Books / Digital Text

Social Liberalism

7. The Concept and Crisis of Social Policy

All the economic policies of the last two generations are designed step by step to abolish private property in the means of production— if not in name, then in substance— and to replace the capitalist social order with a socialistic order. Decades ago Sidney Webb announced it in his Fabian Essays.49As the pictures of the desired future social order varied with the individual branches of socialism, so did their opinions on the road by which the goal was to be reached. There are questions on which all branches could agree. In other questions great differences separated the camps, as, for instance, factory labor by married women, or protection of handcrafts from the competition of big busi­ness. But they all agreed on the rejection of the social ideal of liberalism. No matter how they differed from each other, they joined ranks in the fight against “Manchesterism.” In this point, at least, the champion Socialists of the Chair saw eye to eye with the champions of social liberalism.

For the movement toward a gradual replacement of capi­talism by a socialistic or syndicalistic social order, the term “social policy” slowly gained acceptance. A precise defini­tion of the term was never offered, as sharp conceptual defi­nitions were never the concern of the Historical School. The use of the term “social policy” remained ambiguous. Only in recent years when pressed by economic critique did the social politicians attempt to define the term.

Sombart probably recognized the nature of social policy most clearly. “By social policy,” he wrote in 1897, “we un­derstand those measures of economic policy that effect the preservation, promotion, or repression of certain economic systems.”50 Amonn rightly found many faults with this def­inition, but especially pointed out that measures should be characterized by their objectives, not by their effects within the framework of policy, and that social policy goes beyond the realm that usually is called “economic policy.”51But it is decisive that Sombart saw a change in the economic order as the objective of social policy. Let us bear in mind that when he wrote this, Sombart was standing firmly on Marxian ground, which made him think of the introduction of so­cialism as the only conceivable social policy. We must admit that he correctly perceived the essential point. The only de­ficiency of his definition is his inclusion of all efforts toward a realization of the liberal program, efforts that were made at a time when, in the language of Marx, the bourgeoisie was still a revolutionary class. Similarly, Sombart expressly included the liberation of peasants from feudal servitude as an example of social policy. Many writers followed him in this respect. Again and again they sought to define the term “social policy” in such a way that it would include political measures other than those aiming at the realization of so­cialism.52

It makes little sense to deal further with the empty argu­ment on the concept of social policy, an argument that just recently caught fire. It was touched off by the crisis that seized socialism and syndicalism of all varieties upon the victory of the Marxian Social Democrats in Germany.

Prussian etatism and its intellectual followers in other countries, had gone as far on the road to socialism as possi­ble without too much visible damage to the economy and too great a reduction in the productivity of labor. No one whose vision is unclouded by party politics can deny that Prussia-Germany of the prewar era was more suited than any other country before or since to conduct socialistic ex­periments. The tradition of Prussian officialdom, the faith of all educated people in the calling of the state, the military-hierarchic classification of the population, its inclination to blindly obey the authorities, all provided the prerequisites for socialism given nowhere else. Never can there be men more suited for the management of a socialistic communal operation than the mayors of German cities or the directors of the Prussian railroad. They did everything possible to make communal enterprises work. If, in spite of these advantages the system failed, it proved conclusively that the system just cannot be realized.


Suddenly the Social Democrats came to power in Ger­many and Austria. For many decades they had announced time and again that their genuine socialism had nothing in common with the false socialism of the etatists, and that they would proceed completely differently from the bureau­crats and professors. Now was the time to demonstrate what they could do. But they could not come up with anything new except the term “socialization.” In 1918 and 1919, all political parties in Germany and Austria added the sociali­zation of suitable industries to their programs. At that time no step on the way to pure socialism of the Marxian variety met serious resistance. Even so, what was realized did not exceed in direction or scope that which the Socialists of the Chair had recommended earlier, or in many cases had al­ready tried. Only a few day-dreamers in Munich believed that the example of Lenin and Trotsky in agrarian Russia could be emulated in industrial Germany without causing an unprecedented crisis.

Socialism did not fail because of ideological resistance— the prevailing ideology is socialistic even today. It failed be­cause of its unrealizability. As the general awareness grew that every step taking us away from the private property order always reduced labor’s productivity, and so brought want and misery, it became necessary not only to halt the advance to socialism, but even to repeal some of the socialis­tic measures already taken. Even the Soviets had to yield. They did not proceed with the socialization of land, but merely distributed the land to the rural population. In trade and commerce they replaced pure socialism with the “New Economic Policy.” However, the ideology did not partici­pate in this retreat. It stubbornly clung to its pronounce­ments of decades ago, and sought to explain the failures of socialism in all possible ways except the right one—its basic unrealizability.

Only a few champions of socialism have realized that the failure of socialism was not coincidental, but inevitable. Some went even further and admitted that all social mea­sures reduce productivity, consume capital and wealth, and are destructive. The renunciation of the ideals these men used to embrace is called in economic literature the crisis of social policy.53In reality, it is much more: it is the great world crisis of destructionism—the policy that seeks to de­stroy the social order based on private property in the means of production.

The world can support teeming humanity in the manner in which it has been supported in recent decades only if men work capitalistically. Only capitalism can be expected to further raise the productivity of human labor. The fact that the vast majority of people adheres to an ideology that re­fuses to admit this, and therefore conducts policies that lead to a reduction of labor productivity and consumption of cap­ital, is the essence of the great cultural crisis.

  • 49. Sidney Webb, Die historische Entwicklung [Historical development], edited by Grunwald, Leipzig, 1897, p. 44.
  • 50. Sombart, “Ideale der Sozialpolitik” [Ideals of social policy], Archives for Social Legislation and Statistics, vol. X, p. 8 et seq.
  • 51. See Amonn, “Der Begriff der Sozialpolitik” [The concept of social policy], Schmoller’s Yearbook, 48th year, 1924, p. 160 et seq.
  • 52. It is characteristic that the Historical School, which otherwise knows only of historical categories, seeks to define the concept of social policy so that they may speak also of old Babylonian and Aztecan social policy.
  • 53. See Pribram, “Die Wandlungen des Begriffes der Sozialpolitik” [The changes in the concept of social policy], vol. II, p. 249.
Shield icon library