Socialism and the Classical Liberal Critique

[Updated: 10 July, 2021]

 

[David and Marx in Shanghai]

Introduction

This is a summary of the material on socialism and the Classical Liberal critique which we have online to date. There are also a couple of blog posts on this topic:

  1. The Socialist Critique of Private Property and Free Markets and the French Political Economists’ Response” (12 May 2021)
  2. Socialism is Zombie Economics” (24 Jan. 2021)
  3. Mises on Economic Calculation under Socialism (30 September, 2020)

On the critique of socialism see especially the Austrian economist Ludwig von Mises' early and devastatiing critique of central planning in Socialism (1922) and the work of the Scottish economist and poet Alexander Gray (1882-1968) The Socialist Tradition: Moses To Lenin (1946). The latter is a comprehensive history of socialism which is peppered with his great insight, deep learning, and sceptical and witty observations.

An early argument in favour of a completely "closed economy" where the state would control every aspect oif production and exchange, in other words a vision of a centrally planned economy which the Bolsheviks would attemtpo to introduced in Russia in 1917, was provided by Johann Gottlieb Fichte (1762-1814) in Der geschlossene Handelsstaat (The Closed Commercial State) (1800) [auf deutsch in HTML and facs. PDF]. He was reacting to the economic impact of the Napoleonic Wars on the fragmented German states and the rise of England as an industrial and commercial power. In France, the same concerns led the liberal Jean-Baptiste Say to write his Treatise on Political Economy (1803) [HTML] in which he advocated the exact opposite, the most “open commercial state” imaginable.

A Surevy of the Socialist Tradition and its Critics

As socialist ideas began to emerge during the 1820s and 1830s in Europe, especially in France, classical liberals began to turn their attention to this new set of ideas calling for greater intervention by the state in the economy. I think we can identify four key periods when classical liberals were active in opposing socialist and interventionist ideas more broadly understood:

  • the 1840s in France
  • the 1880s and 1890s in Europe more generally
  • the immediate post-1917 years as the Bolshevik experiment in central planning was underway in Russia.
  • post-1936 following the publication of Keynes The General Theory of Employment, Interest and Money

The 1840s in France

There were three influential French socialists during the 1840s who were all elected to the Chamber of Deputies during the revolution and sparred with Bastiat and the other liberals and political economists. They and their main texts are:

  • Louis Blanc (1811-1882) had elaborate plans to “organise labour” with the aid of the state in 1848; we have a translation of his key pamphlet The Organisation of Work (1840) [HTML] and several editions in French; his work inspired Frédéric Bastiat and Michel Chevalier to write several important critiques of socialism
  • one of the most influential French socialists was the anarchist socialist Joseph Proudhon (1809-1865), whose work Qu’est-ce que la propriété? (What is Property?) (1840) went through many editions before and during the 1848 Revolution [HTML]; it was translated into English in 1876 by the American individualist anarchist Benjamin Tucker [HTML]; he also had an long debate in the press with Bastiat on the legitimacy of charging interest on loans and rent on land; one of Proudhon’s key demands in the Second Republic was for the setting up of state supported “Peoples’ Banks” which would provide low or zero interest loans to workers, see Free Credit (1850) [facs. PDF in French]
  • Victor Considerant (1808-1893) wrote a socialist Manifesto in 1847, one year before Marx wrote his more famous one. French [HTML] and English [HTML]. Considerant was one of Bastiat’s arch-rivals in the Chamber of Deputies during the Second Republic (1848-50); he demanded state funding to set up a trial socialist community just outside Paris to demonstrate the superiority of socialism over the free market; Bastiat replied by suggesting he be allowed to set up a tax-free and regulation-free economic zone as well to show the superiority of free markets and private property over socialism; neither scheme eventuated

Although Karl Marx (1818-1883) was not French he lived in France in the 1840s and did considerable research in political and economic theory there, as well as writing and distributing his Communist Manifesto (Feb. 1848) to a German Workers club based in Paris during the early weeks of the 1848 Revolution; in German [HTML] and English [HTML]

The classical liberals and political economists and some conservatives replied to the socialists in a massive way both in the Chamber of Deputies, the press, and the publishing firm Guillaumin which published dozens of their books and pamphlets. The main classical liberals were:

  • Charles Dunoyer (1786-1862) was the president of the Political Economy Society and wrote a large defence of De la Liberté du travail (On the Freedom of Working) (1845) to oppose the socialist idea of "le droit du travail" (the right to a (state guaranteed) job) [facs. PDF in French]
  • Michel Chevalier (1806–1879) was a Professor of Political Economy at the Collège de France who wrote prolifically on socialism - such as
    • Lettres sur l’Organisation du travail (1848) [in French facs. PDF] and
    • L’économie politique et le socialisme (1849) [in French facs. PDF]
  • Frédéric Bastiat (1801-1850) wrote 12 major anti-socialist pamphlets during 1848-1850) such as his lengthy debate with Proudhon on Gratuité du crédit (Free Credit) (Oct. 1849 - Feb. 1850) [facs. PDF in French] and a full list here (to come)
  • Gustave de Molinari (1819-1912) wrote a book in 1849 which was a a three-way conversation between a conservative (the old school of statism), a socialist (the new school of statism), and an “Economist” (i.e. a classical liberal) in  Les Soirées de la rue Saint-Lazare; entretiens sur les lois économiques et défense de la propriété (1849) [HTML and facs,. PDF in French; draft English trans. at the OLL]. He was also one of the main editors and writers for the monumental Dictionnaire de l'Économie politique (1852-53) [in French] in which the critique of socialism played an important role; see
    • Louis Reybaud's article “Socialistes, Socialisme” in the DEP [en français HTML and in English HTML] as well as
    • the article on "Communism" by the economist Henri Baudrillart [en français HTML and in English HTML]; which were translated and published 40 years later in Lalor's Cyclopedia (1881) [HTML and facs. PDF];
    • Reybaud also wrote a 2 vol. history and critique of socialism in 1849, Les Études sur les réformateurs contemporains, ou socialistes modernes vol.1 facs. PDF and vol. 2 facs. PDF.

Adolphe Thiers (1797-1877) was a conservative politician and historian and not a classical liberal but he wrote a book defending the right to own property which was under attack during the 1848 Revolution: De la Propriété (1848) (en français HTML] and in English with a slightly different title, The Rights of Property: A Refutation of Communism & Socialism (1848) [HTML]. Molinari reviewed this book and criticised Thiers for ignoring one of the main complaints of the socialists about the current distribution of property, namely, that one should not defend unjustly acquired property by means of state privileges and monopolies

The 1880s and 1890s in France, England, and Germany

France: Following the defeat of the Paris Commune in 1871 French socialists took two routes, one intellectual by working within the economics faculties of the state University system (where economics was taught only in the Law Faculties), and the other with the formation of socialist parties which would get into power by means of elctions. The “Parti Ouvrier Français” (French Workers Party) was formed in 1879, while in the Universities the following scholars pushed interventionist ideas:

  • Alfred Jourdan, Du rôle de l’état dans l’ordre économique: ou, Économie politique et socialism (1882);
  • Claudio Jannet, Le Socialisme d’état et la reforme sociale (1889); and
  • Charles Gide, L’idée de solidarité (1893).

These socialists and interventionists were opposed by classical liberals like Frédéric Passy (1822-1912),Yves Guyot (1843-1928), Paul Leroy-Beaulieu (1843-1916), and Ludwig Bamberger (1823-1899). See:

  • Yves Guyot (1843-1928), among many works on this topic:
    • The Tyranny of Socialism (1893) French [HTML] and English [HTML];
    • Les Principes de 89 et le Socialisme (1894) (en français) in HTML and facs. PDF;
    • La Comédie socialiste (1897) - facs. PDF;
    • Les travaux publics (1897) - drawing upon his experience as Minister for Public Works (1889-92) - facs. PDF;
    • Le collectivisme futur et le socialisme présent (1906) - a short speech or essay attacking socialist plans before the Chambre (en français) HTML and facs. PDF.;
    • La Démocratie individualiste (1907) in which he shows his endebtedness to the ideas of Herbert Spencer and the Liberty and Property Defence League - facs. PDF;
    • Sophismes socialistes et faits économiques (1908) [HTML and facs. PDF] trans. as Socialistic Fallacies [HTML and facs. PDF] - better trans. as "Socialist Sophisms and Economic Facts"; and
    • La Gestion par l’État et les Municipalités (1913) [HTML and facs. PDF] trans. as Where and Why Public Ownership has failed [HTML and facs. PDF] - better trans. as "The State and Municipal Administration (of public works)"
  • Paul Leroy-Beaulieu (1843-1916):
    • Collectivism (1884) in French [facs. PDF] and English [HTML], and
    • The Modern State (1889) in French [HTML] and English [HTML]
  • the articles on Socialism in the Nouveau Dictionnaire d’Économie Politique (1890):
    • Eugène d’Eichthal, “Socialisme,” NDEP, T. 1, pp. 815-860 [facs. PDF];
    • Urbain Guérin, “Socialisme Chrétien,” NDEP, T. 1, pp. 860-67. [facs. PDF];
    • Ludwig Bamberger “Socialisme d’état” (state socialism), NDEP, T. 1, pp. 867-820 [facs. PDF]

Britain and the Colonies: The Irish playwright George Bernard Shaw (GBS), along with the writers and educators Sidney and Beatrice Webb, the feminist Emmeline Pankhurst, and the novelist H. G. Wells, founded the Fabian Society in England 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.

  • GBS wrote a "Manifesto" of the Fabian Society (1884) [HTML] and edited a collection of essays Fabian Essays in Socialism (1889) in HTML and facs. PDF

This was quickly replied to by the Liberty and Property Defence League (founded 1882) with two volumes of essays edited by Thomas Mackay:

  • A Plea for Liberty: An Argument Against Socialism and Socialistic Legislation (1891) [HTML] and
  • A Policy Of Free Exchange: the Economical and Social Aspects (1894) [HTML]
  • Australians should note the essays in these volumes by Charles Fairfield on “State Socialism in the Antipodes” and J.W. Fortescue “State Socialism and the Collapse in Australia” since this new form of socialism was much admired by the British socialists of the day and seen as the path for the future. The pioneers of "state socialism" were Bismarck in the new German Reich after 1871 and the Australian colonies in the last decades of the 19th century. On state socialism in the Antipodes, this time in New Zealand but in favour of it: Rossignal and Steward, State Socialism in New Zealand (1910) facs. PDF.

Herbert Spencer also joined in with works on "the coming slavery" of socialist interventionism in The Man versus the State (1884) HTML and facs. PDF, as did the individualist political philosopher Wordsworth Donisthorpe (1847-1914) and Auberon Herbert (1838-1906):

  • Wordsworth Donisthorpe, Individualism: A System of Politics (1889) in HTML and facs. PDF
  • Wordsworth Donisthorpe, Law in a Free State (1895) in HTML and facs. PDF
  • Auberon Herbert, The Voluntaryist Creed (1908) in HTML and facs. PDF

In addition to the Fabian socialist challenge (and soon the Labour Party formed in 1900) classical liberalism was being challenged from within, so to speak, by political philosophers like L.T. Hobhouse, John A. Hobson, T.H. Green who developed a more interventionist form of liberalism which they called the “New Liberalism” (or what the Americans now call just "liberalism", or elsewhere "social" liberalism) which would have enormous influence in the 20th century. See for example the important works by

  • T.H. Green, The Principles of Political Obligation (1879-80) [HTML and facs. PDF] and his Lecture on "Liberal Legislation and Freedom of Contract” (1881) [HTML and facs. PDF]
  • L.T. Hobhouse, Liberalism (1911) in HTML and facs. PDF.

Germany: The main theorist of the "communist" or "revolutionary" variant of socialism, Karl Marx (1818-1883), died before he could finish and publish all the volumes of his Das Kapital. (vol. 1 appeared in his lifetime in 1867). This was left to Friedrich Engels who published vols. 2 (1884) and 3 (1896). See

The appearance of the final volume in 1896 prompted the Austrian economist Eugen von Böhm-Bawerk to write a comprehensive demolition of the "Marxian system" in "Zum Abschluss des Marxschen Systems" ("On the Completion of Marx's System (of Thought): A Critique) in English [HTML and facs.PDF] and German [HTML and facs.PDF).

Given the paucity of specific plans for what a future socialist society would look like and how it would function, there were several attempts to imagine it in the form of speculative fiction. The best known one was by the American socialist Edward Bellamy in Looking Backward. 2000-1887 (1888) [HTML]. Another was by the Australian William Lane (John Millar), The Workingman’s Paradise (1892) and also H.G. Wells, A Modern Utopia (1905).

This should be read alongside the dystopian picture of a socialist future by the German classical liberal politician Eugen Richter in Pictures of the Socialistic Future (1891) [HTML].

Post-1917

Because the "revolutionary socialists" like Karl Marx were very coy about describing in detail how the future centrally planned communist economies would be run (unlike the "democratic socialists" who saw the legislative process as the means to build socialism gradually), we therefore have to make do with sketchy outlines such as:

  • Lenin, The State and Revolution (1917) [HTML]

The economic policies of the Bolsheviks were immediately criticised by

which he continued for the rest of his life in a series of works criticising "interventionism" of all kinds, whether "revolutinary" or "parliamentary" in form.

By the mid-1920s Mises had expanded his critique of Bolshevik central planning into a more general theory of "Interventionismus" or "interventionism" by which he meant any large-scale government intervention in the economy without the direct ownership by the state of all private property and the means of production (such as factories and farms). He began with an article on “Interventionismus” (1926) [HTML auf deutsch] which he expanded and developed over the years in a series of further articles and books. He had in mind (in chronological order) the policy of "Kriegssozialismus" (war socialism) pursued in Germany during WW1, the policy of economic "autarchy" (national self-sifficiency) pursued by the Nazis in the 1930s and 1940s, and the policies of most western nations after WW2, namely Keynesian inspired interventionism concerning interest rates and the supply of money, as well as the interventionism and redistribution of wealth required to build the welfare state.

 

The Keynesian Revolution

The monetary theory of the English economist John Maynard Keynes (1883-1946) produced a revolution in thinking about how governments in the non-Communist world could and should control the economy to overcome the defects of "laissez-faire capitalism", one which would conme to dominate the world for the next 80 or 90 years. In many ways, it was a return to the oilder socialist ideas of Proudhon put forward in the 1848 Revolution for a "Peoples" or "Exchange" bank to be set up by the state in order to provide low or zero interest loans to workers to fund their "ateliers" or workshops.

  • John Maynard Keynes, The General Theory of Employment, Interest and Money (1936) [external HTML]

These ideas were quickly opposed by classical liberals such as:

  • William H. Hutt, The Theory of Idle Resources (1939) [HTML]
  • Ludwig von Mises, Political Economy: A Theory of Trade and Economics (1940) [facs. PDF (auf deutsch)]
  • Henry Hazlitt, The Failure of the “New Economics”: An Analysis of the Keynesian Fallacies (1959) [external PDF]

Apparently to no avail given current economic policy.