2. Marxist and Austrian Class Analysis

~ 2 ~ Marxist and Austrian Class Analysis

Hans-Hermann Hoppe

First I will present a series of theses that constitute the hard-core of the Marxist theory of history. I claim that all of them are essentially correct. Then I will show how these true theses are derived in Marxism from a false starting point. Finally, I want to demonstrate how Austrianism in the Mises-Rothbard tradition can give a correct but categorically different explanation of their validity.

Let me begin with the hard-core of the Marxist belief system:1

(1) “The history of mankind is the history of class struggles.”2 It is the history of struggles between a relatively small ruling class and a larger class of the exploited. The primary form of exploitation is economic: The ruling class expropriates part of the productive output of the exploited or, as Marxists say, “it appropriates a social surplus product” and uses it for its own consumptive purposes.

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

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

(4) Internally, the process of competition within the ruling class generates a tendency toward increasing concentration and centralization. A multipolar system of exploitation is gradually supplanted by an oligarchic or monopolistic one. Fewer and fewer exploitation centers remain in operation, and those that do are increasingly integrated into a hierarchical order. And externally, i.e., as regards the international system, this internal centralization process will (and more intensively the more advanced it is) lead to imperialist interstate wars and the territorial expansion of exploitative rule.

(5) Finally, with the centralization and expansion of exploitative rule gradually approaching its ultimate limit of world domination, class rule will increasingly become incompatible with the further development and improvement of “productive forces.” Economic stagnation and crises become more and more characteristic and create the “objective conditions” for the emergence of a revolutionary class consciousness of the exploited. The situation becomes ripe for the establishment of a classless society, the “withering away of the state,” “the replacement of government of men over men by the administration of things”3 and, as its result, unheard of economic prosperity.

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

What is this Marxist theory of exploitation? According to Marx, such pre-capitalist social systems as slavery and feudalism are characterized by exploitation. There is no quarrel with this. For after all, the slave is not a free laborer, and he cannot be said to gain from his being enslaved. Rather, in being enslaved his utility is reduced at the expense of an increase in wealth appropriated by the slave master. The interest of the slave and that of the slave owner are indeed antagonistic. The same is true as regards the interests of the feudal lord who extracts a land rent from a peasant who works on land homesteaded by himself (i.e., the peasant). The lord’s gains are the peasant’s losses. And it is also undisputed that slavery as well as feudalism indeed hamper the development of productive forces. Neither slave nor serf will be as productive as they would be without slavery or serfdom.

But the genuinely new Marxist idea is that essentially nothing is changed as regards exploitation under capitalism, i.e., if the slave becomes a free laborer, or if the peasant decides to farm land homesteaded by someone else and pays rent in exchange for doing so. To be sure, Marx, in the famous chapter 24 of the first volume of his Kapital, titled “The So-called Original Accumulation,” gives a historical account of the emergence of capitalism which makes the point that much or even most of the initial capitalist property is the result of plunder, enclosure, and conquest. Similarly, in chapter 25, on the “Modern Theory of Colonialism,” the role of force and violence in exporting capitalism to the—as we would nowadays say—Third World is heavily emphasized. Admittedly, all this is generally correct, and insofar as it is there can be no quarrel with labeling such capitalism exploitative. Yet one should be aware of the fact that here Marx is engaged in a trick. In engaging in historical investigations and arousing the reader’s indignation regarding the brutalities underlying the formation of many capitalist fortunes, he actually side-steps the issue at hand. He distracts from the fact that his thesis is really an entirely different one: namely, that even if one were to have “clean” capitalism so to speak, i.e., one in which the original appropriation of capital were the result of nothing else but homesteading, work and savings, the capitalist who hired labor to be employed with this capital would nonetheless be engaged in exploitation. Indeed, Marx considered the proof of this thesis his most important contribution to economic analysis.

What, then, is his proof of the exploitative character of a clean capitalism?

It consists in the observation that the factor prices, in particular the wages paid to laborers by the capitalist, are lower than the output prices. The laborer, for instance, is paid a wage that represents consumption goods which can be produced in three days, but he actually works five days for his wage and produces an output of consumption goods that exceeds what he receives as remuneration. The output of the two extra days, the surplus value in Marxist terminology, is appropriated by the capitalist. Hence, according to Marx, there is exploitation.4

What is wrong with this analysis?5 The answer becomes obvious, once it is asked why the laborer would possibly agree to such a deal! He agrees because his wage payment represents present goods—while his own labor services represent only future goods—and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself. But this would of course imply that he would have to wait longer for any consumption goods to become available to him. In selling his labor services he demonstrates that he prefers a smaller amount of consumption goods now over a possibly larger one at some future date. On the other hand, why would the capitalist want to strike a deal with the laborer? Why would he want to advance present goods (money) to the laborer in exchange for services that bear fruit only later? Obviously, he would not want to pay out, for instance, $100 now if he were to receive the same amount in one year’s time. In that case, why not simply hold on to it for one year and receive the extra benefit of having actual command over it during the entire time? Instead, he must expect to receive a larger sum than $100 in the future in order to give up $100 now in the form of wages paid to the laborer. He must expect to be able to earn a profit, or more correctly an interest return. And he is constrained by time preference, i.e., the fact that an actor invariably prefers earlier over later goods, in yet another way. For if one can obtain a larger sum in the future by sacrificing a smaller one in the present, why then is the capitalist not engaged in more saving than he actually is? Why does he not hire more laborers than he does, if each one of them promises an additional interest return? The answer again should be obvious: because the capitalist is a consumer, too, and cannot help being one. The amount of his savings and investing is restricted by the necessity that he, too, like the laborer, requires a supply of present goods “large enough to secure the satisfaction of all those wants the satisfaction of which during the waiting time is considered more urgent than the advantages which a still greater lengthening of the period of production would provide.”6

What is wrong with Marx’s theory of exploitation, then, is that he does not understand the phenomenon of time preference as a universal category of human action.7 That the laborer does not receive his “full worth” has nothing to do with exploitation but merely reflects the fact that it is impossible for man to exchange future goods against present ones except at a discount. Contrary to the case of slave and slave master where the latter benefits at the expense of the former, the relationship between the free laborer and the capitalist is a mutually beneficial one. The laborer enters the agreement because, given his time preference, he prefers a smaller amount of present goods over a larger future one; and the capitalist enters it because, given his time preference, he has a reverse preference order and ranks a larger future amount of goods more highly than a smaller present one. Their interests are not antagonistic but harmonious. Without the capitalist’s expectation of an interest return, the laborer would be worse off having to wait longer than he wishes to wait; and without the laborer’s preference for present goods the capitalist would be worse off having to resort to less roundabout and less efficient production methods than those which he desires to adopt. Nor can the capitalist wage system be regarded as an impediment to the further development of the forces of production, as Marx claims. If the laborer were not permitted to sell his labor services and the capitalist to buy them, output would not be higher but lower because production would have to take place with relatively reduced levels of capital accumulation.

Under a system of socialized production, quite contrary to Marx’s proclamations, the development of productive forces would not reach new heights but would instead sink dramatically.8 For obviously, capital accumulation must be brought about by definite individuals at definite points in time and space through homesteading, producing and/or saving. In each case it is brought about with the expectation that it will lead to an increase in the output of future goods. The value an actor attaches to his capital reflects the value he attaches to all expected future incomes attributable to its cooperation and discounted by his rate of time preference. If, as in the case of collectively owned factors of production, an actor is no longer granted exclusive control over his accumulated capital and hence over the future income to be derived from its employment, but partial control instead is assigned to non-homesteaders, non-producers, and non-savers, the value for him of the expected income and hence that of the capital goods is reduced. His effective rate of time preference will rise. There will be less homesteading of resources whose scarcity is recognized, and less saving for the maintenance of existing and the production of new capital goods. The period of production, the roundaboutness of the production structure, will be shortened, and relative impoverishment will result.

If Marx’s theory of capitalist exploitation and his ideas on how to end exploitation and establish universal prosperity are false to the point of being ridiculous, it is clear that any theory of history which can be derived from it must be false, too. Or if it should be correct, it must have been derived incorrectly. Instead of going through the lengthier task of explaining all of the flaws in the Marxist argument as it sets out from its theory of capitalist exploitation and ends with the theory of history which I presented earlier, I will take a shortcut here. I will now outline in the briefest possible way the correct—Austrian, Misesian-Rothbardian—theory of exploitation; give an explanatory sketch of how this theory makes sense out of the class theory of history; and highlight along the way some key differences between this class theory and the Marxist one and also point out some intellectual affinities between Austrianism and Marxism stemming from their common conviction that there does indeed exist something like exploitation and a ruling class.9

The starting point for the Austrian exploitation theory is plain and simple, as it should be. Actually, it has already been established through the analysis of the Marxist theory: Exploitation characterized in fact the relationship between slave and slave master and serf and feudal lord. But no exploitation was found possible under a clean capitalism. What is the principle difference between these two cases? The answer is: the recognition or non-recognition of the homesteading principle. The peasant under feudalism is exploited because he does not have exclusive control over land that he homesteaded, and the slave because he has no exclusive control over his own homesteaded body. If, contrary to this, everyone has exclusive control over his own body (is a free laborer, that is) and acts in accordance with the homesteading principle, there can be no exploitation. It is logically absurd to claim that a person who homesteads goods not previously homesteaded by anybody else, or who employs such goods in the production of future goods, or who saves presently homesteaded or produced goods in order to increase the future supply of goods, could thereby exploit anybody. Nothing has been taken away from anybody in this process and additional goods have actually been created. And it would be equally absurd to claim that an agreement between different homesteaders, savers and producers regarding their non-exploitatively appropriated goods or services could possibly contain any foul play, then. Instead, exploitation takes place whenever any deviation from the homesteading principle occurs. It is exploitation whenever a person successfully claims partial or full control over scarce resources which he has not homesteaded, saved or produced, and which he has not acquired contractually from a previous producer-owner. Exploitation is the expropriation of homesteaders, producers and savers by late-coming non-homesteaders, non-producers, non-savers and non-contractors; it is the expropriation of people whose property claims are grounded in work and contract by people whose claims are derived from thin air and who disregard others’ work and contracts.10

Needless to say, exploitation thus defined is in fact an integral part of human history. One can acquire and increase wealth either through homesteading, producing, saving, or contracting, or by expropriating homesteaders, producers, savers or contractors. There are no other ways. Both methods are natural to mankind. Alongside homesteading, producing and contracting, there have always been non-productive and non-contractual property acquisitions. And in the course of economic development, just as producers and contractors can form firms, enterprises and corporations, so can exploiters combine to large-scale exploitation enterprises, governments and states. The ruling class (which may again be internally stratified) is initially composed of the members of such an exploitation firm. And with a ruling class established over a given territory and engaged in the expropriation of economic resources from a class of exploited producers, the center of all history indeed becomes the struggle between exploiters and the exploited. History, then, correctly told, is essentially the history of the victories and defeats of the rulers in their attempt to maximize exploitatively appropriated income and of the ruled in their attempts to resist and reverse this tendency. It is in this assessment of history that Austrians and Marxists agree and why a notable intellectual affinity between Austrian and Marxist historical investigations exists. Both oppose a historiography which recognizes only action or interaction, economically and morally all on a par; and both oppose a historiography that instead of adopting such a value-neutral stand thinks that one’s own arbitrarily introduced subjective value judgments have to provide the foil for one’s historical narratives. Rather, history must be told in terms of freedom and exploitation, parasitism and economic impoverishment, private property and its destruction—otherwise it is told false.11

While productive enterprises come into or go out of existence because of voluntary support or its absence, a ruling class never comes to power because there is a demand for it, nor does it abdicate when abdication is demonstrably demanded. One cannot say by any stretch of the imagination that homesteaders, producers, savers, and contractors have demanded their expropriation. They must be coerced into accepting it, and this proves conclusively that the exploitation firm is not in demand at all. Nor can one say that a ruling class can be brought down by abstaining from transactions with it in the same way as one can bring down a productive enterprise. For the ruling class acquires its income through non-productive and non-contractual transactions and thus is unaffected by boycotts. Rather, what makes the rise of an exploitation firm possible, and what alone can in turn bring it down is a specific state of public opinion or, in Marxist terminology, a specific state of class consciousness.

An exploiter creates victims, and victims are potential enemies. It is possible that this resistance can be lastingly broken down by force in the case of a group of men exploiting another group of roughly the same size. However, more than force is needed to expand exploitation over a population many times its own size. For this to happen, a firm must also have public support. A majority of the population must accept the exploitative actions as legitimate. This acceptance can range from active enthusiasm to passive resignation. But it must be acceptance in the sense that a majority must have given up the idea of actively or passively resisting any attempt to enforce non-productive and non-contractual property acquisitions. The class consciousness must be low, undeveloped and fuzzy. Only as long as this state of affairs lasts is there still room for an exploitative firm to prosper even if no actual demand for it exists. Only if and insofar as the exploited and expropriated develop a clear idea of their own situation and are united with other members of their class through an ideological movement which gives expression to the idea of a classless society where all exploitation is abolished, can the power of the ruling class be broken. Only if and insofar as a majority of the exploited public becomes consciously integrated into such a movement and accordingly displays a common outrage over all non-productive or non-contractual property acquisitions, shows a common contempt for everyone who engages in such acts, and deliberately contributes nothing to help make them successful (not to mention actively trying to obstruct them), can its power be brought to crumble.

The gradual abolishment of feudal and absolutist rule and the rise of increasingly capitalist societies in Western Europe and the United States, and along with this unheard of economic growth and rising population numbers was the result of an increasing class consciousness among the exploited, who were ideologically molded together through the doctrines of natural rights and liberalism. In this Austrians and Marxists agree.12 They disagree, however, on the next assessment: The reversal of this liberalization process and steadily increased levels of exploitation in these societies since the last third of the nineteenth century, and particularly pronounced since World War I, are the result of a loss in class consciousness. In fact, in the Austrian view Marxism must accept much of the blame for this development by misdirecting attention from the correct exploitation model of the homesteader-producer-saver-contractor vs. the non-homesteader-producer-saver-contractor to the fallacious model of the wage earner vs. the capitalist, thus muddling things up.13

The establishment of a ruling class over an exploited one many times its size by coercion and the manipulation of public opinion, i.e., a low degree of class consciousness among the exploited, finds its most basic institutional expression in the creation of a system of public law superimposed on private law. The ruling class sets itself apart and protects its position as a ruling class by adopting a constitution for their firm’s operations. On the one hand, by formalizing the internal operations within the state apparatus as well as its relations vis-à-vis the exploited population, a constitution creates some degree of legal stability. The more familiar and popular private law notions are incorporated into constitutional and public law, the more conducive this will be to the creation of favorable public opinion. On the other hand, any constitution and public law also formalizes the exemptory status of the ruling class as regards the homesteading principle. It formalizes the right of the state’s representatives to engage in non-productive and non-contractual property acquisitions and the ultimate subordination of private to public law. Class justice, i.e., a dualism of one set of laws for the rulers and another for the ruled, comes to bear in this dualism of public and private law and in the domination and infiltration of public law over and into private law. It is not because private property rights are recognized by law, as Marxists think, that class justice is established. Rather, class justice comes into being precisely whenever a legal distinction exists between a class of persons acting under and being protected by public law and another class acting under and being protected instead by some subordinate private law. More specifically then, the basic proposition of the Marxist theory of the state in particular is false. The state is not exploitative because it protects the capitalists’ property rights, but because it itself is exempt from the restriction of having to acquire property productively and contractually.14

In spite of this fundamental misconception, however, Marxism, because it correctly interprets the state as exploitative (contrary, for instance to the public choice school, which sees it as a normal firm among others),15 is on to some important insights regarding the logic of state operations. For one thing, it recognizes the strategic function of redistributionist state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income—a policy of divide et impera—is the state’s means with which it can create divisiveness among the public and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself through democratizing the state constitution and opening up every ruling position to everyone and granting everyone the right to participate in the determination of state personnel and policy is a means for reducing the resistance against exploitation as such. Secondly, the state is indeed, as Marxists see it, the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; non-contractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation.16 And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking elite—even though their explanation for it is faulty. The reason is not that the bourgeois establishment sees and supports the state as the guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state as the very antithesis to private property that it is and takes a close interest in it for this reason. The more successful a business, the larger the potential danger of governmental exploitation, but the larger also the potential gains that can be achieved if it can come under government’s special protection and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration. The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest because as an exploitative firm the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations and allowing them to counterfeit on top of its own counterfeited notes under a regime of fractional reserve banking, the state can easily reach this goal and establish a system of state monopolized money and cartelized banking controlled by the central bank. And through this direct counterfeiting connection with the banking system and by extension the banks’ major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society—not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites and the state.17

Competition within the ruling class and among different ruling classes brings about a tendency toward increasing concentration. Marxism is right in this. However, its faulty theory of exploitation again leads it to locate the cause for this tendency in the wrong place. Marxism sees such a tendency as inherent in capitalist competition. Yet it is precisely so long as people are engaged in a clean capitalism that competition is not a form of zero-sum interaction. The homesteader, the producer, saver and contractor do not gain at another’s expense. Their gains either leave another’s physical possessions completely unaffected or they actually imply mutual gains (as in the case of all contractual exchanges). Capitalism thus can account for increases in absolute wealth. But under its regime no systematic tendency toward relative concentration can be said to exist.18 Instead, zero-sum interactions characterize not only the relationship between the ruler and the ruled, but also between competing rulers. Exploitation defined as non-productive and non-contractual property acquisitions is only possible as long as there is anything that can be appropriated. Yet if there were free competition in the business of exploitation, there would obviously be nothing left to expropriate. Thus, exploitation requires monopoly over some given territory and population; and the competition between exploiters is by its very nature eliminative and must bring about a tendency toward relative concentration of exploitative firms as well as a tendency toward centralization within each exploitative firm. The development of states rather than capitalist firms provides the foremost illustration of this tendency: There are now a significantly smaller number of states with exploitative control over much larger territories than in previous centuries. And within each state apparatus there has in fact been a constant tendency toward increasing the powers of the central government at the expense of its regional and local subdivisions. Yet outside the state apparatus a tendency toward relative concentration has also become apparent for the same reason. Not, as should be clear by now, because of any trait inherent in capitalism, but because the ruling class has expanded its rule into the midst of civil society through the creation of a state-banking-business alliance and in particular the establishment of a system of central banking. If a concentration and centralization of state power then takes place, it is only natural that this be accompanied by a parallel process of relative concentration and cartelization of banking and industry. Along with increased state powers, the associated banking and business establishment’s powers of eliminating or putting economic competitors at a disadvantage by means of non-productive and/or non-contractual expropriations increase. Business concentration is the reflection of a “state-ization” of economic life.19

The primary means for the expansion of state power and the elimination of rival exploitation centers is war and military domination. Interstate competition implies a tendency toward war and imperialism. As centers of exploitation their interests are by nature antagonistic. Moreover, with each of them—internally—in command of the instrument of taxation and absolute counterfeiting powers, it is possible for the ruling classes to let others pay for their wars. Naturally, if one does not have to pay for one’s risky ventures oneself, but can force others to do so, one tends to be a greater risk taker and more trigger happy than one would otherwise be.20 Marxism, contrary to much of the so-called bourgeois social sciences, gets the facts right: there is indeed a tendency toward imperialism operative in history; and the foremost imperialist powers are indeed the most advanced capitalist nations. Yet the explanation is once again faulty. It is the state as an institution exempt from the capitalist rules of property acquisitions that is by nature aggressive. And the historical evidence of a close correlation between capitalism and imperialism only seemingly contradicts this. It finds its explanation, easily enough, in the fact that in order to come out successfully from interstate wars, a state must be in command of sufficient (in relative terms) economic resources. Ceteris paribus, the state with more ample resources will win the war. As an exploitative firm, a state is by nature destructive of wealth and capital accumulation. Wealth is produced exclusively by civil society; and the weaker the state’s exploitative powers, the more wealth and capital society accumulates. Thus, paradoxical as it may sound at first, the weaker or the more liberal a state is internally, the further developed capitalism is; a developed capitalist economy to extract from makes the state richer; and a richer state then makes for more and more successful expansionist wars.

It is this relationship that explains why initially the states of Western Europe, and in particular Great Britain, were the leading imperialist powers, and why in the twentieth century this role has been assumed by the United States.

And a similarly straightforward yet once again entirely non-Marxist explanation exists for the observation always pointed out by Marxists, that the banking and business establishment is usually among the most ardent supporters of military strength and imperial expansionism. It is not because the expansion of capitalist markets requires exploitation, but because the expansion of state protected and privileged business requires that such protection be extended also to foreign countries and that foreign competitors be hampered through non-contractual and non-productive property acquisitions in the same way or more so than internal competition. Specifically, it supports imperialism if this promises to lead to a position of military domination of one’s own allied state over another. For then, from a position of military strength, it becomes possible to establish a system of—as one may call it—monetary imperialism. The dominating state will use its superior power to enforce a policy of internationally coordinated inflation. Its own central bank sets the pace in the process of counterfeiting, and the central banks of the dominated states are ordered to use its currency as their own reserves and inflate on top of them. This way, along with the dominating state and as the earliest receivers of the counterfeit reserve currency its associated banking and business establishment can engage in an almost costless expropriation of foreign property owners and income producers. A double layer of exploitation of a foreign state and a foreign elite on top of a national state and elite is imposed on the exploited class in the dominated territories, causing prolonged economic dependency and relative economic stagnation vis-à-vis the dominant nation. It is this—very uncapitalist—situation that characterizes the status of the United States and the United States dollar and that gives rise to the—correct—charge of United States economic exploitation and dollar imperialism.21

Finally, the increasing concentration and centralization of exploitative powers leads to economic stagnation and thereby creates the objective conditions for their ultimate demise and the establishment of a classless society capable of producing unheard of economic prosperity.

Contrary to Marxist claims, this is not the result of any historical laws, however. In fact, no such things as inexorable historical laws as Marxists conceive of them exist.22 Nor is it the result of a tendency for the rate of profit to fall with an increased organic composition of capital (an increase in the proportion of constant to variable capital, that is), as Marx thinks. Just as the labor theory of value is false beyond repair, so is the law of the tendential fall of the profit rate, which is based on it. The source of value, interest and profit is not exclusively the expenditure of labor, but much more general: acting, i.e., the employment of scarce means in the pursuit of goals by agents who are constrained by time preference and uncertainty (imperfect knowledge). There is no reason to suppose, then, that changes in the organic composition of capital should have any systematic relation to changes in interest and profit.

Instead, the likelihood of crises which stimulate the development of a higher degree of class consciousness (i.e., the subjective conditions for the overthrow of the ruling class) increases because—to use one of Marx’s favorite terms—of the “dialectics” of exploitation which I have already touched on earlier: Exploitation is destructive of wealth formation. Hence, in the competition of exploitative firms, i.e., of states, less exploitative or more liberal ones tend to outcompete more exploitative ones because they are in command of more ample resources. The process of imperialism initially has a relatively liberating effect on societies coming under its control. A relatively more capitalist social model is exported to relatively less capitalist (more exploitative) societies. The development of productive forces is stimulated, economic integration is furthered, division of labor extended, and a genuine world market established. Population figures go up in response, and expectations as regards the economic future rise to unprecedented heights.23 With exploitative domination taking hold, and interstate competition reduced or even eliminated in a process of imperialist expansionism, however, the external constraints on the dominating state’s power of internal exploitation and expropriation gradually disappear. Internal exploitation, taxation and regulation begin to increase the closer the ruling class comes to its ultimate goal of world domination. Economic stagnation sets in and the—worldwide—higher expectations become frustrated. And this—high expectations and an economic reality increasingly falling behind these expectations—is the classical situation for the emergence of a revolutionary potential.24 A desperate need for ideological solutions to the emerging crises arises, along with a more wide-spread recognition of the fact that state rule, taxation and regulation—far from offering such a solution—actually constitute the very problem that must be overcome. If in this situation of economic stagnation, crises, and ideological disillusion25 a positive solution is offered in the form of a systematic and comprehensive libertarian philosophy coupled with its economic counterpart: Austrian economics, and if this ideology is propagated by an activist movement, then the prospects of igniting the revolutionary potential to activism become over-whelmingly positive and promising. Anti-statist pressures will mount and bring about an irresistible tendency toward dismantling the power of the ruling class and the state as its instrument of exploitation.26

If and insofar as this occurs, however, this will not mean—contrary to the Marxist model—social ownership of means of production. In fact, social ownership is not only economically inefficient as has already been explained; moreover, it is incompatible with the idea that the state is “withering away.”27 For if means of production are owned collectively, and if it is realistically assumed that not everyone’s ideas as to how to employ these means of production happen to coincide (as if by miracle), then it is precisely socially owned factors of production which require continued state actions, i.e., an institution coercively imposing one person’s will on another disagreeing one’s. Instead, the withering away of the state, and with this the end of exploitation and the beginning of liberty and unheard of economic prosperity, means the establishment of a pure private property society regulated by nothing but private law.

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28See on the following Karl Marx and Friedrich Engels, The Communist Manifesto (1848; New York: New York Labor News, 1948); Karl Marx, Das Kapital, 3 vols. (1867; 1885; 1894; Hamburg: O. Meissner, 1919); as contemporary Marxists, Ernest Mandel, Marxist Economic Theory (London: Merlin, 1962); idem, Late Capitalism (London: New Left Books, 1975); Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966); from a non-Marxist perspective, Leszek Kolakowski, Main Currents of Marxism; Gustav Wetter, Sowjetideologie heute vol. 1 (Frankfurt/M.: Fischer, 1962); Werner Leonhard, Sowjetideologie heute vol. 2 (Frankfurt/M.: Fischer, 1962).

29Marx, The Communist Manifesto, sect. 1.

30Marx, The Communist Manifesto, sect. 2, last 2 paragraphs; Friedrich Engels, “Von der Autorität,” in Karl Marx and Friedrich Engels, Ausgewählte Schriften 2 vols. (East Berlin: Dietz, 1953), vol. 1, p. 606; idem, Die Entwicklung des Sozialismus von der Utopie zur Wissenschaft, ibid., vol. 2, p. 139.

31See Marx, Das Kapital, vol. 1; the shortest presentation is his Lohn, Preis, Profit (1865). Actually, in order to prove the more specific Marxist thesis that exclusively the owner of labor services is exploited (but not the owner of the other originary factor of production: land), yet another argument would be needed. For if it were true that the discrepancy between factor and output prices constitutes an exploitative relation, this would only show that the capitalist who rents labor services from an owner of labor, and land services from an owner of land would exploit either labor, or land, or labor and land simultaneously. It is the labor theory of value, of course, which is supposed to provide the missing link here by trying to establish labor as the sole source of value. I will spare myself the task of refuting this theory. Few enough remain today, even among those claiming to be Marxists, who do not recognize the faultiness of the labor theory of value. Rather, I will accept for the sake of argument the suggestion made, for instance, by the self-proclaimed “analytical Marxist” John E. Roemer (A General Theory of Exploitation and Class ; Value, Exploitation and Class ) that the theory of exploitation can be separated analytically from the labor theory of value; and that a “generalized commodity exploitation theory” can be formulated which can be justified regardless of whether or not the labor theory of value is true. I want to demonstrate that the Marxist theory of exploitation is nonsensical even if one were to absolve its proponents from having to prove the labor theory of value and, indeed, even if the labor theory of value were true. Even a generalized commodity exploitation theory provides no escape from the conclusion that the Marxist theory of exploitation is dead wrong.

32See on the following Eugen von Böhm-Bawerk, The Exploitation Theory of Socialism-Communism (South Holland, Ill.: Libertarian Press, 1975); idem, Shorter Classics of Böhm-Bawerk (South Holland, Ill.: Libertarian Press, 1962).

33Ludwig von Mises, Human Action (Chicago: Henry Regnery, 1966), p. 407; see also Murray N. Rothbard, Man, Economy, and State, 2 vols. (Los Angeles: Nash, 1970), pp. 300–1.

34See on the time preference theory of interest in addition to the works cited in notes 5 and 6 above, also Frank Fetter, Capital, Interest, and Rent (Kansas City: Sheed Andrews and McMeel, 1977).

35See on the following Hans-Hermann Hoppe, Theory of Socialism and Capitalism (Boston: Kluwer Academic Publishers, 1988); idem, “Why Socialism Must Fail,” Free Market (July 1988); idem, “The Economics and Sociology of Taxation,” in Llewellyn H. Rockwell, ed., Taxation: An Austrian View (Auburn, Ala.: Ludwig von Mises Institute, forthcoming 1993).

36Mises’s contributions to the theory of exploitation and class are unsystematic. However, throughout his writings he presents sociological and historical interpretations that are class analyses, if only implicitly. Noteworthy here is in particular his acute analysis of the collaboration between government and banking elite in destroying the gold standard in order to increase their inflationary powers as a means of fraudulent, exploitative income and wealth redistribution in their own favor. (See for instance his Monetary Stabilization and Cyclical Policy (1928) in idem, On the Manipulation of Money and Credit, Percy L. Greaves, ed. (Dobbs Ferry, N.Y.: Free Market Books, 1978); see also his Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), chap. 20; “The Clash of Group Interests and Other Essays” in Richard M. Ebeling, ed., Money, Method, and the Market Process: Essays by Ludwig von Mises (Boston: Kluwer Academic Publishers, 1990.) Yet Mises does not give systematic status to class analysis and exploitation theory because he ultimately misconceives of exploitation as merely an intellectual error which correct economic reasoning can dispel. He fails to fully recognize that exploitation is also and probably even more so a moral-motivational problem that exists regardless of all economic reasoning. Rothbard adds this insight to the Misesian structure of Austrian economics and makes the analysis of power and power elites an integral part of economic theory and historical-sociological explanations; and he systematically expands the Austrian case against exploitation to include ethics in addition to economic theory, i.e., a theory of justice next to a theory of efficiency, such that the ruling class can also be attacked as immoral. For Rothbard’s theory of power, class and exploitation, see in particular his Power and Market (Kansas City: Sheed Andrews and McMeel, 1977); For a New Liberty (New York: McMillan, 1978); The Mystery of Banking (New York: Richardson and Snyder, 1983); America’s Great Depression (Kansas City: Sheed and Ward, 1975). On important nineteenth century forerunners of Austrian class analysis, see Leonard P. Liggio, “Charles Dunoyer and French Classical Liberalism,” Journal of Libertarian Studies 1, no. 3 (1977); Ralph Raico, “Classical Liberal Exploitation Theory,” ibid; Mark Weinburg, “The Social Analysis of Three Early 19th Century French Liberals: Say, Comte, and Dunoyer,” Journal of Libertarian Studies 2, no. 1 (1978); Jospeh T. Salerno, “Comment on the French Liberal School,” ibid; David M. Hart, “Gustave de Molinari and the Anti-Statist Liberal Tradition,” 2 parts, Journal of Libertarian Studies 5, nos. 3 and 4 (1981).

37See on this also Hoppe, Theory of Socialism and Capitalism; idem “The Justice of Economic Efficiency, “Austrian Economics Newsletter 1 (1988); idem, “The Ultimate Justification of the Private Property Ethics,” Liberty (September 1988).

38See on this theme also Lord (John) Acton, Essays in the History of Liberty (Indianapolis: Liberty Fund, 1985); Franz Oppenheimer, System der Soziologie, Vol. II: Der Staat (Stuttgart: Gustav Fischer, 1964); Alexander Rüstow, Freedom and Domination (Princeton: Princeton University Press, 1986).

39See on this Murray N. Rothbard, “Left and Right: The Prospects for Liberty,” in idem, Egalitarianism As a Revolt Against Nature and Other Essays (Washington, D. C.: Libertarian Review Press, 1974).

40All socialist propaganda to the contrary notwithstanding, the falsehood of the Marxist description of capitalists and laborers as antagonistic classes also comes to bear in certain empirical observations: Logically speaking, people can be grouped into classes in infinitely different ways. According to orthodox positivist methodology (which I consider false but am willing to accept here for the sake of argument), that classification system is better which helps us predict better. Yet the classification of people as capitalists or laborers (or as representatives of varying degrees of capitalist- or laborer-ness) is practically useless in predicting what stand a person will take on fundamental political, social and economic issues. Contrary to this, the correct classification of people as tax producers and the regulated vs. tax consumers and the regulators (or as representatives of varying degrees of tax producer- or consumer-ness) is indeed also a powerful predictor. Sociologists have largely overlooked this because of almost universally shared Marxist preconceptions. But everyday experience overwhelmingly corroborates my thesis: Find out whether or not somebody is a public employee (and his rank and salary), and whether or not and to what extent the income and wealth of a person outside of the public sector is determined by public sector purchases and/or regulatory actions—people will systematically differ in their response to fundamental political issues depending on whether they are classified as direct or indirect tax consumers, or as tax producers!

41Oppenheimer, System der Soziologie, vol. 2, pp. 322–23, presents the matter thus: “The basic norm of the state is power. That is, seen from the side of its origin: violence transformed into might. Violence is one of the most powerful forces shaping society, but is not itself a form of social interaction. It must become law in the positive sense of this term, that is, sociologically speaking, it must permit the development of a system of ‘subjective reciprocity’: and this is only possible through a system of self-imposed restrictions on the use of violence and the assumption of certain obligations in exchange for its arrogated rights. In this way violence is turned into might, and a relationship of domination emerges which is accepted not only by the rulers, but under not too severely oppressive circumstances by their subjects as well, as expressing a ‘just reciprocity’ Out of this basic norm secondary and tertiary norms now emerge as implied in it: norms of private law, of inheritance, criminal, obligational and constitutional law, which all bear the mark of the basic norm of power and domination, and which are all designed to influence the structure of the state in such a way as to increase economic exploitation to the maximum level which is compatible with the continuation of legally regulated domination.” The insight is fundamental that “law grows out of two essentially different roots . . .: on the one hand, out of the law of the association of equals, which can be called a ‘natural’ right, even if it is no ‘natural right,’ and on the other hand, out of the law of violence transformed into regulated might, the law of unequals.”

On the relation between private and public law, see also Friedrich A. Hayek, Law, Legislation and Liberty, 3 vols. (Chicago: University of Chicago Press, 1973–79), esp. vol. 1, chap. 6 and vol. 2, pp. 85–88.

42See James M. Buchanan and Gordon Tullock, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1965), p. 19.

43See Hans-Hermann Hoppe, Eigentum, Anarchie und Staat (Opladen: West-deutscher Verlag, 1987); idem, Theory of Socialism and Capitalism.

44See Hans-Hermann Hoppe, “Banking, Nation States and International Politics,” Review of Austrian Economics 4 (1989); Rothbard, The Mystery of Banking, chaps. 15–16.

45See on this in particular Rothbard, Man, Economy, and State, chap. 10, esp. the section “The Problem of One Big Cartel”; also Mises, Socialism, chaps. 22–26.

46See on this Gabriel Kolko, The Triumph of Conservatism (Chicago: Free Press, 1967); James Weinstein, The Corporate Ideal in the Liberal State (Boston: Beacon Press, 1968); Ronald Radosh and Murray N. Rothbard, eds., A New History of Leviathan (New York: Dutton, 1972); Leonard P. Liggio and James J. Martin, eds., Watershed of Empire (Colorado Springs, Colo.: Ralph Myles, 1976).

47On the relationship between state and war see Ekkehart Krippendorff, Staat und Krieg (Frankfurt/M.: Suhrkamp, 1985); Charles Tilly, “War Making and State Making as Organized Crime,” in Peter B. Evans, et al., eds., Bringing the State Back In (Cambridge: Cambridge University Press, 1985); also Robert Higgs, Crisis and Leviathan (New York: Oxford University Press, 1987).

48On a further elaborated version of this theory of military and monetary imperialism see H. H. Hoppe, “Banking, Nation States and International Politics.”

49See on this in particular Ludwig von Mises, Theory and History (Auburn, Ala.: Ludwig von Mises Institute, 1985), esp. part 2.

50It may be noted here that Marx and Engels, foremost in their Communist Manifesto, championed the historically progressive character of capitalism and were full of praise for its unprecedented accomplishments. Indeed, reviewing the relevant passages of the Manifesto concludes Joseph A. Schumpeter, “Never, I repeat, and in particular by no modern defender of the bourgeois civilization has anything like this been penned, never has a brief been composed on behalf of the business class from so profound and so wide a comprehension of what its achievement is and what it means to humanity.” “The Communist Manifesto in Sociology and Economics,” in Richard Clemence, Essays of J. A. Schumpeter (Port Washington, N. Y.: Kennikat Press, 1951), p. 293. Given this view of capitalism, Marx went so far as to defend the British conquest of India, for example, as a historically progressive development. See Marx’s contributions to the New York Daily Tribune (June 25, 1853; July 11, 1853; August 8, 1853 in Karl Marx and Friedrich Engels, Werke vol. 9 (East Berlin: Dietz, 1960). As a contemporary Marxist taking a similar stand on imperialism see Bill Warren, Imperialism: Pioneer of Capitalism (London: New Left Books, 1981).

51See on the theory of revolution in particular Charles Tilly, From Mobilization to Revolution (Reading, Mass.: Addison-Wesley, 1978); idem, As Sociology Meets History (New York: Academic Press, 1981).

52For a neo-Marxist assessment of the present era of “late capitalism” as characterized by “a new ideological disorientation” born out of permanent economic stagnation and the exhaustion of the legitimatory powers of conservatism and social-democratism (i.e., “liberalism” in American terminology) see Jürgen Habermas, Die Neue Unübersichtlichkeit (Frankfurt/M.: Suhrkamp, 1985); also idem, Legitimation Crisis (Boston: Beacon Press, 1975); Claus Offe, Strukturprobleme des kapitalistischen Staates (Frankfurt/M.: Suhrkamp, 1972).

53For an Austrian-libertarian assessment of the crisis-character of late capitalism and on the prospects for the rise of a revolutionary libertarian class consciousness see Murray Rothbard, “Left and Right”; idem, For a New Liberty, chap. 15; idem. Ethics of Liberty (Atlantic Highlands, N.J.: Humanities Press, 1982), part 5.

54On the internal inconsistencies of the Marxist theory of the state see also Hans Kelsen, Sozialismus und Staat (Vienna: Verlag der Wiener Volksbuchhandlung, 1965).

1For more on the comprehensive system see Alexander Solzhenitsyn, Mikhail Agursky, et al., From Under the Rubble (Boston: Little, Brown, and Company, 1974); Erik von Kuehnelt-Leddihn, Leftism: From de Sade and Marx to Hitler and Marcuse (New Rochelle, N.Y.: Arlington House: 1974; 2nd edition, Regnery, 1990); Paul Hollander, The Many Faces of Socialism (New Brunswick, N.J.: Transaction, 1983); David Conway, A Farewell to Marx: An Outline and Appraisal of His Theories (New York: Viking Penguin, 1987).
2Paul Craig Roberts, in the Wall Street Journal, June 28,1989.
3See Martin Malia, “From Under the Rubble, What?”, in Problems of Communism, January-April 1992; Peter Rutland, The Myth of the Plan (La Salle, Ill.: Open Court, 1985).
4A striking example of Western infatuation with Soviet socialism is Sidney and Beatrice Webb, Soviet Communism: A New Civilization? (New York: Charles Scribner’s Sons, 1936).
5Gary Becker, “The President’s Address,” The Mont Pelerin Society Newsletter, vol. 46, no. 1, February 1993.
6Austrian contributions to this debate include: Eugen von Böhm-Bawerk, Karl Marx and the Close of His System (New York: Augustus M. Kelley, 1949; Philadelphia, Penn.: Orion Editions, 1984); Peter J. Boettke, “The Austrian Critique and the Demise of Socialism: The Soviet Case,” in Richard M. Ebeling, ed. Austrian Economics: Perspectives on the Past and Prospects for the Future (Hillsdale, Mich.: Hillsdale College Press, 1991); F. A. Hayek, New Studies in Philosophy, Politics, Economics, and the History of Ideas (University of Chicago Press, 1978); Trygve J. B. Hoff, Economic Calculation in a Socialist Society (Indianapolis, Ind.: LibertyPress, 1981); Hans-Hermann Hoppe, “De-Socialization in a United Germany,” Review of Austrian Economics 5, no. 2 (1991): 77–106 and A Theory of Socialism and Capitalism (Boston, Mass.: Kluwer Academic Publishers, 1989); Israel M. Kirzner, “The Economic Calculation Debate: Lessons for Austrians,” Review of Austrian Economics 2 (1988): 1–18; Don Lavoie, Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (New York: Cambridge University Press, 1985); Murray N. Rothbard, “The End of Socialism and the Calculation Debate Revisited,” Review of Austrian Economics 5, no.2 (1991): 51–70), “Lange, Mises and Praxeology: The Retreat from Marxism,” Toward Liberty, vol. 2 (Menlo Park, Calif.: Institute for Humane Studies, 1971), pp. 307–21, and “Ludwig von Mises and Economic Calculation Under Socialism,” The Economics of Ludwig von Mises (Kansas City: Sheed and Ward, 1976), pp. 67–78; Ludwig von Mises, “Middle-of-the-Road Policy Leads to Socialism,” Two Essays by Ludwig von Mises (Auburn, Ala.: The Ludwig von Mises Institute, 1991), Socialism (Indianapolis, Ind.: Liberty Press/Liberty Classics, 1981), “Economic Calculation in the Socialist Commonwealth,” F. A. Hayek, ed., Collective Economic Planning (Clifton, N.J.: Kelley Publishing Company, 1975), pp. 87–130, and (Auburn, Ala.: The Ludwig von Mises Institute), and “One Hundred Years of Marxian Socialism,” Money, Method, and the Market Process, Richard M. Ebeling, ed. (Boston, Mass.: Kluwer Academic Publishers, 1990), pp. 215–32.
7On the failure of the Soviet model, see: Zbigniew Brzezinski, The Grand Failure: The Birth and Death of Communism in the Twentieth Century (New York: Macmillan, 1989); Sven Rydenfelt, A Pattern for Failure: Socialist Economies in Crisis (San Diego: Harcourt, Brace, Jonvanovich, 1984); Nick Eberstadt, The Poverty of Communism (New Brunswick, N.J.: Transaction, 1988).
8Martin Malia, “From Under the Rubble, What?”, in Problems of Communism, January-April 1992, p. 96.
9Stolitsa No. 37, 1992, p. 4.
10Peter J. Boettke, The Political Economy of Soviet Socialism: The Formative Years 1918–1928 (Boston: Kluwer, 1990).
11One historical account of such activity is Joseph Finder, Red Carpet (New York: Holt, Rinehart, Winston, 1983).
12For a refutation of neo-Marxist attempts to save the system from itself, see David Gordon, Resurrecting Marx: The Analytical Marxists on Freedom, Exploitation, and Justice (New Brunswick, N.J.: Transaction, 1990).
13All socialist propaganda to the contrary notwithstanding, the falsehood of the Marxist description of capitalists and laborers as antagonistic classes also comes to bear in certain empirical observations: Logically speaking, people can be grouped into classes in infinitely different ways. According to orthodox positivist methodology (which I consider false but am willing to accept here for the sake of argument), that classification system is better which helps us predict better. Yet the classification of people as capitalists or laborers (or as representatives of varying degrees of capitalist- or laborer-ness) is practically useless in predicting what stand a person will take on fundamental political, social and economic issues. Contrary to this, the correct classification of people as tax producers and the regulated vs. tax consumers and the regulators (or as representatives of varying degrees of tax producer- or consumer-ness) is indeed also a powerful predictor. Sociologists have largely overlooked this because of almost universally shared Marxist preconceptions. But everyday experience overwhelmingly corroborates my thesis: Find out whether or not somebody is a public employee (and his rank and salary), and whether or not and to what extent the income and wealth of a person outside of the public sector is determined by public sector purchases and/or regulatory actions—people will systematically differ in their response to fundamental political issues depending on whether they are classified as direct or indirect tax consumers, or as tax producers!
14Oppenheimer, System der Soziologie, vol. 2, pp. 322–23, presents the matter thus: “The basic norm of the state is power. That is, seen from the side of its origin: violence transformed into might. Violence is one of the most powerful forces shaping society, but is not itself a form of social interaction. It must become law in the positive sense of this term, that is, sociologically speaking, it must permit the development of a system of ‘subjective reciprocity’: and this is only possible through a system of self-imposed restrictions on the use of violence and the assumption of certain obligations in exchange for its arrogated rights. In this way violence is turned into might, and a relationship of domination emerges which is accepted not only by the rulers, but under not too severely oppressive circumstances by their subjects as well, as expressing a ‘just reciprocity’ Out of this basic norm secondary and tertiary norms now emerge as implied in it: norms of private law, of inheritance, criminal, obligational and constitutional law, which all bear the mark of the basic norm of power and domination, and which are all designed to influence the structure of the state in such a way as to increase economic exploitation to the maximum level which is compatible with the continuation of legally regulated domination.” The insight is fundamental that “law grows out of two essentially different roots . . .: on the one hand, out of the law of the association of equals, which can be called a ‘natural’ right, even if it is no ‘natural right,’ and on the other hand, out of the law of violence transformed into regulated might, the law of unequals.”
15See James M. Buchanan and Gordon Tullock, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1965), p. 19.
16See Hans-Hermann Hoppe, Eigentum, Anarchie und Staat (Opladen: West-deutscher Verlag, 1987); idem, Theory of Socialism and Capitalism.
17See Hans-Hermann Hoppe, “Banking, Nation States and International Politics,” Review of Austrian Economics 4 (1989); Rothbard, The Mystery of Banking, chaps. 15–16.
18See on this in particular Rothbard, Man, Economy, and State, chap. 10, esp. the section “The Problem of One Big Cartel”; also Mises, Socialism, chaps. 22–26.
19See on this Gabriel Kolko, The Triumph of Conservatism (Chicago: Free Press, 1967); James Weinstein, The Corporate Ideal in the Liberal State (Boston: Beacon Press, 1968); Ronald Radosh and Murray N. Rothbard, eds., A New History of Leviathan (New York: Dutton, 1972); Leonard P. Liggio and James J. Martin, eds., Watershed of Empire (Colorado Springs, Colo.: Ralph Myles, 1976).
20On the relationship between state and war see Ekkehart Krippendorff, Staat und Krieg (Frankfurt/M.: Suhrkamp, 1985); Charles Tilly, “War Making and State Making as Organized Crime,” in Peter B. Evans, et al., eds., Bringing the State Back In (Cambridge: Cambridge University Press, 1985); also Robert Higgs, Crisis and Leviathan (New York: Oxford University Press, 1987).
21On a further elaborated version of this theory of military and monetary imperialism see H. H. Hoppe, “Banking, Nation States and International Politics.”
22See on this in particular Ludwig von Mises, Theory and History (Auburn, Ala.: Ludwig von Mises Institute, 1985), esp. part 2.
23It may be noted here that Marx and Engels, foremost in their Communist Manifesto, championed the historically progressive character of capitalism and were full of praise for its unprecedented accomplishments. Indeed, reviewing the relevant passages of the Manifesto concludes Joseph A. Schumpeter, “Never, I repeat, and in particular by no modern defender of the bourgeois civilization has anything like this been penned, never has a brief been composed on behalf of the business class from so profound and so wide a comprehension of what its achievement is and what it means to humanity.” “The Communist Manifesto in Sociology and Economics,” in Richard Clemence, Essays of J. A. Schumpeter (Port Washington, N. Y.: Kennikat Press, 1951), p. 293. Given this view of capitalism, Marx went so far as to defend the British conquest of India, for example, as a historically progressive development. See Marx’s contributions to the New York Daily Tribune (June 25, 1853; July 11, 1853; August 8, 1853 in Karl Marx and Friedrich Engels, Werke vol. 9 (East Berlin: Dietz, 1960). As a contemporary Marxist taking a similar stand on imperialism see Bill Warren, Imperialism: Pioneer of Capitalism (London: New Left Books, 1981).
24See on the theory of revolution in particular Charles Tilly, From Mobilization to Revolution (Reading, Mass.: Addison-Wesley, 1978); idem, As Sociology Meets History (New York: Academic Press, 1981).
25For a neo-Marxist assessment of the present era of “late capitalism” as characterized by “a new ideological disorientation” born out of permanent economic stagnation and the exhaustion of the legitimatory powers of conservatism and social-democratism (i.e., “liberalism” in American terminology) see Jürgen Habermas, Die Neue Unübersichtlichkeit (Frankfurt/M.: Suhrkamp, 1985); also idem, Legitimation Crisis (Boston: Beacon Press, 1975); Claus Offe, Strukturprobleme des kapitalistischen Staates (Frankfurt/M.: Suhrkamp, 1972).
26For an Austrian-libertarian assessment of the crisis-character of late capitalism and on the prospects for the rise of a revolutionary libertarian class consciousness see Murray Rothbard, “Left and Right”; idem, For a New Liberty, chap. 15; idem. Ethics of Liberty (Atlantic Highlands, N.J.: Humanities Press, 1982), part 5.
27On the internal inconsistencies of the Marxist theory of the state see also Hans Kelsen, Sozialismus und Staat (Vienna: Verlag der Wiener Volksbuchhandlung, 1965).
28In the Soviet Union, Marxism was not thought to be just an economic theory. It pretended to be the universal explanation of nature, life, and society. It was also a deadly weapon to be wielded against personal enemies. As in the case of Sergei Vavilov who was starved to death for violating Marxism because he adhered to the science of genetics, “a false science invented by the Catholic monk Mendel.” In the name of Marxism, the death toll reached 100 million, the rivers of blood flowed from Russia to Kampuchea, from China to Czechoslovakia.
29The failure of socialism in Russia, and the enormous suffering and hardship of people in all socialist countries, is a powerful warning against socialism, statism, and interventionism in the West. “We should all be thankful to the Soviets,” says Paul Craig Roberts, “because they have proved conclusively that socialism doesn’t work. No one can say they didn’t have enough power or enough bureaucracy or enough planners or they didn’t go far enough.”
30In contrast to the West, where Marxist tenets were doctrines of a counter religion, few in the Soviet Union truly believed in the official ideology: not the state managers, not the professors, not the journalists. It was not necessary that they do so, for Marxism was a means of political rent seeking and of coercive control, not a body of ideas held to by honest men.
31The Soviet Union is now gone, as are the huge statues of Marx and Lenin that littered the East, and the good reputation of their systems of thought. This collection of articles is the Requiem for Marx and the social and economic systems created in his name. As with any funeral service, we look back on the life of Marxian ideas. But unlike the ordinary funeral, we are not looking back fondly, for Marxism is as good an example of the maxim that “ideas have consequences” as can be found. It does not speak well of the intellectual class that no body of ideas attracted a greater following in this century.
32It is beyond the capacity of economic analysis to calculate the opportunity costs of the socialist experiment in Russia. But the human toll from Stalin’s collectivization, purges, and Gulags is estimated by Russian historian Roy Medvedev at forty-one million people. A popular Russian aphorism says: “The only lesson of history is that it does not teach us anything.” “Despite the recent collapse of socialism and communism in Soviet Russia and Eastern Europe, socialism is alive and growing,” Gary Becker has said. It presents a mortal danger to economic freedom and the quality of life and will for generations to come.
33The scholars contributing to this volume write in the economic and historical tradition of the Austrian school, founded by Carl Menger with his book Principles of Economics (1875). The tradition emphasizes a deductive method, role of choice and uncertainty in economic affairs, the power of market prices to coordinate economic activity, and the essential nature of private property for forming the basis of rational calculation. The Austrian school is also the historical bete’ noire of the Marxian school. Long before any other school came around to understanding the deep flaws in the Marxian approach, the Austrians had devoted an enormous amount of intellectual power to exposing its fallacies and dangers. Carl Menger refuted the labor theory of value, his student Eugen von Böhm-Bawerk demolished Marx’s views of capital, F. A. Hayek showed the incompatibility between socialism and political freedom, and Ludwig von Mises attacked the core of socialist economic theory.
34From my life and study in Moscow, I can attest to the truth of this prediction. In an economy, nearly every consumption good requires several stages of production. The more natural resources used and the more complex the technology involved, the more stages of production are required. Yet lacking an ability to see a production process through to ends that consumers desire, Soviet socialism gave only military hardware, useless goods, goods to make other goods, while consumers were deprived of bare essentials.
35In the late 1980s, when glasnost at last permitted Soviet economists to speak out, they confirmed the death sentence that Mises pronounced. As Martin Malia put it, “through the voices of Nikolay Shmelev, Gavriil Popov, Vasiliy Selyunin, Grigory Khanin, Larisa Piyasheva, Mikhail Berger, and subsequently Grigoriy Yavlinksy and Yegor Gaydar, they offered us a portrait of the Soviet that was in full accord with the evaluations of . . . Ludwig von Mises, whose book contains hardly a single figure and not a word about GNP.” This powerful confirmation, Malia points out, led to “methodological smuta” (in Russian) in Western economics.
36Larisa Piyasheva—the only visible economist close to the Austrian school in present day Russia—believes that total privatization alone will not solve all the problems, but without it, there is no hope. She was fired by Yeltsin’s government due to “budget cuts.”
37If the present looks bleak, the recent history of the Soviet Union remains widely misunderstood. No one figure represents the confusion better than Mikhail Gorbachev. In the West, he was and is considered the great reformer—witness the title of Princeton Professor Stephen Cohen’s New York Times op-ed, “Gorbachev the Great.” If Gorbachev was a reformer, he was hardly the first Soviet politician to use so-called reforms to maintain power. Lenin was a reformer too, and he resorted to extraordinary means to save communism. As a result of Lenin’s efforts to impose real utopian socialism—not the bureaucratized model that existed until recently—the entire population was dying out. Had he continued on that course, he would not have had any subjects to rule. That’s when he initiated the New Economic Policy, which allowed markets and private property.
38President George Bush played no small part in keeping Gorbachev in power longer than he should have been, sticking by him, and doing everything politically possible to support him. Bush lent his support to the only major world leader without a democratic mandate, a man despised by his subjects, who imposed a system antithetical to Western values. Is it an American tradition that the U.S. president should support the head of Soviet communism in time of need? Similarly, Herbert Hoover bailed out Lenin, Franklin Roosevelt bailed out Stalin, and George Bush rescued Gorbachev.
39The sad legacy of Marxism is the mind set of certain people, both in the East and West, who believe that the state can cure all economic ills and bring about social justice. Yet a return to central management under whatever label is not the solution, but neither is the status quo. What is needed in the former Soviet Union and Soviet-client states is a wholesale repudiation of the legacy of Marx. In the United States, too, Marx’s ideas influenced a generation of reformers during the Progressive Era (out of which came modern central banking and the progressive income tax), the New Deal, the Great Society, and continues to infect departments of literature and sociology in major universities. Remarkably, even after the fall of Soviet and East European social regimes, Marxism has not lost all its academic cache. “I think it’s an exciting time to be a Marxist,” Steve Cullenberg of the University of California at Riverside told the Associated Press. He was among the 2,000 academics that attended the University of Massachusetts at Amherst conference in November 1992 entitled “Marxism in the New World Order: Crises and Possibilities.” The mass media, moreover, pays tribute to Marx’s honor every time it uses the terms “progressive” and “reactionary,” demonstrating an unwitting acceptance of Marx’s version of the historical inevitability of socialism.
40The gradual abolishment of feudal and absolutist rule and the rise of increasingly capitalist societies in Western Europe and the United States, and along with this unheard of economic growth and rising population numbers was the result of an increasing class consciousness among the exploited, who were ideologically molded together through the doctrines of natural rights and liberalism. In this Austrians and Marxists agree. They disagree, however, on the next assessment: The reversal of this liberalization process and steadily increased levels of exploitation in these societies since the last third of the nineteenth century, and particularly pronounced since World War I, are the result of a loss in class consciousness. In fact, in the Austrian view Marxism must accept much of the blame for this development by misdirecting attention from the correct exploitation model of the homesteader-producer-saver-contractor vs. the non-homesteader-producer-saver-contractor to the fallacious model of the wage earner vs. the capitalist, thus muddling things up.
41The establishment of a ruling class over an exploited one many times its size by coercion and the manipulation of public opinion, i.e., a low degree of class consciousness among the exploited, finds its most basic institutional expression in the creation of a system of public law superimposed on private law. The ruling class sets itself apart and protects its position as a ruling class by adopting a constitution for their firm’s operations. On the one hand, by formalizing the internal operations within the state apparatus as well as its relations vis-à-vis the exploited population, a constitution creates some degree of legal stability. The more familiar and popular private law notions are incorporated into constitutional and public law, the more conducive this will be to the creation of favorable public opinion. On the other hand, any constitution and public law also formalizes the exemptory status of the ruling class as regards the homesteading principle. It formalizes the right of the state’s representatives to engage in non-productive and non-contractual property acquisitions and the ultimate subordination of private to public law. Class justice, i.e., a dualism of one set of laws for the rulers and another for the ruled, comes to bear in this dualism of public and private law and in the domination and infiltration of public law over and into private law. It is not because private property rights are recognized by law, as Marxists think, that class justice is established. Rather, class justice comes into being precisely whenever a legal distinction exists between a class of persons acting under and being protected by public law and another class acting under and being protected instead by some subordinate private law. More specifically then, the basic proposition of the Marxist theory of the state in particular is false. The state is not exploitative because it protects the capitalists’ property rights, but because it itself is exempt from the restriction of having to acquire property productively and contractually.
42In spite of this fundamental misconception, however, Marxism, because it correctly interprets the state as exploitative (contrary, for instance to the public choice school, which sees it as a normal firm among others), is on to some important insights regarding the logic of state operations. For one thing, it recognizes the strategic function of redistributionist state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income—a policy of divide et impera—is the state’s means with which it can create divisiveness among the public and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself through democratizing the state constitution and opening up every ruling position to everyone and granting everyone the right to participate in the determination of state personnel and policy is a means for reducing the resistance against exploitation as such. Secondly, the state is indeed, as Marxists see it, the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; non-contractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation. And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking elite—even though their explanation for it is faulty. The reason is not that the bourgeois establishment sees and supports the state as the guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state as the very antithesis to private property that it is and takes a close interest in it for this reason. The more successful a business, the larger the potential danger of governmental exploitation, but the larger also the potential gains that can be achieved if it can come under government’s special protection and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration. The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest because as an exploitative firm the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations and allowing them to counterfeit on top of its own counterfeited notes under a regime of fractional reserve banking, the state can easily reach this goal and establish a system of state monopolized money and cartelized banking controlled by the central bank. And through this direct counterfeiting connection with the banking system and by extension the banks’ major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society—not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites and the state.
43In spite of this fundamental misconception, however, Marxism, because it correctly interprets the state as exploitative (contrary, for instance to the public choice school, which sees it as a normal firm among others), is on to some important insights regarding the logic of state operations. For one thing, it recognizes the strategic function of redistributionist state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income—a policy of divide et impera—is the state’s means with which it can create divisiveness among the public and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself through democratizing the state constitution and opening up every ruling position to everyone and granting everyone the right to participate in the determination of state personnel and policy is a means for reducing the resistance against exploitation as such. Secondly, the state is indeed, as Marxists see it, the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; non-contractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation. And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking elite—even though their explanation for it is faulty. The reason is not that the bourgeois establishment sees and supports the state as the guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state as the very antithesis to private property that it is and takes a close interest in it for this reason. The more successful a business, the larger the potential danger of governmental exploitation, but the larger also the potential gains that can be achieved if it can come under government’s special protection and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration. The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest because as an exploitative firm the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations and allowing them to counterfeit on top of its own counterfeited notes under a regime of fractional reserve banking, the state can easily reach this goal and establish a system of state monopolized money and cartelized banking controlled by the central bank. And through this direct counterfeiting connection with the banking system and by extension the banks’ major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society—not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites and the state.
44In spite of this fundamental misconception, however, Marxism, because it correctly interprets the state as exploitative (contrary, for instance to the public choice school, which sees it as a normal firm among others), is on to some important insights regarding the logic of state operations. For one thing, it recognizes the strategic function of redistributionist state policies. As an exploitative firm, the state must at all times be interested in a low degree of class consciousness among the ruled. The redistribution of property and income—a policy of divide et impera—is the state’s means with which it can create divisiveness among the public and destroy the formation of a unifying class consciousness of the exploited. Furthermore, the redistribution of state power itself through democratizing the state constitution and opening up every ruling position to everyone and granting everyone the right to participate in the determination of state personnel and policy is a means for reducing the resistance against exploitation as such. Secondly, the state is indeed, as Marxists see it, the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; non-contractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation. And finally, Marxists are also correct in noticing the close association between the state and business, especially the banking elite—even though their explanation for it is faulty. The reason is not that the bourgeois establishment sees and supports the state as the guarantor of private property rights and contractualism. On the contrary, the establishment correctly perceives the state as the very antithesis to private property that it is and takes a close interest in it for this reason. The more successful a business, the larger the potential danger of governmental exploitation, but the larger also the potential gains that can be achieved if it can come under government’s special protection and is exempt from the full weight of capitalist competition. This is why the business establishment is interested in the state and its infiltration. The ruling elite in turn is interested in close cooperation with the business establishment because of its financial powers. In particular, the banking elite is of interest because as an exploitative firm the state naturally wishes to possess complete autonomy for counterfeiting. By offering to cut the banking elite in on its own counterfeiting machinations and allowing them to counterfeit on top of its own counterfeited notes under a regime of fractional reserve banking, the state can easily reach this goal and establish a system of state monopolized money and cartelized banking controlled by the central bank. And through this direct counterfeiting connection with the banking system and by extension the banks’ major clients, the ruling class in fact extends far beyond the state apparatus to the very nervous centers of civil society—not that much different, at least in appearance, from the picture that Marxists like to paint of the cooperation between banking, business elites and the state.
45Competition within the ruling class and among different ruling classes brings about a tendency toward increasing concentration. Marxism is right in this. However, its faulty theory of exploitation again leads it to locate the cause for this tendency in the wrong place. Marxism sees such a tendency as inherent in capitalist competition. Yet it is precisely so long as people are engaged in a clean capitalism that competition is not a form of zero-sum interaction. The homesteader, the producer, saver and contractor do not gain at another’s expense. Their gains either leave another’s physical possessions completely unaffected or they actually imply mutual gains (as in the case of all contractual exchanges). Capitalism thus can account for increases in absolute wealth. But under its regime no systematic tendency toward relative concentration can be said to exist. Instead, zero-sum interactions characterize not only the relationship between the ruler and the ruled, but also between competing rulers. Exploitation defined as non-productive and non-contractual property acquisitions is only possible as long as there is anything that can be appropriated. Yet if there were free competition in the business of exploitation, there would obviously be nothing left to expropriate. Thus, exploitation requires monopoly over some given territory and population; and the competition between exploiters is by its very nature eliminative and must bring about a tendency toward relative concentration of exploitative firms as well as a tendency toward centralization within each exploitative firm. The development of states rather than capitalist firms provides the foremost illustration of this tendency: There are now a significantly smaller number of states with exploitative control over much larger territories than in previous centuries. And within each state apparatus there has in fact been a constant tendency toward increasing the powers of the central government at the expense of its regional and local subdivisions. Yet outside the state apparatus a tendency toward relative concentration has also become apparent for the same reason. Not, as should be clear by now, because of any trait inherent in capitalism, but because the ruling class has expanded its rule into the midst of civil society through the creation of a state-banking-business alliance and in particular the establishment of a system of central banking. If a concentration and centralization of state power then takes place, it is only natural that this be accompanied by a parallel process of relative concentration and cartelization of banking and industry. Along with increased state powers, the associated banking and business establishment’s powers of eliminating or putting economic competitors at a disadvantage by means of non-productive and/or non-contractual expropriations increase. Business concentration is the reflection of a “state-ization” of economic life.
46Competition within the ruling class and among different ruling classes brings about a tendency toward increasing concentration. Marxism is right in this. However, its faulty theory of exploitation again leads it to locate the cause for this tendency in the wrong place. Marxism sees such a tendency as inherent in capitalist competition. Yet it is precisely so long as people are engaged in a clean capitalism that competition is not a form of zero-sum interaction. The homesteader, the producer, saver and contractor do not gain at another’s expense. Their gains either leave another’s physical possessions completely unaffected or they actually imply mutual gains (as in the case of all contractual exchanges). Capitalism thus can account for increases in absolute wealth. But under its regime no systematic tendency toward relative concentration can be said to exist. Instead, zero-sum interactions characterize not only the relationship between the ruler and the ruled, but also between competing rulers. Exploitation defined as non-productive and non-contractual property acquisitions is only possible as long as there is anything that can be appropriated. Yet if there were free competition in the business of exploitation, there would obviously be nothing left to expropriate. Thus, exploitation requires monopoly over some given territory and population; and the competition between exploiters is by its very nature eliminative and must bring about a tendency toward relative concentration of exploitative firms as well as a tendency toward centralization within each exploitative firm. The development of states rather than capitalist firms provides the foremost illustration of this tendency: There are now a significantly smaller number of states with exploitative control over much larger territories than in previous centuries. And within each state apparatus there has in fact been a constant tendency toward increasing the powers of the central government at the expense of its regional and local subdivisions. Yet outside the state apparatus a tendency toward relative concentration has also become apparent for the same reason. Not, as should be clear by now, because of any trait inherent in capitalism, but because the ruling class has expanded its rule into the midst of civil society through the creation of a state-banking-business alliance and in particular the establishment of a system of central banking. If a concentration and centralization of state power then takes place, it is only natural that this be accompanied by a parallel process of relative concentration and cartelization of banking and industry. Along with increased state powers, the associated banking and business establishment’s powers of eliminating or putting economic competitors at a disadvantage by means of non-productive and/or non-contractual expropriations increase. Business concentration is the reflection of a “state-ization” of economic life.
47The primary means for the expansion of state power and the elimination of rival exploitation centers is war and military domination. Interstate competition implies a tendency toward war and imperialism. As centers of exploitation their interests are by nature antagonistic. Moreover, with each of them—internally—in command of the instrument of taxation and absolute counterfeiting powers, it is possible for the ruling classes to let others pay for their wars. Naturally, if one does not have to pay for one’s risky ventures oneself, but can force others to do so, one tends to be a greater risk taker and more trigger happy than one would otherwise be. Marxism, contrary to much of the so-called bourgeois social sciences, gets the facts right: there is indeed a tendency toward imperialism operative in history; and the foremost imperialist powers are indeed the most advanced capitalist nations. Yet the explanation is once again faulty. It is the state as an institution exempt from the capitalist rules of property acquisitions that is by nature aggressive. And the historical evidence of a close correlation between capitalism and imperialism only seemingly contradicts this. It finds its explanation, easily enough, in the fact that in order to come out successfully from interstate wars, a state must be in command of sufficient (in relative terms) economic resources. Ceteris paribus, the state with more ample resources will win the war. As an exploitative firm, a state is by nature destructive of wealth and capital accumulation. Wealth is produced exclusively by civil society; and the weaker the state’s exploitative powers, the more wealth and capital society accumulates. Thus, paradoxical as it may sound at first, the weaker or the more liberal a state is internally, the further developed capitalism is; a developed capitalist economy to extract from makes the state richer; and a richer state then makes for more and more successful expansionist wars.
48And a similarly straightforward yet once again entirely non-Marxist explanation exists for the observation always pointed out by Marxists, that the banking and business establishment is usually among the most ardent supporters of military strength and imperial expansionism. It is not because the expansion of capitalist markets requires exploitation, but because the expansion of state protected and privileged business requires that such protection be extended also to foreign countries and that foreign competitors be hampered through non-contractual and non-productive property acquisitions in the same way or more so than internal competition. Specifically, it supports imperialism if this promises to lead to a position of military domination of one’s own allied state over another. For then, from a position of military strength, it becomes possible to establish a system of—as one may call it—monetary imperialism. The dominating state will use its superior power to enforce a policy of internationally coordinated inflation. Its own central bank sets the pace in the process of counterfeiting, and the central banks of the dominated states are ordered to use its currency as their own reserves and inflate on top of them. This way, along with the dominating state and as the earliest receivers of the counterfeit reserve currency its associated banking and business establishment can engage in an almost costless expropriation of foreign property owners and income producers. A double layer of exploitation of a foreign state and a foreign elite on top of a national state and elite is imposed on the exploited class in the dominated territories, causing prolonged economic dependency and relative economic stagnation vis-à-vis the dominant nation. It is this—very uncapitalist—situation that characterizes the status of the United States and the United States dollar and that gives rise to the—correct—charge of United States economic exploitation and dollar imperialism.
49Contrary to Marxist claims, this is not the result of any historical laws, however. In fact, no such things as inexorable historical laws as Marxists conceive of them exist. Nor is it the result of a tendency for the rate of profit to fall with an increased organic composition of capital (an increase in the proportion of constant to variable capital, that is), as Marx thinks. Just as the labor theory of value is false beyond repair, so is the law of the tendential fall of the profit rate, which is based on it. The source of value, interest and profit is not exclusively the expenditure of labor, but much more general: acting, i.e., the employment of scarce means in the pursuit of goals by agents who are constrained by time preference and uncertainty (imperfect knowledge). There is no reason to suppose, then, that changes in the organic composition of capital should have any systematic relation to changes in interest and profit.
50Instead, the likelihood of crises which stimulate the development of a higher degree of class consciousness (i.e., the subjective conditions for the overthrow of the ruling class) increases because—to use one of Marx’s favorite terms—of the “dialectics” of exploitation which I have already touched on earlier: Exploitation is destructive of wealth formation. Hence, in the competition of exploitative firms, i.e., of states, less exploitative or more liberal ones tend to outcompete more exploitative ones because they are in command of more ample resources. The process of imperialism initially has a relatively liberating effect on societies coming under its control. A relatively more capitalist social model is exported to relatively less capitalist (more exploitative) societies. The development of productive forces is stimulated, economic integration is furthered, division of labor extended, and a genuine world market established. Population figures go up in response, and expectations as regards the economic future rise to unprecedented heights. With exploitative domination taking hold, and interstate competition reduced or even eliminated in a process of imperialist expansionism, however, the external constraints on the dominating state’s power of internal exploitation and expropriation gradually disappear. Internal exploitation, taxation and regulation begin to increase the closer the ruling class comes to its ultimate goal of world domination. Economic stagnation sets in and the—worldwide—higher expectations become frustrated. And this—high expectations and an economic reality increasingly falling behind these expectations—is the classical situation for the emergence of a revolutionary potential. A desperate need for ideological solutions to the emerging crises arises, along with a more wide-spread recognition of the fact that state rule, taxation and regulation—far from offering such a solution—actually constitute the very problem that must be overcome. If in this situation of economic stagnation, crises, and ideological disillusion a positive solution is offered in the form of a systematic and comprehensive libertarian philosophy coupled with its economic counterpart: Austrian economics, and if this ideology is propagated by an activist movement, then the prospects of igniting the revolutionary potential to activism become over-whelmingly positive and promising. Anti-statist pressures will mount and bring about an irresistible tendency toward dismantling the power of the ruling class and the state as its instrument of exploitation.
51Instead, the likelihood of crises which stimulate the development of a higher degree of class consciousness (i.e., the subjective conditions for the overthrow of the ruling class) increases because—to use one of Marx’s favorite terms—of the “dialectics” of exploitation which I have already touched on earlier: Exploitation is destructive of wealth formation. Hence, in the competition of exploitative firms, i.e., of states, less exploitative or more liberal ones tend to outcompete more exploitative ones because they are in command of more ample resources. The process of imperialism initially has a relatively liberating effect on societies coming under its control. A relatively more capitalist social model is exported to relatively less capitalist (more exploitative) societies. The development of productive forces is stimulated, economic integration is furthered, division of labor extended, and a genuine world market established. Population figures go up in response, and expectations as regards the economic future rise to unprecedented heights. With exploitative domination taking hold, and interstate competition reduced or even eliminated in a process of imperialist expansionism, however, the external constraints on the dominating state’s power of internal exploitation and expropriation gradually disappear. Internal exploitation, taxation and regulation begin to increase the closer the ruling class comes to its ultimate goal of world domination. Economic stagnation sets in and the—worldwide—higher expectations become frustrated. And this—high expectations and an economic reality increasingly falling behind these expectations—is the classical situation for the emergence of a revolutionary potential. A desperate need for ideological solutions to the emerging crises arises, along with a more wide-spread recognition of the fact that state rule, taxation and regulation—far from offering such a solution—actually constitute the very problem that must be overcome. If in this situation of economic stagnation, crises, and ideological disillusion a positive solution is offered in the form of a systematic and comprehensive libertarian philosophy coupled with its economic counterpart: Austrian economics, and if this ideology is propagated by an activist movement, then the prospects of igniting the revolutionary potential to activism become over-whelmingly positive and promising. Anti-statist pressures will mount and bring about an irresistible tendency toward dismantling the power of the ruling class and the state as its instrument of exploitation.
52Instead, the likelihood of crises which stimulate the development of a higher degree of class consciousness (i.e., the subjective conditions for the overthrow of the ruling class) increases because—to use one of Marx’s favorite terms—of the “dialectics” of exploitation which I have already touched on earlier: Exploitation is destructive of wealth formation. Hence, in the competition of exploitative firms, i.e., of states, less exploitative or more liberal ones tend to outcompete more exploitative ones because they are in command of more ample resources. The process of imperialism initially has a relatively liberating effect on societies coming under its control. A relatively more capitalist social model is exported to relatively less capitalist (more exploitative) societies. The development of productive forces is stimulated, economic integration is furthered, division of labor extended, and a genuine world market established. Population figures go up in response, and expectations as regards the economic future rise to unprecedented heights. With exploitative domination taking hold, and interstate competition reduced or even eliminated in a process of imperialist expansionism, however, the external constraints on the dominating state’s power of internal exploitation and expropriation gradually disappear. Internal exploitation, taxation and regulation begin to increase the closer the ruling class comes to its ultimate goal of world domination. Economic stagnation sets in and the—worldwide—higher expectations become frustrated. And this—high expectations and an economic reality increasingly falling behind these expectations—is the classical situation for the emergence of a revolutionary potential. A desperate need for ideological solutions to the emerging crises arises, along with a more wide-spread recognition of the fact that state rule, taxation and regulation—far from offering such a solution—actually constitute the very problem that must be overcome. If in this situation of economic stagnation, crises, and ideological disillusion a positive solution is offered in the form of a systematic and comprehensive libertarian philosophy coupled with its economic counterpart: Austrian economics, and if this ideology is propagated by an activist movement, then the prospects of igniting the revolutionary potential to activism become over-whelmingly positive and promising. Anti-statist pressures will mount and bring about an irresistible tendency toward dismantling the power of the ruling class and the state as its instrument of exploitation.
53Instead, the likelihood of crises which stimulate the development of a higher degree of class consciousness (i.e., the subjective conditions for the overthrow of the ruling class) increases because—to use one of Marx’s favorite terms—of the “dialectics” of exploitation which I have already touched on earlier: Exploitation is destructive of wealth formation. Hence, in the competition of exploitative firms, i.e., of states, less exploitative or more liberal ones tend to outcompete more exploitative ones because they are in command of more ample resources. The process of imperialism initially has a relatively liberating effect on societies coming under its control. A relatively more capitalist social model is exported to relatively less capitalist (more exploitative) societies. The development of productive forces is stimulated, economic integration is furthered, division of labor extended, and a genuine world market established. Population figures go up in response, and expectations as regards the economic future rise to unprecedented heights. With exploitative domination taking hold, and interstate competition reduced or even eliminated in a process of imperialist expansionism, however, the external constraints on the dominating state’s power of internal exploitation and expropriation gradually disappear. Internal exploitation, taxation and regulation begin to increase the closer the ruling class comes to its ultimate goal of world domination. Economic stagnation sets in and the—worldwide—higher expectations become frustrated. And this—high expectations and an economic reality increasingly falling behind these expectations—is the classical situation for the emergence of a revolutionary potential. A desperate need for ideological solutions to the emerging crises arises, along with a more wide-spread recognition of the fact that state rule, taxation and regulation—far from offering such a solution—actually constitute the very problem that must be overcome. If in this situation of economic stagnation, crises, and ideological disillusion a positive solution is offered in the form of a systematic and comprehensive libertarian philosophy coupled with its economic counterpart: Austrian economics, and if this ideology is propagated by an activist movement, then the prospects of igniting the revolutionary potential to activism become over-whelmingly positive and promising. Anti-statist pressures will mount and bring about an irresistible tendency toward dismantling the power of the ruling class and the state as its instrument of exploitation.
54If and insofar as this occurs, however, this will not mean—contrary to the Marxist model—social ownership of means of production. In fact, social ownership is not only economically inefficient as has already been explained; moreover, it is incompatible with the idea that the state is “withering away.” For if means of production are owned collectively, and if it is realistically assumed that not everyone’s ideas as to how to employ these means of production happen to coincide (as if by miracle), then it is precisely socially owned factors of production which require continued state actions, i.e., an institution coercively imposing one person’s will on another disagreeing one’s. Instead, the withering away of the state, and with this the end of exploitation and the beginning of liberty and unheard of economic prosperity, means the establishment of a pure private property society regulated by nothing but private law.

Requiem for Marx

Hans-Hermann Hoppe