Ludwig von Mises: The Class Struggle

Any philosophy of history must demonstrate the mechanism by means of which the supreme agency that directs the course of all human affairs induces individuals to walk in precisely the ways which are bound to lead mankind toward the goal set. In Marx’s system the doctrine of the class struggle is designed to answer this question.

The inherent weakness of this doctrine is that it deals with classes and not with individuals. What has to be shown is how the individuals are induced to act in such a way that mankind finally reaches the point the productive forces want it to attain. Marx answers that consciousness of the interests of their class determines the conduct of the individuals. It still remains to be explained why the individuals give the interests of their class preference over their own interests. We may for the moment refrain from asking how the individual learns what the genuine interests of his class are. But even Marx cannot help admitting that a conflict exists between the interests of an individual and those of the class to which he belongs.1 He distinguishes between those proletarians who are class conscious, i.e., place the concerns of their class before their individual concerns, and those who are not. He considers it one of the objectives of a socialist party to awake to class consciousness those proletarians who are not spontaneously class conscious.

Marx obfuscated the problem by confusing the notions of caste and class. Where status and caste differences prevail, all members of every caste but the most privileged have one interest in common, viz., to wipe out the legal disabilities of their own caste. All slaves, for instance, are united in having a stake in the abolition of slavery. But no such conflicts are present in a society in which all citizens are equal before the law. No logical objection can be advanced against distinguishing various classes among the members of such a society. Any classification is logically permissible, however arbitrarily the mark of distinction may be chosen. But it is nonsensical to classify the members of a capitalistic society according to their position in the framework of the social division of labor and then to identify these classes with the castes of a status society.

In a status society the individual inherits his caste membership from his parents, he remains through all his life in his caste, and his children are born as members of it. Only in exceptional cases can good luck raise a man into a higher caste. For the immense majority birth unalterably determines their station in life. The classes which Marx distinguishes in a capitalistic society are different. Their membership is fluctuating. Class affiliation is not hereditary. It is assigned to each individual by a daily repeated plebiscite, as it were, of all the people. The public in spending and buying determines who should own and run the plants, who should play the parts in the theater performances, who should work in the factories and mines. Rich men become poor, and poor men rich. The heirs as well as those who themselves have acquired wealth must try to hold their own by defending their assets against the competition of already established firms and of ambitious newcomers. In the unhampered market economy there are no privileges, no protection of vested interests, no barriers preventing anybody from striving after any prize. Access to any of the Marxian classes is free to everybody. The members of each class compete with one another; they are not united by a common class interest and not opposed to the members of other classes by being allied either in the defense of a common privilege which those wronged by it want to see abolished or in the attempt to abolish an institutional disability which those deriving advantage from it want to preserve.

The laissez-faire liberals asserted: If the old laws establishing status privileges and disabilities are repealed and no new practices of the same character — such as tariffs, subsidies, discriminatory taxation, indulgence granted for nongovernmental agencies like churches, unions, and so on to use coercion and intimidation — are introduced, there is equality of all citizens before the law. Nobody is hampered in his aspirations and ambitions by any legal obstacles. Everybody is free to compete for any social position or function for which his personal abilities qualify him.”Capitalism is essentially mass production to fill the needs of the masses. But Marx always labored under the deceptive conception that the workers are toiling for the sole benefit of an upper class of idle parasites.”

The communists denied that this is the way capitalistic society as organized under the liberal system of equality before the law, is operating. In their eyes private ownership of the means of production conveys to the owners — the bourgeois or capitalists in Marx’s terminology — a privilege virtually not different from those once accorded to the feudal lords. The “bourgeois revolution” has not abolished privilege and discrimination against the masses; it has, says the Marxian, merely supplanted the old ruling and exploiting class of noblemen by a new ruling and exploiting class, the bourgeoisie. The exploited class, the proletarians, did not profit from this reform. They have changed masters but they have remained oppressed and exploited. What is needed is a new and final revolution, which in abolishing private ownership of the means of production will establish the classless society.

This socialist or communist doctrine fails entirely to take into account the essential difference between the conditions of a status or caste society and those of a capitalistic society. Feudal property came into existence either by conquest or by donation on the part of a conqueror. It came to an end either by revocation of the donation or by conquest on the part of a more powerful conqueror. It was property by “the grace of God,” because it was ultimately derived from military victory which the humility or conceit of the princes ascribed to special intervention of the Lord. The owners of feudal property did not depend on the market, they did not serve the consumers; within the range of their property rights they were real lords. But it is quite different with the capitalists and entrepreneurs of a market economy. They acquire and enlarge their property through the services they have rendered to the consumers, and they can retain it only by serving daily again in the best possible way. This difference is not eradicated by metaphorically calling a successful manufacturer of spaghetti “the spaghetti king.”

Marx never embarked on the hopeless task of refuting the economists’ description of the working of the market economy. Instead he was eager to show that capitalism must in the future lead to very unsatisfactory conditions. He undertook to demonstrate that the operation of capitalism must inevitably result in the concentration of wealth in the possession of an ever diminishing number of capitalists on the one hand and in the progressive impoverishment of the immense majority on the other hand. In the execution of this task he started from the spurious iron law of wages according to which the average wage rate is that quantum of the means of subsistence which is absolutely required to enable the laborer to barely survive and to rear progeny.2 This alleged law has long since been entirely discredited, and even the most bigoted Marxians have dropped it. But even if one were prepared for the sake of argument to call the law correct, it is obvious that it can by no means serve as the basis of a demonstration that the evolution of capitalism leads to progressive impoverishment of the wage earners. If wage rates under capitalism are always so low that for physiological reasons they cannot drop any further without wiping out the whole class of wage earners, it is impossible to maintain the thesis of the Communist Manifesto that the laborer “sinks deeper and deeper” with the progress of industry. Like all Marx’s other arguments this demonstration is contradictory and self-defeating. Marx boasted of having discovered the immanent laws of capitalist evolution. The most important of these laws he considered the law of progressive impoverishment of the wage-earning masses. It is the operation of this law that brings about the final collapse of capitalism and the emergence of socialism.3 When this law is seen to be spurious, the foundation is pulled from under both Marx’s system of economics and his theory of capitalist evolution.”The whole chain of this reasoning is exploded by the establishment of the fact that the progress of capitalism does not pauperize the wage earners increasingly but on the contrary improves their standard of living.”

Incidentally we have to establish the fact that in capitalistic countries the standard of living of the wage earners has improved in an unprecedented and undreamt-of way since the publication of the Communist Manifesto and the first volume of Das Kapital. Marx misrepresented the operation of the capitalist system in every respect.

The corollary of the alleged progressive impoverishment of the wage earners is the concentration of all riches in the hands of a class of capitalist exploiters whose membership is continually shrinking. In dealing with this issue Marx failed to take into account the fact that the evolution of big business units does not necessarily involve the concentration of wealth in a few hands. The big business enterprises are almost without exception corporations, precisely because they are too big for single individuals to own them entirely. The growth of business units has far outstripped the growth of individual fortunes. The assets of a corporation are not identical with the wealth of its shareholders. A considerable part of these assets, the equivalent of preferred stock and bonds issued and of loans raised, belong virtually, if not in the sense of the legal concept of ownership, to other people, viz., to owners of bonds and preferred stock and to creditors. Where these securities are held by savings banks and insurance companies and these loans were granted by such banks and companies, the virtual owners are the people who have claims against them. Also the common stock of a corporation is as a rule not concentrated in the hands of one man. The bigger the corporation, as a rule, the more widely its shares are distributed.

Capitalism is essentially mass production to fill the needs of the masses. But Marx always labored under the deceptive conception that the workers are toiling for the sole benefit of an upper class of idle parasites. He did not see that the workers themselves consume by far the greater part of all the consumers’ goods turned out. The millionaires consume an almost negligible part of what is called the national product. All branches of big business cater directly or indirectly to the needs of the common man. The luxury industries never develop beyond small-scale or medium-size units. The evolution of big business is in itself proof of the fact that the masses and not the nabobs are the main consumers. Those who deal with the phenomenon of big business under the rubric “concentration of economic power” fail to realize that economic power is vested in the buying public on whose patronage the prosperity of the factories depends. In his capacity as buyer, the wage earner is the customer who is “always right.” But Marx declares that the bourgeoisie “is incompetent to assure an existence to its slave within his slavery.”

Marx deduced the excellence of socialism from the fact that the driving force of historical evolution, the material productive forces, is bound to bring about socialism. As he was engrossed in the Hegelian brand of optimism, there was to his mind no further need to demonstrate the merits of socialism. It was obvious to him that socialism, being a later stage of history than capitalism, was also a better stage.4 It was sheer blasphemy to doubt its merits.

What was still left to show was the mechanism by means of which nature brings about the transition from capitalism to socialism. Nature’s instrument is the class struggle. As the workers sink deeper and deeper with the progress of capitalism, as their misery, oppression, slavery, and degradation increase, they are driven to revolt, and their rebellion establishes socialism.”The workers were never enthusiastic about socialism.”

The whole chain of this reasoning is exploded by the establishment of the fact that the progress of capitalism does not pauperize the wage earners increasingly but on the contrary improves their standard of living. Why should the masses be inevitably driven to revolt when they get more and better food, housing and clothing, cars and refrigerators, radio and television sets, nylon and other synthetic products? Even if, for the sake of argument, we were to admit that the workers are driven to rebellion, why should their revolutionary upheaval aim just at the establishment of socialism? The only motive which could induce them to ask for socialism would be the conviction that they themselves would fare better under socialism than under capitalism. But Marxists, anxious to avoid dealing with the economic problems of a socialist commonwealth, did nothing to demonstrate the superiority of socialism over capitalism apart from the circular reasoning that runs: Socialism is bound to come as the next stage of historical evolution. Being a later stage of history than capitalism, it is necessarily higher and better than capitalism. Why is it bound to come? Because the laborers, doomed to progressive impoverishment under capitalism, will rebel and establish socialism. But what other motive could impel them to aim at the establishment of socialism than the conviction that socialism is better than capitalism? And this pre-eminence of socialism is deduced by Marx from the fact that the coming of socialism is inevitable. The circle is closed.

In the context of the Marxian doctrine the superiority of socialism is proved by the fact that the proletarians are aiming at socialism. What the philosophers, the Utopians, think does not count. What matters is the ideas of the proletarians, the class that history has entrusted with the task of shaping the future.

The truth is that the concept of socialism did not originate from the “proletarian mind.” No proletarian or son of a proletarian contributed any substantial idea to the socialist ideology. The intellectual fathers of socialism were members of the intelligentsia, scions of the “bourgeoisie.” Marx himself was the son of a well-to-do lawyer. He attended a German Gymnasium, the school all Marxians and other socialists denounce as the main offshoot of the bourgeois system of education, and his family supported him through all the years of his studies; he did not work his way through the university. He married the daughter of a member of the German nobility; his brother-in-law was Prussian minister of the interior and as such head of the Prussian police. In his household served a maid, Helene Demuth, who never married and who followed the Marx ménage in all its shifts of residence, the perfect model of the exploited slavey whose frustration and stunted sex life have been repeatedly depicted in the German “social” novel. Friedrich Engels was the son of a wealthy manufacturer and himself a manufacturer; he refused to marry his mistress Mary because she was uneducated and of “low” descent;5 he enjoyed the amusements of the British gentry such as riding to hounds.

The workers were never enthusiastic about socialism. They supported the union movement whose striving after higher wages Marx despised as useless.6 They asked for all those measures of government interference with business which Marx branded petty-bourgeois nonsense. They opposed technological improvement, in earlier days by destroying new machines, later by union pressure and compulsion in favor of feather-bedding. Syndicalism — appropriation of the enterprises by the workers employed in them — is a program that the workers developed spontaneously. But socialism was brought to the masses by intellectuals of bourgeois background. Dining and wining together in the luxurious London homes and country seats of late Victorian “society,” ladies and gentlemen in fashionable evening clothes concocted schemes for converting the British proletarians to the socialist creed.

Ludwig von Mises:

Ludwig von Mises was the acknowledged leader of the Austrian school of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that he called praxeology.

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