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PART III THE ALLEGED INEVITABILITY OF SOCIALISM
SECTION II The Concentration of Capital and the Formation of Monopolies
as Preliminary Steps to Socialism
1 The Problem
The Concentration of Fortunes
A tendency to the concentration of establishments or to the concentration of enterprises
is not by any means equivalent to a tendency to the concentration of fortunes. In
the same degree in which establishments and enterprises became bigger and bigger
modern capitalism has developed forms of enterprise which enable people with small
fortunes to undertake big businesses. The proof that there is no tendency to concentrate
fortunes lies in the number of these types of enterprises that have come up and
are growing daily in importance, while the individual merchant has almost disappeared
from large scale industry, mining, and transport. The history of forms of enterprise,
from the societas unius acti to the modern joint stock company, is a wholesale contradiction
of the doctrine of the concentration of capital so arbitrarily set up by Marx.
If we wish to prove that the poor are becoming ever more numerous and poorer, and
the rich ever less numerous and richer, it is useless to point out that in a period
of remote antiquity, as elusive to us as the Golden Age to Ovid and Virgil, the
differences of wealth were less than they are today. We must prove that there is
an economic cause which leads imperatively to the concentration of fortunes. The
Marxians have not even attempted this. Their theory which ascribes to the capitalist
age a special tendency towards the concentration of fortunes, is pure invention.
The attempt to give it some sort of historical foundation is hopeless and adduces
just the contrary of that which Marx asserts to be demonstrable.
2 The Foundation of Fortunes Outside the Market Economy
The desire for an increase of wealth can be satisfied through exchange, which is
the only method possible in a capitalist economy, or by violence and petition as
in a militarist society, where the strong acquire by force, the weak by petitioning.
In the feudal society ownership of the strong endures only so long as they have
the power to hold it; that of the weak is always precarious, for having been acquired
by grace of the strong it is always dependent on them. The weak hold their property
without legal protection. In a militarist society, therefore, there is nothing but
power to hinder the strong from extending their wealth. They can go on enriching
themselves as long as no stronger men oppose them.
Nowhere and at no time has the large scale ownership of land come into being through
the working of economic forces in the market. It is the result of military and political
effort. Founded by violence, it has been upheld by violence and by that alone. As
soon as the latifundia are drawn into the sphere of market transactions they begin
to crumble, until at last they disappear completely. Neither at their formation
nor in their maintenance have economic causes operated. The great landed fortunes
did not arise through the economic superiority of large scale ownership, but through
violent annexation outside the area of trade. "And they covet fields" complains
the prophet Micah, "and take them by violence; and houses, and take them away."
Thus comes into existence the property of those who, in the words of Isaiah, "join
house to house ... lay field to field, till there be no place, that they may be
placed alone in the midst of the earth."
The non-economic origin of landed fortunes is clearly revealed by the fact that,
as a rule, the expropriation by which they have been created in no way alters the
manner of production. The old owner remains on the soil under a different legal
title and continues to carry on production.
Land ownership may be founded also on gifts. It was in this way that the Church
acquired its great possessions in the Frankish kingdom. Not later than the eighth
century, these latifundia fell into the hands of the nobility; according to the
older theory this was the result of secularizations by Charles Martel and his successors,
but recent research is inclined to make "an offensive of the lay aristocrats" responsible.
That in a market economy it is difficult even now to uphold the latifundia, is shown
by the endeavours to create legislation institutions like the "Fideikommiss" (feoffment
in trust) and related legal institutions such as the English "entail." The purpose
of the "Fideikommiss" was to maintain large-scale landed proprietorship, because
it could not be kept together otherwise. The Law of Inheritance is changed, mortgaging
and alienation are made impossible, and the State is appointed guardian of the indivisibility
and inalienability of the property, so that the prestige of family tradition shall
not be impaired. If economic circumstances had tended towards the continuous concentration
of land ownership such laws would have been superfluous. Legislation would have
been enacted against the formation of estates rather than for their protection.
But of such laws legal history knows nothing. The regulations against "Bauernlegen,"
against enclosing arable land, etc., are directed against movements outside the
area of trade, that is, against force. The legal restrictions of mortmain are similar.
The lands of the mortmain, which, incidentally, are legally protected in much the
same way as the "Fideikommiss," do not increase by force of economic development
but through pious donations.
Now the highest concentration of fortunes is to be found just in agriculture, where
concentration of establishments is impossible and the concentration of enterprises
economically purposeless, where the large property appears to be economically inferior
to the small and unable to withstand it in free competition. Never was the ownership
of the means of production more closely concentrated than at the time of Pliny,
when half the province of Africa was owned by six people, or in the days of the
Merovingians, when the Church possessed the greater part of all French soil. And
in no part of the world is there less large-scale land ownership than in capitalist
3 The Formation of Fortunes Within the Market Economy
The assertion that wealth on the one hand and poverty on the other are ever increasing
was maintained at first without any conscious connection with an economic theory.
Its supporters think they have derived it from an observation of social relations.
But the observer's judgment is influenced by the idea that the sum of wealth in
any society is a given quantity, so that if some possess more others must possess
less. As, however, in every society the growth of new riches and the coming into
existence of new poverty are always to be found in a conspicuous manner whilst the
slow decline of ancient fortunes and the slow enrichment of less propertied classes
easily escape the eye of the inattentive student, it is easy to arrive at the premature
conclusion summed up in the socialist catchword "the rich richer, the poor poorer."
No protracted argument is required to prove that the evidence completely fails to
substantiate this assertion. It is quite an unfounded hypothesis that in a society
based on the division of labour the wealth of some implies the poverty of others.
Under certain assumptions it is true of militarist societies, where there is no
division of labour. But of a capitalist society it is untrue. Moreover an opinion
formed on the basis of casual observations of that narrow section with which the
individual is personally acquainted is quite insufficient proof of the theory of
The foreigner who visits England equipped with good recommendations has opportunities
for learning something of the noble and wealthy families, and their manner of living.
If he wants to know more or feels it his duty to make his visit more than a mere
pleasure trip, he is allowed to make a flying tour of the works of great enterprises.
For the layman, there is nothing particularly attractive about this. At first the
noise, the bustle, the activity astonish the visitor, but after inspecting two or
three factories the spectacle grows monotonous. Such a study of social relations,
on the other hand, as can be undertaken during a short visit to England, is more
stimulating. A walk through the slums of London or any other large city produces
more vivid impressions, and the effect on the traveller who, when not occupied in
this study, will be hurrying from one entertainment to another, is twice as powerful.
Thus visits to the slums have become a popular item in the itinerary of the Continental's
obligatory tour of England. In this way the future statesman and economist gathered
an impression of the effects of industry on the masses, which became a basis for
the social views of a lifetime. He went home firm in the opinion that industry makes
few rich and many poor. When later he wrote or spoke about industrial conditions
he never forgot to describe the misery he had found in the slums, elaborating the
most painful details, often with more or less conscious exaggeration. All the same
his picture tells us nothing more than that some people are rich and some poor.
But to know this, we do not need the report of people who have seen the suffering
with their own eyes. Before they wrote we knew that Capitalism has not yet abolished
all misery in the world. What they have to set about proving is that the number
of wealthy people is decreasing, while the wealthy individual grows richer, and
that the number and the poverty of the poor is steadily on the increase. It would,
however, take a theory of economic evolution to prove this.
Attempts to demonstrate by statistical research the progressive increase of the
misery of the masses and the growth of wealth among a numerically diminishing rich
class are no better than these mere appeals to emotion. The estimates of money incomes
at the disposal of statistical inquiry are unusable because the purchasing power
of money alters. This fact alone is enough to show that we lack any basis for comparing
arithmetically the distribution of income over a number of years. For where it is
not possible to reduce to a common denominator the various goods and services of
which incomes are composed, one cannot form any series for historical comparison
from known statistics of income and capital.
The attention of sociologists is often drawn to the fact that mercantile and industrial
wealth, that is, wealth not invested in land and mining property, seldom maintains
itself in one family for a long period. The bourgeois families rise steadily from
poverty to wealth, sometimes so quickly that a man who has been in want a few years
previously becomes one of the richest of his time. The history of modern fortunes
is full of stories of beggar boys who have made themselves millionaires. Little
is said of the decay of fortunes among the well-to-do. This does not usually take
place so quickly as to strike the casual observer; closer examination, however,
will reveal how unceasing the process is. Seldom does mercantile and industrial
wealth maintain itself in one family for more than two or three generations, unless,
by investment in land, it has ceased to be wealth of this nature. It becomes
property in land, no longer used in the business of active acquisition.
Fortunes invested in capital do not, as the naive economic philosophy of the common
man imagines, represent eternal sources of income. That capital yields a profit,
that it even maintains itself at all, is by no means a self-evident fact following
a priori from the fact of its existence. The capital goods, of which capital is
concretely composed, appear and disappear in production; in their place come other
goods, ultimately consumption goods, out of the value of which the value of the
capital mass must be reconstituted. This is possible only when the production has
been successful, that is when it has produced more value than it absorbed. Not only
profits of capital, but the reproduction of capital presupposes a successful process
of production. The profits of capital and maintenance of capital are always the
result of successful enterprise. If this enterprise falls, the investor loses not
only the yield on the capital, but his original capital fund as well. One ought
carefully to distinguish between produced means of production and the primary factors
of production. In agriculture and forestry the original and indestructible forces
of the soil are maintained even though production fails, for faulty management cannot
dissipate them. They may become valueless through changes in demand, but they cannot
lose their inherent capacity to yield produce. This is not so in manufacturing production.
There everything can be lost, root and branch. Production must continually replenish
capital. The individual capital goods which compose it have a limited life; the
existence of capital is prolonged only by the manner in which the owner deliberately
reinvests it in production. To own capital one must earn it afresh day by day. In
the long run a capital fortune is not a source of income which can be enjoyed in
To combat these arguments by pointing to the steady yield from "good" capital investments
would be wrong. The point is that the investments must be "good," and to be that,
they must be the result of successful speculation. Arithmetical jugglers have calculated
the amount to which a penny, invested at compound interest at the time of Christ,
would have grown by now. The result is so striking that one might very well ask
why nobody was clever enough to reap a fortune this way. But quite apart from all
the other obstacles to such a course of action, there is the crowning disability
that to every capital investment is attached the risk of a total or partial loss
of the original capital sum. This is true not only of the entrepreneur's investment,
but also of the investment the capitalist makes in lending to the entrepreneur,
for his investment naturally depends completely on the entrepreneur's. His risk
is smaller, because the entrepreneur offers him as security that part of his own
wealth which is outside the immediate undertaking, but qualitatively the two risks
are the same. The moneylender too can, and often does, lose his wealth.
An eternal capital investment is as non-existent as a secure one. Every capital
investment is speculative; its success cannot be foreseen with absolute assurance.
Not even the idea of an "eternal and secure" capital yield could have arisen if
the concepts of capital investment had been taken from the sphere of business and
capital enterprise. The ideas of eternity and security come from rents secured on
landed property and from the related government securities. It corresponds to actual
conditions when the law recognizes as trustee investments only those which are in
land or in incomes secured on land or afforded by the State or by other public corporations.
In capitalist enterprise there is no secure income and no security of wealth. It
is obvious that an entail invested in enterprises outside agriculture, forestry,
and mining would be senseless.
If, then, capital sums do not grow of themselves, if for their maintenance alone,
quite apart from their fructification and increase, successful speculation is constantly
required, there can be no question whatever of a tendency for fortunes to grow bigger
and bigger. Fortunes cannot grow; someone has to increase them. For this the
successful activity of an entrepreneur is needed. The capital reproduces itself,
bears fruit and increases only so long as a successful and lucky investment endures.
The more rapid the change in economic environment the shorter the time in which
an investment is to be considered as good. For the making of new investments, for
reorganization of production, for innovations in technique, abilities are needed
which only a few possess. If under exceptional circumstances these are inherited
from generation to generation, the successors are able to maintain the wealth left
by their ancestors, even perhaps to increase it, despite the fact that it may have
been split up on inheritance. But if, as is generally the case, the heirs are not
equal to the demands which life makes on an entrepreneur, the inherited wealth rapidly
When rich entrepreneurs wish to perpetuate their wealth in the family they take
refuge in land. The descendants of the Fuggers and the Welsers live even today
in considerable affluence, if not luxury, but they have long since ceased to be
merchants and have transformed their wealth into landed property. They became members
of the German nobility, differing in no way from other South German noble families.
Numerous merchant families in other countries have undergone the same development;
having become rich in trade and industry they have ceased to be merchants and entrepreneurs
and have become landowners, not to increase their fortunes but to maintain them
and transmit them to their children and their children's children. The families
which did otherwise soon disappeared in obscure poverty. There are few banking families
whose business has existed for a hundred years or more, and a closer glance at the
affairs of these few will show that they are generally commercially active only
in administering fortunes really invested in land and mines. There are no ancient
fortunes which thrive in the sense that they continually increase.
4 The Theory of Increasing Poverty
The theory of increasing poverty among the masses stands at the centre of Marxist
thought as well as of older socialist doctrines. The accumulation of poverty parallels
the accumulation of capital. It is the "antagonistic character of capitalist production"
that "the accumulation of wealth at one pole" is simultaneously "accumulation of
misery, work torture, slavery, ignorance, brutalization, and moral degeneracy at
the other." This is the theory of the progressive increase in the absolute poverty
of the masses. Based on nothing but the tortuous processes of an abstruse system
of thought, it need occupy us all the less in that it is gradually receding into
the background, even in the writings of orthodox Marxian disciples and the official
programmes of the Social-Democratic parties. Even Kautsky, during the revisionism
quarrel, was reduced to conceding that, according to all the facts, it was precisely
in the most advanced capitalist countries that physical misery was on the decline,
and that the working classes had a higher standard of life than fifty years ago.
The Marxians still cling to the theory of increasing poverty purely on account of
its propaganda value, and exploit it today just as much as during the youth of the
now aged Party.
But intellectually the theory of the relative growth of poverty, developed by Rodbertus,
has replaced the theory of absolute growth. "Poverty," says Rodbertus, "is a social,
that is, a relative, concept. Now, I maintain that the justifiable needs of the
working classes, since these have attained a higher social position, have become
considerably more numerous. It would be as wrong, now that they have attained this
position, not to speak, even with unchanged wages, of a deterioration in their material
condition as it would have been at an earlier stage when their wages fell, and they
had not yet attained this position." This thought is derived entirely from the
point of view of the State Socialist, which considers a raising of the workers'
claims to be "justified" and assigns them a "higher position" in the social order.
Against arbitrary judgments of this kind, no argument is possible.
The Marxians have taken over the doctrine of the relative growth of poverty. "If
in the course of evolution the grandson of a small master weaver, who had lived
with his own journeymen, comes to inhabit a palatial, magnificently furnished villa,
while the journeyman's grandson lives in lodgings, which though more comfortable,
no doubt, than his grandfather's garret in the master weaver's house, yet serves
to widen the social gulf between the two, then the journeyman's grandson will feel
his poverty all the more for seeing the comforts that are within his employer's
reach. His own position is better than his ancestor's, his standard of living has
risen, but relatively his situation has become worse. Social misery becomes greater
... the workers relatively more wretched." Assuming that this were true, it would
be no indictment against the capitalist system. If Capitalism improves the economic
position all round, it is of secondary importance that it does not raise all to
the same level. A social order is not bad simply because it helps one more than
another. If I am doing better, what can it harm me that others are doing better
still? Must one destroy Capitalism which better satisfies from day to day the wants
of all people, merely because some individuals become rich and a few of them very
rich? How, then, can it be asserted as "logically unassailable" that "a growth in
the relative poverty of the masses ... must finally end in catastrophe."
Kautsky tries to make his conception of the Marxian theory of increasing poverty
different from that which emerges from an unprejudiced reading of Das Kapital. "The
word poverty," he says, "may mean physical poverty, but it may also mean social
poverty. In the first sense it is measured by man's physiological needs. These are
indeed not everywhere and at all times the same, still they do not show differences
nearly so great as the social needs, non-satisfaction of which produces social poverty."
It is social poverty, says Kautsky, that Marx had in mind. Considering the clarity
and precision of Marx's style this interpretation is a masterpiece of sophistry,
and it was accordingly rejected by the revisionists. To the person who does not
take Marx's words as revelation it may, indeed, be a matter of indifference whether
the theory of increasing social poverty is contained in the first volume of Das
Kapital or is taken from Engels or was first put forward by the neo-Marxists. The
important questions are whether it is tenable and what conclusions follow from it.
Kautsky holds that the growth of poverty in the social sense is "attested by the
bourgeoisie themselves, only they have given the matter a different name; they call
it covetousness ... The decisive fact is that the contrast between the wage-earners'
needs and the possibility of satisfying them out of wages, the contrast therefore
between wage-earning and capital, is becoming greater and greater." Covetousness
has always existed, however; it is no new phenomenon. We may even admit that it
is more prevalent now than formerly; the general striving after improvement of economic
position is a peculiarly characteristic mark of capitalist society. But how one
can conclude from this that the capitalist order of society must necessarily change
into the socialist, is inexplicable.
The fact is, that the doctrine of increasing relative social poverty is nothing
more than an attempt to give an economic justification to policies based on the
resentment of the masses. Growing social poverty means merely growing envy. Mandeville
and Hume, two of the greatest observers of human nature, have remarked that the
intensity of envy depends on the distance between the envier and the envied. If
the distance is great one does not compare oneself with the envied, and, in fact,
no envy is felt. The smaller the distance, however, the greater the envy. Thus
one can deduce from the growth of resentment in the masses that inequalities of
income are diminishing. The increasing "covetousness" is not, as Kautsky thinks,
a proof of the relative growth of poverty; on the contrary, it shows that the economic
distance between the classes is becoming less and less.
Micah, II, 2.
Isaiah, V, 8.
Schröder, Lehrbuch der deutschen Rechtsgeschichte,
pp. 159 ff.; Dopsch, Wirtschaftliche und soziale Grundlagen der europäischen Kulturentwicklung, Part 2
(Vienna, 1920), pp. 289, 309 ff.
Michels, Die Verelendungstheorie
(Leipzig, 1928), pp. 19 ff.
Hansen, Die drei Bevölkerungsstufen (Munich, 1889),
pp. 181 ff.
This is quite apart from the effects of
Considerant tries to prove the theory of
concentration with a metaphor borrowed from mechanics: "Les capitaux suivent aujourd'hui
sans contrepoids la loi de leur propre gravitation; c'est que, s'attirant en raison de
leurs masses, les richesses sociales se concentrent de plus en plus entre ks mains des
grands possesseurs." ("Capital today follows, without any opposing force, the law of its
own magnetism. Capital attracts capital to itself, by mason of its very size. Social wealth
is concentrated more and more in the hands of the largest owners.") Quoted by
Tugan-Baranowsky, Der moderne Sozialismus in seiner geschichtlichen Entwicklung, p. 62.
That is word play, nothing more.
Marx, Das Kapital, Vol. I, p. 611.
Kautsky, Bernstein und das Sozialdemokratische
Programm (Stuttgart, 1899), p. 116.
Rodbertus, "Erster sozialer Brief an v.
Kirchmann" (Ausgabe von Zeller, Zur Erkenntnis unserer staatwirtschaftlichen Zustände,
2nd ed. (Berlin, 1885), p. 273 n.
Herman Müller, Karl Marx und die Gewerkschaften
(Berlin, 1918) pp. 82 ff.
As is done by Ballod, Der Zukunftsstaat,
2nd ed. (Stuttgart, 1919), p. 12.
Kautsky, Bernstein und das Sozialdemokratische
Programm, p. ll6.
Ibid., p. 120.
 Compare the remarks of Weitling, quoted in
Sombart, Der proletarische Sozialismus (Jena, 1924), Vol. I, p. 106.
Hume, A Treatise of Human Nature, Philosophical
Works, ed. Green and Grose (London, 1874), Vol. II, pp. 162 ff.; Mandeville, Bienenfabel,
ed. Bobertag (Munich, 1914), p. 123; Schatz, L'Individualisme économique et social
(Paris, 1907), p. 73 n2, calls this an "idée fondamentale pour bien comprendre
la cause profonde des antagonismes sociaux." ("Fundamental idea for a good understanding
of the profound cause of social animosities.")
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