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Marxist and Austrian Class Analysis

My topic is Marxist and Austrian class analysis. I want to do the following: first, I will present a series of theses that constitute the hard-core of the Marxist theory of history. I claim that all of them are essentially correct. And then I will show these true theses are derived in Marxism from a false starting-point. And finally, I want to demonstrate how Austrianism in the Mises-Rothbard tradition can give a correct but categorically different explanation of their validity.

Let me begin with the hard-core of the Marxist belief system.

The history of mankind is the history of class struggles. That is the history of struggles between a relatively small ruling class, and a larger class of the exploited. The primary form of exploitation is economic. The ruling class expropriates parts of the productive output of the exploited or, as Marxists say, it appropriates a social surplus product, and uses it for its own consumptive purposes.

Second, the ruling class is unified by its common interest in upholding its exploitative position, and maximizing its exploitatively appropriated surplus product. It never deliberately gives up power or exploitation income. Instead, any loss of power or income must wrestled away from it through struggles whose outcome ultimately depends on the class consciousness of the exploited. That is, on whether or not and to what extent the exploited are aware of their own status and are consciously united with other class members in common opposition to exploitation.

Third, class rule manifests itself primarily in specific arrangements regarding the assignment of property rights. Or in Marxist terminology: in specific relations of production. In order to protect these arrangements or production relations, the ruling class forms and is in command of the state as the apparatus of compulsion and coercion. The state enforces and helps reproduce a given class structure through the administration of a system of class justice. And it assists in the creation and the support of an ideological superstructure designed to lend legitimacy to the existence of class rule.

Fourth, internally, the process of competition within the ruling class generates a tendency towards increasing concentration and centralization. A multi-polar system of exploitation is gradually supplanted by an oligarchic or monopolist one. Fewer and fewer exploitation centers remain in operation, and those that do are increasingly integrated into a heirarchical order. And externally, that is as regards the international system, this internal centralization process will lead to imperialist interstate wars and the territorial expansion of exploitative rule.

Fifth, with the centralization and expansion of exploitative rule gradually approaching its ultimate limit of world domination, class rule will increasingly become incompatible with the further development and improvement of productive forces. Economic stagnation and crises become more and more characteristic, and create the so-called 'objective conditions' for the emergence of a revolutionary class consciousness of the exploited. The situation becomes ripe for the establishment of a classless society, the withering-away of the state, or the replacement of government of men-over-men by the administration of things. And, as its result, unheard-of economic prosperity.

All of these theses can be given a perfectly good justification, as I will show. Unfortunately however, it is Marxism, which subscribes to all of them, that has done more than any other ideological system to discredit their validity, in deriving them from a patently absurd exploitation theory. Now what is this Marxist theory of exploitation?

According to Marx, such pre-capitalist socialist systems as slavery and feudalism are characterized by exploitation. There is no quarrel with this, for after all the slave is not a free laborer, and he cannot be said to gain from his being enslaved. Rather, in being slaved, his utility is reduced at the expense of an increase in wealth appropriated by the slave-master. The interests of the slave and that of the slave-owner are indeed antagonistic.

The same is true as regards the interests of the feudal lord, who extracts a land-rent from a peasant who works on land homesteaded by himself -- that is, by the peasant. The lord's gains are the peasant's losses. And it is also undisputed that slavery as well as feudalism indeed hampers the development of productive forces. Neither slave nor serf will be as productive as they would be without slavery or serfdom.

But the genuinely new Marxist idea is that essentially nothing is changed as regards exploitation under capitalism. That is, if the slave becomes a free laborer, or if the peasant decides to farm land homesteaded by someone else, and pays rent in exchange for doing so. To be sure, Marx, in the famous chapter 24 of the first volume of his Capital, titled "The So-Called Original Accumulation", gives a historical account of the emergence of capitalism which makes the point that much or even most of the initial capitalist property is the result of plunder, enclosure, and conquest. And similarly, in chapter 25, on the modern theory of colonialism, the role of force and violence in exporting capitalism to the -- as we would now say -- third world, is heavily emphasized.

Admittedly, all this is generally correct. And insofar as it is, there can be no quarrel with labelling such capitalism exploitative. Yet one should be aware of the fact that Marx here is engaged in a trick. In engaging in historical investigations, and arousing the reader's indignation regarding the brutalities underlying the formation of many capitalist fortunes, he actually side-steps the issue at hand. He distracts from the fact that his thesis is really an entirely different one. Namely, that even if one were to have a 'clean capitalism' so to speak, that is, one in which the original appropriation of capital were the result of nothing else but homesteading, work, and savings, the capitalist who hired labor to be employed with this capital would nonetheless be engaged in exploitation. Indeed, Marx considered the proof of this thesis his most important contribution to economic analysis.

Now what then is his proof of the exploitative character of a clean capitalism? It consists in the observation that the factor prices, and in particular the wages paid to laborers by the capitalists, are lower than the output prices. The laborer, for instance, is paid a wage that represents consumption goods which can be produced in three days, but he actually works five days for his wage, and produces an output of consumption goods that exceeds what he receives as remuneration. The output of the two extra days -- the surplus value in Marxist terminology -- is appropriated by the capitalist. Hence, according to Marx, there is exploitation.

Now what is wrong with this analysis? The answer becomes obvious once it is asked why the laborer would possibly agree to such a deal. He agrees because his wage-payment represents present goods, while his own labor services represent only future goods, and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the full value of his output himself. But this would of course imply that he would have to wait longer for any consumption goods to become available to him. In selling his labor services, he demonstrates that he prefers a smaller amount of consumption goods now, over a possibly larger one at some future date.

On the other hand, why would the capitalist want to strike a deal with the laborer? Why would he want to advance present goods -- that is, present money -- to the laborer in exchange for services that bear fruit only later? Obviously he would not want to pay out for instance $100 now, if he were to receive the same amount in one year's time. In that case, why not simply hold on to it one year, and receive the extra benefit of having actual command over it during the entire time? Instead, he must expect to receive a larger sum than $100 in the future, in order to give up $100 now in the form of wages paid to the laborer. He must expect to be able to earn a profit -- or more correctly, an interest return.

And he is constrained by time-preference -- that is, the fact that an actor invariably prefers earlier over later goods -- in yet another way: for if one can obtain a larger sum in the future by sacrificing a smaller one in the present, why then is the capitalist not engaged in more saving than he actually is? Why does he not hire more laborers than he does, if each one promises an additional interest return? The answer again should be obvious: because the capitalist is a consumer too, and cannot help being one. The amount of his savings and investing is restricted [--audio glitch--] by the necessity that he too, like the laborer, requires a supply of present goods large enough to secure the satisfaction of all those wants, the satisfaction of which during the waiting time is considered more urgent than the advantags which a still greater lengthening of the period of production would provide.

Now what is wrong with Marx's theory of exploitation, then, is that he does not understand the phenomenon of time-preference as a universal category of human action. That the laborer does not receive his "full worth", so to speak, has nothing to do with exploitation, but merely reflects the fact that it impossible for man to exchange future goods against present ones except at a discount.

Contrary to the case of slave and slave-master, where the latter benefits at the expense of the former, the relationship between the free-laborer and the capitalist is a mutually beneficial one. The laborer enters the agreement because, given his time preference, he prefers a smaller amount of present goods over a larger future one. And the capitalist enters it because, given his time-preference, he has a reverse preference order, and ranks a larger future amount of goods more highly than a smaller present one.

Their interests are not antagonist, but harmonious. Without the capitalist's expectation of an interest return, the laborer would be worse off, having to wait longer than he wishes to wait. And without the laborer's preference for present goods, the capitalist would be worse off, having to resort to less-roundabout and less-efficient production methods than those which he desires to adopt.

Nor can the capitalist wage system be regarded as an impediment to the further development of the forces of production, as Marx claims. If the laborer were not permitted to sell his labor services, and the capitalist to buy them, output would lower, because production would have to take place with relatively reduced levels of capital accumulation.

Under a [--audio glitch--] homesteading, producing, and or savings. In each case it is brought about with the expectation that it will lead to an increase in the output of future goods. The value an actor attaches to his capital reflects the value he attaches to all expected future incomes, attributable to its cooperation, and discounted by his rate of time-preference.

If, as in the case of collectively-owned factors of production, an actor is no longer granted exclusive control over his accumulated capital and hence over the future income to be derived from its employment, but partial control instead is assigned to non-homesteaders, non-producers, and non-savers, the value for him of the expected income and hence then of the capital goods, is reduced. His effective rate of time-preference will rise. There will be less homesteading of resources whose scarcity is recognized, and less saving for the maintenance of existing -- and the production of new -- capital goods. The period of production, the round-aboutness of the production structure, will be shortened, and relative impoverishment will result.

If Marx's theory of capitalist exploitation, and his ideas on how to end exploitation and establish universal prosperity are false to the point of being ridiculous, it is clear that any theory of history which can be derived from it must be false too. Or, if it should be correct, it must have been derived incorrectly. Instead of going through the lengthier task of explaining all of the flaws in the Marxist argument as its sets out from its theory of capitalist exploitation and ends with the theory of history which I presented earlier, I will take a shortcut here.

I will now outline in the briefest possible way the correct Austrian, Misesian, Rothbardian theory of exploitation. I will then give an explanatory sketch of how this theory makes sense out of the class theory of history, and highlight along the way some key differences between this class theory and the Marxist one, and also point out some intellectual affinities between Austrianism and Marxism, stemming from their common conviction that there does indeed exist something like exploitation and a ruling class.

The starting-point for the Austrian exploitation theory is plain and simple, as it should be. Actually, it has already been established through the analysis of the Marxist theory. Exploitation characterized in fact the relationship between slave and slave-master, and between serf and feudal lord, but no exploitation was found possible under a 'clean' capitalism.

Now what is the principle difference between these two cases? The answer is this: the recognition or non-recognition of the homesteading principle. The peasant, under feudalism, is exploited because he does not have exclusive control over land that he homesteaded; and the slave, because he has no exclusive control over his own homesteaded body. If, contrary to this, everyone has exclusive control over his own body -- that is, everyone is a free laborer, and acts in accordance with the homesteading principle, there can be no exploitation.

It is logically absurd to claim that a person who homesteads goods not previously homesteaded by anybody else, or who employs such goods in the production of future goods, or who saves presently-homesteaded or produced goods in order to increase the future supply of goods, could thereby exploit anybody. Nothing has been taken away from anybody in this process, and additional goods have actually been created. And it would be equally absurd to claim that an agreement between different homesteaders, savers, and producers, regarding their non-exploitatively appropriated goods or services, could possibly contain any foul play then.

Instead, exploitation takes place whenever any deviation from the homesteading princple occurs. It is exploitation whenever a person successfully claims partial or full control over resources which he has not homesteaded, saved, or produced, and which he has not acquired contractually from a previous producer-owner. Exploitation is the expropriation of homesteaders, producers, and savers, by late-coming non-homesteaders, non-producers, and non-savers and non-contractors. It is the expropriation of people whose property claims are grounded in work and contract by people whose claims are derived from thin air, and who disregard other's works and contracts.

Needless to say, exploitation defined in this way is in fact an integral part of human history. One can acquire and increase wealth either through homesteading, producing, saving, or contracting -- or by by expropriating homesteaders, producers, savers, or contractors. There are no other ways. Both methods are natural to mankind. Alongside homesteading, producing, and contracting, there have always been non-productive and non-contractual property acquisitions.

And in the course of economic development, just as the producers and contractors can form firms, enterprises, and corporations, so can exploiters combine to large-scale exploitation enterprises -- to governments and states. The ruling class is initially composed of the members of such an exploitation firm. And with a ruling class established over a given territory, and engaged in the expropriation of economic resources from a class of exploited producers, the center of all history indeed becomes a struggle between exploiters and the exploited.

History then, correctly told, is essentially the history of the victories and the defeats of the rulers in their attempt to maximize exploitatively-appropriated income, and of the ruled in their attempts to resist and reverse this tendency. It is in this assesment of history that Austrians and Marxists agree. And by a notable intellectual affinity between Austrian's and Marxist's historical investigations exists. Both oppose a historeography which recognizes only action or interaction, economically and morally all on a par. And both oppose a historeography that instead of adopting such a value-neutral stand, thinks that one's own arbitrarily-introduced subjective value judgements have to provide the foil for one's historical narratives. Rather, history must be told in terms of freedom and exploitation, parasitism and economic impoverishment, private property and its destruction. Otherwise it is told false.

While productive enterprises come into or go out of existence because of voluntary support or its absense, a ruling class never comes to power because there is a demand for it. Nor does it abdicate when abdication is demonstrably demanded. One cannot say by any stretch of the imagination that homesteaders, producers, savers, and contractors, have demanded their exploitation. They must be coerced into accepting it, and this proves conclusively that the exploitation firm is not in demand at all.

Nor can one say that a ruling class can be brought down by abstraining from transactions with it, in the same way as one can bring down a productive enterprise. For the ruling class acquires its income through nonproductive and noncontractual transactions, and thus is unaffected by boycotts. Rather, what makes the rise of an exploitation firm possible, and what alone can in turn bring it down, is a specific state of public opinion -- or, in Marxist terminology, a specific state of class consciousness.

An exploiter creates victims, and victims are potential enemies. It is possible that this resistance can be lastingly broken down by force in the case of a group of men exploiting another group of roughly the same size. However, more than force is needed to expand exploitation over a population many times its own size. For this to happen, a firm must also have public support. A majority of the population must accept the exploitative actions as legitimate. This acceptance can range from active enthusiasm to passive resignation. But it must be acceptance in the sense that a majority must have given up the idea of actively or passively resisting any attempt to enforce nonproductive and noncontractual property acquisitions. The class consciousness must be low, undeveloped, and fuzzy.

Only as long as this state of affairs lasts, is there still room for an exploitive firm to prosper even if no actual demand for it exists. Only if and insofar as the exploited and expropriated develop a clear idea of their own situation, and are united with other members of their class through an ideological movement, which gives expression to the idea of a classless society where all exploitation is abolished, can the power of the ruling class be broken. Only if and insofar as the majority of the exploited public becomes consciously integrated into such a movement, and accordingly displays a common outrage over all nonproductive or noncontractual property acquisitions, shows a common contempt for everyone who engages in such acts, and deliberately contributes nothing to help them make successful, not to mention actively trying to obstruct them, can its power be brought down to crumble.

The gradual abolishment of feudal and absolutist rule and the rise of increasingly capitalist societies in Western Europe and the United States, and along with this unheard of economic growth and rising population numbers, was the result of an increasing class consciousness among the exploited, who were ideologically molded together through the doctrines of natural rights and liberalism. In this, Austrians and Marxists agree. They disagree however on the next assessment.

The reversal of this liberalization process, and steadily increased levels of exploitation in these societies, since the last third of the nineteenth century, and particularly pronounced since World War I, are the result of a loss in class consciousness. In fact, in the Austrian view, Marxism must accept much of the blame for this development, by misdirecting attention from the correct exploitation model of the homesteader-producer-saver-contractor vs. the non-homesteader-producer-saver-contractor, to the fallacious model of the wage-earner vs. the capitalist, thereby muddling things up.

The establishment of a ruling class over an exploited one many times its own size by coercion and the manipulation of public opinion -- that is, a low degree of class consciounsess among the exploited -- finds its most basic institutional expression in the creation of a system of public law, superimposed on private law. The ruling class sets itself apart and protects its position as the ruling class, by adopting a constitution for their firm's operation. On the one hand, by formalizing the internal operations within the state apparatus, as well as its relations vis-à-vis the exploited population, a constitution creates some degree of legal stability. The more familiar and popular private-law notions are incorporated into constitutional and public law, the more conducive this will be to the creation of favorable public opinion.

On the other hand, any constitution and public law also formalizes the exemptory status of the ruling class as regards the homesteading principle. It formalizes the right of the state's representatives to engage in nonproductive and noncontractual property acquisitions, and the ultimate subordination of private to public law. Class justice -- that is, a dualism of one set of laws for the rulers and another for the ruled -- comes to bear in this dualism of public and private law, and in the domination and infiltration of public law over and into private law. It is not because private property rights are recognized by law, as Marxists think, that class justice is established. Rather, class justice comes into being precisely whenever a legal distinction exists between a class of persons acting under and being protected by public law, and another class acting under and being protected instead by some subordinate private law.

More specifically then, the basic proposition of the Marxist theory of exploitation is false. The state is not exploitive because it protects the capitalist's property rights, but because it itself is exempt from the restriction of having to acquire property productively and contractually. In spite of this fundamental misconception however, Marxism, because it correctly interprets the state as exploitative, contrary for instance to the Public Choice school, which sees it as a normal firm among others, is on to some important insights regarding the logic of state operations.

For one thing, Marxism recognized the strategic function of redistributive state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income, a policy of divide et emperor, is the state's means with which it can create divisiveness among the public, and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself, through democratizing the state constitution and opening up every ruling position to everyone, and granting everyone the right to participate in the determination of state personnel and policy, is a means for reducing the resistance against exploitation as such.

Secondly, the state is indeed as Marxists see it, the great center of ideological propaganda and mystification. Exploitation is really freedom; taxes are really voluntary contributions; noncontractual relations are really 'conceptually contractual' ones; no-one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist, and the poor would perish. All of this is part of the ideological superstructure, designed to legitimize an underlying basis of economic exploitation.

And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking element, even though the exploitation is faulty. The reason is not that the borgeois establishment sees and supports the state as a guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state the very antithesis to private property that it is, and takes a close interest in it for this reason. The more successful a business, the [-- audio glitch --], but the larger also the potential gains that can be achieved if it can come under government's special protection, and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration.

The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest, because as an exploitative firm, the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations, and allowing them to counterfeit on top of its own counterfeited notes, under a system of fractional reserve banking, the state can easily reach this goal, and establish a system of state monopolized money and cartelized banking, controlled by its central bank. And through this direct counterfeiting connection with the banking system, and by extension the bank's major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society. Not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites, and the state.

Competition within the ruling class, and among different ruling classes, brings about a tendency toward increasing concentration. Marxism is right in this. However, its faulty theory of exploitation again leads it locate the cause for this tendency in the wrong place. Marxism sees such a tendency inherent in capitalist competition. Yet it is precisely so long as people are engaged in a 'clean' capitalism, that competition is not a form of zero-sum interaction. The homesteader, the producer, saver and contractor, do not gain at another's expense. Their gains either leave another's physical possesions completely unaffected, or they actually imply mutual gains -- as in the case of all contractual exchanges.

Capitalism thus can account for increases in absolute wealth. But under its regime no systematic tendency towards relative concentration can be said to exist. Instead, zero-sum interactions characterize not only the relationship between the ruler and the ruled, but also between competing rulers. Exploitation, defined as non-productive and non-contractual property acquisitions, is only possible as long as there is anything to be appropriated. Yet if there were free competition in the 'business' of exploitation, there would obviously be nothing left to expropriate. Thus, exploitation requires monopoly over some given territory and population.

And the competition between exploiters is by its very nature eliminative, and must bring about a tendency toward relative concentration of exploitation firms, as well as a tendency towards centralization within each exploitative firm. The development of states, rather than capitalist firms, provides the foremost illustration of this tendency. There are now a significantly smaller number of states, with exploitative control over much larger territories, than in previous centuries. And within each state apparatus, there has in fact been a constant tendency toward increasing the powers of the central government at the expense of its regional and local subdivisions.

Yet outside the state apparatus a tendency toward relative concentration has also become apparent, and for the same reason. Not, as should be clear by now, by any trait inherent in capitalism, but because the ruling class has expanded its rule into the midst of civil society, through the creation of a state banking business alliance, and in particular through the establishment of a system of central banking. If a concentration and centralization of state power then takes place, it is only natural that this be accompanied by a parallel process of relative concentration and cartelization of banking and industry. Along with increased state powers, the associated banking and business establishment's powers of eliminating or putting economic competitors at disadvantage by means of non-productive or non-contractual exploitation increases. Business concentration is a reflection of state-ization of economic life.

The primary means for the expansion of state power and the elimination of rival exploitation centers, is war and military domination. Interstate competition implies a tendency toward war and imperialism. As centers of exploitation, their interests are by nature antagonistic. Moreover, with each of them internally in command of the instrument of taxation and absolute counterfeiting powers, it is possible for the ruling classes to let others pay for their wars. Naturally, if one does not have to pay for one's own risky ventures, but can force others to do so, one tends to be a greater risk-taker, and more trigger-happy, than one otherwise would be.

Marxism, contrary to much of the so-called borgeois social sciences, gets the facts right: there is indeed a tendency towards imperialism operative in history, and the foremost imperialist powers are indeed the most advanced capitalist nations. Yet the explanation is once again faulty. It is the state, as an institution exempt from the capitalist rules of property acquisitions, that is by nature aggressive. And the historical evidence of a close correlation between capitalism and imperialism only seemingly contradicts this. It finds its explanation, easily enough, in the fact that in order to come out successfully from interstate wars, a state must be in command of sufficient, in relative terms, of sufficient economic resources. Other things being equal, the state with more ample resources will win.

As an exploitative firm, a state is by nature destructive of wealth and capital accumulation. Wealth is produced exclusively by civil society, and the weaker the state's exploitative powers, the more wealth and capital society accumulates. Thus, paradoxical as it may sound at first, the weaker or a more liberal a state is internally, the further developed capitalism is. A developed capitalist economy to develop from, makes a state richer, and a richer state then makes for more and more successful expansionist wars. It is this relationship which explains why initially the states of Western Europe, and in particular Great Britain, were the leading imperialist powers, and why in the 20th century this role has been assumed by the United States.

And a similarly straight-forward, yet once again entirely non-Marxist explanation exists for the observation, always pointed out by Marxists, that the banking and business establishment is usually among the most ardent supporters of military strength and imperial expansion. It is not because the expansion of capitalist markets requires exploitation, but because the expansion of state-protected and -privileged businesses requires that such protection be extended also to foreign countries, and that foreign competitors be hampered through noncontractual and nonproductive property acquisitions in the same way or even more so than internal competition.

Specifically, the business elite supports imperialism if this imperialism promises to lead to a position of military domination of one's own allied state over another state. For then, from a position of military strength, it becomes possible to establish a system of -- as one might call it -- monetary imperialism. The dominating state will use its superior power to enforce a policy of internationally coordinated inflation. Its own central bank sets the pace in the process of counterfeiting, and the central banks of the dominated states are ordered to use its currency, the currency of the dominating state, as their own reserve currency, and inflate on top of it. This way, along with the dominating state, its associated banking and business establishment, as the earliest receivers of the counterfeit reserve currency, can engage in an almost costless expropriation also of foreign property owners and income producers.

A double-layer of exploitation of a foreign state and a foreign elite, on top of a national state and a national elite, is imposed on the exploited class in the dominated territories, causing prolonged economic dependency and relative economic stagnation vis-à-vis the dominant nation. It is this very uncapitalist situation that characterizes the status of the United States and the US dollar, and that gives rise to the quite correct charge of US economic exploitation and dollar imperialism.

Now I come to the last thesis. The increasing concentration and centralization of exploitative powers, leads to economic stagnation, impedes the development of productive forces, and thereby creates the objective conditions for its ultimate demise and the establishment of a classless society capable of producing unheard-of economic prosperity. Contrary to Marxist claims, this is not of course the result of any historical laws. In fact, there exists no such thing as historical laws as Marxists conceive of them. Nor is it the result of a tendency for the profit rate to fall, with an increased organic composition of capital, as Marxists phrase it -- that is, an increase of constant capital as compared to variable capital. Instead [--audio glitch--] of crises, that promote the development of a higher degree of [--audio glitch--].

Exploitation is destructive of wealth-formation. Yet in the competition of exploitative firms, that is of states, less-exploitative ones, because they are in command of more ample resources, will win out over more exploitative ones. Hence the process of economic imperialism, specifically of US imperialism, initially has a relatively [--audio glitch--].

State rule becomes increasingly recognized as incompatible with the further development of productive forces and economic growth. Anti-statist social pressures mount, and bring a process of withering-away the state. Contrary to the Marxist model, however, if and insofar as this occurs, it will not mean 'social' ownership of means of production. In fact, not only is social ownership economically inefficient, as I've already explained earlier, moreover it is in fact incompatible with the idea that the state is withering away. Because, if means of production are owned collectively, and if it is realistically assumed that not everybody's idea as to what to do with these means happens to coincide as if by a miracle, then it is precisely socially owned factors of production which require state action. That is, they require state action in order to impose one person's will on another disagreeing person's will.

Instead the withering-away of the state, then, and with this the end of exploitation, means the establishment of a pure private property society, ordered by nothing but private law.

Thank you.

(applause)

Hans-Hermann Hoppe delivered the above in 1988 at a Mises Institute event titled Marx and Marxism, and I transcribed it from the mp3 available from its media archive.