A History of Economic Doctrines / from the time of the physiocrats to the present day

by Charles Gide; Charles Rist

CHAPTER II: STATE SOCIALISM

The nineteenth century opened with a feeling of contempt for government of every kind, and with unbounded confidence on the part of at least every publicist in the virtue of economic liberty and individual initiative. It closed amid the clamour for State intervention in all matters affecting economic or social organisation. In every country the number of public men and of economists who favour an extension of the economic function of government is continually growing, and to-day such men are certainly in the majority. To some writers this change of opinion has seemed sufficiently important to warrant special treatment as a new doctrine, variously known as State Socialism or “the Socialism of the Chair” in Germany and Interventionism in France.

Really it is not an economic question at all, but a question of practical politics upon which writers of various shades of economic opinion may agree despite extreme differences in their theoretical preconceptions. The problem of defining the limits of governmental action in the matter of producing and distributing wealth is one of the most important in the whole realm of political economy, but it can hardly be considered a fundamental scientific question upon which economic opinion is hopelessly divided. It is clear that the solution of the problem must depend not merely upon purely economic factors, but also on social and political considerations, upon the peculiar conception of general interest which the individual has formed for himself and the amount of confidence which he can place in the character and ability of Governments.[866] The problem is always changing, and whenever a new kind of society is created or a new Government is established a fresh solution is required to meet the changed conditions.

How is it, then, that this question has assumed such extravagant proportions at certain periods of our history?

Had the issue been confined to the limits laid down by Smith it is probable that such passionate controversies would have been avoided. Smith’s arguments in favour of laissez-faire were largely economic. Gradually, however, under the growing influence of individual and political liberty, a kind of contempt for all State action took the place of the more careful reasoning of the earlier theory, and the superiority of individual action in matters non-economic became an accepted axiom with every publicist.

This method of looking at the problem is very characteristic of Bastiat. The one feature of government that interested him was not the fact that it represented the general interest of the citizens, but that whenever it took any action it had to employ force,[867] whereas individual action is always free. Every substitution of State for individual action meant victory for force and the defeat of liberty. Such substitution must consequently be condemned. Smith’s point of view is totally different. To appreciate this difference we need only compare their treatment of State action. In addition to protecting the citizens from invasion and from interference with their individual rights, Smith adds that the sovereign should undertake “the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”[868] The scope is sufficiently wide, at any rate. If we turn to Bastiat, on the other hand, we find that the Government has only two functions to perform, namely, “to guard public security and to administer the common land.”[869] Viewed in this light, the problem of governmental intervention, instead of remaining purely economic, becomes a question of determining the nature, aims, and functions of the State, and individual temperament and social traditions play a much more important part than either the operation of economic phenomena or any amount of economic reasoning. It is not surprising that some writers thought that the one aim of economics was to defend the liberty and the rights of the individual!

Such exaggerated views were bound to beget a reaction, and the defence of State action assumes equally absurd proportions with some of the writers of the opposite school. Even as far back as 1856 Dupont-White, a French writer, had uttered a protest against this persistent depreciation of the State, in a short work entitled L’Individu et l’État. His ideas are so closely akin to those of the German State Socialists that they have often been confused with them, and it is simpler to give an exposition of both at the same time. But he was a voice crying in the wilderness. Public opinion under the Second Empire was very little disposed to listen to an individual who, though a Liberal in politics, was yet anxious to strengthen the power and to add to the economic prerogative of the Crown. More favourable circumstances were necessary if there was to be a change of public opinion on the matter. The times had ripened by the last quarter of the century, and the elements proved propitious, especially in Germany, where the reaction first showed itself.

The reaction took the form not so much of the creation of a new doctrine as of a fusion of two older currents, which must first be examined.

During the course of the nineteenth century we find a number of economists who, while accepting Smith’s fundamental conception, gradually limit the application of his principle of laissez-faire. They thought that the superiority of laissez-faire could not be scientifically demonstrated and that in the great majority of cases some form of State intervention was necessary.

On the other hand, we meet with a number of socialists who prove themselves to be more opportunistic than their comrades, and though equally hostile to private property and freedom of production, yet never hesitate to address their appeals on behalf of the workers to existing Governments.

State Socialism represents the fusion of these two currents. It surpasses the one in its faith in the wisdom of Governments, and is distinguished from the other by its greater attachment to the rights of private property; but both of them contribute some items to its programme. In the first place we must try to discover the source of these separate tendencies, and in the second place watch their amalgamation.

I: THE ECONOMISTS’ CRITICISM OF LAISSEZ-FAIRE

The doctrine of absolute laissez-faire was not long allowed to go unchallenged. From the time of Smith onward there is an uninterrupted sequence of writers—all of them by no means socialists—who ventured to attack the fundamental propositions of the great Scotsman and who attempted to show that his practical conclusions were not always borne out by the facts.

Smith based his advocacy of laissez-faire upon the supposed identification of public and private interests. He showed how competition reduced prices to the level of cost of production, how supply adapted itself to meet demand in a perfectly automatic fashion, and how capital in an equally natural way flowed into the most remunerative occupations.

This principle of identity of interests was, however, rudely shaken by the teachings of Malthus and Ricardo, although both of them remained strong adherents of the doctrine of individual liberty.

Sismondi, who was the next to intervene, laid stress upon the evils of competition, and showed how social inequality necessitated the submission of the weak to the will of the strong. His whole book was simply a refutation of Smith’s providential optimism.

In Germany even, as early as 1832, that brilliant economist Hermann was already proceeding with his critical analysis of the Classical theories; and after demonstrating how frequently individual interest comes into conflict with public welfare, and how inadequate is the contribution which it can possibly make to the general well-being, he declares his inability to subscribe to the doctrine laid down by most of Smith’s followers, namely, that individual activity moved by personal interest is sufficient to meet all the demands of national economy. Within the bounds of this national economy[870] he thinks there ought to be room for what he calls the civic spirit (Gemeinsinn) as well.

The next critic, List, bases his whole case upon the opposition between immediate interests, which guide the individual, and the permanent interests of the nation, of which the Government alone can take account.

Stuart Mill, in the famous fifth book of the Principles, refuses even to discuss the doctrine of identity of interests, believing it to be quite untenable. On the question of non-intervention he admits the validity of one economic argument only, namely, the superiority of self-interest as an economic motive. But he is quick to recognise its shortcomings and the exceptions to its universal operation—in the natural incapacity of children and of the weak-minded, the ignorance of consumers, the difficulty of achieving it, even when clearly perceived, without the help of society as a whole, as in the case of the Factory Acts. Mill also points out how this motive is frequently wanting in modern industrial organisation, where, for example, we have joint stock companies acting through the medium of a paid agency, or charitable work undertaken by an individual who has to consider, not his own interests, but those of other people. Private interest is also frequently antagonistic to public interest, as in the case of the public supply of gas or water, where the individual entrepreneur is influenced by the thought of a maximum profit rather than by considerations of general interest. In matters of that kind Stuart Mill was inclined to favour State intervention.[871]

M. Chevalier, from his professorial chair in the Collège de France, extended his congratulations to Mill upon his successful restoration of the legitimate duties of Governments.[872] Chevalier thought that those who believed that the economic order could be set up simply by the aid of competition acting through personal interest were either illogical in their arguments or irrational in their aims. Government was simply the manager of the national organisation, and its duty was to intervene whenever the general interest was endangered. But the duties and privileges of government are not exactly those of the village policeman.[873] Applying this principle to public works, he points out that they are more or less State matters, and the guarantee for good work is quite as great when the State itself undertakes to perform it as when it is entrusted to a private individual.

In 1863 Cournot, whose reputation was unequal to either Mill’s or Chevalier’s, but whose penetrating thought, despite its small immediate influence, is quite important in the history of economic doctrines, treats of the same problem in his Principes de la Théorie des Richesses. Going straight to the heart of the problem, he asks whether it is possible to give a clear definition of this general interest—the economic optimum which we are anxious to realise—and whether the system of free competition is clearly superior to every other. He justly remarks that the problem is insoluble. Production is determined by demand, which depends both upon the preliminary distribution of wealth and also upon the tastes of consumers. But if this be the case, it is impossible to outline an ideal system of distribution or to fix upon the kind of tastes that will prove most favourable for the development of society. A step farther and Cournot must have hit upon the distinction so neatly made by Pareto between maximum utility, which is a variable, undefined notion, and maximum ophelimity, “the investigation of which constitutes a clearly defined problem wholly within the realm of economics.”[874]

But Cournot does not therefore conclude that we ought to abstain from passing any judgment in the realm of political economy and abandon all thought of social amelioration. Though the absolutely best cannot be defined, it does not follow that we cannot determine the relatively good. “Improvement or amelioration is possible,” says he, “by introducing a change which operates upon one part of the economic system, provided there are no indirect effects which damage the other parts of the system.”[875] Such progress is not necessarily the result of private effort. Following Sismondi, he quotes several instances in which the interests of the individual collide with those of the public and in which State intervention might prove useful.

Every one of these authors—in varying degrees, of course—admits the legitimacy of State intervention in matters economic. Liberty doubtless is still the fundamental principle. Sismondi was content with mere aspiration, so great did the difficulties of intervention appear to him. Stuart Mill thought that the onus probandi should rest with the innovator. Cournot considered liberty as being still the most natural and simple method, and should the State find it necessary to intervene it could only be in those instances in which science has clearly defined the aim in view and demonstrated the efficacy of the methods proposed. Every one of them has abandoned liberty as a scientific principle. To Cournot it was an axiom of practical wisdom;[876] Stuart Mill upheld it for political reasons as providing the best method of developing initiative and responsibility among the citizens. They all agree that the State, far from being a pis aller, has a legitimate sphere of action. The difficulty is just to define this.[877] This was the task to which Walras addressed himself with remarkable success in his lectures on the theory of the State, delivered in Paris in 1867-68.[878]

And so we find that the progress of thought since the days of Adam Smith had led to important modifications of the old doctrines concerning the economic functions of the State. The publicists, however, were not immediately converted. Even when the century was waning they still remained faithful to the optimistic individualism of the earlier period. The organon of State Socialism merely consists of these analyses incorporated into a system. The authors just mentioned must consequently be regarded, if not as the precursors of State Socialism, at any rate as unconsciously contributing to the theory.

II: THE SOCIALISTIC ORIGIN OF STATE SOCIALISM. RODBERTUS AND LASSALLE

State Socialism is not an economic doctrine merely. It has a social and moral basis, and is built upon a certain ideal of justice and a particular conception of the function of society and of the State. This ideal and this conception it received, not from the economists, but from the Socialists, especially Rodbertus and Lassalle. The aim of these two writers was to effect a kind of compromise between the society of the present and that of the future, using the powers of the modern State simply as a lever.

The idea of a compromise of this kind was not altogether new. A faint suggestion of it may be detected more than once in the course of the century, and an experiment of the kind was mooted in France towards the end of the July Monarchy. At that time we find men like Louis Blanc and Vidal—who were at least socialists in their general outlook—writing to demand State intervention not merely with a view to repairing the injustice of the present society, but also with a view to preparation for the society of the future with as little break with the past as possible. Louis Blanc was in this sense the first to anticipate the programme of the State Socialists. But its more immediate inspirers were Rodbertus and Lassalle, both of whom belonged to that country in which its effects were most clearly seen.

Their influence upon German State Socialism cannot be exactly measured by the amount of direct borrowing that took place. They were linked by ties of closest friendship to the men who were responsible for creating and popularising the new ideas, and it is important that we should appreciate the personal influence which they wielded. Rodbertus formed the centre of the group, and during the two years 1862-64 he carried on an active correspondence with Lassalle. They were brought together by the good offices of a common friend, Lothar Bucher, an old democrat of 1848 who had succeeded in becoming the confidant of Bismarck. Strangely enough, Bismarck kept up his friendship with Lassalle even when the latter was most busily engaged with his propaganda work.[879] Wagner, also, the most eminent representative of State Socialism, was in frequent communication with Rodbertus, and he never failed to recognise his great indebtedness to him. Wagner himself was on more than one occasion consulted by Bismarck.

But apart altogether from their connection with State Socialism, Rodbertus and Lassalle would deserve a place in our history. Rodbertus is a theoretical writer of considerable vigour and eloquence, and his thoughts are extraordinarily suggestive. Lassalle was an agitator and propagandist rather than an original thinker, but he has left a lasting impression upon the German labour movement. Hence our determination to give a somewhat detailed exposition of their work, especially of that of Rodbertus, and to spare no effort in trying to realise the importance of the contribution made by both of them.

1. Rodbertus

In a history of doctrines Rodbertus has a place peculiarly his own. He forms, as it were, a channel through which the ideas first preached by Sismondi and the Saint-Simonians were transmitted to the writers who belong to the last quarter of the century. His intellectual horizon—largely determined for him by his knowledge of these French sources[880]—was fixed as early as 1837, when he produced his Forderungen, which the Gazette universelle d’Augsburg refused to publish. His first work appeared in 1842,[881] and the earliest of the Soziale Briefe[882] belong to 1850 and 1851. At the time these passed almost unnoticed. It was only when Lassalle in his treatise in 1862 referred to him as the greatest of German economists, and when conservative writers like Rudolf Meyer and Wagner drew attention to his work, that his books received the notice which they deserved. The German economists of the last thirty years have been greatly influenced by him. His ideas, it is true, are largely those of the earliest French socialists, who wrote before the movement had lost its purely intellectual tone and become involved in the struggle of the July Monarchy, but his clear logic and his systematic method, coupled with his knowledge of economics, which is in every way superior to that of his predecessors, gives to these ideas a degree of permanence which they had never enjoyed before. This “Ricardo of socialism,” as Wagner[883] calls him, did for his predecessors’ doctrines what Ricardo had succeeded in doing for those of Malthus and Smith. He magnified the good results of their work and emphasised their fundamental postulates.

Rodbertus’s upbringing decreed that he should not become involved in that democratic and radical socialism which was begotten of popular agitation, and whose best-known representative is Marx. Marx considered socialism and revolution, economic theory and political action, as being indissolubly one.[884] Rodbertus, on the other hand, was a great liberal landowner who sat on the Left Centre in the Prussian National Assembly of 1848, and his political faith is summed up in the two phrases “constitutional government” and “national unity.”[885] The success won by the Bismarckian policy gradually drew him nearer the monarchy, especially towards the end of his life.[886] His ideal was a socialist party renouncing all political action and confining its attention solely to social questions. Although personally favourably inclined towards universal suffrage, he refused to join Lassalle’s Arbeiterverein because Lassalle had insisted upon placing this article of political reform on his programme.[887] The party of the future, he thought, would be at once monarchical, national, and socialistic, or at any rate conservative and socialistic.[888] At the same time we must remember that “in so far as the Social Democratic party was aiming at economic reforms he was with it heart and soul.”[889]

Despite his belief in the possibility of reconciling the monarchical policy with his socialistic programme, he carefully avoided the economic teachings of the socialists. His too logical mind could never appreciate their position, and he had the greatest contempt for the Socialists of the Chair. He would be the first to admit that in practice socialism must content itself with temporary expedients, although he cannot bring himself to believe that such compromise constitutes the whole of the socialistic doctrine. He refers to the Socialists of the Chair as the “sweetened water thinkers,”[890] and he refused to join them at the Eisenach Congress of 1872—the “bog of Eisenach,” as he calls it somewhere. He regarded the whole thing as a first-class comedy. Even labour legislation, he thought, was merely a caprice of the humanitarians and socialists.[891] So that whenever we find him summing up his programme in some such sonorous phrase as Staat gegen Staatslosigkeit[892] (“the State as against the No-State”) we must be careful to distinguish it from the hazy doctrines of the State Socialists.[893] Despite himself, however, he proved one of the most influential precursors of the school, and therein lies his real significance.

Rodbertus’s whole theory rests upon the conception of society as an organism created by division of labour. Adam Smith, as he points out, had caught a faint glimmer of the significant fact that all men are linked together by an inevitable law of solidarity which takes them out of their isolation and transforms an aggregate of individuals into a real community having no frontiers and no limits save such as division of labour imposes, and sufficiently wide in scope to include the whole universe.[894] As soon as an individual becomes a part of economic society his well-being no longer depends upon himself and the use which he makes of the natural medium to which he applies himself, but upon the activity of his fellow-producers. The execution of certain social functions, which Rodbertus enumerates as follows, and which he borrows partly from Saint-Simon, henceforth become the determining factors: (1) The adaptation of production to meet demand; (2) the maintenance of production at least up to the standard of the existing resources; (3) the just distribution of the common produce among the producers.

Should society be allowed to work out these projects spontaneously, or should it endeavour to carry out a preconceived plan? To Rodbertus this was the great problem which society had to consider. The economists of Smith’s school treated the social organism as a living thing. The free play of natural laws must have the same beneficial effects upon it as the free circulation of the blood has upon the human body. Every social function would be regularly discharged provided “liberty” only was secured. Rodbertus thought this was a mistake. “No State,” says he, “is sufficiently lucky or perhaps unfortunate enough to have the natural needs of the community satisfied by natural law without any conscious effort on the part of anyone. The State is an historical organism, and the particular kind of organisation which it possesses must be determined for it by the members of the State itself. Each State must pass its own laws and develop its own organisation. The organs of the State do not grow up spontaneously. They must be fostered, strengthened, and controlled by the State.”[895] Hence, after 1837 we find Rodbertus proposing the substitution of a system of State direction[896] for the system of natural liberty, and his whole work is an attempt to justify the introduction of such a system. Let us examine his thesis and review the various economic functions which we defined above. Let us also watch their operation at the present day and see how differently these functions would be discharged in a better organised community.

1. It is hardly correct to speak of production adapting itself to social need under existing conditions, because production only adapts itself to the effective demand, i.e. to the demand when expressed in terms of money. This fact had been hinted at by Smith, and Sismondi had laid considerable stress upon it; but Rodbertus was the earliest to point out that this really meant that only those people who already possess something can have their wants satisfied.[897] Those who have nothing to offer except their labour, and find that there is no demand for that labour, have no share in the social product. On the other hand, the individual who draws an income, even though he never did any work for it, is able to make effective his demand for the objects of his desire. The result is that many of the more necessitous persons must needs go unsatisfied, while others wallow in luxury.

Truer word was never spoken. Rodbertus had a perfect right to insist on the fundamental fallacy lurking within a system which could treat unemployment—that modern form of famine—as simply an over-production of goods, and which found itself unable to modify it except through public or private charity. His remedy consisted of a proposal to set up production for social need as a substitute for production for demand. The first thing to be done was to find out the time which each individual would be willing to give to productive work, making a note of the character and quantity of goods required at the same time.[898] He thought that “the wants of men in general form an even series, and that the kind and number of objects required can easily be calculated.”[899] Knowing the time which society could afford to give to production, there would be no great difficulty in distributing the products among the various producers.

This is to go to work a little too precipitately and to shun the greatest difficulty of all. The uniform series of wants of which Rodbertus speaks exist only in the imagination. What we really find is a small number of collective needs combined with a great variety of individual needs. Social need is merely a vague term used to designate both kinds of wants at once. The slightest reflection shows that every individual possesses quite a unique series of needs and tastes. To base production upon social need is to suppress liberty of demand and consumption. It implies the establishment of an arbitrary scale of needs which must be satisfied and which is to be imposed upon every individual. The remedy would be worse than the evil.

But the opposition between social need and effective demand by no means disposes of his argument. The opposition needs some proving, and some explanation of the producers’ preference for demand rather than need ought to be offered. The explanation must be sought in the fact that the capitalistic producer of to-day manages his business in accordance with the dictates of personal interest, and personal interest compels him to apply his instruments to produce whatever will yield him the largest net product. He is more concerned about the amount of profit made than about the amount of produce raised. He produces, not with a view to satisfying any social need, but simply because it yields him rent or profit.[900]

This contrast between profit-making and productivity deserves some attention. Sismondi had already called attention to it by distinguishing between the net and the gross product. A number of writers have treated of it since, and it holds a by no means insignificant place in the history of economic doctrines.[901]

The opposition is dwelt upon in no equivocal fashion by Rodbertus. This pursuit of the maximum net product is clearly the producer’s only guide, but the conclusions which he proceeds to draw from it are somewhat more questionable. If we accept his opinion that the satisfaction of social need and not of individual demand is the determining factor in production, we are driven to the conclusion that modern society, actuated as it is by this one motive, cannot possibly satisfy every individual demand. But we have already shown that the phrase “social need” has no precise connotation; neither has the term “productivity,” which is so intimately connected with it. Further, if society has no desire to impose upon its members an arbitrary scale of wants that must be satisfied—in other words, if demand and consumption are to remain free—it can only be by adopting that system which recognises a difference between the present and the future “rentability” of the product. This difference between the sale price and the real cost of production of any commodity must, it seems to us, be recognised even by a collectivist society as the only method of knowing whether the satisfaction which a commodity gives is in any way commensurate with the labour involved in its production.[902] Pareto has given an excellent demonstration of this by showing how collectivist society will have to take account of price indications if social demand is to be at all adequately supplied.

2. Turning to the other desideratum, namely, a fuller utilisation of the means of production, Rodbertus contents himself with quoting the criticisms of the Saint-Simonians concerning the absence of conscious direction which characterises the present régime and the hereditary element which is such a common feature of economic administration. He is in full agreement with Sismondi when the latter declares that production is entirely at the option of the capitalist proprietor.[903] In this matter he is content merely to follow his leaders, without making any contribution of his own to the subject.

3. There still remains a third economic function which society ought to perform, and which Rodbertus considered the most important of all, namely, the distribution of the social product. An analysis of the present system of distribution was one of the tasks he had set himself to accomplish, believing with Sismondi and other socialists that a solution of the problem of distribution and the explanation of such phenomena as economic crises and pauperism constitute the most vital problems which face the science at the present moment.

A just distribution, in Rodbertus’s opinion, should secure to everyone the product of his labour.[904] But does not the present régime of free competition and private property accomplish this?

Let us watch the mechanism of distribution as we find it operating at the present time. Rodbertus’s description of it is not very different from J. B. Say’s, and it tallies pretty closely with the Classical scheme. On the one hand we have the entrepreneur who purchases the services of labour, land, and capital, and sells the product which results from this collaboration. The prices which he pays for these services and the price he himself receives from the consumer are determined by the interaction of demand and supply. What remains after paying wages, interest, and rent constitutes his profits.[905]

The distribution of the product is effected through the mechanism of exchange, and the result of its operation is to secure to the owner of every productive service the approximate market value of that service. Could anything be juster? Apparently not. But if we examine the social and economic hinterland behind this mechanism what we do find is the callous exploitation of the worker by every capitalist and landlord. The various commodities which are distributed among the different beneficiaries are really the products of labour. They are begotten of effort and toil—largely mechanical. Rodbertus did not under-value intellectual work or under-estimate the importance of directive energy. But intelligent effort seemed to him an almost inexhaustible force, and its employment should cost nothing, just as the forces of nature may be got for nothing. Only manual labour implies loss of time and energy—the sacrifice of something that cannot be replaced.[906] Consequently he does not recognise the intellectual or moral effort (the name is immaterial) involved in the postponement of consumption, whereby a present good is withheld with a view to contributing to the sum total of future good.[907] And he proceeds to define and to develop the opening paragraph of Smith’s Wealth of Nations: “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour or in what is purchased with that produce from other nations.”

The difference between his attitude and Marx’s is also interesting. Marx was thoroughly well versed in political economy, and had made a special study of the English socialists. His one object was to set up a new theory of exchange, with labour as the source of all value. Rodbertus, who drew his inspiration from the Saint-Simonians, focused attention upon production, and treated labour as the real source of every product—a simpler, a truer, but a still incomplete proposition. Rodbertus never definitely commits himself to saying that labour by itself creates value, but, on the other hand, he never denies it.[908] Social progress, he always maintained, must consist in the greater degree of coincidence[909] between the value of a product and the quantity of labour contained in it. But this is a task which the future must take in hand.[910] Again, if it be true that the worker creates the product, but that the proprietors of the soil and the capitalists who have had no share in its production are able to manipulate exchange in such a way as to retain a portion of it for themselves, it is clear that our judgment concerning the equity of the present system needs some revision. This secret embezzlement for the profit of the non-worker and to the injury of the diligent proceeds without any outward display of violence through the free play of exchange operating within a system of private property. Its sole cause lies in the present social system, “which recognises the claim of private landowners and capitalists to a share of the wealth distributed, although they have contributed nothing towards its production.”[911]

Hence his exposition of the twofold aspect of distribution. Economically exchange attributes to each of the factors land, capital, and labour a portion of the produce corresponding to the value of their respective services as estimated in the market. Socially it often means taking away from the real producers—from the workers—a part of the goods which their toil has created. This portion Rodbertus refers to under the simple name “rent,” which includes both the revenue of capitalists and the income of landlords.

No economist ever put the twofold aspect of the problem in a clearer light. Laying hold of the eternal opposition between the respective standpoints, he emphasises the difficulties which they present to so many minds. Justice would relate distribution to merit, but society is indifferent provided its own needs are satisfied. Society simply takes account of the market value of these products and services without ever showing the least concern for their origin or the efforts which they may originally have involved—the weary day of the industrious labourer and the effortless lounge of the lazy capitalist being similarly rewarded. Rodbertus’s great merit was to separate this truth from the other issues so frequently confused with it in the writings of the earlier economists and to bring it clearly before the notice of his fellow economists.

Rodbertus’s criticism did not end there, although the demonstration which we have just given of the distinction between the social and the purely economic point of approach to distribution constitutes its essential merit. We must not omit the practical conclusions which he draws from it.

What concerned Rodbertus most—at least, so we imagine from the standpoint which he adopted—was not the particular way in which the rate of wages or interest, high or low rents, are determined, but the proportion of the revenue that goes to the workers and non-workers respectively. The former question is a purely economic one of quite secondary importance compared with this other social problem. Believing that he had already shown the possibility of the workers being robbed, the problem now was to determine whether this spoliation was likely to continue. Does economic progress give any ground for hoping that rent or unearned income will gradually disappear? Bastiat and Carey had replied in the affirmative. The proportion that goes to capital, so they affirmed, is gradually becoming less, to the great advantage of the labourer. Ricardo, faced with the same dilemma, had come to the conclusion that with the inevitable increase in the cost of producing food the landowner’s share must be constantly growing. Say had asked himself the same question in the earliest edition of his treatise, but had found no reply. Rodbertus adopts none of their solutions, but independently arrives at the conclusion that the worker’s share gradually dwindles, to the advantage of the other participants.[912]

Theorist as he was, a simple deduction was all that was needed to convince him of the truth of this view. The rate of wages, we have already seen, is determined by the interaction of demand and supply in the labour market. The market price of labour, however, like that of any other product, is always gravitating towards a normal value—this normal value being none other than Ricardo’s necessary wage. “The share of the product that falls to the lot of the producer both in an individual instance and as a general rule is not measured by the amount which he himself has produced, but by that quantity which is sufficient for the upkeep of his strength and the upbringing of his children.”[913] This celebrated “brazen law” became the pivot of Lassalle’s propaganda, although it was never definitely recognised by Marx.

Granting the existence of such a law, and admitting also that the amount produced by labour is always increasing, so that the mass of commodities produced always keeps growing, a very simple arithmetical calculation suffices to show that the total quantity obtained by the workers always remains the same, representing a diminished fraction of the growing totality.

A similar demonstration affords a clue to the prevalence of crises. The entrepreneur keeps adding to the mass of commodities produced until he touches the full capacity of social demand.[914] But while production grows and expands the worker’s share dwindles, and thus his demand for some products remains permanently below production level. The structure is giving way under the very feet of the unsuspecting producer.[915] This theory of crises is simply a re-echo of Sismondi,[916] and gives an explanation of a chronic evil rather than of a crisis pure and simple. Its scientific value is just about equal to Sismondi’s other theory concerning proportional distribution.

This theory upon which Rodbertus laid such emphasis had already been outlined in his Forderungen, and a fuller development is given in his Soziale Briefe, where he expressly states it to be the fundamental point of his whole system, all else being mere scaffolding. His one ambition all his life long was to be able to give a statistical proof of it, but its importance is not nearly as great as he imagined it to be.

In the first place, doubt as to the validity of the “brazen” or “iron law of wages”—upon which the theory is based—is entertained not merely by economists, but also by socialists. And even if it were true, Rodbertus’s proof would still be inconclusive, for the workers’ share of the total product depends not upon one fact alone, but upon two—the rate of wages and the number of workers. Rodbertus’s error and Bastiat’s are very similar. Bastiat had tried to determine the capitalists’ share of the total product by taking account of one fact only, namely, the rate of interest, whereas he ought to have taken the amount of existing capital into consideration as well.

But we must admit that although the arguments used by Rodbertus are scarcely more reliable than Bastiat’s, his theory itself is nearer the facts as judged by statistics. No amount of a priori reasoning without some recourse to statistics can ever solve the problem. Statistics themselves seem to prove that labour’s portion, in some countries at least, has shown signs of diminishing since the beginning of the present century.

This does not necessarily mean that the worker must be worse off, for it may well happen that a diminution in the general share obtained by labour is accompanied by a growth of individual wages. All that we can conclude is that wages have not increased as rapidly as has capital’s share,[917] but this has not prevented the workers sharing in the general growth of prosperity.

Logically enough, Rodbertus proceeds to draw certain practical conclusions, including the necessity for the suppression of private property and of individual production. The community should be the sole owner of the means of production. Unearned income must go. Everyone should contribute something to the national dividend, and each should share in the total produce in proportion to his labour. The value of all commodities will depend upon the amount of time spent on them and effort put into them; and since the supply will always adapt itself to the needs of society the measure will be constant and exact, and equal distribution will be assured.

But Rodbertus recoils from his own solution, and the ardent socialist becomes a simple State Socialist. What frightens him is not the terrible tyranny of a system under which production and even consumption would be strictly regulated. “There would be as much personal freedom under a system of this kind as in any other form of society,” he remarks,[918] “society” evidently always implying some measure of restraint. His apprehension was of a different kind. He had a perfect horror of any revolutionary change, and stood aghast at the lack of education displayed by the masses. He realised how unwilling they were to sacrifice even a part of their wages in order to enable other men to have the necessary leisure to pursue the study of the arts and sciences—the noblest fruits of civilisation. Finally it seemed to him that illegal appropriation and the rightful ownership which results from vigorous toil are too often confused by being indiscriminately spoken of as private property. “There is,” says he, “so much that is right mixed up with what is wrong that one goads the lawful owner into revolt in trying to lay hold of the unlawful possessor.”[919]

Some kind of compromise should at all costs be effected. If private property—one of the great evils of the present day—cannot be got rid of without some inconvenience, cannot we possibly dispense with freedom of contract, the other source of inequality? Let us assume, then, that we have got rid of free contract while retaining the institution of private property. By doing this, although we are not immediately able to clear away unearned income, we shall have removed some of the greatest inconveniences that result from it. We shall arrest the downward trend of labour’s remuneration, and poverty and crises will disappear together.[920]

Such an attempt might be made even now. Let the State estimate the total value of the social product in terms of labour and determine the fraction that should go to the workers. Let it give to each entrepreneur in accordance with the number of workers he employs a number of wage coupons, in return for which the entrepreneur shall be obliged to put on the market a quantity of commodities equal in value. Lastly, let the said workers, paid in wage coupons, supply themselves with whatever they want from the public stores in return for these coupons. The national estimate would from time to time be subject to revision; and in order that the proportions should always be the same, the number of coupons given to labour would have to be increased if the number of commodities produced ever happened to increase. Rodbertus’s aim was to give the workers a share in the general progress made, and such was the plan which he laid down.[921]

There is no need to emphasise its theoretical, let alone its practical difficulties. We were led to mention it for a double reason. In the first place, it is interesting as an attempt to effect a compromise between the society of the present and the collectivism of the future. Marx regards the growing servility of the worker with a certain measure of equanimity as a necessary preliminary to his final emancipation. Rodbertus would speed the process of amelioration and would better his lot here and now.[922] It also throws an interesting light upon his extraordinary confidence in the all-powerful sovereignty of the State, and the ability of government to bend every individual will, even the most recalcitrant, to the general will. At the same time it reveals his utter indifference to individual liberty as an economic motive.

This indifference gradually merges into extreme hostility, while his confidence in the centralised executive becomes all the more thoroughly established. His later historical works contain an exposition of an organic theory of the State which is meant to justify such confidence. Just as in the animal world the higher animals are found to possess the most highly differentiated organs as well as the most closely co-ordinated, so in history as we pass from the lower social strata to the higher ones “the State advances both in magnitude and efficiency; and its action, while increasing in scope, grows in intensity as well. The State in its passage from one evolutionary stage to another presents us not merely with a greater degree of complexity, each function being to a greater and greater extent discharged by some special organ, but also with an increasing degree of harmony. The social organisms, despite their ever-increasing variation, are placed in growing dependence upon one another by being linked to some central organ. In other words, the particular grade that a social organism occupies in the organic hierarchy depends upon the degree to which division of labour and centralisation have been carried.”[923]

We are thus driven back upon the fundamental question set by Rodbertus at the outset of his inquiry: Can the various social functions, acting spontaneously, efficiently further the good of the social body, or should these functions be discharged by the mediation of a special organ, the State or Government? There is also the further question as to whether the reply which he gives is entirely satisfactory.

We are immediately struck by a preliminary contradiction: the economic boundaries of the community do not coincide with its political boundaries. The one is the result of division of labour and is coextensive with the limits set by division of labour, while the second is the product of the changing conditions of history. It is only logical that the economic functions of the State should be performed by other organs than those of the political Government, since its sphere of action is necessarily different. But it is to the State, as evolved in the course of a long historical process, that Rodbertus would entrust this directing power. Between Rodbertus’s description of the State’s economic activity and his final recourse to a national monarchical State is an element of contradiction which strikes us rather forcibly, especially when he comes to speak of “national” socialism.

In order to demonstrate how inadequately the present social organisation performs its duties, Rodbertus appeals to an ideal method of discharging them which he himself has created, and he has not the slightest difficulty in showing that hardly any of his ideal functions are being performed at the present time. Production is not based upon social need, nor is the wealth produced distributed in accordance with the labour spent. But we must never forget that Rodbertus’s conception of the social need was extremely hazy. His distribution formula, “to everyone according as he produces,” if applied logically is impossible, and satisfies neither the demands of humanity nor the needs of production. Had his definition of social function been less ambitious, his argument, perhaps, would have been more convincing.

Let us admit, however, that the existence of an economic society implies the successful accomplishment of certain functions which we need not trouble to define just now. The question then arises—a question that implies the severest criticism of the present organisation: Can the control and oversight which men ought to exercise over these functions be performed otherwise than through the instrumentality of the State? There was only one alternative for Rodbertus—extreme individualism or State control. But nature and history both escape the dilemma. The biological analogy has been carried too far, and most writers would be content to abandon it altogether. Like most of his contemporaries, Rodbertus imagined that economic individualism and personal liberty were indissolubly bound together, and that it was impossible to check individualism without endangering liberty. It is now realised, however, that this association of ideas, like many another, is temporary and not eternal, and the growth of voluntary associations intermediate between the State and the individual is every day showing it to be false.

We are now in a better position to appreciate the kind of appeal which this doctrine would make to State Socialists—people who are essentially conservative, but nevertheless genuinely desirous of seeing a larger element of justice introduced into our industrial régime. The distinction drawn between politics and economic socialism makes a first claim upon their respect. Then would follow the organic conception of society, which is a feature of all Rodbertus’s writings. It was his belief that production and distribution could only be regarded as social functions, and that the breakdown of individualism implied a need for greater centralisation or a greater degree of State control. On the other hand, the State Socialists refuse to associate themselves with the radical condemnation of private property and unearned income, both of which are features of Rodbertus’s teaching. The State Socialists set out to transform the Rodbertian compromise into a self-sufficing system, and instead of regarding their doctrine as a diluted form of socialism they are rather inclined to treat socialism as an exaggerated development of their theory.[924]

2. Lassalle

Rodbertus’s efforts to establish a doctrine of State Socialism upon the firm foundation of a new social theory had already met with a certain measure of success, but it was reserved for Lassalle to infuse vitality into these new ideas.

Lassalle’s brief but brilliant political career, ever memorable for the natural vigour of his eloquence, at once popular and refined, and its indelible impression of a strikingly original nature aflame with a passion both for thought and action, together with the romantic, dramatic character of his checkered existence, lent wonderful force to his utterances. In 1848, at the early age of twenty-three, he was a Marxian revolutionist. The revolutionary period was followed by a time of enforced inactivity, when he devoted himself almost exclusively to philosophical, legal, and literary pursuits. In 1862 the silence was at last broken by his re-entry into the political arena. The whole political life of Germany was at that moment convulsed by the half-hearted opposition which the Prussian Liberal party was offering to Bismarck’s constitutional changes. Lassalle declared war both upon the Government and upon the bourgeois Opposition—upon the latter more than the former, perhaps. Turning to the working classes, he urged them to form a new party which would avoid all purely political questions and to concentrate upon their own economic emancipation. For two eventful years the whole of Germany resounded with his speeches and his declamations before various tribunals, while the country was flooded with his pamphlets advocating the complete establishment of the Allgemeiner deutscher Arbeiterverein (General Association of German Workers), which he had already founded at Leipzig in 1863. The workers of the Rhineland received with open arms the agitator who thus took up in their midst the tangled skein of a broken career, and welcomed him with songs and decked him with garlands. The Liberal press, on the other hand, thoroughly taken aback by his unexpected onslaughts, mercilessly attacked him, even accusing him of having secret dealings with the Government. Suddenly the clamour ceased: Lassalle died on August 31, 1864, as the result of a wound which he had received in a duel,[925] and only the Deutscher Arbeiterverein, the earliest embryo of the great German Social Democratic party, remained as a memento of those violent attacks upon individualist Liberalism.

As far as theory goes, Lassalle’s socialism is hardly distinguishable from Marx’s. Social evolution is summed up in a stricter limitation of the rights of private property,[926] which in the course of a century or two must result in its total disappearance.[927] But Lassalle was pre-eminently a man of action, bent upon practical results. At that particular moment the German working class was only just waking up to the possibility of political existence. The path that it should follow was still undecided. In the year 1863 a number of workmen had tried to persuade their comrades to meet together in a kind of general congress. They further appealed to Lassalle and to other well-known democrats for their advice concerning the labour question. This gave Lassalle the opportunity he required for forming a political party of his own, with himself as chief. The next question was to fix upon a programme. “Working men,” says Lassalle, “must have something definite,”[928] and, on the other hand, “it is almost impossible to get the public to understand the final object which we must keep in view.”[929] So, without burdening his propaganda with too remote an ideal, he concentrates all his efforts upon two demands, the one political, the other economic—universal suffrage on the one hand and the establishment of producers’ associations supported by the State on the other. In order to win over the masses, he invoked, not the doctrine of the exploitation of the workers by the proprietors—which would have alienated the middle classes from him[930]—but the “brazen law of wages,” which is the happy title by which he chose to designate the Ricardian law of wages.

Rodbertus realised the necessity for distinguishing between an esoteric and an exoteric Lassalle[931]—between the logical theorist of the study and the opportunist politician of the public platform. Only to his contemporaries was the latter Lassalle really known. But his letters, which have been published since his death, go to show that there is at least no need to attach any greater importance to his proposed reforms than he was prepared to give them himself. It is not necessary to emphasise the fact that his plan was really borrowed from Louis Blanc or to call attention to the letter written to Rodbertus in which he declares himself quite prepared to change his plan provided a better one can be found. This idea of association was one that was by no means unknown to the German Liberal party; nor was it the first time that it had been preached to the working classes. Lassalle’s rival, Schulze-Delitzsch, had begun an active campaign even as far back as 1849, and had succeeded in establishing a great number of co-operative credit societies, composed largely of artisans, and aiming at supplying them with cheap raw materials. But such associations were to receive no support from the Government.

What was new in Lassalle’s scheme was just this appeal for State intervention. It was his energetic protest against eternal laissez-faire that impressed public opinion, and he himself was anxious that it should be presented in this light. Speaking to the workers of Frankfort on May 19, 1863, he declared that “State intervention is the one question of principle involved in this campaign. That is the consideration that has weighed with me, and there lies the whole issue of the battle which I am about to wage.”[932]

He harks back to this fundamental idea in all his principal writings. It was the theme of his first address delivered to the workers in Berlin in 1862. It is there presented with all his customary force. The bourgeois conception of the State is contrasted with the true conception, which is identical with the workers’. The bourgeoisie seem to think that the State has nothing to do except to protect the property and defend the liberties of the individual—a conception of State action that would be quite sufficient were everybody equally strong and intelligent, equally cultured and equally rich.[933] But where such equality does not exist the State is reduced to the position of a “night watchman,” and the weak is left at the mercy of the strong. In reality the State exists for quite other purposes. The history of mankind is the story of one long struggle to establish liberty in the face of natural forces, to overcome oppression of every kind, and to triumph over the misery, ignorance, want, and weakness with which human nature has always had to reckon. In that struggle the individual, in his isolation, is hopeless and union becomes indispensable. This union is a creation of the State, and its object is to realise the destiny of mankind, namely, the attainment of the highest degree of culture of which humanity is capable. It is a means of educating and of furthering the development of humanity along the path of liberty.

The formula savours of metaphysics rather than of economics. There is a striking similarity between it and the formula employed by Hegel, the philosopher.[934] Lassalle was really a disciple of Hegel and Fichte.[935] Through the influence of Lassalle the theories of the German idealists came into conflict with the economists’, and his incomparable eloquence contributed not a little to the rising tide of indignation with which the Manchester ideas came to be regarded.

III: STATE SOCIALISM—PROPERLY SO CALLED

The years that elapsed between the death of Lassalle and the Congress of Eisenach (1872) proved to be the decisive period in the formation of German State Socialism.

Bismarck’s remarkable coups d’état in 1866 and 1870 had done much to discredit the political reputation of the leaders of the Liberal party, who had shown themselves less than a match for the Chancellor’s political insight. This reacted somewhat upon economic Liberalism, because it so happened that the leaders of both parties were the same.[936] On the other hand, the idea of a rejuvenated empire incarnate in the Iron Chancellor seemed to add fresh lustre to the whole conception of the State. The Jahrbücher für Nationalökonomie, first issued by the Historical school in 1863, had by this time become the recognised organ of the University Economists, and had done a great deal to accustom men’s minds to the relative character of the principles of political economy and to prepare their thoughts for an entirely new point of view.

Labour questions had also suddenly assumed an importance quite undreamt of before this. The German revolution of 1848 was presumably political in character: the great capitalistic industry had not reached that stage of development which characterised it both in England and in France; and it is a significant fact that the two great German socialists, Rodbertus and Marx, had to go abroad to either of those two countries to get their illustrations. But since 1848 German industry had made great strides. A new working-class community had come into being, and Lassalle had further emphasised this transformation by seeking to found a party exclusively upon this new social stratum. The association which was thus founded still survives. Another agitation, largely inspired by Marxian ideas, was begun about the same time by Liebknecht and Bebel. In 1867 both of them were elected to the Reichstag, and two years later they founded the Socialdemokratische Arbeiterpartei (Social Democratic party), which was destined to play such an important part in the history of the next thirty years.

In this way labour questions suddenly attracted attention, just as they had previously done in France during the July Monarchy; and just as in France a new current of opinion—unceremoniously set aside by the coup d’état, it is true—had urged upon the educated classes the importance of abandoning the doctrine of absolute laissez-faire and of claiming the support of Government in the struggle with poverty, so in Germany an increasing number of authors had persuaded themselves that a purely passive attitude in face of the serious nature of the social problem which confronted them was impossible, and that the establishment of some sort of compact between the warring forces of capital and labour should not prove too much of an undertaking for the rejuvenated vitality of a new empire.

The new tendencies revealed themselves in unmistakable fashion at Eisenach in 1872. A conference, which was largely composed of professors and economists, of administrators and jurists, decided upon the publication of a striking manifesto in which they declared war upon the Manchester school. The manifesto spoke of the State as “a great moral institution for the education of humanity,” and claimed that it should be “animated by a high moral ideal,” which would “enable an increasing number of people to participate in the highest benefits of civilisation.”[937] At the same time the members of the congress determined upon the establishment of the Verein für Sozialpolitik, an association charged with the task of procuring the necessary scientific material for this new political development. This was the beginning of the “Socialism of the Chair,” as it was derisively named by the Liberals on account of the great number of professors who took part in this conference. The same doctrine, with a somewhat more radical bias, became known as State Socialism. The imparting of such a bias was the task undertaken by Wagner,[938] in his Grundlegung, which appeared in 1876.[939]

Difficult though the task may prove, we must try to distinguish between the work of the earlier economists and the special contributions made by the State Socialists. Like all doctrines that purport to sum up the aspirations of a group or an epoch and to supply a working agreement between principles in themselves irreconcilable, it lacks the definiteness of a purely individualistic or theoretical system. Its ideas are borrowed from various sources, but it is not always scrupulous in recognising this.

It is first and foremost a reaction, not against the fundamental ideas of the English Classical school, as is generally believed, but against the exaggerations of their second-grade disciples, the admirers of Bastiat and Cobden—known to us as the “Optimists” and styled the “Manchestrians” in Germany. The manifesto, drawn up by Professor Schmoller at the Eisenach Congress, speaks of the “Manchester school,” but makes no mention of the Classical writers.[940] It is true that a great many German writers regard the expressions “Smithianismus” and “Manchesterthum” as synonymous, but these are perhaps polemical exaggerations upon which we ought not to lay too much stress. On the other hand, Liberalism had nowhere assumed such extravagant proportions as it had in Germany. Prince Smith, who is the best-known representative of Liberalism after Dunoyer, was convinced that the State had nothing to do beyond guaranteeing security, and denied that there was any element of solidarity between economic agents save such as results from the existence of a common market. “The economic community, as such, is a community built upon the existence of a market, and it has no facility to offer other than free access to a market.”[941]

The State Socialists, on the contrary, are of opinion that there exists a moral solidarity which is much more fundamental than any economic tie between the various individuals and classes of the same nation—such solidarity as results from the possession of a common language, similar manners, and a uniform political constitution. The State is the organ of this moral solidarity, and because of this title it has no right to remain indifferent to the material poverty of a part of the nation. It has something to do besides protecting people against internal or external violence. It has a real work of “civilisation and well-being”[942] which it ought to perform. In this way State Socialism becomes reconciled to the philosophic standpoint which Lassalle had chosen for it. Lassalle’s insistence upon the mission of Governments and the importance of their historic rôle has been incorporated into its system, and the attention that is paid to national considerations reminds one of the teaching of Friedrich List.

It is impossible not to ask whether the State is capable of carrying out the duties that have been entrusted to it. There is little use in emphasising duty where there is no capacity for discharging it. The State’s incapacity as an economic agent has long been a notorious fact. Wagner and his friends were particularly anxious to correct this false impression, and as far as their doctrine contains anything original it may most conveniently be described as an attempt to rehabilitate the State. Optimists of Bastiat’s genre looked upon the State as the very incarnation of incapacity. The State Socialists, on the other hand, regard government as an economic agent very similar to other agents which the community employs, only a little more sympathetic perhaps. Much of their argument consists of an attempt to create a presumption in favour of government as against the ordinarily accepted opinion which individualism had begotten. Such was the nature of the task which they undertook.

Their first action was to insist upon the weaknesses of individuals. Following in the wake of Sismondi and other socialists, they emphasised the social inconveniences of competition, which is, however, generally confused with individual liberty.[943] They also insisted upon the social inequality of masters and workers when it comes to a question of wage-bargaining—a fact that had already been noted by Adam Smith—as well as upon the universal opposition that exists between the weak and the strong. The inadequacy of merely individual effort to satisfy certain collective wants is another fact that was considerably emphasised.

As far back as the year 1856 Dupont-White, a Frenchman, had complained bitterly that all the paths of civilisation remained closed merely because of the existence of one obstacle—the infirmity and malignity of the individual.[944] He also attempted to show how the collective interests of modern society are becoming increasingly complex in character and of such magnitude as to be utterly beyond the compass of individual thought.[945] “There are,” says he in that excellent formula in which he summarises the instances in which State intervention may be necessary, “certain vital things which the individual can never do, either because he has not the necessary strength to perform them or because they would not pay him; or, again, because they require the co-operation of everybody, which can never be got merely by common consent. The State is the one person—the entrepreneur—who can undertake such tasks.”[946] But his words went unheeded.

Writing in a similar vein, Wagner invokes the testimony of history in support of his State doctrine, showing us how the State’s functions vary from one period to another, so that one never feels certain about prescribing limits to its action. Individual interest, private charity, and the State have always had to divide the field of activity between them. Never has the first of these, taken by itself, proved sufficient, and in all the great modern states its place is taken by State action. To conclude that this solution was useful and necessary and in accordance with the true law of historical development only involved one further step.[947] One almost unconsciously proceeds from the mere statement of a fact to the definite formulation of a law. “Anyone,” says Wagner, “who has appreciated the immanent tendencies of evolution (i.e. the essential features of economic, social, or political evolution) may very properly proceed from such a historical conception of social evolution to the formulation of postulates relative to what ought to be.”[948] In virtue of this conception there is a demand for the extension of the State’s functions, which may easily be justified on the ground of its capacity for furthering the well-being and civilisation of the community. The influence of Rodbertus’s thought, especially his theory concerning the development of governmental organs to meet the needs of a higher social development,[949] is quite unmistakable in this connection.

The similarity between his views and those of Dupont-White, though entirely fortuitous, perhaps, is sufficiently remarkable to justify our calling attention to it. White is equally emphatic in his demand that the State should exercise charity and act beneficently.[950] He shows how the modern State has extended its dominion, substituting local government for class dominion and parental despotism, taking women, children, and slaves successively under its care, and adding to its duties and responsibilities in proportion as civilisation grows and liberty broadens downward. Fresh life requires more organs, new forces demand new regulations. But the ruler and the organ of society is the State.[951] In a moment of enthusiasm he even goes so far as to declare that “the State is simply man minus his passions; man at such a stage of development that he can commune even with truth itself, fearing neither God nor his own conscience. However imperfect it may be, the State is still vastly superior to the individual.”[952] Such writing is not without a touch of mysticism.

Without going the extent of admitting, as M. Wagner would have us do, that the simple demonstration of the truth of historical evolution is enough to justify his policy, we must commend State Socialism for the service it has performed in combating the Liberal contempt for government. If we admit the right of a central power to regulate social relations, it is difficult to understand why certain economic relations only should be subjected to such supervision.

But the real difficulty, even when the principle is fully recognised, is to define the spheres that should respectively belong to the State and to the individual. How far, within what limits, and according to what rules should the State intervene? We must at any rate, as Wagner says, begin with a rough distribution of attributes. It is impossible to proceed by any other method unless we are to assume, as the collectivists seem to do, a radical change in human psychology resulting in the complete substitution of a solicitude for the public welfare for private interest.

Dupont-White thought the problem insoluble,[953] and Wagner is equally emphatic about the impossibility of formulating an absolute rule. The statesman must decide each case on its merits. He does, however, lay down a few general rules. As a first general principle it is clear that the State can never completely usurp the place of the individual.[954] It can only concern itself with the general conditions of his development. The personal activity of the individual must for ever remain the essential spring of economic progress. The principle is apparently the same as Stuart Mill’s, but there is quite a marked difference between them. Mill wished to curtail individual effort as little as possible, Wagner to extend Government action as much as he could. Mill insists throughout upon the negative rôle of Government; Wagner emphasises the positive side, and claims that it should help an ever-increasing proportion of the population to share in the benefits of civilisation. No inconvenience, Wagner thinks, would result from a little more communism in our social life. “National economy should be transferred from the control of the individual to the control of the community in general,” he writes, in a sentence that might have been borrowed directly from Rodbertus.[955] Both he and Mill are agreed that the limit of Government action must be placed just at that point where it threatens to cramp individual development.[956]

The practical application of these ideas would affect both the production and the distribution of wealth. But on this question State Socialism has done little more than seize hold of ideas that were current long before its day.

In the matter of distribution it takes exactly the same standpoint as Sismondi. There is no condemnation either of profits or interest as a matter of principle, such as is the case with the Socialists, nor is there any suggestion of doing away with private property as the fundamental institution of society; but there is the expression of a desire for a more exact correspondence between income and effort[957] and for such a limitation of profits as the economic conjuncture will allow of, and, on the other hand, for such an increase of wages as will permit of a more humane existence. It is impossible to disguise the fact that all this sounds very vague.[958]

The State would thus undertake to see that distribution conformed to the moral sentiment of each period. Taxation was to be employed as the instrument of such reforms. Dupont-White, in his Capital et Travail,[959] which was written as early as the year 1847, had hit upon the precise formula in which to describe these projects: “To levy a tax such as will strike the higher classes and to apply the yield to help and reward labour.” Wagner says just the same thing. “Logically State Socialism must undertake two tasks which are closely connected with one another. In the first place it must raise the lower strata of the working classes at the expense of the higher classes, and in the second place it must put a check upon the excessive accumulation of wealth among certain strata of society or by certain members of the propertied classes.”[960]

In the matter of production State Socialism has simply been content to reproduce the list given by Mill, Chevalier, and Cournot of the cases in which there is no economic principle against the direct control or management of an industrial enterprise by the State. Speaking generally, Wagner is of the opinion that the State should take upon itself the control of such industries as are of a particularly permanent or universal character, or such as require either uniform or specialised methods of control or are likely to become monopolies in the hands of private individuals. The same argument would apply to industries satisfying some general want, but in which it is almost impossible to determine the exact advantage which the consumer derives from them. The State administration of rivers, forests, roads, and canals, the nationalisation of railways and banks, and the municipalisation of water and gas, are justified on the same grounds.

Such are the essential features of State Socialism, which bases its appeal, not on any precise criticism of property or of unearned income, such as we are accustomed to get from the socialists, but entirely upon moral and national considerations. A juster distribution of wealth and a higher well-being for the working classes appear to be the only methods of maintaining that national unity of which the State is the representative. But it neither specifies the rules of justice nor indicates the limits of the ameliorative process. The fostering of collective effort affords another means of developing moral solidarity and of limiting purely selfish action; but the maintenance of private property and individual initiative seemed indispensable to the growth of production—a consideration which renders it inimical to collectivism. Its moral character explains the contrast between the precise nature of some of its positive demands and the somewhat vague character of its general principles, which may be applied to a greater or lesser extent according to individual preferences. It is impossible to deny the essentially subjective character of its criteria, and this affords some indication of the vigorous criticism offered by the economists, who are above all anxious for scientific exactitude, and the measure of enthusiasm with which it has been welcomed by all practical reformers. It forms a kind of cross-roads where social Christianity, enlightened conservatism, progressive democracy, and opportunistic socialism all come together.

But its success was due not so much to the value of its principles as to the peculiar nature of the political and economic evolution toward the end of the century. Its most conspicuous representative in Germany was Prince Bismarck, who was totally indifferent to any theory of State Socialism, and who preferred to justify his policy by an appeal to the principles of Christianity or the Prussian Landrecht.[961] One of his great ambitions was to consolidate and cement the national unity which he had succeeded in creating. A system of national insurance financed and controlled by the State appealed to him as the best way of weaning the working classes from revolutionary socialism by giving them some positive proof of the sympathy of the Government in the shape of pecuniary interest in the welfare of the empire. In a somewhat similar fashion the French peasant became attached to the Revolution through the sale of national property. “I consider,” says Bismarck, speaking of invalidity insurance, “that it is a tremendous gain for us to have 700,000 annuitants among the very people who think they have nothing to lose, but who sometimes wrongly imagine that they might gain something by a change. These individuals would lose anything from 115 to 200 marks, which just keeps them above water. It is not much, perhaps, but it answers the purpose admirably.”[962] Such was the origin of those important laws dealing with sickness, accidents, invalidity, and old age which received the imperial seal between 1881 and 1889. But just because the Chancellor did not consider that there was the same pecuniary advantage to be derived from labour laws in the narrow sense of the term—that is, in laws regulating the duration of labour, Sunday rest, the inspection of factories, etc.—he was less favourably inclined towards their extension. The personal predilection of the Emperor William II, as expressed in the famous decrees of February 4, 1890, was needed to give the Empire a new impetus in this direction.

Accordingly it was the intelligent conservatism of a Government almost absolute in its power, but possessed of no definitely social creed, that set about realising a part of the programme of the State Socialists. In England and France and the other countries where political liberty is an established fact similar measures have been carried out at the express wish of an awakening democracy. The working classes are beginning to find out how to utilise for their own profit the larger share of government which they have recently secured. Progressive taxation, insurance, protective measures for workmen, more frequent intervention of Government with a view to determining the conditions of labour, are just the expressions of a tendency that operates independently of any preconceived plan.

The regulation of the relationship between masters and workmen gave to State Socialism a legislative bias. Governments and municipalities have long since extended their intervention to the domain of production, the new character of social life rather than any social theory being again the determining motive. Public works, such as canals, roads, and railways, have multiplied enormously in the course of the nineteenth century, thanks to the existence of new productive forces. The demand for public services has increased because of the increasing concentration of population. Communal life keeps encroaching upon what was formerly an isolated, dispersive existence, and community of interest is extending its sway in village and borough as well as in the great city and the nation at large. Industry also is being gradually linked together, and the area of free competition is perforce becoming narrower. In the labour market, as well as in the produce and the money markets, concentration has taken the place of dispersion. Monopoly is everywhere. Collective enterprise, instead of being the exception, tends to be the rule, and public opinion is gradually being reconciled to the idea of seeing the State—the “collective being” par excellence—becoming in its turn industrial.

Under conditions such as these it was impossible that the doctrine of State Socialism should not influence public opinion.

State Socialism has the peculiar merit of being able to translate the confused aspirations of a new epoch in the history of politics and economics into practical maxims without arousing the suspicions of the public to the extent that socialism generally does. Legislators and public men generally have been supplied with the necessary arguments with which to defend the inauguration of that new policy upon which they had secretly set their hearts. A common ground of action is found for parties that are generally opposed to one another and for temperaments that are usually incompatible. That is the outstanding merit of a doctrine that seems eminently suitable for the attainment of tangible results.

And so by a curious inversion of functions by no means exceptional in the history of thought, State Socialism at the end of the century finds itself playing the part of its great adversary, the Liberal Optimism of the early century. One of the outstanding merits of that earlier Liberalism was the preparation it afforded for a policy of enfranchisement or liberty, which was absolutely necessary for the development of the industrial régime. And so it became the interpreter of the great economic currents of the time. In pursuance of this exclusive task all traces of its scientific origin disappeared, the elaboration of economic theory was neglected, and the habit of close reasoning so essential to systematic thinking was abandoned. In a somewhat similar manner State Socialism has become the creed of all those who desire to put an end to the abuses of economic liberty in its extremer aspects, or such as are generally concerned about the miserable condition of an increasing number of the working classes. Absorbed in immediate matters of this kind, the promoters of State Socialism have managed to influence practical politics without shedding much light upon economic theory. And now they in their turn find their system threatened by the fate which awaits all political doctrines. Even at the present moment one is tempted to ask whether this growing multiplicity of State function is not in danger of arousing on the part of consumers, entrepreneurs, and workmen a general feeling of contempt for the economic capacity of the State.

In conclusion, we must note another characteristic fact. Whereas during the greater part of the nineteenth century the attacks of Socialism were directed against Liberalism and economic orthodoxy, Neo-Marxian syndicalism is concentrating its attention almost exclusively upon State Socialism. Sorel emphasises the similarity that exists between Marxism and Manchesterism, and on more then one point he finds himself in agreement with a “Liberal” like Pareto. On the other hand, no words are sufficiently vigorous to express his condemnation of the partisans of social peace and interventionism, which appear to him to corrupt the working classes. Syndicalist working men have on more than one occasion shown their contempt for the State by refusing to avail themselves of measures passed on their behalf—old-age pensions, for example. This attitude is perhaps due to the influence of the anarchists upon the leaders of French syndicalism.

The fusion of these two currents of ideas—the Neo-Marxian and the anarchist—and their effect in turning the attention of the French working classes away from State Socialism, is an interesting fact whose political results will by no means prove negligible.[963]