At any given moment the position of the individual in the social economy determines his relation to all other members of society. He is related to them in respect of exchange, as giver and receiver, as seller and buyer. His position in the society need not necessarily tie him down to one and the same activity. One man may be simultaneously landlord, wage-earner, and capitalist; another simultaneously entrepreneur, employee, and landlord; a third entrepreneur, capitalist, and landlord, etc. One may produce cheese and baskets and hire himself out occasionally as a day labourer.

The theory of the class war constantly confuses the notions of Estate (‘Stand’) and class.1  Estates were legal institutions, not economically determined facts. Every man was born into an estate and generally remained in it until he died. All through life one possessed estate-membership, the quality of being a member of a certain estate.

The settlement of particular conflicts between estates could not remove the distinction between estates, as long as the idea of dividing society in this way remained. Even when the oppressed shook off the yoke, all differences in status were not abolished. Liberalism alone could overcome the fundamental conflict of estates. It did so by abolishing slavery — on the ground that free labour was more productive than unfree — and by proclaiming freedom of movement and choice of occupation as the fundamental desiderata of a rational policy.

The total national product is divided into wages, rent, interest, and profits. All economic theory considers it definitely settled that this division proceeds, not according to the extra-economic power of the individual classes, but according to the importance which the market imputes to individual factors of production. Classical Political Economy and the modem theory of marginal value agree in this. Even Marxian doctrine, which has borrowed its theory of distribution from classical theory, agrees.

From the theory of the class-war, Marxians argue that the socialist order of society is the inevitable future of the human race. In any society based on private property, says Marxism, there must of necessity be an irreconcilable conflict between the interests of separate classes: exploiters oppose the exploited. This contrast of interests, it is assumed, determines the historical position of the classes; it prescribes the policy they must follow.

The opinion that history leads to Socialism is almost universal to-day. From Feudalism through Capitalism to Socialism, from the rule of the aristocracy through the rule of the bourgeoisie to proletarian democracy — thus, approximately, people conceive the inevitable evolution. The gospel that Socialism is our inescapable destiny is acclaimed by many with joy, accepted by others with regret. doubted by only the courageous few. This scheme of evolution was known before Marx, but Marx developed it and made it popular. Above all Marx managed to fit it into a philosophic system.

Race, nationality, citizenship, estate-rights: these things directly affect action. It does not matter whether a party ideology unites all those belonging to the same race or nation, the same state or estate. The fact that races, nations, states or estates exist determines human action even when there is no ideology to guide members of a group in a certain direction. A German’s thought and actions are influenced by the kind of mind he has acquired as a member of the German language community. Whether or not he is influenced by nationalist party ideology is here unimportant.

The simplest way to depict the evolution of society is to show the distinction between two evolutionary tendencies which are related to each other in the same way as intension and extension. Society develops subjectively and objectively; subjectively by enlarging its membership, objectively by enlarging the aims of its activities. Originally confined to the narrowest circles of people, to immediate neighbours, the division of labour gradually becomes more general until eventually it includes all mankind.