An Austrian Perspective on the History of Economic Thought

12.1   The Marxian strategy

Marx desperately sought a materialistic dialectic of history, a dialectic that would account for all basic historical change and would lead inevitably to communist revolution. Lacking a Boehmeian ‘nisus’ or mystical inner drive to serve as motor of the dialectic, Marx had to fall back on class conflict embedded in historical materialism. But it was characteristic of Marx that this crucial area of the Marxian system, along with other important discussions, was presented, not systematically, but in the course of fugitive paragraphs or even passages, here and there throughout the writings of Marx and Engels. The system has to be constructed out of these widely separated passages. As a result, or perhaps from the inherently grave weakness of the argument, Marx’s terminology is invariably vague and fuzzy, and his allegedly law-like linkages of the dialectic virtually non-existent. Often they are mere unsupported assertion. As a result, the Marxian system is not only a tissue of fallacies, but of flimsy fallacies and linkages as well.

No economic or social theory is obliged to come up with correct predictions, in the sense of forecasts of the future. But the Marxian doctrine is different. Like pre-millennial pietists who are forever predicting an imminent Armageddon, Marx claims to come up with ‘laws of history’ which, according to him, are ‘scientific’ rather than mystical. Well, if he knows the laws of history, then Marx had better come up with correct predictions of such allegedly determined laws. Yet all his predictions have proved utterly wrong. At this point, Marxists invariably fall back on changing the prediction, or pointing to some offsetting factor (seen only in hindsight) that temporarily delayed the prediction from coming true. Thus, as we shall see further below, one of Marx’s predictions, crucial to the inevitable workings of the road to socialism, was that the working class would suffer increasing poverty and immizeration. When the working classes, in contrast, obviously continued to gain spectacularly in living standards in the western world, Marxian apologists fell back on the assertion that Marx meant only poverty ‘relative to’ the capitalist class. It is doubtful, however, whether bloody revolution will be waged by a proletariat for having only one yacht while capitalists have a dozen each. ‘Relative’ misery is a very different kettle of fish. The Marxists then came up with the view that western workers’ standards of living were rising because of a ‘temporary’ delay brought about by western imperialism, enabling western workers to be ‘capitalists’ relative to the exploited Third World. The fact that Marx and Engels were themselves in favour of western, particularly German, imperialism, as a progressive force, is usually passed over in silence by Marxian writers.

On theoretical matters, the strategy of Marxists is similar. Increasingly, as crucial Marxian doctrines become evidently too absurd to be held seriously, e.g. technological determinism of all life, or the labour theory of value, they are abandoned by the Marxist, who then proceeds to maintain stubbornly that he is still a ‘Marxist’, and that Marxism essentially still holds true. But this is the attitude of a mystical religious adept rather than of a scientific or even a rational thinker.

One crucial weapon wielded often by Marxists and by Marx himself was ‘the dialectic’. Since the dialectic allegedly means that the world and human society consist of conflicting or ‘contradictory’ tendencies side by side or even within the same set of circumstances, any prediction can then be justified as the result of one’s deep insight into whichever part of the contradictory dialectic might be prevailing at any given time.1 In short, since either A or non-A can occur, Marxians can safely hedge their bets so that no prediction of theirs can ever be falsified. It has been said that Gerry Healy, the absolute leader of the left-wing British Trotskyite movement until scandal brought him down in recent years, was able to maintain his power by claiming the power of exclusive insight into the mysterious workings of the dialectic. And an outstanding example of hedging one’s bets by Marx himself was described in a letter to Engels. Marx writes to Engels that he has just forecast something in his column for the New York Tribune. He adds cynically and revealingly: ‘It is possible that I may be discredited. But in that case it will still be possible to pull through with the help of a bit of dialectic. It goes without saying that I phrased my forecasts in such a way that I would prove to be right also in the opposite case’.2

12.2   Historical materialism

There is no place in his system where Marx is fuzzier or shakier than at its base: the concept of historical materialism, the key to the inevitable dialectic of history.

At the base of historical materialism and of Marx’s view of history is the concept of the ‘material productive forces’. These ‘forces’ are the driving power that creates all historical events and changes. So what are these ‘material productive forces’? This is never made clear. The best that can be said is that material productive forces mean ‘technological methods’. On the other hand, we are also faced with the term ‘mode of production’, which seems to be the same thing as material productive forces, or the sum of, or systems of, technological methods.

At any rate, these material productive forces, these technologies and ‘modes of production’, uniquely and monocausally create all ‘relations of production’ or ‘social relations of production’ independently of people’s wills. These ‘relations of production’, also extremely vaguely defined, seem to be essentially legal and property relations. The sum of these relations of production somehow make up the ‘economic structure of society’. This economic structure is the ‘base’ which causally determines the ‘superstructure’, which includes natural science, legal doctrines, religion, philosophies, and all other forms of ‘consciousness’. In short, at the bottom of the base is technology which in turn constitutes or determines modes of production, which in turn determines relations of production, or institutions of law or property, and which finally in turn determine ideas, religious values, art, etc.

How, then, do historical changes take place in the Marxian schema? They can only take place in technological methods, since everything else in society is determined by the state of technology at any one time. In short, if the state of technology is T and everything else is the determined superstructure, S, then to Marx,

Tn → Sn

where n is any point of time. But then, the only way in which social change can take place is via change in technology, in which case

Tn + 1 → Sn + 1

As Marx put it in the clearest and starkest statement of his technological determjnist view of history, in his Poverty of Philosophy:

In acquiring new productive forces men change their mode of production, and in changing their mode of production, their means of gaining a living, they change all their social relations. The hand mill gives you society with the feudal lord; the steam mill society with the industrial capitalist.

The first grave fallacy in this farrago is right at the beginning: Where does this technology come from? And how do technologies change or improve? Who puts them into effect? A key to the tissue of fallacies that constitute the Marxian system is that Marx never attempts to provide an answer. Indeed he cannot, since if he attributes the state of technology or technological change to the actions of man, of individual men, his whole system falls apart. For human consciousness, and individual consciousness at that, would then be determining material productive forces rather than the other way round. As von Mises points out:

We may summarize the Marxian doctrine in this way: In the beginning there are the ‘material productive forces’, i.e., the technological equipment of human productive efforts, the tools and machines. No question concerning their origin is permitted; they are, that is all; we must assume that they are dropped from heaven.3

And, we may add, any changes in that technology must therefore be dropped from heaven as well.

Furthermore, as von Mises also demonstrated, consciousness, rather than matter, is predominant in technology:

a technological invention is not something material. It is the product of a mental process, of reasoning and conceiving new ideas. The tools and machines may be called material, but the operation of the mind which created them is certainly spiritual. Marxian materialism does not trace back ‘superstructural’ and ‘ideological’ phenomena to ‘material’ roots. It explains these phenomena as caused by an essentially mental process, viz. invention.4

Machines are embodied ideas. In addition, technological processes do not only require inventions. They must be brought forth from the invention stage and be embodied in concrete machines and processes. But that requires savings and capital investment as well as invention. But, granting this fact, then the ‘relations of production’, the legal and property rights system in a society, help determine whether or not saving and investment will be encouraged and discouraged. Once again, the proper causal path is from ideas, principles, and the legal and property rights ‘superstructure’ to the alleged ‘base’.

Similarly, machines will not be invested in, unless there is a division of labour of sufficient extent in a society. Once again, the social relations, the cooperative division of labour and exchange in society, determine the extent and development of technology, and not the other way round.5

In addition to these logical flaws, the materialist doctrine is factually absurd. Obviously, the hand mill, which ruled in ancient Sumer, did not ‘give you’ a feudal society there: furthermore, there were capitalist relations long before the steam mill. His technological determinism led Marx to hail each important new invention as the magical ‘material productive force’ that would inevitably bring about the socialist revolution. Wilhelm Liebknecht, a leading German Marxist and friend of Marx, reported that Marx once attended an exhibition of electric locomotives in London, and delightedly concluded that electricity would give rise to the inevitable communist revolution.6

Engels carried technological determinism so far as to declare that it was the invention of fire that separated man from the animals. Presumably the group of animals to whom fire somehow arrived were thereupon determined to evolve upward; the emergence of man himself was simply a part of the superstructure.

Even granting Marx’s thesis momentarily for the sake of argument, his theory of historical change still faces insuperable difficulties. For why can’t technology, which somehow develops as an automatic given, simply and smoothly change the ‘relations of production’ and the ‘superstructure’ above it? Indeed, if the base at each moment of time determines the rest of the superstructure, how can a change in the base not smoothly determine an appropriate change in the rest of the structure? But, again, a mysterious element enters the Marxian system. Periodically, as technology and the modes of production advance, they come into conflict, or, in the peculiar Hegelian-Marxian jargon, in ‘contradiction’ to the relations of production, which continue in the conditions appropriate to the past time period and past technology. These relations therefore become ‘fetters’ blocking technological development. Since they become fetters on growth, the new technology gives rise to an inevitable social revolution that overthrows the old production relations and the superstructure and creates new ones that have been blocked or fettered. In this way, feudalism gives rise to capitalism, which in turn will give way to socialism.

But if technology determines social production relations, what is the mysterious force that delays the change in those relations? It couldn’t be human stubbornness or habit or culture, since we have already been informed by Marx that modes of production impel men to enter into social relations apart from their mere wills.

As Professor Plamenatz points out, we are merely told that the relations of production become fetters on the productive forces. Marx merely asserts this point, and never even attempts to offer a cause, material or otherwise. As Plamenatz puts the entire problem:

then, all of a sudden, without warning and without explanation, he [Marx] tells us that there nevertheless arises inevitably from time to time an incompatibility between them [the productive forces and the relations of production] which only social revolution can resolve. This incompatibility apparently arises because the dependent variable [the relations] begins to impede the free operation of the variable on which it depends. [The material productive forces.] This is an astounding statement, and yet Marx can make it without even being aware that it requires explanation.7

Professor Plamenatz has shown that part of the deep confusion is both generated, and camouflaged, by Marx’s failure to define ‘relations of production’ adequately. This concept apparently includes legal property relations. But if legal property relations were at fault in this dialectical delay in adjustment, thus setting up the ‘fetters’, then Marx would be conceding that the problem is really legal or political rather than economic. But he wanted the determining base to be purely economic; the political and the ideological had to be merely part of the determined superstructure. So ‘social relations of production’, allegedly economic, were the fetters; but this can only makes sense if this means the property rights or legal system. And so Marx got out of his dilemma by being so fuzzy and ambivalent about the ‘relations of production’ that these relations could be taken either as including the property structure, as identical with that structure, or else the two might be totally separate entities.

In particular, Marx accomplished his obscurantist purpose by asserting that the property rights system was part of the ‘legal expression of the ‘relations of production’ – thus somehow being able to be part of the superstructure and yet of the economic ‘relations of production’ at the same time. ‘Legal expression’, needless to say, was not defined either. As Plamenatz summed up, the entire concept of ‘relations of production’, so necessary to the Marxian thesis of material or economic determinism, serves Marx as a ‘ghost battalion closing a vital gap in the front of Marxian theory’.8 Yet in all this there is no way that the concept of ‘relations of production’ can make economic determinism intelligible, and there is no way by which these relations can either be determined by the modes of production or can in themselves determine the property rights system.

The only possible coherent chain of causation, in contrast, is the other way round: from ideas to property rights systems to the fostering or crippling the growth of saving and investment, and of technological development.

Twentieth century Marxists, from Lukacs to Genovese, have often tried to save the day from the embarrassment of the technological determinism of Marx and his immediate followers. They maintain that all sophisticated Marxists know that the causation is not unilinear, that the base and the superstructure really influence each other. Sometimes, they try to torture the data to claim that Marx himself took such a sophisticated position. Either way, they are characteristically obfuscating the fact that they have in reality abandoned Marxism. Marxism is monocausal technological determinism, along with all the rest of the fallacies we have depicted, or it is nothing, and it has demonstrated no inevitable or even likely dialectic mechanism.9

12.3   The class struggle

Even assuming that the unexplained incompatibility between the productive forces and the relations of production exists, why shouldn’t this incompatibility continue forever? Why doesn’t the economy simply lapse into permanent stagnation of the technological forces? This ‘contradiction’, so to speak, was scarcely enough to generate Marx’s goal of the inevitable proletarian communist revolution.

The answer that Marx supplies, the motor of the inevitable revolutions in history, is inherent class conflict, inherent struggles between economic classes. For, in addition to the property rights system, one of the consequences of the relations of production, as determined by the productive forces, is the ‘class structure’ of society. For Marx, the fetters are invariably applied by the privileged ‘ruling classes’, who somehow serve as surrogates for, or living embodiments of, the social relations of production and the legal property system. In contrast, another, inevitably ‘rising’ economic class somehow embodies the oppressed, or fettered, technologies and modes of production. The ‘contradiction’ between the fettered material productive forces and the fettering social relations of production thus becomes embodied in a determined class struggle between the ‘rising’ and the ‘ruling’ classes, which are bound, by the inevitable (material) dialectic of history to result in a triumphant revolution by the rising class. The successful revolution at last brings the relations of production and the material productive forces, or technological system, into harmony. All is then peaceful and harmonious until later, when further technological development gives rise to new ‘contradictions’, new fetters, and a new class struggle to be won by the rising economic class. In that way, feudalism, determined by the hand mill, gives rise to middle classes when the steam mill develops, and the rising middle classes, the living surrogates of the steam mill, overthrow fetters imposed by the feudal landlord class. Thus, the material dialectic takes one socio-economic system, say feudalism, and claims that it ‘gives rise’ to its opposite, or ‘negation’, and its inevitable replacement by ‘capitalism’, which thus ‘negates’ and transcends feudalism. And in the same way electricity (or whatever) will inevitably give rise to a proletarian revolution which will permit electricity to triumph over the fetters that capitalists place upon it.

It is difficult to state this position without rejecting it immediately as drivel. In addition to all the flaws in historical materialism we have seen above, there is no causal chain that links a technology to a class, or that permits economic classes to embody either technology or its ‘production relations’ fetters. There is no proffered reason why such classes must, or even plausibly might, act as determined puppets for or against new technologies. Why must feudal landlords try to suppress the steam mill? Why can’t feudal landlords invest in steam mills? And why can’t capitalists cheerfully invest in electricity as they already have in steam? Indeed, they have in fact happily invested in electricity, and in all other successful and economical technologies (as well as bringing them about in the first place). Why are capitalists inevitably oppressed under feudalism, and why are the proletariat equally inevitably oppressed under capitalism? (On Marx’s attempt to answer the latter question, see below.)

If, finally, class struggle and the material dialectic bring about an inevitable proletarian revolution, why does the dialectic, as Marx of course maintains, at that point come to an end? For crucial to Marxism, as to other millennial and apocalyptic creeds, is that the dialectic can by no means roll on forever. On the contrary, the chiliast, whether pre- or post-millennial, invariably sees the end of the dialectic, or the end of history, as imminent. Very soon, imminently, the third age, or the return of Jesus, or the Kingdom of God on earth, or the total self-knowledge of the man-God, will effectively put an end to history. Marx’s atheist dialectic, too, envisioned the imminent proletarian revolution, which would, after the ‘raw communist’ stage, bring about a ‘hig her communism’ or perhaps a ‘beyond communist’ stage, which would be a classless society, a society of total equality, of no division of labour, a society without rulers. But since history is a ‘history of class struggles’ for Marx, the ultimate communist stage would be the final one, so that, in effect, history would then come to an end.

Critics of Marx, from Bakunin to Machajski to Milovan Djilas, have of course pointed out, both prophetically and in retrospect, that the proletarian revolution, whichever its stage, would not eliminate classes, but, on the contrary, would set up a new ruling class and a new ruled. There would be no equality, but another inequality of power and inevitably of wealth: the oligarchic elite, the vanguard, as rulers, and the rest of society as the ruled.

In order to round out his system, Marx was interested in the dialectical workings of the past, the passages from oriental despotism or the ‘Asiatic mode of production’ to the ancient world, thence to feudalism, and from feudalism to capitalism. But his main interest, understandably, was in demonstrating the precise mechanism by which capitalism was supposed to give way, imminently, to the proletarian revolution. After working out this broad system, the rest of Marx’s life was largely devoted to demonstrating and developing these alleged mechanisms.

12.4   The Marxian doctrine of ‘ideology’

Even Marx must dimly recognize that not ‘material productive forces’, not even ‘classes’, act in the real world, but only individual consciousness and individual choice. Even in the Marxian analysis, each class, or the individuals within it, must become conscious of its ‘true’ class interests in order to act upon pursuing or achieving them. To Marx, each individual’s thinking, his values and theories, are all determined, not by his personal self-interest, but by the interest of the class to which he supposedly belongs. This is the first fatal flaw in the argument; why in the world should each individual ever hold his class higher than himself? Second, according to Marx, this class interest determines his thoughts and viewpoints, and must do so, because each person is only capable of ‘ideology’ or false consciousness in the interest of his class. He is not capable of a disinterested, objective search for truth, nor of pursuit of his own interest or of that of all mankind. But, as von Mises has pointed out, Marx’s doctrine pretends to be pure, non-ideological science, and yet written expressly to advance the class interest of the proletariat. But, while all ‘bourgeois’ economics and all other disciplines of thought were interpreted by Marx as false by definition, as ‘ideological’ rationalizations of bourgeois class interest, the Marxists

were not consistent enough to assign to their own doctrines merely ideological character. The Marxian tenets, they implied, are not ideologies. They are a foretaste of the knowledge of the future classless society which, freed from the fetters of class conflicts, will be in a position to conceive pure knowledge, untainted by ideological blemishes.10

Dr David Gordon has aptly summed up this point:

If all thought about social and economic matters is determined by class position, what about the Marxist system itself? If, as Marx proudly proclaimed, he aimed at providing a science for the working class, why should any of his views be accepted as true? Mises rightly notes that Marx’s view is self-refuting: if all social thought is ideological, then this proposition is itself ideological and the grounds for believing it have been undercut. In his Theories of Surplus Value, Marx cannot contain his sneering at the ‘apologetics’ of various bourgeois economists. He did not realize that in his constant jibes at the class bias of his fellow economists, he was but digging the grave of his own giant work of propaganda on behalf of the proletariat.11

Von Mises also raises the point that it is absurd to believe that the interests of any class, including the capitalists, could ever be served better by a false than by a correct doctrine.12 To Marx, the point of philosophy was only the achievement of some practical goal. But if, as in pragmatism, truth is only ‘what works’, then surely the interests of the bourgeoisie would not be served by clinging to a false theory of society. If the Marxian answer holds, as it has, that false theory is necessary to justify the existence of capitalist rule, then, as von Mises points out, from the Marxian point of view itself the theory should not be necessary. Since each class ruthlessly pursues its own interest, there is no need for the capitalists to justify their rule and their alleged exploitation to themselves. There is also no need to use these false doctrines to keep the proletariat subservient, since, to Marxists, the rule or the overthrow of a given social system depends on the material productive forces, and there is no way by which consciousness can delay this development or speed it up. Or, if there are such ways, and the Marxists often implicitly concede this fact, then there is a grave and self-defeating flaw in the heart of Marxian theory itself.

It is a well-known irony and another deep flaw in the Marxian system that, for all the Marxian exaltation of the proletariat and the ‘proletarian mind’, all leading Marxists, beginning with Marx and Engels, were emphatically bourgeois themselves. Marx was the son of a wealthy lawyer, his wife was a member of the Prussian nobility and his brother-in-law Prussian minister of the interior. Friedrich Engels, his lifelong benefactor and collaborator, was the son of a wealthy manufacturer, and himself a manufacturer. Why were not their views and doctrines also determined by bourgeois class interests? What permitted their consciousness to rise above a system so powerful that it determines the views of everyone else?

In this way, every determinist system attempts to provide an escape-hatch for its own believers, who are somehow able to escape the determinist laws that afflict everyone else. Unwittingly, these systems become in that way self-contradictory and self-refuting. In the twentieth century, Marxists such as the German sociologist Karl Mannheim attempted to elevate this escape-hatch into High Theory: that somehow, ‘intellectuals’ are able to ‘float free’, to levitate above the laws that determine all other classes.

12.5   The inner contradiction in the concept of ‘class’

A ‘class’ is a set of entities with one identifiable thing in common. Thus there is a class of ‘bald eagles’ or of ‘geraniums’, and such a class can be widened or narrowed: e.g., the class of ‘geraniums growing in New Jersey’. A ‘social class’ is a class of human beings with one thing in common. The number of identifiable social classes is virtually infinite. Thus: there is the ‘class of people over 6 feet 4 inches in height’, the ‘class of people named Smith’, the ‘class of people weighing under 160 pounds’, etc. ad infinitum. Some of these classes will be useful for certain types of social analysis (e.g. the ‘class of people over 65 years of age with diabetes’), for medical or insurance or demographic purposes. But from our point of view, in a study of the Marxian theory of class, these classes are all worthless because there is no inherent conflict between them. In the market economy, in the international division of labour and exchange of products, there is no inherent conflict between short and tall people, people of various weights and names, etc. All classes live in harmony through the voluntary exchange of goods and services that mutually benefits them all. Furthermore, there is no reason for an individual in a free society, or in a market economy, to act on behalf of ‘the interests of his class’ rather than, or even as a surrogate for, his own individual interest. Will a person, when deciding at what job to work, or what investment to make, first and foremost consult his ‘class interest’ as the member of a ‘class over 6 feet tall’? The very idea is absurd.

Is there no time, then, when social classes are in inherent conflict? Yes, there are such times, but only when some classes are privileged by state coercion, while other classes are restricted or burdened by state coercion. Ludwig von Mises perceptively used the term ‘caste’ to identify groups either privileged or burdened by the state, as distinguished from ‘classes’, which are simply groups of people on the free market in no sense in inherent conflict. The caste system in India was a classic case. The privileged or ‘ruling’ castes acquired power, income, and status by state coercion; the submerged or ‘ruled’ castes, for example, were prevented by coercion from leaving the lowly occupations of their ancestors. Other ruling and ruled ‘castes’ or classes are not as rigid as the Indian caste system, but still they partake of the same coercively determined status. Thus, the Brahmin caste, privileged by the state, was in inherent conflict with the Untouchables, who were submerged as a class by the state. These castes then have conflicting class (or ‘caste’) interest: the Brahmins to maintain their privileges, the Untouchable or other submerged castes to break out of their burdens. The point is that, by the use of state power, each individual Brahmin has a common or ‘class’ interest in maintaining his privileges; while each Untouchable has a common class interest in freeing himself from oppression.

Thus, even in less rigid cases than in an absolute caste system, the class of short and tall people, or the class of people named Smith, normally living in peace and harmony, could become classes in inherent conflict. Suppose, for example, the state decrees a large subsidy for all people over 6 feet tall, or a special heavy tax on all those under 5 feet 5 inches. If special privileges were heaped on people named Smith, then this would be a privileged class at the expense of everyone else, and there would be an economic incentive to try to join the ‘ruling class’, people named Smith, as quickly as possible.

Even in such situations, as Marx in practice could not deny, there were and are individuals who, for various reasons of ideology or opportunism, fail to follow their own common class-interest. There were and are Brahmins who put the demands of justice (that is, ideas or principles) higher than their class interest, or Untouchables who, for personal interest, willingly submit to the existing order.

There is a grave inner contradiction at the heart of the Marxian system, in Marx’s crucial concept of class. In the Marxian dialectic, two mighty social classes face each other in inherent conflict, the ruling and the ruled. In the first two of history’s major conflicts: ‘oriental despotism’, and ‘feudalism’, the social classes are defined by Marx in what we have seen to be the libertarian, or Misesian, manner: as classes privileged or burdened by the state. Thus, in ‘oriental despotism’, or the ‘Asiatic mode of production’, the emperor and his technocratic bureaucracy run the state, and constitute its ‘ruling class’. This class acquires privileges from the state, and taxes and controls the ‘ruled’ classes, that is, everyone else, largely the peasantry but also craftsmen and merchants. Here Marx adopts the libertarian (as we have seen advanced by James Mill) definition of a two-class system, the ruling Few who have gained control of the state, who are governing and exploiting the ruled Many. Under feudalism, a similar concept applies. The landlord class has acquired territory through war and conquest, and has settled down to oppress the peasantry and the merchants and craftsmen via coerced rents, taxes, controls and serfdom. Once again, Marx’s class categories are ‘caste’ categories: the ruling class is such by virtue of its having gained control of the state, the main social apparatus of coercion.

All well and good. But then, suddenly, when Marx gets to capitalism, the class categories change, without acknowledgement. Now the ruling class is not simply defined as the class that runs the state apparatus. Now, suddenly, the original act of rule or ‘exploitation’ is the voluntary market wage contract, the very act of a capitalist hiring a worker and a worker agreeing to be hired. This in itself, to Marx, establishes a common ‘class-interest’ among capitalists, exploiting a ‘common class’ of workers. It is true that Marx also believed that this ‘capitalist class’ runs the state, but only as ‘the executive committee of the ruling class’, that is, of a ruling class that previously existed on the free market, because of the wage system. So that what Marx, as analyst of oriental despotism or feudalism, would consider ruling-class exploitation still exists under capitalism, but only as an addendum to the preexisting capitalist exploitation of the workers through the wage system. Ruling-class exploitation under capitalism is unique in exercising a double exploitation: first, on the market as part of the wage contract, and second, the alleged exploitation by the state as executive committee of the ruling class.

It should be evident that Marx’s analysis of class is by this point a mishmash, in total disarray; two contradictory definitions of class are jammed together, unfused and unacknowledged. Why should capitalism, of all systems, be able to levy a ‘double’ exploitation that no other ruling class in Marx’s historical schema can ever enjoy?

But the crucial point is that Marx’s definition of class and class conflict under capitalism is hopelessly muddled and totally wrong. How can ‘capitalists’, even in the same industry let alone in the entire social system, have any thing crucial in common? Brahmins and slaves, in a caste system, certainly enjoy a common class-interest, in conflict with other castes. But what is the common ‘class-interest’ of the ‘capitalist class’? On the contrary, capitalist firms are in continual competition and rivalry with each other. They compete for raw material, for labour, for sales and customers. They compete in price and quality, and in seeking new products and new ways to get ahead of their competitors. Marx, of course, did not deny the reality of this competition. So how can all capitalists, or even ‘the steel industry’, be considered a class with common interests? Again, in only one way: the steel industry only enjoys common interests if it can induce the state to create such interests through special privilege. State intervention to impose a steel tariff, or a steel cartel with restricted output and higher price, would indeed create a privileged ‘ruling class’ of steel industrialists. But no such class having common interests pre-exists on the market before such intervention comes about. Only the state can create a privileged class (or a subordinate and burdened class) by acts of intervention into the economy or society. There can be no ‘capitalist ruling class’ on the free market.

Similarly, there can be no ‘working class’ with common class-interests on the free market. Workers compete with each other, just as capitalists or entrepreneurs compete with each other. Once again, if groups of workers can use the state to exclude other groups, they can become a ruling class as against the excluded groups. Thus, if government immigration restrictions keep out new workers, the native workers can benefit (at least in the short run) at the expense of incomes of immigrants; or if white workers can keep black workers out of skilled jobs by state coercion (as was done in South Africa), the former becomes a privileged or ruling class at the expense of the latter.

An important point here is that any group that can manage to control, or gain privileges from, the state can take its place among the exploiters: this can be specific groups of workers, or businessmen, or Communist Party members, or whatever. There is no reason to assume that only ‘capitalists’ can acquire such privileges.

In his class analysis, Marx constantly had to struggle with the fact that neither capitalists nor workers act in practice as if they are each members of monolithic, conflicting classes. On the contrary, capitalists persist in competing with each other, and workers likewise. Even in their rousing Communist Manifesto, Marx and Engels had to admit that ‘The organization of the proletarians into a class, and consequently into a political party, is continually being upset again by the competition among the workers themselves’. Indeed.

But there are more grave problems. For Marx had his two-class analysis; the essence of each titanic struggle in history is between two great social classes: the ruling vs the ruled, the rising class in tune with the new material productive forces, the declining one out of tune. But it is one thing to employ a two-class ruler vs ruled analysis according to libertarian or Millian definitions; since there are indeed common caste interests and conflicts, this concept is here a simplification, but an important and workable one. But what are we to do in the complex, multi-class world of the capitalist market economy? How can we employ a two-class model there, either for market or political action?

And there is no question that Marx is committed to the two-class model: capitalists vs proletarians. All other classes fade away, so that the mighty, exploited immizerated class can and will rise up as a monolith to overthrow ‘the capitalist class’. As Marx and Engels say in the Communist Manifesto: ‘Our epoch, the epoch of the bourgeoisie, possesses, however, this distinctive feature: it has simplified the class antagonisms: Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other: Bourgeoisie and Proletariat’.13

But in practice, in analysing recent history or current events, Marx and Engels were forced to talk about many classes and groups, and their interactions – thereby implicitly but definitely betraying their own absurd two-class model. And so we have the problem that Marx’s two classes are far from monoliths, that their members compete with each other constantly and collaborate very rarely, and also that in capitalist society in particular it is impossible to analyse historical action by squeezing all human actors into two classes.

In practice, however, Marx and other Marxists happily use a multi-class model in analysing historical events: ‘steel capital’, ‘textile capital’, ‘armament capital’, ‘finance capital’, etc. But they do not seem to realize that while they are being far more realistic than when prating about ‘capitalists’ vs ‘workers’ as two-class monoliths, they are totally betraying the Marxian dialectic itself. No inevitable revolution, for example, will ever follow from multi-class squabbling – certainly not Marx’s cherished proletarian one.

Marx himself, and Marxists generally, have devoted many millions of words to the concept and use of the term ‘class’. Yet in all his writings, Marx never once defined it. For if he had attempted a definition, the stark inner contradiction in the concept, the slippage between state creation and mere market action, would have become starkly clear, and something would have had to give.

Thus, in Marx’s theoretical magnum opus, Capital, there is no attempt at a definition of class. Only an incomplete Volume I was published in Marx’s lifetime (1867), at which point he had substantially finished working on the book. After Marx’s death in 1883, Engels worked up, edited and published the remaining manuscript in two further volumes (1885, 1894).14 Only in the famous very last chapter of the third volume does Marx finally arrive at an attempt to define what he and Engels had been talking and writing about for four decades. It is an unfinished chapter of startling brevity – five short paragraphs. In this chapter, ‘Classes’, Marx begins with the classical Ricardian triad: that the sources of income in the market economy are wages, profits and rents, and that the receivers of such income constitute the ‘three big classes of modern society’ – labourers, capitalists and landlords.15 So far, so good. But then Marx adds that even England, ‘the most highly and classically developed’ capitalist country, contains ‘middle and intermediate strata [which] even here obliterate lines of demarcation everywhere’. But, he quickly hastens to assure his readers that this problem is irrelevant, since the concentration and polarization of classes is proceeding apace.

Marx then begins the third paragraph of this seemingly climactic chapter. ‘The first question to be answered is this: What constitutes a class?’ Indeed. He then adds that the reply to this question ‘follows naturally’ from the reply to a second, related question: ‘What makes wage-labourers, capitalists, and landlords constitute the three great social classes?’ We are now primed for the answer, first to the latter Ricardian question and then to the first, critical query, ‘What constitutes a class?’

On the second question, Marx states that ‘at first glance’ the identity of incomes with their sources constitutes the answer. After all, workers earn wages from their labour, capitalists make profits from their capital, and landlords obtain rent from their land. But Marx quickly warns us that this simple answer will not do. For:

However, from that standpoint, physicians and officials, e.g., would also constitute two classes, for they belong to two distinct social groups, the members of each of these groups receiving their revenues from one and the same source. The same would also be true of the infinite fragmentation of interest and rank into which the division of social labour splits labourers as well as capitalists and landlords – the latter, e.g. into owners of vineyards, farm owners, owners of forests, mine owners and owners of fisheries.

Precisely. Marx has said it very well; his cherished two-class monolith model (or three-class, if we throw in the allegedly declining ‘feudal remnant’ – the landlord class) lies totally in ruins.16

Thus Marxian class theory, and therefore Marxism, lay destroyed by its creator’s own hand. But if it is always darkest before the dawn, if the suffering of the oppressed class is greatest just before the apocalyptic revolutionary moment, we would expect Karl Marx to step in and triumphantly save the day. How does he do it? How does the drama unfold? In one of the great anti-climactic moments in the history of social thought, the manuscript ends with the lines we have just quoted. There is just a cryptic footnote from Engels: ‘Here the manuscript breaks off.

The way Engels puts it implies that the Master was struck down just as his pen was ready to wield the Answer that would rescue the crumbling Marxian theory of class and place it on solid foundations. But we know this was not true, for the ‘breaking off’ occurred 16 years before Marx’s death. Marx had ample time for his dramatic and conclusive answer. Why didn’t he pursue it? We can only conclude that he couldn’t, that he was stopped, that he realized that there was no answer, and that Marxism would henceforth have to rely on repetition and bluster to carry it through.

12.6   The origin of the concept of class

We have seen above that James Mill, in the early decades of the nineteenth century, worked out a simple but cogent and effective two-class theory of class; the ruling class that ran the state, and the remainder of society, who constituted the ruled. At about the same time, during the Restoration period in France after the fall of Napoleon in 1814, a group of laissez-faire libertarian theorists were working out a far more sophisticated version of the same model, a model that contained a historical and sociological dimension absent in James Mill. This group were the spiritual and physical descendants of the ideologues of the Napoleonic era, and the major link was J.B. Say. Say was the inspirer and elder statesman of this Restoration group, which was led by his son-in-law Charles Comte (François Charles Louis Comte, 1782–1837) and Charles Dunoyer (Barthélemy Charles Pierre Joseph Dunoyer, 1786–1862). An important follower of Comte and Dunoyer was the young Augustin Thierry (1795–1856), soon to become to most notable of French historians. At the beginning of the Restoration and until 1820, Comte and Dunoyer founded and edited Le Censeur followed by Le Censeur Europe’en, periodicals that became the centre for the new laissez-faire movement.

Like Mill, Comte and Dunoyer defined conflicting classes as those who gained control of the state apparatus as against those who were controlled by the state. But they also pointed out that history had been a history of such class (or ‘caste’) struggles. Under oriental despotism, the emperor and his bureaucracy constituted the ruling class; in early Europe, conquering tribes settled down among the conquered to constitute a state with a ruling class; historically, then, another component of such a ruling class is that, at least initially, it was of a different ethnic group from the ruled. In this way, ethnic oppression reinforced political-economic class oppression by the state.

But to Comte and Dunoyer, the new element, the factor that would bring about the inevitable emergence and triumph of a classless (in the sense of ‘casteless’) society, was what they called industrielisme. The emergence of an industrial society required an international free market economy to enable it to work; hence Comte and Dunoyer saw it as inevitable that a free market economy would spread throughout Europe and eventually the world, dissolving the ruling classes, and bringing about a libertarian region and world, a world free of the oppression of the state. Thus the state, in this vision, would wither away, to be dissolved into the market exchange economy, and in the explicit language of Comte and Dunoyer, ‘the government of men would be replaced by the administration of things’.

Thus Comte and Dunoyer saw the world as being split into the productive classes (workers, entrepreneurs, producers of all kinds), crippled and oppressed by the ‘non-productive’ classes, using the state to levy tribute upon the producers. The ‘non-producers’ were, in particular, politicians, government officials, and rentiers living off government bonds, as well as subsidized businessmen or receivers of government privilege. The ‘peak of perfection’, which Comte and Dunoyer saw as eventually arriving, ‘would be reached if all the world worked, and no one governed’.

In their analysis, Comte and Dunoyer went beyond their mentor, J.B. Say, with his blessing, to add the historical, sociological, and political philosophic dimensions to the strictly economic.

The Comte-Dunoyer movement were firm and militant believers in individual liberty and in property rights. Thus Dunoyer’s attack on egalitarian-ism: ‘Equality would be the reversal of that fundamental law of humanity and of society’ which provides that the income and the position of each man ‘depends above all on his conduct, and is proportionate to the activity, the intelligence and the morality and the persistence of his efforts’. And on liberty, Dunoyer wrote that for 40 years, ‘I have defended the same principles: liberty in everything, in religion, in philosophy, in literature, industry, in politics. And by liberty I mean the triumph of individuality...’.17

The worm in the apple, the way in which libertarian social class analysis got transmuted into a mixture of itself and its opposite, was provided by a garrulous French aristocrat Henri, Comte de Saint-Simon (Claude Henri de Rouvroy, Comte de Saint-Simon 1760–1825). Saint-Simon, a hopelessly muddled thinker, was not aided in his existential confusion by his penchant for picking up ideas orally, at salons, instead of by systematic reading.18 For a while, during the Censeur period, Saint-Simon, who had picked up the Comte-Dunoyer ideas at salons, was what could best be described as a fellow-traveller of theirs, and pushed their ideas in his own periodical, I’Industrie (1816–18). After that, however, Saint-Simon grew increasingly authoritarian and hostile to laissez-faire liberalism. Having imbibed libertarian class analysis from Comte and Dunoyer, he characteristically got the concepts confused, and introduced the fateful and unacknowledged contradiction: between conflicting classes in the sense of those who govern, or are governed by, the state versus employers vis-à-vis wage earners on the free market. The Marxian jumble was Saint-Simon’s dubious contribution to social thought. After Saint-Simon’s death in 1825, his disciple Olinde Rodrigues, an engineer and son of a bureaucrat, joined by Enfantin and Bazard, founded the Saint-Simonian journal Le Producteur which, followed by conferences and tracts for the remainder of the 1820s, converted their deceased master’s confused social philosophy into a militant proposal for a totalitarian socialist system. This system was to be run by what the Saint-Simonians considered the true class representatives of industrielisme: an alliance of engineers and other technocratic intellectuals with investment bankers, coordinated and led by a banker-dominated central bank.

In short, in contrast to communist socialism, which was at least ostensibly egalitarian, Saint-Simonianism was frankly elitist, to be run by the ‘good’ and allegedly modern classes. Thus the Saint-Simonians, who were the first users of the word ‘socialism’, repudiated capitalists and entrepreneurs, on behalf of their favoured bankers and intellectual classes, representing the worker-producers. It is perhaps not coincidental that, of the two maximum co-leaders of Saint-Simonianism, Enfantin and Bazard, Barthélemy Prosper Enfantin was the son of a banker, was trained as a banker and engineer, and had been a mathematics student of Olinde Rodrigues. Nor is it surprising that Saint-Simonianism appealed hugely to the investment bankers, the Producteur being financed by the prominent banker, Jacques Laffitte. The Saint-Simonian culture reached the peak of its remarkable influence in France from 1830–32, after which the dual popes of this political-religious cult, Enfantin and Saint-Amand Bazard (1791–1832) had a fiery split on the free love question on which every disciple was required to take immediate sides. Unfortunately, the destructive split between the two popes came too late, and the Saint-Simonian socialist movement had already become astoundingly influential throughout Europe. In France, artists and writers became Saint-Simonians, including George Sand, Balzac, Hugo, and Eugène Sue, while in music Berlioz attempted to apply Saint-Simonian principles by composing a Song on the Installation of Railroads, and Franz Liszt played the piano at Saint-Simonian meetings.

In England, the reactionary romantic pantheist Thomas Carlyle took to Saint-Simonian socialism immediately, and became its leading spokesman in England, going so far as to translate and attempting to publish the master’s final work, The New Christianity, in which he foreshadowed the development of his movement into the cult of a new religion. Of more lasting importance was the deep influence that Saint-Simonianism had on John Stuart Mill. For it was the Saint-Simonians who were initially and largely responsible for Mill’s quasi-conversion from his father’s hard-core free market views to semi-socialism. In his Autobiography, Mill explains that he read every Saint-Simonian tract and how it was ‘partly by their writings that [his] eyes were opened to the very limited and temporary value of the old political economy, which assumes private property and inheritance as indefeasible facts and freedom of production and exchange as the dernier mot of social improvement’. Indeed, in a letter to a leading French Saint-Simonian, Gustave d’Eichtal, a friend of Rodrigues, Mill went so far as to concede that some form of Saint-Simonian socialism ‘is likely to be the final and permanent condition of our race’, although he differed with them in believing that it would take a long time for mankind to become capable of achieving that happy state.19

There is no country, however, that took to Saint-Simonianism with more gusto than Germany. In the early 1830s, Saint-Simonianism ‘went like wildfire through the German literary world’.20 Its enthusiastic adepts included the eminent political writer, Friedrich Buchholz and the famous poet Heinrich Heine, while the Young German school of poets became Saint-Simonian adepts. But the most important influence of Saint-Simonianism in Germany was on the Young Hegelians, Young German poets such as T. Mundt and G. Kuehne were Hegelian university lecturers on philosophy. More directly, Saint-Simonianism exercised a formative influence on Marx. In the first place, Marx’s home town of Trier had been part of the German Rhineland occupied by France for two decades of the French revolutionary wars. Hence the town had become greatly susceptible to French intellectual influences. As a result, Trier was rife with Saint-Simonian agitation when Marx was a young adolescent; so much so that the archbishop felt obliged to condemn Saint-Simonian doctrines from the pulpit. Ludwig Gall, former secretary to the Trier city council, was a prominent and prolific Saint-Simonian writer. There is little doubt that Marx read Gall’s writings.

Another powerful influence on Marx was one of his favourite teachers at the University of Berlin, Eduard Gans, one of Hegel’s favourite disciples, who taught criminal law. Gans was both a Hegelian and a Saint-Simonian, and the interpenetration of the two doctrines in Germany deeply shaped the views of the Young Hegelians, of whom Marx became a leader. As Billington notes, ‘The entire phenomenon of left Hegelianism has indeed been described as “nothing more than a Hegelianized Saint-Simonianism or a Saint-Simonianized Hegelianism”.’21 Steeped in Saint-Simon as well as Hegel, Marx found the concept of class struggle, as strained through the defective lenses of the Saint-Simonians, ready to hand and suited for incorporation into his own Grand Design. In addition to the class struggle between proletarians and capitalists, Marx also adopted the Saint-Simonian version of industry and its embodiment (among the Saint-Simonians and in Marx, the workers) as inevitably victorious, along with the future goal of history as the withering away of the state and the ‘replacement of the government of men by the administration of things’. There was, of course, a crucial difference between this abortive concept and its original. Among Comte and Dunoyer, the Utopian state was to be a purely free society of individual property-holders and free market exchangers; for Marx it was to be a communal collective ‘self ownership of all goods by ‘man’, with no extant division of labour, specialization, money or exchange.

Marx himself has testified to a particularly powerful Saint-Simonian influence over him, as conveyed by his beloved mentor, surrogate father, and future father-in-law, Baron Ludwig von Westphalen. Towards the end of his life, Marx told his close friend and admirer, the Russian liberal aristocrat Maxim Kovalevsky, that he had imbibed Saint-Simonianism from von Westphalen, who was apparently an ardent admirer of Saint-Simonian doctrine.

We have already seen that in the Communist Manifesto, Marx and Engels slipped into the original libertarian, rather than the Saint-Simonian-Marxian theory of class, confusing the state-privileged with capitalists who hire workers on the market. In a penetrating discussion, Professor Ralph Raico has pointed out that the term ‘bourgeois’ as used on the Continent provided the basis for that confusion. As Raico notes:

When Marx says that the bourgeoisie is the main exploiting and parasitic class in modern society, ‘bourgeoisie’ may be understood in two different ways. In England and the United States, it has tended to suggest the class of capitalists and entrepreneurs who make their living by buying and selling on the (more or less) free market... On the Continent, however, the term ‘bourgeoisie’ has no such necessary connection with the market: it can just as easily mean the class of ‘civil servants’ and rentiers off the public debt as the class of businessmen involved in the process of social production.22

Raico goes on to state that the systematic exploitation of other classes by bureaucrats and public debt-holders ‘was a commonplace of 19th century social thought’; Tocqueville, for example, denounces the ‘middle class’ rule under the ‘bourgeois monarchy’ of Louis Phillippe (1830–48) as follows: ‘It settled into every office, prodigiously increased the number of offices, and made a habit of living off the public Treasury almost as much as from its own industry.’23

But this is far from all. Professor Raico shows that, in analysing specific historical events, particularly in contemporary French history, Marx and Engels kept slipping into the state-bound two-class, libertarian-type analysis. Thus, consider Marx’s Eighteenth Brumaire of Louis Bonaparte (1852), analysing the events leading up to Bonaparte’s coup of 2 December 1851, which Marx himself portrayed as a ‘demonstration how the class struggle in France created circumstances and relationships that made it possible for a grotesque mediocrity to play a hero’s part’. In the Eighteenth Brumaire, Marx writes indignantly of:

This executive power, with its enormous bureaucracy and military organization, with its ingenious state machinery, embracing wide strata, with a host of officials numbering half a million, this appalling parasitic body, which enmeshes the body of French society like a net and chokes all its pores, sprang up in the days of the absolute monarchy... Every common interest was straightway severed from society, counterpoised to it as a higher general interest, snatched from the activity of society’s members themselves and made an object of government activity, from a bridge, a schoolhouse and the communal property of a village community to the railways, the national wealth and the national university of France... AH revolutions perfected this machine instead of smashing it. The parties that contended in turn regarded the possession of this huge state edifice as the principal spoils of the victor... [Ujnder the second Bonaparte... the state seems to have made itself completely independent. As against civil society, the state machine has consolidated its position...24

Not only is Marx using here a two-class state-bound analysis of class conflict, but he foreshadows the libertarian development of the idea of the state as an anti-social instrument, as in Herbert Spencer and in Franz Oppenheimer, and even Albert Jay Nock’s advanced twentieth century libertarian analysis of ‘state power’ as being an interest inherently opposed to, and exploitative of, ‘social power’.

Fine. But where in all of this are the capitalists and their use of the state as their ‘executive committee’ to redouble their exploitation of the proletariat? Where, in fact, are capitalists and proletariat at all! As Raico points out, there is a delicious irony here. For sophisticated libertarian analysts speak not only of state power, but also of various groups in history – Asiatic bureaucratic despotism, feudal landlords, Communist Parties, or whatever – who have managed to gain control of the state and use its coercive apparatus of exploitative rule over the rest of society. Thus, as Raico notes, the Marxian analysis ‘here completely ignores the massive use of state-power by segments of the capitalist class, and limits itself to the exploitative activities of those directly in control of the state apparatus’. Why Marx and Engels ‘should care to whitewash the capitalists in this way’, Raico concludes ironically, ‘I cannot say’.25

Marx repeated a similar analysis 20 years later in his The Civil War in France (1871) on the rise and fall of the Paris Commune. That Commune, he wrote, aimed at restoring ‘to the social body all the forces hitherto absorbed by the State parasite feeding upon, and clogging the free movement of society’. In particular, the Commune was able to succeed, at least for a while, ‘by destroying the two greatest sources of [government] expenditure – the standing army and State functionarism’.

Finally, Engels in his 1891 preface to the Civil War in France, applied this same libertarian, and very un-Marxian, analysis to the existing political situation in the United States:

Nowhere do ‘politicians’ form a more separate and powerful section [class?] of the nation than precisely in North America. There, each of the two major parties which alternately succeed each other in power is itself in turn controlled by people who make a business of politics... It is in America that we see best how there takes place this process of the state power making itself independent in relation to society... we find two great gangs of political speculators, who alternately take possession of the state power and exploit it by the most corrupt means and for the most corrupt ends – the nation is powerless against these two great cartels of politicians who are ostensibly its servants, but in reality dominate and plunder it.26

Professor Raico concludes his analysis as follows:

It seems, therefore, that there are two theories of the state (as well as, correspondingly, two theories of exploitation) within Marxism: there is the customarily discussed and very familiar one [and the one which Marx himself proclaimed], of the state as the instrument of the ruling class (and the concomitant theory which locates exploitation within the production process); and there is the theory of the state which pits it against ‘society’ and ‘nation’ (two surprising and significant terms to find in this context...). Moreover, it would seem suggestive that it is this second theory that predominates in those writings of Marx which, because of their nuanced and sophisticated treatment of concrete and immediate political reality, many commentators have found to be the best expositions of the Marxian historical analysis.27

12.7   The legacy of Ricardo

As Karl Marx plunged into the economics of capitalism that would occupy the rest of his life, he found ready at hand a marvellous weapon: Ricardian economics. In contrast to J.B. Say and the French tradition, Ricardo concentrated not on market exchange and its inevitable focus on individual actors and enchangers benefiting from exchange, but on ‘production’ followed by ‘distribution’ of income as a distinct and separate process. Ricardo’s main focus was on how this social income from production is ‘distributed’. Whereas Say or Turgot looked at individual factors of production and how their income emerges from production and exchange, Ricardo focused only on entire, allegedly homogeneous, ‘classes’ of producers: workers earning wages, capitalists earning ‘profits’ and landlords acquiring rent. As von Mises pointed out: ‘On the market there are always only single individuals... Even Marx had to make a point of explaining that as purchases and sales are made only between single individuals, it is not admissible to look to them for relations between social classes’,28

For Ricardo, then, tautologically, given total production, which was mysteriously there and not explained, more of the fixed total pie obtained by one class must mean less for other classes. There are, as we remember, no entrepreneurs in Ricardo, because the Ricardians had their eyes firmly fixed on long-run equilibrium, which is supposed to describe living reality, and in such equilibrium, devoid of change or uncertainty, there is no room for entrepreneurship. Thus, for Ricardo, the conditions were already there for a class-struggle theory of the capitalist economy.

Not only that. For the delighted Marx found that Ricardian doctrine was, in effect, a quantity of labour theory of value. Utility dropped out, and since only reproducible goods and not non-reproducible goods such as Rembrandt paintings were considered explainable, only the cost of production was considered a determinant of the embodied value of goods. And since Ricardo finessed ‘rent’ as allegedly not a part of cost, the only possible cost except labour hours was profit (interest) or cost of capital, and this was so small as to be readily neglected. Besides, profits are allegedly only a declining residual after the payment of wages, which are doomed to keep rising in money but not in real terms as population continues to press upon the food supply.

In the gloomy Ricardian perspective, there are two logical paths towards a call for change in the status quo. For Marx the labour theory of value, the view that labour is the sole producer of value, meant that the capitalist’s return, profit, constituted the exploitative extraction of ‘surplus value’ from the workers. The workers produce all value, but the capitalists are able somehow to coerce the workers into accepting wages that are below the full product. In fact, adopting the Malthusian-Ricardian view of population, the workers are paid a subsistence wage, while the capitalists extract the remainder of the workers’ product as their surplus value, or profit. To the old Malthusian problem: wouldn’t the same problem of overpopulation foil a socialist economy? the Marxian answer was that such an iron law of wages (to adopt the term of Lassalle) would not apply under socialism.

Oddly, neither Marx nor his critics ever realized that there is one place in the economy where the Marxian theory of exploitation and surplus value does apply: not to the capitalist-worker relation in the market, but to the relation of master and slave under slavery. Since the masters own the slaves, they indeed only pay them their subsistence wage: enough to live on and reproduce, while the masters pocket the surplus of the slaves’ marginal product over their cost of subsistence. This surplus value extracted from the slave constitutes the profits of the masters from slave-ownership. In the free society, in contrast, the workers, owning their own bodies and their own labour, pocket their full marginal product (discounted, as an Austrian would add, by the interest return the labourers freely and willingly pay to the capitalists for advancing them the value of their production now rather than wait until after the product is produced and sold).

Yet, such is the process of capitalization in the market that, in a system of slavery in the midst of a general market economy (as in the American South), the surplus value will be capitalized (by bidding up the value, and therefore the selling or buying price of the slaves). The long-run tendency will be for the business of slavery to yield a return equal to that of any other industry. The surplus profits will be bid away into the general rate of return on capital.

To return to Marx, he also found very handy the Smithian concept (not, to the latter’s credit, much employed by Ricardo) that only material commodities, and not immaterial services, constitute production or value. Material goods are frozen labour, whereas immaterial labour services are, in Marxian terms, ‘non-productive’. In this area, Marx took a giant step backwards from Ricardo to Adam Smith. All this, however, fitted neatly into Marxian philosophical materialism.

Marx also found that Ricardo had already treated all labour as homogeneous, with any differences in quality simply weighted by some sort of index to reduce them to quantity of labour hours.

One logical path for a radical Ricardian, clearly, was to call for the expropriation of surplus value, and the establishment of a system in which the labourers earn the full value of their product. As we shall see shortly, this was the path taken by the ‘Ricardian socialist’ writers in Britain. But there was another, more logical path. After all, the Ricardians could and did say that capital earned profits from their supplying workers with capital goods, with ‘frozen labour’. Such a service is clear, otherwise the workers would not have had to rely on capitalists for money while working on the product. Marx’s reply, that capital goods, being frozen labour, should be owned by the workers misses the point that something, some service must have been added by the capitalists – which, as we have already seen, was essentially savings and, if we may put it that way, who were advancing the workers’ ‘frozen time’.

A very different radical path, much more Ricardian and indeed already trod by James Mill, was to concentrate on the other possible bugbear class in the Ricardian system: the landlords – they who simply extract a return for no service, for simply sitting on the ‘original and indestructible powers of the soil’. Furthermore, in their own vision of historical laws, the orthodox Ricardians saw the capitalists losing profit, the workers static at subsistence level, and the social product increasingly eaten up by the parasitic landlord class. The nationalization of land rent, then, the ‘pre-Henry Georgist’ route, was taken by other disciples, including the last of the consistent, radical Ricardians, Henry George.

But how has Marx managed to dispose of the land question that so agitated Ricardo and Mill? First of all, Marx was the great prophet of man as labourer; in his version of Hegelianism, man created nature, indeed the entire universe. Since land is man’s creature, there is no room for worry about land or land-created value. Labour is all. Second, land as the basis for technology, the economy, and the social system, was the key to the feudal system, but feudalism was part of the dying ‘pre-capitalist’ pre-industrial order, a reactionary remnant unworthy of attention. Basically, then, Marx simply assimilated land into ‘capital’, and returns on land into profits. Thus land – the annoying superfluous third class of factors – can drop out and make way for the mighty two-class polarization and final struggle between the capitalists and the proletariat.

12.8   Ricardian socialism

Marx was hardly the first person to arrive at radical proletarian conclusions from the Ricardian system and the labour theory of value. Mediating between Ricardo and Marx were the ‘Ricardian socialists’, who greatly influenced Marx, but whose influence has been depreciated by Marxists – including Marx himself – who like to think that the master’s unique genius in arriving at neo-Ricardian socialism had no predecessors.

The first Ricardian socialist was William Thompson (1775–1833), a well-to-do Irish landlord from County Cork. Thompson’s prolix and repetitious work, An Inquiry into the Principles of the Distribution of Wealth, published in 1824, went into three editions in the next half-century. An extreme Benthamite utilitarian, Thompson in his Inquiry also simply declared that ‘labour is the sole parent of wealth’. Neither utility, pleasure, or scarcity had anything to do with it. From this flat assertion, the labour theory of value swiftly followed. As Alexander Gray puts it, with his characteristic wit, ‘it should be obvious that if the definition selected gives in advance an assurance labour is the sole parent of wealth, this ought to be a considerable aid towards proving that wealth may be attributed entirely to labour’.29

Thompson advocated a world of free and voluntary exchanges as a way of ensuring that workers will earn their product. But what of the existing system of exchange? Anticipating Marx, these exchanges were, according to Thompson, coerced, the capitalists ‘seizing the products of their labour [of the labourers] by force’. But here, on the edge of Marxism, Thompson retreated into a libertarian class analysis. For what constitutes such coercion? An entire spectrum of ‘bounties, protestations, apprenticeships, guilds, corporations, monopolies’ – which sounds very much like Comte, Dunoyer, or James Mill.

But Thompson presses on. Rent and profit are, in particular, ‘surplus value’ (in Thompson’s original phrase) extracted from the exploited workers. But then Thompson retreats again from his full vision, conceding that ‘the labourer must pay for the use of these [capital goods], when so unfortunate as not to possess them’. So even though Thompson is full of invective against the greedy and rapacious capitalists, he concedes that they perform a necessary function. How much, then, should they be paid? It is not surprising that Thompson floundered in trying to discover such a principle.

Thompson wound up, then, far from a revolutionary; instead, his mild, pre-John Stuart Mill-like solution was to encourage cooperatives as a means of arriving at inter-class harmony (in his Labor Rewarded, 1827). But this scarcely exhausted Thompson’s heresies as a pre-Marxian. For, being dedicated to free exchange, Thompson sensibly had to admit that from exchange often emerges accumulation, and from accumulation there arises the dread capitalist class. Thus: ‘you cannot abridge the exchanges and consequent accumulations of the capitalist without at the same time abridging all barter’. And, further, admitting the serpent of wages and rent back into Eden: ‘Why not permit the labourer to exchange for the use of a house, a horse, a machine, as well as for its possession?30

The other founding father of Ricardian socialism in 1820s, John Gray (1799–1883), was possessed, like Thompson, of a most un-Marxian spirit of moderation. As a young Scottish clerk in a wholesale house in London, Gray published his socialistic Lectures on Human Happiness in 1825. An arch-utilitarian, and expounder of the Ricardian labour theory of value, Gray fulminated against capitalists as exploiters of the working class, and, like Marx, saw the seeds of such exploitation in trade or barter. If William Thompson’s innovation was the phrase ‘surplus value’, John Gray’s particular contribution to the Marxian brew was to bring back, in a heavy way, the physiocratic-Adam Smith notion of productive vs unproductive labour, and thus rescue this flawed concept from Ricardian neglect. Not only that: but Gray narrowed the Smithian standard of productive labour considerably. As Gray put it, ‘they only are productive members of society who apply their own hands either to the cultivation of the earth itself, or to the preparing and appropriating the produce of the earth to the uses of life’. Having narrowed the definition of productive, Gray then began to make curious concessions, admitting, for example, that some occupations may be to some extent ‘useful’ although ‘unproductive’.

John Gray then proceeded happily to run through the list of British occupations, and to allocate in an obviously purely arbitrary way the percentages of ‘productivity’ or ‘usefulness’ in each occupation. Thus, Gray contends that merchants, manufacturers and others who are ‘mere distributors of wealth’, could still be ‘useful’ but ‘only in a sufficient number’. Gray concluded that the productive classes were far short of half the total population.

Harking back, perhaps unconsciously, to the ancient Greeks, Gray reserved some of his choicest venom for the retailers, whom he savaged as ‘productive’ only of ‘deception and falsehood, folly and extravagance, slavery of the corporeal, and prostitution of the intellectual faculties of man’.31

It turns out that for Gray, the main sin, the crucial evil, is competition. The competition of labour pushes the wages of labour down to a minimum. Standard Marxian fare, no doubt. But, in addition, even though labour is supposedly the sole creator of value, Gray also worries that competition, with equal perni-ciousness, also keeps to a minimum the amount of profits and rent.32

John Gray concludes with the general principle that every individual in society, except those living on fixed incomes, finds their incomes limited and ground down by competition.

It turns out that the exploitation of labour, indeed of everyone, is engineered by competition itself, which ‘limits’ production. Put an end to competition, then, and not only will the ideal world arrive where the labourer earns his full product, but also wealth will then be multiplied ‘without any known limits’. The world is only impoverished because of competition; eliminate it, and wealth will be abundant for all.33

Even though Gray maintained that competition could be abolished immediately and with only good effects, he was distressingly vague on how to accomplish this feat. He seemed to favour some sort of all-embracing cooperative, thereby bringing him close to Thompsonian reform. Soon, however, Gray shifted his attention to the ‘limitations’ on production allegedly imposed by hard money, and so he turned increasingly to a call for accelerating amounts of cheap and easy money.

Thus, in 1831, Gray’s book The Social System called for cheap and abundant credit to fuel and finance increased production, guided by a governmental national bank. Gray, of course, also advocated irredeemable paper money and the abolition of the gold standard. This analysis was further developed in John Gray’s last work, Lectures on the Nature and Use of Money (1848).

After 1848, John Gray’s social protests ceased completely, and so until recently it was assumed by historians that he had died ‘around 1850’. It turns out, however, that Gray, shortly after the publication of his Lecture of Human Happiness, founded with his brother James the famous publishing firm of J. & J. Gray of Edinburgh. As the firm flourished, especially after 1850, Gray settled down to a comfortable existence, and died at a ripe old age of 84 in 1883.

A decade and a half after Thompson and Gray, the third leading Ricardian socialist made his appearance: John Francis Bray (1809–97), in his major work, much quoted by Marx, Labour’s Wrongs and Labour’s Remedy (1839). Bray was born in Washington DC, the child of English actors, and, when his mother died, his ailing father brought John Francis back to Leeds in England in 1822. In Leeds, Bray became a compositor, and plunged into the trade-union movement, becoming treasurer of the Leeds Working Men’s Association in 1837.

Like the others an extreme utilitarian, Bray, in Labour’s Wrongs, asserts that God had meant men to be happy, but that unhappiness was injected into the world by the institution of private property, which destroyed the just institution of communal property, particularly in the land. From private property arose the odious division of labour and class conflict, exploitation of labourers and extraction of their surplus value by the capitalist class. Moreover, Bray averred that the root problem is the alleged fact of unequal exchange. Although understanding that, in market exchanges, each party benefits, Bray asserts that, especially in a labour contract, this is not enough, that the exchange and its benefits must be ‘equal’.

Not realizing that there is no point in any exchange unless the value, for each man, of each of the two exchanged goods is unequal, Bray, in a notable pre-Marxian passage, asserts:

Men have only two things which they can exchange with each other, namely, labour and the product of labour; therefore, let them exchange as they will, they merely give, as it were, labour for labour. If a system of exchanges were acted upon, the value of all others would be determined by the entire cost of production, and equal values would always exchange for equal values.34

Here we have packed into one short compass a number of crucial Marxian fallacies: that only commodities are produced or important (in contrast to allegedly non-productive services); the ancient Aristotelian fallacy that exchange implies equality of value; the labour theory of value; and the idea that in a just world, prices will all be equal to their costs of production, basically the quantity of labour hours expended in production.

To John Bray, as to Marx after him, the remedy for all this systemic evil is communism, ‘the most perfect form of society man can institute’. But in contrast to Marx, Bray saw no inevitable mechanism or law of history to yield that great event. To the contrary, and in contrast to the other communists of his day, John Bray perceived that communism required a New Communist Man to work, but that the advent of this new man was definitely not on the horizon. Any communism would come up against ‘the foul and loathsome selfishness which now more or less accompanies every action, clings to every thought, and pollutes every aspiration’.35

Instead, Bray focused his vision, not on the impractical and remote ultimate goal, but on his allegedly practical transition, or intermediate, social goal. That happened to be a hypertrophied version of the cooperative schemes that had proved so alluring to Thompson and Gray. Bray proposed that the world be organized into one vast cartellized network of cooperative corporations: that is, cooperatives organized on the principle of one stockholder, one vote. The cartellized network would be achieved by the workers and coopera-tors buying out all existing capitalists. Bray did not seem to see that acquiring the capital to finance this most massive buy out of all time might be even more impractical than organizing Marx’s violent proletarian revolution.

Scratch a socialist of this epoch and one will find a money crank. Sure enough, Bray envisioned that the cooperative cartel, once established, would eliminate existing money, and substitute a national bank that would issue notes to each worker based on the quantity of labour-time he had expended in production. The goods the labourer would buy would in their turn be priced at the amount of labour-time embodied within them. Perhaps if Marx had ever been interested in charting his future communist economy, labour-time notes might have been part of his package.

Strictly, there would be no reason for Marxian labour-time notes to increase, but John Bray, as an inflationist, did not of course see it that way. The function of his national bank would be to keep money issued and flowing ‘like blood within the living body,... equably through society at large, and infuse universal health and vigor’. The note issue would, of course, always be kept ‘within the limits of the actual effective capital existent’ – a form of ‘needs of trade’ argument at least as absurd as the usual variant.36 For the nominal ‘value’ of existing capital would of course increase as the money supply kept rising.

A few years after the publication of Labour’s Wrongs, in 1842, Bray returned to the United States. A second book, A Voyage from Utopia, was finished in manuscript, but remained unpublished until the 1950s. For the rest of his life in the United States, Bray wrote sporadically, contributing many letters to labour and socialist periodicals, as well as chapters in the mid-18508 for an unfinished book, The Coming Age. Bray’s life was as sporadic as his output. He found making a living precarious, working for brief jobs as a printer for newspapers, and complaining, rather inconsistently with his doctrines, that American employers were far more exploitative than British, the ‘Yankees’, as Professor Dorfman paraphrased Bray, ‘appearing] more like gamblers and sharpers than honest businessmen’.37

Eventually, Bray went west to Michigan, where he had inherited some land, and eked out a living as a newspaperman and small farmer. During the 1870s and 1880s, Bray became vice-president of the American Labor Reform League and was a member of the socialistic Knights of Labor. His later writings, some of which denounced spiritualism, emphasized attacks on the gold standard and a call for an abundance of state paper money that would allegedly drive interest rates down to zero. His communist ideal was now abandoned as Utopian.

Two of Bray’s later writings are worthy of note. Even though he was opposed to slavery in Labour’s Wrongs, his opposition to the Civil War in his anonymous anti-war pamphlet, American Destiny: What Shall it Be, Republican or Cossack? (1864) led him onward to judge slavery as really no worse than countries cursed by a huge public debt. Moreover, the natural state of the black man, to Bray, is ‘nakedness and indolence’, so that a South that freed its slaves would decay irremediably, with capital disappearing, and plantations returning to the wilderness.

In his final book, God and Man a Unity and All Mankind a Unity (1879), John Bray added to his money crankism the idea of a ‘non-theological religion’, in which establishing the right social institutions would bring about a this-worldly kind of ‘immortality’.

A striking anomaly is a writer of the 1820s and later who is invariably listed by historians as a leading Ricardian socialist, but who was most emphatically neither a Ricardian nor a socialist. Thomas Hodgskin (1787–1869) was a brilliant, innovative and self-educated political theorist who, far from being a socialist, was a laissez-faire libertarian to the point of being an individualist anarchist. Hodgskin’s father was a storekeeper at the naval dockyard who sent his son to sea at the age of 12. Eventually, Hodgskin’s individualist instincts and principles rubbed against naval discipline, and one day, he writes, ‘I complained of the injury done me, by a commander-in-chief, to himself, in the language that I thought it merited; he had unjustly deprived me of every chance of promotion from my own exertions, and that was robbing me of every hope’.38

As one might expect, Hodgskin’s naval commander did not take kindly to his outburst of righteous indignation, and Hodgskin was forcibly retired from the navy, at half-pay, at the comparatively young retirement age of 25. Embittered, Hodgskin promptly took revenge on the navy by publishing his first book, An Essay on Naval Discipline (1813), a blistering attack on military tyranny. Eloquently, Hodgskin began his work by setting down the main lesson he had learned: ‘Patiently submitting to oppression (because it comes from a superior) is a vice: to surmount your fears of that superior, and resist it, is a virtue’.39

Hodgskin’s experience left him a bitter enemy of government and government intervention in all its forms; and several years of travelling around Europe and reading and meeting people strengthened and deepened these convictions. Returning to Great Britain, Hodgskin published a two-volume travel book, Travels in the North of Germany (Edinburgh, 1820), in which, as Alexander Gray puts it, ‘innocent Reisebilder are interlarded with anarchistic digressions, doubtless to the amazement and perturbation of many of his readers’.40

Settled in London, Hodgskin was, for the rest of his life, to work as a lecturer and a journalist. He worked for a while with people who seemed to be his natural allies for laissez-faire: Francis Place, James Mill, and the philosophic radicals. But very shortly it became clear that there were severe philosophical differences between them. In the first place, Hodgskin abandoned his early Benthamite utilitarianism for a trenchant and militant natural law and natural rights position. In his brilliant and logical work, The Natural and Artificial Right of Property Contrasted (1832), Hodgskin presented a radicalized Lockean view of property rights. An ardent defence of the right of private property, including a homesteading defence of private property in land, Hodgskin corrected Locke’s various slippages from a consistent ‘Lockean’ position. To Hodgskin, it was crystal-clear that ‘natural’ private property rights were sound and just (such as each man in his own person, or in property that he creates or land that he homesteads, or in property which he acquires in an exchange of just property titles). On the other hand, great mischief was performed by ‘artificial’ property rights, that is, rights created by government artificially, in defiance of natural law and natural rights. Hodgskin’s work remains today as one of the best expositions of natural property rights doctrine.

Another difference with the Benthamites was that unfortunately and anomalously, Hodgskin imbibed the labour theory of value from another influential ‘Ricardian socialist’ of the day, the pseudonymous ‘Piercy Ravenstone’.41 Ravenstone denounced private ownership of land and capital for creating stolen, or ‘artificial’, property, whereas since labour is the sole creator of production, by rights, or naturally, all income should redound to labour. Rent and profit, asserted Ravenstone, are extracted from the product of labour: this ‘fund for the maintenance of the idle is the surplus produce of the labour of the industrious’. Furthermore, Ravenstone put forth a truly bizarre theory of capital, in which ‘capital’ is a non-existent concept designed to cloak the theft of labour’s surplus. Capital, Ravenstone absurdly declared, ‘may be increased to any imaginable amount without adding to the real riches of a nation’.42

From then on, Hodgskin was afflicted by an anomalous combination of laissez-faire anarchism and a Ravenstonian labour theory of value. How square the two? At first, Hodgskin tried to do so by attributing the exploitation, the ‘surplus value’ of labour, solely to such government intervention as the Combination Laws, which restricted the right to form labour unions. Hence Hodgskin helped found the Mechanics’ Magazine, and then its affiliate, the London Mechanics’ Institute, an institution for lectures to the working classes. During the course of the successful Ricardian-Benthamite agitation for repeal of the Combination Laws in 1824, Hodgskin wrote his Ravenstonian booklet, Labour Defended Against the Claims of Capital (1825), followed by Mechanics’ Institute lectures published as Popular Political Economy (1827).

Particularly bizarre was Hodgskin’s development of the Ravenstonian view that capital is unimportant and non-existent. Hodgskin denies that any savings are involved in capital, any advances from foregone consumption. Circulating capital, he says sophistically, are not produced in advance; the bread the worker buys is baked each day rather than being stored in advance by the capitalist. In fact, of course, no one claims that the capitalist actually stores the workers’ food and other means of subsistence in advance; but his saved money is advanced ahead of production and sale to the worker, which enables the worker to buy his subsistence now instead of having to wait for years. As for fixed capital, not only is it stored-up labour – a general Ricardian socialist argument – but these machines are only ‘inert, decaying and dead matter’, unless ‘guided, directed and applied by skillful hands’. Hodgskin concludes that ‘fixed capital does not derive its utility from previous, but present labour’, grotesquely ignoring the fact that just because capital and labour need each other does not make labour the sole factor of production. In the crowning absurdity, Hodgskin declares that ‘it is a miserable delusion to call capital something saved’.

There is no question that Hodgskin’s ultra labourism influenced Karl Marx, but his extreme labour theory of value does not make him a Ricardian, much less a socialist. In fact, Hodgskin was highly critical of Ricardo and the Ricardian system, denounced Ricardo’s abstract methodology and his theory of rent, and considered himself a Smithian rather than a Ricardian. Smith’s natural law and harmony-of-interest free market doctrine was also far more congenial to Hodgskin.

Although continuing to be a labourist, Hodgskin became increasingly repelled by the English labour movement, and its growing interest in state intervention. Labour unions he no longer saw as much of a remedy, let alone a panacea. Increasingly, he saw that the only way to reconcile labourism and laissez-faire was to press for the repeal of all government intervention, indeed of all positive law that was not simply a restatement of natural law and natural rights. For all such law was an invasion of rights of property. In contrast to the Ricardian socialists who extolled cartel-like cooperatives, Hodgskin called for removal of all government restrictions on free and unlimited competition. He enthusiastically joined Cobden and Bright in agitation for repeal of the Corn Laws, and in repealing feudalistic laws restricting and entailing land from free sale outside the family. From 1846–55, Hodgskin served as an editor of the Economist, the journalistic champion of laissez-faire, with as yet no important incompatibility of views with editor-in-chief James Wilson. There he became a friend and mentor of the young Herbert Spencer, hailing Spencer’s anarchistic work, Social Statics, with the exception of denouncing the early Spencer’s pre-Georgist land socialism on behalf of Lockean individualism.

Furthermore, even at his most labourist in the 1820s, Thomas Hodgskin, in contrast to John Gray, widened rather than narrowed the definition of ‘labour’. Mental activity is as much ‘labour’, he pointed out, as muscular exertion, so he warned against limiting the term ‘labour’ to the ‘operations of the hands’. Not only that: Hodgskin also pointed out cogently that the capitalist is also very often a manager, and therefore also a ‘labourer’. So whereas capitalists may be oppressors, businessmen in their capacity as managers or ‘masters’, ‘are labourers as well as their journeymen’. And there is nothing wrong with the wages of management.43

In addition, the Hodgskin of the 1820s hailed retailers as ‘indispensable agents’, and praised wholesalers and merchants in Smithian terms as conferring blessings on society by pursuing their own interests. Even bankers ‘are still very important, and have long been very useful labourers’. Banking, ‘let us never forget... is altogether a private business, and no more needs to be regulated by meddling statesmen, than the business of paper-making’. Finally, in his Popular Political Economy, Hodgskin eulogized the market price system, which, in a deep sense, is ‘the finger of Heaven, indicating to all men how they may employ their time and talents most profitably for themselves, and most beneficially for the whole society’.44

After his retirement from the Economist editorial board, Hodgskin continued to write articles for that journal. There he praised commerce (‘We are all merchants... and... trade is only mutual service by mutual dealing’); speculation (‘without speculation we should have no railroads, no docks, no great companies...’) and competition (‘the soul of excellence, and gives to every man his fair reward’).45

In his final publication, of lectures on criminal law delivered in 1857, Thomas Hodgskin summed up his economic and political philosophy. The people’s wants for higher standards of living, he declared, ‘can only be satisfied by more freedom, and less taxation’. The free trade principles of the 1840s must be only a stepping-stone towards ever purer and more consistent laissez-faire. Ultimately, all government services must be privatized and subjected to the requirements of the free market:

The unrestricted competition, which nature establishes, must be the rule for all our transactions; and by the higgling of the market, which is mutual and free action, the salaries of [government] officials, and the payments of the priesthood must be regulated as well as the profit of the shopkeeper, and the wages of the labourer.

In printing his lectures, Hodgskin announced his intention of completing and publishing a masterwork, The Absurdity of Legislation Demonstrated, which would show, ‘in a connected didactic form’, that ‘all legislation, which of course includes Government, is founded on false assumptions’.46

Unfortunately, Hodgskin never completed the work, or published anything further, and when he died, in 1869, at the age of 82, this man, once so widely influential, received not a single obituary notice in the London papers. But, at any rate, enough is surely known to dismiss the view that this individualist, despite the labourism that influenced Marx, was in any sense a socialist, or even a Ricardian.

12.9   Notes

• 1As Gray wittily puts it, the dialectic often seems ‘to the illiterate and ignorant outsider to become a mere toy which enables every swing of every pendulum to be regarded as the embodiment of a great philosophical principle’. Alexander Gray, The Socialist Tradition (London: Longmans, Green, 1947), p. 300.
• 2In Igor Shafarevich, The Socialist Phenomenon (New York: Harper & Row, 1980), p. 210.
• 3Ludwig von Mises, Theory and History (1957, Auburn, Ala.: Mises Institute, 1985), pp. 111–2.
• 4Ibid., pp. 109–10.
• 5In the Poverty of Philosophy, Marx angrily denounced Proudhon for making this very point, that division of labour precedes machines.
• 6See M.M. Bober, Karl Marx’s Interpretation of History (2nd rev. ed., Cambridge, Mass.: Harvard University Press, 1948), p. 9.
• 7John Plamenatz, German Marxism and Russian Communism (New York: Longmans, Green & Co., 1954), p. 29.
• 8Ibid., p. 27.
• 9For a defence of technological monocausality as a key to Marxism by the founder of Russian Marxism, George V. Plekhanov (1857–1918), see Plekhanov, The Development of the Monist View of History (New York: International Publishers, 1973). Cf. David Gordon, Critics of Marxism (New Brunswick, MJ: Transaction Books, 1986), p. 22. For a critique of Marxism-Plekhanovism, see Leszek Kolakowski, Main Currents of Marxism (Oxford: Oxford, University Press, 1981), pp. 340–2.
• 10Von Mises, op. cit., note 3, p. 126.
• 11David Gordon, ‘Mises Contra Marx’, The Free Market, 5 (July 1987), pp. 2–3.
• 12For the refutation of another, allied point in Marx’s ideology doctrine, that each economic class has a different logical structure of mind [‘polylogism’], see Ludwig von Mises, Human Action (New Haven, Conn.: Yale University Press, 1949), pp. 72–91.
• 13In the first, ‘Bourgeois and Proletarians’ section of the Communist Manifesto, Marx and Engels continually confuse the concepts of ‘caste’ and ‘class’, i.e. class as special privilege vs sets of individuals on the free market. Thus: ‘In the earlier epochs of history, we find almost everywhere a complicated arrangement of society into various orders, a manifold gradation of social rank. In ancient Rome we have patricians, knights, plebeians, slaves; in the Middle Ages, feudal lords, vassals, guild-masters, journeymen, apprentices, serfs; in almost all of these classes, again, subordinate gradations, [i.e., classes as castes]’. Further, ‘The modern bourgeois society that has sprouted from the ruins of feudal society has... established new classes, new conditions of oppression... [The unexamined leap from a caste-class to a free-market situation]’.
• 14During the 1870s, Marx led Engels to believe that he was working hard and steadily on Volumes II and III of Capital, At Marx’s death, Engels was astonished to find that Marx had done virtually no work on the manuscript since 1867, in short, that Marx had lied shamelessly to his friend and patron. See W.O. Henderson, The Life of Friedrich Engels (London: Frank Cass, 1976), 11, p. 563.
• 15See below on the Ricardian contribution to the Marxian theory of class.
• 16Cf. these insights from Marxism’s outstanding twentieth century opponent, Ludwig von Mises: ‘The theory of irreconcilable class conflict is illogical when it stops short at dividing society into three or four large classes. Carried to its logical conclusions, the theory would have to go on dissolving society into groups of interests till it reached groups whose members fulfilled precisely the same function. It is not enough to separate owners into landowners and capitalists. The differentiation must proceed until it reaches such groups as cotton spinners who manufacture the same count of yarn, or the manufacturers of black kid leather, or the brewers of light beer.... No special common interest unites the owners of arable land, of forests, of vineyards, of mines, or of urban real estate... There are no common interests among labourers either. Homogeneous labour is as non-existent as the universal worker. The work of the spinner is different from the work of the miner and the work of the doctor... Nor is unskilled labour homogeneous. A scavenger is different from a porter’. Ludwig von Mises, Socialism: An Economic and Sociological Analysis (4th ed., Indianapolis: Liberty Classics, 1981), pp. 300–301.
• 17See James Bland Briscoe, ‘Saint-Simonianism and the Origins of Socialism in France, 1816–32’ (doctoral dissertation in history, Columbia University, 1980), p. 59.
• 18It is difficult not to agree with Alexander Gray’s assessment of Saint-Simon, as quoted from the French social philosopher Émile Faguet: ‘Saint-Simon is a rare example of incoherence in his life, incoherence in his character, and incoherence in his detailed ideas, combined with a fixity in his ruling views.’ (My translation.) Gray, op. cit., note 1, p. 160n.
• 19See F.A. von Hayek, The Counter-Revolution of Science (Glencoe, 111.: The Free Press, 1952), p. 158.
• 20Ibid., p. 159.
• 21James Bilhngton, Fire in the Minds of Men: Origins of the Revolutionary Faith (New York: Basic Books, 1980), p. 225.
• 22Ralph Raico, ‘Classical Liberal Exploitation Theory: A Comment on Professor Liggio’s Paper’, The Journal of Libertarian Studies, 1 (Summer 1977), p. 179.
• 23Alexis de Tocqueville, Recollections, ed. by J.P. Mayer and A.P. Kerr (Garden City, New York: Doubleday & Co. 1970), p. 5.
• 24Raico, op. cit., note 22, pp. 179–80. Professor Tucker, curiously enough, hails The Eighteenth Brumaire as a ‘brilliant masterpiece’, and an application of class struggle analysis and the materialist conception of history. But isn’t this work a demonstration of quite the opposite? See Robert C. Tucker (ed.), The Marx-Engels Reader (2nd ed„ New York: W.W. Norton, 1978), p. 594.
• 25Raico, op. cit., note 22, p. 180.
• 26Ibid., p. 180, 183n4.
• 27Ibid., p. 180.
• 28Von Mises, op. cit., note 16, p. 292; he notes that this passage in Vol 1 of Capital was not in the first 1867 edition, but was added by Marx in the French edition (1873). The insertion was connected to the desperate changes made by Marx in his theory in Volume HI of Capital, not published until after his death.
• 29Gray, op. cit., note 1, p. 271.
• 30From Labour Rewarded. See Gray, op. cit., note 1, p. 276.
• 31Ibid., p. 290n.
• 32Ibid., p. 294.
• 33Ibid., pp. 294–5.
• 34Quoted in G.D.H. Cole, Socialist Thought: The Forerunners, 1789-1850 (London: Macmillan, 1959), p. 137.
• 35Gray, op. cit., note 1, p. 287.
• 36In Joseph Dorfman, The Economic Mind in American Civilization, 1606–1865 (New York: Viking Press, 1946), II, p. 688.
• 37Ibid., p. 689.
• 38Élie Halévy, Thomas Hodgskin (London: Ernest Benn, Ltd, 1956), p. 30.
• 39Ibid., p. 31.
• 40Gray, op. cit., note 1, p. 278.
• 41Piercy Ravenstone, A Few Doubts as to the Correctness of Some Opinions Generally Entertained on the Subjects of Population and Political Economy (London, 1821).
• 42Halévy, op. cit., note 38, pp. 89n-90n. Ravenstone was apparently not a socialist either. Best indications are that he was either the Rev. Edward Edward, a High Tory Anglican clergyman, or Richard Puller, the equally Tory son of a director of the South Sea Company, the Tory speculative banking scheme. Ravenstone’s goal was apparently to strike an effective blow against capitalism and free markets by one of their ancient enemies, the High Tory advocates of statism and big government.
• 43Gray, op. cit., note 1, p. 282.
• 44Ibid., p. 280. Gray, an adherent of the Austrian School, adds a teasing and witty note on his fellow Austrians: ‘Even an orthodox economist of these days, brought up on Tales from the Viennese Woods, may well be forgiven if his faith falters when invited to identify the price-system with the finger of Heaven.’
• 45In Halévy, op. cit., note 38, pp. 148–9.
• 46Ibid., p. 164.