstheorie
Central board, 168
Centralist Socialism, 168
Centrist (Catholic) party, 344-345, 371
Chamberlin, E. H., 790
Chartist movement, 309
Chigi, A., 125
Childlessness, 157
Christian Socialism, 309
Clark, C., 115
Clark, J. B., 770
Class war, 14
Classical economists, 750
Cobden, R., 282
Commercial society, 167
Committee on socialization, German, 300
Common good, 250, 265
Communism, 168, 358-363
Communist Manifesto, 7, 14, 15, 39, 50,
55, 110, 2050, 236, 308, 317, 372
Competition, perfect, 77-78, 103-105; im-
perfect, 78; monopolistic, 79; preda-
tory or cutthroat, 80; modus operandi
of, 84-85

Competitive leadership, 269, 271
Comte, A., 12 in

Concentration of economic power, 33,
140

Confederation generate du travail, 340,
355

Constitutional monarchy, 270

Continental congresses, 248

Cost accounting in socialism, 176-177

Cournot, A., 78

Crises, Marx’s theory of, 38-42

Croce, B., 3190

Crowds, psychology of, 257

Debs, E. V„ 335
De Leon, D., 334“335

377

Index

378

Delire dHriterpretation, 122
Democracy, and socialist groups, 237"
240; difficulty of defining, 243-247?
direct, 245-246; legal theories of, 247;
classical doctrine of, 250-252; defini-
tion of, 269; and waste of energy, 286-
287, 296; conditions of success of, 289;
in the socialist order, 296-302; bour-
geois, 296-298

Democratic Federation, 323

Denikin venture, the, 36 in

Dictatorship, 296; of the proletariat, 236

Discipline, 210-218

Disraeli, B., 275

Dobb, M., 39n

Dock strike of 1889, 3210

Double-entry bookkeeping, 123

Dromard, G., 121

Durkheim, E., 14

Dynamics, 103

Economic interpretation of history, 10-13

Economic welfare, 190-192

Edgeworth, F. Y., 103

Efficiency defined, 188-190

Electorate, role of, 282

Engels, F., 11, 290, 34, 390, 4in, 57, 312,

346

English Socialism in office, 366-370
Entrepreneur, function of, 132
Equality, 265
Equilibrium, 79
Erfurt program, 320, 3580
Ethical imperialism, 373
Evolution toward socialism, 56
“Ex’s,” 33on
Excess capacity, 105
Exploitation, 22, 26-28
Expropriation, theory of, 33, 38
Extrapolation, 72

Fabians, the, 311, 321-325

Family, the disintegration of the, 157-

158

Family motive, the, 160

Ferrara, F., 103

Fettered capitalism, 201

Filmer, R., 247n

Fisher, Irving, yyn

First International, 308, 318-319

Five-Year Plan of 1928, 216

Fourier, C., 390, 3070
Frankfort Resolutions, 357
Free contracting, 141
Free entry, 164
Freud, S., 121, 256
Frisch, R., 103
Fugger, J., 125

Gallicanism, i35n
General strike of 1926, 367n
Gettysburg address, 2650
Gladstone, W. E., 126, 275-276, 2770
Gobineau, Count, 14
Goncourt, E. and J., 126
Gotha program, 319-320
Government by the people, 247
Guesde, J,, 337, 350, 352

Hamburg, Congress of, 357
Hayek, F., i85n
Hegelianism, 9
Hermens, F. A., 272
Heterogony of aims, 13 in
Hicks, J. R., 103
Hilferding, R., 41, 49, 56
Home, the decay of the, 158-159
Hungary, bolshevist episode in, 3600
Huysmans, C., 357

Idle rich, 192
Immiserization, 22, 34-37
Imperfect competition, 78
Imperialism, Marxist theory of, 49-54
Incentives, 207-209
Independent Labour party, 321
Industrial democracy, 300
Industrial revolution, 67
Industrial Workers of the World, 334-
B35

Inevitability of socialism, meaning of,
61

Intellectuals, sociology of, 145-154; defi-
nition, 145-146; early history of, 147-
148; unemployment and unemploy-
ability of, 152; influence of, 153-155
Investment opportunity, and saturation,
113; and the declining birthrate, 113-
115; and new lands, 115-117; and
technological advance, 117

Index 379

Investment, safeguarding of, 87, 96-98
Iron law of wages, 28

James, W., 2610
Jauit's, J., 337-538
Juglar, C., 41

Junkers, the, and German civil service,
341

Kahn, R. F., 1030

Kautsky, K., 49, 186, 300, 347, 353

Keir Hardie, 321

Keynes, J. M., 112

Kienthal, convention at, 357n, 358

Knights of Labor, 333-334

Kondratieff, N. D., 68

Labor and Socialist International, 357

Labor party, English, 366-370

Lafargue, 337

Lange, O., 1730

Lassalle, F., 28, 314, 315, 320

Le Bon, G., 256

Lenin, N., 169, 227, 329-330, 358-59
Lerner, A. P., 1730, i76n
L^vy-Briihl, L., 12 in
Liberal Socialism, 374
Liebknecht, K., 226, 3580
Liebknecht, W., 320
Locke, J., 248

Luxemburg, R., 49, 226, 346, 3580
M

Malthus, T. R., 1150
Manchesterism, 341
Mannheim, K., iin
Marshall, A., 77, 78, 103, 112
Martov, L., 329

Marx, K., 1-58, 68, 82, 108, 111, 1270,
128, 134, 140, 150, 162, 169, lygn, i84n,
204, 2050, 219, 235, 305, 306, 308-310,
3i2-3i9> 364

Marxism, religious character of, 1
Mason, E. S., 920

Materialistic interpretation of history.
See economic interpretation of history
Maturity, 220-21
McDonald, R., 353, 355 » 366-370

Medici, the, i25n
Mensheviks, 329
Militarist Socialism, 374
Mill, J. S„ 22, 103, 208, 248
Millerandism, 338
Mills, F. C., 64n
Ministry of Production, 168, 301
Mises, L. V., 170
Monopolistic competition, 79
Monopolistic practices, 87-106
Monopoly, nature of, 98-100; theory of,
100-101; short-run, 102
More, T„ 306

Napoleon, and the will of the people,

255

Nationalization, English possibilities of,
230-231

Neo-Marxists, 350, 42, 49, 54, 128, 348

New Deal policies, 64, 371

New Economic Policy, 216, 360, 362

Odger, G., 3180
Oligopoly, 79
Ostracism, 2540

Outlook for socialist parties, 373-375
Output, index of, 63
Owen, R., 306-307

Pacifism, 128
Pacioli, L., 1230
Pareto, V., 66n, 1240, 1730, 256
Parliament, legal nature of, 248; func-
tion of, 278

Peel, Sir Robert, 100, 276, 368, 369
Persons, W. M., 63, 640
Philosophical radicals, 249
Pigou, A. C., 690
Plekhanov, G. V., 130, 329, 33on
Poincar^, R., 2750, 2850
Political party, nature of, 282
Population, redundancy of, 36
Posadowsky, Count, 341
President of the United States, 2730
Prime Minister, 251, 273-77, 286
Propaganda, 254

Property, evaporation of, 141, 158
Proportional representation, 272
Protecting strata, i 35‘39

Index

380

Protectionism, Neo-Marxist theory of, 54
Proudhon, P. J., 307

Quesnay, F., 22

RadicauX‘SOcialistes, 337
Rational thought, evolution of, 122
Rationalistic civilization, 211
Rerum novarum encyclical, 345
Reserve army, industrial, theory of,
35-37

Restraints of trade, 91
Revisionism, 346-348
Revolution, the Marxist, 57-58, 346
Rhodes, C., 52
Ribot, T., 256

Ricardo, D., 22, 23, 25, 35, 36, 37, 103

Rigid prices, 92-96

Robbins, L., t85n

Robinson, J., 790

Rodbertus, K., i7n, 22, 25, 39

Romanticism, 249

Roos, C. F., 103

Russian labor policies, 216-218

Russian socialism before 1914, 326-330

Sapori, A., i23n
Saving, 210
Say, J. B., 40
Schmoller, G., 14, 42
Scientific socialism, 8, 56
Second International, 349-351
Senior, N. W., 33n
Shaw, J[. B,, 147
Sismondi, J. C., 22, 39
Smith, A., 75n, loo
Social classes, Marx's theory of, 13-20
Social Democratic party of Germany,
239* 320* 341-349* 355-357^ 370-372
Social Democratic party of Russia, 328
Socialism, definition of, 167; cultural
indeterminateness of, 170; pure logic
of, 172-182; and the competitive re-
gime, 183

Stocialist parties and the first world war,
352-354> 363-365

Socialist party, the American, 334
Socialists of the chair, 341
Socialization, 221-228

Socialization, German commission on,
300

Sombart, W., 170
Sorel, G., 340
Spartacus league, 3580
Stakhanovism, 216
Stalin, J., 237, 361-363
Stamp, Lord, 650, 66n
Stephens, U. S., 334
Sternberg, F., 49
Stone, W. S., 332n
St. Simon, H., 1790, 307
Suetonius, 24in

Superstructure, psychological, 121
Surplus value, 27
Swedish socialism, 325-326
Syndicalism, 339-341

Taussig, F. W., 23, 770
Taylor, F. M., 1730
Taylorism, 258
Therraidorism, 362

Third (Communist) International, 357,
359-360, 361
Thomas, N., 238
Thompson, W., 308
Tinbergen, J., 103
Tisch, K., i73n
Tory democracy, 3i9n
Trade Disputes Act, 321
Transition, two types of, 219
Trotsky, L., 288, 3270, 3480, 359
Tugan-Baranowsky, M., 390

Unemployment, 69-71, 196
Unified Socialist party (in France), 337
Utilitarianism, 127, 129, 145, 248
Utopian socialism, 56, 306

Value, Marx’s theory of, 23-25
Vanishing investment opportunity, the-
ory of, 111-120
Verein fur Sozialpolitik, 342
Verelendung, 22, 34-37
Victorian standards, 157
Vienna International, 357
Vinci, L. da, 125
Vollmar, G, v., 347, 352
Voltaire, F., 149, 244n

Wallas, G., 2560, 26m
Walras, L., 7711
Weber, M., 11, 30
Weimar Republic, 291
Wellington, Duke of, 149
White-collar class, German, 370
Wicksell, K., 77, 112
Wieser, F., i73n
Wilkes, J., 146

Will of the people, 247, 249, 250, 253
William 11, 341, 343^^
Wissenssoziologie, 1 1
Witch hunting, 241

381

World revolution, 373
World War, the first, effects on posi-
tion of socialist parties, 354-355
Wrangel venture, the, 36 in
Wundt, W., 13 in

Young England group, 32on
Z

Zassenhaus, H., i73n

Zimmerwald, convention at, 3570, 358

Zusammenbruchstheorie, 42

Index

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