The essence of Socialism is this: All the means of production are in the exclusive control of the organized community. This and this alone is Socialism. All other definitions are misleading.

It is possible to believe that Socialism can only be brought about under quite definite political and cultural conditions. Such a belief however is no justification for confining the term to one particular form of Socialism and withholding it from all other conceivable ways of realizing the socialist ideal. Marxian socialists have been very zealous in commending their own particular brand of Socialism as the only true Socialism and in insisting that all other socialist ideals and methods of realizing Socialism have nothing to do with genuine Socialism. Politically this attitude of the socialists has been extremely astute. It would have greatly increased the difficulties of their campaign if they had been prepared to admit that their ideal had anything in common with the ideals advocated by the leaders of other parties. They would never have rallied millions of discontented Germans to their banners if they had openly admitted that their aims were not fundamentally different from those of the governing classes of the Prussian state. If a marxian had been asked before October 1917 in what way his Socialism differed from the Socialism of other movements, especially from that of the Conservatives, he would have replied that under Marxian Socialism, Democracy and Socialism were indissolubly united, and moreover that Marxian Socialism was a stateless Socialism because it intended to abolish the State.

We have seen already how much these arguments are worth, and as a matter of fact, since the victory of the Bolsheviks, they have rapidly disappeared from the list of Marxian commonplaces. At any rate the conceptions of democracy and statelessness which the Marxians hold to-day are quite different from those which they held previously.

But the Marxians might have answered the question another way. They might have said that their Socialism was revolutionary, as opposed to the reactionary and conservative Socialism of others. Such an answer leads much sooner to a recognition of the difference between Marxian social democracy and other socialist movements. For to a Marxian, revolution does not merely signify a forcible alteration of the existing state of affairs, but, as befits his peculiar fatalism, a process which brings mankind nearer the fulfilment of its destiny.1  For him the impending social revolution which will bring about Socialism is the last step to eternal salvation. Revolutionaries are those whom history has chosen to be the instruments for the realization of its plan. The revolutionary spirit is the sacred fire which has descended upon them and enables them to accomplish this great work. In this sense the Marxian socialist regards it as the most notable characteristic of his party that it is a revolutionary party. In this sense he regards all other parties as a single, uniform, reactionary mass because they are opposed to his methods of achieving ultimate bliss.

It is obvious that all this has nothing to do with the sociological concept of the socialist community. It is certainly a remarkable thing that a group of persons should claim to be the only people elected to bring us to salvation; but when these persons know of no other road to salvation than one which many others have believed in, the assertion that they exclusively are ordained for the task is not sufficient to differentiate their aim fundamentally from that of others.

• 1On the other meanings which the term Revolution has for the Marxists see above, p. 81 et seq.

To understand the concept of State Socialism it is not sufficient to explain the term etymologically. The history of the word reflects only the fact that State Socialism was the Socialism professed by the authorities of the Prussian and other German states. Because they identified themselves with the State and with the form taken by the State and with the idea of the State generally, it suggested calling the Socialism which they adopted State Socialism. The more Marxian teaching about the class character of the State and the decay of the State obscured the fundamental idea of the State, the easier it became to use the term.

Marxian Socialism was vitally concerned in making a distinction between nationalization and socialization of the means of production. The slogans of the social democratic party would never have become popular if they had represented nationalization of the means of production as the ultimate aim of socialist change. For the state known to the people among whom Marxism found its widest acceptance was not such as to inspire much hope from its incursions into economic activity. The German, Austrian and Russian disciples of Marxism lived in open feud with the powers which to them represented the State. In addition they had the opportunity of gauging the results of nationalization and municipalization; and, with the best will in the world, they could not overlook the great shortcomings of state and municipal enterprise. It was quite impossible to arouse enthusiasm for a programme aiming at nationalization. A party of opposition was bound above all things to attack the hated authoritarian state; only in this way could it win over the discontented. From this need of political agitation arose the marxian doctrine of the withering away of the state. The liberals had demanded the limitation of the authority of the state and the transfer of government to the representatives of the people; they had demanded the free state. Marx and Engels tried to outbid them by unscrupulously adopting the anarchistic doctrine of the abolition of all state authority regardless of the fact that Socialism would not mean the abolition, but rather the unrestricted expansion of the power of the state.

Equally untenable and absurd as the doctrine of the withering away of the state under Socialism is the academic distinction between nationalization and socialization which is closely bound up with it. The Marxians themselves are so conscious of the weakness of their line of argument that they usually avoid discussing this point and confine themselves to talking of the socialization of the means of production, without any further elaboration of the idea, so as to create the impression that socialization is something different from the nationalization with which everybody is acquainted. When they cannot avoid discussing this ticklish point they are obliged to admit that the nationalization of undertakings is a ‘preliminary stage in the acquisition of all productive powers by society itself1  or ‘the natural jumping-off point in the process leading to the socialist community’.2

Thus Engels finally contents himself with entering a caveat against accepting without further ado ‘every’ form of nationalization as socialistic. He would not in the first place describe as ‘steps towards Socialism’, nationalization carried out for purposes of state finance, such as might be adopted ‘chiefly to provide new sources of revenue independent of Parliamentary sanction’. Nevertheless for these reasons nationalization would also mean, in the marxian language, that in one branch of production, the appropriation of surplus value by the capitalist was abolished. The same is true of nationalization carried out for political or military reasons which Engels also refused to accept as socialistic. He regards it as the criterion of socialistic nationalization that the means of production and trade taken over ‘should have actually out-grown the direction by joint stock companies, so that nationalization has become economically inevitable’. This necessity arises first in the case of ‘the large scale communications: posts, telegraphs and railways’.3  But it is precisely the largest railways in the world — the North American — and the most important telegraphs lines — the deep sea cables — that have not been nationalized, whilst small unimportant lines in the etatistic countries have long been nationalized. The nationalization of the postal service moreover was primarily for political reasons and that of the railways for military ones. Can it be said that these nationalizations were ‘economically inevitable?’ And what on earth does ‘economically inevitable’ mean?

Kautsky, too, contents himself with rejecting the view ‘that every nationalization of an economic function or of an economic enterprise is a step towards Socialism and that this can be brought about by a general nationalization of the whole economic machine without the need for a fundamental change in the nature of the State’.4  But no one has ever disputed that the fundamental nature of the State would be greatly changed if it were transformed into a socialist community through the nationalization of the whole economic apparatus. Thus Kautsky is unable to say anything more than that ‘as long as the possessing classes are the governing classes’ complete nationalization is impossible. It will be achieved when ‘the workers become the governing classes in the state’. Only when the proletariat has seized political power will it ‘transform the state into a great fundamentally self-sufficient economic society’.5  The main question — the question which alone needs an answer — whether complete nationalization carried out by another party than the socialist one would also constitute Socialism, Kautsky carefully avoids.

There is, of course, a fundamental distinction of the highest importance between the nationalization or municipalization of individual undertakings which are publicly or communally run in a society otherwise maintaining the principle of private property in the means of production, and the complete socialization which tolerates no private ownerships by individuals in the means of production alongside that of the socialist community. As long as only a few undertakings are run by the State, prices for the means of production will be established in the market, and it is thus still possible for State undertakings to make calculations. How far the conduct of the undertakings would be based on the results of these calculations is another question; but the very fact that to a certain extent the results of operations can be quantitatively ascertained provides the business administration of such undertakings with a gauge which would not be available to the administration of a purely socialist community. The way in which State undertakings are run may justifiably be called bad business but it is still business. In a socialist community, as we have seen, economy in the strict sense of the word, cannot exist.6

Nationalization of all the means of production involves complete Socialism. Nationalization of some of the means of production is a step towards complete Socialism. Whether we are to remain satisfied with the first step or whether we desire to proceed further does not alter its fundamental character. In the same way, if we wish to transfer all undertakings to the ownership of the organized community we cannot do otherwise than nationalize every single undertaking, simultaneously or successively.

The obscurity thrown by Marxism on the idea of socialization was strikingly illustrated in Germany and Austria when the social-democrats came into power in November 1918. A new and hitherto almost unheard slogan became popular overnight: Socialization (Sozialisierung) was the solution. This was merely the paraphrasing of the German word Vergesellschaftung into a fine-sounding foreign word. The idea that Sozialisierung was nothing more than nationalization or municipalization could not occur to anybody; anyone who maintained this was simply believed to know nothing about it, since it was thought that between the two things yawned an abysmal gap. The Socialization Commissions set up soon after the social-democrats acquired power were set the problem of defining Sozialisierung in such a way that, ostensibly at least, it could be distinguished from the nationalization and municipalization of the previous regime.

The first report issued by the German commission dealt with the socialization of the coal industry, and in rejecting the idea of achieving this by the nationalization of the coal mines and the coal trade it emphasized in a striking manner the shortcomings of a national coal industry. But nothing was said as to how socialization differed actually from nationalization. The report professed the opinion that ‘an isolated nationalization of the coal industry cannot be considered as socialization while capitalist enterprise continues in other branches of production: it would only mean the replacement of one employer by another’. But it left open the question whether an isolated ‘socialization’ such as it intended and proposed could mean anything else under the same conditions.7  It would have been understandable if the commission had gone on to say that in order to fulfil the happy results of a socialist order of society it was not sufficient to nationalize one branch of production, and had recommended that the State should take over all undertakings at one blow, as the Bolsheviks in Russia and Hungary had done and as the Spartacists in Germany wanted to do. But it did not do this. On the contrary, it elaborated proposals for socialization which advocated the isolated nationalization of various branches of production, beginning with coal production and distribution. That the commission avoided using the term nationalization makes no difference. It was mere juristic hair-splitting when the commission proposed that the owners of the socialized German coal industry should not be the German State but a ‘German public coal trust’ and when it went on to assert that this ownership should be conceived ‘only in a formal juristic sense’, but that ‘the material position of the private employer and thereby the possibility of exploiting workers and consumers’ is denied to this public trust,8  the commission was using the emptiest of gutter catchwords. Indeed the whole report is nothing but a collection of all the popular fallacies about the evils of the capitalist system. The only way in which the coal industry, socialized in accordance with the proposals of the majority, would differ from other public undertakings is the composition of its directorate. At the head of the coal mines there should be no single official but a committee constituted in a certain way. Parturiunt montes, nascetur ridiculus mus!

State Socialism, therefore, is not distinguished by the fact that the State is the pivot of the communal organization, since Socialism is quite inconceivable otherwise. If we wish to understand its nature we must not look to the term itself. This would take us no further than would an attempt to grasp the concept of metaphysics from an examination of the meaning of the parts that make up the word. We must ask ourselves what ideas have been associated with the expression by those who are generally regarded as the followers of the state socialistic movements, that is, the out-and-out etatists.

Etatistic Socialism is distinguished from other socialist systems in two ways. In contradistinction to many other socialist movements which contemplate the greatest possible measure of equality in the distribution of the social income between individuals, Etatistic Socialism makes the basis of distribution the merit and rank of the individual. It is obviously superfluous to point out that judgment of merit is purely subjective and cannot in any way be tested from a scientific view of human relations. Etatism has quite definite views about the ethical value of individual classes in the community. It is imbued with a high esteem for the monarchy, the nobility, big landowners, the clergy, professional soldiers, especially the officer class, and officials. With certain reservations it also allots a privileged position to savants and to artists. Peasants and small tradesmen are in a special class and below them come the manual labourers. At the bottom are the unreliable elements which are discontented with the sphere of action and the income allotted to them by the etatist plan and strive to improve their material position. The etatist mentally arranges a hierarchy of the members composing his future state. The more noble will have more power, more honours and more income than the less noble. What is noble and what is ignoble will be decided above all by tradition. To the etatist the worst feature of the capitalist system is that it does not assign income according to his valuation of merit. That a milk dealer or a manufacturer of trouser buttons should draw a larger income than the sprig of a noble family, than a privy councillor or a lieutenant, strikes him as intolerable. In order to remedy this state of affairs the capitalist system must be replaced by the etatistic.

This attempt on the part of the etatists to maintain the traditional social order of rank and the ethical valuation of different classes, in no way contemplates transferring all property in the means of production to the formal ownership of the State. This indeed, in the etatistic view, would be a complete subversion of all historical rights. Only the large undertakings would be nationalized, and even then an exception would be made in favour of large scale agriculture, especially inherited family property. In agriculture and in small and medium-sized industries private property is to continue in name at least. In the same way the free professions will be allowed scope, with certain limitations. But all enterprises must become essentially state undertakings. The agriculturist will retain the name and title of owner, but he will be forbidden ‘egoistically to look merely to mercantile profit’; he has the ‘duty to execute the aims of the State’.9  For agriculture, according to the etatist, is a public office. ‘The agriculturist is a state official and must cultivate for the needs of the State according to his best knowledge and conscience, or according to state orders. If he gets his interest and sufficient to maintain himself he has everything he is entitled to demand.’10  The same applies to the artisan and the trader. For the independent entrepreneur with free control over the means of production there is as little room in State Socialism as in any other Socialism. The authorities control prices and decide what and how much shall be produced and in what way. There will be no speculation for ‘excessive’ profit. Officials will see to it that no one draws more than the appropriate ‘fair income’, that is to say an income ensuring him a standard of life appropriate to his rank. Any excess will be ‘taxed away’.

Marxian writers are also of the opinion that to bring Socialism about, small undertakings need not necessarily be transferred directly to public ownership. Indeed they have regarded this as quite impossible; the only way in which socialization can be carried out for these small undertakings is to leave them in the formal possession of their owners and simply subject them to the all-embracing supervision of the State. Kautsky himself says that ‘no socialist worthy of serious consideration has ever demanded that peasants should be expropriated, let alone their property confiscated.11  Neither does Kautsky propose to socialize small producers by expropriating their property.12  The peasant and the craftsman will be fitted into the machinery of the socialist community in such a way that their production and the valuation of their products will be regulated by the economic administration whilst nominally the property will remain theirs. The abolition of the free market will transform them from independent owners and entrepreneurs into functionaries of the socialist community, distinguished from other citizens only by the form of the remuneration.13  It cannot therefore be regarded as a peculiarity of the etatistic socialist scheme that in this way remnants of private property in the means of production formally persist. The only characteristic peculiarity is the extent to which this method of arranging the social conditions of production is applied. It has already been said that etatism in general proposes in the same way to leave the large landowners — with the exception perhaps of the latifundia owners — in formal possession of their property. What is still more important is that it proceeds upon the assumption that the greater part of the population will find work in agriculture and small concerns, and that comparatively few will enter the direct service of the State as employees in large undertakings. Not only is etatism opposed to orthodox Marxists, as represented by Kautsky, through its theory that small scale agriculture is not less productive than large scale agriculture, but it is also of the opinion that in industry too, small scale undertakings have a great scope for operation at the side of the large concerns. This is the second peculiarity which distinguishes State Socialism from other socialist systems, especially social-democracy.

It is perhaps unnecessary further to elaborate the picture of the ideal State drawn by the state socialists. Over a large part of Europe it has been for decades the tacit ideal of millions, and everyone knows it even if no one has clearly defined it. It is the Socialism of the peaceful loyal civil servant, of the land-owner, the peasant, the small producer and of countless workers and employees. It is the Socialism of the professors, the famous ‘socialists of the chair’ — the Katheder Sozialismus — it is the Socialism of artists, poets, writers in an epoch of the history of art plainly bearing all the signs of decay. It is the Socialism supported by the churches of all denominations. It is the Socialism of Caesarism and of Imperialism, the ideal of the so-called ‘social monarchy’. It is this that the policy of most European states, especially the German states, envisaged as the distant goal of man’s endeavours. It is the social ideal of the age which prepared the Great War and perished with it.

A Socialism which allots the shares of individuals in the social dividend according to merit and rank can be conceived only in the form of State Socialism. The hierarchy on which it bases its distribution is the only one popular enough not to arouse overwhelming opposition. Although it is less able to withstand rationalist criticism than many others that might be suggested, nevertheless it has the sanction of age. In so far as State Socialism attempts to perpetuate this hierarchy and to prevent any change in the scale of social relationships, the description ‘conservative socialism’, sometimes applied to it, is justified.14  In fact it is imbued more than any other form of Socialism with ideas that credit the possibility of complete crystallization and changelessness of economic conditions: its followers regard every economic innovation as superfluous and even harmful. And corresponding to this attitude is the method by which Etatism wishes to attain its ends. If Marxian Socialism is the social ideal of those who expect nothing except through a radical subversion of the existing order by bloody revolutions, State Socialism is the ideal of those who call in the police at the slightest sign of trouble. Marxism relies upon the infallible judgment of a proletariat filled with the revolutionary spirit, Etatism upon the infallibility of the reigning authority. They both agree in belief in a political absolutism which does not admit the possibility of error.

In contrast to State Socialism, Municipal Socialism presents no special form of the socialist ideal. The municipalization of undertakings is not regarded as a general principle on which to base a new arrangement of economic life. It would affect only undertakings with a market limited in space. In a rigorous system of State Socialism the municipal undertakings would be subordinated to the chief economic administration and would be no freer to develop than the agricultural and industrial undertakings nominally remaining in private hands.

• 1Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 299.
• 2Kautsky, Das Erfurter Programm, 12th Edition, Stuttgart 1914, p. 129.
• 3Engels, Herrn Eugen Dührings Umwälzung der Wissenschaft, p. 298 et seq.
• 4Kautsky, Das Erfurter Programm, p. 129.
• 5Kautsky, Das Erfurter Programm, p. 129.
• 6See above p. 119 et seq.
• 7Bericht der Sozialisierungskommission über die Frage der Sozialisierung des Kohlenbergbaues vom 31 Juli 1920, with appendix: Vorläufiger Bericht vom 15 Februar 1919, 2nd Edition, Berlin 1920, p. 32 et seq.
• 8Bericht der Sozialisierungskommission über die Frage der Sozialisierung des Kohlenbergbaues vom 31 Juli, 1920, with appendix: Vorläufiger Bericht vom 15 Februar 1919, 2nd Edition, Berlin 1920, p. 37.
• 9Philipp v. Arnim, Ideen zu einer vollständigen landwirtschaftlichen Buchhaltung, 1805, p. vi (quoted by Waltz, Vom Reinertrag in der landwirtschafi, p. 20).
• 10Philipp v. Arnim, Ideen zu einer vollstandigen landwirtschaftlichen Buchhaltung, 1805, p. 2 (quoted in Waltz, op. cit., p. 21). See also Lenz, Agrarlehre und Agrarpolitik der deutschen Romantik, Berlin 1912, p. 84. See similar remarks of Prince Alois Liechtenstein, a leader of the Austrian Christian Socialists, quoted in Nitti, heSocialisms catholique, p. 370 et seq.
• 11Kautsky, Die Soziale Revolution, II, p. 33.
• 12Ibid. p. 35.
• 13Bourguin, Die Sozialistischen Systeme, p. 62 et seq.
• 14Andler (Les Origines du Socialisme d’Etat en Allemagne, and Edition, Paris 1911, p. 2) specially stresses this character of state Socialism.

Military Socialism is the Socialism of a state in which all institutions are designed for the prosecution of war. It is a State Socialism in which the scale of values for determining social status and the income of citizens is based exclusively or preferably on the position held in the fighting forces. The higher the military rank the greater the social value and the claim on the national dividend.

The military state, that is the state of the fighting man in which everything is subordinated to war purposes, cannot admit private ownership in the means of production. Standing preparedness for war is impossible if aims other than war influence the life of individuals. All warrior castes whose members have been supported by the assignment of manorial rights or of grants of land, or even by industries based on a supply of unfree labour, have in time lost their warlike nature. The feudal lord became absorbed in economic activity and acquired other interests than waging war and reaping military honours. All over the world the feudal system demilitarized the warrior. The knights were succeeded by the junkers. Ownership turns the fighting man into the economic man. Only the exclusion of private property can maintain the military character of the State. Only the warrior who has no other occupation apart from war than preparation for war, is always ready for war. Men occupied in affairs may wage wars of defence but not long wars of conquest.

The military state is a state of bandits. It prefers to live on booty and tribute. Compared with this source of income the product of economic activity plays only a subordinate role; often it is completely lacking. And if booty and tribute accrue from abroad it is clear that they cannot go direct to individuals but only to the common treasury, which can distribute them only according to military rank. The army which alone assures the continuance of this source of income would not tolerate any other method of distribution. And this suggests that the same principle of distribution should be applied to the products of home production, which similarly accrue to citizens as the tribute and yield of serfdom.

In this way the communism of the Hellenic pirates of Lipara and all other robber states can be explained.1  It is the ‘communism of robbers and freebooters’,2  arising from the application of military ideas to all social relationships. Caesar relates of the Suebi, whom he calls gens longe bellicosissima Germanorum omnium, that they sent warriors over the borders every year for plunder. Those who remained behind carried on economic activity for those in the field; in the following year the roles were exchanged. There was no land in the exclusive ownership of individuals.3  Only by each sharing in the product of the military and economic activity carried on with a common purpose and subject to a common danger, can the warrior state make every citizen a soldier and every soldier a citizen. Once it allows some to remain soldiers and others to remain citizens working with their own property the two callings will soon stand out in contrast. Either the warriors must subjugate the citizens and in that case it would be doubtful if they could set out on plundering expeditions leaving an oppressed population at home —or the citizens will succeed in gaining the upper hand. In the latter event the warriors will be reduced to mercenaries and forbidden to set out in search of plunder because, as a standing danger, they cannot be allowed to grow too powerful. In either case the state must lose its purely military character. Therefore any weakening of ‘communistic’ institutions involves a weakening of the military nature of the state, and the warrior society is slowly transformed into an industrial one.4

The forces driving a military state to Socialism could be clearly observed in the Great War. The longer the war lasted and the more the states of Europe were transformed into armed camps, the more politically untenable seemed the distinction beween the fighting man, who had to endure the hardships and danger of the war, and the man who remained at home to profit from the war boom. The burden was distributed too unequally. If the distinction had been allowed to persist and the war had continued longer the countries would infallibly have been split into two factions and the armies would have finally turned their weapons against their own kinsmen. The Socialism of conscript armies demands for its complement the Socialism of conscript labour at home.

The fact that they cannot preserve their military character without a communistic organization does not strengthen the warrior states in the war. Communism is for them an evil which they must accept; it produces a weakness by which they eventually perish. Germany in the first years of the war trod the path to Socialism because the military etatistic spirit, which was responsible for the policy leading to the war, drove it towards State Socialism. Towards the end of the war socialization was more and more energetically carried out because, for the reasons just stated, it was necessary to make conditions at home similar to those at the front. State Socialism did not alleviate the situation in Germany, however, but worsened it; it did not stimulate production but restricted it; it did not improve the provisioning of the army and those at home but made it worse.5  And needless to say it was the fault of the etatistic spirit that in the tremendous convulsions of the war and the subsequent revolution not one strong individual arose from the German people.

The lesser productivity of communistic methods of economic activity is a disadvantage to the communistic warrior state when it comes into clash with the richer and therefore better armed and provisioned members of nations which acknowledge the principle of private property. The destruction of initiative in the individual, unavoidable under Socialism, deprives it in the decisive hour of battle of leaders who can show the way to victory, and subordinates who can carry out their instructions. The great military communist state of the Incas6  was easily overthrown by a handful of Spaniards.

If the enemy against which the warrior state has to fight is to be found at home then we can speak of a communism of overlords. ‘Casino communism’ was the name given by Max Weber to the social arrangements of the Dorians in Sparta because of their habits of eating together.7  If the ruling caste, instead of adopting communistic institutions assigns land together with its inhabitants to the ownership of individuals sooner or later it will be ethnically absorbed by the conquered. It becomes tranformed into a land-owning nobility, which eventually draws even the conquered into military service. In this way the state loses the character based upon the waging of war. This development took place in the kingdoms of the Langobards, the West Goths and the Franks and in all the regions where the Normans appeared as conquerors.

• 1On Lipara see Poehlmann, Geschichte der sozialen Frage und des Sozialismus in der antiken welt, Vol. I, p. 44 et seq.
• 2Max Weber, Der Streit urn dun Charakter der altgermanischen Sozialverfassung in der deutschen Literatur des letzten Jahrzehnts (Jahrbücher fur Nationalökonomie und Statistik, Vol. XXVIII, 1904, p. 445).
• 3Caesar, De bello Gallico, IV, 1.
• 4Herbert Spencer, Die Prinzipien der Soziologie, translated by Vetter, Vol. II, Stuttgart 1899, p. 710 et seq.
• 5See my Nation, Staat und Wirtschaft, p. 115 et seq.; 143 et seq.
• 6Wiener (Essai sur les institutions politiques, religieuses, économiques et societies de l’Empire des Incas, Paris 1874, pp. 64, 90 et seq) attributes Pizarro’s easy conquest of Peru to the fact that communism had unnerved the people.
• 7Max Weber, Der Streit urn der Charakter der altgermanischen Sozialverfassung in der deutschen Literatur des letzten Jahrzehnts (Jahrbücher für Nationalökonomie und Statistik, Vol. XXVIII, 1904), p. 445.

A theocratic organization of the state demands either a self-sufficing family economy or the socialist organization of industry. It is incompatible with an economic order which allows the individual free play to develop his powers. Simple faith and economic rationalism cannot dwell together. It is unthinkable that priests should govern entrepreneurs.

Christian Socialism, as it has taken root in the last few decades among countless followers of all Christian churches, is merely a variety of State Socialism. State Socialism and Christian Socialism are so entangled that it is difficult to draw any clear line between them, or to say of individual socialists whether they belong to the one or the other. Even more than etatism, Christian Socialism is governed by the idea that the economic system would be perfectly stationary if the desire for profit and personal gain by men directing their efforts solely to the satisfaction of material interests did not disturb its smooth course. The advantage of progressive improvements in methods of production is admitted, if only with limitations; but the Christian socialist does not clearly understand that it is just these innovations which disturb the peaceful course of the economic system. In so far as this is recognized, the existing state of affairs is preferred to any further progress. Agriculture and handicraft, with perhaps small shopkeeping, are the only admissible occupations. Trade and speculation are superfluous, injurious, and evil. Factories and large scale industries are a wicked invention of the ‘Jewish spirit’; they produce only bad goods which are foisted on buyers by the large stores and by other monstrosities of modern trade to the detriment of purchasers. It is the duty of legislation to suppress these excesses of the business spirit and to restore to handicraft the place in production from which it has been displaced by the machinations of big capital.1  Large transport undertakings that cannot be abolished should be nationalized.

The basic idea of Christian Socialism that runs through all the teachings of its representatives is purely stationary in outlook. In the economic system which they have in mind there is no entrepreneur, no speculation, and no ‘inordinate’ profit. The prices and wages demanded and given are ‘just’. Everyone is satisfied with his lot because dissatisfaction would signify rebellion against divine and human laws. For those incapable of work Christian charity will provide. This ideal it is asserted was achieved in medieval times. Only unbelief could have driven mankind out of this paradise. If it is to be regained mankind must first find the way back to the Church. Enlightenment and liberal thought have created all the evil which afflicts the world to-day.

The protagonists of Christian social reform as a rule do not regard their ideal Society of Christian Socialism as in any way socialistic. But this is simply self-deception. Christian Socialism appears to be conservative because it desires to maintain the existing order of property, or more properly it appears reactionary because it wishes to restore and then maintain an order of property that prervailed in the past. It is also true that it combats with great energy the plans of socialists of other persuasions for a radical abolition of private property, and in contradistinction to them asserts that not Socialism but social reform is its aim. But Conservatism can only be achieved by Socialism. Where private property in the means of production exists not only in name but in fact, income cannot be distributed according to an historically determined or an any other way permanently established order. Where private property exists, only market prices can determine the formation of income. To the degree in which this is realized, the Christian social reformer is step by step driven to Socialism, which for him can be only State Socialism. He must see that otherwise there cannot be that complete adherence to the traditional state of affairs which his ideal demands. He sees that fixed prices and wages cannot be maintained, unless deviations from them are menaced by threats of punishment from a supreme authority. He must also realize that wages and prices cannot be arbitrarily determined according to the ideas of a world improver, because every deviation from market prices destroys the equilibrium of economic life. He must therefore progressively move from a demand for price regulation to a demand for a supreme control over production and distribution. It is the same path that practical etatism has followed. At the end in both cases, is a rigid Socialism which leaves private property only in name, and in fact transfers all control over the means of production to the State.

Only a part of the Christian socialist movement has openly subscribed to this radical programme. The others have shunned an open declaration. They have anxiously avoided drawing the logical conclusions of their premises. They give one to understand that they are combating only the excrescences and abuses of the capitalist order; they protest that they have not the slightest desire to abolish private property; and they constantly emphasize their opposition to Marxian Socialism. But they characteristically perceive that this opposition mainly consists in differences of opinion as to the way in which the best state of society can be attained. They are not revolutionary and expect everything from an increasing realization that reform is necessary. For the rest they constantly proclaim that they do not wish to attack private property. But what they would retain is only the name of private property. If the control of private property is transferred to the State the property owner is only an official, a deputy of the economic administration.

It can be seen at once how the Christian Socialism of to-day corresponds to the economic ideal of the medieval Scholastics. The starting point, the demand for ‘just’ wages and prices, that is, for a definite historically attained distribution of income, is common to both. Only the realization that this is impossible if the economic system retains private property in the means of production, forces the modern Christian reform movement towards Socialism. In order to achieve their demands, they must advocate measures which, even if formally retaining private property, lead to the complete socialization of society.

It will be shown later that this modern Christian Socialism has nothing to do with the suppositious but often cited Communism of the Early Christians. The socialist idea is new to the Church. This is not altered by the fact that the most recent development of Christian social theory has led the Church2  to recognize the fundamental rightfulness of private property in the means of production, whereas the early Church teaching, in view of the command of the gospels condemning all economic activity, had avoided unconditionally accepting even the name of private property. For we must understand what the Church has done in recognizing the rightfulness of private property, only as opposition to the efforts of the socialists to overthrow the existing order forcibly. In reality the Church desires nothing but State Socialism of a particular colour.

The nature of socialistic methods of production is independent of the concrete methods involved in the attempt to realize it. Every attempt at Socialism, however brought about, must founder on the impracticability of setting up a purely socialistic economy. For that reason, and not because of deficiencies in the moral character of mankind, Socialism must fail.

It may be granted, that the moral qualities required of the members of a socialist community could best be fostered by the Church. The spirit which must prevail in a socialist community is most akin to that of a religious community. But to overcome the difficulties in the way of establishing a socialist community would require a change in human nature or in the laws of the nature by which we are surrounded, and even faith cannot bring this to pass.

• 1See the criticism of the economic policy of the Austrian Christian-Socialist Party in Sigmund Mayer, Die Aufhebung des Befähigungsnachweises in Osterrach, Leipzig 1894, especially p. 124 et seq.
• 2In the above text we have always spoken only of the Church in general, without considering the differences between the various denominations. This is quite admissible. The evolution towards Socialism is common to all denominations. In Catholicism, Leo XIII’s encyclical, ‘Rerum Novarum’, of 1891, has recognized the origin of private property in Natural Law; but simultaneously the Church laid down a series of fundamental ethical principles for the distribution of incomes, which could be put into practice only under State Socialism. On this basis stands also Pius XI’s encyclical, ‘Quadragesimo anno’ of 1931. In German Protestantism the Christian Socialist idea is so tied up with State Socialism that the two can hardly be distinguished.

The so-called planned economy (Planwirtschaft) is a more recent variety of Socialism.

Every attempt to realize Socialism comes up quickly against insurmountable difficulties. This is what happened to Prussian State Socialism. The failure of nationalization was so striking that it could not be overlooked. Conditions in government undertakings were not such as to encourage further steps along the road to state and municipal control. The blame for this was thrown upon the officials. It had been a mistake to exclude the ‘business man’. In some way or other the abilities of the entrepreneur must be brought to the service of Socialism. From this notion came the arrangement of ‘mixed’ enterprise. Instead of complete nationalization or municipalization we have the private undertaking in which the state or municipality is interested. In this way, on the one side, regard is paid to the demand of those who think it is not right that the state and municipalities should not share in the yield of undertakings carried on under their august sway. (Of course the State might get and gets its share more effectively by taxation without exposing the public finances to the possibility of loss.) On the other hand it is thought by this system to bring all the active powers of the entrepreneur into the service of the common enterprise — a gross error. For as soon as representatives of the government take part in administration all the hindrances which cripple the initiative of public officials come into play. The ‘mixed’ form of undertaking makes it possible to exempt employees and workers from the regulations applying to public officials and thereby to mitigate slightly the harmful effects which the official spirit exerts upon the profitability of undertakings. The mixed undertakings have certainly turned out better on the whole than the purely governmental undertakings. But this no more shows that Socialism is practicable than do the good results occasionally shown by individual public undertakings. That it is possible under certain favourable circumstances to carry on a public enterprise with some success in the midst of an economic society otherwise based on private property in the means of production does not prove that a complete socialization of society is practicable.

During the Great War the authorities in Germany and Austria tried, under war Socialism, to leave to the entrepreneurs the direction of nationalized undertakings. The haste with which socialist measures were adopted under very difficult war conditions and the fact that at the outset no one had any clear idea of the fundamental implications of the new policy, nor of the lengths to which it was to be carried, left no other means open. The direction of individual branches of production was made over to compulsory associations of employers, who were put under government supervision. Price regulation on the one hand and drastic taxation of profits on the other hand were to ensure that the employer was no more than an employee sharing the yield.1  The system worked very badly. Nevertheless it was necessary to adhere to it, unless all attempts at Socialism were to be abandoned, because no one knew anything better to put in its place. The memorandum of the German Economic Ministry (May 7th, 1919), drawn up by Wissell and Moellendorff, states in plain words, that there was nothing else for a socialist government to do but to maintain the system known during the war as ‘war economy’. ‘A socialist government’ it says ‘cannot ignore the fact that, because of a few abuses, public opinion is being poisoned by interested criticisms against a systematic planned economy; it may improve the planned system; it may reorganize the old bureaucracy; it may even in the form of self-government make over the responsibility to the people concerned in the business; but it must proclaim itself an adherent of the compulsory planned economy: that is to say an adherent of the most unpopular concepts of duty and coercion.’2

Planned economy is a scheme of a socialist community that attempts to solve in a particular way the insoluble problem of the responsibility of the acting organ. Not only is the idea on which this attempt is based deficient, but the solution itself is only a sham, and that the creators and supporters of this scheme should overlook this, is particularly characteristic of the mental attitude of officialdom. The self-government granted to individual areas and to individual branches of production is important only in minor matters, for the centre of gravity of economic activity lies in the adjustment between individual areas and individual branches of production. This adjustment can only proceed uniformly; if this is not provided for, the whole plan would have to be regarded as syndicalist. In fact Wissel and Moellendorff envisage a State Economic Council which has ‘supreme control of the German economic system in co-operation with the highest competent organs of the State.’3  In essence, therefore, the whole proposal comes to nothing more than that responsibility for the economic administration is to be shared between the ministers and a second authority.

The Socialism of the planned economy is distinguished from the State Socialism of the Prussian State under the Hohenzollerns chiefly by the fact that the privileged position in business control and in the distribution of income, which the latter allotted to the Junkers and the bureaucrats, is here assigned to the ci-devant entrepreneur. This is an innovation dictated by the change in the political situation resulting from the catastrophe which has overwhelmed the Crown, the nobility, the bureaucracy and the officer class; apart from this it is without significance for the problem of Socialism.

In the last few years, a new word has been found for that which was covered by the expression ‘planned economy’: State Capitalism, and no doubt in the future many more proposals for the salvaging of Socialism will be brought forward. We shall learn many new names for the same old thing. But the thing, not its names, is what matters, and all schemes of this sort will not alter the nature of Socialism.

• 1On War-Socialism and its consequences, see my Nation, Staat und Wirtschaft, p. 140 et seq.
• 2Denkschrift des Reichswirtschaftsministeriums, reprinted in Wissell, op. cit. p. 106.
• 3Denkschrift des Reichewirtschaftsministeriums, reprinted in Wissell, p. 116.

In the first years after the World War, people in England and on the Continent looked on Guild Socialism as the panacea. It has long since been forgotten. Nevertheless, we must not pass it over in silence, when discussing socialist projects; for it represents the one contribution to modern socialist plans made by the Anglo-Saxons, in economic matters the most advanced of peoples. Guild Socialism is another attempt to surmount the insoluble problem of a socialist direction of industry. It did not need the failure of state socialistic activities to open the eyes of the English people, preserved by the long reign of liberal ideas from that over-valuation of the State which has been prevalent in modern Germany. Socialism in England has never been able to overcome the mistrust of the government’s capacity to regulate all human affairs for the best. The English have always recognized the great problem which other Europeans before 1914 had scarcely grasped.

In Guild Socialism three different things must be distinguished. It establishes the necessity for replacing the capitalist system by a socialist one; this thoroughly eclectic theory need not worry us further. It also provides a way by which Socialism may be realized; this is only important for us inasmuch as it could very easily lead to Syndicalism instead of Socialism. Finally it draws up the programme of a future socialist order of society. It is with this that we are concerned.

The aim of Guild Socialism is the socialization of the means of production. We are therefore justified in calling it socialism. Its unique feature is the particular structure which it gives to the administrative organization of the future socialist state. Production is to be controlled by the workers in individual branches of productions They elect foremen, managers and other business leaders, and they regulate directly and indirectly the conditions of labour and order the methods and aims of production.1  The Guilds as organizations of the producers in the individual branches of industry, face the State as the organization of the consumers. The State has the right to tax the Guilds, and is thus able to regulate their price — and wages-policy.2

Guild Socialism greatly deceives itself if it believes that in this way it could create a socialist order of society which would not endanger the freedom of the individual and would avoid all those evils of centralized Socialism which the English detest as Prussianism.3  Even in a guild socialist society the whole control of production belongs to the State. The State alone sets the aim of production and determines what must be done in order to achieve this aim. Directly or indirectly through its taxation policy, it determines the conditions of labour, moves capital and labour from one branch of industry to another, makes adjustments and acts as intermediary between the guilds themselves and between producers and consumers. These tasks falling to the State are the only important ones and they constitute the essence of economic control.4  What is left to the individual guilds, and, inside them, to the local unions and individual concerns is the execution of work assigned to them by the State. The whole system is an attempt to translate the political constitution of the English State into the sphere of production; its model is the relation in which local governments stands to central government. Guild Socialism expressly describes itself as economic Federalism. But in the political constitution of a liberal state it is not difficult to concede a certain independence to local government. The necessary co-ordination of the parts within the whole is sufficiently ensured by the compulsion enforced on every territorial unit to manage its affairs in accordance with the laws. But in the case of production this is far from sufficient. Society cannot leave it to the workers themselves in individual branches of production to determine the amount and the quality of the labour they perform and how the material means of production thereby involved shall be applied.5  If the workers of a guild work less zealously or use the means of production wastefully, this is a matter which concerns not only them but the whole society. The State entrusted with the direction of production cannot therefore refrain from occupying itself with the internal affairs of the guild. If it is not allowed to exercise direct control by appointing managers and works directors, then in some other way — perhaps by the means which lie at hand in the right of taxation, or the influence it has over the distribution of consumption goods — it must endeavour to reduce the independence of the guilds to a meaningless facade. It is the foremen who are in daily and hourly contact with the individual worker to direct and supervise his work who are hated most by the worker. Social reformers, who take over naively the sentiments of the workers, may believe it possible to replace these organs of control by trustworthy men chosen by the workers themselves. This is not quite as absurd as the belief of the anarchists that everyone would be prepared without compulsion to observe the rules indispensable for communal life; but it is not much better. Social production is a unity in which every part must perform exactly its function in the framework of the whole. It cannot be left to the discretion of the part to determine how it will accommodate itself to the general scheme. If the freely chosen foreman does not display the same zeal and energy in his supervisory work as one not chosen by the workers, the productivity of labour will fall.

Guild Socialism therefore does not abolish any of the difficulties in the way of establishing a socialist order of society. It makes Socialism more acceptable to the English spirit by replacing the word nationalization, which sounds disagreeable in English ears, by the catchword ‘Self-Government in Industry’. But in essence it does not offer anything different from what continental socialists recommend to-day, namely, the proposal to leave the direction of production to committees of the workers and employees engaged in production, and of consumers. We have already seen that this brings us no nearer to solving the problem of Socialism.

Guild Socialism owes much of its popularity to the syndicalistic elements which many of its adherents believe are to be found in it. Guild Socialism as its literary representatives conceive it, is doubtless not syndicalistic. But the way in which it proposes to attain its end might very easily lead to Syndicalism. If, to begin with, national guilds were established in certain important branches of production which would have to work in an otherwise capitalist system, this would mean the syndicalization of individual branches of industry. As everywhere else, so here too, what appears to be the road to Socialism can in fact easily prove to be really the path to Syndicalism.

• 1‘Guildsmen are opposed to private ownership of industry, and strongly in favour of public ownership. Of course, this does not mean that they desire to see industry bureaucratically administered by State departments. They aim at the control of industry by National Guilds including the whole personnel of the industry. But they do not desire the ownership of any industry by the workers employed in it. Their aim is to establish industrial democracy by placing the administration in the hands of the workers, but at the same time to eliminate profit by placing the ownership in the hands of the public. Thus the workers in a Guild will not be working for profit: the prices of their commodities and, indirectly at least, the level of their remuneration will be subject to a considerable measure of public control. The Guild system is one of industrial partnership between the workers and the public, and is thereby sharply distinguished from the proposals described as “Syndicalist” ... The governing idea of National Guilds is that of industrial self-government and democracy. Guildsmen hold that democratic principles are fully as applicable to industry as to politics.’ (Cole, Chaos and Order in Industry, London 1930, p. 58 et seq.)
• 2Cole, Self-Government in Industry, 5th Edition, London 1920, p. 235 et seq.; also Schuster, Zum englischen Gildensozialismus (Jahrbücher für Nationalökonomie und Statistik, Vol. CXV) p. 487 et seq.
• 3Cole, Self-Government in Industry, p. 255.
• 4‘A moment’s consideration will show that it is one thing to lay drains, another to decide where drains are to be laid; it is one thing to make bread, another to decide how much bread is to be made; it is one thing to build houses, another to decide where the houses are to be built. This list of opposites can be lengthened indefinitely, and no amount of democratic fervour will destroy them. Faced with these facts, the Guild Socialist says that there is need for local and central authorities whose business it shall be to watch over that important part of life that lies outside production. A builder may think it advisable to be for ever building, but the same man lives in some locality and has a right to say whether this purely industrial point of view shall have absolutely free play. Everyone, in fact, is not a producer but also a citizen.’-G. D. H. Cole and W. Mellon The Meaning of Industrial Freedom, London 1918, p. 30.
• 5Tawney (The Acquisitive Society, London 1921, p. 122) considers that the advantage of the Guild System for the worker is that it puts an end to ‘the odious and degrading system under which he is thrown aside like unused material whenever his services do not happen to be required’. But just this reveals the gravest defect of the system recommended. If one needs no more building because relatively sufficient buildings exist, yet must build so as to occupy the workers in the building trades who are unwilling to change over to other branches of production that suffer from a comparative scarcity of labour, the position is uneconomic and wasteful. The very fact that Capitalism forces men to change their occupations is its advantage from the standpoint of the General Best, even though it may directly disadvantage the special interests of small groups.

In recent decades few have managed to remain uninfluenced by the success of the socialist criticism of the capitalist social order. Even those who did not want to capitulate to Socialism, have tried in many ways to act according to its criticism of private ownership in the means of production. Thus they have originated systems, ill-thought-out, eclectic in theory and weak in politics, which attempted to reconcile the contradictions. They were soon forgotten. Only one of these systems has spread — the system which calls itself Solidarism. This is at home above all in France; it has been called, not unjustly, the official social philosophy of the Third Republic. Outside of France, the term ‘Solidarism’ is less well known, but the theories which make Solidarism are everywhere the social-political creed of all those religiously or conservatively inclined who have not joined Christian or State Socialism. Solidarism is distinguished neither by the depth of its theory, nor the number of its adherents. That which gives it a certain importance is its influence on many of the best and finest men and women of our times.

Solidarism starts by saying that the interests of all members of society harmonize. Private ownership in the means of production is a social institution the maintenance of which is to the interest of all, not merely of the owners; everyone would be harmed were it replaced by a common ownership endangering the productivity of social labour. So far, Solidarism goes hand in hand with Liberalism. Then, however, their ways separate. For solidarist theory believes that the principle of social solidarity is not realized simply by a social order based on private ownership in the means of production. It denies — without, however, arguing this more closely or bringing to light ideas not put forward before by the socialists, especially the non-marxists — that merely acting for one’s own property-interests within a legal order guaranteeing liberty and property ensures an interaction of the individual economic actions corresponding to the ends of social co-operation. Men in society, by the very nature of social cooperation, within which alone they can exist, are reciprocally interested in the well-being of their fellow men; their interests are ‘solidary,’ and they ought therefore to act with ‘solidarity’. But mere private ownership in the means of production has not achieved solidarity in the society dividing labour. To do so special, provisions must be made. The more etatistically inclined wing of Solidarism wants to bring about ‘solidary’ action by State action: laws shall impose obligations on the possessors in favour of the poorer people and in favour of the public welfare. The more ecclesiastically inclined wing of Solidarism wants to achieve the same thing by appeals to the conscience; not by State laws, but by moral prescriptions: Christian love will make the individual fulfil his social duties.

The representatives of Solidarism have laid down their social-philosophic views in brilliantly written essays, which reveal all the splendour of the French spirit. No one has been better able to paint in beautiful words the mutual dependence of men in society. At the head of them all is Sully Prudhomme. In his famous sonnet he shows the poet on awaking from a bad dream in which he has seen himself, as division of labour has ceased and no one will work for him, seal, abandonné de tout le genre humain. This leads him to the knowledge:

          ‘... qu’au siècle ou nous sommes
Nul ne peut se vanter de se passer des hommes;
Et depuis ce jour-là, je les ai tous aimés,’

They have also known well how to state their case firmly, either by theological1  or juristic arguments.2  But all this must not blind us to the inner weakness of the theory. Solidarist theory is a foggy eclecticism. It demands no special discussion. It interests us here much less than its social ideal, which claims ‘to avoid the faults of the individualist and socialist systems, to maintain that which is right in both’.3

Solidarism proposes to leave the private ownership in the means of production. But it places above the owner an authority — indifferent whether Law and its creator, the State, or conscience and its counsellor, the Church — which is to see that the owner uses his property correctly. The authority shall prevent the individual from exploiting ‘unrestrainedly’ his position in the economic process; certain restrictions are to be imposed on property. Thus State or Church, law or conscience, become the decisive factor in society. Property is put under their norms, it ceases to be the basic and ultimate element in the social order. It continues to exist only as far as Law or Ethics allow, that is to say, ownership is abolished, since the owner, in administering his property, must follow principles other than those imposed on him by his property interests. To say that, under all circumstances, the owner is bound to follow the prescription of Law and Ethics, and that no legal order recognizes ownership except within limits drawn by the norms, is by no means a reply. For if these norms aim only at free ownership and to prevent the owner from being disturbed in his right to keep his property as long as it does not pass to others on the basis of contracts he has made, then these norms contain merely recognition of private ownership in the means of production. Solidarism, however, does not regard these norms as alone sufficient to bring together fruitfully the labour of members of society. Solidarism wants to put other norms above them. These other norms thus become society’s fundamental law. No longer private property but legal and moral prescription of a special kind, are society’s fundamental law. Solidarism replaces ownership by a ‘Higher Law’; in other words, it abolishes it.

Of course, the solidarists do not really want to go as far. They want, they say, only to limit property, but to maintain it in principle. But when one has gone so far as to set up for property limits other than those resulting from its own nature, one has already abolished property. If the owner may do with his property only that which is prescribed to him, what directs the national economic activity is not property but that prescribing power.

Solidarism desires, for instance, to regulate competition; it shall not be allowed to lead to ‘the decay of the middle-class’ or to the ‘oppression of the weak’.4  This merely means that a given condition of social production is to be preserved, even though it would vanish under private property. The owner is told what and how and how much he shall produce and at what conditions and to whom he shall sell. He thus ceases to be owner; he becomes a privileged member of a planned economy, an official drawing a special income.

Who shall decide in every single case, how far Law or Ethics go in limiting the owner’s rights? Only the Law or Ethics itself.

Were Solidarism itself clear about the consequences of its postulates, it would certainly have to be called a variety of Socialism. But it is far from clear. It believes itself fundamentally different from State Socialism,5  and the majority of its supporters would be horrified, were they to recognize what their ideal really was. Therefore its social ideal may still be counted one of the pseudo-socialist systems. But it must be realized that what separates it from Socialism is one single step. Only the mental atmosphere of France, generally more favourable to Liberalism and Capitalism, has prevented the French Solidarists and the Jesuit Pesch, an economist under French influence, from overstepping decisively the boundary between Solidarism and Socialism. Many, however, who still call themselves solidarists, must be counted complete etatists. Charles Gide, for example, is one of these.

• 1Here one must name before all the Jesuit Pesch (Lehrbuch der Nationalökonomie, Vol. I, and Edition, Freiburg 1914, pp. 392-438). In France there is a conflict between catholic and freethinking solidarists — about the relation of the Church to the State and to society, rather than about the real principles of social theory and pohcy — which makes Church circles suspicious of the term ‘solidarism’. See Haussonville, Assistance publique et bienfaisance privée (Revue des Deux Mondes, Vol. CLXII, 1900, pp. 773-808); Bouglé, Le Solidarisme, Paris 1907, p. 8 ff.
• 2Bourgeois, Solidarité, 6th Edition, Paris 1907, p. 115 et seq.; Waha, Die Nationalökonomie in Frankreich, Stuttgart 1910, p. 432 et seq.
• 3Pesch, op. cit., Vol. I, p. 420.
• 4Pesch, op. cit., Vol. I, p. 42a.
• 5Ibid., p. 420.

Precapitalist movements for the reform of property generally culminate in the demand for equality in wealth. All shall be equally rich; no one shall possess more or less than the others. This equality is to be achieved by redividing the land and to be made lasting by prohibiting sale or mortgage of land. Clearly, this is not Socialism, though it is sometimes called agrarian-Socialism.

Socialism does not want to divide the means of production at all, and wants to do more than merely expropriate; it wants to produce on the basis of common ownership of the means of production. All such proposals therefore, which aim only to expropriate the means of production are not to be regarded as Socialism; at best, they can be only proposals for a way to Socialism.

If, for example, they proposed a maximum amount to which one and the same person may own private property, they could be regarded as Socialism only if they intend to make the wealth thus accruing to the State the basis of socialist production. We should then have before us a proposal for socialization. It is not difficult to see that this proposal is not expedient. Whether the amount of the means of production which could thus be socialized is a greater or smaller one will depend on the extent to which private fortunes are still permitted. If this is fixed low, the proposed system is little different from immediate socialization. If it is fixed high, the action against private property will not do much to socialize the means of production. But anyway a whole series of unintended consequences must occur. For just the most energetic and active entrepreneurs will be prematurely excluded from economic activity, whilst those rich men whose fortunes approach the limit will be tempted to extravagant ways of living. The limitation of individual fortunes may be expected to slow down the formation of capital.

Similar considerations apply to proposals, which one hears in various quarters, to abolish the right of inheritance. To abolish inheritance and the right to make donations intended to circumvent the prohibition, would not bring about complete Socialism, though it would, in a generation, transfer to society a considerable part of all means of production. But it would, above all, slow down the formation of new capital, and a part of the existing capital would be consumed.

One school of well-meaning writers and entrepreneurs recommends profit-sharing with wage earners. Profits shall no longer accrue exclusively to the entrepreneur; they shall be divided between the entrepreneurs and the workers. A share in the profits of the undertakings shall supplement the wages of the workers. Engel expects from this no less than ‘a settlement, satisfying both parties, of the raging fight, and thus, too, a solution of the social question.’1  Most protagonists of the profit-sharing system attach no less importance to it.

The proposals to transfer to the worker a part of the entrepreneur’s profits proceed from the idea that, under Capitalism, the entrepreneur deprives the worker of a part of that which he could really claim. The basis for the idea is the obscure concept of an inalienable right to the ‘full’ product of labour, the exploitation theory in its popular, most naive, form, here expressed more or less openly. To its advocates the social question appears as a fight for the entrepreneur’s profit. The socialists want to give this to the workers; the entrepreneurs claim it for themselves. Somebody comes along and recommends that the fight be ended by a compromise: each party shall have part of his claim. Both will thus fare well: the entrepreneurs, because their claim is obviously unjust, the workers because they get, without fighting, a considerable increase of income. This train of thought, which treats the problem of the social organization of labour as a problem of rights, and tries to settle a historical dispute as if it were a quarrel between two tradesmen, by splitting the difference, is so wrong that there is no purpose in going into it more closely. Either private ownership in the means of production is a necessary institution of human society or it is not. If it is not, one can or must abolish it, and there is no reason to stop half-way out of regard for the entrepreneur’s personal interests. If, however, private property is necessary, it needs no other justification for existing, and there is no reason why, by partially abolishing it, its social effectiveness should be weakened.

The friends of profit-sharing think it would spur the worker on to a more zealous fulfilment of his duties than can be expected from a worker not interested in the yield of the undertaking. Here too, they err. Where the efficiency of labour has not been diminished by all kinds of socialist destructionist sabotage, where the worker can be dismissed without difficulty and his wages adjusted to his achievements without regard to collective agreements, no other spur is necessary to make him industrious. There, in such conditions, the worker works fully conscious of the fact that his wages depend on what he does. But where these factors are lacking, the prospect of getting a fraction of the net profit of the undertaking would not induce him to do more than just as much as is formally necessary. Though of a different order of magnitude, it is the same problem we have already considered in examining the inducements in a socialist community to overcome the disutility of labour. Of the product of the extra labour, the burden of which the worker alone has to carry, he receives a fraction not sufficiently large to reward the extra effort.

If the workers’ profit-sharing is carried out individually, so that each worker participates in the profits of just that undertaking he happens to be working for, there are created without any evident reason, differences in income which fulfil no economic function, appear to be utterly unjustified, and which all must feel unjust. ‘It is inadmissible that the turner in one works should earn twenty marks and receive ten marks more as a share of profits, while a turner in a competing works, where business is worse, perhaps worse directed, gets only twenty marks. This means either that a ‘rent’ is created and perhaps that jobs connected with this ‘rent’ are sold or that the worker tells his entrepreneur: ‘I don’t care from what fund you pay the thirty marks; if my colleague receives it from the competition I demand it too.’2  Individual profit-sharing must lead straight to Syndicalism, even if it is a Syndicalism where the entrepreneur still keeps part of the entrepreneur’s profit.

However, another way could be tried. Not the individual workers participate in the profits, but all the citizens; a part of the profits of all undertakings is distributed to all without distinction. This is already realized in taxation. Long before the war, joint stock companies in Austria had to surrender to the State and to other tax-levying authorities from twenty to forty per cent of their net profits; in the first years of the peace this grew from sixty to ninety per cent and more. The ‘mixed’ public enterprise is the attempt to find a form for the community’s participation, which makes the community share the management of the concern, in return for which it has to share in the providing of capital. Here, too, there is no reason why one should be content with half abolishing private property, if society could abolish the institution completely without injuring the productivity of labour. If, however, to abolish private property is disadvantageous, then the half abolition is disadvantageous too. The half-measure may, in fact, be hardly less destructive than the clean sweep. Advocates usually say that the ‘mixed’ undertaking leaves scope for the entrepreneur. However, as we have already shown, state or municipal activity hampers the freedom of the entrepreneur’s decisions. An undertaking forced to collaborate with civil servants is not able to utilize the means of production in such ways as profit making demands.3

• 1Engel, Der Arbeitsvertrag und die Arbeitsgesellschaft (in ‘Arbeiterfreund’, 5 Jahrg., 1867, pp. 129-154). A survey of the German literature on profit sharing is given in the memorandum of the German ‘Statistisches Reichsamt’: Untersuchungen und Vorschläge zur Beteiligung der Arbeiter an dem Etrage wirtschaftlicher Unternehmungen, published as a supplement to the Reichs-Arbeitsblatt of March 3, 1920.
• 2See the arguments of Vogelstein at the Regensburg session of the Verein für Sozialpolitik (Schriften des Vereins für Sozialpolitik, Vol. CLIX, p. 132).
• 3See above, p. 256.

As political tactics Syndicalism presents a particular method of attack by organized labour for the attainment of their political ends. This end may also be the establishment of the true Socialism, that is to say, the socialization of the means of production. But the term Syndicalism is also used in a second sense, in which it means a sociopolitical aim of a special kind. In that sense Syndicalism is to be understood as a movement whose object is to bring about a state of society in which the workers are the owners of the means of production. We are concerned here with Syndicalism only as an aim; with Syndicalism as a movement, as political tactics, we need not deal.

Syndicalism as an aim and Syndicalism as political tactics do not always go hand in hand. Many groups which have adopted the syndicalist ‘direct action’ as the basis of their proceedings are striving for a genuinely socialist community. On the other hand the attempt to realize Syndicalism as an end can be carried on by methods other than those of violence recommended by Sorel.

In the minds of the great bulk of workers who call themselves socialists or communists, Syndicalism presents itself, at least as vividly as Socialism, as the aim of the great revolution. The ‘petty bourgeois’ ideas which Marx thought to overcome are very widespread — even in the ranks of the marxian socialists. The great mass desire not the genuine Socialism, that is, centralized Socialism but Syndicalism. The worker wishes to be the lord of the means of production which are employed in his particular undertaking. The social movement round about us shows more clearly every day that this and nothing else is what the worker desires. In contradistinction to Socialism which is the result of armchair study, syndicalist ideas spring direct from the mind of the ordinary man, who is always hostile to ‘unearned’ income obtained by someone else. Syndicalism like Socialism aims at the abolition of the separation of worker from the means of production, only it proceeds by another method. Not all the workers will become the owners of all the means of production; those in a particular industry or undertaking or the workers engaged in a complete branch of production will obtain the means of production employed in it. The railways to the railway men, the mines to the miners, the factories to the factory hands — this is the slogan.

We must ignore every freak scheme for enacting Syndicalist ideas and take a thoroughly consistent application of the main principle to the whole economic order as the starting point of our examination. This is not difficult. Every measure which takes the ownership of all the means of production from the entrepreneurs, capitalists, and landlords without transferring it to the whole of the citizens of the economic area, is to be regarded as Syndicalism. It makes no difference in this case, whether in such a society more or less of these associations are formed. It is unimportant whether all branches of production are constituted as separate bodies or only single undertakings, just as they happen to have evolved historically, or single factories or even single workshops. In essence the scheme is hardly affected if the lines drawn through the society are more or less, horizontal or vertical. The only decisive point is that the citizen of such a community is the owner of a share of certain means of production and the non-owner of other means of production, and that in some cases, for example, when he is unable to work, he may own no property at all. The question whether the workers’ incomes will, or will not, be noticeably increased, is unimportant here. Most workers have absolutely fantastic ideas about the increase of wealth they could expect under syndicalist arrangements of property. They believe that just the mere distribution of the share which landlords, capitalists and entrepreneurs draw under capitalist industry must considerably increase the income of each of them. Apart from this they expect an important increase in the product of industry, because they, who regard themselves as particularly expert, will themselves conduct the enterprise, and because every worker will be personally interested in the prosperity of the undertaking. The worker will no longer work for a stranger but for himself. The liberal thinks quite differently about all this. He points out that the distribution of rent and profit incomes among the workers would bring them an insignificant increase in incomes. Above all he maintains that enterprises which are no longer directed by the self-interest of entrepreneurs working on their own account but by labour leaders unfitted for the task will yield less, so that the workers will not only earn no more than under a free economy, but considerably less.

If syndicalist reform merely handed over to the workers the ownership of the means of production and left the system of property of the capitalist order otherwise unchanged, the result would be no more than a primitive redistribution of wealth. The redistribution of goods with the object of restoring the equality of property and wealth is at the back of the mind of the ordinary man whenever he thinks of reforming social conditions, and it forms the basis for all popular proposals for socialization. This is not incomprehensible in the case of land workers, to whom the object of all ambition is to acquire a homestead and a piece of land large enough to support him and his family; in the village, redistribution, the popular solution of the social problem, is quite conceivable. In industry, in mining, in communications, in trade and in banking where a physical redistribution of the means of production is quite inconceivable, we get instead a desire for the division of the property rights while preserving the unity of the industry or enterprise. To divide in this simple way would be, at best, a method of abolishing for the moment the inequality in the distribution of income and poverty. But after a short time, some would have squandered their shares, and others would have enriched themselves by acquiring the shares of the less economically efficient. Consequently there would have to be constant redistributions, which would simply serve to reward frivolity and waste — in short every form of uneconomic behaviour. There will be no stimulus to economy if the industrious and thrifty are constantly compelled to hand over the fruits of their industry and thrift to the lazy and extravagant.

Yet even this result — the temporary achievement of equality of income and property — could not be accomplished by syndicalization. For syndicalization is by no means the same for all workers. The value of the means of production in different branches of production is not proportional to the number of workers employed. It is unnecessary to elaborate the fact that there are products which involve more of the productive factor, labour, and less of the productive factor, Nature. Even a division of the means of production at the historical commencement of all human production would have led to inequality; much more so if these means are syndicalized at a highly progressive stage of capital accumulation in which not only natural factors of production but produced means of production are divided. The values of the shares falling to individual workers in a redistribution of this kind would be very different: some would obtain more, others less, and as a result some would draw a larger income from property — unearned income — than others. Syndicalization is in no way a means of achieving equality of incomes. It abolishes the existing inequality of incomes and property and replaces it by another. It may be that this syndicalistic inequality is regarded as more just than that of the capitalistic order — but on this point science can give no judgment.

If syndicalist reform is to mean more than the mere redistribution of productive goods, then it cannot allow the property arrangements of Capitalism to persist in regard to the means of production. It must withdraw productive goods from the market. Individual citizens must not dispose of the shares in the means of production which are allotted to them; for under Syndicalism these are bound up with the person of the owner in a much closer way than is the case in the liberal society. How, in different circumstances, they may be separated from the person can be regulated in various ways.

The naive logic of the advocates of Syndicalism assumes without any further ado a completely stationary condition of society, and pays no attention to the problem, how the system will adapt itself to changes of economic conditions. If we assume that no changes occur in the methods of production, in the relations of supply and demand, in technique, or in population, then everything seems to be quite in order. Each worker has only one child, and departs out of this world at the moment his successor and sole heir becomes capable of work; the son promptly steps into his place. We can perhaps assume that a change of occupation, a transfer from one branch of production to another or from one independent undertaking to another by a voluntary simultaneous exchange of positions and of shares in the means of production will be permitted. But for the rest the syndicalist state of society necessarily assumes a strictly imposed caste system and the complete end of all changes in industry and, therefore, in life. The mere death of a childless citizen disturbs it and opens up problems which are quite insoluble within the logic of the system.

In the syndicalist society the income of a citizen is made up of the yield from his portion of property and of the wages from his labour. If the shares in the property in the means of production can be freely inherited, then in a very short time differences in property holding will arise even if no changes occur among the living. Even if at the beginning of the syndicalist era the separation of the worker from the means of production is overcome, so that every citizen is an entrepreneur as well as a worker in his undertaking, it may so happen that later on citizens who do not belong to a particular undertaking inherit shares in it. This would very quickly drive the syndicalist society to a separation of labour and property, without the advantages of the capitalist order of society.1

Every economic change immediately creates problems on which Syndicalism would inevitably be wrecked. If changes in the direction and extent of demand or in the technique of production cause changes in the organization of the industry, which require the transfer of workers from one concern to another or from one branch of production to another, the question immediately arises what is to be done with the shares of these workers in the means of production. Should the workers and their heirs keep the shares in those industries to which they happened to belong at the actual time of syndicalization and enter the new industries as simple workers earning wages, without being allowed to draw any part of the property income? Or should they lose their share on leaving an industry and in return receive a share per head equal to that possessed by the workers already occupied in the new industry? Either solution would quickly violate the principle of Syndicalism. If, in addition, men were permitted to dispose of their shares, conditions would gradually return to the state prevailing before the reform. But if the worker on his departure from an industry loses his share and on entering another industry acquires a share in that, those workers who stood to lose by the change would, naturally, oppose energetically every change in production. The introduction of a process making for greater productivity of labour would be resisted if it displaced workers or might displace them. On the other hand the workers in an undertaking or branch of industry would oppose any development by the introduction of new workers if it threatened to reduce their income from property. In short, Syndicalism would make every change in production practically impossible. Where it existed there could be no question of economic progress.

As an aim Syndicalism is so absurd, that speaking generally, it has not found any advocates who dared to write openly and clearly in its favour. Those who have dealt with it under the name of copartnership have never thought out its problems. Syndicalism has never been anything else than the ideal of plundering hordes.

• 1It is misleading, therefore, to call Syndicalism ‘workers’ Capitalism’, as I too have done in Nation, Staat und Wirtschaft, p. 164.

Natural ownership of the means of production is divisible. In capitalist society, it generally is divided.1  But the power to dispose which belongs to him who directs production and which alone we call ownership, is indivisible and illimitable. It may belong to several people jointly, but cannot be divided in the sense that the power of disposing itself can be decomposed into separate rights of command. The power to dispose of the use of a commodity in production can only be unitary; that this could in any way be dissolved into elements is unthinkable. Ownership in the natural sense cannot be limited; wherever one speaks of limitation, one means either a curtailment of a too-widely drawn juristic definition or recognition of the fact that ownership in the natural sense belongs concretely to someone other than the person whom the law recognizes as owner.

All attempts to abolish by a compromise the contrast between common property and private ownership in the means of production are therefore mistaken. Ownership is always where the power to dispose resides.2  Therefore State Socialism and planned economies, which want to maintain private property in name and in law, but in fact, because they subordinate the power of disposing to State orders, want to socialize property, are socialist systems in the full sense. Private property exists only where the individual can deal with his private ownership in the means of production in the way he considers most advantageous. That in doing so he serves other members of society, because in the society based on division of labour everyone is the servant of all and all the masters of each, in no way alters the fact that he himself looks for the way in which he can best perform this service.

It is not possible to compromise, either, by putting part of the means of production at the disposal of society and leaving the remainder to individuals. Such systems simply stand unconnected, side by side, and operate fully only within the space they occupy. Such mixture of the social principles of organization must be considered senseless by everyone. No one can believe that the principle which he holds to be right should not be carried through to the end. Nor can anyone assert that one or the other of the systems proves the better only for certain groups of the means of production. Where people seem to be asserting this, they are really asserting that we must demand the one system at least for a group of the means of production or that it should be given at most for a group. Compromise is always only a momentary lull in the fight between the two principles, not the result of a logical thinking-out of the problem. Regarded from the stand-point of each side, half-measures are a temporary halt on the way to complete success.

The best known and most respected of the systems of compromise believes indeed that it can recommend half-measures as a permanent institution. The land-reformers want to socialize the natural factors of production, but for the rest to leave private ownership in the means of production. They hereby proceed from the assumption, regarded as self-evident, that common property in the means of production gives a higher yield than private property. Because they regard land as the most important means of production, they wish to transfer it to society. With the breakdown of the thesis that public ownership could achieve better results than private ownership, the idea of land reform also falls to the ground. Whoever regards land as the most important means of production must certainly advocate the private ownership of land, if he considers private ownership the superior economic form.

• 1See above, p. 40 et seq.
• 2On interventionism see my ‘Kritik des Interventionismus’, ibid., p. 1 et seq.