THE
characteristic mark of this age of dictators, wars and revolutions
is its anticapitalistic bias. Most governments and political parties
are eager to restrict the sphere of private initiative and free
enterprise. It is an almost unchallenged dogma that capitalism is
done for and that the coming of all-round regimentation of economic
activities is both inescapable and highly desirable.
Nonetheless capitalism is still very vigorous in the
Western Hemisphere
. Capitalist production
has made very remarkable progress even in these last years. Methods
of
production were greatly improved.
Consumers have been supplied with better and cheaper goods and with
many new articles unheard of a short time ago. Many countries have
expanded the size and improved the quality of their manufacturing.
In spite of the anticapitalistic policies of all governments and of
almost all political parties, the capitalist mode of production is
still fulfilling its social function in supplying the consumers with
more, better and cheaper goods.
It
is
certainly not a merit of
governments, politicians and labor union officers that the standard
of living is improving in the countries committed
to
the principle of private
ownership of the means of production. Not offices and bureaucrats,
hut big business deserves credit for the fact that most of the
families in the
United States
own a
motorcar and a radio set. The increase in per capita consumption in
America
as
compared with conditions a quarter of a century ago is not an
achievement of laws and executive orders. It is an accomplishment of
businessmen who enlarged the size of their factories or built new
ones.
One must stress this
point because our contemporaries are inclined to ignore it.
Entangled in the superstitions of stateism and government
omnipotence, they are exclusively preoccupied with governmental
measures. They expect everything from authoritarian action and very
little from the initiative of enterprising citizens. Yet, the only
means to increase well-being is to increase the quantity of
products. This is what business aims at.
It is grotesque that
there is much more talk about the achievements of the Tennessee
Valley Authority than about all the unprecedented and unparalleled
achievements of American privately operated processing industries.
However, it was only the latter which enabled the United Nations to
win the war.
The dogma that the State or the Government
is
the embodiment of all that is
good and beneficial and that the individuals are wretched
underlings, exclusively intent upon inflicting harm upon one another
and badly in need of a guardian, is almost unchallenged. It is taboo
to question it in the slightest way. He who proclaims the godliness
of the State and the infallibility of its priests, the bureaucrats,
is considered as an impartial student of the social sciences. All
those raising objections are branded as biased and narrow-minded.
The supporters of the new religion of statolatry are even more
fanatical and intolerant than were the Mohammedan conquerors of
Africa
and
Spain
.
History will call our
age the age of the dictators and tyrants. We have witnessed in the
last years the fall of two of these inflated supermen. But the
spirit which raised these knaves to autocratic power survives. It
permeates textbooks and periodicals, it speaks through the mouths of
teachers and politicians, it manifests itself in party programs and
in plays and novels. As long as this spirit prevails there cannot be
any hope of durable peace, of democracy,
the preservation of freedom or of a steady improvement in the
nations’
economic well-being.
1
The Failure of
Interventionism
NOTHING
is more unpopular today than the free market economy, i.e.,
capitalism. Everything that is considered unsatisfactory in
present-day conditions is charged to capitalism. The atheists make
capitalism responsible for the survival of Christianity. But the
papal encyclicals blame capitalism for the spread of irreligion and
the sins of our contemporaries, and the Protestant churches and
sects are no less vigorous in their indictment of capitalist greed.
Friends of peace consider our wars as an offshoot of capitalist
imperialism. But the adamant nationalist warmongers of
Germany
and
Italy
indicted capitalism for its “bourgeois” pacifism, contrary to human
nature and to the inescapable laws of history. Sermonizers accuse
capitalism of disrupting the family and fostering licentiousness.
But the “progressives” blame capitalism for the preservation of
allegedly outdated rules of sexual restraint. Almost all men agree
that poverty is an outcome of capitalism. On the other hand many
deplore the fact that capitalism, in catering lavishly to the wishes
of people intent upon getting more amenities and a better living,
promotes a crass materialism. These contradictory accusations of
capitalism cancel one another. But the fact remains that there are
few people left who would not condemn capitalism altogether.
Although capitalism is
the economic system of modern Western civilization, the policies of
all Western nations are guided by utterly anticapitalistic ideas.
The aim of these interventionist policies is not to preserve
capitalism, but to substitute a mixed economy for it. It is assumed
that this mixed economy is neither capitalism nor socialism. It is
described as a third system, as far from capitalism as it is from
socialism. It is alleged that it stands midway between socialism and
capitalism, retaining the advantages of both and avoiding the
disadvantages inherent in each.
More than half a century ago the outstanding man in
the British socialist movement, Sidney Webb, declared that the
socialist philosophy is “but the conscious and explicit assertion of
principles of social organization which have been already in great
part unconsciously adopted.” And he added that the economic history
of the nineteenth century
was
“an almost continuous record of the
progress of socialism.”
A
few years later an eminent
British statesman, Sir William Harcourt, stated: “We are all
socialists now.”
When in 1913 an American, Elmer Roberts, published a book on the
economic policies of the Imperial Government of Germany as conducted
since the end of the seventies, be called them “monarchical
socialism.”
However, it
was
not correct simply to identify
interventionism and socialism. There are many supporters of
interventionism who consider it as the most appropriate method to
realize step by step full socialism. But there are also many
interventionists who are not outright socialists: they aim at the
establishment of the mixed economy as a permanent system of economic
management. They endeavor to restrain, to regulate and to “improve”
capitalism by government interference with business and by labor
unionism.
In order to comprehend
the working of interventionism and of the mixed economy it is
necessary to clarify two points:
First: If within a
society based on private ownership of the means of production some
of these means are owned and operated by the government or by
municipalities, this still does not make for a mixed system which
would combine socialism and private ownership. As long as only
certain individual enterprises are publicly controlled, the
characteristics of the market economy determining economic activity
remain essentially unimpaired. The publicly owned enterprises, too,
as buyers of raw materials, semi-finished goods, and labor and as
sellers of goods and services, must fit into the mechanism of the
market economy. They are subject to the law of the market; they have
to strive after profits or, at least, to avoid losses. When it is
attempted to mitigate or to eliminate this dependence by covering
the losses of such enterprises with subsidies out of public funds,
the only result is a shifting of this dependence somewhere else.
This is because the means for the subsidies have to be raised
somewhere. They may be raised by collecting taxes. But the burden of
such taxes has its effects on the public, not on the government
collecting the tax. It is the market, and not the revenue
department, which decides upon whom the burden of the tax falls and
how it affects production and consumption. The market and its
inescapable law are supreme.
Second: There are two different patterns for the
realization of socialism. The one pattern we may call it the Marxian
or Russian pattern is purely bureaucratic.
All
economic enterprises are
departments of the government just as the administration of the army
and the navy or the postal system. Every single plant, shop, or
farm, stands in
the same relation to the superior central organization as does a
post office to the office of the Postmaster General. The whole
nation forms one single labor army with compulsory service: the
commander of this army is the chief of state.
The second pattern -we
may call it the German or Zwangswirtschaft system
differs from the first one in that it, seemingly and nominally,
maintains private ownership of the ‘means of production,
entrepreneurship. and market exchange. So-called entrepreneurs do
the buying and selling, pay the workers, contract debts and pay
interest and amortization. But they are no longer entrepreneurs. In
Nazi Germany they were called shop managers or
Betriebsfuhrer.
The government tells
these seeming entrepreneurs what and how to produce, at what prices
and from whom to
buy, at what prices and to
whom to sell. The government decrees at what wages laborers should
work and to whom and under what terms the capitalists should entrust
their funds. Market exchange is but a sham. As all prices, wages,
and interest rates are fixed by the authority, they are prices,
wages, and interest rates in appearance only; in fact they are
merely quantitative terms in the authoritarian orders determining
each citizen’s income, consumption, and standard of living. The
authority, not the consumers, directs production. The central hoard
of production management is supreme; all citizens are nothing else
but civil servants. This is socialism, with the outward appearance
of capitalism. Some labels of the capitalistic market economy are
retained, hut they signify here something entirely different from
what they mean in the market economy.
It is necessary to
point out this fact to prevent a confusion of socialism and
interventionism. The system of the hampered market economy, or
interventionism, differs from socialism by the very fact that it is
still market economy. The authority seeks to influence the market by
the intervention of its coercive power, but it does not want to
eliminate the market altogether. It desires that production and
consumption should develop along lines different from those
prescribed by the unhindered market, and it wants to achieve its aim
by injecting into the working of the market orders, commands, and
prohibitions for whose enforcement the police power and its
apparatus of coercion and compulsion stand ready. But these are
isolated interventions: their authors assert that they do not plan
to combine these measures into a completely integrated system which
regulates all prices, wages, and interest rates, and which thus
places full control of production and consumption in the hands of
the authorities.
However, all the methods of interventionism are
doomed to failure. This means: the interventionist measures must
needs result in conditions which
from
the point of view of their own
advocates are more
unsatisfactory than the previous state of affairs they were designed
to alter. These policies are therefore contrary to purpose.
Minimum wage rates, whether enforced by government
decree or by labor union pressure and compulsion, are useless if
they
fix
wage rates at the market level. But if
they try to raise wage rates above the level which the unhampered
labor market would have determined, they result in permanent
unemployment of a great part of the potential labor force.
Government spending
cannot create additional jobs. If the government provides the funds
required by taxing the citizens or by borrowing from the public, it
abolishes on the one hand as many jobs as it creates on the other.
If government spending is financed by borrowing from the commercial
banks, it means credit expansion and inflation, If in the course of
such an inflation the rise in commodity prices exceeds the rise in
nominal wage rates, unemployment will drop. But what makes
unemployment shrink, is precisely the fact that real wage rates are
falling.
The inherent tendency of capitalist evolution is to
raise real wage rates steadily. This is the effect of the
progressive accumulation of capital by means of which technological
methods of production are improved. There is no means by which the
height of wage rates can be raised for all those eager to earn wages
other than through the increase of the per capita quota of capital
invested. Whenever the accumulation of additional capital stops, the
tendency toward a further increase in real wage rates comes to a
standstill. If capital consumption is substituted for an increase in
capital available, real wage rates must drop temporarily until the
checks on a further increase in capital are removed. Government
measures which retard capital accumulation
or
lead to capital consumption -such
as confiscatory taxation are therefore detrimental to the vital
interests of
the
workers.
Top of Page
Credit expansion can bring about a temporary boom.
But such a fictitious prosperity must end in
a
general depression of trade, a slump.
It can hardly be
asserted that the economic history of the last decades has run
counter to the pessimistic predictions of the economists. Our age
has to face great economic troubles. But this is not a crisis of
capitalism. It is the crisis of interventionism, of policies
designed to improve capitalism and to substitute a better system for
it.
No economist ever
dared to assert that interventionism could result in anything else
than in disaster and chaos. The advocates of interventionism
foremost among them the Prussian Historical School and the American
Institutionalists were not economists. On the contrary. In order to
promote their plans they flatly denied that there is any such thing
as economic law. In their opinion governments are free to achieve
all they aim at without being restrained by an inexorable regularity
in the sequence of economic phenomena. Like the German socialist
Ferdinand Lassalle, they maintain that the State is God.
The interventionists do not approach the study of
economic matters with scientific disinterestedness. Most of them are
driven by an envious resentment against those whose incomes are
larger than their own. This bias makes it impossible for them to see
things as they really are. For the main thing is not to improve the
conditions of the masses, but to harm the entrepreneurs and
capitalists even if this policy victimizes the immense majority of
the people. In the eyes of the interventionists the mere existence
of profits is objectionable. They speak of profit without dealing
with its corollary, loss. They do not comprehend that profit and
loss
are the instruments by
means of the consumers keep a tight rein on all entrepreneurial
activities. It is profit and loss that make the consumers supreme in
the direction of business. It is absurd to contrast production for
profit and production for use.
On
the unhampered market a man can
earn profits only by supplying the consumers in the best and
cheapest way with the goods they want to use. Profit and loss
withdraw the material factors of production from the hands of the
inefficient and place them in the hands of the more efficient. It
is
their social function to make a man
the more influential in the conduct of business the better he
succeeds in producing commodities for which people scramble. The
consumers suffer, when the laws of the country prevent the most
efficient entrepreneurs from expanding the sphere of their
activities. ‘What made some enterprises develop into “big business”
was precisely their success in filling best the demand of the
masses.
Anticapitalistic policies sabotage the operation of
the capitalist system of the market economy. The failure of
interventionism does not demonstrate the necessity of adopting
socialism. It merely exposes the futility of interventionism. All
those evils which the self-styled “progressives” interpret as
evidence of the failure of capitalism are the outcome of their
allegedly beneficial interference with the market. Only the
ignorant, wrongly identifying interventionism and capitalism,
believe that the remedy for these evils is socialism.
2
The Dictatorial,
Anti-democratic and Socialist Character of Interventionism
MANY
advocates of
interventionism are bewildered when one tells them that in
recommending interventionism they themselves are fostering
antidemocratic and dictatorial tendencies and the establishment of
totalitarian socialism. They protest that they are sincere believers
in democracy and opposed to tyranny and socialism. What they aim at
is only the improvement of the conditions of the poor. They say that
they are driven b y considerations of social justice arid favor a
fairer distribution of income precisely because they are intent upon
preserving capitalism and its political corollary or superstructure,
viz., democratic government.
What these people fail to realize is that the various
measures they suggest are not capable of bringing about the
beneficial results aimed at. On the contrary they produce a state of
affairs which from the point of view of their advocates is worse
than the previous state which they were designed to alter.
If
the government, faced with this
failure of its first intervention, is not prepared to undo its
interference with the market and to return to a free economy, it
must add to its first measure more and more regulations and
restrictions. Proceeding step by step on this way it finally reaches
a point in which all economic freedom of individuals has
disappeared. Then socialism of the German pattern, the
Zwangswirtschaft
of the Nazis,
emerges.
We have already mentioned the case of minimum wage
rates. Let
us
illustrate the matter further by an
analysis of a typical case of price control.
If the government wants to make it possible for poor
parents to give more milk to their children, it must buy the milk at
the market price and sell it to those poor people with a loss at a
cheaper rate; the loss may be covered from the means collected by
taxation. But if the government simply fixes the price of milk at a
lower rate than the market, the results obtained will be contrary to
the aims of the government. The marginal producers will, in order to
avoid losses, go out of the business of producing and selling milk.
There will be
less
milk available for the consumers, not
more. This outcome is contrary to the government’s intentions. The
government interfered because it considered milk as a vital
necessity. It did not want to restrict its supply.
Now the government has to face the alternative:
either to refrain from any endeavors to control prices or to add to
its first measure a second one, i.e., to fix the prices of the
factors of production necessary for the production of milk. Then the
same story repeats itself on a remoter plane; the government has
again to fix the prices of the factors of production necessary for
the production of those factors of production which are needed for
the production of milk. Thus the government has to go further and
further, fixing the prices of all the factors of production both
human (labor) and material -and forcing every entrepreneur and every
worker to continue work at these prices and wages. No branch of
production can be omitted from this all-round fixing of prices and
wages and this general order to continue production. If some
branches of production were left free, the result would be a
shifting of capital and labor to them and a corresponding
fall
of the supply of the goods
whose prices the government had fixed. However, it is precisely
these goods which the government considers as especially important
for the satisfaction of the needs of the masses.
But when this state of all-round control of business
is achieved, the market economy has been replaced by a system of
planned economy, by socialism. Of course, this is not the socialism
of immediate state management of every plant by the government as in
Russia
,
but the socialism of the
German or Nazi pattern.
Many people were fascinated by the alleged success of
German price control. They said: You have only to be as brutal and
ruthless
as
the Nazis and you will succeed in
controlling prices. What these people, eager to fight Nazism by
adopting its methods, did not see was that the Nazis did not enforce
price control within a market society, but that they established a
full socialist system, a totalitarian commonwealth.
Price control is
contrary to purpose if it is limited to some commodities only. It
cannot work satisfactorily within a market economy. If the
government does not draw from this failure the conclusion that it
must abandon all attempts to control prices, it must go further and
further until it substitutes socialist all-round planning for the
market economy.
Production can either
be directed by the prices fixed on the market by the buying and by
the abstention from buying on the part of the public. Or it can be
directed by the government’s central board of production management.
There is no third solution available. There is no third social
system feasible which would be neither market economy nor socialism.
Government control of only a part of prices must result in a state
of affairs which -without any exception everybody considers as
absurd and contrary to purpose. Its inevitable result is chaos and
social unrest.
It is this that the
economists have in mind in referring to economic law and asserting
that interventionism is contrary to economic law.
In the market economy the consumers are supreme.
Their buying and their abstention from buying ultimately determines
what the entrepreneurs produce and in what quantity and quality. It
determines directly the prices of the consumers’ goods and
indirectly the prices of all producers’ goods, viz., labor and
material factors
of
production. It determines the
emergence of profits and losses and the formation of the rate of
interest. It determines every individual’s income. The focal point
of the market economy is the market, i.e., the process of the
formation of commodity prices, wage rates and interest rates and
their derivatives, profits and losses. It makes all men in their
capacity as producers responsible to the consumers. This dependence
is direct with entrepreneurs, capitalists, farmers and professional
men, and indirect with people working for salaries and wages. The
market adjusts the efforts of all those engaged in supplying the
needs of the consumers to the wishes of those for whom they produce,
the consumers. It subjects production to consumption.
The market is a democracy in which every penny gives
a right to vote. It is true that the various individuals have not
the same power to vote. The richer man casts more ballots than the
poorer fellow. But to be rich and to earn a higher income is, in the
market economy, already the outcome of a previous election. The only
means to acquire wealth and to preserve it, in a market economy not
adulterated by government-made privileges and restrictions, is to
serve the consumers in the best and cheapest way. Capitalists and
landowners who fail in this regard suffer losses.
If
they do not change their
procedure, they lose their wealth and become poor. It is the
consumers who make poor people rich and rich people poor. It is the
consumers who fix
the wages of a movie star and
an opera singer at a higher level than those of a welder or an
accountant.
Every individual is
free to disagree with the outcome of an election campaign or of the
market process. But in a democracy he has no other means to alter
things than persuasion. If a man were to say: “I do not like the
mayor elected by majority vote: therefore I ask the government to
replace him by the man I prefer,” one would hardly call him a
democrat. But if the same claims are raised with regard to the
market, most people are too dull to discover the dictatorial
aspirations involved.
The consumers have made their choices and determined
the income
of
the shoe manufacturer, the movie
star and the welder. Who is Professor X to arrogate to himself the
privilege of
overthrowing their decision? If he were not a potential dictator,
lie would not ask the government to interfere. He would try to
persuade his fellow-citizens to increase their demand for the
products of the welders and to reduce their demand for shoes and
pictures.
The consumers are not
prepared to pay for cotton prices which would render the marginal
farms, i.e., those producing under the least favorable conditions,
profitable. This is very unfortunate indeed for the farmers
concerned; they must discontinue growing cotton and try to integrate
themselves in another way into the whole of production.
But what shall we think of the statesman who
interferes by compulsion in order to raise the price of cotton above
the level it would reach on the free market? What the
interventionist aims at is the substitution of police pressure for
the choice of the consumers. All this talk: the state should do this
or that, ultimately means: the police should force consumers to
behave otherwise than they would behave spontaneously. In such
proposals as: let
us
raise farm prices, let
us
raise wage rates, let
us
lower profits, let us curtail the
salaries of executives, the
us
ultimately refers to the police. Yet,
the authors of these projects protest that they are planning for
freedom and industrial democracy.
In most non-socialist countries the labor unions are
granted special rights. They are permitted to prevent non-members
from working. They are allowed to call a strike and, when on strike,
are virtually free to employ violence against all those who are
prepared to continue working, viz., the strikebreakers. This system
assigns an unlimited privilege
to those engaged in vital
branches of industry. Those workers whose strike cuts off the
supply of water, light, food and other necessities are in a position
to obtain all they want a t the expense of the rest of the
population. It is true that in the
United States
their
unions have up to now exercised some moderation in taking advantage
this opportunity. Other American unions and the European unions have
been less
cautious. They are
intent enforcing wage increases without bothering about the disaster
inevitably resulting.
Top of Page
The interventionists are not shrewd enough to realize
that labor union pressure and compulsion are absolutely incompatible
with any system of social organization. The union problem has no
reference whatsoever to the right of citizens to associate with one
another in assemblies and associations; no democratic
country
denies its citizens this right.
Neither does anybody dispute a man’s right to stop work and to go on
strike. The only question is whether or not the unions should be
granted the privilege of resorting with impunity to violence. This
privilege is no less incompatible with socialism than with
capitalism. No social cooperation under the division of labor is
possible when some people or unions of people are granted the right
to prevent b y violence and the threat of violence other people from
working. When enforced by violence, a strike in vital branches of
production or a general strike are tantamount to a revolutionary
destruction of society.
A government abdicates if it tolerates any
non-governmental agency’s use of violence.
If
the government forsakes its
monopoly of
coercion and compulsion, anarchic
conditions result. If it were true that a democratic system of
government is unfit to protect unconditionally every individual’s
right to work in defiance of the orders of a union, democracy would
be doomed. Then dictatorship would be the only means to preserve the
division of labor and to
avoid anarchy. What
generated dictatorship in
Russia
and
Germany
was
precisely the fact that the mentality of these nations made
suppression of union violence unfeasible under democratic
conditions. The dictators abolished strikes and thus broke the spine
of labor unionism. There is no question of strikes in the Soviet
empire.
It is illusory to believe that arbitration of labor
disputes could bring the unions into the framework of the market
economy and make their functioning compatible with the preservation
of domestic peace. Judicial settlement of controversies is feasible
if there is
a set of rules
available, according to which individual cases can be judged. But if
such a code is valid and its provisions are applied to the
determination of the height of wage rates, it is no longer the
market which fixes them, but the code and those who legislate with
regard to it. Then the government is supreme and no longer the
consumers buying and selling on the market. If no such code exists,
a standard according to which a controversy between employers and
employees could be decided is lacking. It is vain to speak of “fair”
wages in the absence of such a code. The notion of fairness is
nonsensical if not related to an established standard. In practice,
if the employers do not yield to the threats of the unions,
arbitration is tantamount to the determination of wage rates by the
government-appointed arbitrator. Peremptory authoritarian decision
is substituted for the market price. The issue is always the same:
the government or the
market. There is no third solution.
Metaphors are often very useful in elucidating
complicated problems and in making them comprehensible to less
intelligent minds. But they become misleading and result in nonsense
if people forget that every comparison is imperfect. It is silly to
take metaphorical idioms literally and to deduce from their
interpretation features of the object one wished to make more easily
understandable by their use. There was no harm in the economists’
description of the operation of the market as
automatic
and in their custom
of speaking of the anonymous forces operating on the market. They
could not anticipate that anybody would be so stupid as to take
these metaphors literally.
No “automatic” and “anonymous” forces actuate the
“mechanism” of the market. The only factors directing the market and
determining prices are purposive acts of men. There is no
automatism; there are men consciously aiming at ends chosen and
deliberately resorting to definite means for the attainment of these
ends. There are no mysterious mechanical forces: there is only the
will of every individual to satisfy his demand for various goods.
There is no anonymity; there are you and
I
and Bill and Joe and all the rest. And
each of us is engaged both in production and consumption. Each
contributes his share to the determination of prices.
The dilemma is not
between automatic forces and planned action. It is between the
democratic process of the market in which every individual has his
share and the exclusive rule of a dictatorial body. Whatever people
do in the market economy, is the execution of their own plans. In
this sense every human action means planning. What those calling
themselves planners advocate is not the substitution of planned
action for letting things go. It is the substitution of the
planner’s own plan for the plans of his fellowmen. The planner is a
potential dictator who wants to deprive all other people of the
power to plan and act according to their own plans. He aims at one
thing only: the exclusive absolute preeminence of his own plan.
It is no less
erroneous to declare that a government that is not socialistic has
no plan. Whatever a government does is the execution of a plan,
i.e., of a design. One may disagree with such a plan. But one must
not say that it is not a plan at all. Professor Wesley C. Mitchell
maintained that the British liberal government “planned to have no
plan.”
However, the British government in the liberal age certainly had a
definite plan. Its plan was private ownership of the means of
production, free initiative and market economy.
Great Britain
was
very prosperous indeed under this plan which according to Professor
Mitchell is “no plan.”
The planners pretend that their plans are scientific
and that there cannot be disagreement with regard to them among
well-intentioned and decent people. However, there is no such thing
as a scientific
ought.
Science is competent to establish
what is. It
can never dictate what ought to
be and what ends people should aim at. It is a fact that men
disagree in their value judgments. It is insolent to arrogate to
oneself the right to overrule the plans of other people and to force
them to submit to the plan of the planner. Whose plan should be
executed? The plan of the CIO or those of any other group? The plan
of Trotsky or
that of Stalin? The plan of
Hitler or that of Strasser?
When people were
committed to the idea that in the field of religion only one plan
must be adopted, bloody wars resulted. With the acknowledgment of
the principle of religious freedom these wars ceased. The market
economy safeguards peaceful economic cooperation because it does not
use force upon the economic plans of the citizens. If one master
plan is to be substituted for the plans of each citizen, endless
fighting must emerge. Those who disagree with the dictator’s plan
have no other means to carry on than to defeat the despot by force
of arms.
It is an illusion to believe that a system of planned
socialism could be operated according to democratic methods of
government. Democracy is inextricably linked with capitalism. It
cannot exist where there is planning. Let us refer to the words of
the most eminent of the contemporary advocates of socialism.
Professor Harold Laski declared that the attainment of power by the
British Labor Party in the normal parliamentary fashion must result
in a radical transformation of parliamentary government.
A
socialist administration needs “guarantees”
that its work of transformation would not be “disrupted” by repeal
in event of its defeat at the polls. Therefore the suspension of the
Constitution is “inevitable.”
How pleased would Charles I and George
I
have been if they had known the books
of Professor Laski!
Sidney and Beatrice
Webb (Lord and Lady Passfield) tell us that “in any corporate action
a loyal unity of thought is so important that, if anything is to he
achieved, public discussion must be suspended between the
promulgation of the decision and the accomplishment of the task.”
Whilst “the work is in progress” any expression of doubt, or even of
fear that the plan will not be successful, is “an act of disloyalty,
or even of treachery.”
Now as the process of production never ceases and some work
is
always in progress and there is
always something to he achieved, it follows that a socialist
government must never concede any freedom of speech and the press.
“A loyal unity of thought,” what a high-sounding circumlocution for
the ideals of Philip II and the inquisition! In this regard another
eminent admirer of the Soviets, Mr. T. C. Crowther, speaks without
any reserve. He plainly declares that inquisition is “beneficial to
science when it protects a rising class,”
i.e., when Mr. Crowther’s friends resort to it. Hundreds of similar
dicta could he quoted.
In the Victorian age, when John Stuart Mill wrote his
essay
On Liberty,
such views as those held by
Professor Laski, Mr. and Mrs. Webb and Mr. Crowther were called
reactionary. Today they are called “progressive” and “liberal.” On
the other hand people who oppose the suspension of parliamentary
government and of the freedom of speech and the press and the
establishment of inquisition are scorned as “reactionaries.”
as
“economic royalists” and as
“Fascists.”
Those interventionists who consider interventionism
as a method of bringing about full socialism step by step are at
least consistent.
If
the measures adopted fail to achieve
the beneficial results expected and end in disaster, they ask for
more and more government interference until the government has taken
over the direction of all economic activities. But those
interventionists who look at interventionism as a means of improving
capitalism and thereby preserving it are utterly confused.
In the eyes of these people all the undesired and
undesirable effects of government interference with business are
caused by capitalism. The very fact that a governmental measure has
brought about a state of affairs which they dislike is for them a
justification of further measures. They fail, for instance, to
realize that the role monopolistic schemes play in our time is the
effect of government interference such as tariffs and patents. They
advocate government action for the prevention of monopoly. One could
hardly imagine a more unrealistic idea. For the governments whom
they ask to fight monopoly are the same governments who are devoted
to the principle of monopoly. Thus, the American New Deal Government
embarked upon a thorough-going monopolistic organization of every
branch of American business, by the NRA, and aimed at organizing
American farming as a vast monopolistic scheme, restricting farm
output for the sake of substituting monopoly prices for the lower
market prices. It was a party to various international commodity
control agreements the undisguised aim of which was to establish
international monopolies of various commodities. The same is true of
all other governments. The
Union of Soviet Socialist
Republics
was also a party to some of
these intergovernmental monopolistic conventions.
Its repugnance for collaboration with the capitalistic countries was
not so great as to cause it to miss any opportunity for fostering
monopoly.
The program of this
self-contradictory interventionism is dictatorship, supposedly to
make people free. But the liberty its supporters advocate is liberty
to do the “right” things, i.e., the things they themselves want to
he done. They are not only ignorant of the economic problems
involved. They lack the faculty of logical thinking.
The most absurd justification of interventionism is
provided by those who look upon the conflict between capitalism and
socialism as if it were a contest over the distribution of income.
Why should not the propertied classes he more compliant? Why should
they not accord to the poor workers a part of their ample revenues?
Why should they oppose the government’s design to raise the share of
the underprivileged by decreeing minimum wage rates and maximum
prices and by cutting profits and interest rates down to a “fairer”
level? Pliability in such matters, they say, would take the wind
from the sails of the radical revolutionaries and preserve
capitalism. The worst enemies of capitalism, they say, are those
intransigent doctrinaires whose excessive advocacy of economic
freedom, of laissez-faire and Manchesterism renders vain all
attempts to come to a compromise with the claims of labor. These
adamant reactionaries are alone responsible for the bitterness of
contemporary party strife and the implacable hatred it generates.
What is needed is the substitution of a constructive program for the
purely negative attitude of the economic royalists. And,
of
course, “constructive” is in
the eyes of these people only interventionism.
However, this mode of reasoning is entirely vicious.
It takes for granted that the various measures
of
government interference with business
will attain those beneficial results which their advocates expect
from them. It blithely disregards all that economics says about
their futility in attaining the ends sought and their unavoidable
and undesirable consequences, The question is not whether minimum
wage rates are fair or unfair, but whether or not they bring about
unemployment of a part of those eager to work. By calling these
measures just, the interventionist does not refute the objections
raised against their expediency by the economists. He merely
displays ignorance of the question at issue.
The conflict between capitalism and socialism is not
a contest between two groups of claimants concerning the size of the
portions to be allotted to each of them out of a definite supply of
goods. It is a dispute concerning what system
of
social organization best serves human
welfare. Those fighting socialism do not reject socialism because
they envy the workers’ benefits they could allegedly derive from the
socialist mode of production. They fight socialism precisely because
they are convinced that it would harm the masses in reducing them to
the status of poor serfs entirely at the mercy of irresponsible
dictators.
In this conflict of
opinions everybody must make up his mind and take a definite stand.
Everybody must side either with the advocates of economic freedom or
with those of totalitarian socialism. One cannot evade this dilemma
by adopting an allegedly middle-of-the-road position, namely
interventionism. For interventionism is neither a middle way nor a
compromise between capitalism and socialism. It is a third system.
It is a system the absurdity and futility of which is agreed upon
not only by all economists but even by the Marxians.
There is no such thing
as an “excessive” advocacy of economic freedom. On the one hand,
production can be directed by the efforts of each individual to
adjust his conduct so as to fill the most urgent wants of the
consumers in the most appropriate way. This is the market economy.
On the other hand, production can be directed by authoritarian
decree. If these decrees concern only some isolated items of the
economic structure, they fail to attain the ends sought and their
own advocates do not like their outcome. If they come up to
all-round regimentation, they mean totalitarian socialism.
Men must choose between the market economy and
socialism. The state can preserve the market economy in protecting
life, health and private property against violent or fraudulent
aggression; or it can itself control the conduct of all production
activities. Some agency must determine what should be produced. If
it is not the consumers by means of demand and supply on the market,
it must be the government by compulsion.
Top of Page
3
Socialism and Communism
IN
the terminology of Marx and Engels the words communism and socialism
are synonymous. They are alternately applied without any distinction
between them. The same was true for the practice of all Marxian
groups and sects until 1917. The political parties of Marxism which
considered the
Communist
Manifesto as the unalterable
gospel of their doctrine called themselves
socialist
parties. The most influential and
most numerous of these parties, the German party, adopted the name
Social Democratic Party. In
Italy
, in
France
and
in all other countries in which Marxian parties already played a
role in political life before 1917, the term
socialist
likewise superseded the term
communist.
No Marxian ever ventured,
before 1917, to distinguish between communism and socialism.
In 1875, in his
Criticism of the Gotha Program of the German Social Democratic
Party, Marx distinguished between a lower (earlier) and a higher
(later) phase of the future communist society. But he did not
reserve the name of communism to the higher phase and did not call
the lower phase socialism as differentiated from communism.
One of the fundamental
dogmas of Marx is that socialism is bound to come “with the
inexorability of a law of nature.” Capitalist production begets its
own negation and establishes the socialist system of public
ownership of the means of production. This process “executes itself
through the operation of the inherent laws of capitalist
production.”
It is independent of the wills of people.
It is impossible for men to accelerate it, to delay it or to hinder
it. For “no social system ever disappears before all the productive
forces are developed for the development of which it is broad
enough, and new higher methods of production never appear before the
material conditions of their existence have been hatched out in the
womb of previous society.”
This doctrine is, of course, irreconcilable with
Mars’s
own
political activities and with the
teachings he advanced for the justification of these activities.
Marx tried to organize a political party which by means of
revolution and civil war should accomplish the transition from
capitalism to socialism. The characteristic feature of their parties
was, in the eyes of Marx and all Marxian doctrinaires, that they
were revolutionary parties invariably committed to the idea of
violent action. Their aim was to rise in rebellion, to establish the
dictatorship of the proletarians and to exterminate mercilessly all
bourgeois. The deeds of the Paris Communards in 1871 were considered
as the perfect model of such a civil war. The
Paris
revolt, of
course, had lamentably failed. But later uprisings were expected to
succeed.
However, the tactics
applied by the Marxian parties in various European countries were
irreconcilably opposed to each of these two contradictory varieties
of the teachings of Karl Marx. They did not place confidence in the
inevitability of the coming of socialism. Neither did they trust in
the success of a revolutionary upheaval. They adopted the method of
parliamentary action. They solicited votes in election campaigns and
sent their delegates into the parliaments. They “degenerated” into
democratic parties. In the parliaments they behaved like other
parties of the opposition. In some countries they entered into
temporary alliances with other parties, and occasionally socialist
members sat in the cabinets. Later, after the end of the first World
War, the socialist parties became paramount in many parliaments. In
some countries they ruled exclusively, in others in close
cooperation with “bourgeois” parties.
It is true, that these domesticated socialists before
1917
never abandoned lip
service to the rigid principles of orthodox Marxism. They repeated
again and again that the coming of socialism is unavoidable. They
emphasized the inherent revolutionary character of their parties.
Nothing could arouse their anger more than when somebody dared to
dispute their adamant revolutionary spirit. However, in fact they
were parliamentary parties like all other parties.
From a correct Marxian
point of view, as expressed in the later writings of Mars and Engels
(but not yet in the Communist Manifesto), all measures designed to
restrain, to regulate and to improve capitalism were simply
“petty-bourgeois” nonsense stemming from an of the immanent laws of
capitalist evolution. True socialists should not place any obstacles
in the way of capitalist evolution. For only the full maturity of
capitalism could bring about socialism. It is not only vain, but
harmful to the interests of the proletarians to resort to such
measures. Even labor-unionism is not an adequate means for the
improvement of the conditions of the workers.
Marx did not believe that interventionism could benefit the masses.
He violently rejected the idea that such measures as minimum wage
rates, price ceilings, restriction of interest rates, social
security and so on are preliminary steps in bringing about
socialism. He aimed at the radical abolition of the wages system
which can be accomplished only by communism in its higher phase. He
would have sarcastically ridiculed the idea of abolishing the
“commodity character” of labor within the frame of a capitalist
society by the enactment of a law.
But the socialist parties as they operated in the
European countries were virtually no less committed to
interventionism than the
Sozialpolitik
of the Kaiser’s
Germany
and
the American New Deal. It was against this policy that Georges Sorel
and Syndicalism directed their attacks. Sorel, a timid intellectual
of a bourgeois background, deprecated the “degeneration” of the
socialist parties for which he blamed their penetration by bourgeois
intellectuals. He wanted to see the spirit of ruthless
aggressiveness, inherent in the masses, revived and freed from the
guardianship of intellectual cowards. For
Sorel
nothing counted
but riots. He advocated
action
directe,
i.e., sabotage and
the general strike as initiatory steps toward the final great
revolution.
Sorel
had success mostly
among snobbish and idle intellectuals and no less snobbish and idle
heirs of wealthy entrepreneurs. He did not perceptibly move the
masses. For the Marxian parties his passionate criticism was hardly
more than a nuisance. His historical importance consisted mainly in
the role his ideas played in the evolution of Russian Bolshevism and
Italian Fascism.
In order to understand the mentality of the
Bolshevists we must again refer to the dogmas of Karl Marx. Marx was
fully convinced that capitalism is a stage of economic history which
is
not limited to a few advanced countries only. Capitalism has the
tendency to convert all parts of the world into capitalist
countries. The bourgeoisie forces all nations to
become capitalist nations. When
the final hour of capitalism sounds, the whole world will he
uniformly in the stage of mature capitalism, ripe for the transition
to socialism. Socialism will emerge at the same time in all parts of
the world.
Marx erred on this point no less than in all his
other statements. Today even the Marxians cannot and do not deny
that there still prevail enormous differences in the development of
capitalism in various countries. They realize that there are many
countries which, from the point of view of the Marxian
interpretation of history, must be described as precapitalistic. In
these countries the bourgeoisie has not yet attained a ruling
position and has not yet set the historical stage of capitalism
which is the necessary prerequisite of the appearance of socialism.
These countries therefore must first accomplish their “bourgeois
revolution” and must go through all phases of capitalism before
there can be any question of transforming them into socialist
countries. The only policy which Marxians could adopt in such
countries would be to support the bourgeois unconditionally. first
in their endeavors to seize power and then in their capitalistic
ventures.
A
Marxian party could for a very long
time have no other task than to he subservient to bourgeois
liberalism. This alone is the mission which historical materialism,
if consistently applied, could assign to Russian Marxians. They
would be forced to wait quietly until capitalism should have made
their nation ripe for socialism.
But the Russian Marxians did not want to wait. They
resorted to a new modification of Marxism according to which it was
possible for a nation to jump over one of the stages of historical
evolution. They shut their eyes to the fact that this new doctrine
was not a modification of Marxism, but rather the
denial of the last remnant which was left of it. It was an
undisguised return to the pre-Marxian and anti-Marxian socialist
teachings according to which men are free to adopt socialism a t any
time if they consider it as a system more beneficial to the
commonweal than capitalism. It utterly exploded all the mysticism
inwrought into dialectical materialism and in the alleged Marxian
discovery of the inexorable laws of mankind’s economic evolution.
Having emancipated themselves from Marxian
determinism, the Russian Marxians were free to discuss the most
appropriate tactics for the realization
of
socialism in their country. They were
no longer bothered with economic problems. They had no longer to
investigate whether or not the time had come. They had only one task
to accomplish, the seizure of the reins of government.
One group maintained that lasting success could only
be expected if the support of a sufficient number of the people,
though not necessarily of the majority, could be won. Another group
did not favor such a time-consuming procedure. They suggested a hold
stroke.
A
small group of fanatics should be
organized as the vanguard of the revolution. Strict discipline and
unconditional obedience to the chief should make these professional
revolutionists fit for a sudden attack. They should supplant the
Czarist government and then rule the country according to the
traditional methods of the Czar’s police.
The terms used to
signify these two groups Bolshevists (majority) for the latter and
Mensheviks (minority) for the former refer to a vote taken in at a
meeting held for the discussion of these tactical issues. The only
difference dividing the two groups from one another was this matter
of tactical methods. They both agreed with regard to the ultimate
end: socialism.
Both sects tried to
justify their respective points of view by quoting passages from
Marx’s and Engels’ writings. This is, of course, the Marxian custom.
And each sect was in a position to discover in these sacred books
dicta confirming its own stand.
Lenin, the Bolshevist chief, knew his countrymen much
better than his adversaries and their leader, Plekhanov, did. He did
not, like Plekhanov, make the mistake of applying to Russians the
standards of the Western nations. He how twice foreign women had
simply usurped supreme power and quietly ruled for a life-time. He
was aware of the fact that the terrorist methods of the Czar’s
secret police were very successful, and he was confident that he
could considerably improve on these methods. He was
a
ruthless dictator and he knew
that the Russians lacked the courage to resist oppression. Like
Cromwel
