Socialism - A Study Guide and Reader - Online Library of Liberty PDF

24/04/2019 Socialism: A Study Guide and Reader - Online Library of Liberty
Online Library of Liberty A project of Liberty Fund, Inc.
A collection of scholarly works about individual liberty and free markets.
Socialism: A Study Guide and Reader
Louis Blanc vs. Karl Marx vs. GB Shaw vs. Vladimir Lenin vs.
Frédéric Bastiat Böhm-Bawerk Herbert Spencer Ludwig von Mises
Date: July 20, 2018

Revised: July 22, 2018
Introduction
This Study Guide examines the long-standing clash between Socialism and Marxism (S&M), and
Classical Liberalism (CL) over the past 200 years or so. It provides a brief history of the S&M
tradition, some of its main criticisms of the free market, the CL response to these criticisms,
extensive quotes from some of these texts, and links to them in the OLL collection.
Note: In October 2018 the OLL will be hosting a “Liberty Matters” online discussion of the work of
Karl Marx. /pages/liberty-matters.
For additional reading see the following groups of people and collections of texts:
Topic: Socialism and the Classical Liberal Critique

People: School of Thought: Socialism
Debate: Fabian Socialism vs. Radical Liberalism
https://oll.libertyfund.org/pages/socialism 1/65
See also:
the section of the OLL Reader dealing with Socialism: Part X: The Critique of Socialism and
Interventionism /pages/oll-reader#part10
a collection of Socialist Manifestos /pages/socialist-tracts (at the moment only GBS’s
Fabian Manifesto (1884) /pages/shaw-s-fabian-manifesto-1884.
a collection of Marx’s writings on economics (in HTML) in German /pages/marx-works
We will be selling “The Anti-S&M Reading Pak” at the YAL conference:
1. Bastiat, Collected Works, vol. 2

2. Mackay, A Plea for Liberty (1891)
3. Mises, Bureaucracy (1944)
4. Acton, The Illusion of the Epoch (1949)
5. Sirc DVD (2003)
I. Classical Liberalism vs. Socialism/Marxism: Critique and Counter-Critique

The Fundamental Antagonism between Classical Liberalism and Socialism/Marxism
The Changing Face of Socialism/Marxism
A Summary of the S&M Critique of the Free Market
A Summary of CL Criticisms of S&M
II. A Brief History of CL opposition to S&M
Introduction
French Socialism during the 1840s and 1850s
The Rise of Socialism in France
Frédéric Bastiat’s Anti-Socialist Pamphlets (1848–1850)
Gustave de Molinari
The Ambivalent Position of John Stuart Mill (1806–1873)
The Emergence of Organised Socialist Parties in Europe from 1860s to 1900
Socialist Parties
Key Works
German Socialism in the 1860s to the 1890s
The Work of Karl Marx
The CL Critique of German Socialism
Eugen von Böhm-Bawerk (1851–1914)
Eugen Richter (1838–1906)
English Socialism in the 1880s
George Bernard Shaw and the Fabian Society
The CL Critique of English/Fabian Socialism in the 1880s and 1890s
Thomas Mackay (1849–1912)
Wordsworth Donisthorpe (1847–1914) and Bruce Smith (1851–1937)
Auberon Herbert (1838–1906)
French Socialism from the 1880s to WW1
The Critique of Frédéric Passy (1822–1912)
The Critique of Yves Guyot (1843–1928)
Paul Leroy-Beaulieu (1843–1916)
War Socialism and Bolshevism in WW1 and the 1920s
Ludwig von Mises’s Critique of Central Planning under Communism

War Socialism, Interventionism, and Bureaucracy in WW2
Ludwig von Mises (again)
Friedrich Hayek on the Road to Serfdom
Post WW2 Communism
The Experience of Ljubo Sirc (1920–2016)
Revelations of the true Horrors of Communism
Revisiting the Systemic Economic problems of Communism in the 1980s and
1990s: Lavoie and Boettke
III. Modern Interpretations and Critiques of S&M
In the OLL Collection
H. B. Acton and John Passmore
Not in the OLL collection
Alexander Gray
Murray N. Rothbard
Richard Ebeling
David Prytchitko
I. Classical Liberalism vs. Socialism/Marxism: Critique

and Counter-Critique
The Fundamental Antagonism between Classical Liberalism and

Socialism/Marxism
There is a fundamental antagonism between Classical Liberalism and Socialism/Marxism

concerning many aspects of their social, political, and economic views.
CLs believe in individual liberty, free markets, voluntary exchange, the division of labour, laissez-
faire economic policies, free trade, limited government, property rights, and the rule of law. The
primary focus is on the individual who has the right to dispose of themselves and their property as
they see fit, without the intervention of government or other bodies, so long as they do not initiate
the use of force against other individuals and thereby violate their rights to life, liberty, and
property. If a government or other body takes an individual’s property or restricts their liberty,
that individual should have consented to this (either individually or through their elected
representative).
Socialists/Marxists on the other hand reject most of the above and believe that “society” (or the
“working class”, or “the nation”) should be the primary concern of the government, which should
have the power and the duty to remake or reform society in order to serve the needs of the
community (however they define it) rather than to allow individuals to pursue their own (“selfish”)
interests. They believe that the government or the people’s representatives have the right to use
“die Gewalt” (the force or power of the government) to override the interests of private individuals
in the name of “the people” or “the workers.”
In his “Critique of the Gotha Program” (1875) of the newly formed German Social Democratic
Party, Marx encapsulated the socialist program as
“Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen!” (to each according to their need, from
each according to their ability!).
In 1851 the French socialist Louis Blanc said much the same thing in Plus de Girondins (No More
Girondins!):
“De chacun selon ses facultés, à chacun selon ses besoins” (from each according to their capacity, to each
according tot their needs)
A CL or libertarian version might go something like:
“to each according to/with the consent of others, from each according to/with their own consent.”
Furthermore, socialists and Marxists believe that, if left “unchecked,” the fee market would lead
inevitably to inequality, an unjust distribution of profits and wealth, an increase in the number of
monopolies, and catastrophic economic recessions or depressions. Socialist differ on how best to
achieve their goals. Some advocate voluntary socialist experiments, others working within the
democratic parliamentary system to achieve incremental reforms, while others advocate the
violent revolutionary overthrow of the "capitalist” system and the seizure of power by a
“dictatorship of the proletariat.”
In spite of these stark differences, there are several areas in which CLs and S&Ms do agree, such as
the desire for peace between nation states, an end to exploitation of one class by another (they
differ of course on what a “class” and “exploitation” is), the use of economic resources for
productive activity which will benefit all people, and confidence that progress is possible if
impediments to it are removed.
The Changing Face of Socialism/Marxism
From the beginning of the emergence of socialist thinking and organisation in the early 19th
century up until the present, classical liberals, political economists, and radical individualists have
opposed the changing forms taken by socialism. These forms include the following:
1. voluntary socialist communities proposed by people such as Robert Owen and Charles
Fourier and whose followers set up model communities in the U.S. (e.g. New Harmony in
Indiana); property is communally owned and there is no wage labour or profit taking (also
known as “utopian socialism”); conceivably possible on a small scale with very committed
members;
2. the classic form of S&M, namely supposedly "temporary" state ownership of the means
of production under the control of a “dictatorship of the proletariat” (die Diktatur des
Proletariats) before a pure form of communism would eventually emerge (as advocated by
Marx in the Communist Manifesto (1848)) and when the state would "wither away"
(Engels); Lenin attempted to put this into practice after the Bolshevik Revolution of 1917
3. state socialism (Staatssozialismus, Socialisme d’état) - although Marx thought the state
would eventually “wither away” (absterben) after the workers had seized control of the
means of production there were some socialists in the late 19th century who advocated a
permanent form of state ownership of the means of production and distribution (such as
Ferdinand Lassalle and perhaps also Otto von Bismarck in Germany, and Claudio Jennet in
France)
4. war socialism (Kriegssozialismus) which emerged during WW1 to reorganize the German
economy in order to fight the war and which provided Lenin and the Bolsheviks with a
model for their own version of central planning under communism
5. national socialism which is a combination of vigorous nationalism and state intervention
and regulation of the economy in the name of the “nation” and “the people” (das Volk), in
contrast to late 19thC socialism which was supposed to be “internationalist” in its outlook
(working classes of all nations); the links between “fascism” and socialism are strong and
not commonly recognised; need to remember that Adolph Hitler headed the
“Nationalsozialistische Deutsche Arbeiterpartei” (NSDAP) (the National Socialist German
Workers Party, or Nazi Party) from 1920–1945
6. various forms of social democracy which allow considerable private property and
business activity but funds the social democratic agenda though heavy taxation and
regulation of the economy; state ownership of the economy’s “commanding heights”
(Lenin’s phrase from 1922) — heavy industry (e.g., steel), mining, railroads,
telecommunications, etc. This includes
1. the Fabian socialism (“labourism”, the Labour Party) which emerged in England in
the 1880s and 1890s
2. the socialist parties which emerged in western Europe before WW1 (the Social
Democratic Party of Germany)
3. the welfare state socialism which emerged in Europe and America after WW2;
comprehensive economic regulation by the administrative state (obviating the need
for nationalization of economic sectors) and government redistribution of wealth and
provision of Health, Education, and Welfare (HEW)
4. a new contemporary form of Green Socialism (The Greens) where the
“environment” has replaced “the workers” or the “nation state” or “the people” as the
reason for state regulation and intervention in the economy
7. Interventionism was a term coined by Ludwig von Mises to describe the kinds of
governments which emerged in the post-war period which were neither fully free market
nor fully socialist but a mixture of the two. The key feature was the extensive controls and
regulation (i.e. “intervention”) the government imposed on private economic activity in
order to achieve national or social goals. The intervention could be for social purposes - the
welfare state - or for national and military purposes - the warfare state. Thus the
modern American interventionist state might now be called a hybrid welfare-warfare
state.
A Summary of the S&M Critique of the Free Market
The socialists’s critique of free market and wage labour which emerged during the 1840s in
France, England, and Germany and continues to this day (in various versions), included the
following points. We have categorised them as follows:
economic criticism
moral and philosophical criticism
political criticism
Economic Criticism
1. the free market and bourgeois society is based upon private property - this is
unjust; it prevents others from accessing the resources they need to survive; it was originally
acquired by force (conquest, slavery)
2. wage labour leads to the “exploitation” of workers - according to the labour theory
of value (from Adam Smith and David Ricardo) labour was the main source of the creation
of value, workers were not given the full value of their labour, hence the profits going to the
owners were therefore "unearned”; profit comes from “surplus value” extracted from
workers, (“absolute SV” = longer working day; “relative SV” = more intense exploitation by
capital invested in production)
3. alienation of the workers (die Entfremdung) - wage labour (especially factory work)
“alienates” the workers from both the things they create and their full potential which is
realizable only under socialism, and leads to exploitation, overwork, boredom, injury;
workers demoralized by division of labour, being bought and sold as “mere commodities”;
the “fetish” of money
4. the injustice of profit, interest, and land rent - they are all “unearned” income from
surplus value extracted from workers
1. workers did not receive the full value of their labour in the wages they were paid, the
profits made by the “capitalist” or factory owner came at the expence of the workers,
thus the workplace had to be “re-orgnised” so that workers received the full value of
their labour
2. the interest charged on loans was unjust as the capitalist did no labour, thus the state
should abolish interest or strictly regulate it
3. rent from land was “a gift of the soil” and therefore rent was also “unearned” by the
land owner, thus it was unjust and should be eliminated or reduced, or land should be
redistributed to propertyless
5. competition has disastrous consequences for the workers; ruthless completion and
the pursuit of “profits” causes companies and individuals to behave like predators to their
own and society’s great harm - it leads to
competition between workers leading to decreasing wages for workers (to starvation level);
“the immiserisation of the workers”
increasing concentration of capital and domination of the economy by monopolies
periodic economic crises of “overproduction”
4. the immiserisation of the workers - there was an inevitable impoverishment of the

working class due to population pressure (Malthusianism) which led to unemployment in
the short term, starvation in the long term, and a tendency for wages to fall to substance
level “das eiserne und grausame Gesetz” (the iron hard and cruel law of wages) of Lassalle
5. the tendency towards the formation of monopolies - that inherent in the free
market system was the tendency of large firms to get even larger, to take over smaller firms,
reduce competition, and thus raise prices and exert greater control over labor
6. periodic economic crises were an inherent part of the unstable capitalist system which
suffered periodic crises (overproduction) which caused unemployment and misery for the
workers; the political economists were “heartless” in not guaranteeing workers jobs
(especially during economic recessions) and state-welfare for the poor, sick, and old
7. the emergence of international capitalism leads to “free trade”, global competition,
and the destruction of national industry and domestic unemployment; increasing
international rivalry leads to imperialism and war between the capitalist powers (Lenin’s
theory of Imperialism as “highest stage of capitalism”)
Moral and Philosophical Criticism
1. increasing inequality - the free market and wage labour leads to increasing inequality
among individuals
2. the heartlessness of capitalism and selfish individualism - as a result of the pursuit
of profit and selfish individualism, the weak, the sick, and the old are left to die
3. the destruction of community - the pursuit of individual self-interest (“individualism”)
destroys the fabric of society and community
Political Criticism
1. the growing power and wealth of the “capitalist class” (the bourgeoisie) - this
included both political and economic power; the working class was excluded from politics
and decision-making; the courts, police, and army served the needs of the ruling class; all
opposition or criticism is crushed (censorship)
2. the unequal relationship between employers and labor - that given their size,
power, and control over capital, employers faced labor in a very unequal relationship
concerning bargaining power over conditions and wages; therefore workers had to organise
themselves so they could bargain for better conditions in the work place (trade unions) and
lobby government for legislation to improve the condition of the working class (labour
party, socialist party)
3. the traditional “nuclear family” perpetuates bourgeois thought and behaviour; it needs
to be replaced by state run institutions in order to inculcate more socially responsible
behaviour and allow the full potential of all individuals (not just the wealthy) to develop
A Summary of CL Criticisms of S&M
The following is a list of some common arguments used by economists and CLs against their
socialist critics. The economists argued that the socialists ignored or misunderstood the following
problems which have been organised into the following categories (some of which are theoretical
and others historical):
1. economic arguments
2. moral and philosophical arguments
3. political arguments
4. sociological/historical arguments
Economic Arguments
1. the myth of the labour theory of value - the amount of labour needed to make
something has nothing to do with its “value” to the end consumer (labour can be wasted in
making things people do not want; individuals subjectively value things according to their
time, circumstance, and place); there are some things of value that no human labour has
gone into creating (diamonds)
2. the scarcity problem - S&Ms assume away the key economic problem, that is that
resources are scarce, that here are multiple uses for these scarce resources, and that
resources have to be found, created, exchanged, and put to their most productive use. Since
S&Ms believed that capitalism was inherently wasteful, once it had been abolished or
drastically reformed there would be abundance for all. The problem of scarcity would simply
disappear.
3. the price problem - changing prices tell people about relative scarcities, the intensity of
supply and demand, changing consumer preferences, etc; without free market prices
(especially for capital goods) the cannot be rational economic planning (Mises on “planned
chaos)
4. both parties benefit from exchange - exchange (goods, services, labour) is not a zero
sum game; both sides benefit if voluntary; there is no “class struggle” between the
bourgeoisie and the proletariat: nobody is exploited in a voluntary exchange
5. the incentive problem - S&Ms do not recognize the importance of incentives and
disincentives in human behaviour. A common slogan was “from each according to his
ability; to each according to his need” (Louis Blanc and Karl Marx), with the idea of the
payment of equal wages for any work done. S&Ms have a mistaken view of the role of
“profit” (and losses) in economic decision-making; profit is not exploitation but
incentive/reward for satisfying consumer needs; key indicator that resources are being used
efficiently; losses indicate opposite
1. communally organised living and working arrangements destroy incentives for
individuals to work hard (or harder than anyone else) since all profits go to the
community (society) to be equally distributed
2. there is also no incentive for businesses to economise on their use of scarce (and
hence expensive) resources (since there are no free market prices, or profits to gain
and losses to avoid)
3. without secure property rights there is no guarantee that an individual can keep what
they have earned; anything can be taken by “society” and be given to someone else
deemed more “deserving” or “needy”
6. the division of labour problem - massively increases productivity of labour; the myth of
the “alienation of labour” in factories (compared to what?)
1. people with key skills (managerial, financial, technical, organisational,
entrepreneurial) need to be paid for their extra contribution to the productive
process;
2. not all labour is “equal” in value and needs to be compensated accordingly
7. the risk problem - one of the functions of the entrepreneur is to asses and assume the risk
in starting and running an enterprise. Marx has no understanding of the important role
played by the entrepreneur in taking risks and organizing all the factors of production in
order to anticipate consumer demand for goods and services
1. all economic activity involves risks (loss, miscalculation, natural disaster) which
needs to be rewarded;
2. business owners in particular advance money to their employees before final sales are
made and if they have miscalculated consumer demand they will make losses
8. the human action - socialists deny the fact that humans choose from the alternatives
before them and take action to achieve their goals; that they prioritize their choices given
the fact of their scarce time and resources; and attempt to balance the costs of benefits of
their acts and choices
9. the problem of ignoring economic laws -
1. socialists ignore the fact that the economy (i.e. human behaviour) is governed by
economic laws (such as law of supply and demand) which cannot be ignored or
wished away either by well meaning people or by economic predators;
2. the problem of “scarcity”, that resources have competing uses and that there are
“opportunity costs’ for every economic choice which is made
10. the accumulation of capital problem - Marxists believe that capital can only be
accumulated in two ways, by seizing the “surplus value” created by workers’ labour or by
plundering others by outright theft or enslavement. They have no concept of the role played
by saving from current consumption in order to set aside money and/or goods for future
productive use (also the concept of the preference)
11. the economy (“capitalism”) does not run itself - businesses have to adjust everyday
to changing consumer demand, changing (relative) prices, technological change, natural
disasters, etc.
1. Marx seemed to think that once capitalism had reached a certain stage in its
development (size of industries, technological sophistication) it could have its
exploiting “capitalist” class of owners and mangers “removed” (i.e. dispossessed),
replaced by the workers or their “representatives,” and that industries would continue
to function in much the same way producing wealth, which would now be diverted to
the workers.
2. Welfare state socialists similarly believe that capitalists will continue to produce
wealth in spite of disincentives to do so (high taxes, stifling regulation, labour
regulations).
3. Thomas Piketty has a similar view about how wealth (capital) tends to grow
automatically over time without the need for entrepreneurial supervision. Very naive
view about how industry works. Schumpeter’s idea of creative destruction; constant
change brought about by changing consumer tastes, technological change/innovation
12. ignoring the role consumers play - there is no place for consumers in the socialist
economy. In a free market consumer demand is what drives entrepreneurs to take risks,
invest their money, and seek profits in satisfying that demand. In many ways, the future
socialist economy is unchanging and has no need to satisfy consumer demand (changing or
otherwise).
13. the myth of the crisis of over-production - periodic crises (the business cycle) are
caused by governments inflating the money supply and distorting investment of capital, not
something which is inherent in the free market system
14. ignoring the importance of ideas - Marx’s theory of “historical materialism” ignores
the important role played by ideas; he believed that ideas were part of the "superstructure"
of society which was based upon and hence "determined" by the "means of production"
which any given society depended upon for wealth creation. In fact the ideas people hold
determine what they consider to be their "material interests” (Mises) and how they rank
their preferences concerning how different goods and services will satisfy their needs and
interests.
Moral and Philosophical Arguments
1. the private ownership of property is one of the foundation stones of individual

liberty - all individuals have a right to “self-ownership*, i.e. the right to their own person
(body) and to use it as they see fit (i.e. their “labour”) so long as they respect the equal right
of others to this as well; thus workers are “traders” or “merchants” of their own labour
(Molinari); individuals also have a right to own the things they have created and to
trade/exchange these with others (subject to any contracts they may have entered into with
others, and the justly aquired property of others).
2. the individual liberty problem - Marx was attracted to the idea of “Gewalt” (power,
force, coercion by the state) and the “dictatorship of the proletariat” for S&Ms to achieve
their goals:
1. socialists envisaged that the new communal institutions would be organised like an
army or a government bureaucracy which implies hierarchical structures, command
from above, communal eating and sleeping arrangements; all of which would violate
individual choice and liberty
2. the injustice of expropriation: to create a socialist system existing justly owned
property has to be confiscated and given to the new communally organised groups
3. under central planning workers have to be allocated to particular occupations and
locations according to social and economic needs by the planning agency
4. in order to prevent the perpetuation of “bourgeois” or “individualist” modes of
thinking and behaviour, the state needs to educate all children in new ways of
“socialist” thinking and behaviour in state run schools
3. the human nature problem:
1. socialists assumed human nature is not fixed but malleable, that it is possible to
create a "new socialist man";
2. economists believed humans were social and cooperative but not communist, that
they have strong ties to the family and local communities which are (can be) more
powerful than their ties to the “collective” (social class); that they were self-interested
(broadly understood) and not willing to sacrifice their interests to the community's;
3. humans have vastly different tastes, preferences, skills, and interests which the free
market can cater to
4. they cannot be made in a “new socialist man” by coercion
4. inequality in wealth is not immoral i - the problem is how that wealth was acquired
(justly or unjustly); mutually beneficial exchange between individuals who have acquired
their property justly is not immoral or unjust and the outcomes of such exchanges, if they
result in “unequal” results, are likewise not immoral or unjust
5. voluntary vs. coerced forms of community (fraternity) - “True” (or natural)
community comes from voluntary cooperation with others, productive activity, and
exchanging with others the fruit of this activity. “False” (or artificial) community (fraternity)
is the result of coercion and government (central) planning. (Bastiat)
6. who exploits who? - “capitalists” do not exploit the workers or the consumers unless they
have access to state power to gain privileges at consumers/taxpayers expence (crony
capitalism, plutocracy (Sumner)); the injustice of expropriation/regulation by the
state/party
Political Arguments
1. the “public choice” problem - government officials, party members, and state-
appointed factory “managers” are not disinterested parties but have own their own personal
and “selfish” agendas which they pursue (power over others, promotion within the
bureaucracy, and other political rewards)
2. the class problem - a socialist/communist society is not (and never has been) a classless
society; whoever controls the reins of power and uses it to their own advantage are the new
“ruling class” of exploiters; Marx’s inability to predict the existence of class rule in
communists society (managers, party bosses, charismatic leaders, secret police, the
military) is a fundamental flaw in his thinking; many CLs also had their own theory of class,
class exploitation, and class rule which was based upon who had access to the power of the
state which they could use to get benefits for themselves at ordinary tax-payer and
consumer expense.
3. who is the real “utopian”? - Marx denounced French socialists like Fourier and
Considerant for being “utopian” and considered that since he had discovered the “laws of
capitalist development” his version of socialism was therefore “scientific. But since neither
he, Engels, or Lenin ever explained in any detail what a future socialist/communist society
would look like and how it would function they were in the the real “utopians”.
Historical Arguments
In addition to the above listed theoretical problems in socialism there are a number of historical
facts which undermine the socialist position:
1. the laws of history identified by Marx which would force capitalism to inevitably evolve
into a “higher stage” of socialism are not true; the myth of the inevitable progress through
stages from feudalism, capitalism, to communism; falsified by communism not happening
in Germany but peasant Russia. Marx’s “scientific laws” of capitalism included the
following:
1. The “Law of Capitalist Accumulation” - investing in capital to increase productivity
will lead to a falling rate of profit
2. the “Law of the Concentration of Capital” - brutal competition will force many
capitalists out of business and concentrate capital in fewer and fewer hands
3. the “Law of Increasing Misery” - as capital and machinery replaces human workers
they will be forced into unemployment and poverty
2. the spread of free markets has not led to the “immiseration of the workers” but the contrary,
what McCloskey has called the “Great Enrichment”
3. the spread of free markets has not led to the creation of more and more monopolies, but the
contrary - the constant “creative destruction” (Schumpeter) of old firms and the
creation of new ones; the extraordinary turnover among successful corporations over
decades (Fortune 500 (Dan Mitchell and Don Boudreaux)) disproves Picketty’s thesis;
monopolies only exist because of government privileges and the lack of competition (free
entry into industry)
4. as the wealth of ordinary workers has increased they have become capitalists in their own
right through retirement investments
5. in countries where socialism has been tried or where extensive welfare programs has been
created there has not been any withering away of the state (“das Absterben des Staates”
- Engels 1878) or the disappearance or “abolition” of classes, rather there has been the
creation of a new kind of class rule by senior party members, bureaucrats and managers,
and the military
6. the failure of communism to provide prosperity to ordinary people - Communism
failed miserably in the 20thC to provide their citizens with the basic comforts of life. Their
economies, although (or rather because) they were “centrally planned,” suffered from
shortages of consumer goods (especially food), lack of innovation, and heavy pollution of
the environment.
7. the failure of welfare states to be economically sustainable in the long run, especially as
their populations age. They suffer from bloated and inefficient bureaucracies, inefficient
services, high levels of unionization of the public sector (susceptible to strikes - e.g. public
transport), high levels of taxation, high unemployment (especially youth), and high levels of
debt. They have created a virtually permanent class of welfare recipients who find it hard to
escape their situation.
8. time and time again it has been shown by historical experience that individuals (whether
"producers" or "consumers", or "bureaucrats" and "politicians" do respond to the
incentives and disincentives they face, whether these be material, financial,
intellectual, or "spiritual."
9. ignoring the actual choices faced by workers - in the early phase of industrialisation,
as contemporaries noted at the time, conditions in the factories could be harsh (see Engels’s
book on The Condition of the Working Class in England (1845)) with long hours and poor
working conditions.
1. Critics need to ask themselves what alternatives these immigrants from rural areas
faced when they decided to move to the city in search of work in the factories: did
they consider the move to be in their interest; were their alternatives (such as staying
put) worse;
2. Economists argue that their “demonstrated preference” was that they thought they
would be (and often were) better off working in a factory in a city that working in
agriculture (seasonal, low paid, physically hard). See Ben Powell’s work on
“sweatshops” in industrializing countries today.
3. what other reasons might there be to explain their poverty? The latter concerned
several French political economists such as Charles Dunoyer, Gustave de Molinari,
and Bastiat who argued that many regulations and taxes imposed by the state
hindered the free movement of people, the number of careers/jobs that were available
to poor people, and raised the cost of food and accommodation.
II. A Brief History of CL opposition to S&M
Introduction
Modern socialism emerged in the 1830s and 1840s in France and England at a time when classical
liberalism was beginning to have an impact with reforms such as the First Electoral Reform Act of
1832 and the success of the Anti-Corn Law League (1846). The spread of socialist ideas before and
during the revolutions of 1848 meant that classical liberals increasingly had to turn their attention
to combatting calls for government intervention in the economy from the “Left” as Frederic Bastiat
did in the last few years of his life.
As classical liberalism began to decline in the late 19th century it fell to a handful of radical
individualists like Thomas Mackay and Herbert Spencer to oppose the gradualist, Fabian school of
socialism in Britain, and to strict laissez-faire advocates like Eugen Richter in the German
parliament to oppose the growing influence of the Social Democratic Party (i.e. a Marxist party). It
was only after the rise of the Bolsheviks to power in Russia after the First World War that the most
coherent and devastating critique of socialism appeared in the work of Ludwig von Mises and later
in that of Friedrich Hayek.
We can thus identify four broad historical periods when socialism and CL clashed:
1. 1840s France when organised socialism first made an appearance in the 1848 Revolution
2. 1870s, 1880s and 1890s in western Europe when organised socialist parties began to
emerge
3. 1920s and 1930s: when Mises first exposed the serious economic weaknesses in
Marxist/Bolshevik central planning
4. 1980s and 1990s: a new younger generation of Austrian economists (Don Lavoie and Peter
Boettke) examined weakness of planned economies on the eve of their collapse
Many of the works we have in the OLL collection were written to oppose the different forms of
socialism which were being advocated at these times. In addition, we also have a number of
socialist works online in order to better understand the intellectual and political context of these
debates.
French Socialism during the 1840s and 1850s
The Rise of Socialism in France
Louis Blanc (1811–1882)
The decades between 1830–1860 were a key period in the development of political ideology when
CL began to form as a distinct “worldview” which applied basic ideas about individual liberty,
private property, free markets, limited government to a full range of problems (economic, political,
social). The culmination of this was the formation of the Liberal Party in England in 1859.
The 1830s and 1840s were also a key period in the development of socialism as a distinct
“worldview” and French socialists played a very important part in this, such as the following
individuals and texts:
the utopian socialism of Charles Fourier and Victor Considerant

Charles Fourier, Le Nouveau monde industriel et sociétaire (1829–30)
Victor Considerant, Droit de propriété et du droit au travail (1848)
the electoral or political socialism of Louis Blanc (“socialism from below”)
Louis Blanc, Organisation du travail. Association universelle. Ouvriers (1841)
Louis Blanc, Le Socialisme. Droit au travail, réponse à M. Thiers (1848)
the anarchist socialism of Proudhon (1809–1865)
Proudhon, Qu’est-ce que la propriété? ou Recherches sur le principe du Droit et du
Gouvernement (1840)
Proudhon, Système des contradictions économiques, ou philosophy de la misère

(1846)
Pierre Joseph Proudhon, Le droit au travail et le droit de propriété (1850)
the revolutionary and so-called “scientific” socialism of Karl Marx (1818–1883) who lived
and worked in Paris 1843–45, Brussels 1845–48 (where he attended a meeting of the free
market Congress of Economists in 1847 to deliver a speech critical of free trade), and Paris
1848–49
Economic and Philosophic Manuscripts of 1844 (The Paris Manuscripts) written
while he was living in Paris
Wage Labour and Capital (1847)
Undelivered speech in Brussels to the Congress of Economists attacking free trade,
“The Protectionists, the Free Traders and the Working Class” (16 and 18 September
1847)
Manifesto of the Communist Party (1848) presented to the German Workers
Association in Paris in February 1848
these early writings would be consolidated into his more mature works such as
Grundrisse (Sketch of a Criticism of Political Economy (1857); A Contribution to the
Critique of Political Economy (1859); and Capital, Vol. I (Das Kapital) (1867)
the bureaucratic or state socialism of Napoleon III ("socialism from above”), which was later
continued under Otto von Bismarck in the Second German Reich (1871–1918) between
1883–89 when the foundations of the modern welfare state were laid down
Louis Napoléon Bonaparte had been influenced by the socialist ideas of Saint-Simon
as he shows in his books Des idées napoléoniennes ( 1839) and L’Extinction du
paupérisme (1844).
What is important for our purposes here is that is was during this period that the basic socialist
criticisms of the free market were first expressed at some length and with some coherence, and
solutions proposed (usually involving state ownership, regulation or economic activity, and
transfer payments to the poor and unemployed) which would remain essentially the same for the
next hundred years or so.
The French socialists had an opportunity in the early months of the February Revolution of 1848
to put some of their ideas into practice with the National Workshops scheme run by Louis Blanc.
This was the first attempt to create a modern welfare state, and was the precursor of what would
emerge after WW2 in western Europe, UK, and later USA. The idea was for the state to provide
tax-payer funded employment for those who were out of work as the first step towards a universal
state-guaranteed "right to a job” (droit au travail), a measure which they also tried to make part of
the new French constitution which was debated over the summer of 1848.
This is how Louis Blanc in 1841 conceived the role of government in running the “ateliers sociaux”
(social workshops) which would replace private firms operating in a free market and which he
attempted to put into practice in 1848:
Le gouvernement serait considéré comme le régulateur The government ought to be considered as the supreme
suprême de la production, et investi, pour accomplir sa regulator of production, and ought to be invested with
tâche, d’une grande force. great coercive powers in order to carry out its task.
Cette tâche consisterait à se servir de l’arme même de la This task would entail using the weapon of competition
concurrence, pour faire disparaître, la concurrence. itself in order to make competition disappear.
Le gouvernement lèverait un emprunt, dont le produit The government would raise a loan the proceeds of
serait affecté à la création d’ateliers sociaux dans les which would be used to create social workshops in the
branches les plus importantes de l’industrie nationale. most important sectors of national industry.
Cette création exigeant une mise de fonds considérable, This creation (of workshops) would require the
le nombre des ateliers originaires serait rigoureusement investment of considerable funds and the number of of
circonscrit; mais, en vertu de [103] leur organisation workshops would at first be strictly limited; but in virtue
même, comme on le verra plus bas, ils seraient doués of the fact of their very organisation, as one will see
d’une force d’expansion immense. below, they would be endowed with a huge power of
Le gouvernement étant considéré comme le fondateur expansion.
unique des ateliers sociaux, ce serait lui qui rédigerait Since the government would be considered to be the
les statuts. Cette rédaction, délibérée et votée par la sole founder of these social workshops,it would be it
représentation nationale, aurait forme et puissance de (the government) which would draw up the statutes.
loi. This document, deliberated and voted upon by the
Seraient appelés à travailler dans les ateliers sociaux, national representative body would have the form and
jusqu’à concurrence du capital primitivement rassemblé power of the law.
pour l’achat des instruments de travail, tous les ouvriers All workers who could offer guarantees of their moral
qui offriraient des garanties de moralité. (uprightness) would be called upon to work in the social
workshops, until (enough) primitive capital had been
gathered to purchase the tools of work.
Source: “Conclusion. De quelle manière on pourrait, selon nous, organiser le travail” in Louis
Blanc, Organisation du travail. Association universelle. Ouvriers. - Chefs d’ateliers. - Hommes de
lettres. (Paris: Administration de librairie, 1841. First edition 1839), pp. 76–93.
In the same year of 1848 Karl Marx was in Paris when the revolution broke out, distributing copies
of his newly written Communist Manifesto to a group of German workers who lived in Paris. Here
is his list of reforms he wanted to see introduced in order to begin building a communist society:
Diese Maaßregeln werden natürlich je nach den These measures will, of course, be different in different
verschiedenen Ländern verschieden sein. countries.
Für die fortgeschrittensten Länder werden jedoch die Nevertheless, in most advanced countries, the following
folgenden ziemlich allgemein in Anwendung will be pretty generally applicable.
kommen können: 1 Abolition of property in land and application of all
1) Expropriation des Grundeigenthums und rents of land to public purposes.
Verwendung der Grundrente zu Staatsausgaben. 2 A heavy progressive or graduated income tax.
2) Starke Progressiv-Steuer. 3 Abolition of all rights of inheritance.
3) Abschaffung des Erbrechts. 4 Confiscation of the property of all emigrants and
4) Konfiskation des Eigenthums aller Emigranten rebels.
und Rebellen. 5 Centralisation of credit in the hands of the state, by
5) Centralisation des Kredits in den Händen des Staats means of a national bank with State capital and an
durch eine Nationalbank mit Staatskapital und exclusive monopoly.
ausschließlichem Monopol. 6 Centralisation of the means of communication and
6) Centralisation alles Transportwesens in den Händen transport in the hands of the State.
des Staats. 7 Extension of factories and instruments of production
7) Vermehrung der Nationalfabriken, Produktions- owned by the State; the bringing into cultivation of
Instrumente, Urbarmachung und Verbesserung der waste-lands, and the improvement of the soil generally
Ländereien nach einem gemeinschaftlichen Plan. in accordance with a common plan.
8) Gleicher Arbeitszwang für Alle, Errichtung 8 Equal liability of all to work. Establishment of
industrieller Armeen besonders für den Ackerbau. industrial armies, especially for agriculture.
9) Vereinigung des Betriebs von Ackerbau und 9 Combination of agriculture with manufacturing
Industrie, Hinwirken auf die allmählige Beseitigung des industries; gradual abolition of all the distinction
Gegensatzes von Stadt und Land. between town and country by a more equable
10) Oeffentliche und unentgeltliche Erziehung aller distribution of the populace over the country.
Kinder. Beseitigung der Fabrikarbeit der Kinder in ihrer 10 Free education for all children in public schools.
heutigen Form. Vereinigung der Erziehung mit der Abolition of children’s factory labour in its present form.
materiellen Produktion u. s. w., u. s. w. Combination of education with industrial production,
&c, &c.
Source: Marx und Engels, “Manifest der Kommunistischen Partei” (1848) /pages/marx-
manifest#Maaßregeln.
Source: Manifesto of the Communist Party. By Karl Marx and Frederick Engels. Authorized
English translation: Edited and Annotated by Frederick Engels (Chicago: Charles H. Kerr &
Company, 1888, 1910) in PDF < /titles/2753 > and /pages/marx-manifesto#measures.
The French economists and classical liberals responded to the socialist critique throughout the
1840s and early 1850s with the following works:
Charles Dunoyer, La Liberté du travail (1845): literally on “the liberty of working” as

opposed to the socialist notion of “the right to work (or to a job)”
F. Bastiat, Economic Sophisms I (1846) and II (1848)
Adolphe Thiers, De la propriété (1848)
Léon Faucher, Du droit au travail (1848)
Michel Chevalier, Lettres sur l’Organisation du travail (1848)
Frédéric Bastiat’s series of 12 anti-socialist pamphlets (1848–1850)

Molinari, Les Soirées de la rue Saint-Lazare (1849)
Bastiat and Proudhon, Gratuité du crédit (Oct. 1849 - Feb. 1850)
Dictionnaire de l’économie politique (1852–53): many articles on socialism and socialist
theorists
Frédéric Bastiat’s Anti-Socialist Pamphlets (1848–1850)
Frédéric Bastiat (1801–1850)
Frédéric Bastiat (1801–1850) was one of the leading advocates of free markets and free trade in
the mid–19 century. He was inspired by the activities of Richard Cobden and the organization of
the Anti-Corn Law League in Britain in the 1840s and tried to mimic their success in France.
Bastiat was an elected member of various French political bodies and opposed both protection and
the rise of socialist ideas in these forums. His writings for a broader audience were very popular
and were quickly translated and republished in the U.S. and throughout Europe. His incomplete
magnum opus, Economic Harmonies, is full of insights into the operation of the market and is still
of great interest to economists. He died at a young age from cancer of the throat.
In his brilliant Economic Sophisms (1845–50) Bastiat focussed mainly on debunking protectionist
fallacies and sophisms but he also occasionally referred to the socialists of his day. After the
February Revolution of 1848 he turned his attention to the socialists and over a period of two years
wrote over 12 major anti-socialist pamphlets in order to directly refute their ideas. In a very
comprehensive critique of socialist ideas over the previous one hundred years Bastiat addressed
the criticisms of Rousseau, Robespierre and several other 18th century thinkers, along with his
contemporaries Charles Fourrier, Pierre Leroux, Louis Blanc, Victor Considerant, Proudhon, and
Alexandre Ledru-Rollin.
1. “Property and Law” (15 May 1848) in CW2, pp. 43–59 - directed at Louis Blanc and
critiques of property in general /titles/2450#lf1573-02_label_134
2. “Justice and Fraternity” (15 June 1848) in CW2, pp. 60–81 - directed against Pierre Leroux
/titles/2450#lf1573-02_label_153
3. “Individualism and Fraternity” (June 1848), in CW2, pp. 82–92 - directed against Blanc and
the Montagnard socialist faction /titles/2450#lf1573-02_label_171
4. “Property and Plunder” (24 July 1848, in CW2, pp. 147–184 - directed against Blanc,
Considerant, Proudhon /titles/2450#lf1573-02_label_218
5. “The State” (June 1848, September 1848, and c. July 1849), in CW2, pp. 105–6, 93–104 -
directed against the radical socialist Montagnard faction /titles/2450#lf1573-02_label_183.
See the revised translation with additional notes about the socialists FB was attacking
/pages/state-lf.
6. “Protectionism and Communism” (January 1849), in CW2, pp. 235–65 - directed at the
conservative protectionist Mimerel committee accusing them of adopting “communist”
policies to protect their interests /titles/2450#lf1573-02_label_308
7. Capital and Rent (February 1849) , in CW4 (forthcoming) - directed at Proudhon
8. “Damned Money” (April 1849), in CW4 (forthcoming) - directed at general misperceptions
about nature of money, especially socialists who wanted the state to provide “free credit” to
workers
9. Free Credit. A Discussion between M. Fr. Bastiat and M. Proudhon (Oct. 1849 - Feb. 1850),
in CW4 (forthcoming) - directed again at Proudhon
10. “Private Property and Communal Property” Chap. VIII of Harmonies économiques (written
mid 1849 and published in first edition of EH in Jan. 1850), in CW5 (forthcoming) - a direct
appeal to socialists by FB, explicitly mentions Proudhon’s maxim “propriété, c’est le vol”
(property is theft)
11. “Baccalaureate and Socialism” (early 1850), in CW2, pp. 185–234 - to oppose a bill before
the Chamber in early 1850 on education reform which was supported by Thiers, argued that
studying the classics encouraged a belief in socialist ideas /titles/2450#lf1573-
02_label_246
12. “Plunder and Law” (May 1850), in CW2, pp. 266–76 - against Louis Blanc and the
Luxembourg Commission /titles/2450#lf1573-02_label_331
13. The Law (July 1850), in CW2, pp. 107–46 - against Louis Blanc and his 18th century
predecessors /titles/2450#lf1573-02_label_197. See the revised translation with additional
notes about the socialists FB was attacking /pages/bastiat-the-law-revised-lf-edition.
14. Ce qu’on voit et ce qu’on ne voit pas (July 1850), in CW3, pp. 401–52 - directed against all
those who misunderstood the operation of the free market /titles/956#lf0181_label_033
The following quotes comes from Bastiat’s essay “Individualism and Fraternity” (June 1848) in
which he attacks Louis Blanc and the Montagnard group of socialists:
Aussi, quand ils arrivent à proposer quelque chose qui For this reason, when they (the socialists) come to
ressemble à de la pratique, on les voit toujours diviser propose something which appears to be practical, we
l’humanité en deux parts. D’un côté l’État, le pouvoir always see them dividing humanity into two parts: on
dirigeant, qu’ils supposent infaillible, impeccable, dénué the one hand, the state, the ruling power which they
de tout sentiment de personnalité ; de l’autre le peuple, take to be infallible, impeccable, and free from any
n’ayant plus besoin de prévoyance ni de garanties. egoistic character; on the other, the people who no
Pour réaliser leurs plans, ils sont réduits à confier la longer need plans for the future or any guarantees as to
direction du monde à une puissance prise, pour ainsi their security.
dire, en dehors de l’humanité. Ils inventent un mot : To carry out their plans, they are reduced to entrusting
l’État. Ils supposent que l’État est un être existant par the ruling of the world to a power that is drawn, so to
lui-même, possédant des richesses inépuisables, speak, from outside humanity. They invent a word: the
indépendantes de celles de la société ; qu’au moyen de state. They suppose that the state is a being that exists
ces richesses, l’État peut fournir du travail à tous, in itself, that possesses an inexhaustible amount of
assurer l’existence de tous. Ils ne prennent pas garde wealth independent from society’s wealth, and that by
que l’État ne peut jamais que rendre à la société des means of this wealth the state can provide work for
biens qu’il a commencé par lui prendre ; qu’il ne peut everyone and ensure everyone’s existence. They take no
même lui en rendre qu’une partie ; que de plus l’État est heed of the fact that the state can only give back to
composé d’hommes, et que ces hommes portent aussi en society goods that it started off taking from it, and that it
eux-mêmes le sentiment de la personnalité, enclin chez can actually give back only a part of these; nor
eux, comme chez les gouvernés, à dégénérer en abus ; furthermore, that the state is made up of men endowed
qu’une des plus grandes tentations pour que la with the sense of self, which in them just as in those
personnalité d’un homme froisse celle de ses being governed is inclined to degenerate into abuse; nor
semblables, c’est que cet homme soit puissant, en that one of the greatest temptations enticing one
mesure de vaincre les résistances. Les socialistes, à la personality to offend others occurs when the man
vérité, espèrent sans doute, quoiqu’ils ne s’expliquent concerned is powerful and able to overcome resistance.
guère à ce sujet, que l’État sera soutenu par des In truth, although they have never expressed many
institutions, par les lumières, la prévoyance, la views on this subject, the socialists probably hope that
surveillance assidue et sévère des masses. Mais, s’il en the state will be supported by institutions, by education,
est ainsi, il faut que ces masses soient éclairées et by foresight, and by close and severe supervision of the
prévoyantes ; et le système que j’examine tend masses. However, if this is to be so, the masses have to
précisément à détruire la prévoyance dans les masses, be enlightened and farsighted, and the system of
puisqu’il charge l’État de pourvoir à toutes les governance that I am examining tends precisely to
nécessités, de combattre tous les obstacles, de prévoir destroy the foresight of the masses since it makes the
pour tout le monde. state responsible for supplying all necessities,
combating all obstacles, and providing for everyone.
Source: Frédéric Bastiat, The Collected Works of Frédéric Bastiat. Vol. 2: The Law, The State, and
Other Political Writings, 1843–1850 (2012). /titles/2450#Bastiat_1573-02_631.
In one of the last things Bastiat wrote, “The Law” (June 1850) , he attacks socialism more
extensively as the following quotes indicate:
Or, remarquons-le bien : organiser la Justice par la Loi, Well, we should note this clearly: to organize justice by
c’est-à-dire par la Force, exclut l’idée d’organiser par la (means of the) law, that is to say, by (the use of coercive)
Loi ou par la Force une manifestation quelconque de force, excludes the idea of organizing by law or by (the
l’activité humaine : Travail, Charité, Agriculture, use of) force any expression of human activity: (such as)
Commerce, Industrie, Instruction, Beaux-Arts, labor, charity, agriculture, trade, industry, education,
Religion ; car il n’est pas possible qu’une de ces the fine arts, or religion, for it is impossible for any of
organisations secondaires n’anéantisse l’organisation these secondary organizations (organised by force in
essentielle. Comment imaginer, en effet, la Force this way) not to destroy the (primary and) essential
entreprenant sur la Liberté des citoyens, sans porter organization (which is society itself). In effect, how can
atteinte à la Justice, sans agir contre son propre but ? we imagine (the use of) force impinging on the freedom
Ici je me heurte au plus populaire des préjugés de notre of citizens without undermining justice or acting against
époque. On ne veut pas seulement que la Loi soit juste ; its own purpose?
on veut encore qu’elle soit philanthropique. On ne se Here I am coming up against the most popular
contente pas qu’elle garantisse à chaque citoyen le libre preconception of our age. Not only do we want the law
et inoffensif exercice de ses facultés, appliquées à son to be just, we also want it to be philanthropic. We are
développement physique, intellectuel et moral ; on exige not content for it to guarantee each citizen the free and
d’elle qu’elle répande directement sur la nation le bien- harmless exercise of his faculties as they apply to his
être, l’instruction et la moralité. C’est le côté séduisant physical, intellectual, and moral development; we
du Socialisme. require it to spread well-being, education, and morality
directly across the nation. This is the seductive side of
socialism.
And:
Au bout de ses systèmes et de ses efforts, il semble que For all its theories about systems and (all) its efforts it
le Socialisme, quelque complaisance qu’il ait pour lui- appears that socialism, however indulgent it is toward
même, ne puisse s’empêcher d’apercevoir le monstre de itself, cannot avoid catching a glimpse of the monster
la Spoliation légale. Mais que fait-il ? Il le déguise which is legal plunder. But what does it do? It cleverly
habilement à tous les yeux, même aux siens, sous les shrouds it from all eyes, even its own, under the
noms séducteurs de Fraternité, Solidarité, Organisation, seductive names of fraternity, solidarity, organization,
Association. Et parce que nous ne demandons pas tant à and association.64 And because we do not ask so much
la Loi, parce que nous n’exigeons d’elle que Justice, il of the law since we require only justice from it,
suppose que nous repoussons la fraternité, la solidarité, (socialism) presumes that we are rejecting fraternity,
l’organisation, l’association, et nous jette à la face solidarity, organization, and association and hurls the
l’épithète d’individualistes. epithet “Individualist!” at us.
Qu’il sache donc que ce que nous repoussons, ce n’est It ought to know, therefore, that what we are rejecting is
pas l’organisation naturelle, mais l’organisation forcée. not natural organization, but coerced organization.
Ce n’est pas l’association libre, mais les formes It is not free association, but the forms of association
d’association qu’il prétend nous imposer. that it wants to impose on us.
Ce n’est pas la fraternité spontanée, mais la fraternité It is not spontaneous fraternity, but legally (imposed)
légale. fraternity.
Ce n’est pas la solidarité providentielle, mais la It is not providential solidarity, but artificial solidarity,
solidarité artificielle, qui n’est qu’un déplacement which is only an unjust displacement of responsibility.
injustede Responsabilité. Socialism, like the old politics from which it stems,
Le Socialisme, comme la vieille politique d’où il émane, confuses government with society. For this reason, each
confond le Gouvernement et la Société. C’est pourquoi, time we do not want something to be done by the
chaque fois que nous ne voulons pas qu’une chose soit government, it concludes that we do not want this thing
faite par le Gouvernement, il en conclut que nous ne to be done at all. We reject education by the state;
voulons pas que cette chose soit faite du tout. Nous therefore we do not want education. We reject a state
repoussons l’instruction par l’État ; donc nous ne (established) religion; therefore we do not want religion.
voulons pas d’instruction. Nous repoussons une religion We reject equality established by the state; therefore we
d’État ; donc nous ne voulons pas de religion. Nous do not want equality, etc. It is as though it was accusing
repoussons l’égalisation par l’État ; donc nous ne us of not wanting men to eat because we reject the
voulons pas d’égalité, etc. C’est comme s’il nous accusait growing of wheat by the state.
de ne vouloir pas que les hommes mangent, parce que
nous repoussons la culture du blé par l’État.
Source: Revised translation of “The Law” /pages/bastiat-the-law-revised-lf-edition.
Gustave de Molinari
Gustave de Molinari (1819-1912)
Gustave de Molinari was born in Liège on March 3, 1819 and died in Adinkerque on January 28,
1912. He was the leading representative of the laissez-faire school of classical liberalism in France
in the second half of the 19th century and was still campaigning against protectionism, statism,
militarism, colonialism, and socialism into his 90s on the eve of the First World War. As he said
shortly before his death, his classical liberal views had remained the same throughout his long life
but the world around him had managed to turn full circle in the meantime.
In his 1849 book Evenings on Saint Lazarus Street: Discussions on Economic Laws and the
Defence of Property (1849) he pits a “Conservative” and a “Socialist” against an “Economist” who
defends the free market against all their criticisms. In each “soirée” or chapter Molinari argues for
a policy of complete laissez faire,” exposes the folly of socialism and other forms of government
intervention in the economy, and supports the idea of the private provision of all public goods. See
especially the 11th conversation in which Molinari argues for the first time that public goods such
as police and defence services, might be provided voluntarily by the free market.
In the very first Soirée Molinari has the Economist have this conversation with the Socialist on the
issue of the ownership of property:
le Socialiste. THE SOCIALIST.

Une observation encore. J’admets volontiers la One further observation. I readily accept property as
propriété comme souverainement équitable et utile dans supremely equitable and useful in the state of isolation.
l’état d’isolement. Un homme vit et travaille seul. Il est A man lives and works alone. It is entirely fair that this
parfaitement juste que cet homme jouisse seul du fruit man should have sole enjoyment of the fruits of his
de son travail. Il n’est pas moins utile que cet homme labor. It is equally useful that he be assured of holding
soit assuré de conserver sa propriété. Mais ce régime de on to his property. Can this regime of individual
propriété individuelle peut-il se maintenir property be maintained fairly and usefully, however, in
équitablement et utilement dans l’état de société? the social state? [p. 38]
[38] I am also happy to admit that Justice and Utility
Je veux bien admettre encore que la Justice et l’Utilité prescribe, in this common state as much as in the other,
commandent de reconnaître à chacun, dans cet état that the entire property of each individual and that
comme dans l’autre, l’entière propriété de sa personne portion of his powers that he has alienated from his
et de cette portion de ses forces qu’il sépare de lui-même person by working, be recognized as his. Would
en travaillant. Mais les individus pourraient-ils individuals really, however, be able to enjoy these two
véritablement jouir de cette double propriété, si la forms of property, if society were not organized in such
société n’était pas organisée de manière à la leur a way as to guarantee them this satisfaction? If this
garantir? Si cette organisation indispensable n’existait indispensable organization did not exist; if by some
point; si, par un mécanisme quelconque, la société ne mechanism or other, society did not distribute to each
distribuait point à chacun l’équivalent de son travail, le person the equivalent of his labor, would not the weak
faible ne se trouverait-il pas à la merci du fort, la man find himself at the mercy of the strong, would not
propriété des uns ne serait-elle pas perpétuellement some people’s property be perpetually intruded on by
envahie par la propriété des autres? Et si l’on the property of others? And if we were so imprudent as
commettait l’imprudence d’affranchir pleinement la to emancipate property fully, before society was fully
propriété, avant que la société fût dotée de ce empowered with this distributive mechanism, would we
mécanisme distributif, ne verrions-nous pas se not be witness to increasing encroachments of the
multiplier encore les empiétements des forts sur la strong on the property of the weak? Would not the
propriété des faibles? Le complet affranchissement de la complete emancipation of property aggravate the ill
propriété n’aggraverait-il pas le mal au lieu de le rather than correcting it?
corriger? THE ECONOMIST.
l’économiste. If the objection were sound, if it were necessary to
Si l’objection était fondée, s’il était nécessaire de construct a mechanism for the distribution to each
construire un mécanisme pour distribuer à chacun person of the equivalent of his labor, then clearly
l’équivalent de son travail, le socialisme aurait socialism would clearly have its raison d’être and I like
pleinement sa raison d’être, et je serais socialiste comme you would be a socialist. In fact, this mechanism you
vous. Mais ce mécanisme que vous voulez établir wish to establish artificially, exists naturally and it
artificiellement, il existe naturellement et il fonctionne. works. Society has been organized: the evil which you
La société est organisée. Le mal que vous attribuez à son attribute to its lack of organization, derives from
défaut d’organisation vient des entraves apportées au obstacles preventing the free play of that organization.
libre jeu de son organisation.
le socialiste. THE SOCIALIST.
Vous osez affirmer qu’en permettant à tous les hommes Are you so bold as to claim that, by allowing all men to
de disposer librement de leurs propriétés, dans le milieu manage their property as they see fit, in the social
[39] social où nous sommes, les choses s’arrangeraient circumstances [p. .39] we live in, we would find things
d’elles-mêmes de manière à rendre le travail de chacun working out by themselves in such a way as to render
le plus productif possible, et la distribution des fruits du each man’s labor as productive as possible, and the
travail de tous pleinement équitable?… distribution of the fruits of the labor of all, fully
l’économiste. equitable? …
J’ose l’affirmer. THE ECONOMIST.
le socialiste. I am bold enough to claim this.
Vous croyez qu’il deviendrait superflu d’organiser sinon THE SOCIALIST.
la production du moins la distribution, l’échange, de So you think it would become unnecessary, leaving aside
désobstruer la circulation… production, to plan at least distribution and exchange,
to free up circulation…
l’économiste. THE ECONOMIST.
J’en suis sûr. Laissez faire les propriétaires, laissez I am sure of it. Let property owners freely go about their
passer les propriétés et tout s’arrangera pour le mieux. business. Let property circulate and everything will
Mais on n’a jamais laissé faire les propriétaires; on n’a work out for the best.
jamais laissé passer les propriétés. In fact, property owners have never been left to go freely
Jugez-en. about their business and property has never been
S’agit-il du droit de propriété de l’homme sur lui-même; allowed to circulate freely.
du droit qu’il possède d’utiliser librement ses facultés, Judge for yourself.
en tant qu’il ne cause aucun dommage à la propriété Is it a matter of the property rights of the individual
d’autrui? Dans la société actuelle les fonctions les plus man; of the right he has to use his abilities freely, insofar
élevées et les professions les plus lucratives ne sont pas as he causes no damage to the property of others? In the
libres; on ne peut exercer librement les fonctions de present society, the highest posts and the most lucrative
notaire, de prêtre, de juge, d’huissier, d’agent de change, professions are not open; one cannot practice freely as a
de courtier, de médecin, d’avocat, de professeur; on ne solicitor, a priest, a judge, bailiff, money-changer,
peut être librement imprimeur, boucher, boulanger, broker, doctor, lawyer or professor. Nor can one
entrepreneur de pompes funèbres; on ne peut fonder straightforwardly be a printer, a butcher, baker or
librement aucune association commerciale, aucune entrepreneur in the funeral business. We are not free to
banque, aucune compagnie d’assurances, aucune grande set up a commercial organization, a bank, an insurance
entreprise de transport, construire librement aucun company, or a large transport company, nor free to
chemin, établir librement aucune institution de charité, build a road or establish a charity, nor to sell tobacco or
vendre librement du tabac, de la poudre, du salpêtre, gunpowder, or saltpeter, nor to carry [p. .40] mail, or
transporter [40] des lettres, battre monnaie; on ne peut print money, 78 nor to meet freely with other workers to
librement se concerter avec d’autres travailleurs pour establish the price of labor. 79 The property a man holds
fixer le prix du travail. La propriété de l’homme sur lui- in himself, his internal property , is in every detail
même, la propriété intérieure, est de toutes parts shackled.
entravée. Man’s ownership of the fruits of his labor, his external
La propriété de l’homme sur les fruits de son travail, la property , is equally impeded. Literary and artistic
propriété extérieure ne l’est pas moins. La propriété property and the ownership of inventions are recognized
littéraire ou artistique et la propriété des inventions ne and guaranteed only for a short period. Material
sont reconnues et garanties que pendant une courte property is generally recognized in perpetuity, but it is
période. La propriété matérielle est généralement subject to a multitude of restrictions and charges. Gifts,
reconnue à perpétuité, mais elle est soumise à une inheritance and loans are restricted too. Trade is heavily
multitude de restrictions et de charges. Le don, encumbered as much by capital transfer taxes,
l’héritage et le prêt ne sont pas libres. L’échange est registration charges and stamp duty, by licensing and by
lourdement grevé tant par les impôts de mutation, customs duties, as by the privileges granted to agents
d’enregistrement et de timbre, les octrois et les douanes, working as intermediaries in certain markets.
que par les priviléges accordés aux agents servant Sometimes, in addition, trade is completely prohibited
d’intermédiaires à certains marchés; parfois aussi outside certain limits. Finally, the law of expropriation
l’échange est complétement prohibé hors de certaines on grounds of public utility, endlessly threatens such
limites. Enfin, la loi d’expropriation pour cause d’utilité weak remnants of Property as the other restrictions have
publique menace incessamment la faible portion de spared.
Propriété que les autres restrictions ont épargnée.
THE CONSERVATIVE.
le conservateur. All the restrictions you have just listed were established
Toutes les restrictions que vous venez d’énumérer ont in the interests of society.
été établies dans l’intérêt de la société. THE ECONOMIST.
l’économiste. That may be true. Those who brought them in, however,
C’est possible; mais ceux qui les ont établies ont eu la brought about a pernicious result, for all these
main malheureuse, car toutes agissent, à différents restrictions act, in different degrees, and some with
degrés, et quelques-unes avec une puissance considerable impact, as causes of injustice and harm to
considérable, comme causes d’injustices et de society.
dommages pour la société. THE CONSERVATIVE.
le conservateur. So that by destroying them we would come to enjoy a
De sorte qu’en les détruisant, nous jouirions d’un veritable paradise on earth. [p. .41]
véritable paradis sur la terre. THE ECONOMIST.
[41] I do not say that. What I do say is that society would
l’économiste. find itself in the best possible situation, in terms of the
Je ne dis pas cela. Je dis que la société se trouverait dans present state of development in the arts and science.
la situation la meilleure possible, eu égard au degré
actuel d’avancement des arts et des sciences.
Source: Gustave de Molinari, Les Soirées de la Rue Saint-Lazare: Entretiens sur les lois
économiques et défense de la propriété (Paris: Guillaumin, 1849).
/titles/1344#Molinari_0383_186.
Source: From the Draft English translation /pages/gdm-soirees
See also:
the Liberty Matters online discussion of Gustave de Molinari’s Legacy for Liberty .
Gustave de Molinari, Les Soirées de la Rue Saint-Lazare: Entretiens sur les lois
économiques et défense de la propriété (Paris: Guillaumin, 1849). /titles/1344
Draft of LF’s translation: /pages/gdm-soirees.
The Ambivalent Position of John Stuart Mill (1806–1873)
John Stuart Mill (1806–1873)
The English classical liberal and political economist John Stuart Mill (1806–1873) wrote one of the
basic works of classical political economy in 1848 with the Principle son Political Economy (1848).
He was the precocious child of the Philosophical Radical and Benthamite James Mill. Taught
Greek, Latin, and political economy at an early age, He spent his youth in the company of the
Philosophic Radicals, Benthamites and utilitarians who gathered around his father James. J.S.
Mill went on to become a journalist, Member of Parliament, and philosopher and is regarded as
one of the most significant English classical liberals of the 19th century.
He was sympathetic to many arguments of the socialists of his day and thus had a soft spot for
their conception of an ideal society. In an unpublished draft of a book on socialism (c. 1869) he
points out many of “The Difficulties of Socialism” but nevertheless believes it should be given a
chance to prove its viability.
On sharing the benefits of communal work equally he notes:
It is a simple rule, and under certain aspects a just one, to give equal [744] payment to all who share in
the work. But this is a very imperfect justice unless the work also is apportioned equally. Now the many
different kinds of work required in every society are very unequal in hardness and unpleasantness. To
measure these against one another, so as to make quality equivalent to quantity, is so difficult that
Communists generally propose that all should work by turns at every kind of labour. But this involves an
almost complete sacrifice of the economic advantages of the division of employments, advantages which
are indeed frequently over-estimated (or rather the counter-considerations are under-estimated) by
political economists, but which are nevertheless, in the point of view of the productiveness of labour,
very considerable, for the double reason that the co-operation of employment enables the work to
distribute itself with some regard to the special capacities and qualifications of the worker, and also that
every worker acquires greater skill and rapidity in one kind of work by confining himself to it. The
arrangement, therefore, which is deemed indispensable to a just distribution would probably be a very
considerable disadvantage in respect of production. But further, it is still a very imperfect standard of
justice to demand the same amount of work from every one. People have unequal capacities of work,
both mental and bodily, and what is a light task for one is an insupportable burthen to another. It is
necessary, therefore, that there should be a dispensing power, an authority competent to grant
exemptions from the ordinary amount of work, and to proportion tasks in some measure to capabilities.
As long as there are any lazy or selfish persons who like better to be worked for by others than to work,
there will be frequent attempts to obtain exemptions by favour or fraud, and the frustration of these
attempts will be an affair of considerable difficulty, and will by no means be always successful. These
inconveniences would be little felt, for some time at least, in communities composed of select persons,
earnestly desirous of the success of the experiment; but plans for the regeneration of society must
consider average human beings, and not only them but the large residuum of persons greatly below the
average in the personal and social virtues. The squabbles and ill-blood which could not fail to be
engendered by the distribution of work whenever such persons have to be dealt with, would be a great
abatement from the harmony and unanimity which Communists hope would be found among the
members of their association. That concord would, even in the most fortunate circumstances, be much
more liable to disturbance than Communists suppose. The institution provides that there shall be no
quarrelling about material interests; individualism is excluded from that department of affairs. But there
are other departments from which no institutions can exclude it: there will still be rivalry for reputation
and for personal power. When selfish ambition is excluded from the field in which, with most men, it
chiefly exercises itself, that of riches and pecuniary interest, it would betake itself with greater [745]
intensity to the domain still open to it, and we may expect that the struggles for pre-eminence and for
influence in the management would be of great bitterness when the personal passions, diverted from
their ordinary channel, are driven to seek their principal gratification in that other direction. For these
various reasons it is probable that a Communist association would frequently fail to exhibit the attractive
picture of mutual love and unity of will and feeling which we are often told by Communists to expect, but
would often be torn by dissension and not unfrequently broken up by it.
/titles/232#Mill_0223-05_1344
Source: “Chapters on Socialism” (1879) in John Stuart Mill, The Collected Works of John Stuart
Mill, Volume V - Essays on Economics and Society Part II, ed. John M. Robson, introduction by
Lord Robbins (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1967).
/titles/232#lf0223-05_head_048.
Yet he is willing to accept the fact that with proper education men might be able to live and
prosper in a communist society:
From these various considerations I do not seek to draw any inference against the possibility that
Communistic production is capable of being at some future time the form of society best adapted to the
wants and circumstances of mankind. I think that this is, and will long be, an open question, upon which
fresh light will continually be obtained, both by trial of the Communistic principle under favourable
circumstances, and by the improvements which will be gradually effected in the working of the existing
system, that of private ownership. The one certainty is, that Communism, to be successful, requires a
high standard of both moral and intellectual education in all the members of the community—moral, to
qualify them for doing their part honestly and energetically in the labour of life under no inducement but
their share in the general interest of the association, and their feelings of duty and sympathy towards it;
intellectual, to make them capable of estimating distant interests and entering into complex
considerations, sufficiently at least to be able to discriminate, in these matters, good counsel from bad.
Now I reject altogether the notion that it is impossible for education and cultivation such as is implied in
these things to be made the inheritance of every person in the nation; but I am convinced that it is very
difficult, and that the passage to it from our present condition can only be slow. I admit the plea that in
the points of moral education on which the success of Communism depends, the present state of society
is demoralising, and that only a Communistic association can effectually train mankind for Communism.
It is for Communism, then, to prove, by practical experiment, its power of giving this training.
Experiments alone can show whether there is as yet in any portion of the population a sufficiently high
level of moral cultivation to make Communism succeed, and to give to the next generation among
themselves the education necessary to keep up that high level permanently. If Communist associations
show that they can be durable and prosperous, they will multiply, and will probably be adopted by
successive portions of the population of the more advanced countries as they become morally fitted for
that mode of life. But to force unprepared populations into Communist societies, even if a political
revolution gave the power to make such an attempt, would end in disappointment.
/titles/232#Mill_0223-05_1347.
But to be fair to JS Mill, he did believe that when comparing the system of Communism with that
of the free market and ownership of private property the true comparison should be between
“Communism at its best” and classical liberalism at its best, not the ideal of an unrealized and
untested communism compared with the flawed practices of contemporary European society in
1848.
If (therefore) the choice were to be made between Communism with all its chances, and the present state
of society with all its sufferings and injustices; … if this or Communism were the alternative, all the
difficulties, great or small, of Communism would be but as dust in the balance. But to make the
comparison applicable, we must compare Communism at its best, with the régime of individual property,
not as it is, but as it might be made. The principle of private property has never yet had a fair trial in any
country; and less so, perhaps, in this country than in some others. … To judge of the final destination of
the institution of property, we must suppose everything rectified, which causes the institution to work in
a manner opposed to that equitable principle, of proportion between remuneration and exertion, on
which in every vindication of it that will bear the light, it is assumed to be grounded. We must also
suppose two conditions realized, without which neither Communism nor any other laws or institutions
could make the condition of the mass of mankind other than degraded and miserable. One of these
conditions is, universal education; the other, a due limitation of the numbers of the community. With
these, there could be no poverty, even under the present social institutions: and these being supposed,
the question of Socialism is not, as generally stated by Socialists, a question of flying to the sole refuge
against the evils which now bear down humanity; but a mere question of comparative advantages, which
futurity must determine. We are too ignorant either of what individual agency in its best form, or
Socialism in its best form, can accomplish, to be qualified to decide which of the two will be the ultimate
form of human society. /titles/102#lf0223-02_footnote_nt_843_ref
Source: JSM, PPE, Book II Distribution, Chap. 1: Of Property” in John Stuart Mill, The Collected
Works of John Stuart Mill, Volume II - The Principles of Political Economy with Some of Their
Applications to Social Philosophy (Books I-II), ed. John M. Robson, introduction by V.W. Bladen
(Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1965).
/titles/102#lf0223-02_label_1329. Quote <>.
See the following works:
John Stuart Mill, The Collected Works of John Stuart Mill, Volume II - The Principles of
Political Economy with Some of Their Applications to Social Philosophy (Books I-II), ed.
John M. Robson, introduction by V.W. Bladen (Toronto: University of Toronto Press,
London: Routledge and Kegan Paul, 1965). /titles/102
John Stuart Mill, The Collected Works of John Stuart Mill, Volume III - The Principles of
Political Economy with Some of Their Applications to Social Philosophy (Books III-V and
Appendices), ed. John M. Robson, Introduction by V.W. Bladen (Toronto: University of
Toronto Press, London: Routledge and Kegan Paul, 1965). /titles/243 - especially
CHAPTER VII: “On the Probable Futurity of the Labouring Classes”.
“Chapters on Socialism” (1879) in John Stuart Mill, The Collected Works of John Stuart
Mill, Volume V - Essays on Economics and Society Part II, ed. John M. Robson,
introduction by Lord Robbins (Toronto: University of Toronto Press, London: Routledge
and Kegan Paul, 1967). /titles/232#lf0223-05_head_048.
The Emergence of Organised Socialist Parties in Europe from 1860s to

1900
Socialist Parties
In chronological order the following socialist parties appeared in Europe during this period:
1. Social Democratic Party in Germany: Ferdinand Lassalle founded “Allgemeiner Deutscher

Arbeiterverein” (ADAV, General German Workers’ Association) in 1863; August Bebel and
Wilhelm Liebknecht founded the “Sozialdemokratische Arbeiterpartei” (SDAP, Social
Democratic Workers’ Party of Germany - 1869) which merged with the ADAV at a
conference held in Gotha in 1875, taking the name Socialist Workers’ Party of Germany
(SAPD);
2. “Parti Ouvrier Français” (French Workers Party - 1879);
3. Australian Labor Party (1891)
4. English Social Democratic Federation (1884); Labour Party (1900)
5. Bolshevik Party was founded by Vladimir Lenin in 1912 by a faction (Bolshevik = majority)
of the Russian Social Democratic Labour Party (RSDLP)
Key Works
Some important socialist texts from this period:
1. Germany:
1. theoretical work of Karl Marx in 1840s (in Paris) culminating in Communist
Manifesto (Feb. 1848); “Zur Kritik” (1857), Das Kapital vol. 1 (1867)
2. Ferdinand Lassalle, Arbeiterprogramm (1863)
3. August Bebel, Die Frau und der Sozialismus (1879)
2. France:
1. Alfred Jourdan, Du rôle de l’état dans l’ordre économique: ou, Économie politique et
socialisme (1882).
2. Edmond Villey, Du rôle de l’état dans l’ordre économique (1882).
3. Claudio Jannet, Le Socialisme d’état et la reforme sociale (1889).
4. Charles Gide, Principes d’économie politique (1883); “L’École nouvelle" (28 March,
1890); L’idée de solidarité (1893)
5. Claudio Jannet, Le Socialisme d’état et la reforme sociale (1889).
3. England: George Bernard Shaw, Fabian Essays (1884)
4. USA: Edward Bellamy Looking Backward, 2000–1887 (1888)
German Socialism in the 1860s to the 1890s
The Work of Karl Marx
Karl Marx (1818–1883)
The major theorist of socialist ideas in the mid- and late–19th century was Karl Marx (1818–1883).
Marx prided himself on having discovered the “laws” which governed the operation of the
capitalist system, laws which would inevitably lead to its collapse. His form of socialism, in which
the socialist party leaders would guide the working class in a “dictatorship of the proletariat” (die
Diktatur des Proletariats) in order to destroy the capitalist system by means of a revolution, should
be distinguished from the “utopian socialists” (like Charles Fourier, Louis Blanc, and Proudhon),
who wanted to create small, voluntary communities where socialism could be put into practise,
and the “social democrats” or “labour parties”, which planned to work peacefully within the
parliamentary system in order to bring about piecemeal socialist reform.
Marx was born in Trier in Germany and studied philosophy at the universities of Bonn and Berlin.
He first worked as a journalist in the early 1840s but was forced to flee to Paris and then to
London in order to escape the censors. Ironically, it was only in the liberal political environment of
London that Marx was able to write his most famous critique of the capitalist system.
His first writings on political economy were written when he lived in Paris 1843–44 and are known
as The Paris Manuscripts (which are not online). In late 1847 he wrote a “manifesto” for the
Communist League of the Just which was published in February 1848 as The Communist
Manifesto. An English and German version of this classic work can be found online here
/pages/marx-manifest.
After a hiatus when Marx worked as a journalist for the New York Herald Tribune Marx published
the first volume of what would become a three volume criticism of the capitalist system. Only vol. 1
appeared in Marx’s lifetime (1867); the other two vols. were published posthumously by Engels
(1885, 1894). We have these works in both German and English versions.
Of the many passages we could cite in his voluminous writings this one on the extraction of
“Mehrwert” (surplus value) by the capitalist from the worker gives a good sense of Marx’s hostility
to wage labour, or the “capitalist system” (des kapitalistischen Systems) as he called it:
Andrerseits aber verengt sich der Begriff der Capitalist production is not merely the production of
produktiven Arbeit. Die kapitalistische Produktion ist commodities, it is essentially the production of surplus-
nicht nur Produktion von Ware, sie ist wesentlich value. The labourer produces, not for himself, but for
Produktion von Mehrwert. Der Arbeiter produziert nicht capital. It no longer suffices, therefore, that he should
für sich, sondern für das Kapital. Es genügt daher nicht simply produce. He must produce surplus-value. That
länger, daß er überhaupt produziert. Er muß Mehrwert labourer alone is productive, who produces surplus-
produzieren. Nur der Arbeiter ist produktiv, der value for the capitalist, and thus works for the self-
Mehrwert für den Kapitalisten produziert oder zur expansion of capital. If we may take an example from
Selbstverwertung des Kapitals dient. Steht es frei, ein outside the sphere of production of material objects, a
Beispiel außerhalb der Sphäre der materiellen schoolmaster is a productive labourer, when, in addition
Produktion zu wählen, so ist ein Schulmeister to belabouring the heads of his scholars, he works like a
produktiver Arbeiter, wenn er nicht nur Kinderköpfe horse to enrich the school proprietor. That the latter has
bearbeitet, sondern sich selbst abarbeitet zur laid out his capital in a teaching factory, instead of in a
Bereicherung des Unternehmers. Daß letztrer sein sausage factory, does not alter the relation. Hence the
Kapital in einer Lehrfabrik angelegt hat, statt in einer notion of a productive labourer implies not merely a
Wurstfabrik, ändert nichts an dem Verhältnis. Der relation between work and useful effect, between
Begriff des produktiven Arbeiters schließt daher labourer and product of labour, but also a specific, social
keineswegs bloß ein Verhältnis zwischen Tätigkeit und relation of production, a relation that has sprung up
Nutzeffekt, zwischen Arbeiter und Arbeitsprodukt ein, historically and stamps the labourer as the direct means
sondern auch ein spezifisch gesellschaftliches, of creating surplus-value. To be a productive labourer is,
geschichtlich entstandnes Produktionsverhältnis, therefore, not a piece of luck, but a misfortune. …
welches den Arbeiter zum unmittelbaren
Verwertungsmittel des Kapitals stempelt. Produktiver The prolongation of the working day beyond the point at
Arbeiter zu sein ist daher kein Glück, sondern ein Pech. which the labourer would have produced just an
equivalent for the value of his labour-power, and the
Die Verlängrung des Arbeitstags über den Punkt hinaus, appropriation of that surplus-labour by capital, this is
wo der Arbeiter nur ein Äquivalent für den Wert seiner production of absolute surplus-value. It forms the
Arbeitskraft produziert hätte, und die Aneignung dieser general groundwork of the capitalist system, and the
Mehrarbeit durch das Kapital - das ist die Produktion starting point for the production of relative surplus-
des absoluten Mehrwerts. Sie bildet die allgemeine value. The latter presupposes that the working day is
Grundlage des kapitalistischen Systems und den already divided into two parts, necessary labour, and
Ausgangspunkt der Produktion des relativen surplus-labour. In order to prolong the surplus-labour,
Mehrwerts. Bei dieser ist der Arbeitstag von vornherein the necessary labour is shortened by methods whereby
in zwei Stücke geteilt: notwendige Arbeit und the equivalent for the wages is produced in less time.
Mehrarbeit. Um die Mehrarbeit zu verlängern, wird die The production of absolute surplus-value turns
notwendige Arbeit verkürzt durch Methoden, exclusively upon the length of the working day; the
vermittelst deren das Äquivalent des Arbeitslohns in production of relative surplus-value, revolutionises out
weniger Zeit produziert wird. Die Produktion des and out the technical processes of labour, and the
absoluten Mehrwerts dreht sich nur um die Länge des composition of society.
Arbeitstags; die Produktion des relativen Mehrwerts
revolutioniert durch <533> und durch die technischen It therefore presupposes a specific mode, the capitalist
Prozesse der Arbeit und die gesellschaftlichen mode of production, a mode which, along with its
Gruppierungen. methods, means, and conditions, arises and developes
itself spontaneously on the foundation afforded by the
Sie unterstellt also eine spezifisch kapitalistische formal subjection of labour to capital. In the course of
Produktionsweise, die mit ihren Methoden, Mitteln und this development, the formal subjection is replaced by
Bedingungen selbst erst auf Grundlage der formellen the real subjection of labour to capital. …
Subsumtion der Arbeit unter das Kapital naturwüchsig
entsteht und ausgebildet wird. An die Stelle der
formellen tritt die reelle Subsumtion der Arbeit unter
das Kapital.
Wir sahen im vierten Abschnitt bei Analyse der We saw in Part IV., when analysing the production of
Produktion des relativen Mehrwerts: innerhalb des relative surplus-value: within the capitalist system all
kapitalistischen Systems vollziehn sich alle Methoden methods for raising the social productiveness of labour
zur Steigerung der gesellschaftlichen Produktivkraft der are brought about at the cost of the individual labourer;
Arbeit auf Kosten des individuellen Arbeiters; alle Mittel all means for the development of production transform
zur Entwicklung der Produktion schlagen um in themselves into means of domination over, and
Beherrschungs- und Exploitationsmittel des exploitation of, the producers; they mutilate the
Produzenten, verstümmeln den Arbeiter in einen labourer into a fragment of a man, degrade him to the
Teilmenschen, entwürdigen ihn zum Anhängsel der level of an appendage of a machine, destroy every
Maschine, vernichten mit der Qual seiner Arbeit ihren remnant of charm in his work and turn it into a hated
Inhalt, entfremden ihm die geistigen Potenzen des toil; they estrange from him the intellectual
Arbeitsprozesses im selben Maße, worin letzterem die potentialities of the labour-process in the same
Wissenschaft als selbständige Potenz einverleibt wird; proportion as science is incorporated in it as an
sie verunstalten die Bedingungen, innerhalb deren er independant power; they distort the conditions under
arbeitet, unterwerfen ihn während des Arbeitsprozesses which he works, subject him during the labour-process
der kleinlichst gehässigen Despotie, verwandeln seine to a despotism the more hateful for its meanness; they
Lebenszeit in Arbeitszeit, schleudern sein Weib und transform his life-time into working-time, and drag his
Kind unter das Juggernaut-Rad des Kapitals. Aber alle wife and child beneath the wheels of the Juggernaut of
Methoden zur Produktion des Mehrwerts sind zugleich capital, But all methods for the production of surplus
Methoden der Akkumulation, und jede Ausdehnung der value are at the same time methods of accumulation;
Akkumulation wird umgekehrt <675> Mittel zur and every extension of accumulation becomes again a
Entwicklung jener Methoden. Es folgt daher, daß im means for the development of those methods. It follows
Maße wie Kapital akkumuliert, die Lage des Arbeiters, therefore that in proportion as [709] capital
welches immer seine Zahlung, hoch oder niedrig, sich accumulates, the lot of the labourer, be his payment
verschlechtern muß. Das Gesetz endlich, welches die high or low, must grow worse. The law, finally, that
relative Übervölkerung oder industrielle Reservearmee always equilibrates the relative surplus-population, or
stets mit Umfang und Energie der Akkumulation in industrial reserve army, to the extent and energy of
Gleichgewicht hält, schmiedet den Arbeiter fester an das accumulation, this law rivets the labourer to capital
Kapital als den Prometheus die Keile des Hephästos an more firmly than the wedges of Vulcan did Prometheus
den Felsen. Es bedingt eine der Akkumulation von to the rock. It establishes an accumulation of misery,
Kapital entsprechende Akkumulation von Elend. Die corresponding with accumulation of capital.
Akkumulation von Reichtum auf dem einen Pol ist also Accumulation of wealth at one pole is, therefore, at the
zugleich Akkumulation von Elend, Arbeitsqual, same time accumulation of misery, agony of toil,
Sklaverei, Unwissenheit, Brutalisierung und moralischer slavery, ignorance, brutality, mental degradation, at the
Degradation auf dem Gegenpol, d.h. auf Seite der opposite pole, i.e., on the side of the class that produces
Klasse, die ihr eignes Produkt als Kapital produziert. its own product in the form of capital.
Source: </pages/marx-k1-1890>
Source: /titles/965#Marx_0445-01_1214
See also:
Capital, vol. 1 , Part V. The Production of Absolute and Relative Suplius-Value, chap. XVI
“Absolute and Relative Surplus-Value”. Karl Marx, Capital: A Critique of Political
Economy. Volume I: The Process of Capitalist Production, by Karl Marx. Trans. from the
3rd German edition, by Samuel Moore and Edward Aveling, ed. Frederick Engels. Revised
and amplified according to the 4th German ed. by Ernest Untermann (Chicago: Charles H.
Kerr and Co., 1909). /titles/965#Marx_0445-01_944
Karl Marx, Capital: A Critique of Political Economy. 3 vols. Edited and translated by
Frederick Engels and Ernest Untermann (Chicago: Charles H. Kerr and Co., 1909–1910).
Volume I: The Process of Capitalist Production (1909) /titles/965
Volume II: The Process of Circulation of Capita (1910) /titles/966
Volume III: The Process of Capitalist Production as a Whole (1909). /titles/967
Das Kapital is also available here in German at /pages/marx-works.
The CL Critique of German Socialism
When Friedrich Engels published posthumously the third and final volume of Karl Marx’s Das
Kapital in 1894 the the Austrian economist Eugen von Böhm-Bawerk wrote a devastating review
of Marx’s magnum opus. It should be read in its entirety as it it a very important and ultimately
unanswerable critique of the most advanced and thoughtful socialist theorist.
See Böhm-Bawerk, “On the Completion of Marx’s System (of Thought)” (1896, 1898)
/pages/completion.
Böhm-Bawerk cut to the heart of Marxist economic theory by rejecting the validity (both
theoretical and in practice) of his theory of “surplus value”. As he stated in the opening paragraph
of his review of the final volume:
This faith (of Marx’s followers) was, moreover, in one case put to an unusually severe test. Marx had
taught in his first volume that the whole value of commodities was based on the labor embodied in them,
and that by virtue of this “law of value” they must exchange in proportion to the quantity of labor which
they contain; that, further, the profit or surplus value falling to the capitalist was the fruit of extortion
practiced on the worker; that, nevertheless, the amount of surplus value was not in proportion to the
whole amount of the capital employed by the capitalist, but only to the amount of the “variable” part—
that is, to that part of capital paid in wages—while the “constant capital,” the capital employed in the
purchase of the means of production, added no surplus value. In daily life, however, the profit of capital
is in proportion to the total capital invested; and, largely on this account, the commodities do not as a
fact exchange in proportion to the amount of work incorporated in them. Here, therefore, there was a
contradiction between system and fact which hardly seemed to admit of a satisfactory explanation. Nor
did the obvious contradiction escape Marx himself. He says with reference to it, “This law” (the law,
namely, that surplus value is in proportion only to the variable part of capital), “clearly contradicts all
prima facie experience.” But at the same time he declares the contradiction to be only a seeming one, the
solution of which requires many missing links, and will be postponed to later volumes of his work.
Expert criticism thought it might venture to prophesy with certainty that Marx would never redeem this
promise, because, as it sought elaborately to prove, the contradiction was insoluble. Its reasoning,
however, made no impression at all on the mass of Marx’s followers. His simple promise outweighed all
logical refutations.
He also takes Marx to task for deliberately excluding from his analysis valuable things which are
not the product of labour, such as “gifts of nature” which are valuable but upon which no human
labour has been expended:
From the beginning he only puts into the sieve those exchangeable things which contain the property
which he desires finally to sift out as “the common factor,” and he leaves all the others outside. He acts as
one who urgently desiring to bring a white ball out of an urn takes care to secure this result by putting in
white balls only. That is to say he limits from the outset the field of his search for the substance of the
exchange value to “commodities,” and in doing so he forms a conception with a meaning narrower than
the conception of “goods” (though he does not clearly define it), and limits it to products of labor as
against gifts of nature. Now it stands to reason that if exchange really means an equalization, which
assumes the existence of a “common factor of the same amount,” this common factor must be sought
and found in every species of goods which is brought into exchange, not only in products of labor but
also in gifts of nature, such as the soil, wood in trees, water power, coal beds, stone quarries, petroleum
reserves, mineral waters, gold mines, etc. To exclude the exchangeable goods which are not products of
labor in the search for the common factor which lies at the root of exchange value is, under the
circumstances, a great error of method. It is just as though a natural philosopher, desiring to discover a
property common to all bodies—weight, for instance—were to sift the properties of a single group of
bodies—transparent bodies, for instance—and after passing in review all the properties common to
transparent bodies were to declare that transparency must be the cause of weight, for the sole reason
that he could demonstrate that it could not be caused by any of the other properties.
Eugen Richter (1838–1906) was one of the very few radical liberals in late 19th century Germany.
As a member of the Reichstag, he consistently opposed the growing budget, German militarism
and imperialism, and the rise of socialism. His book Pictures of the Socialistic Future (1893)
/titles/295 is a satire of what would happen to Germany if the socialism espoused by the trade
unionists, social democrats, and Marxists was actually put into practice. It is thus a late 19th
century version of Orwell’s 1984, minus the extreme totalitarianism which Orwell had witnessed in
Nazi Germany and Stalinist Russia but which was still inconceivable to 19th century liberals. The
main point of the book is to show that government ownership of the means of production and
centralised planning of the economy would not lead to abundance as the socialists predicted would
happen when capitalist “inefficiency and waste” were “abolished”. The problem of incentives in the
absence of profits, the free rider problem, the public choice insight about the vested interests of
bureaucrats and politicians, the connection between economic liberty and political liberty, were all
wittily addressed by Richter, much to the annoyance of his socialist opponents.
In his satire about what would happen to Germany if a socialist revolution was successful Richter
describes a speech the new socialist Chancellor gave to the Parliament on how the socialist regime
was coping with the economic collapse the introduction of socialism produced, by cutting food
rations and limiting consumer expenditure on “frivolous” items:
The Chancellor—“It is a well-known fact that there are many estimable persons—I allude to those
persons who are styled vegetarians—who hold not only that meat may very well be dispensed with
altogether, but that it is positively injurious to the human system. (Uproar from the Right.)
“One of the main sources, however, from which we calculate upon effecting economy, is the placing of
narrower bounds to individual caprice as manifested in the purchase of articles. A measure of this nature
is a necessary and logical step in the direction of social equality, and we hope, by its means, to put an end
to the irrational rule of supply and demand which even nowadays to a great extent obtains, and which so
much tends to place obstacles in the way of production, and to raise the price of things correspondingly.
The Community produces, let us say, articles of consumption, furniture, clothes, and so on. But the
demand for these articles is regulated by the merest freak or caprice—call it fashion, taste, or whatever
you like.”
The Chancellor’s lady—“Oh, oh.”

The Chancellor hesitated a moment, and sought by means of a glass of water to calm his evident
irritation at this interruption. He then continued—
“I repeat, the caprice of fashion is directed only too frequently, not to those articles which are already
[105] in stock, but to some new-fangled thing which takes the fancy of the moment. As a result of this,
those goods which are manufactured and exposed for sale by the Community become often so-called
shop-veterans, or they spoil—in short, fail to fulfil the purpose for which they were produced; and all
this, forsooth, just because these goods do not quite take the fancy of Mr. and Mrs. X. Y. Z. Now I put the
question to you: are we justified in so far yielding to the caprices of such persons, that we offer them a
choice of various goods to one and the same identical end—such as nourishment, furnishing, and attire—
in order that Mr. and Mrs. X. may live, and dress, and furnish their house differently from Mr. and Mrs.
Y.? Just reflect how vastly all processes of manufacture would be cheapened if, in place of having any
variety in goods which are destined to fulfil the same purpose, all such articles were limited to a few
patterns, or, better still, if they were all made on one single pattern. All losses arising from goods being
left on hand as unsaleable, would be avoided if it were, once for all, definitely understood that Mr. and
Mrs. X. Y. Z. had to dine, and attire themselves, and furnish their houses in that manner which had been
prescribed by the State.
“Hence, lady and gentlemen, the Government contemplates shortly submitting to your consideration
plans for regulating your other meals in a manner similar to that which was adopted from the first for
the regulation of the chief meal of the day. It will also tend to promote more real social equality if all
household goods and chattels, such as bedding, tables, chairs, wardrobes, linen, etc. etc., be declared the
property of the State. By means of each separate dwelling being furnished by the State with these various
requisites, [106] all after one identical pattern, and all remaining as a permanent part of each dwelling,
the trouble and expense of removal are done away with. And only then, when we shall have advanced
thus far, shall we be in a position to approach, at least approximately, the principle of equality as
respects the question of dwelling-houses, no matter how different their situations and advantages. This
problem we propose to solve by a universal fresh drawing of lots from quarter to quarter. In this way, the
chances which everybody has to win a nice suite of apartments on the first-floor front are renewed every
quarter of a year. (Laughter from the Left. Applause here and there from the Right.)
“As an additional aid to the promotion of equality, we propose that in future all persons shall attire
themselves in garments whose cut, material, and colour, it will be the province of this House to
determine beforehand. The length of time during which all garments are to be worn will also be fixed
with precision.”
Source: Eugen Richter, Pictures of the Socialistic Future (Freely adapted from Bebel), trans.
Henry Wright, Introduction by Thomas Mackay (London: Swan Sonnenschein & Co., 1907).
/titles/295#Richter_0160_319.
English Socialism in the 1880s
George Bernard Shaw and the Fabian Society
George Bernard Shaw (1856-1950)
In the late 19th century the classical liberal, free market orthodoxy was beginning to be challenged
by socialists like the Irish playwright George Bernard Shaw (GBS) (1856-1950), along with the
writers and educators Sidney and Beatrice Webb, the feminist Emmeline Pankhurst, and the
novelist H. G. Wells, who founded the Fabian Society in England in In 1884. Its aim was to bring
about a socialist society by means of intellectual debate, the publication of books and pamphlets,
and the “permeation” of socialist ideas into the universities, the press, government institutions,
and political parties. Unlike the Marxists, who desired revolutionary change, the “Fabian
socialists” advocated incremental change through the parliamentary system.
GBS wrote the “manifesto” for the Fabian Society in 1884 and edited a collection of essays about
their ultimate aims.
Some of the main points in the fabian manifesto are the following:
THE FABIANS are associated for the purpose of spreading the following opinions held by them, and
discussing their practical consequences.
That the most striking result of our present system of farming out the national Land and Capital
to private individuals has been the division of Society into hostile classes, with large appetites
and no dinners at one extreme, and large dinners and no appetites at the other.
That the practice of entrusting the Land of the nation to private persons in the hope that they will
make the best of it has been discredited by the consistency with which they have made the worst
of it; and that the Nationalization of the Land in some form is a public duty.
That the pretensions of Capitalism to encourage Invention, and to distribute its benefits in the
fairest way attainable, have been discredited by the experience of the nineteenth century.
That, under the existing system of leaving the National Industry to organize itself, Competition
has the effect of rendering adulteration, dishonest dealing, and inhumanity compulsory.
That since Competition among producers admittedly secures to the public the most satisfactory
products, the State should compete with all its might in every department of production.
That such restraints upon Free Competition as the penalties for infringing the Postal monopoly,
and the withdrawal of workhouse and prison labour from the markets, should be abolished.
That no branch of Industry should be carried on at a profit by the central administration.
That the Public Revenue should be raised by a direct Tax; and that the central administration
should have no legal power to hold back for the replenishment of the Public Treasury any portion
of the proceeds of the Industries administered by them.
That the State should compete with private individuals—especially with parents—in providing
happy homes for children, so that every child may have a refuge from the tyranny or neglect of its
natural custodians.
See:
George Bernard Shaw, A Manifesto. Fabian Tracts No. 2 (London: George Standring,
1884).
facsimile PDF: /titles/2751
an HTML version: /pages/shaw-s-fabian-manifesto-1884
George Bernard Shaw, Fabian Essays in Socialism, ed. G. Bernard Shaw, American Edition
Ed. by H.G. Wilshire, (New York: The Humboldt Publishing Co., 1891). First published
1889. /titles/298.
The CL Critique of English/Fabian Socialism in the 1880s and 1890s
Shaw’s anthology provoked a reply by supporters of private property and laissez-faire economics
led by Thomas Mackay. See the Debate: “Fabian Socialism vs. Radical Liberalism” /groups/76.
These writers were followers of the sociologist and political theorist Herbert Spencer (1820–1903)
who was one of the leading 19th century English radical individualists. He began working as a
journalist for the laissez-faire magazine The Economist in the 1850s. Much of the rest of his life
was spent working on an all-encompassing theory of human development based upon the ideas of
individualism, utilitarian moral theory, social and biological evolution, limited government, and
laissez-faire economics. See in particular ”The Man versus the State” (1884) and “From Freedom
to Bondage” (1891) in The Man versus the State (1884), with Six Essays on Government, Society
and Freedom (LF ed.) /titles/330.
Herbert Spencer (1820-1903)
Herbert Spencer (1820-1903) wrote the Introduction to Mackay’s collection of essays “A Plea for
Liberty” which was entitled “From Freedom to Bondage.” in it he contrasted the “voluntary co-
operation” of the free market with the “compulsory co-operation” which would result from a
socialist form of economic organisation. He argued that what the socialists don’t tell the people is
the sheer number of regulators they would need to run such a system, or what he called the
“regulative apparatus” which would control the new “régime of industrial obedience”:
Beyond the regulative apparatus such as in our own society is required for carrying on national defence
and maintaining public order and personal safety, there must, under the régime of socialism, be a
regulative apparatus everywhere controlling all kinds of production and distribution, and everywhere
apportioning the shares of products of each kind required for each locality, each working establishment,
each individual. … Suppose now that this industrial régime of willinghood, acting spontaneously, is
replaced by a régime of industrial obedience, enforced by public officials. Imagine the vast
administration required for that distribution of all commodities to all people in every city, town and
village, which is now effected by traders! Imagine, again, the still more vast administration required for
doing all that farmers, manufacturers, and merchants do; having not only its various orders of local
superintendents, but its sub-centres and chief centres needed for apportioning the quantities of each
thing everywhere needed, and the adjustment of them to the requisite times. Then add the staffs wanted
for working mines, railways, roads, canals; the staffs required for conducting the importing and
exporting businesses and the administration of mercantile shipping; the staffs required for supplying
towns not only with water and gas but with locomotion by tramways, omnibuses, and other vehicles, and
for the distribution of power, electric and other. Join with these the existing postal, telegraphic, and
telephonic administrations; and finally those of the police and army, by which the dictates of this
immense consolidated regulative system are to be everywhere enforced. Imagine all this and then ask
what will be the position of the actual workers! Already on the [23] continent, where governmental
organizations are more elaborate and coercive than here, there are chronic complaints of the tyranny of
bureaucracies—the hauteur and brutality of their members. What will these become when not only the
more public actions of citizens are controlled, but there is added this far more extensive control of all
their respective daily duties? What will happen when the various divisions of this army of officials,
united by interests common to officialism—the interests of the regulators versus those of the regulated—
have at their command whatever force is needful to suppress insubordination and act as ‘saviours of
society’? Where will be the actual diggers and miners and smelters and weavers, when those who order
and superintend, everywhere arranged class above class, have come, after some generations, to inter-
marry with those of kindred grades, under feelings such as are operative in existing classes; and when
there have been so produced a series of castes rising in superiority; and when all these, having everything
in their own power, have arranged modes of living for their own advantage: eventually forming a new
aristocracy far more elaborate and better organized than the old? How will the individual worker fare if
he is dissatisfied with his treatment—thinks that he has not an adequate share of the products, or has
more to do than can rightly be demanded, or wishes to undertake a function for which he feels himself
fitted but which is not thought proper for him by his superiors, or desires to make an independent career
for himself? This dissatisfied unit in the immense machine will be told he must submit or go. The mildest
penalty for disobedience will be industrial excommunication. And if [24] an international organization of
labour is formed as proposed, exclusion in one country will mean exclusion in all others—industrial
excommunication will mean starvation.
Source: Thomas Mackay, A Plea for Liberty: An Argument against Socialism and Socialistic
Legislation, consisting of an Introduction by Herbert Spencer and Essays by Various Writers,
edited by Thomas Mackay (Indianapolis: Liberty Fund, 1981). Foreword by Jeffrey Paul.
/titles/313#Mackay_0071_121.
Thomas Mackay (1849–1912)
[We do not have an image of Mackay]
Thomas Mackay (1849–1912) was a successful Scottish wine merchant who retired early from
business so he could devote himself entirely to the study of economic issues such as the Poor Laws,
growing state intervention in the economy, and the rise of socialism. Mackay was asked by the
individualist and laissez-faire lobby group, the Liberty and Property Defense League, to put
together a collection of essays by leading classical liberals to rebut the socialist ideas contained in
Fabian Essays in Socialism edited by George Bernard Shaw in 1889. The result was A Plea for
Liberty (1891) and A Policy of Free Exchange (1894).
1. A Plea for Liberty: An Argument against Socialism and Socialistic Legislation (1891)
/titles/313. This collection of essays was originally published in 1891 in response to a collection of
Fabian Essays on Socialism which advocated policies which would eventually lead to the modern
welfare state. The theoretical and empirical contributions are fine examples of the classical liberal
tradition in British thought.
2. A Policy of Free Exchange (1894) /titles/314. The companion volume to A Plea for Liberty
which continued the argument against the Fabian Socialists and for a policy of strict non-
intervention in the economy by the government.
Mackay took a great interest in the condition of the working class and in his essay on “The Interest
of the Working Class in Free Exchange” in the second collection he attempted to show the average
worker why he should be interested in a full free market society rather than a socialist one. This
view was based on the notion that all workers were property owners, especially of their own bodies
and the labour they could accomplish with their own body, and like any other property owner they
had an interest in a system of property ownership in which their property was protected from
theft, fraud, and coercion:
‘THE property which every man has in his own labour, as it is the original foundation of all other
property, so it is the most sacred and inviolable.’ Such is the axiom in which Adam Smith proclaims the
charter of human freedom. It is a pregnant phrase, and the corollaries which follow from it are far-
reaching and important. A man’s property in himself gives him a right of exclusive use in his own labour,
and, as under the present subdivision of labour its principal use will consist in being exchanged for
wages, it gives him also a right of Free Exchange. To argue that exchange should be other than free is to
countenance slavery. This monopoly, or exclusive power of sale over his own labour, is sacred and
inviolable. It can only be exercised by the free will of the seller, that is to say, in Free Exchange. This
universal right vested in every seller of labour does not confer on any one man a right to compel others to
purchase his labour, for such a forced exchange would be a violation of our axiom, in that it compelled
other men to part with their labour, or the results of their labour, against their will. The axiom gives,
therefore, no guarantee of employment, no droit au travail; it merely affirms each man’s exclusive right
to take his own labour and services to market. Further, if the greater may be held to include the less, each
man has the same right of property over all that he obtains in exchange for his labour. In other words,
within the limits set by an enlightened jurisprudence, a man is entitled to dispose of his wages as he
thinks fit. In the infinite series of exchanges here foreshadowed, labour is ‘the original foundation of all
other [214] property.’ To complete our view of the organizing influence of exchange, another deduction
must be drawn, which seems to follow naturally from the axiom above stated. It is, that if a man has a
right of sale he has also a right of gift. Hence the jurisprudence of the civilized world, recognizing that
economically as well as physiologically the life of the child is a continuation of the life of the parent, has
sanctioned, what it is probably powerless to forbid, the right of inheritance and bequest, as being on the
whole the simplest and most equitable method of passing property from one generation to another.
Every man, then, has property in his own labour, his own mental efforts, and in the values which
neighbours freely give him in exchange for these. Liberty and Property, or, as relatively to an industrial
society it may more suggestively be stated, Free Exchange and Property are two inseparable ideas.
Source: Thomas Mackay, A Policy of Free Exchange. Essays by Various Writers on the
Economical and Social Aspects of Free Exchange and Kindred Subjects, edited by Thomas
Mackay (New York: D. Appleton and Co., 1894)./titles/314#Mackay_0135_446.
Wordsworth Donisthorpe (1847–1914) and Bruce Smith (1851–1937)
Two other radical individualists contributed to this critique of Fabian socialism., the Englishman
Wordsworth Donisthorpe (1847–1914) and the Australian Bruce Smith (1851–1937).
Wordsworth Donisthorpe (1847–1914)
Very little is known about Wordsworth Donisthorpe (1847–1914) other than his father was a
prosperous textile manufacturer, that he was a barrister, and that he also had a private income
income which enabled him to be active in promoting chess, inventing an early moving picture
camera, and radical libertarian politics. The latter included membership in the “Liberty and
Property Defence League” (1882) founded by Lord Elcho and whose weekly newsletter “Jus: A
Weekly Organ of Individualism” was edited by him. His main writings include Principles of
Plutology (1876), Individualism, a System of Politics (1889), and Law in a Free State (1895).
1. Individualism: A System of Politics (1889) /titles/291. Donisthorpe provides a theory of politics
from the individualist standpoint in the tradition of Herbert Spencer and Auberon Herbert. He
also attacks the rise of socialism which he regards as the greatest threat to social progress.
2. Law in a Free State (London: Macmillan and Co., 1895). /titles/290. A collection of essays by a
radical individualist political thinker on a range of topics which he called “the hardest nuts to
crack”, in other words, topics which pushed the theory of individual liberty to its limits. He
discusses questions of libel, of cruelty to animals, of copyright, of adulteration, of the relation of
the sexes, of rights over land, and of nuisance
In his book Individualism: A System of Politics (1889) the second last chapter is devoted to
exposing the errors of socialism, Chap. XI. An Analysis of Socialism” in which he examines a
pamphlet by the socialist James Leigh Joynes, The Socialist Catechism (1885). Among its many
faults he identifies the false distinction between the “use value” and the “exchange value” of an
object which was a central concept for many socialists:
As for the term “use value”, it is almost meaningless, and absolutely without either use or value as an
economic expression! It is impossible to measure the amount of pleasure which anything is capable of
affording. Such amount varies with the individual enjoying it. Moreover the different kinds of pleasure
enjoyed by a single individual are, inter sc, incommensurable. How many times does the pleasure of
eating cheese-cakes go into the pleasure of gazing on a lovely landscape, or listening to a grand
symphony? Let us clear our heads of all these cobwebs. The elements of plutology are not really very
difficult or mysterious. Most of the dust has been kicked up by the economists themselves. Let us see.
Wealth is everything which affords pleasure to man. Part of it is found ready to hand, contributed, so to
speaic, by nature: and part of it is due (in part) to the labour of man. But even this latter is not, as a rule,
wholly the product of labour. If the raw material had value before it was operated upon, that part of the
manufactured article’s value is due not to labour but to nature. The value of a thing is simply the amount
(according to any standard of measurement) of other things for which it can be exchanged. And this of
course varies in different localities. In London a spectroscope is wortth a good deal more than a handful
of glass beads; on the Gold Coast, a good deal less. The expression ” use value “should be abolished
altogether. Then value stands for exchange value, and that alone. The following statement, therefore,
amounts to nothing more than that a loaf is more useful to a hungry man than to one who is satiated.
This is quite true, but not very original or profound. ” Its use value to a starving man is infinitely great, as
it is a question of life and death with him to obtain it; it is nothing at all to a turtle-fed alderman, sick
already with excessive eating; but its exchange value remains the same in all cases.”
Source: Wordsworth Donisthorpe, Individualism: A System of Politics (London: Macmillan and

Co., 1889). /titles/291#Donisthorpe_1233_673.
Donsithorpe also wittily debunks the socialist idea of “surplus value” and the nature of exploitation
(plunder):
We are next introduced to “surplus value,” which is defined as the difference between a bare subsistence
and the fruits of labour. “Necessary labour is that which would feed and clothe and keep in comfort the
nation if all took their part in performing it.” It is already evident that Mr. Joynes, like all socialists, is a
member of the “Daniel Lambert” school of politics. To exist is necessary; to be fat is necessary: but to be
educated, cultured, something above the mere brute-that is not necessary, it is a luxury.
What do we mean by necessary labour? I mean nothing by it. I never use the expression. The labour
which results in a noble work of art is in my opinion quite as necessary as the labour which results in a
pair of corduroy trousers. …
No individual employer, we are told, is responsible for the exploitation of the labourers; the blame
applies to the whole class. Individual employers may be ruined, but the employing class continue to
appropriate the surplus value. And the reason of this is because competition is as keen amongst the
capitalists as among the labourers. It determines the division of [339] the spoil; different sets of people
struggling to get a share in the surplus value. It does not affect the labourers at all. It is assumed that the
plunder is to be shared among the “upper classes,” and the only question is in what proportion this shall
be done. All this may be quite true without justifying the language used when we are told that that which
the employers take from the employed is spoil and plunder. It is nothing of the sort. It is merely the
fruits of a bargain which, from the labourers’ point of view, is a very foolish and bad bargain. We may
admit that, without accusing those who get the best of the bargain of being plunderers.
But in what follows it is not the language only which is censurable, it is the gross fallacy on which the
whole socialist argument rests. “This plunder is labelled by many names, such as rent, brokerage, fees,
profits, wages of superintendence, reward of abstinence, insurance against risk, but above all, interest on
capital. They are all deducted from the labourers’ earnings. There is no other fund from which they could
possibly come, and they are simply taken for nothing, just as a thief accumulates his stolen goods.” Here
is the socialist fallacy in its nakedness. “There is no other fund from which they could possibly come!” i.e.
wages of superintendence, fees for medical attendance, and legal advice and such like; as if all these
payments were not for hard work and skilled work done. To say that a man who adds more to production
by working with his head than perhaps one hundred men do by-working with their hands is paid
necessarily out of the fruits of their labour is simply transparent nonsense.
Source: Individualism: A System of Politics (1889), /titles/291#Donisthorpe_1233_689.
Bruce Smith (1851–1937)
Bruce Smith (1851–1937) was an Australian Barrister and a Member of the Parliament of New
South Wales in the late 19th and early 20th centuries. Smith was one of the very few (perhaps the
only one) Spencerite liberals in the Australian colonies. He was influenced by the writings of the
English “Liberty and Property Defence League” which was a group of radical individualists and
free traders who had among their members Thomas Mackay and Auberon Herbert.
In his book Liberty and Liberalism (1888) Smith defends what he calls “True Liberalism” from the
“Socialist school” which was gaining influence in Britain and the Australian colonies. The True
Liberal sought only “equal opportunities” from the state, whereas the Socialists demanded “equal
wealth or social conditions” as well:
The principles which I have classed under the title of “True Liberalism” are almost identical with those
which an advocate of laissez faire (according to the proper meaning of the term) would approve. The
only difference, of any consequence, among the advocates of that principle is as to where that limit
should be placed, beyond which state interference should not go. Socialism is, in effect, a struggling for
equal or, at [434] least, approximately equal wealth and social conditions. It is none the less so because
of the impossibility of attaining to the extreme point desired, viz., absolute equality. That that attainment
is impossible has been admitted by Mr. Chamberlain himself, but he nevertheless advocates, as I have
shown in my opening chapter, the attempt at an approximation. The fundamental distinction which
appears to be unobserved by the advocates of Socialistic legislation is that which exists between equal
wealth or social conditions on the one hand, and equal opportunities on the other. No one now-a-days
would seriously contend that one citizen should possess better opportunities than another. It is
admitted, on all hands, that all should be equal in that respect, that is to say, that every citizen should be
free to attempt anything which his fellow-citizens are allowed to do. But Socialists claim that every
citizen should have or possess anything which his fellow-citizens possess. There is a great difference
between giving a man the liberty to do anything, and supplying him with the means with which to do it.
This distinction has been clearly stated by Hobbes in his own quaint way. He says, in the chapter of his
“Leviathan,” entitled “The Liberty of Subjects:” “When the impediment of motion is in the constitution of
the thing itself, we use not to say, it wants the liberty, but the power to move, as when a stone lieth still,
or a man is fastened to his bed by sickness.” True Liberalism would give to every man the liberty to do
anything which his fellow-citizens are allowed to do; but Socialism is not content with liberty only: it
wants the state to confer the power also, that is to say the means. If a man is incapable now-a-days of
living as he would wish, it is not by reason of the existence of any aristocratic privileges. There is now no
law of any kind, which restricts the liberty of the poor man, without also equally affecting the rich. There
is, now, no legislative or enforcible social restriction which will dictate to the poorest citizen [435] the
quality of clothes he may wear, the amount of wages he may receive, the number and nature of the
courses of which his meals may be constituted, the distances he may travel for work, or the nature of the
arrangements for combination which he may enter into with his fellow-workmen. He may wear apparel
as elaborate and as gaudy as that of Oliver Goldsmith in his most prosperous moments—if he possess it;
he is at liberty to receive wages as large as the income of a Vanderbilt—if only he can earn them; he can
live in true epicurean style—if only he be possessed of the viands; and he can, by combination with his
fellow-workmen, lift his wages to unprecedented levels—if only the laws of supply and demand will
admit of it. The state, far from interfering with him in the enjoyment of these liberties, has secured that
enjoyment to him—provided he obtain for himself, and that lawfully, the material which is essential to
such enjoyment. But while the state thus secures him that liberty of enjoyment of his own possessions, it
stops short, or should stop short at that stage at which he asks for the material itself. This is where
Individualism and Socialism diverge; and it requires, I think, only a moment’s reflection to see which is
the only possible policy of the two. Socialism practically says, “We have the liberty to dress and eat as we
like, to be educated and to lift our wages as high as economic laws will allow—but we want you to supply
us with the clothes, the food, the education, and the work itself even, out of that apparently inexhaustible
fund known as the general revenue.”
Source: Smith, Liberty and Liberalism (1888) /titles/296#SmithB_0306_960.
See:
Liberty and Liberalism: A Protest against the Growing Tendency toward undue
Interference by the State, with Individual Liberty, Private Enterprise and the Rights of
Property (1888) /titles/296. Smith was a follower of Herbert Spencer and the English
Liberty and Property Defence League. His book is a critique of the growing intervention of
the state in economic and civil matters in Australia and elsewhere in the late 19th century.
Chap. X deals with “Socialism and Communism.”
One of the last of the Spencerites in the 1890s and early 20th century was Auberon Herbert
(1838–1906). With a group of other late Victorian classical liberals he was active in such
organizations as the Personal Rights and Self-Help Association and the Liberty and Property
Defense League. He formulated a system of “thorough” individualism that he described as
“voluntaryism.” During the 1890s, Herbert engaged in lengthy published exchanges with two
prominent socialists of his day, E. Belfort Bax and J. A. Hobson, as in “Salvation by Force” (1898).
1. “The True Line of Deliverance” in Thomas Mackay, A Plea for Liberty: An Argument
against Socialism and Socialistic Legislation, consisting of an Introduction by Herbert
Spencer and Essays by Various Writers, edited by Thomas Mackay (Indianapolis: Liberty
Fund, 1981). Foreword by Jeffrey Paul. /titles/313#lf0071_head_025.
2. ”The Right and Wrong of Compulsion by the State (1895) and “Salvation by Force” (1898) in
Auberon Herbert, The Right and Wrong of Compulsion by the State (1895), and Other
Essays, ed. Eric Mack (Indianapolis: Liberty Fund, 1978). /titles/591
Whatever other objections Herbert had to socialism, the one that concerned him the most was the
socialist’s willingness to use force in order to achieve his social agenda.
Now let us get to business and see how the matter stands. Mr. Hobson justifies socialism—or the
compulsory organization of all human beings—by the fact of our social interdependence. In many forms
of words he returns again and again to the same point of view. Psychology brings, he tells us, “a cloud of
witnesses to prove the direct organic interaction of mind upon mind”; society is “an organic system of
the relations between individuals”; “the familiar experience of everyone exhibits thoughts, emotions,
character as elaborate social products”; “minds breathe a common atmosphere, and habitually influence
one another by constant interferences.” We are not, as he says, to look at “numbers,” but rather at “the
action of the social will.” Without examining critically these metaphors, that he employs, we need not so
far have any quarrel. We are all agreed probably that we are subject to innumerable influences, that we
all act and react upon each other in the great social whole, that the environment constantly affects and
modifies the individual. Marvelous indeed is the great subtle web of relations in which we are all bound
together—man and nature, man and man, body and mind, nation and nation, each forever interacting on
the other. But what in the name of good logic and plain common sense have this universal interaction
and interdependence to do with the fundamental dogmas of socialism? Socialism rests upon the
assumed right of some men to constrain other men. It naturally exhibits several varieties; but all the
thoroughgoing forms of it are so far alike that they depend upon universal compulsory organization. It
must be always borne in mind that socialism differs from other systems in this essential, that it
recognizes, and, so to speak, sanctifies compulsion as a universally true and proper method; and the
compulsion, which it sanctifies, must for practical reasons, as well as for the assumed virtues in
compulsion itself, be left undefined and unlimited in extent. It represents the belief that prosperity,
happiness, and morality are to be conferred upon the world by force—the force of some men applied to
other men.
That may be, or may not be. Force may be the greatest and most far-reaching thing in the world; or it
may be the weakest and most contemptible. But before we discuss the strength or the weakness of force
as a reforming instrument, before we decide what force can or cannot do on our behalf, we have to
consider, first of all, if we have a moral right to employ force. The socialist assumes—he is obliged to
assume for the sake of his system—that men have a right to use force for any purpose and to any extent
that he desires, in order that he may be enabled to restrain men from using their faculties for their own
individual advantage. If you ask which men are to be the depositories of force, he can only answer, the
biggest number of men; or if not the biggest number, then such a number of men as by efficient
organization can succeed in obtaining possession of power and in retaining it.
I need not spend time in proving this point. Every thoroughgoing socialist, who is willing to deal frankly
in the matter, will admit that socialism rests on the cornerstone of force. Private property is by force to
be turned into common property; and when that has taken place, no individual will be allowed to acquire
private property or to employ it for his own purposes, except to a very small extent, and under strict
regulations. John Smith could not be allowed to work for Richard Parker, as this would be a return to the
system of free labor, and must necessarily endanger the system of state labor. Richard Parker could not
be allowed to open a shop and sell his wares to John Smith, for this would be to allow free enterprise and
the individual acquisition of wealth once more to reappear in the world. The whole meaning of socialism
is force, applied in restraint of faculties. For good or for evil, it is the attempt to place all men and all
human affairs under a compulsory system; and to allow no free system to exist by the side of its own
system, which would be necessarily endangered by such rivalry. It differs from every free system in this
essential particular: that under liberty, you may give away your own liberty, if you think good, and be
socialist, or anything else you like; under socialism, you must be socialist, and may not make a place for
yourself in any free system. …

I have dwelt at some length on this question of force, because it is the test question, by which socialism
has to be tried. Socialism undertakes to save the world from all its sorrows by a greatly extended use of
force, a use of force, far exceeding the force which even emperors and despotic governments employ; and
what the philosophical and literary defenders of socialism—I do not mean the mere promisers of prize
money—have to do is to convince us first of all that force is a right weapon in itself—that we are morally
justified in using it against each other; and second, that it is likely—as far as we can judge by past
experience—when applied in this new universal fashion, to make men better and happier. Socialism
intends to found itself upon force; and therefore we stand upon the threshold, and call upon it, before it
goes any further, to justify force. Does Mr. Hobson do this? Does he lay any moral foundations for the
use of force? Does he satisfy us that three men may rightly do whatever they please with the minds,
bodies and property of two men? Does he satisfy us that the three men can produce any lawful
commission for saying to the two men: “Henceforth your faculties belong to us and not to you;
henceforth you are forbidden to employ those faculties for your own advantage, and in such fashion as
you choose; henceforth they are to be employed for what we are pleased to call the public good.” In
another paper, I hope to follow Mr. Hobson’s argument, and see how far it is suited to remove the
hesitations and scruples of those who believe that every man and woman is the true owners of his or her
own faculties, and that every forcible annexation of these faculties by others has prevented the world
from discovering the ways of true happiness.
Source: Auberon Herbert, The Right and Wrong of Compulsion by the State, and Other Essays,
ed. Eric Mack (Indianapolis: Liberty Fund, 1978). /titles/591#Herbert_0146_271.
French Socialism from the 1880s to WW1
The Critique of Frédéric Passy (1822–1912)
Frédéric Passy (1822–1912)
One of the last representatives of the radical free market “Paris School” of political economists,
Frédéric Passy (1822–1912), was asked to give a lecture at a conference surveying the state of
political economy in the French-speaking world in Geneva in 1890. He was the sole defender of the
free market and was confronted by three other hostile speakers who defended three different
forms of socialism and state intervention, Claudio Jannet who defended state socialism, Gaston
Stiegler who defended the communism of Ferdinand Lassalle, and Charles Gide who defended a
form of “cooperative socialism” based upon the ideas of the socialist Charles Fourier.
See my translation of Passy’s lecture for a good summary of the state of free market thinking at
this time and his criticism of these growing and influential socialist groups.
Quatre écoles d’économie sociale. Conférences données à l’aula de l’Université de Genève

sous les auspices de la Société chrétienne suisse d’économie sociale. L’École Le Play
(Claudio Jannet), L’École collectiviste (G. Stiegler), L’École nouvelle (Charles Gide), L’École
de la Liberté (Frédéric Passy). (Genève: Librairie Stapelmohr, éditeur, 1890). Frédéric
Passy’s lecture on “L’École de la Liberté” can be found on pp. 157–231.
David M. Hart, “For Whom the Bell Tolls: The School of Liberty and the Rise of
Interventionism in French Political Economy in the Late 19thC,” Journal of Markets and
Morality, vol. 20, Number 2 (Fall 2017), pp. 383–412.
See the critique of “state socialism”:
Ludwig Bamberger, “Socialisme d’état” (State Socialism), in Nouveau Dictionnaire

d’Économie Politique, publié sur la direction de M. Léon Say et de M. Joseph Chailley.
Deuxième édition (Paris: Librairie de Guillaumin et Cie, 1900). 1st ed. 1890. Vol. 2, pp.
866–882.
In his lecture to the other socialist economists at the Conference Passy warned them of the dangers
France would face if it adopted socialism. He believed that, whatever the intentions of the
socialists reformers were, it would be the state itself not the people would be the ultimate
beneficiary of any expanded powers:
Et c’est là. Messieurs, une considération qui devrait faire And herein, gentlemen, lies a consideration that should
réfléchir à la fois et les gouvernements et les gouvernés. give pause to both the governments and the people they
En étendant ses attributions, l’État, c’est-à-dire le govern. By expanding its functions, the State, that is to
gouvernement qui le représente, étend, comme le say the government that represents (them), expands its
remarque justementRobespierre, ses empiétements sur infringements upon the freedoms of the citizens, as
la libertés des citoyens. C’est un grand dommage pour Robespierre correctly noted. This comes at a hefty price
ceux-ci, car il diminue d’autant pour eux le champ de to them as it thus reduces the scope of their activities
leur activité [202] et les moyens de développer leur and the means to develop their personal worth. It can
valeur personnelle. Mais ce n’est pas un moindre also prove damaging to the government because as the
dommage pour lui, car il élargit d’autant ses scope of its responsibilities widen, likewise the chances
responsabilités, et augmente avec ses chances d’erreurs of errors increase and with them causes for disaffection.
les causes de mécontentement. Plus il exagère son As its action becomes more complex, the risks increase
action, plus, en la compliquant, il la rend hasardeuse, et and make it more vulnerable. It becomes more prone to
plus il multiplie du même coup ses côtés vulnérables. En arbitrary rule and, to use Robespierre’s observation
même temps qu’il offre plus de prise à l’arbitraire, pour again, offers greater opportunities for ambitious men.
reprendre encore l’observation de Robespierre, il en The more powerful it becomes, or appears to become,
offre davantage à l’ambition. Plus il est puissant ou plus the more it will come under attack, and thus (become)
il semble l’être, et plus il est attaqué, et par conséquent (more) fragile. You turn it into a dispenser of favors, the
fragile. Vous enfaites le dispensateur des faveurs, le regulator of wealth, to some a benefactor and to others a
régulateur des fortunes, le bienfaiteur des uns, et le “giver of orders” (prescripteur). But then everyone
proscripteur des autres. Mais chacun voudra être l’État, wants to become the state, or at least have the state at its
ou avoir tout au moins un État à sa guise ; et alors c’est beck and call; and then you have the perpetual struggle
la lutte perpétuelle des factions et des compétitions; between factions and and those competing (for power);
c’est l’incessante bascule de ceux qui tiennent la queue the unceasing back and forth between those who are
de la poêle et de ceux qui veulent la prendre ; c’est, holding the handle of the frying pan and those who want
comme le dit Bastiat, la loi cessant d’être le bouclier to get hold of it. As Bastiat puts it, the law stops being
commun, l’impartial et solide rempart de la liberté the common protective shield, the impartial and solid
contre les entreprises qui la menacent, la justice en un rampart of liberty against the organisations that
mot, et devenant ce qu’elle n’est que trop déjà, hélas ! le threaten it, in one word, justice, and becomes instead
champ de bataille de toutes les cupidités, de toutes les what it has already unfortunately become far too much,
convoitises et de toutes les illusions. the battlefield for all kinds of greed, covetousness, and
illusions.
Source: Frédéric Passy, “L’École de la Liberté” in Quatre écoles d’économie sociale (1890), p. 201–
2.
Source: My paper on Passy for Acton Institute: David M. Hart, “For Whom the Bell Tolls: The
School of Liberty and the Rise of Interventionism in French Political Economy in the Late 19thC,”
and Passy, “The School of Liberty” in Journal of Markets and Morality, vol. 20, Number 2 (Fall
2017), pp. 383–412. Online
http://www.marketsandmorality.com/index.php/mandm/article/view/1298 and
http://www.marketsandmorality.com/index.php/mandm/article/view/1299.
The Critique of Yves Guyot (1843–1928)
Yves Guyot (1843–1928)
Yves Guyot (1843–1928) was one of the leading French laissez-faire economists at the end of the
19th and in the early 20th century. He began his career as editor of several Republican newspapers
and journals in the late 1860s and early 1870s when France was wracked by the turmoil of the
Paris Commune and Franco-Prussian War. In the Third Republic he was elected to the Paris
Municipal Council and in 1885 to the national Chamber of Deputies. In 1889 he was appointed
Minister of Public Works. He was active in classical liberal economic circles as editor of the
Journal des Économistes, president of the Paris Société des Économistes, a member of the British
Cobden Club and the Royal Statistical Society, and also a member of the American Academy of
Political and Social Sciences. Among his many interests were taxation policy and opposition to
socialism in all its forms.
In his book The Tyranny of Socialism (1893) Guyot taunted the socialists of his day by saying they
were no better than the wealthy landowners and capitalists who wanted “protection” from foreign
imports.
Yes, large and small proprietors alike, those of you are Socialists, who beg for customs duties. For what is
it you ask, if not for the intervention of the State to guarantee the revenue of your property? What is it
you ask for, tradesmen and manufacturers of every kind, who seek the imposition of import duties, if not
for the intervention of the State to guarantee your profits? And what is it the Socialists ask, if not for the
intervention of the State to guarantee to the workman a maximum of work, a minimum of wage? In a
word, what is it you all ask, if not for the intervention of the State to protect you all against competition?
The Protectionist asks for protection from the competition of progress from without—the Socialist asks
for protection from the competition of activity within—and in aid of what? To throw political
interference into the scale so as to violate the Law of Supply and Demand for the arbitrary benefit of such
and such a class of producers or workmen, and to the detriment of all consumers and ratepayers, which
means—everybody.
This conception of the economic duties of the State is the same for the large landowner who calls himself
“conservative,” for the large manufacturer who scorns the Socialists, and for the miserable Socialist who
flings his scornful invectives against property and manufactures. They all make the same mistake. They
are all victims of the same illusion. Those who look upon one another as enemies are brothers in
doctrine. Hence it is that every recrudescence of [244] Protection engenders a revival of Socialism. The
Socialists of 1848 were the true sons of the Protectionist copyholders of the Restoration and of Louis-
Philippe’s Government. If Protectionists deny this intimate relationship, I will introduce them to a
Socialist who will say to them:
“You ask for customs duties so that your revenues and profits may be guaranteed. You appeal to the
superior interests of agriculture and national labour. So be it. You have even asked me to join you for this
purpose.1 But what share will you give to me—to me, the working man? You demand the aid of “society.”
I, too, claim a share in it, and with so much the more right that in society I hold, at least in point of
numbers, a larger place than yours.”
Source: Chap. VI. “Militarism, Protectionism, and Socialism” in Yves Guyot, The Tyranny of
Socialism, ed. J.H. Levy (London: Swan Sonnenschein and Co., 1894). 7/19/2018.
/titles/91#Guyot_0166_891
1. The Tyranny of Socialism (1893) /titles/91: In this volume, in the tradition of Bastiat, he
criticises what he calls “socialistic sophisms,” socialistic legislation, strikes, subsidies to
business, and the connection between militarism, protectionism, and socialism.
2. Socialistic Fallacies (1910) /titles/1166: One of several books Guyot wrote attacking
socialism in the late 19th and early 20th centuries. In this volume he provides a brief history
of socialist ideas, especially socialist utopian thinking from Plato to Paraguay, and an
extensive critique of modern socialist ideas in France (Saint-Simon and Proudhon) and
Germany (Marx). In the tradition of Frédéric Bastiat, he criticises what he calls socialistic
“sophisms” and “fallacies” such as the immiseration of the working class, the social class
war, and the future of socialism under democracy.
3. Where and Why Public Ownership has Failed (1912) /titles/326: In this volume, drawing
upon his experience as the French Minister for Public Works, Guyot discusses the
differences between public and private trading, with reference to railways, trams, public
housing, and various government monopolies, and examines the negative financial,
administrative, political, and social consequences, such as disorder, corruption, and waste.
We do not currently have any works by Paul Leroy-Beaulieu online but he is another strong anti-
socialist voice in France in the late 19thC.
Paul Leroy-Beaulieu (1843–1916) came from a well-connected Orléanist family in Paris and
became an influential economist and journalist. He studied law in Paris before doing further study
in Bonn and Berlin. In 1872 he was appointed a professor at the École libre des sciences politiques
and later went on to the Collège de France where he was made a professor of political economy in
1880. It was during this period that he founded L’Économiste française in 1873 which came to
rival the more orthodox classical liberal Journal des Économistes (founded 1842).
Leroy-Beaulieu made a name for himself with a number of works during the late 1860s and 1870s
on social questions, such as the working class, De l’État moral et intellectual des populations
ouvrières (1868) and La Question ouvrière au XIXe siècle (1872), and women, Le Travail des
femmes au XIXe siècle (1873). But much more controversial was his prize-winning work De la
Colonisation chez les peuples modernes (1874) which alienated mainstream political economists
with its support for French colonial expansion. In two later works he returned to a more anti-
statist position in his critique of socialism, Le Collectivisme: Examen critique du nouveau
socialisme (1884), and the expanding bureaucratic state, L’État moderne et ses fonctions (1890).
Some of his work has been translated into English:
Paul Leroy-Beaulieu, Collectivism; a study of some of the leading social questions of the
day. Tr. and abridged by Sir Arthur Clay (London, J. Murray, 1908).
Paul Leroy-Beaulieu, The modern state in relation to society and the individual (London, S.
Sonnenschein & co., 1891).
Paul Leroy-Beaulieu, Liberty and property: the two main factors of human progress
(London, Liberty & Property Defence League, 1897).
In the conclusion to his book on Collectivism (1884, 3rd. ed 1893) Leroy-Beaulieu argues that
there is no real different between the “moderate” socialists working within the Parliamentary
system and the radical, revolutionary socialists (Marxists, communists) who wanted to seize power
in a revolution. Their goals were the same in his view, only the means to achieve the goals differed:
It has been shown that there is no real difference between the various sects of socialists, whether they
call themselves “Socialistes réformistes,” “Solidaristes,” or “Collectivists.” Complete collectivism is the
ideal which, consciously or unconsciously, they all pursue. Some would advance rapidly and directly,
others would follow a less direct course, which, however, would affect but little the distance to be
traversed or the real rate of approach. Under the proposed regime,individual liberty and dignity must
disappear, either abruptly, as proposed by the Marxists, or gradually, as proposed by the “Socialistes
réformistes” and the “Solidaristes.” It is astonishing to see the number of socialist publications which
actually claim that their regime would secure the development of individual liberty and dignity! How
could liberty exist in a society in which everyone would be an employee of the state brigaded in
squadrons from which there would be no escape, dependent upon a system of official classification for
promotion, and for all the amenities of life! Even now, the commands issued by ministers, especially at
election time, and the arbitrary dismissals of employees, constitute an eloquent commentary upon the
liberty and [327] dignity of state employees; and this subjection of the individual to those in authority
would be greatly increased if the competition of private administration were abolished. The employee
(and all will be employees) would be the slave, not of the state, which is merely an abstraction, but of the
politicians who possessed themselves of power. A heavy yoke would be imposed upon all, and since no
free printing presses would exist, it would be impossible to obtain publicity for criticism or for grievances
without the consent of the government. The press censure exercised in Russia would be liberty itself
compared to that which would be the inevitable accompaniment of collectivism. However numerous the
dissentients, they would be condemned to silence and subjected to injustice under this régime; and a
tyranny such as has never been hitherto experienced, would close all mouths and bend all necks. Again,
what dignity could exist in a society when state obligations would be substituted for all moral duties?
Source: Paul Leroy-Beaulieu, Collectivism; a study of some of the leading social questions of the
day. Tr. and abridged by Sir Arthur Clay (London, J. Murray, 1908). Quote pp. 326–27.
War Socialism and Bolshevism in WW1 and the 1920s
The length and “total” nature of WW1 led many nations to introduce extensive controls of their
economies which in many ways amounted to a form of “war socialism.” This was most pronounced
in Germany where “Kriegssozialismus” (war socialism) was openly discussed and implemented by
the conservative military controlled by Generals Erich Ludendorf and Paul von Hindenburg. To a
lesser extent war socialism was also adopted in Great Britain and the United States (the War
Industries Board).
Vladimir Lenin (1870-1924)
It was also during WW1 that the communist Bolshevik Party under Vladimir Lenin seized control
in November 1917 and attempted to implement the first Marxist-inspired communist revolution.
Lenin himself had thought little about how exactly a communist system would look like and how it
would be organised (neither did Marx for that matter as he regarded it as unnecessary as the final
stage of capitalism would “prepare” the ground for its own eventual replacement). For some idea
of what Lenin had in mind see his pamphlet The State and Revolution (Aug.-Sept. 1917) especially
the extraordinary sections where he talks about modeling the administration of complex economic
entities such as factories and even the entire economy on that of the postal service.
“Capitalist culture has created large-scale production, factories, railways, the postal service, telephones,
etc., and on this basis the great majority of the functions of the old “state power” have become so
simplified and can be reduced to such exceedingly simple operations of registration, filing, and checking
that they can be easily performed by every literate person, can quite easily be performed for ordinary
“workmen’s wages”, and that these functions can (and must) be stripped of every shadow of privilege, of
every semblance of “official grandeur”.”
“A witty German Social-Democrat of the seventies of the last century called the postal service an example
of the socialist economic system. This is very true. At the present the postal service is a business
organized on the lines of state-capitalist monopoly. Imperialism is gradually transforming all trusts into
organizations of a similar type, in which, standing over the “common” people, who are overworked and
starved, one has the same bourgeois bureaucracy. But the mechanism of social management is here
already to hand. Once we have overthrown the capitalists, crushed the resistance of these exploiters with
the iron hand of the armed workers, “and smashed the bureaucratic machinery of the modern state, we
shall have a splendidly-equipped mechanism, freed from the “parasite”, a mechanism which can very
well be set going by the united workers themselves, who will hire technicians, foremen and accountants,
and pay them all, as indeed all “state” officials in general, workmen’s wages. Here is a concrete, practical
task which can immediately be fulfilled in relation to all trusts, a task whose fulfilment will rid the
working people of exploitation, a task which takes account of what the Commune had already begun to
practice (particularly in building up the state).
To organize the whole economy on the lines of the postal service so that the technicians, foremen and
accountants, as well as all officials, shall receive salaries no higher than “a workman’s wage”, all under
the control and leadership of the armed proletariat–that is our immediate aim. This is what will bring
about the abolition of parliamentarism and the preservation of representative institutions. This is what
will rid the laboring classes of the bourgeoisie’s prostitution of these institutions.”
Source: “4. The Higher Phase of Communist Society” in Lenin, The State and Revolution (Aug.-
Sept. 1917). Online: https://www.marxists.org/archive/lenin/works/1917/staterev/
Ludwig von Mises’s Critique of Central Planning under Communism
The Bolshevik experiment was closely observed by Ludwig von Mises who wrote Nation, State,
and Economy (1919) immediately after the war and then the second devastating critique of
Marxism, Die Gemeinwirtschaft (Socialism) (1922), in which he discussed the insoluble problem
of the impossibility of rational economic calculation under socialism (since there were no free
market prices, especially for capital goods, to tell factory owners what to produce and where).
Ludwig von Mises (1881–1973)
Ludwig von Mises (1881–1973) was the acknowledged leader of the Austrian School of economic
thought, a prodigious originator in economic theory, and a prolific author. Mises’ 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 which Mises called “praxeology”. He taught at the
University of Vienna and later at New York University. Mises wrote many works on two related
economic themes: 1. monetary economics, inflation, and the role of government, and 2. the
differences between government-controlled economies and free trade. His influential work on
economic freedoms, their causes and consequences, brought him to highlight the
interrelationships between economic and non-economic freedoms in societies, and the appropriate
role for government.
Mises’s key insight was to realize that rational economic calculation would be impossible under
complete socialism. In addition to the incentive problem of getting workers to work harder if all
were paid the same, there was the problem of apportioning the contribution of many of the factors
of production their correct share of the final product, especially for the different quality of skilled
or unskilled labour , or hardworking or lazy workers. Mises would later apply this same insight
into the much more problematic issue of the price of capital goods and the longer period of time it
would take for capital owners to be rewarded for their contribution:
In der sozialistischen Gesellschaftsordnung kann Under Socialism the usual connection between work
zwischen Arbeitsleistung und Arbeitsentgelt keine performed and its remuneration cannot exist. All
derartige Beziehung bestehen. An der Unmöglichkeit, attempts to ascertain what the work of the individual
rechnerisch die produktiven Beitrage der einzelnen has produced and thereby to determine the wage rate,
Produktionsfaktoren zu ermitteln, müßten alle Versuche must fail because of the impossibility of calculating the
scheitern, den Ertrag der Arbeit des Einzelnen productive contributions of the different factors of
festzustellen und danach den Lohn zu bestimmen. Das production. The socialist community could probably
sozialistische Gemeinwesen kann wohl die Verteilung make distribution dependent upon certain external
von gewissen äußerlichen Momenten der aspects of the work performed. But any such
Arbeitsleistung abhängig machen; aber jede derartige differentiation would be arbitrary. Let us suppose that
Differenzierung beruht auf Willkür. Nehmen wir an, es the minimum requirement is determined for each
werde für jeden Produktionszweig das Mindestmaß der branch of production. Let us suppose this is done on the
Leistungen festgesetzt. Nehmen wir an, daB das in der basis of Rodbertus’ proposal for a “normal working
Weise geschähe, [151] wie es Rodbertus als ,,normalen day.” For each industry there is laid down the time
Werkarbeitstag" vorschlägt. Für jedes Gewerbe werden which a worker with average strength and effort can
die Zeit, die ein Arbeiter mit mittlerer Kraft und continue to work and the amount of work which an
Anstrengung dauernd arbeiten kann, und dann die average worker of average skill and industry can
Leistung, die ein mittlerer Arbeiter bei mittlerer perform in this time. We will completely ignore the
Geschicklichkeit und mittlerem Fleiß wahrend dieser technical difficulties in the way of deciding, in any
Zeit vollbringen kann, festgesetzt. Von den technischen particular concrete example the question whether this
Schwierigkeiten, die dann in jedem einzelnen konkreten minimum has been achieved or not. Nevertheless it is
Falle der Beurteilung der Frage, ob dieses Mindestmaß obvious that any such general determination can only be
tatsachlich erreicht wurde oder nicht, entgegenstehen, quite arbitrary. The workers of the different industries
wollen wir dabei ganz absehen. Doch es ist klar, daß eine would never be made to agree on this point. Everyone
derartige allgemeine Festsetzung nicht anders als would maintain that he had been overtasked and would
willkürlich sein kann. Eine Einigung darüber wird strive for a reduction of the amount set to him. Average
zwischen den Arbeitern der einzelnen Gewerbe nie zu quality of the worker, average skill, average strength,
erzielen sein. Jeder wird behaupten, durch die average effort, average industry—these are all vague
Festsetzung überbürdet worden zu sein, und nach conceptions that cannot be exactly determined.
Herabminderung der ihm auferlegten Aufgaben streben.
Mittlere Qualität des Arbeiters, mittlere Now it is evident that the minimum performance
Geschicklichkeit, mittlere Kraft, mittlere Anstrengung, calculated for the worker of average quality, skill, and
mittlerer Fleiß sind vage Begriffe, die nicht exakt strength will be achieved only by a part—say one-half—
festgestellt werden können. of the workers. The others will do less. How can the
authorities ascertain whether a performance below the
Nun aber ist es klar, daB ein Mindestmaß an Leistung, minimum is due to laziness or incapacity? Either the
das auf die Arbeiter von mittlerer Qualität, mittlerer unfettered decision of the administration must be
Geschicklichkeit und mittlerer Kraft berechnet ist, nur allowed free play, or certain general criteria must be
von einem Teil, sagen wir, von der Hälfte der Arbeiter, established. Doubtless, as a result, the amount of work
erreicht werden kann. Die anderen werden weniger performed would be continually reduced.
leisten. Wie soil dann geprüft werden, ob einer aus
Unfleiß oder aus Unvermögen hinter der
Mindestleistung zurückgeblieben ist ? Auch hier muß
entweder dem freien Ermessen der Organe ein weiter
Spielraum gelassen werden, oder man muß sich
entschließen, gewisse allgemeine Merkmale festzulegen.
Zweifellos wird aber der Erfolg der sein, daB die Menge
der geleisteten Arbeit immer mehr und mehr sinkt.
In der kapitalistischen Gesellschaftsordnung ist jeder Under Capitalism everybody who takes an active part in
einzelne in der Wirtschaft Tätige darauf bedacht, daß business life is concerned that labour should be paid the
jeder Arbeit ihr voller Ertrag zufalle. Der Unternehmer, whole product. The employer who dismisses a worker
der einen Arbeiter, der seinen Lohn wert ist, entlaßt, who is worth his wage harms himself. The foreman who
schädigt sich selbst. Der Zwischenvorgesetzte, der einen discharges a good worker and retains a bad one,
guten Arbeiter entlaßt und einen schlechten behalt, adversely affects the business results of the department
schädigt das Geschäftsergebnis sich selbst. Hier ist die under his charge, and thereby indirectly himself. Here
Aufstellung formaler Merkmale zur Einschränkung des we do not need formal criteria to limit the decisions of
Ermessens derer, die die Arbeitsleistungen zu beurteilen those who have to judge the work performed. Under
haben, nicht erforderlich. In der sozialistischen Socialism such criteria would have to be established,
Gesellschaftsordnung müssen solche aufgestellt werden, because otherwise the powers entrusted to persons in
weil sonst die den Vorgesetzten eingeräumten Rechte charge could be arbitrarily misused. And so then the
[152] willkürlich mißbraucht werden konnten. Dann worker would have no further interest in the actual
aber hat kein Arbeiter ein Interesse mehr, wirklich performance of work. He would only be concerned to do
etwas zu leisten. Er hat nur noch das Interesse, die as much as is prescribed by the formal criteria in order
formalen Bedingungen zu erfüllen, die er erfüllen muß, to avoid punishment.
wenn er nicht straffällig werden will.
What kind of results will be achieved by workers, who
Was für Ergebnisse Arbeiter, die am Ertrag der Arbeit are not directly interested in the product of the work,
nicht interessiert sind, erzielen, lehrt die Erfahrung, die can be learnt from the experience of a thousand years of
man in Jahrtausenden mit der unfreien Arbeit gemacht slave labour. Officials and employees of state and
hat. Ein neues Beispiel bieten die Beamten und municipal undertakings provide new examples. An
Angestellten der staats- und kommunalsozialistischen attempt may be made to weaken the argumentative
Betriebe. Man mag die Beweiskraft dieser Beispiele force of the first example by contending that these
damit abzuschwächen suchen, daß man darauf hinweist, workers had no interest in the result of their labour
diese Arbeiter hätten kein Interesse am Erfolg ihrer because they did not share in the distribution; in the
Arbeit, weil sie selbst bei der Verteilung leer ausgehen; socialist community everyone would realize that he was
im sozialistischen Gemeinwesen werde jeder wissen, working for himself and that would spur him on to the
daß er für sich arbeitet, und das werde ihn zu höchstem highest activity. But this is just the problem. If the
Eifer anspornen. Doch darin liegt ja gerade das worker exerts himself more at the work then he has so
Problem: Wenn der Arbeiter sich bei der Arbeit mehr much the more labour disutility to overcome. But he will
anstrengt, dann hat er um so viel mehr Arbeitsleid zu receive only an infinitesimal fraction of the result of his
überwinden. Von dem Erfolg der Mehranstrengung increased effort. The prospect of receiving a two
kommt ihm aber nur ein verschwindender Bruchteil zu. thousand millionth part of the result of his increased
Die Aussicht darauf, ein halbes Milliardstel dessen, was effort will scarcely stimulate him to exert his powers any
durch seine Mehranstrengung erzielt wurde, auch more than he needs.
wirklich für sich behalten zu dürfen, kann keinen [116]
genügenden Anreiz zur Anspannung der Kräfte bieten.
Socialist writers generally pass over these ticklish
Die sozialistischen Schriftsteller pflegen über diese questions in silence or with a few inconsequential
heiklen Fragen mit Stillschweigen oder mit einigen remarks. They only bring forward a few moralistic
nichtssagenden Bemerkungen hinwegzugleiten. Sie phrases and nothing else. The new man of Socialism will
wissen nichts anderes vorzubringen als einige be free from base self-seeking; he will be morally
moralisierende Sentenzen. Der neue Mensch des infinitely above the man of the frightful age of private
Sozialismus werde von niedriger Selbstsucht frei sein, er property and from a profound knowledge of the
werde sittlich unendlich hoch über dem Menschen der coherency of things and from a noble perception of duty
bösen Zeit des Sondereigentums stehen und aus he will devote all his powers to the general welfare.
vertiefter Erkenntnis des Zusammenhanges der Dinge But closer examination shows that these arguments lead
und aus edler Auffassung seiner Pflicht seine Kräfte in to only two conceivable alternatives: free obedience to
den Dienst des allgemeinen Besten stellen. Sieht man the moral law with no compulsion save that of the
aber naher zu, dann bemerkt man unschwer, daß sich individual conscience, or enforced service under a
ihre Ausführungen nur um jene beiden allein denkbaren system of reward and punishment. Neither will achieve
Alternativen drehen: Freie Befolgung des Sittengesetzes the end. The former supplies no sufficient incentive to
ohne jeden anderen Zwang als den des eigenen persist in overcoming the disutility of labour even
Gewissens oder Erzwingung der Leistungen durch ein though it is publicly extolled on every possible occasion
System von Belohnungen und Strafen. Keine von beiden and proclaimed in all schools and churches; the latter
kann zum Ziele führen. Jene bietet, auch wenn sie can only lead to a formal performance of duty, never to
tausendmal öffentlich gepriesen und in alien Schulen performance with the expenditure of all one’s powers.
und Kirchen verkündet wird, keinen genügenden
Antrieb, immer wieder das Arbeitsleid zu überwinden;
diese kann nur [153] eine formale Erfüllung der Pflicht,
niemals eine Erfüllung mit höchstem Einsatz der
eigenen Kraft erzielen.
Source: Mises, Die Gemeinwirtschaft. (1932), pp. 150-53.
Source: Mises, Socialism (LF ed.), pp. 115–16.
§ 2. Die Theorie der Wirtschaftsrechnung zeigt, daB im The theory of economic calculation shows that in the
sozialistischen Gemeinwesen Wirtschaftsrechnung nicht socialistic community economic calculation would be
möglich ist. impossible.
[87]
In jedem größeren Unternehmen sind die einzelnen
Betriebe oder Betriebsabteilungen in der Verrechnung In any large undertaking the individual works or
bis zu einem gewissen Grade selbständig. Sie departments are partly independent in their accounts.
verrechnen gegenseitig Materialien und Arbeit, und es They can reckon the cost of materials and labour, and it
ist jederzeit möglich, für jede einzelne Gruppe eine is possible at any time for an individual group to strike a
besondere Bilanz aufzustellen, und die Ergebnisse ihrer separate balance and to sum up the results of its activity
Tätigkeit rechnerisch zu erfassen. Man vermag auf diese in figures. In this way it is possible to ascertain with
Weise festzustellen, mit welchem Erfolg jede einzelne what success each separate branch has been operated
Abteilung gearbeitet hat, und darnach Entschlüsse über and thereby to make decisions concerning the
die Umgestaltung, Einschränkung oder Erweiterung reorganization, limitations or extension of existing
bestehender Gruppen und über die Einrichtung neuer branches or the establishment of new ones. Some
zu fassen. Gewisse Fehler sind bei solchen mistakes are of course unavoidable in these calculations.
Berechnungen freilich unvermeidlich. Sie rühren zum They arise partly from the difficulty of allocating
Teil von den Schwierigkeiten her, die sich bei der overhead costs. Other mistakes again arise from the
Aufteilung der Generalunkosten ergeben. Andere Fehler necessity of calculating from insufficiently determined
wieder entstehen aus der Notwendigkeit, in mancher data, as, e.g. when in calculating the profitability of a
Hinsicht mit nicht genau ermittelbaren Daten zu certain process, depreciation of the machinery employed
rechnen, z. B. wenn man bei Ermittlung der Rentabilität is determined by assuming a certain working life for the
eines Verfahrens die Amortisation der verwendeten machine. But all such errors can be confined within
Maschinen unter Annahme einer bestimmten Dauer certain narrow limits which do not upset the total result
ihrer Verwendungsfähigkeit berechnet. Doch alle of the calculation. Whatever uncertainty remains is
derartige Fehler können innerhalb gewisser enger attributed to the uncertainty of future conditions
Grenzen gehalten werden, so daß sie das inevitable in any imaginable state of affairs.
Gesamtergebnis der Rechnung nicht stören. Was an
Ungewißheit übrig bleibt, kommt auf Rechnung der It seems natural then to ask why individual branches of
Ungewißheit künftiger Verhältnisse, die in keinem production in a socialistic community should not make
denkbaren System behoben werden könnte. separate accounts in the same manner. But this is
impossible. Separate accounts for a single branch of one
Es scheint nun nahezuliegen, in analoger Weise es auch and the same undertaking are possible only when prices
im sozialistischen Gemeinwesen mit selbständiger for all kinds of goods and services are established in the
Verrechnung der einzelnen Produktionsgruppen zu market and furnish a basis of reckoning. Where there is
versuchen. Das ware jedoch unmöglich, denn jene no market there is no price system, and where there is
selbständige Verrechnung der einzelnen Zweige eines no price system there can be no economic calculation.
und desselben [111] Unternehmens beruht
ausschließlich darauf, daß im Marktverkehr für alle
Arten von verwendeten Gütern und Arbeitern
Marktpreise gebildet werden, die zur Grundlage der
Rechnung genommen werden können. Wo der
Marktverkehr fehlt, gibt es keine Preisbildung; ohne
Preisbildung gibt es keine Wirtschaftsrechnung.
Source: Mises, Die Gemeinwirtschaft. (1932), pp. 110-11.
Source: “Economic Calculation in the Socialist Community”, in Ludwig von Mises, Socialism: An
Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis:
Liberty Fund, 1981). /titles/1060#lf0069_label_349.
See:
Ludwig von Mises, Nation, State, and Economy: Contributions to the Politics and History
of Our Time, trans. Leland B. Yeager, ed. Bettina Bien Greaves (Indianapolis: Liberty
Fund, 2006). /titles/1819 (1919). Nation, State, and Economy, published less than a year
after Austria’s defeat in World War I, examines and compares prewar and postwar
economic conditions and explicates Mises’s theory that each country’s prosperity supports
rather than undercuts the prosperity of other countries. Two sections of the book deal with
socialism: the policy of “war socialism” adopted by Germany during the war, and “Socialism
and Imperialism” in which he discusses socialist utopianism, different kinds of socialism,
and socialism’s connection with imperialism.
Ludwig von Mises, Die Gemeinwirtschaft. Untersuchungen über den Sozialismus. Zweite,
umgearbeitete Auflage (Jena: Gustave Fischer, 1932). 1st ed. 1922.
Ludwig von Mises, Socialism: An Economic and Sociological Analysis, trans. J. Kahane,
Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981). /titles/1060 (1922). See
especially “Appendix . A Contribution To The Critique Of Attempts To Construct A System
Of Economic Calculation For The Socialist Community” /titles/1060#lf0069_head_216.
“This book must rank as the most devastating analysis of socialism yet penned… . An
economic classic in our time.” (Henry Hazlitt). More than thirty years ago F. A. Hayek said
of Socialism: “It was a work on political economy in the tradition of the great moral
philosophers, a Montesquieu or Adam Smith, containing both acute knowledge and
profound wisdom… . To none of us young men who read the book when it appeared was the
world ever the same again.” This is a newly annotated edition of the classic first published in
German in 1922. It is the definitive refutation of nearly every type of socialism ever devised.
Mises presents a wide-ranging analysis of society, comparing the results of socialist
planning with those of free-market capitalism in all areas of life. Friedrich Hayek’s foreword
(not available online for copyright reasons) comments on the continuing relevance of this
great work: “Most readers today will find that Socialism has more immediate application to
contemporary events than it had when it first appeared.”
Ludwig von Mises, Selected Writings of Ludwig von Mises, vol. 2: Between the Two World
Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression, edited
and with an Introduction by Richard M. Ebeling (Indianapolis: Liberty Fund, 2002).
/titles/2665. See in particular
Part VII: Economic Calculation under Socialism (1923–1932). Vol. 2 of a three
volume collection of Mises’ essays found in Moscow in 1996. Vol. 2 contains essays on
inflation, interventionism, the great depression, Austrian economic policy, autarchy,
the theory of Austrian economics, and economic calculation under socialism.
War Socialism, Interventionism, and Bureaucracy in WW2
Ludwig von Mises (again)
Ludwig von Mises (1881–1973)
Mises continued his attack on socialism, central planning of the economic, and what he called
“interventionism” in several works, including:
Ludwig von Mises, Interventionism: An Economic Analysis, Edited with a Foreword by

Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011). /titles/2394 (1940) .
Interventionism provides Mises’s analysis of the problems of government interference in
business from the Austrian School perspective. Written in 1940, before the United States
was officially involved in World War II, this book offers a rare insight into the war
economies of Hitler’s Germany and Mussolini’s Italy. Mises criticizes the pre-World War II
democratic governments for favoring socialism and interventionism over capitalist methods
of production. Mises contends that government’s economic role should be limited because
of the negative political and social consequences of the economic policy of interventionism.
Ludwig von Mises, Bureaucracy, edited and with a Foreword by Bettina Bien Greaves
(Indianapolis: Liberty Fund, 2007). /titles/1891 (1944). Originally published by Yale
University Press in 1944, Bureaucracy is a classic fundamental examination of the nature of
bureaucracies and free markets in juxtaposition to various political systems. Bureaucracy
contrasts the two forms of economic management—that of a free market economy and that
of a bureaucracy. In the market economy entrepreneurs are driven to serve consumers by
their desire to earn profits and to avoid losses. In a bureaucracy, the managers must comply
with orders issued by the legislative body under which they operate; they may not spend
without authorization and they may not deviate from the path prescribed by law. Writing in
an age of exuberant socialism, Ludwig von Mises here lucidly demonstrates how the
efficiencies of private ownership and control of public good production ultimately trump the
guesswork of publicly administered “planning” through codes and “officialdom.” Although
Mises aptly critiques bureaucracy and expounds thoroughly upon the immense power of
law-like codes of commissions and administrations, he does not condemn nor dismiss
bureaucracy but rather frames its proper bounds within constitutional democratic
governments.
Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War,
edited with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011).
/titles/2399 (1944). Published in 1944, during World War II, Omnipotent Government was
Mises’s first book written and published after he arrived in the United States. In this volume
Mises provides in economic terms an explanation of the international conflicts that caused
both world wars. Although written more than half a century ago, Mises’s main theme still
stands: government interference in the economy leads to conflicts and wars. According to
Mises, the last and best hope for peace is liberalism—the philosophy of liberty, free markets,
limited government, and democracy.
Ludwig von Mises, Human Action: A Treatise on Economics, in 4 vols., ed. Bettina Bien
Greaves (Indianapolis: Liberty Fund, 2007). Vol. 3. /titles/1895 (1949). In volume three of
his magnum opus on economic theory Mises discusses socialism in some detail.
Part 5: Social Cooperation Without a Market
Part 6: The Hampered Market Economy
Ludwig von Mises, The Anti-capitalist Mentality, edited and with a preface by Bettina Bien
Greaves (Indianapolis: Liberty Fund, 2006). /titles/1889 (1956). In The Anti-capitalistic
Mentality, the respected economist Ludwig von Mises plainly explains the causes of the
irrational fear and hatred many intellectuals and others feel for capitalism. In five concise
chapters, he traces the causation of the misunderstandings and resultant fears that cause
resistance to economic development and social change. He enumerates and rebuts the
economic arguments against and the psychological and social objections to economic
freedom in the form of capitalism. Written during the heyday of twentieth-century
socialism, this work provides the reader with lucid and compelling insights into human
reactions to capitalism.
Ludwig von Mises, Economic Freedom and Interventionism: An Anthology of Articles and
Essays, selected and edited by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007).
/titles/1887 (1990). Economic Freedom and Interventionism is both a primer of the
fundamental thought of Ludwig von Mises and an anthology of the writings of perhaps the
best-known exponent of what is now known as the Austrian School of economics. This
volume contains forty-seven articles edited by Mises scholar Bettina Bien Greaves. Among
them are Mises’s expositions of the role of government, his discussion of inequality of
wealth, inflation, socialism, welfare, and economic education, as well as his exploration of
the “deeper” significance of economics as it affects seemingly noneconomic relations
between human beings. These papers are essential reading for students of economic
freedom and the science of human action.
In his magnum opus Human Action (1949) Mises discusses a third kind of economic system which
called “interventionism”:
Private ownership of the means of production (market economy or capitalism) and public ownership of
the means of production (socialism or communism or “planning”) can be neatly distinguished. Each of
these two systems of society’s economic organization is open to a precise and unambiguous description
and definition. They can never be confounded with one another; they cannot be mixed or combined; no
gradual transition leads from one of them to the other; they are mutually incompatible. With regard to
the same factors of production there can only exist private control or public control. If in the frame of a
system of social cooperation only some means of production are subject to public ownership while the
rest are controlled by private individuals, this does not make for a mixed system combining socialism
and private ownership. The system remains a market society, provided the socialized sector does not
become entirely separated from the non-socialized sector and lead a strictly autarkic existence. (In this
latter case there are two systems independently coexisting side by side—a capitalist and a socialist.)
Publicly owned enterprises operating within a system in which there are privately owned enterprises and
a market, and socialized countries, exchanging goods and services with nonsocialist countries, are
integrated into a system of market economy. They are subject to the law of the market and have the
opportunity of resorting to economic calculation. … /titles/1895#Mises_3843-03_119
The first pattern (we may call it the Lenin or the Russian pattern) is purely bureaucratic. All plants,
shops, and farms are formally nationalized (verstaatlicht); they are departments of the government
operated by civil servants. Every unit of the apparatus of production stands in the same relation to the
superior central organization as does a local post office to the office of the postmaster general.
The second pattern (we may call it the Hindenburg or German pattern) nominally and seemingly
preserves private ownership of the means of production and keeps the appearance of ordinary markets,
prices, wages, and interest rates. There are, however, no longer entrepreneurs, but only shop managers
(Betriebsführer in the terminology of the Nazi legislation). These shop managers are seemingly
instrumental in the conduct of the enterprises entrusted to them; they buy and sell, hire and discharge
workers and remunerate their services, contract debts and pay interest and amortization. But in all their
activities they are bound to obey unconditionally the orders issued by the government’s supreme office of
production management. This office (the Reichswirtschaftsministerium in Nazi Germany) tells the shop
managers what and how to produce, at what prices and from [718] whom to buy, at what prices and to
whom to sell. It assigns every worker to his job and fixes his wages. It decrees to whom and on what
terms the capitalists must entrust their funds. Market exchange is merely a sham. …
/titles/1895#Mises_3843-03_123
It is necessary to point out this fact in order to prevent a confusion of socialism and interventionism. The
system of interventionism or of the hampered market economy differs from the German pattern of
socialism by the very fact that it is still a market economy. The authority interferes with the operation of
the market economy, but does not want to eliminate the market altogether. It wants production and
consumption to develop along lines different from those prescribed by an unhampered market, and it
wants to achieve its aim by injecting into the working of the market orders, commands, and prohibitions
for whose enforcement the police power and its apparatus of violent compulsion and coercion stand
ready. But these are isolated acts of intervention. It is not the aim of the government to combine them
into an integrated system which determines all prices, wages and interest rates and thus places full
control of production and consumption into the hands of the authorities.
The system of the hampered market economy or interventionism aims at preserving the dualism of the
distinct spheres of government activities on the one hand and economic freedom under the market
system on the other hand. What characterizes it as such is the fact that the government does not limit its
activities to the preservation of private ownership of the means of production and its protection against
violent or fraudulent encroachments. The government interferes with the operation of business by
means of orders and prohibitions.
The intervention is a decree issued directly or indirectly, by the authority in charge of society’s
administrative apparatus of coercion and compulsion which forces the entrepreneurs and capitalists to
employ some of the factors of production in a way different from what they would have resorted to if they
were only obeying the [719] dictates of the market. Such a decree can be either an order to do something
or an order not to do something. It is not required that the decree be issued directly by the established
and generally recognized authority itself. It may happen that some other agencies arrogate to themselves
the power to issue such orders or prohibitions and to enforce them by an apparatus of violent coercion
and oppression of their own. If the recognized government tolerates such procedures or even supports
them by the employment of its governmental police apparatus, matters stand as if the government itself
had acted. If the government is opposed to other agencies’ violent action, but does not succeed in
suppressing it by means of its own armed forces, although it would like to suppress it, anarchy results.
It is important to remember that government interference always means either violent action or the
threat of such action. The funds that a government spends for whatever purposes are levied by taxation.
And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know
that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is
able to collect the money that it wants to spend. Government is in the last resort the employment of
armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of
government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking
for more government interference are asking ultimately for more compulsion and less freedom.
/titles/1895#Mises_3843-03_125
Source: /titles/1895#lf3843-03_label_322
Friedrich Hayek on Intellectuals on the Road to Serfdom
Friedrich Hayek (1899-1992)
From his position at the London School of Economics Friedrich Hayek also could observe the
economic and political problems caused by central planning under the Bolsheviks and the British
government’s efforts to run the British economy during WW2.
Unfortunately, we do not have the electronic rights to the books by Hayek which LF publishes. See
the University of Chicago press The Collected Works of F.A. Hayek, ed. Bruce Caldwell
http://press.uchicago.edu/ucp/books/series/CWFAH.html.
See:
The Road to Serfdom. The Definitive Edition. Edited by Bruce Caldwell In The Collected
Works of F.A. Hayek (University of Chicago Press, 1944, 2007).
http://press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html From the
publisher’s blurb: “An unimpeachable classic work in political philosophy, intellectual and
cultural history, and economics, The Road to Serfdom has inspired and infuriated
politicians, scholars, and general readers for half a century. Originally published in 1944—
when Eleanor Roosevelt supported the efforts of Stalin, and Albert Einstein subscribed lock,
stock, and barrel to the socialist program—The Road to Serfdom was seen as heretical for its
passionate warning against the dangers of state control over the means of production. For F.
A. Hayek, the collectivist idea of empowering government with increasing economic control
would lead not to a utopia but to the horrors of Nazi Germany and Fascist Italy.”
CW1: The Fatal Conceit: The Errors of Socialism, ed. W.W. Bartley III (University of
Chicago Press, 1989).
http://press.uchicago.edu/ucp/books/book/chicago/F/bo3643985.html From the
publisher’s blurb: “Hayek gives the main arguments for the free-market case and presents
his manifesto on the “errors of socialism.” Hayek argues that socialism has, from its origins,
been mistaken on factual, and even on logical, grounds and that its repeated failures in the
many different practical applications of socialist ideas that this century has witnessed were
the direct outcome of these errors. He labels as the “fatal conceit” the idea that “man is able
to shape the world around him according to his wishes.””
CW10: Socialism and War: Essays, Documents, Reviews. Edited by Bruce Caldwell
(Indianapolis: Liberty Fund, 2009). https://www.libertyfund.org/books/socialism-and-
war. In the essays in this volume Hayek contributed to economic knowledge in the context
of socialism and war, while providing an intellectual defense of a free society. The
connection between the two topics is illuminated through essays containing some of
Hayek’s contributions to the socialist-calculation debate, writings pertaining to war, and the
cult of scientific economic planning from the late 1930s and 1940s.
“The Intellectuals and Socialism,” The University of Chicago Law Review (Spring 1949),
pp. 417–433, The University of Chicago Press; George B. de Huszar ed., The Intellectuals: A
Controversial Portrait (Glencoe, Illinois: the Free Press, 1960) pp. 371–84. Also an edition
by the Institute for Humane Studies, 1990.
In 1950 Hayek pondered why so many intellectuals (or what he termed “the professional
secondhand dealers in ideas”) of his era were attracted to socialism. He concluded that they are
drawn to the “visionary” ideal of the possibility of an “entire reconstruction of society” along
socialist lines, something which he believed classical liberalism was sorely lacking.
The selection of the personnel of the intellectuals is also closely connected with the predominant interest
which they show in general and abstract ideas. Speculations about the possible entire reconstruction of
society give the intellectual a fare much more to his taste than the more practical and short-run
considerations of those who aim at a piecemeal improvement of the existing order. In particular, socialist
thought owes its appeal to the young largely to its visionary character; the very courage to indulge in
Utopian thought is in this respect a source of strength to the socialists which traditional liberalism sadly
lacks. This difference operates in favor of socialism, not only because speculation about general
principles provides an opportunity for the play of the imagination of those who are unencumbered by
much knowledge of the facts of present-day life, but also because it satisfies a legitimate desire for the
understanding of the rational basis of any social order and gives scope for the exercise of that
constructive urge for which liberalism, after it had won its great victories, left few outlets. The
intellectual, by his whole disposition, is uninterested in technical details or practical difficulties. What
appeal to him are the broad visions, the spacious comprehension of the social order as a whole which a
planned system promises.
This fact that the tastes of the intellectual were better satisfied by the speculations of the socialists
proved fatal to the influence of the liberal tradition. Once the basic demands of the liberal programs
seemed satisfied, the liberal thinkers turned to problems of detail and tended to neglect the development
of the general philosophy of liberalism, which in consequence ceased to be a live issue offering scope for
general speculation. Thus for something over half a century it has been only the socialists who have
offered anything like an explicit program of social development, a picture of the future society at which
they were aiming, and a set of general principles to guide decisions on particular issues. Even though, if I
am right, their ideals suffer from inherent contradictions, and any attempt to put them into practice
must produce something utterly different from what they expect, this does not alter the fact that their
program for change is the only one which has actually influenced the development of social institutions.
It is because theirs has become the only explicit general philosophy of social policy held by a large group,
the only system or theory which raises new problems and opens new horizons, that they have succeeded
in inspiring the imagination of the intellectuals.
Source: Hayek, “The Intellectuals and Socialism” (IHS ed.), pp. 19–20.
Post WW2 Communism
The Experience of Ljubo Sirc (1920–2016)
To get some idea of what life was like under communism see this interesting interview with a free
market economist who lived in Yugoslavia.
Ljubo Sirc (1920–2016) was trained in both economics and law, and was thus able to unite the
perspective of a scholar with personal experience to observe firsthand the dangers of communist
regimes. Born in Kranj, Slovenia, he participated in the Resistance and served in the Yugoslav
Army between 1941 and 1945. In 1947, due to his political opposition and friendship with Western
diplomats, he was sentenced to death. His sentence was ultimately commuted to twenty years in
prison, of which he served seven, much of it in solitary confinement. In his various teaching posts
since then, including twenty years at the University of Glasgow, Sirc has been a leading expert on
socialist economics and communist regimes. Since 1983, he has served as Director of the Centre
for Research into Post-Communist Economies in London. He is the author of numerous books and
articles in a variety of languages. His autobiography, Between Hitler and Tito, was published in
1989.
See an interview with him done in 2003: The Intellectual Portrait Series: A Conversation with
Ljubo Sirc /titles/sirc-the-intellectual-portrait-series-a-conversation-with-ljubo-sirc.
Revelations of the true Horrors of Communism
Aleksandr Solzhenitsyn (1918–2008)
The Russian novelist Aleksandr Solzhenitsyn (1918–2008) brought the crimes of the communist
regime in Russia to the attention of intellectuals in the west (many of whom were socialist
sympathizers) in his history of the labour camps, The Gulag Archipelago (1973).
These were more fully documented in The Black Book of Communism: Crimes, Terror,
Repression (1997) by Stéphane Courtois, Nicolas Werth, Andrzej Paczkowski.
Revisiting the Systemic Economic problems of Communism in the 1980s and 1990s:
Lavoie and Boettke
Don Lavoie (1951–2001)
A new younger generation of Austrian economists, Don Lavoie (1951–2001) and Peter Boettke, re-
examined the weakness of planned economies on the eve of their collapse in 1991 in a series of
works in the mid–1980s and early 1990s:
Don Lavoie, Rivalry and Central Planning (1985) and National Economic Planning: What
Is Left? (1985)
Peter Boettke, The Political Economy of Soviet Socialism: The Formative Years, 1918–1928
(1990), Why Perestroika Failed: The Economics and Politics of Socialism Transformation
(1993) , and Calculation and Coordination: Essays on Socialism and Transitional Political
Economy (2001)
III. Modern Interpretations and Critiques of S&M
In the OLL Collection
H. B. Acton and John Passmore
The following books do not look at S&M from an economic perspective but from a broader
philosophical one.
Harry Burrows Acton (1908–1974) was an English academic who taught at the London School of
Economics, the University of Edinburgh, and the University of Chicago. His book on Marxism as
The Illusion of the Epoch (1949) focused on the philosophical incoherence of Marxist thought.
H.B. Acton, The Illusion of the Epoch: Marxism-Leninism as a Philosophical Creed

(Indianapolis: Liberty Fund, 2003). /titles/877.
The Australian philosopher John Passmore (1914 - 2004), who taught for many years at the
Australian National University in Canberra, explores the history of the idea of perfectibility -
manifest in the ideology of perfectibilism - and its consequences, which have invariably been
catastrophic for individual liberty and responsibility in private, social, economic, and political life.
He situates socialist and Marxist ideas of the possibility of the perfectibility of the new “socialist
man” in the historical context of other failed utopian views.
John Passmore, The Perfectibility of Man (3rd ed.) (Indianapolis: Liberty Fund, 2000).
/titles/670.
H.B. Acton in the conclusion of his book makes the excellent point that, in spite of all his protests
to the contrary, Marx’s view of a future communist society was indeed a utopian one.
My second and last point concerns the Marxist objection to Utopianism. Lenin, in State and Revolution,
recognized that the Marxist views about the future communist society might be criticized as Utopian. In
rebutting this charge he says that “the great Socialists” did not promise that communism would come
but foresaw its arrival; and in foreseeing communism, he goes on, they “presupposed both a productivity
[[233]] of labour unlike the present and a person unlike the present man in the street… .” Marxists, then,
according to Lenin, do not say that they will inaugurate a communist society of abundance and freedom,
but, like astronomers predicting the planetary movements, say that it will and must come. To promise to
do something is Utopian, to foresee that it must come is not. And I think that he is arguing that “the
great Socialists” also foresaw a greatly increased productivity and a new type of human being, whereas
Utopians merely hoped for these things and called upon people to bring them about. Lenin’s objections
are based on the discussion of Utopian socialism in Engels’ Anti-Dühring. According to Engels, Saint-
Simon, Fourier, and Owen, the Utopian socialists whose views paved the way for Marx’s scientific
socialism, regarded socialism as “the expression of absolute truth, reason, and justice,” thought that it
was a mere accident that it had not been discovered earlier, and assumed that it needed only to be
discovered “to conquer the world by virtue of its own power.” “What was required,” they held, “was to
discover a new and more perfect social order and to impose this on society from without, by propaganda
and where possible by the example of model experiments.” They imagined the outlines of a new society
“out of their own heads, because within the old society the elements of the new were not yet generally
apparent; for the basic plan of the new edifice they could only appeal to reason, just because they could
not as yet appeal to contemporary history.” Hence they produced “phantasies of the future, painted in
romantic detail.” Their inadequacy in this regard was due, according to Engels, to the fact that they lived
at a time when capitalism was still immature and did not yet allow the lineaments of the new society to
be discerned within it.
Utopians, then, make promises rather than predictions. (It is not relevant to our present point, but
surely promising is a guarantee that the promissee may make a prediction about the future behavior of
the [[234]] promissor.) They appeal to reason and justice, and imagine reasonable and just societies “out
of their own heads,” instead of observing the first beginnings of a new society within the existing one.
They think it is sufficient to advocate a new society of the sort they have imagined, or to try to bring it
into being on a small scale, for the world to be convinced by their scheme.
Now this last point is important. It is a defect of Utopias of most sorts that they leave vague the means of
transition from the existing state of affairs to the future ideal. This means that two things are left vague,
viz., who are to bring the changes about, and how they are to proceed in doing it. Marxists claim that
there is no vagueness in their view on these particulars. It is the proletariat, under suitable leadership,
who will bring the changes about, and they will do so by a revolutionary dictatorship under which the
bourgeoisie are expropriated and suppressed. But of course this very precision (such as it is) may turn
many influential people against Marxist scientific socialism. But according to the Marxists this does not
matter in the long run, because the already existing proletariat is the first beginning of the new society.
When a party has been formed to lead it, socialism is no longer an aspiration but an actual movement.
But although Marxists are right in pointing out that Utopians often fail to show how the transition from
the actual to the ideal is to be effected, and although Marxists do have a theory and policy about this, this
is not enough to show that their view is at all adequate. The first difficulty in it is this. Marxists claim that
their view of the future society is not invented out of their heads, but is based on the first beginnings of
the new society already apparent within capitalism. These first beginnings must be the proletarian class
beginning to be organized by and in a party. But what is there here that certainly foreshadows a
condition in which there is no force and no domination? Nothing, it seems to me, except the fact that
Communists, if they get the chance, are going to put an end to private property, unless it be the increase
in productivity that capitalism has brought with it—that other forms of organization will increase it still
further is mere aspiration. Lenin, in the passage I have just quoted, says that men in communist society
will not be like the present man in the street. Let us see what Engels says about this. We may look
forward, he says, following Saint-Simon, to “the transformation of political government [[235]] over men
into the administration of things and the direction of productive processes.” “The seizure of the means of
production by society,” he goes on, “puts an end to commodity production, and therewith to the
domination of the product over the producer. Anarchy in social production is replaced by conscious
organization on a planned basis. The struggle for individual existence comes to an end. And at this point,
in a certain sense, man finally cuts himself off from the animal world, leaves the condition of animal
existence behind him and enters conditions which are really human… . Men’s own social organization
which has hitherto stood in opposition to them as if arbitrarily decreed by Nature and history, will then
become the voluntary act of men themselves… . It is humanity’s leap from the realm of necessity into the
realm of freedom.”50 Anarchy, then, is replaced by plan, politics by “administration” (whatever this may
be), the struggle for existence by peace, the animal by something “really human,” divided mankind by
unified mankind, specialization by universal adaptability.
I feel sure that anyone who reflects on these contrasts must conclude that, for all that Marxists say about
their views being based on observed facts in the capitalist world, in fact their future communism is even
more out of touch with human realities than are the speculations of the Utopians whom they criticize.
Furthermore, the future they depict is extremely vague, and they refuse to make it more precise on the
ground that such precision is Utopian, that detailed specification of not yet developed societies are
romantic fantasies. (We may compare this with the exponents of Negative Theology who can only say
what God is not, but never what he is.) But if they are right in this last contention, then surely they are
wrong in claiming that their view differs from Utopianism in being predictive in any important sense.
Very vague predictions are of even less practical value than are detailed wishes. I do not think that the
“predictions” about communist society have much more content in them than the more baffling among
the utterances of the Delphic Oracle. What is this “administration” that is so different from
“government,” and this “planning” and “direction” that are consistent with the full development of each
individual [[236]] and can be made effective without the use of force? They are so different from
anything that we have had experience of in developed societies, where administrators (generally) have
the law behind them, where planning and direction meet with opposition, and where all must reconcile
themselves to some limited and specialized career, that it is hard to attach any definite meaning to them
at all. And what scientific prediction can it be that says we shall leave the condition of animal existence
behind us? This is something that even Fourier might have repudiated, and that Owen would have taken
seriously only during that period of his life when he was in communication with departed spirits. It is
difficult to see how any attentive reader of their works could have taken at their face value the Marxists’
profession of being scientific socialists rather than Utopians. They do in some manner fill in the gap
between present conditions and the future society they look forward to—they insert between the two a
real and active movement, but this has the function, not of making their system a scientific one, but of
being a seat of authority which can give unquestioned guidance to any doubter within it. Marxism is
Utopianism with the Communist Party as a visible and authoritative interpreter of the doctrine striving
to obtain supreme power. The scientific part of Marxist politics concerns the methods by which the
Communist Party maintains itself and aims to spread its power, and here Marxism and Realpolitik go
hand in hand. But the alleged goal of the Marxist activities is a society in which there is administration
without law, planning without miscalculation, direction without domination, high productivity without
property or toil, and, it would seem, unrepressed men who nevertheless have left the condition of animal
existence behind them.
Source: /titles/877#Acton_6844_294, pp. 233–37.
Not in the OLL collection
Alexander Gray
Alexander Gray, The Socialist Tradition: Moses to Lenin (London: Spottiswoode, Ballantyne &
Co., 1963). 1st ed. 1946.
available online at the Mises institute: https://mises.org/library/socialist-tradition-moses-

lenin.
Typical of Gray’s witty and engaging style is this commentary of the French Socialist Louis Blanc
with whom Bastiat clashed in 1848:
The significance of Louis Blanc lies in the fact that in a sense he represents the transition from Utopian
socialism to what, for convenience, may be termed proletarian socialism. We have left behind the wild
imaginings of Fourier, the revelations of Saint-Simon and the parallelograms of Owen. For Louis Blanc
claims to have a sense of reality, and he would like to be regarded as moderate. ‘To prepare for the future
without breaking violently with the past,’ as he once described his purpose, is an excellent ideal.
Doubtless, with Fourier and Owen, he is an ‘associationist,’ but the form of association at which he aims
has a more modern flavour; nor is it expected that some generous millionaire will by his touch heal and
renew this putrescent world.
For, among much that is nebulous, Louis Blanc sees with extreme clarity just exactly whence our
salvation must come: Our safety cometh from the State. Blanc may or may not have been original in this,
but at least no one before had so clearly taught that the State, with which we are familiar here and now,
such as it is, must be used to establish a new social order. Social and political reform are intertwined; if
the former is the aim and object, the latter is the means. For it is not enough to decide, according to the
rules of reason, justice and humanity, where you want to get to in this matter of the organisation of
labour. You must be in a position to give effect to the principles decided upon. Power is needed; and
power is ultimately a matter of laws, tribunals and soldiers—in a word, the State. In a somewhat famous
sentence he adds the warning that if you do not make use of the State as an instrument, you will
encounter it as an obstacle. Moreover, the magnitude of the task of emancipating the proletarians is such
that all the power of the State is needed. What is required is that they should be given the necessary tools
of production; and here precisely is the function of the government. In a definition, more arresting than
just, ‘the State is, or ought to be, the Banker of the Poor.”
Thus the State must intervene; there is indeed no other authority to whom appeal can be made.
Authority is invoked, it should be observed, in the name of Liberty itself; for Liberty, in the world as seen
by Blanc, is but an affair of theoretical rights which cannot be enforced. There can be no liberty where an
‘immense weakness’ confronts an ‘immense strength’. The State must make these rights a reality, and for
this purpose it must be a strong State, since there are those who in their weakness need its protection.
Source: “Chap. IX. Louis Blanc”, pp. 219–20.
Murray N. Rothbard
of his many writings on “war socialism” see Rothbard’s “ War Collectivism in World War I,”
in A New History of Leviathan: Essays on the Rise of the American Corporate State.
Edited by Ronald Radosh and Murray N. Rothbard (New York: E.P. Dutton, 1972), pp. 66–
110. Online at the Mises Institute: https://mises.org/library/new-history-leviathan
“Egalitarianism as a Revolt against Nature” (1973) in Egalitarianism as a Revolt Against
Nature, ed. Roy A. Childs, Jr. (Washington, D.C.: Libertarian Review Press, 1974), pp. 1–13.
Online at Mises institute: https://mises.org/library/egalitarianism-revolt-against-nature-
and-other-essays.
Rothbard provides a comprehensive critique of Marxism in the second volume of his An
Austrian Perspective on the History of Economic Thought. Vol. 2: Classical Economics
(Auburn, Alabama: Mises Institute, 2006). (HET) See these five chapters:
Roots of Marxism: messianic communism 297
Marx’s vision of communism
Alienation, unity, and the dialectic 347
The Marxian system, I: historical materialism and the class struggle 369
The Marxian system, II: the economics of capitalism and its inevitable demise 407
In the essay “Egalitarianism as a Revolt against Nature” (1973) Rothbard attacks the “absurd
fantasies” of the utopian Marxist views of equality under communism:
Nowhere is the Left Wing attack on ontological reality more apparent than in the Utopian dreams of
what the future socialist society will look like. In the socialist future of Charles Fourier, according to
Ludwig von Mises:
“all harmful beasts will have disappeared, and in their places will be animals which will assist man in his
labors—or even do his work for him. An antibeaver will see to the fishing; an antiwhale will move sailing
ships in a calm; an antihippopotamus will tow the river boats. Instead of the lion there will be an
antilion, a steed of wonderful swiftness, upon whose back the rider will sit as comfortably as in a well-
sprung carriage. “It will be a pleasure to live in a world with such servants.”
Furthermore, according to Fourier, the very oceans would contain lemonade rather than salt water.
Similarly absurd fantasies are at the root of the Marxian utopia of communism. Freed from the supposed
confines of specialization and the division of labor (the heart of any production above the most primitive
level and hence of any civilized society), each person in the communist utopia would fully develop all of
his powers in every direction. As Engels wrote in his Anti-Dühring, communism would give “each
individual the opportunity to develop and exercise all his faculties, physical and mental, in all
directions.” And Lenin looked forward in 1920 to the “abolition of the division of labor among people …
the education, schooling, and training of people with an all-around development and an all-around
training, people able to do everything. Communism is marching and must march toward this goal, and
will reach it.
In his trenchant critique of the communist vision, Alexander Gray charges:

“That each individual should have the opportunity of developing all his faculties, physical and mental, in
all directions, is a dream which will cheer the vision only of the simple-minded, oblivious of the
restrictions imposed by the narrow limits of human life. For life is a series of acts of choice, and each
choice is at the same time a renunciation.
Even the inhabitant of Engels’s future fairyland will have to decide sooner or later whether he wishes to
be Archbishop of Canterbury or First Sea Lord, whether he should seek to excel as a violinist or as a
pugilist, whether he should elect to know all about Chinese literature or about the hidden pages in the
life of a mackerel.”
Of course one way to try to resolve this dilemma is to fantasize that the New Communist Man of the
future will be a superman, superhuman in his abilities to transcend nature. William Godwin thought
that, once private property was abolished, man would become immortal. The Marxist theoretician Karl
Kautsky asserted that in the future communist society, “a new type of man will arise … a superman … an
exalted man.” And Leon Trotsky prophesied that under communism:
“man will become incomparably stronger, wiser, finer. His body more harmonious, his movements more
rhythmical, his voice more musical. … The human average will rise to the level of an Aristotle, a Goethe,
a Marx. Above these other heights new peaks will arise.”
Source: pp. 11–12
Here are two snippets from his thorough demolition of Marxian economics, the first on the
“immiseration of the workers” and the second his final summing up:
Now here is a critical and crucial point in the Marxian argument. The increasing impoverishment of the
working class is a key to the Marxian system, because on it rests the allegedly inevitable doom of
capitalism and its replacement by the proletariat. If there is no increasing impoverishment, there is no
reason for the working class to react against their intensifying exploitation and burst asunder their
‘capitalist integument’, those fetters on the technological mode of production. So how does Marx
demonstrate the increasing poverty of the proletariat?
At this point, Marx seems to grow desperate, and to come up with a number of varied and contrasting
arguments, some of which are mutually contradictory. It’s as if Marx wildly tries to multiply the
arguments, however feeble, in the hope that at least one will stick, and that he will demonstrate the
inevitability of the next, proletarian communist, stage of history. But all of these attempts to prove
increasing misery come up, first and foremost, against an insuperable obstacle, an obstacle that only
Ludwig von Mises has clearly demonstrated. For if workers’ wages are already and at all times at the
means of subsistence, kept there by the iron law, how can they get any worse off! They have been at
maximum poverty level, so to speak, for a long time. But if for that reason they cannot get worse off,
where is the dynamic that will lead them to rise up and overthrow the system? We can concede, of
course, that the new proletarians, so rudely tossed into the ranks of the working class by their
triumphant fellow-capitalists, will be particularly edgy and disgruntled at their new lot in life. But surely
Marx would not be content to confine his revolutionary workers to the relatively limited ranks of recently
declasse capitalists. Especially since the bulk of the workers simply remain where they have always been:
at the margin of subsistence.
Setting aside for the moment this grave inner contradiction with the iron law of wages, how does Marx
propose to establish his alleged law of the increasing impoverishment of the proletariat? In one answer,
the eternally falling rate of profits puts a severe pressure on capitalists to find more profit by sweating
and exploiting the proletariat more intensively, making them work harder and for longer hours. But
aside from the problem of the ever-present iron law, Marx is faced with the problem: why did capitalists
allow their rate of exploitation to grow slack until finally spurred on by a falling rate of profit? Don’t
capitalists always and at all times try to maximize their rates of profit? And if so, and unless we are to
assume a sudden intensification of greed, or of eagerness for profit among capitalists, they are never
slack or lax in squeezing the greatest possible amount of profit from the workers. But then, how can a
falling rate of profit spur them on to ever-greater heights? Surely, it is not simply a desire for profit.
Source: HET, vol. 2, pp. 423–24.
And his conclusion about “the Marxian system”:
Thus, Karl Marx created what seems to the superficial observer to be an impressive, integrated system of
thought, explaining the economy, world history, and even the workings of the universe. In reality, he
created a veritable tissue of fallacies. Every single nodal point of the theory is wrong and fallacious, and
its ‘integument’ – to use a good Marxian term – is a web of fallacy as well. The Marxian system lies in
absolute tatters and ruin; the ‘integument’ of Marxian theory has ‘burst asunder’ long before its
predicted ‘bursting’ of the capitalist system. Far from being a structure of ‘scientific’ laws, furthermore,
the jerry-built structure was constructed and shored up in desperate service to the fanatical and crazed
messianic goal of destruction of the division of labour, and indeed of man’s very individuality, and to the
apocalyptic creation of an allegedly inevitable collectivist world order, an atheized variant of a venerable
Christian heresy.
During the 1960s, messianic and romantic Marxists liked to make a sharp separation between the earlier
lovable, idealistic, ‘humanist’ Marx, and the later, mean, hard-core, proto-Stalinist ‘economist’ Marx. But
we now know that there is no such division. There is only one Marx, whether early or late, once he
adopted Marxism in the 1840s. There is even a good case for seeing one lifelong Marx, including his
crazed, demonic poems calling for universal destruction in his still earlier graduate school years at
Berlin. In fact, the humanist Marx is scarcely a relief from the later economist – quite the contrary. All
Marxes-in-one were in service to his fanatical and destructive messianic vision of communism. A
convincing case can be made, indeed, that the well-known horrors of twentieth century communism: of
Lenin, Stalin, Mao and Pol Pot, can be considered the logical unfolding, the embodiment, of the
nineteenth century vision of their master, Karl Marx.
Source: HET, vol. 2, p. 433.
Richard Ebeling
Richard Ebeling has written extensively on S&M, especially in the anniversary years of 2017 (the
centenary of the Bolshevik Revolution) and 2018 (the 200th anniversary of the birth of Karl Marx.
See his numerous essays on Marxism for the Future of Freedom Foundation (FFF) and
Foundation for Economic Education (FEE):
“Socialism, Like Dracula, Rises Again From The Grave” https://www.fff.org/explore-

freedom/article/socialism-like-dracula-rises-again-from-the-grave/ FFF July 17, 2018
“Karl Marx And Marxism At Two Hundred” https://www.fff.org/explore-
freedom/article/karl-marx-marxism-two-hundred/ May 7, 2018
“Paul Leroy-Beaulieu: A Warning Voice About The Socialist Tragedy To Come”
https://www.fff.org/explore-freedom/article/paul-leroy-beaulieu-warning-voice-socialist-
tragedy-come/ January 29, 2018
“Disaster In Red: The Hundredth Anniversary Of The Russian Socialist Revolution”
https://www.fff.org/explore-freedom/article/disaster-red-hundredth-anniversary-russian-
socialist-revolution/ November 7, 2017
“Tyrants Of The Mind And The New Collectivism” https://www.fff.org/explore-
freedom/article/tyrants-mind-new-collectivism/ August 7, 2017
“Economic Ideas: Karl Marx And The Presumption Of A “Right Side” To History”
https://www.fff.org/explore-freedom/article/economic-ideas-karl-marx-presumption-
right-side-history/ June 5, 2017
“How Communism Became the Disease It Tried to Cure” https://fee.org/articles/how-
communism-became-the-disease-it-sought-to-cure/ March 17 2017
“Socialism: Marking A Century Of Death And Destruction” https://www.fff.org/explore-
freedom/article/socialism-marking-century-death-destruction/ March 6, 2017
“Economic Ideas: Karl Marx’s Misconceptions About Man And Markets”
https://www.fff.org/explore-freedom/article/economic-ideas-karl-marxs-misconceptions-
man-markets/ February 20, 2017
“Economic Ideas: Karl Marx, The Man Behind The Communist Revolution”
https://www.fff.org/explore-freedom/article/economic-ideas-karl-marx-man-behind-
communist-revolution/ February 13, 2017
“Democratic Socialism” Means The Loss Of Liberty” https://www.fff.org/explore-

freedom/article/democratic-socialism-means-the-loss-of-liberty/ November 30, 2015
“The Human Cost Of Socialism In Power” https://www.fff.org/explore-freedom/article/the-
human-cost-of-socialism-in-power/ September 9, 2015
“Why Socialism Is Impossible” https://fee.org/articles/why-socialism-is-impossible/ Oct. 1
2004
“The Austrian Economists Who Refuted Marx (and Obama)” The Daily Bell, March 4, 2014
https://www.thedailybell.com/all-articles/editorials/richard-ebeling-the-austrian-
economists-who-refuted-marx-and-obama/
David Prytchitko
The Austrian economist David Prytchitko has written some important pieces for Econlib:
David L. Prychitko, “The Nature and Significance of Marx’s: Capital: A Critique of Political
Economy" Econlib Sept. 6, 2004
https://www.econlib.org/library/Columns/y2004/PrychitkoMarx.html
David Prychitko, “Marxism” Econlib https://www.econlib.org/library/Enc/Marxism.html
Last modified July 24, 2018

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24/04/2019 Socialism: A Study Guide and Reader - Online Library of Liberty

Online Library of Liberty A project of Liberty Fund, Inc.

A collection of scholarly works about individual liberty and free markets.

Socialism: A Study Guide and Reader

Date: July 20, 2018

Topic: Socialism and the Classical Liberal Critique

We will be selling “The Anti-S&M Reading Pak” at the YAL conference:

1. Bastiat, Collected Works, vol. 2

I. Classical Liberalism vs. Socialism/Marxism: Critique and Counter-Critique

Ludwig von Mises’s Critique of Central Planning under Communism

I. Classical Liberalism vs. Socialism/Marxism: Critique

The Fundamental Antagonism between Classical Liberalism and

There is a fundamental antagonism between Classical Liberalism and Socialism/Marxism

A CL or libertarian version might go something like:

The Changing Face of Socialism/Marxism

A Summary of the S&M Critique of the Free Market

4. the immiserisation of the workers - there was an inevitable impoverishment of the

Moral and Philosophical Criticism

A Summary of CL Criticisms of S&M

Moral and Philosophical Arguments

1. the private ownership of property is one of the foundation stones of individual

II. A Brief History of CL opposition to S&M

French Socialism during the 1840s and 1850s

The Rise of Socialism in France

Louis Blanc (1811–1882)

the utopian socialism of Charles Fourier and Victor Considerant

Proudhon, Système des contradictions économiques, ou philosophy de la misère

Charles Dunoyer, La Liberté du travail (1845): literally on “the liberty of working” as

Frédéric Bastiat’s series of 12 anti-socialist pamphlets (1848–1850)

Frédéric Bastiat’s Anti-Socialist Pamphlets (1848–1850)

Frédéric Bastiat (1801–1850)

Source: Revised translation of “The Law” /pages/bastiat-the-law-revised-lf-edition.

Gustave de Molinari (1819-1912)

le Socialiste. THE SOCIALIST.

Source: From the Draft English translation /pages/gdm-soirees

The Ambivalent Position of John Stuart Mill (1806–1873)

John Stuart Mill (1806–1873)

On sharing the benefits of communal work equally he notes:

See the following works:

The Emergence of Organised Socialist Parties in Europe from 1860s to

1. Social Democratic Party in Germany: Ferdinand Lassalle founded “Allgemeiner Deutscher

Some important socialist texts from this period:

German Socialism in the 1860s to the 1890s

The Work of Karl Marx

Karl Marx (1818–1883)

The CL Critique of German Socialism

Eugen von Böhm-Bawerk (1851–1914)

Eugen von Böhm-Bawerk (1851–1914)

Eugen Richter (1838–1906)

Eugen Richter (1838–1906)

The Chancellor’s lady—“Oh, oh.”

English Socialism in the 1880s

George Bernard Shaw and the Fabian Society

George Bernard Shaw (1856-1950)

The CL Critique of English/Fabian Socialism in the 1880s and 1890s

Herbert Spencer (1820-1903)

Thomas Mackay (1849–1912)

[We do not have an image of Mackay]

Wordsworth Donisthorpe (1847–1914) and Bruce Smith (1851–1937)

Wordsworth Donisthorpe (1847–1914)

Source: Wordsworth Donisthorpe, Individualism: A System of Politics (London: Macmillan and

Source: Individualism: A System of Politics (1889), /titles/291#Donisthorpe_1233_689.

Bruce Smith (1851–1937)