CONTENTS

BUY ME!

Acknowledgments

Introduction by Richard M. Ebeling

1ST LECTURE: Mind, Materialism, and the Fate of Man

2ND LECTURE: Class Conflict and Revolutionary Socialism

3RD LECTURE: Individualism and the Industrial Revolution

4TH LECTURE: Nationalism, Socialism, and Violent Revolution

5TH LECTURE: Marxism and the Manipulation of Man

6TH LECTURE: The Making of Modern Civilization: Savings, Investment, and Economic Calculation

7TH LECTURE: Money, Interest, and the Business Cycle

8TH LECTURE: Profit and Loss, Private Property, and the Achievements of Capitalism

9TH LECTURE: Foreign Investments and the Spirit of Capitalism

Index

ACKNOWLEDGMENTS

    The lectures by Ludwig von Mises contained in Marxism Unmasked were delivered at the San Francisco Public Library, June 23–July 3, 1952, under the sponsorship of The Freeman magazine. They were taken down, word for word, in shorthand and transcribed by Mrs. Bettina Bien Greaves. She has very kindly made these lectures available to the Foundation for Economic Education for publication. Mrs. Greaves worked as a senior staff member at FEE for practically 50 years, only retiring in 1999. Along with her late husband, Percy L. Greaves, Jr., she was a long-time friend and associate of Ludwig von Mises. Indeed, there are few people in the world today who are as conversant with Mises’s ideas and writings as she.

The publication of these lectures has been made possible through the kind and generous continuing support of Mr. Sheldon Rose of Farmington Hills, Michigan, and the Richard E. Fox Foundation of Pittsburgh, Pennsylvania. Special thanks are due to Mr. Michael Pivarnik, Executive Director of the Fox Foundation, for his dedicated interest in the ideas of the Austrian School of Economics and Ludwig von Mises in particular.

Mrs. Beth Hoffman, managing editor of FEE’s monthly magazine, The Freeman, has once again overseen the entire preparation of the manuscript. Her eye for detail in all things is reflected in the fine final product.

INTRODUCTION

by Richard M. Ebeling

AUSTRIAN ECONOMIST LUDWIG VON MISES delivered these nine lectures, which we have titled Marxism Unmasked, from June 23 to July 3, 1952, in San Francisco at a seminar sponsored by The Freeman. A history teacher who received a scholarship to attend the program later wrote to the magazine to say:

The lectures themselves I found provocative, stimulating and highly rewarding. As a classic exposition of the virtues of individualism and the evils of socialism, buttressed with an impressive array of scholarship, they were unmatched. ...I am not trying to say that I became converted completely to the set of ideas that Dr. Mises and the Freeman represent. But I do say that any student or teacher of the social sciences who fails to think deeply on these ideas is negligent and ill-informed, if not worse. This feeling the seminar did leave me with. Certainly I personally appreciate some of these ideas far more than I did a month ago.¹

It is worth recalling the state of the world in 1952 when Ludwig von Mises gave these lectures. Everywhere around the globe Soviet socialism seemed to be on the march. World War II had left all of Eastern Europe in the grip of the Soviet Union. In 1949, mainland China had fallen under the control of Mao Zedong’s communist armies. In June of 1950 the Korean War had broken out, and in 1952 American armies under the UN flag were in a bloody stalemate along the 38th parallel against the forces of North Korea and Communist China. The French were immersed in a seemingly endless colonial conflict in Indochina against Ho Chi Minh’s communist guerrilla army.

In the West, large numbers of intellectuals were persuaded that “history” was inescapably on the side of socialism, under the leadership Comrade Stalin in the Kremlin. Communist parties in France and Italy had large memberships, and followed every ideological twist and turn made by Moscow. Even many of those who rejected the brutality of Soviet-style socialism still believed that economic planning was inevitable. A prominent political scientist at the University of Chicago even declared in 1950 that “Planning is coming. Of this there can be no doubt. The only question is whether it will be the democratic planning of a free society, or totalitarian in character.”²

In both Europe and the United States it was presumed that capitalism, when left unregulated, could only lead to exploitation, misery, and social injustice. Governments on both sides of the Atlantic were introducing ever more stringent interventionist and welfare statist policies meant to ameliorate the supposed cruelty of the market economy. And because of the “emergency” of the Korean War, the U.S. government had further burdened the American people with a comprehensive system of wage and price controls that hampered almost every aspect of economic activity.³

The primary source and impetus for the global bias toward socialism were the writings of Karl Marx (1818–1883). He claimed to have discovered the invariant “laws” of human historical development that would lead to the demise of capitalism and the triumph of socialism, followed by a final transition to a blissful, post-scarcity communist world. During the intermediary socialist stage leading to communism, Marx declared, there would be a “revolutionary dictatorship of the proletariat.” It would prevent remnants of the old capitalist ruling class from trying to return to power and would “reeducate” the workers into a “higher consciousness” free from the residues of the prior bourgeois mentality.⁴

What makes this entire process inescapable and irreversible, Marx insisted, is that the physical means of production follow technological transformations in a series of historical stages that are beyond man’s control. Each of these stages of transformation requires a particular set of human institutional relationships for the full blossoming of that technology’s potential. What men, in their limited and subjective views of the world, take to be the invariant foundations of human life—morality, family, property, religious faith, customs and traditions, and so on—are merely the temporary elements of a societal “superstructure” serving the ends of the objective material forces of production during each of these historical epochs. Therefore, even man’s “consciousness” about himself and the world around him is a product of his particular place and role in this process of historical evolution.⁵

Every man’s “class” position in society, according to Marx, is determined by his relationship to the ownership of the means of production. Those who own the means of production in capitalist society must, by historical necessity, “exploit” the others who offer their labor services to them for hire. The capitalist class lives off the labor of the working class by expropriating as “profit” a part of what the laborers in their employ have produced. Hence, these two social classes are in irreconcilable conflict with each other for the material rewards of human labor. This conflict reaches its climax with the violent overthrow of the exploiters by the proletariat, who experience an increasing economic misery during the final death throes of the capitalist system.⁶

In the new socialist order that replaces capitalism, the means of production will be nationalized and centrally planned for the economic betterment of the vast majority of humanity, and no longer will be used only for the profit-oriented benefit of the capitalist property owners. Economic planning will generate material prosperity far exceeding anything experienced under capitalism; technological advances and rising production will not only eliminate poverty but also push society to a level of material abundance at which all physical wants and worries will be a thing of the past. This final stage of communism will create a paradise on earth for all mankind.⁷

Ludwig von Mises as Critic of Socialism

There were many critics of socialism and Marxism in the nineteenth and early twentieth centuries. One of the most outstanding was the French economist Paul Leroy-Beaulieu, who in 1885 penned an extremely insightful and devastating analysis of collectivism, addressing its dangers to both personal liberty and economic prosperity.⁸ In 1896 one of Ludwig von Mises’s own professors at the University of Vienna, the internationally renowned Austrian economist Eugen von Böhm-Bawerk, published the most damaging critique of Marx’s labor theory of value and the accompanying idea of exploitation of labor under capitalism.⁹ There were even highly effective anti-utopian novels that depicted the disastrous effects to be expected if a socialist regime were to come to power and impose central planning on society.¹⁰

But none of these writers was as penetrating in demonstrating the inherent unworkability of a system of socialist central planning as Ludwig von Mises. During  World War I and its immediate aftermath there was an enthusiastic confidence that the age of government planning had finally arrived. The wartime price and wage controls and production planning boards imposed in virtually all the belligerent nations were considered by many the precursors of continued peacetime planning. Following the Bolshevik Revolution in Russia in 1917, Lenin’s Marxist regime imposed “war communism” in 1918, heralding it not only as an emergency device to fight the anti-communist White armies during the three-year civil war in Russia, but also as the great leap into the fully planned society. And following the end of the war in November 1918, new Social Democratic Party governments in Germany and Austria declared that the time for “socialization” and economic planning had finally arrived.¹¹

In 1919, at a meeting of the Austrian Economic Society, Mises delivered a paper on “Economic Calculation in the Socialist Commonwealth,” which was published in a leading German-language journal in 1920.¹² He incorporated this article as the centerpiece in a comprehensive treatise on collectivism that he published two years later in 1922, titled Socialism: An Economic and Sociological Analysis in its English translation.¹³

Mises observed that most of the earlier critics of socialism had rightly pointed out that a system of comprehensive government planning of economic affairs would create the worst tyranny ever experienced in human history. With all production, employment, and distribution of output completely under the monopoly control of the State, the fate and fortune of every individual would be at the mercy of the political authority. In addition, these earlier opponents of socialism had cogently argued that with the end of private property and freedom of enterprise, individuals would lose much of the self-interested motivation for industry, innovation, and work effort that exists in a market economy.

But, Mises said, what had not been thoroughly examined and challenged was whether a socialist economic system was even workable in practice. In other words, would the socialist central planners be able to rationally and efficiently manage the everyday affairs of economic life?

His answer was no. In the market economy production is guided by the expected consumer demand of the buying public. Businessmen and entrepreneurs, in the quest to earn profits and avoid losses, must direct the resources at their disposal in a way that minimizes their costs of production relative to the expected revenues from supplying goods and services that consumers want to purchase.

Money prices for both finished consumer goods and the means of production facilitate the process. The prices for consumer goods tell entrepreneurs what consumers want. The prices for the means of production—land, labor, and capital—tell them the costs of producing those goods with different types of resources and raw materials in different combinations. The entrepreneur’s task is to select that resource “mix” that minimizes the expense of bringing goods to market in the quantities and qualities demanded by consumers.

The price attached to any one of those resources (whether it be land, labor, or capital) reflects its value in alternative uses, as represented by the competing bids to purchase or hire it by rival entrepreneurs who also seek to employ it for some production purpose in the market. Unless the expected price for the finished good is able to cover the costs necessary to employ a variety of resources to produce it, it is uneconomical— wasteful—to devote those resources for its manufacture. As Mises later explained in his book on Bureaucracy, “To the entrepreneur of capitalist society a factor of production through its price sends out a warning: Don’t touch me, I am earmarked for the satisfaction of another, more urgent need” of the consuming public.¹⁴

This means that the price system of a competitive free market tends to assure that the scarce resources of society are allocated and used in a way that best reflects the wants and desires of all of us in our roles as consumers. Since one of the inescapable elements of the world in which we live is constant change, every shift in consumer demand and every modification in the availability and uses of those scarce resources are reflected in changes in the market structure of relative prices. Such changes in the structure of market prices provide new information to both producers and consumers that they may have to adjust their buying, selling, and production decisions, given the new circumstances.

Mises’s challenge to the socialists was to argue that this “rationality” of the market, which constantly coordinated selling prices with cost-prices, and supply with demand, would be totally absent under a system of central planning. Prices emerge out of the buying and selling of the market participants. But buying and selling are only possible with the institution of private property, under which goods and resources are owned, used, and transferred through voluntary exchange at the discretion of the owners.

Furthermore, under capitalism the complex network of market transactions is made possible through the use of a commonly accepted medium of exchange—money. With all goods and resources bought and sold in the market through a medium of exchange, their respective exchange values are all expressed in terms of the same common denominator: their money prices. This common denominator of money prices enables the process of “economic calculation,” i.e., the comparing of relative costs with selling prices.

The primary goal of practically all socialists in the nineteenth century and most of the twentieth century was the abolition of private property, market competition, and money prices. In their place, the State would nationalize the means of production, and as the “trustee” of the interests of the “working class” would centrally plan all of society’s economic activities. The central planning agency would determine what got produced, how and where it was produced, and then distribute the resulting output to the members of the new “workers’ paradise.”

Mises showed that the end of private property would mean the end to economic rationality. Without private ownership of the means of production—and no competitive market upon which rival entrepreneurs could bid for those resources based on their profit-motivated estimates of their respective values in producing goods desired by the consuming public—there would be no way to know real and actual opportunity costs among the potential alternative uses for which they might be applied. How, therefore, would the central planners know whether or not they were misusing and wasting the resources of society in their production decisions? As Mises summarized the dilemma, “It is not an advantage to be ignorant of whether or not what one is doing is a suitable means of attaining the ends sought. A socialist management would be like a man forced to spend his life blindfolded.”¹⁵

Even if a socialist system were not controlled by brutal dictators but instead by human “angels” who only wanted to do “good” for humanity, and even if the incentives for work and industry were not reduced or eliminated through the abolition of private property, Mises was able to demonstrate that the very institutional structure of a socialist regime made it impossible for it to produce a material “heaven on earth” for mankind superior to the productive and innovative efficiency of a functioning free-market economy.¹⁶ It is what enabled Mises to declare in the early 1930s, when the appeal of socialist planning around the world was reaching its zenith, that, “From the standpoint of both politics and history, this proof is certainly the most important discovery made by economic theory....It alone will enable future historians to understand how it came about that the victory of the socialist movement did not lead to the creation of the socialist order of society.”¹⁷

Mises’s San Francisco Lectures

Mises believed that any comprehensive critique of socialism had to deal with more than merely its unworkability as an economic system, however central this was to the case against socialism. It was also necessary to challenge and refute the philosophical and political underpinnings of the socialist and Marxian conceptions of man and society. His 1922 book on Socialism attempted to do this in great detail. And he returned to this theme a few years after he delivered these lectures in San Francisco in his work on Theory and History.¹⁸

What Mises offered those attending these lectures in late June and early July of 1952 was a clear understanding and insight into the fundamental errors and misconceptions to be found in Marx’s theories of dialectical materialism and class warfare, as well as a historical analysis of the real benefits from the Industrial Revolution that coincided with the emergence of modern capitalist society. He also explains the role of savings, investment, and the profit and loss system as the engines for economic and cultural progress, and which have helped eliminate the poverty that has plagued mankind through most of history.

In an especially insightful lecture, Mises discusses the nature and workings of capital markets and the importance of market-based interest rates free from government manipulation and inflation. In addition, he shows that foreign investment in underdeveloped parts of the world have not been the cause of poverty or exploitation, as socialists have constantly claimed, but the source of accelerated prosperity and human improvement for tens of millions of people in these countries.

All of these arguments and analyses are placed in the wider context of individualism versus collectivism, the importance of freedom for the dignity and betterment of every human being, and the dangers from surrendering liberty and property to the paternalistic state. Through it all, the reader is offered a vision of the classical-liberal ideal of the free and prosperous society.

As with an earlier series of lectures that Ludwig von Mises delivered in 1951, and which was published by FEE under the title The Free Market and Its Enemies,¹⁹ a unique quality of Marxism Unmasked is that it captures Mises as teacher. Unlike many of his longer, more formal writings, these lectures are peppered with numerous historical asides and common-sense examples that convey the ease and spirit of the spoken word.

These lectures, like the earlier ones, were taken down, word for word, in shorthand and then transcribed by Bettina Bien Greaves, a long-time former senior staff member at the Foundation for Economic Education. Mrs. Greaves is one of the leading experts on the ideas and writings of Ludwig von Mises, and her deep appreciation for his contributions to economic theory and policy is reflected in the care with which she transcribed these lectures for eventual publication. They would not be available now in print if not for her dedication and diligent scholarship, for which we are all especially grateful.

When Mises delivered these lectures Marxian socialism seemed to be conquering the world. Despite the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991, Marxian criticisms of capitalist society still set the tone for those around the world who persistently hope for the end of human freedom and the market economy.²⁰ For that reason, what Mises had to say more than 50 years ago still has much meaning for us today.

But now, simply enjoy “listening” to the mind of one of the greatest economists of the twentieth century as you read this book.

1 Letter from Robert Miller, “From a History Teacher,” The Freeman (August 11, 1952), pp. 752, 782.

2 Charles E.Marriam,“The Place of Planning,”in Seymour E.Harris,ed., Saving American Capitalism (New York:Alfred A.Knopf,1950),p.161.

3 On the importance of a free-market pricing system even during a time of war emergency, see Ludwig von Mises, Human Action: A Treatise on Economics (New York: Foundation for Economic Education, 4th revised ed., 1996), pp. 825–28; also, F.A.Hayek,“Prices versus Rationing”and “The Economy of Capital”[1939] in Bruce Caldwell, ed., The Collected Works of F. A. Hayek, Vol. X: Socialism and War (Chicago: University of Chicago Press, 1997), pp. 151–60.

4 See Karl Marx, “Critique of the Gotha Program” [1875], in Robert C. Tucker, ed., The Marx-Engels Reader (New York:W.W. Norton, 1972),pp. 382–98.

5 Karl Marx, “A Contribution to the Critique of Political Economy” [1859], in ibid., pp. 4–5.

6 Karl Marx and Frederick Engels, “Manifesto of the Communist Party” [1848] in ibid., pp. 331–62.

7 On the appeal of paternalism, planning, and paradise on earth over the centuries, see Alexander Gray, The Socialist Tradition: Moses to Lenin [1946] (New York: Harper & Row, 1968); and Igor Shafarevich, The Socialist Phenomenon [1975] (New York: Harper & Row, 1980).

8 Paul Leroy-Beaulieu, Collectivism [1885] (London: John Murray, 1908); on Leroy-Beaulieu and other early critics of socialist economic planning, see Richard M. Ebeling, Austrian Economics and the Political Economy of Freedom (Northampton, Mass.: Edward Elgar, 2003), Chapter 4: “Economic Calculation Under Socialism: Ludwig von Mises and His Predecessors,” pp. 101–35.

9 Eugen von Böhm-Bawerk,“Karl Marx and the Close of His System” [1896] in Shorter Classics of Eugen von Böhm-Bawerk (South Holland, Ill.: Libertarian Press, 1962), pp. 201–302; see also H.W. B. Joseph, The Labor Theory of Value in Karl Marx (London: Oxford University Press, 1923).

10 Eugene Richter, Pictures of the Socialistic Future [1893] (London: Swan Sonnenschein, 1907).

11 On the failure of these first attempts at nationalization and planning in Russia, Germany, and Austria, see Arthur Shadwell, The Breakdown of Socialism (London: Ernest Benn,1926),pp.23–131.

12 Ludwig von Mises,“Economic Calculation in the Socialist Commonwealth” [1920] in F. A. Hayek, ed., Collectivist Economic Planning: Critical Studies on the Problem of Socialism (London: George Routledge, 1935), pp. 87–130; reprinted in Israel M. Kirzner, ed.,Classics in Austrian Economics: A Sampling in the History of a Tradition,Vol. III (London: William Pickering, 1994), pp. 3–30.

13 Ludwig von Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Classics [1922; English trans., 1936, revised ed., 1953], 1981); Mises later restated and refined his critique of socialist central planning in Human Action: A Treatise on Economics (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1949; revised eds., 1963,1966] 1996), pp. 200–31, 689–715.

14 Ludwig von Mises, Bureaucracy (New Haven: Yale University Press, 1944), p. 29.

15 Ibid., p. 30.

16 See also Richard M. Ebeling, “Why Socialism is ‘Impossible’,” The Freeman: Ideas on Liberty (October 2004), pp. 8–12.

17 Ludwig von Mises,“On the Development of the Subjective Theory of Value”[1931] in Epistemological Problems of Economics [1933] (New York: New York University Press, 1981),p.157.

18 Ludwig von Mises, Theory and History: An Interpretation of Social and Economic Evolution [1957] (Indianapolis: Liberty Fund, 2005).

19 Ludwig von Mises, The Free Market and Its Enemies: Pseudo-Science, Socialism, and Inflation (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 2004). 20 Richard M. Ebeling, “Is the ‘Specter of Communism’ Still Haunting the World?” Notes from FEE (March 2006).

1ST LECTURE

Mind, Materialism, and the Fate of Man

THE FIRST FIVE LECTURES IN THIS SERIES will be on philosophy, not on economics. Philosophy is important because everybody, whether or not he knows it, has a definite philosophy, and his philosophical ideas guide his actions.

The philosophy of today is that of Karl Marx [1818–1883]. He is the most powerful personality of our age. Karl Marx and the ideas of Karl Marx—ideas which he did not invent, develop, or improve, but which he combined into a system—are widely accepted today, even by many who emphatically declare that they are anti-communist and anti-Marxist. To a considerable extent, without knowing it, many people are philosophical Marxists, although they use different names for their philosophical ideas.

Marxists today speak of Marxism-Leninism-Stalinism. Volumes are written today in Russia about the contributions of [Vladimir Ilyich] Lenin [1870–1924] and [Josef] Stalin [1879–1953].Yet the system remains what it was in the days of Karl Marx; Marxism is in effect petrified. Lenin contributed only very strong invectives against his adversaries; Stalin contributed nothing. Thus, it is questionable to call any of these contributions “new,” when we realize that the most important contribution of Marx to this philosophy was published in 1859.¹

It takes a long time for ideas to conquer the world. When Marx died in 1883, his name was by and large unknown. A few newspapers reported in a couple of lines that Karl Marx, the author of various books, had died. Eugen von Böhm-Bawerk [1851–1914] published a critique of Marx’s economic ideas² in 1896, but it was only 20 years later that people began to consider Marx a philosopher.

The ideas of Marx and of his philosophy truly dominate our age. The interpretation of current events and the interpretation of history in popular books, as well as in philosophical writings, novels, plays, and so forth, are by and large Marxist. At the center is the Marxian philosophy of history. From this philosophy is borrowed the term “dialectical,” which is applied to all his ideas. But this is not so important as it is to realize what Marxist materialism means.

Materialism has two different meanings. The first refers exclusively to ethical problems. A material man is interested only in material things––food, drink, shelter––not in art, culture, and so forth. In this sense, the majority of men are materialists. The second meaning of materialism refers to a special group of solutions proposed to a basic philosophical problem––the relation between the human mind or soul on the one side, and the human body and the physiological functions of the body on the other side. Various answers to this problem have been offered––among them religious answers. We know very well that there is a connection between body and mind; surgery has proved that certain damages to the brain bring about certain changes in the function of the human mind. However, materialists of this second variety explain all manifestations of the human mind as products of the body.

Among these philosophical materialists, there are two schools of thought:

A. One school considers man as a machine. This machine variety of materialists say these problems are very simple––the human “machine” works precisely as any other machine works. A Frenchman, Julien de La Mettrie [1709–1751], wrote a book containing this idea, Man, the Machine; and today many people still want to explain all operations of the human mind, directly or indirectly, as if they were mechanical operations. For instance, see the Encyclopedia of the Social Sciences. One of the contributors, a teacher at the New School for Social Research, says the newborn child is like a Ford car, ready to run. Perhaps! But a machine, a newborn Ford, does not run by itself. A machine doesn’t achieve anything, doesn’t do anything alone––it is always men or a number of men who achieve something by means of the machine. Someone must run the machine. If the operation of the man ceases, the operation of the machine ceases too. We must ask this professor of the New School for Social Research, “Who runs the machine?” The answer would destroy the materialist machine doctrine.

People also talk sometimes about “feeding” the machine, as if it were alive. But, of course, it isn’t alive. Then too people sometimes say the machine suffers a “nervous breakdown.” But how can an object without nerves suffer a nervous breakdown? This machine doctrine has been repeated again and again, but it is not very realistic. We don’t have to deal with it because no serious men really believe it.

B. The physiological doctrine put forth by the second class of materialists is more important. This doctrine was formulated in a primitive way by Ludwig Feuerbach [1804–1872] and Karl Vogt [1817–1895] in the early days of Karl Marx. This idea was that thoughts and ideas are “simply” secretions of the brain. (No materialist philosopher ever fails to use the world “simply.” That means, “I know, but I can’t explain it.”) Today scientists know that certain pathological conditions cause certain secretions, and that certain secretions cause certain activities in the brain. But these secretions are chemically the same for all people in the same situation and condition. However, ideas and thoughts are not the same for all people in the same situation and condition; they are different.

First, ideas and thoughts are not tangible. And second, the same external factors do not produce the same reaction with everybody. An apple once fell from a tree and hit a certain young man [Isaac Newton]. This may have happened to many other young men before, but this particular happening challenged this particular young man and he developed some ideas from it.

But people do not always have the same thoughts when they are presented with the same facts. For instance, in school some learn; some don’t. There are differences in men.

Bertrand Russell [1872–1970] asked, “What is the difference between men and stones?” He said there was no difference except that men react to more stimuli than do stones. But actually there is a difference. Stones react according to a definite pattern which we can know; we can anticipate what will happen to a stone if it is treated in a certain way. But men don’t all react the same way when treated a certain way; we cannot establish such categories of actions for men. Thus, even though many people think physiological materialism is a solution, it actually leads to a dead end. If it were really the solution to this problem, it would mean that in any event we could know the way everyone would react. We cannot even imagine what the consequences would be if everybody knew what everybody else was going to do.

Karl Marx was not a materialist in the first sense––the machine sense. But the physiological idea was very popular in his day. It is not easy to know exactly what influenced Marx because he had personal hatreds and envies. Karl Marx hated Vogt, the exponent of physiological materialism. As soon as materialists like Vogt began to talk politics, Karl Marx said they had bad ideas; that meant Marx didn’t like them.

Marx developed what he thought was a new system. According to his materialist interpretation of history, the “material productive forces” (this is an exact translation of the German) are the bases of everything. Each stage of the material productive forces corresponds to a definite stage of production relations. The material productive forces determine the production relations, that is, the type of ownership and property which exists in the world. And the production relations determine the superstructure. In the terminology of Marx, capitalism or feudalism are production relations. Each of these was necessarily produced by a particular stage of the material productive forces. In 1859, Karl Marx said a new stage of material productive forces would produce socialism.

But what are these material productive forces? Just as Marx never said what a “class” was, so he never said exactly what the “material productive forces” are. After looking through his writings we find that the material productive forces are the tools and machines. In one of his books [Misère de la philosophie—The Poverty of Philosophy], written in French in 1847, Marx said “the hand mill produces feudalism––the steam mill produces capitalism.”³ He didn’t say it in this book, but in other writings he wrote that other machines will come which will produce socialism.

Marx tried hard to avoid the geographical interpretation of progress, because that had already been discredited. What he said was that “tools” were the basis of progress. Marx and [Friedrich] Engels [1820–1895] believed that new machines would be developed which would lead to socialism. They rejoiced at every new machine, thinking that meant socialism was just around the corner. In the French book of 1847, he criticized those who attached importance to the division of labor; he said the important thing was the tools.

We must not forget that tools don’t fall from heaven. They are the products of ideas. To explain ideas, Marx said the tools, the machines––the material productive forces––reflect themselves in the brains of men and in this way ideas come. But the tools and machines are themselves the product of ideas. Also, before there can be machines, there must be division of labor. And before there can be division of labor, definite ideas must be developed. The origin of these ideas cannot be explained by something which is possible only in a society, which is itself the product of ideas.

The term “material” fascinated people. To explain changes in ideas, changes in thoughts, changes in all those things which are the products of ideas, Marx reduced them to changes in technological ideas. In this he was not original. For example, Hermann Ludwig Ferdinand von Helmholtz [1821–1894] and Leopold von Ranke [1795-1886] interpreted history as the history of technology.

It is the task of history to explain why definite inventions were not put into practice by people who had all the physical knowledge required for their construction. Why, for instance, did the ancient Greeks, who had the technical knowledge, not develop railroads?

As soon as a doctrine becomes popular, it is simplified in such a way as to be understood by the masses. Marx said everything depends on economic conditions. As he stated in his 1847 French book [The Poverty of Philosophy], he meant that the history of factories and tools developed independently. According to Marx, the whole movement of human history appears as a corollary to the development of the material productive forces, the tools. With this development of tools, the construction of society changes and as a consequence everything else changes too. By everything else, he meant the superstructure. Marxian authors, writing after Marx, explained everything in the superstructure as due to definite changes in the production relations. And they explained everything in the production relations as due to changes in the tools and machines. This was a vulgarization, a simplification, of the Marxian doctrine for which Marx and Engels were not completely responsible. They created a lot of nonsense, but they are not responsible for all the nonsense today.

What is the influence of this Marxian doctrine on ideas? The philosopher René Descartes [1596–1650], who lived in the early seventeenth century, believed that man had a mind and that man thinks, but that animals were merely machines. Marx said, of course, Descartes lived in an age in which the “Manufakturperioden,” the tools and machines, were such that he was forced to explain his theory by saying that animals were machines. Albrecht von Hailer [1708–1777],a Swiss, said the same thing in the eighteenth century (he didn’t like liberal government’s equality under law). Between these two men, lived de La Mettrie, who also explained man as a machine. Therefore, Marx’s concept that ideas were a product of the tools and machines of a particular era is easily disproved.

John Locke [1632–1704], the well-known philosopher of empiricism, declared that everything in men’s minds comes from sensual experience. Marx says John Locke was a spokesman for the class doctrine of the bourgeoisie. This leads to two different deductions from the writings of Karl Marx:(1) The interpretation he gave to Descartes is that he was living in an age when machines were introduced and, therefore, Descartes explained the animal as a machine; and (2) The interpretation he gave to John Locke’s inspiration––that it came from the fact that he was a representative of bourgeois class interests. Here are two incompatible explanations for the source of ideas. The first of these two explanations, to the effect that ideas are based on material productive forces, the tools and machines, is irreconcilable with the second, namely that class interests determine ideas.

According to Marx, everybody is forced––by the material productive forces––to think in such a way that the result shows his class interests. You think in the way in which your “interests” force you to think; you think according to your class “interests.” Your “interests” are something independent of your mind and your ideas. Your “interests” exist in the world apart from your ideas. Consequently, the production of your ideas is not truth. Before the appearance of Karl Marx, the notion of truth had no meaning for the whole historical period. What the thinking of the people produced in the past was always “ideology,” not truth.

“Les idéologues” in France were well advertised by Napoleon [1769–1821], who said everything would be all right in France but for these “idéologues.” In 1812, Napoleon was defeated. He left the army in Russia, returned alone, incognito, and appeared at the end of December 1812 in Paris. He blamed the evils that happened to his country on the bad “idéologues” which influenced the country.

Marx used ideology in a different sense. According to Marx, ideology was a doctrine thought out by members of a class. These doctrines were necessarily not truths, but merely the expressions of the interests of the class concerned. Of course, one day there will be a classless society. One class––the proletarian class––prepares the way for the classless society. The truth of today is the idea of the proletarians. The proletarians will abolish all classes and then will come the Golden Age, the classless society.

Marx called Joseph Dietzgen [1828–1888] a proletarian, but Marx would have called him a petty bourgeois if he had known more about him. Officially Marx approved all the ideas of Dietzgen, but in his private correspondence with Ferdinand Lassalle [1825–1864] he expressed some disagreement. There is no universal logic. Every class has its own logic. But, of course, the logic of the proletariat is already the true logic of the future. (These people were offended when the racists took over the same ideas, claiming that the various races have different logics but the logic of the Aryans is the true logic.)

Karl Mannheim’s [1893–1947] sociology of knowledge grew out of Hitler’s ideas. Everybody thinks in ideologies––i.e., false doctrines. But there is one class of men which enjoys a special privilege––Marx called them the “unattached intellectuals.” These “unattached intellectuals” have the privilege of discovering truths which are not ideology.

The influence of this idea of “interests” is enormous. First of all, remember that this doctrine doesn’t say men act and think according to what they consider to be their interests. Secondly, remember that they consider “interests” as independent of the thoughts and ideas of men. These independent interests force men to think and to act in a definite way. As an example of the influence this idea has on our thinking today, I might mention a U.S. Senator––not a Democrat––who said that people vote according to their “interests”; he didn’t say in accordance with what they think to be their interests. This is Marx’s idea––assuming that “interests” are something definite and apart from a person’s ideas. This idea of class doctrine was first developed by Karl Marx in the Communist Manifesto.

Neither Engels nor Marx was of the proletariat. Engels was very wealthy. He hunted for fox in a red coat––this was the pastime of the rich. He had a girlfriend he considered too far beneath him to think of marrying. She died, and her sister became her successor. He finally married the sister, but just as she was dying––only two days before her death.

Karl Marx never made much money himself. He received some money as a regular contributor to The New York Tribune. But he was almost completely supported by his friend Engels. Marx was not a proletarian; he was the son of a well-to-do lawyer. His wife, Mrs. Karl Marx [Jenny von Westphalen, 1814–1881], was the daughter of a high Prussian Junker. And Marx’s brother-in-law was the head of the Prussian police.

Thus, these two men, Marx and Engels, who claimed that the proletarian mind was different from the mind of the bourgeoisie, were in an awkward position. So they included a passage in the Communist Manifesto to explain: “When the time comes, some members of the bourgeoisie join the rising classes.” However, if it is possible for some men to free themselves from the law of class interests, then the law is no longer a general law.

Marx’s idea was that the material productive forces lead men from one stage to another, until they reach socialism, which is the end and the height of it all. Marx said socialism cannot be planned in advance; history will take care of it. In Marx’s view, those who say how socialism will work are just “utopians.”

Socialism was already defeated intellectually at the time Marx wrote. Marx answered his critics by saying that those who were in opposition were only “bourgeois.” He said there was no need to defeat his opponents’ arguments, but only to unmask their bourgeois background. And as their doctrine was only bourgeois ideology, it was not necessary to deal with it. This would mean that no bourgeois could write anything in favor of socialism. Thus, all such writers were anxious to prove they were proletarians. It might be appropriate to mention at this time also that the ancestor of French socialism, Saint-Simon,⁴ was a descendant of a famous family of dukes and counts.

It is simply not true that inventions develop because people search for practical purposes and not for truths.

When Marx published his writings, German thought was dominated by George Wilhelm Friedrich Hegel [1770–1831], professor at the University of Berlin. Hegel had developed the doctrine of the philosophical evolution of history. In some respect his ideas were different from, even the very opposite to, those of Marx. Hegel was the man who destroyed German thinking and German philosophy for more than a century, at least. He found a warning in Immanuel Kant [1724–1804] who said the philosophy of history can only be written by a man who has the courage to pretend that he sees the world with the eyes of God. Hegel believed he had the “eyes of God,” that he knew the end of history, that he knew the plans of God. He said Geist (mind) develops itself and manifests itself in the course of historical evolution. Therefore, the course of history is inevitably progress from less satisfactory to more satisfactory conditions.

In 1825, Hegel said that we have reached a wonderful state of affairs. He considered the Prussian kingdom of Friedrich Wilhelm III [1770–1840] and the Prussian Union Church as the perfection of secular and spiritual government. Marx said, as Hegel had, that there was history in the past, but there will be no history anymore when we have reached a state that is satisfactory. Thus, Marx adopted the Hegelian system, although he used material productive forces instead of Geist. Material productive forces go through various stages. The present stage is very bad, but there is one thing in its favor––it is the necessary preliminary stage for the appearance of the perfect state of socialism. And socialism is just around the corner.

Hegel was called the philosopher of Prussian absolutism. He died in 1831. His school thought in terms of left and right wings. (The left didn’t like the Prussian government and the Prussian Union Church.) This distinction between the left and the right has existed since then. In the French Parliament, those who didn’t like the king’s government were seated on the left side of the assembly hall. Today no one wants to sit on the right.

Originally, i.e., before Karl Marx, the term “right” meant the supporters of representative government and civil liberties, as opposed to the “left” who favored royal absolutism and the absence of civil rights. The appearance of socialist ideas changed the meaning of these terms. Some of the “left” have been outspoken in expressing their views. For instance, Plato [427–347 BC] was frank in stating that a philosopher shall rule. And Auguste Comte [1798–1857] said that freedom was necessary in the past because it made it possible for him to publish his books, but now that these books have been published there is no longer any need for freedom. And in the same way Etienne Cabet [1788–1856] spoke of three classes of books––the bad books, which should be burned; the intermediate books, which should be amended; and the remaining “good” books. Therefore, there was great confusion as to the civil liberties to be assigned to the citizens of the socialist state. This was because Marxian ideas did not develop in countries which had civil liberties, but in countries in which the people did not have civil liberties.

Nikolai Bukharin [1888–1938], a Communist author who lived in a Communist country, wrote a pamphlet in 1917⁵, in which he said, we asked for freedom of the press, thought, and civil liberties in the past because we were in the opposition and needed these liberties to conquer. Now that we have conquered, there is no longer any need for such civil liberties. [Bukharin was tried and condemned to death in the Moscow Purge Trial of March 1938.] If Mr. Bukharin had been an American Communist, he would probably still be alive and free to write more pamphlets about why freedom is not necessary.

These peculiarities of Marxian philosophy can only be explained by the fact that Marx, although living in Great Britain, was not dealing with conditions in Great Britain, where he felt civil liberties were no longer needed, but with the conditions in Germany, France, Italy, and so on, where civil liberties were still needed. Thus we see that the distinction between right and left, which had meaning in the days of the French Revolution, no longer has any meaning.

1 [A Contribution to the Critique of Political Economy (Moscow: Progress Publishers, 1859).]

2 [“The Unresolved Contradiction in the Economic Marxian System” in Shorter Classics of Eugen von Böhm-Bawerk (South Holland, Ill.: Libertarian Press, 1962 [1896; Eng.Trans. 1898]), pp. 201–302.]

3 [“Le moulin à bras vous donnera la société avec le souzerain; le moulin à vapeur, la société avec le capitaliste industriel.” Karl Marx, Misère de la philosophie (Paris and Brussels, 1847), p. 100.—Ed.]

4 [Claude Henri de Rouvroy, Comte de Saint-Simon [1760–1825]—Ed.]

5 [“The Russian Revolution and Its Significance,” The Class Struggle, Vol. I, No. 1, May–June,1917.—Ed.]

2ND LECTURE

Class Conflict and
Revolutionary Socialism

MARX ASSUMED that “interests” were independent of human ideas and thoughts. He said that socialism was the ideal system for the proletariat. He said class interests determine the thinking of individuals and that this situation causes irreconcilable conflicts between the various classes. Marx then returned to the point at which he had started—namely, that socialism is the ideal state.

The fundamental concept of the Communist Manifesto (1848) was that of “class” and “class conflict.” But Marx didn’t say what a “class” was. Marx died in 1883, 35 years after the publication of the Communist Manifesto. In those 35 years he published many volumes, but in not one of them did he say what he meant by the term “class.” After Marx’s death, Friedrich Engels published the unfinished manuscript of the third volume of Marx’s Das Kapital. Engels said this manuscript, on which Marx had stopped work, many years before he died, had been found in Marx’s desk after his death. In one three-page chapter in that volume, Marx tells us what a “class” was not. But you may search through all his writings to learn what a “class” was without ever finding out. In fact, “classes” don’t exist in nature. It is our thinking—our arranging in categories—that constructs classes in our minds. The question is not whether social classes exist in the sense of Karl Marx; the question is whether we can use the concept of social classes in the way in which Karl Marx meant it. We can’t.

Marx did not see that the problem of the “interest” of an individual, or of a class, cannot be solved simply by referring to the fact that there is such an interest and that men must act according to their interests. Two questions must be asked: (1) Toward what ultimate ends do these “interests” lead people? (2) What methods do they want to apply in order to reach these ends?

The First International was a small group of people, a committee of a few men in London, friends and enemies of Karl Marx. Someone suggested that they cooperate with the British labor-union movement. In 1865, Karl Marx read at the meeting of the International Committee, a paper, Value, Price, and Profit, one of his few writings originally written in English. In this paper, he pointed out that the methods of the union movement were very bad and must be changed. Paraphrasing: “The unions want to improve the fate of the workers within the framework of the capitalist system—this is hopeless and useless. Within the framework of the capitalist system there is no possibility of improving the state of the workers. The best the union could achieve in this way would be some short-term success. The unions must abandon this ‘conservative’ policy; they must adopt the revolutionary policy. They must fight for the abolition of the wage society as such and work for the coming of socialism.” Marx didn’t have the courage to publish this paper during his lifetime; it was published only after his death by one of his daughters. He didn’t want to antagonize the labor unions; he still had hopes they would abandon their theory.

Here is an obvious conflict of opinions among the proletarians themselves concerning the right means to use. The proletarian unions and Marx disagreed as to what was in the “interest” of the proletarians. Marx said that the “interest” of a class was obvious—there could be no doubt about it—everyone would know it. Then here comes a man who doesn’t belong to this proletarian class at all, a writer and a lawyer who tells the unions they were wrong. “This is bad policy,” he said. “You must radically change your policy.” Here the whole idea of the class breaks down, the idea that an individual may sometimes err but that a class as a whole can never err.

Criticisms of Marxian doctrines have always been superficial. They haven’t pointed out how Marx contradicted himself and how he failed to explain his ideas. Böhm-Bawerk’s critique¹ was good but he didn’t cover the entire system. Critics of Marx didn’t even discover Karl Marx’s most manifest contradictions.

Marx believed in the “iron law of wages.” He accepted that as the fundamental basis of his economic doctrine. He didn’t like the German term for this law, the “brazen” law of wages, about which Ferdinand Lassalle [1825–1864] had published a pamphlet. Karl Marx and Ferdinand Lassalle were not friends; they were competitors, very serious competitors. Marx said Lassalle’s only contribution was the term itself, the “brazen” law of wages. And what was more, the term was borrowed, borrowed from the dictionary and from Goethe.²

The “iron law of wages” still survives in many textbooks, in the minds of politicians, and consequently in many of our laws. According to the “iron law of wages,” the wage rate is determined by the amount of food and other necessities required for the preservation and reproduction of life, to support the workers’ children until they can themselves work in the factories. If wage rates rise above this, the number of workers would increase and the increased number of workers would bring wage rates down again. Wages cannot drop below this point because there would then develop a shortage of labor. This law considers the worker to be some kind of microbe or rodent without free choice or free will.

If you think it is absolutely impossible under the capitalist system for wages to deviate from this rate, how then can you still talk, as Marx did, about the progressive impoverishment of the workers as being inevitable? There is an insoluble contradiction between the Marxian idea of the iron law of wage rates, according to which wages will remain at a point at which they are sufficient to support the progeny of workers until they can themselves become workers, and his philosophy of history, which maintains that the workers will be more and more impoverished until they are driven to open rebellion, thus bringing about socialism. Of course, both doctrines are untenable. Even 50 years ago the leading socialist writers were forced to resort to other elaborate schemes in the attempt to support their theories. What is amazing is that, during the century since Marx’s writings, no one has pointed out this contradiction. And this contradiction is not the only contradiction in Marx.

What really destroyed Marx was his idea of the progressive impoverishment of the workers. Marx didn’t see that the most important characteristic of capitalism was large-scale production for the needs of the masses; the main objective of capitalists is to produce for the broad masses. Nor did Marx see that under capitalism the customer is always right. In his capacity as a wage earner, the worker cannot determine what is to be made. But in his capacity as a customer, he is really the boss and tells his boss, the entrepreneur, what to do. His boss must obey the orders of the workers as they are members of the buying public. Mrs. Webb³, like other socialists, was the daughter of a well-to-do businessman. Like other socialists, she thought her father was an autocrat who gave orders to everybody. She didn’t see that he was subject to the sovereignty of the orders of the customers on the market. The “great” Mrs. Webb was no smarter than the dumbest messenger boy who sees only that his boss gives orders.

Marx had no doubt as to what the ends were toward which men aim. Nor did he have any doubts as to the best way to attain these ends. How is it that a man who read so much and interrupted his reading only to write, didn’t realize the discrepancy in his ideas?

To answer that question, we must go back to the thinking of his time. That was the time of Charles Darwin’s Origin of the Species [1859]. It was the intellectual fashion of that day to look upon men merely from the point of view of their membership in the zoological class of mammals, which acted on the basis of instincts. Marx didn’t take into account the evolution of mankind above the level of very primitive men. He considered unskilled labor to be the normal type of labor and skilled labor as the exception. He wrote in one of his books that progress in the technological improvement of machines causes the disappearance of specialists because the machine can be operated by anyone; it takes no special skill to operate a machine. Therefore, the normal type of man in the future will be the non-specialist.

With regard to many of his ideas, Marx belonged to much earlier ages, especially in constructing his philosophy of history. Marx substituted for Hegel’s evolution of Geist the evolution of the material factors of production. He didn’t realize that the material factors of production, i.e., the tools and machines, are actually products of the human mind. He said these tools and machines, the material productive forces, inevitably bring about the coming of socialism. His theory has been called “dialectical materialism,” abbreviated by the socialists to “diamet.”

[In an aside, Dr. Mises told of visiting a school in Mexico, an “escuela socialista,” a “socialist school.” Mises asked the school’s Mexican dean what “socialist school” meant. The dean explained that Mexican law required schools to teach the Darwinian doctrine of evolution and dialectical materialism. Then he commented on the provision in the law making this requirement and on the school system itself: “There is a great difference between the letter of the law and the practice. Ninety percent of the teachers in our schools are female and most of them are practicing Catholics.”]

Marx reasoned from the thesis to the negation of the thesis to the negation of the negation. Private ownership of the means of production by every individual worker was the beginning, the thesis. This was the state of affairs in a society in which every worker was either an independent farmer or an artisan who owned the tools with which he was working. Negation of the thesis—ownership under capitalism—when the tools were no longer owned by the workers, but by the capitalists. Negation of the negation was ownership of the means of production by the whole society. Reasoning in this way, Marx said he had discovered the law of historical evolution. And that is why he called it “scientific socialism.”

Marx branded all previous socialists “utopian socialists” because they tried to point out why socialism was better. They wanted to convince their fellow citizens to their view because they expected people would adopt the socialist social system if they were convinced it was better. They were “utopians,” Marx said, because they tried to describe the future earthly paradise. Among the forerunners of Marx whom he considered “utopians” were Saint-Simon, a French aristocrat; Robert Owen [1757–1858], a British manufacturer; and Charles Fourier [1772–1837], a Frenchman who was without doubt a lunatic. (Fourier was called the “fou [fool] du Palais-Royal.” He used to make such statements as “In the age of socialism, the ocean will no longer be salt but lemonade.”) Marx considered these three as great forerunners. But, he said, they didn’t realize that what they were saying was just “utopian.” They expected the coming of socialism because of a change in the opinions of the people. But for Marx, the coming of socialism was inevitable; it would come with the inevitability of nature.

On the one hand, Karl Marx wrote of the inevitability of socialism. But on the other hand, he organized a socialist movement, a socialist party, declared again and again that his socialism was revolutionary, and that the violent overthrow of the government was necessary to bring about socialism.

Marx borrowed his metaphors from the field of gynecology. The socialist party is like obstetrics, Marx said; it makes the coming of socialism possible. When asked if you consider the whole process inevitable, why do you not favor evolution instead of revolution, the Marxists reply, “There are no evolutions in life. Is not birth itself a revolution?”

According to Marx, the goal of the socialist party was not to influence, but only to help the inevitable. But obstetrics itself influences and changes conditions. Obstetrics has actually brought about progress in this branch of medicine, and even saved lives. And by saving lives it could be said obstetrics has actually changed the course of history.

The term “scientific” acquired prestige during the course of the nineteenth century. Engels’ Anti-Dühring (1878) became one of the most successful books among the writings of philosophical Marxists. One chapter in this book was reprinted as a pamphlet under the title “The Development of Socialism from Utopia to Science,” and it had enormous success. Karl Radek [1885–1939], a Soviet Communist, later wrote a pamphlet called “The Development of Socialism, from Science to Action.”

Marx’s doctrine of ideology was concocted to discredit the writings of the bourgeoisie. [Tomás] Masaryk [1850–1937] of Czechoslovakia was born of poor people, farmers and workers, and he wrote about Marxism. Yet the Marxians called him a bourgeois. How could he be considered “bourgeois” if Marx and Engels called themselves “proletarian”?

If the proletarians must think according to the “interests” of their class, what does it mean if there are disagreements and dissent among them? The confusion makes the situation very difficult to explain. When there is dissent among proletarians, they call a dissenter a “social traitor.” After Marx and Engels, the great man of the Communists was a German, Karl Kautsky [1854-1938]. In 1917, when Lenin tried to revolutionize the whole world, Karl Kautsky was opposed to the idea. And because of this disagreement, the former great man of the party became overnight a “social traitor,” and he was called that as well as many other names.

This idea is like that of the racists. The German racists declared that a definite set of political ideas were German and every real German must necessarily think according to this particular set of ideas. This was the Nazi idea. According to the Nazis, the best situation was to be in a state of war. But some Germans—Kant, Goethe, and Beethoven, for instance—had different “un-German” ideas. If not every German must think in a certain way, who is to decide which ideas are German and which are un-German? The answer can only be that an “inner voice” is the ultimate standard, the ultimate yardstick. This position necessarily leads to conflicts that must result in civil, or even international, war.

There were two groups of Russians, both of whom considered them-selves proletarians—the Bolsheviks and the Mensheviks. The only method to “settle” disagreements between them was to use force and liquidation. The Bolsheviks won. Then within the ranks of the Communist Bolsheviks there arose other differences of opinion—between Trotsky⁴ and Stalin— and the only way to resolve their conflicts was a purge. Trotsky was forced into exile, trailed to Mexico, and there in 1940 he was hacked to death. Stalin originated nothing; he went back to the revolutionary Marx of 1859—not to the interventionist Marx of 1848.

Unfortunately, purges are not something which happen just because men are imperfect. Purges are the necessary consequences of the philosophical foundation of Marxian socialism. If you cannot discuss philosophical differences of opinion in the same way you discuss other problems, you must find another solution—through violence and power. This refers not only to dissent concerning policies, economic problems, sociology, law, and so on. It refers also to problems of the natural sciences. The Webbs, Lord and Lady Passfield, were shocked to learn that Russian magazines and papers dealt even with problems of the natural sciences from the point of view of the philosophy of Marxism-Leninism-Stalinism. For instance, if there is a difference of opinion with regard to science or genetics, it must be decided by the “leader.” This is the necessary unavoidable consequence of the fact that, according to Marxist doctrine, you do not consider the possibility of dissent among honest people; either you think as I do, or you are a traitor and must be liquidated.

The Communist Manifesto appeared in 1848. In that document, Marx preached revolution; he believed the revolution was just around the corner.

He believed then that socialism was to be brought about by a series of interventionist measures. He listed ten interventionist measures—among them the progressive income tax, the abolition of the rights of inheritance, agricultural reform, and so on. These measures were untenable, he said, but necessary for socialism to come.

Thus, Karl Marx and Engels believed in 1848, that socialism could be attained by interventionism. By 1859, eleven years after the Communist Manifesto, Marx and Engels had abandoned the advocacy of interventions; they no longer expected socialism to come from legislative changes. They wanted to bring about socialism by a radical change overnight. From this point of view, followers of Marx and Engels considered later measures— the New Deal, the Fair Deal, and so forth—to be “petty bourgeois” policies. In the 1840s Engels had said British labor laws were a sign of progress and a sign of the breakdown of capitalism. Later they called such interventionist measures or interventionist policy (Sozialpolitik) very bad.

In 1888—40 years after the publication of the Communist Manifesto— a translation was made by an English writer. Engels added some comments to this translation. Referring to the ten interventionist measures advocated in the Manifesto, he said these measures were not only untenable, as the Manifesto claimed, but precisely because they were untenable, they would necessarily push further and further toward still more measures of this kind, until eventually these more advanced measures would lead to socialism.

1 [“The Unresolved Contradiction in the Economic Marxian System” in Shorter Classics of Eugen von Böhm-Bawerk, (South Holland, Ill.: Libertarian Press, 1962 [1896; Eng.Trans. 1898]), pp. 201–302.—Ed.]

2 [Marx also criticized Lassalle for using the term “Arbeiterstand” (state of work); Marx said Lassalle was confused, but Marx never explained how Lassalle was confused.—Ed.]

3 [Beatrice Webb (1858–1943), wife of Sidney Webb (1859–1947), later Lady and Lord Passfield, British Fabians.—Ed.]

4 [Leon Trotsky (1879–1940)]

3RD LECTURE

Individualism and the Industrial Revolution

LIBERALS STRESSED THE IMPORTANCE OF THE INDIVIDUAL. The nineteenth-century liberals already considered the development of the individual the most important thing. “Individual and individualism” was the progressive and liberal slogan. Reactionaries had already attacked this position at the beginning of the nineteenth century.

The rationalists and liberals of the eighteenth century pointed out that what was needed was good laws. Ancient customs that could not be justified by rationality should be abandoned. The only justification for a law was whether or not it was liable to promote the public social welfare. In many countries the liberals and rationalists asked for written constitutions, the codification of laws, and for new laws which would permit the development of the faculties of every individual.

A reaction to this idea developed, especially in Germany where the jurist and legal historian Friedrich Karl von Savigny [1779–1861] was active. Savigny declared that laws cannot be written by men; laws are developed in some mystical way by the soul of the whole unit. It isn’t the individual that thinks—it is the nation or a social entity which uses the individual only for the expression of its own thoughts. This idea was very much emphasized by Marx and the Marxists. In this regard the Marxists were not followers of Hegel, whose main idea of historical evolution was an evolution toward freedom of the individual.

From the viewpoint of Marx and Engels, the individual was a negligible thing in the eyes of the nation. Marx and Engels denied that the individual played a role in historical evolution. According to them, history goes its own way. The material productive forces go their own way, developing independently of the wills of individuals. And historical events come with the inevitability of a law of nature. The material productive forces work like a director in an opera; they must have a substitute available in case of a problem, as the opera director must have a substitute if the singer gets sick. According to this idea, Napoleon and Dante, for instance, were unimportant—if they had not appeared to take their own special place in history, someone else would have appeared on stage to fill their shoes.

To understand certain words, you must understand the German language. From the seventeenth century on, considerable effort was spent in fighting the use of Latin words and in eliminating them from the German language. In many cases a foreign word remained although there was also a German expression with the same meaning. The two words began as synonyms, but in the course of history, they acquired different meanings. For instance, take the word Umwälzung, the literal German translation of the Latin word revolution. In the Latin word there was no sense of fighting. Thus, there evolved two meanings for the word “revolution”—one by violence, and the other meaning a gradual revolution like the “Industrial Revolution.” However, Marx uses the German word Revolution not only for violent revolutions such as the French or Russian revolutions, but also for the gradual Industrial Revolution.

Incidentally, the term Industrial Revolution was introduced by Arnold Toynbee [1852–1883]. Marxists say that “What furthers the overthrow of capitalism is not revolution—look at the Industrial Revolution.”

Marx assigned a special meaning to slavery, serfdom, and other systems of bondage. It was necessary, he said, for the workers to be free in order for the exploiter to exploit them. This idea came from the interpretation he gave to the situation of the feudal lord who had to care for his workers even when they weren’t working. Marx interpreted the liberal changes that developed as freeing the exploiter of the responsibility for the lives of the workers. Marx didn’t see that the liberal movement was directed at the abolition of inequality under law, as between serf and lord.

Karl Marx believed that capital accumulation was an obstacle. In his eyes, the only explanation for wealth accumulation was that somebody had robbed somebody else. For Karl Marx the whole Industrial Revolution simply consisted of the exploitation of the workers by the capitalists. According to him, the situation of the workers became worse with the coming of capitalism. The difference between their situation and that of slaves and serfs was only that the capitalist had no obligation to care for workers who were no longer exploitable, while the lord was bound to care for slaves and serfs. This is another of the insoluble contradictions in the Marxian system. Yet it is accepted by many economists today without realizing of what this contradiction consists.

According to Marx, capitalism is a necessary and inevitable stage in the history of mankind leading men from primitive conditions to the millennium of socialism. If capitalism is a necessary and inevitable step on the road to socialism, then one cannot consistently claim, from the point of view of Marx, that what the capitalist does is ethically and morally bad. Therefore, why does Marx attack the capitalists?

Marx says part of production is appropriated by the capitalists and withheld from the workers. According to Marx, this is very bad. The consequence is that the workers are no longer in a position to consume the whole production produced. A part of what they have produced, therefore, remains unconsumed; there is “underconsumption.” For this reason, because there is underconsumption, economic depressions occur regularly. This is the Marxian underconsumption theory of depressions. Yet Marx contradicts this theory elsewhere.

Marxian writers do not explain why production proceeds from simpler to more and more complicated methods.

Nor did Marx mention the following fact: About 1700, the population of Great Britain was about five and a half million; by the middle of 1700, the population was six and a half million, about 500,000 of whom were simply destitute. The whole economic system had produced a “surplus” population. The surplus population problem appeared earlier in Great Britain than on continental Europe. This happened, first of all, because Great Britain was an island and so was not subject to invasion by foreign armies, which helped to reduce the populations in Europe. The wars in Great Britain were civil wars, which were bad, but they stopped. And then this outlet for the surplus population disappeared, so the numbers of surplus people grew. In Europe the situation was different; for one thing, the opportunity to work in agriculture was more favorable than in England.

The old economic system in England couldn’t cope with the surplus population. The surplus people were mostly very bad people—beggars and robbers and thieves and prostitutes. They were supported by various institutions, the poor laws,¹ and the charity of the communities. Some were impressed into the army and navy for service abroad. There were also superfluous people in agriculture. The existing system of guilds and other monopolies in the processing industries made the expansion of industry impossible. In those pre-capitalist ages, there was a sharp division between the classes of society who could afford new shoes and new clothes, and those who could not. The processing industries produced by and large for the upper classes. Those who could not afford new clothes wore hand-me-downs. There was then a very considerable trade in secondhand clothes—a trade which disappeared almost completely when modern industry began to produce also for the lower classes. If capitalism had not provided the means of sustenance for these “surplus” people, they would have died from starvation. Smallpox accounted for many deaths in pre-capitalist times; it has now been practically wiped out. Improvements in medicine are also a product of capitalism.

What Marx called the great catastrophe of the Industrial Revolution was not a catastrophe at all; it brought about a tremendous improvement in the conditions of the people. Many survived who wouldn’t have survived otherwise. It is not true, as Marx said, that the improvements in technology are available only to the exploiters and that the masses are living in a state much worse than on the eve of the Industrial Revolution. Everything the Marxists say about exploitation is absolutely wrong! Lies! In fact, capitalism made it possible for many persons to survive who wouldn’t have otherwise. And today many people, or most people, live at a much higher standard of living than that at which their ancestors lived 100 or 200 years ago.

During the eighteenth century, there appeared a number of eminent authors—the best known was Adam Smith [1723–1790]—who pleaded for freedom of trade. And they argued against monopoly, against the guilds, and against privileges given by the king and Parliament. Secondly, some ingenious individuals, almost without any savings and capital, began to organize starving paupers for production, not in factories but outside the factories, and not for the upper classes only. These newly organized producers began to make simple goods